SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. __ )
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(as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
Imclone Systems Incorporated.
(Name of Registrant as Specified In Its Charter)
___________________________________________________________________
(Name of Person)s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee Required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
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previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing
1) Amount previously paid:
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PRELIMINARY COPIES
IMCLONE SYSTEMS INCORPORATED
180 Varick Street
New York, NY 10014
(212) 645-1405
----------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Date: May 24, 1999
Time: 10:00 a.m.
Place: Hilton New York & Towers
1355 Avenue of the Americas
New York, New York 10019
----------------------------
Items of Business:
1. Election of ten directors.
2. Approval of amendment to the Company's 1996 Incentive Stock Option Plan, as
amended (the "1996 ISO Plan") to increase the number of shares of common
stock which are authorized to be issued under the 1996 ISO Plan.
3. Approval of amendments to the 1996 Non-Qualified Stock Option Plan, as
amended (the "1996 Non-Qualified Plan") to (i) increase the number of
shares of common stock which are authorized to be issued under the 1996
Non-Qualified Plan, and (ii) increase the annual option grant made to
members of the Board of Directors (the "Board") and the Chairman who are
not full-time employees of the Company under the 1996 Non-Qualified Plan.
4. Approval of an amendment to the Company's certificate of incorporation to
increase the number of shares of common stock the Company is authorized to
issue.
5. Approval of the grant of an option to the President and Chief Executive
Officer.
6. Approval of the grant of an option to the Executive Vice President and
Chief Operating Officer.
7. Ratification of the appointment of KPMG LLP as the Company's independent
certified public accountants for the fiscal year ending December 31, 1999.
8. Any other matters properly brought before the shareholders at the meeting.
Record Date:
Only holders of the common stock of record at the close of business on
April 7, 1999 are entitled to notice of and to vote at the meeting.
Annual Report:
Our 1998 Annual Report, which is not a part of the proxy soliciting
material, is enclosed.
Proxy Voting:
It is important that your shares be represented and voted at the meeting.
To vote, please complete, sign and date the enclosed proxy and promptly return
it in the envelope provided to our transfer agent, Boston EquiServe, 150 Royall
Street, Mail Stop 45-02-62, Canton, MA 02021. Sending in your proxy will not
prevent you from voting in person at the meeting.
By Order of the Board of Directors
New York, New York JOHN B. LANDES
April __, 1999 Secretary
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Table of Contents
ABOUT THE MEETING..............................................................1
What is the purpose of the meeting?............................................1
Who is entitled to vote?.......................................................1
Who can attend the meeting?....................................................1
What constitutes a quorum?.....................................................1
How do I vote?.................................................................2
Can I change my vote after I return my proxy card?.............................2
What are the Board's recommendations?..........................................2
What vote is required to approve each item?....................................2
How are votes counted?.........................................................2
Who pays for this proxy solicitation?..........................................2
STOCK OWNERSHIP................................................................3
Who are the largest owners of the Company's stock?.............................3
How much stock do the Company's directors, certain officers and
certain others own?..........................................................3
ITEM 1--ELECTION OF BOARD OF DIRECTORS.........................................5
Nominees for Director..........................................................5
Business Experience of Nominees for Director...................................6
Directors' Compensation........................................................8
Information Concerning Board and Committee Meetings............................9
Information Concerning Officers...............................................10
Certain Transactions..........................................................11
Executive Compensation........................................................11
Report of the Compensation Committee on Executive Compensation................11
Compensation Committee Interlocks and Insider Participation...................13
Summary Compensation Table....................................................14
Option Grants for Fiscal 1998.................................................16
Option and Warrant Exercises and Values for Fiscal 1998.......................17
Stock Price Performance.......................................................18
ITEM 2 -- Approval of amendment to 1996 Incentive Stock Option Plan...........19
ITEM 3 -- Approval of amendments to 1996 Non-Qualified Stock Option Plan......23
ITEM 4 -- Approval of amendment to the Certificate of Incorporation...........27
ITEM 5 -- Approval of option grant to the President and
Chief Executive Officer.............................................29
ITEM 6 -- Approval of option grant to the Executive Vice President
and Chief Operating Officer.........................................32
ITEM 7 -- Ratification of the appointment of KPMG LLP for fiscal 1999.........35
Stockholder Proposals for fiscal 1999.........................................35
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IMCLONE SYSTEMS INCORPORATED
180 Varick Street
New York, New York 10014
-----------------
PROXY STATEMENT
-----------------
This proxy statement is furnished in connection with the solicitation of
proxies for use at the Annual Meeting of Stockholders of ImClone Systems
Incorporated (the "Company") to be held at 10:00 a.m., local time, on Monday,
May 24, 1999, at the Hilton New York & Towers, 1355 Avenue of the Americas, New
York, New York 10019, and at any adjournments thereof.
ABOUT THE MEETING
What is the purpose of the meeting?
At the meeting, stockholders will act upon the matters outlined in the
accompanying notice of meeting, including the election of directors, approval of
an amendment to the Company's 1996 Incentive Stock Option Plan, as amended (the
"'96 ISO Plan"), approval of amendments to the Company's 1996 Non-Qualified
Stock Option Plan, as amended (the "1996 Non-Qualified Plan"), approval of an
amendment to the Company's certificate of incorporation, approval of the grant
of an option to the Company's President and Chief Executive Officer, approval of
the grant of an option to the Company's Executive Vice President and Chief
Operating Officer and ratification of the Company's independent auditors. In
addition, the Company's management will report on the performance of the Company
during fiscal 1998 and respond to questions from stockholders.
Who is entitled to vote?
Only stockholders of record at the close of business on the record date, April
7, 1999, are entitled to receive notice of the meeting and to vote the shares of
common stock that they held on that date at the meeting, or any postponement or
adjournment of the meeting. Each outstanding share entitles its holder to cast
one vote on each matter to be voted upon.
Who can attend the meeting?
Although we encourage you to complete and return the proxy card to ensure that
your vote is counted, you can attend the annual meeting and vote your shares in
person. All stockholders as of the record date, or their duly appointed proxies,
may attend the meeting. Please note that if you hold your shares in "street
name" (that is, through a broker or other nominee), you will need to bring a
copy of a brokerage statement reflecting your stock ownership as of the record
date and check in at the registration desk at the meeting.
What constitutes a quorum?
The presence at the meeting, in person or by proxy, of the holders of a majority
of the shares of common stock outstanding on the record date will constitute a
quorum, permitting the meeting to conduct its business. As of the record date,
24,618,255 shares of common stock of the Company were outstanding. Proxies
received but marked as abstentions and broker non-votes will be included in the
calculation of the number of shares considered to be present at the meeting.
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How do I vote?
If you complete and properly sign the accompanying proxy card and return it to
the Company, it will be voted as you direct. If you are a registered stockholder
and attend the meeting, you may deliver your completed proxy card in person.
"Street name" stockholders who wish to vote at the meeting will need to obtain a
proxy form from the institution that holds their shares.
Can I change my vote after I return my proxy card?
Yes. Even after you have submitted your proxy, you may change your vote at any
time before the proxy is exercised by filing with the Secretary of the Company
either a notice of revocation or a duly executed proxy bearing a later date. The
powers of the proxy holders will be suspended if you attend the meeting in
person and so request, although attendance at the meeting will not by itself
revoke a previously granted proxy.
What are the Board's recommendations?
The persons named as proxy holders on the proxy card will vote in accordance
with the recommendations of the Board of Directors (the "Board"). The Board's
recommendation is "for" each of the items set forth in this proxy statement.
With respect to any other matter that properly comes before the meeting, the
proxy holders will vote as recommended by the Board or, if no recommendation is
given, in their own discretion.
What vote is required to approve each item?
Election of Directors. The affirmative vote of a plurality of the votes cast at
the meeting is required for the election of directors.
Amendment of Certificate of Incorporation. The affirmative vote of the holders
of a majority of the shares outstanding on the record date will be required for
approval. A properly executed proxy marked "ABSTAIN" with respect to any such
matter will not be voted.
Other Item. For each other item, the affirmative vote of the holders of a
majority of the shares present in person or represented by proxy and entitled to
vote on the item will be required for approval. A properly executed proxy marked
"ABSTAIN" with respect to any such item will not be voted, although it will be
counted for purposes of determining the number of votes cast on the item.
Accordingly, an abstention will have the effect of a negative vote.
How are votes counted?
If you hold your shares in "street name" through a broker or other nominee, your
broker or nominee will not be permitted to vote your shares on matters that the
New York Stock Exchange does not determine to be routine. Thus, if you do not
give your broker or nominee specific instructions on non-routine matters, your
shares may not be voted on those matters and will not be counted in determining
the number of shares necessary for approval. Shares represented by such "broker
non-votes" will, however, be counted in determining whether there is a quorum
and in determining the number of votes cast on a routine item. Items 1, 4 and 7
are considered routine matters. Items 2, 3, 5 and 6 are considered non-routine
matters.
Who pays for this proxy solicitation?
We do. In addition to sending you these materials, some of our employees may
contact you by telephone, by mail, or in person. None of these employees will
receive any extra compensation for doing this. In addition, we have retained
Corporate Investor Communications, Inc. to assist us in soliciting your proxy
for a fee of $5,000 plus reasonable out-of-pocket expenses.
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STOCK OWNERSHIP
Who are the largest owners of the Company's stock?
Except as set forth in the table below, the Company knows of no single person or
group that is the beneficial owner of more than 5% of the Company's common
stock. Unless otherwise indicated, information about 5% beneficial holders is
based solely on Schedule 13G reports filed with the Securities and Exchange
Commission ("SEC").
How much stock do the Company's directors, certain officers and certain others
own?
The following table shows the amount of common stock of the Company beneficially
owned (unless otherwise indicated) by the Company's directors, the Named
Officers in the Summary Compensation Table below and the directors and executive
officers of the Company as a group. Except as otherwise indicated, all
information is as of April 1, 1999. "Beneficial Ownership" is a technical term
defined by the SEC to mean more than ownership in the usual sense. For example,
you "beneficially own" our common stock if you own it directly or indirectly
(through a relationship, a position as a director or trustee or through an
agreement).
Shares
Beneficially Percent
Name and Address(1) Owned Owned(2)
- ------------------- ----- --------
The Oracle Group ................................ 1,496,700(3) 5.86%
712 Fifth Avenue, NY, NY 10019
Samuel D. Waksal,Ph.D ........................... 1,300,583(4) 5.12%
Harlan W. Waksal, M.D ........................... 1,098,380(5) 4.36%
Robert F.Goldhammer ............................. 852,390(6) 3.39%
Carl S. Goldfischer, M.D ........................ 241,666(7) *
John B. Landes .................................. 233,500(8) *
John Mendelsohn, M.D ............................ 173,476(9) *
David M. Kies ................................... 150,500(10) *
Paul B. Kopperl ................................. 71,460(11) *
Vincent T. DeVita, Jr., M.D ..................... 63,592(12) *
Jean Carvais, M.D ............................... 48,542(13) *
William R. Miller ............................... 29,897(14) *
Richard Barth ................................... 29,000(15) *
John A. Gilly ................................... 5,198(16) *
All Directors and Executive Officers as a group
(11 persons) .................................... 4,059,486(17) 14.98%
* Less than 1%.
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(1) Unless otherwise noted, each person's address is in care of ImClone
Systems Incorporated, 180 Varick Street, Seventh Floor, New York, New York
10014.
(2) The percentage of voting stock owned by each stockholder is calculated by
dividing (i) the number of shares deemed to be beneficially held by such
stockholder as of April 1, 1999, as determined in accordance with Rule
13d-3 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), by (ii) the sum of (A) 24,617,358 which is the number of shares of
common stock outstanding as of April 1, 1999 plus (B) the number of shares
of common stock issuable upon exercise of currently exercisable options
and warrants held by such stockholder. For purposes of this security
ownership table "currently exercisable options" and "currently exercisable
warrants" consist of options and warrants exercisable as of April 1, 1999
or within 60 days after April 1, 1999. Shares of the Company's Series A
Convertible Preferred Stock (the "Series A preferred stock" or "Series A
preferred shares") are not included in the denominator because they do not
have voting rights.
(3) Includes 925,000 shares issuable upon the exercise of currently
exercisable warrants. This information is as of April 5, 1999 and was
obtained from a letter of confirmation supplied by The Oracle Group. The
Oracle Group is comprised of various investment partnerships and managed
accounts controlled by Larry N. Feinberg.
(4) Includes 350,000 shares issuable upon the exercise of currently
exercisable warrants and 415,000 shares issuable upon the exercise of
currently exercisable options.
(5) Includes 240,000 shares issuable upon the exercise of currently
exercisable options; 340,680 shares issuable upon the exercise of
currently exercisable warrants; and 2,600 shares owned by Dr. Waksal's
sons as to which he disclaims beneficial ownership.
(6) Includes 113,542 shares issuable upon the exercise of currently
exercisable options; 379,990 shares issuable upon the exercise of
currently exercisable warrants; and 13,314 shares held in trust as to
which Mr. Goldhammer disclaims beneficial ownership.
(7) Consists of 241,666 shares issuable upon exercise of currently exercisable
options.
(8) Includes 94,000 shares issuable upon the exercise of currently exercisable
options and 104,000 shares issuable upon the exercise of currently
exercisable warrants.
(9) Consists of 173,476 shares issuable upon the exercise of currently
exercisable options.
(10) Includes 12,500 shares issuable upon the exercise of currently exercisable
options and 8,000 shares held by Mr. Kies as custodian for his son as to
which he disclaims beneficial ownership.
(11) Includes 42,500 shares issuable upon the exercise of currently exercisable
options; and 500 shares held by Mr. Kopperl's spouse as to which Mr.
Kopperl disclaims beneficial ownership.
(12) Includes 63,292 shares issuable upon the exercise of currently exercisable
options.
(13) Consists of 48,542 shares issuable upon the exercise of currently
exercisable options.
(14) Includes 28,897 shares issuable upon the exercise of currently exercisable
options.
(15) Includes 27,500 shares issuable upon exercise of currently exercisable
options.
(16) Consists of shares of common stock, 191 of which are held in a custodial
account for the benefit of Dr. Gilly's sons. Dr. Gilly ceased employment
with the Company as of December 31, 1998 and all his options remaining
unexercised on that date were cancelled.
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(17) Includes an aggregate of (i) 2,477,585 shares issuable upon the exercise
of currently exercisable options and warrants and (ii) 24,414 shares as to
which beneficial ownership is disclaimed. Shares held by Mr. Landes have
not been included as he is not considered an executive officer of the
Company and shares held by Mr. Gilly have not been included as he no
longer is employed by the Company.
PROPOSAL NO. 1
ELECTION OF BOARD OF DIRECTORS
An entire board of directors, consisting of ten members, will be elected at the
meeting. The directors elected will hold office until their successors are
elected, which should occur at the next annual meeting.
Nominations. At the meeting, the Board of Directors will nominate the persons
named in this proxy statement as directors. Although we don't know of any reason
why any of these nominees might not be able to serve, the board of directors
will propose a substitute nominee if any nominee is not available for election.
General Information About the Nominees. All of the nominees are currently
directors of the Company. Each of the nominees has agreed to be named in the
proxy statement and to serve as a director if elected. The ages listed for the
nominees are as of April 1, 1999.
Nominees For Director
Current Position Director of
Name with Company Company Since
- ---- ------------ -------------
Richard Barth (1)(2) Director 1996
Jean Carvais, M.D. Director 1993
Vincent T. DeVita, Jr., M.D. (1)(5) Director 1992
Robert F. Goldhammer (2)(3)(4) Chairman of the Board 1984
David M. Kies (2)(4) Director 1996
Paul B. Kopperl (1)(2)(4) Director 1993
John Mendelsohn, M.D.(4)(5) Director 1998
William R. Miller (1)(4) Director 1996
Harlan W. Waksal, M.D. (3)(4)(5) Executive Vice President, Chief 1984
Operating Officer and Director
Samuel D. Waksal, Ph.D. (3)(5) President, Chief Executive Officer 1985
and Director
(1) Member of Audit Committee
(2) Member of Compensation and Stock Option Committee
(3) Member of Executive Committee
(4) Member of Nominating and Corporate Governance Committee
(5) Member of Research Oversight Committee
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BUSINESS EXPERIENCE OF NOMINEES FOR DIRECTOR
Richard Barth, 67, has been a Director of the Company since October 1996.
Mr. Barth served as Chairman of the Board of Ciba-Geigy Corporation, United
States ("Ciba-Geigy") from 1990 until December 1996, and was President and Chief
Executive Officer of Ciba-Geigy from 1986 until April 1996. Mr. Barth is a
member of the Board of Directors of numerous organizations, including Novartis
Corporation, United States, The Bank of New York and Bowater, Inc., and serves
as Chairman of the Board of Trustees of New York Medical College.
Jean Carvais, M.D., 72, has been a Director of the Company since July
1993, and has since 1984 been an independent consultant to companies in the
pharmaceutical industry. Prior to that time, Dr. Carvais was President of The
Research Institute of Roger Bellon, S.A., now a division of Rhone-Poulenc Rorer,
Inc. ("Rhone-Poulenc"). As such, he was involved in the development of a line of
anti-cancer drugs, including Bleomycin and Adriamycin, as well as a new line of
antibiotics and quinolones. Following the acquisition of Roger Bellon, S.A. by
Rhone-Poulenc, Dr. Carvais became a member of Rhone-Poulenc's central research
committee which directs the company's worldwide research and development
activities. Dr. Carvais is a director of Columbia Laboratories, Inc.
Vincent T. DeVita, Jr., M.D., 64, has been a Director of the Company since
February 1992. Dr. DeVita is Director of the Yale Cancer Center as well as
Professor of Medicine and Professor of Epidemiology and Public Health at Yale
University School of Medicine, New Haven, Connecticut. From September 1988
through June 1995, Dr. DeVita served as Attending Physician at Memorial
Sloan-Kettering Cancer Center ("Sloan-Kettering"), New York, and through June
1991 as Physician-in-Chief. From 1980 to 1988, he served under Presidential
appointment as Director of the National Cancer Institute ("NCI"), where he had
held various positions since 1966. During his years with the NCI, Dr. DeVita was
instrumental in developing the first successful combination cancer chemotherapy
program. This work ultimately led to effective regimens of curative chemotherapy
for a variety of cancers. Dr. DeVita's numerous awards include the 1990 Armand
Hammer Cancer Prize and the 1982 Albert and Mary Lasker Medical Research Award
for his contribution to the cure of Hodgkin's disease. Dr. DeVita received his
M.D. from the George Washington University School of Medicine, Washington, DC,
in 1961.
Robert F. Goldhammer, 68, has served as the Company's Chairman of the
Board since February 1991 and has been a Director of the Company since October
1984. Mr. Goldhammer has been a partner of Concord International Investment
Group, L.P. since 1991. He was a partner of Rohammer Corporation, a private
investment company, from 1989 to 1991. He was a managing director of Kidder,
Peabody Group Inc., an investment banking firm, from May 1988 to January 1989.
He is a director of E.G.&G, Inc. and Esterline Technologies Corporation.
David M. Kies, 55, has been a Director of the Company since June 1996. Mr.
Kies is a Partner of the New York based law firm Sullivan & Cromwell,
specializing in mergers and acquisitions, securities and general corporate
matters. Mr. Kies joined Sullivan & Cromwell in 1968, and was elected a partner
of the firm in 1976. From 1991 until 1995, he was the managing partner of the
firm's London office.
Paul B. Kopperl, 65, has served on the Board since December 1993. He is
President of Pegasus Investments, Inc., Boston, a private investment management
firm established in 1994. He has served as President of Delano & Kopperl, Inc.,
a financial advisory firm in Boston and its predecessor firms from 1976 to the
present. From 1967 through 1975 he was Vice President and a principal of Kidder,
Peabody & Co. Incorporated, New York, an investment banking firm. From 1959 to
1967 he was an associate with Goldman, Sachs & Co., New York. Mr. Kopperl is a
Trustee and Governor of the Dana-Farber Cancer Institute, Boston, and over the
years has served as a trustee or director of numerous not-for-profit
educational, performing arts and social welfare organizations and businesses.
John Mendelsohn, M.D., 62, has been a Director of the Company since
February 1998. He has served as the President of M.D. Anderson Cancer Center,
University of Texas, where he has also been Professor of Medicine since 1996.
From 1985 to 1996 he was Chairman of the Department of Medicine at
Sloan-Kettering, New York, as well as holder of the Winthrop Rockefeller Chair
in Medical Oncology at Sloan-Kettering. He was also Professor and Vice-Chairman
of Medicine at Cornell University Medical College and an attending physician at
both Memorial
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and New York Hospitals. Dr. Mendelsohn served on the faculty of the University
of California, San Diego and was instrumental in the creation of the
University's Cancer Center, where he served as Director from 1976 to 1985. Dr.
Mendelsohn's work has focused on growth factors and their role in regulating the
proliferation of cancer cells through cell surface receptors. Dr. Mendelsohn was
responsible for developing specific monoclonal antibodies that block receptors,
including epidermal growth factor receptors, which mediate growth factor
activation of cell and growth and division. Dr. Mendelsohn is currently a board
member of the Richard Lounsbery Foundation and the Greater Houston Partnership,
and a fellow of the New York Academy of Medicine. In 1997, Dr. Mendelsohn was
elected to the Institute of Medicine of the National Academy of Sciences.
William R. Miller, 70, has been a Director of the Company since June 1996.
Mr. Miller served as Vice Chairman of the Board of Directors of the
Bristol-Myers Squibb Company from 1985 until 1991, at which time he retired. Mr.
Miller is a director of Isis Pharmaceuticals, Inc., Transkaryotic Therapies,
Inc., Westvaco Corporation and Xomed Surgical Products, Inc. He is Chairman of
the Board of Vion Pharmaceuticals, Inc. and SIBIA Neurosciences, Inc. He is
Chairman of the Board of Trustees of the Cold Spring Harbor Laboratory and is a
past Chairman of the Board of the Pharmaceutical Manufacturers Association. Mr.
Miller is a Trustee of the Manhattan School of Music, Metropolitan Opera
Association and Opera Orchestra of New York. He is a member of Oxford University
Chancellor's Court of Benefactors, Honorary Fellow of St. Edmund Hall and
Chairman of the English-Speaking Union of the United States.
Harlan W. Waksal, M.D., 46, is a founder of the Company and has been a
Director since April 1984. He has directed the Company's research and
development since April 1985, and has served as the Company's Executive Vice
President and Chief Operating Officer since March 1987. From 1985 to March 1987,
Dr. Waksal served as the Company's President. Dr. Waksal received his training
in Internal Medicine from Tufts-New England Medical Center Hospital and in
Pathology from Kings County Hospital in Brooklyn, New York from 1982 to 1987.
From 1984 to 1985, Dr. Waksal was Chief Resident in Pathology at Kings County
Hospital. He received his Medical Degree from Tufts University School of
Medicine in 1979. He is currently Adjunct Assistant Professor in the Department
of Pathology at Downstate Medical Center, New York. Dr. Harlan Waksal and Dr.
Samuel Waksal are brothers.
Samuel D. Waksal, Ph.D., 51, President of the Company, is a founder of the
Company and has been its Chief Executive Officer and a Director since August
1985 and President since March 1987. From 1982 to 1985, Dr. Waksal was a member
of the faculty of Mt. Sinai School of Medicine as Associate Professor of
Pathology and Director of the Division of Immunotherapy within the Department of
Pathology. He has served as visiting Investigator of the National Cancer
Institute, Immunology Branch, Research Associate of the Department of Genetics,
Stanford University Medical School, Assistant Professor of Pathology at Tufts
University School of Medicine and Senior Scientist for the Tufts Cancer Research
Center. Dr. Waksal was a scholar of the Leukemia Society of America from 1979 to
1984. Dr. Waksal currently serves on the Executive Committee of the New York
Biotechnology Association, the Board of Directors of Cadus Pharmaceutical
Corporation and is Chairman of the New York Council for the Humanities. Dr.
Samuel Waksal and Dr. Harlan Waksal are brothers.
The Board recommends a vote "FOR" each of the nominees named above
(Proposal No. 1 on the proxy card).
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DIRECTORS' COMPENSATION
Cash Compensation
Each director of the Company, exclusive of the Chairman, who is not an
employee of the Company or who does not otherwise provide consulting services to
the Company receives compensation of $10,000 per year, or a pro rata portion
thereof for persons not serving the full fiscal year, for such person's services
as a director as well as reimbursement of the director's reasonable
out-of-pocket expenses incurred in connection with his Board and Board committee
activities. In addition, subject to the first sentence of this paragraph, the
Chairman of each of the Audit Committee, Compensation and Stock Option Committee
and Nominating and Corporate Governance Committee receives $5,000 per year as
compensation for the services of each as Chairman.
Directors' Stock Options
Pursuant to the Company's 1996 Non-Qualified Plan, directors who are not
full-time employees of the Company automatically receive on each February 15th
an option to purchase 2,500 shares of common stock, or a pro rata portion
thereof for persons not having served the full fiscal year. Such options vest
after one full year of service on the Board from the date of grant and have an
exercise price equal to the fair market value of the common stock on the date of
grant. Directors newly joining the Board who are not full-time employees of the
Company are made a one-time option grant under the 1996 Non-Qualified Plan to
purchase 25,000 shares of common stock. Such options vest as to 25% of the
shares of common stock over the four-year period commencing with the date of
grant, subject to such individual's continued service on the Board on the
scheduled date of vesting, and have an exercise price equal to the fair market
value of the common stock on the date of grant. From time to time, non-employee
directors are granted additional options in consideration for providing services
on the Board. No such additional options were granted in 1998. Shareholders are
being asked to approve an amendment to the 1996 Non-Qualified Plan to increase
the automatic annual grant to directors (except the Chairman) who are not
full-time employees of the Company from 2,500 to 15,000 and to increase the
automatic annual grant to the Chairman who is not a full-time employee from
2,500 to 30,000 (Proposal No. 3 to this Proxy Statement).
The table below sets forth option grants to non-employee directors during
the year ended December 31, 1998 in consideration for such directors serving on
the Board:
Name Number of Options
---- -----------------
Richard Barth 2,500(1)
Jean Carvais 2,500(1)
Vincent T. DeVita, Jr 2,500(1)
Robert F. Goldhammer 2,500(1)
David M. Kies 2,500(1)
Paul B. Kopperl 2,500(1)
John Mendelsohn 2,226(1)
25,000(2)
William R. Miller 2,500(1)
(1) These options were granted automatically pursuant to the terms of the 1996
Non-Qualified Plan on February 15, 1998 at a per share exercise price of $6.94
which is equal to the fair market value of the common stock on the date of
grant. They vested and became exercisable in their entirety on February 15, 1999
and terminate February 14, 2008. Pursuant to the terms of the 1996 Non-Qualified
Plan, Dr. Mendelsohn received a smaller grant due to his joining the Board after
the beginning of the 1998 fiscal year.
(2) This option was granted automatically pursuant to the terms of the 1996
Non-Qualified Plan upon Dr. Mendelsohn's newly joining the Board in January
1998. It is exercisable at a per share exercise price of $5.97, the fair market
value of the common stock on the date of grant, and vests as to 25% of the
shares of common stock on each of January 30, 1999, January 30, 2000, January
30, 2001 and January 30, 2002, subject to Dr. Mendelsohn's continued service on
the Board.
8
<PAGE>
INFORMATION CONCERNING BOARD AND COMMITTEE
MEETINGS AND COMMITTEES OF THE BOARD
The Board of Directors oversees the business and affairs of the Company
and monitors the performance of management. In accordance with corporate
governance principles, the Board does not involve itself in day-to-day
operations. During the year ended December 31, 1998, there were five meetings of
the Company's Board. No incumbent director attended fewer than 75% of the total
number of meetings of the Board and of the Committees of the Board on which he
served.
The Company has an Executive Committee of the Board composed of Dr. Samuel
D. Waksal (Chairman), Robert F. Goldhammer and Dr. Harlan W. Waksal. The
Executive Committee acts for the Board when formal Board action is required
between Board meetings. The Executive Committee has all the power of the full
Board in the management of the business and affairs of the Company, except those
powers that by law cannot be delegated by the Board. The Executive Committee met
two times during the year ended December 31, 1998 and also took during the year
certain other action by means of unanimous written consent.
The Company has an Audit Committee of the Board composed of Paul B.
Kopperl (Chairman), Vincent T. DeVita, Jr., Richard Barth and William R. Miller.
The Audit Committee considers matters relating to the adequacy of the Company's
internal financial controls and the objectivity of the Company's financial
reporting, reviews the Company's annual financial statements and the performance
of the Company's auditors and makes recommendations to the Board with respect to
these matters. The Audit Committee also reviews the Company's "Year 2000"
compliance program. The Audit Committee's Chairman reviews the Company's
quarterly financial statements. The Audit Committee met twice during the year
ended December 31, 1998.
The Company has a Compensation and Stock Option Committee (the
"Compensation Committee") of the Board composed of Robert F. Goldhammer
(Chairman), Paul B. Kopperl, David M. Kies and Richard Barth. The Compensation
Committee is responsible for developing executive compensation policies. The
Compensation Committee (i) determines on an annual basis the base salary to be
paid to the Chief Executive Officer and determines bonuses and incentive awards
to be paid from time to time to the Chief Executive Officer; and (ii) approves
on an annual basis a salary plan for other senior officers on the recommendation
of the Chief Executive Officer in conjunction with other senior personnel and
approves bonuses and incentive awards to be paid from time to time to such
senior officers on the recommendation of the Chief Executive Officer in
conjunction with other senior personnel. The Compensation Committee also
administers the Company's various stock option and purchase plans, including the
granting of options under the option plans. The Compensation Committee met one
time during the year ended December 31, 1998 and also took during the year
certain other action by means of unanimous written consent.
The Company has a Nominating and Corporate Governance Committee composed
of David M. Kies (Chairman), Paul B. Kopperl, John Mendelsohn, William R.
Miller, Robert F. Goldhammer and Harlan W. Waksal. The Nominating and Corporate
Governance Committee considers and makes recommendations to the Board regarding
Board and committee nominees and membership, director performance and officer
candidates. The Nominating and Corporate Governance Committee also considers and
makes recommendations to the Board with respect to corporate organizational and
governance matters. The Corporate Governance Committee did not meet during the
year ended December 31, 1998 but took certain action by means of unanimous
written consent. The Nominating and Corporate Governance Committee considers
nominations for director made by stockholders of the Company in accordance with
the procedures for submission of proposals at annual or special meetings of
stockholders set forth in the Company's Amended and Restated By-laws.
The Company has a Research Oversight Committee composed of Samuel D.
Waksal (Chairman), Vincent T. DeVita, Jr., John Mendelsohn and Harlan W. Waksal.
The Research Oversight Committee is responsible for directing the research focus
of the Company. The Research Oversight Committee did not meet during the year
ended December 31, 1998.
9
<PAGE>
INFORMATION CONCERNING OFFICERS
Certain information concerning each officer of the Company is provided
below.
Samuel D. Waksal, Ph.D., is the President and Chief Executive Officer of
the Company. Certain information concerning Dr. Waksal appears on page seven.
Harlan W. Waksal, M.D., is the Executive Vice President and Chief
Operating Officer of the Company. Certain information concerning Dr. Waksal
appears on page seven.
Peter Bohlen, Ph.D., 56, has been Vice President, Research of the Company
since September 1996. From November 1995 to July 1996 he was Senior Director of
Ixsys, a privately-held biotechnology company. From October 1987 to June 1996 he
was department head of the Molecular Biology Section of American Cyanamid's
Medical Research Division and director of the company's angiogenesis program. He
also has held academic positions at the Salk Institute, San Diego and the
University of Zurich, Switzerland. Dr. Bohlen received his Ph.D. in chemistry
from the University of Berne in Switzerland. In 1983, he received the Cloetta
Award in Switzerland for his contributions in the field of protein analysis.
Michael Feldman, Ph.D., 73, became Vice President, Discovery Research for
the Company in May 1995. Prior thereto he served as Director of Basic Research
for the Company since 1993. Dr. Feldman is former head of the Department of Cell
Biology at the Weizmann Institute of Science in Rehovot, Israel, and a former
dean of its graduate school. He has done pioneering work in the areas of
transplantation immunology, differentiation of lymphocytes and cancer
immunology. In 1984, he received the Griffuel Award in France for his work in
cancer metastasis, and in 1986 received the Rothschild Award for his work in
immunology. Dr. Feldman is a member of the Israeli Academy of Sciences and
Humanities and the World Academy of Arts and Sciences.
Carl S. Goldfischer, M.D., 40, has served as Vice President, Finance and
Chief Financial Officer since May 1996. From June 1994 until joining the
Company, Dr. Goldfischer served as a healthcare analyst with Reliance Insurance
Company. From June 1991 until June 1994, Dr. Goldfischer was Director of
Research for D. Blech & Co., an investment banking firm. Dr. Goldfischer
received a doctorate of medicine from Albert Einstein College of Medicine in
1988 and served as a resident in radiation oncology at Montefiore Hospital of
the Albert Einstein College of Medicine until 1991. Dr. Goldfischer is a
director of Immulogic Pharmaceutical Corporation. Dr. Goldfischer has resigned
from the Company to resume his career in investment banking. This resignation is
expected to be effective the end of May 1999.
John B. Landes, 51, has served as Vice President, Business Development and
General Counsel since November 1992. Prior thereto, he was Vice President,
Administration and Legal since December 1984. He also has been Secretary of the
Company since April 1985 and served as its Treasurer from April 1984 through
September 1991, except for an interim period from December 1988 to February
1991. From 1978 to 1984, Mr. Landes was an associate attorney with the Boston
law firm of Mahoney, Hawkes and Goldings.
Ronald A. Martell, 37, has served as the Company's Vice President,
Marketing since November 1998. Prior to joining the Company he worked at
Genentech, Inc. for ten years where he held various positions. Most recently,
from 1996 until joining the Company, he served as Genentech's Group Manager of
Oncology Products where he directed the launch of Herceptin, Genentech's
monoclonal antibody product approved to treat breast cancer. From 1995 to 1996
he served as Senior Product Manager where he launched Pulmozyme for cystic
fibrosis in Europe. From 1994 through 1995 he served as Manager of Genentech's
Piedmont Sales Division. Prior to that, he served from 1993 as Associate Product
Manager for Genentech's Pulmozyme.
S. Joseph Tarnowski, Ph.D., 45, has served as the Company's Vice
President, Product and Process Development since January 1999. Prior to joining
the Company, he held various positions with CellPro Inc., the principal business
of which was the development, manufacture and marketing of automated systems
that utilize monoclonal antibodies to purify large quantities of specific cells
for therapeutic and diagnostic applications. He joined CellPro in June 1992 as
Vice President of Operations and was appointed to the position of Vice President
of
10
<PAGE>
Research and Development in June 1995 and became Senior Vice President and Chief
Technical Officer in December 1996. From November 1986 to May 1992, Dr.
Tarnowski was Director, Process and Product Development of Scios Nova Inc.
(formerly California Biotechnology Inc.), a company that develops recombinant
human proteins for therapeutic uses. Dr. Tarnowski received a Ph.D. in
Biochemistry from the University of Tennessee in 1979 and was a Postdoctoral
Fellow at the Roche Institute of Molecular Biology from 1979 through 1981.
Section 16(a) Beneficial Ownership Reporting Compliance
Ownership of and transactions in the Company's securities by executive
officers and directors of the Company and owners of 10% or more of the Company's
outstanding common stock are required to be reported to the Securities and
Exchange Commission (the "Commission") pursuant to Section 16(a) of the Exchange
Act. During the year ended December 31, 1998, based on information received by
the Company, one form was untimely filed for each of Dr. Samuel Waksal, Dr.
Harlan Waksal, Dr. Carl S. Goldfischer and Mr. Robert F. Goldhammer.
CERTAIN TRANSACTIONS
During the year ended December 31, 1998, the Company paid Dr. Vincent T.
DeVita, Jr., a director of the Company, a total of $100,000 for scientific
consulting services provided to the Company by Dr. DeVita.
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.
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
December 31, 1998, the total amount due the Company, including interest, was
approximately $142,000 and is classified in the stockholders' equity section of
the balance sheet as a note receivable from officer and stockholder.
In October 1998, the Company accepted an unsecured promissory note
totaling $100,000 from its Executive Vice President and COO. The note is payable
on demand including interest at the annual rate of 8.25% for the period that the
loan is outstanding. On April 8, 1999, Dr. Waksal repaid the note in full,
including all interest accrued thereon.
In January 1999, the Company accepted an unsecured promissory note
totaling $60,000 from its Vice President, Product and Process Development. The
note is payable upon the earlier of on demand or July 28, 1999 and bears
interest at an annual rate equal to the prime rate at Citibank, N.A. plus 1% for
the period that the loan is outstanding. The loan was made as a bridge in
connection with the officer's relocation in connection with accepting employment
with the Company.
EXECUTIVE COMPENSATION
Report of Compensation Committee
The Compensation Committee is responsible for developing and making
recommendations to the Board with respect to the Company's executive
compensation policies. Pursuant to authority delegated by the Board, the
Committee determines the executive compensation policy of the Company and
determines on an annual basis the compensation to be paid to the Chief Executive
Officer and approves compensation to other officers of the Company, at the
recommendation of the Chief Executive Officer and other supervising personnel.
11
<PAGE>
Overall Philosophy
The Company's overall executive compensation philosophy is based on the
premise that compensation should be set at levels that support the Company's
business strategies and long-term objectives and should reward executives for
their contributions to the enhancement of shareholder value. The key elements of
the executive compensation package are base salary, annual incentive awards and
stock options. In establishing base salaries, annual incentive awards and awards
of stock options, the Compensation Committee considers periodic compensation
surveys, including those provided by third parties covering the
biopharmaceutical industry. Officers' compensation is compared to that of other
executives in peer group surveys. In evaluating each senior executive's
performance, the Company generally conforms to the following process:
o Company and individual goals and objectives are set at the beginning
of the performance cycle.
o At the end of the performance cycle, the executive's manager, or in
the case of the Chief Executive Officer, the Compensation Committee,
evaluates the accomplishment of the executive's goals and objectives
and his or her contributions to the Company.
o The executive's performance is then reviewed by the executive's
manager with the executive and consideration is given to goals for
the following performance cycle.
o The comparative results, combined with comparative compensation
practices of other companies in the industry, are then used to
determine salary, bonus, and stock option levels.
The Compensation Committee uses no set formulas in making these
determinations and may afford different weight to different factors for each
senior executive. Such weighting may vary from year to year. In determining
compensation, the Compensation Committee does not attempt to correlate
compensation with specific financial results, such as revenues or profits, for
the current period. This is in large part due to the nature of the
biopharmaceutical industry in which traditional evaluations of corporate
performance may not apply in reviewing the performance of executives. The
Committee looks toward the progress of the Company's research and development
programs, its ability to gain appropriate levels of support for its programs
through its strategic partnering agreements, its ability to attract, motivate
and retain talented employees and its ability to secure capital sufficient for
its product development programs to achieve rapid and effective
commercialization as may be practicable.
Base Salary
At the end of each year, the Compensation Committee reviews and
establishes the base salary of the Chief Executive Officer based on a comparison
to national surveys, taking into consideration the Company's performance and
current circumstances, accomplishment of his goals and objectives and his
contributions to the Company. The Compensation Committee also reviews and
approves, or modifies, a salary plan for the other senior executives prepared by
the Chief Executive Officer in conjunction with other senior personnel.
Annual Incentive Awards
Although the Company does not have a formal bonus plan for its management,
the Compensation Committee determines annual incentive awards to senior
executives from time to time based on individual performance and Company
performance. Specific performance goals of each executive are determined early
each year in direct consultation with the executive's supervisor. These
performance goals include successful and cost efficient management of the
executive's department and specific contributions made by that department to the
immediate and ultimate goals of the Company. For the Chief Executive Officer,
such goals are determined in reference to the CEO's plan for the coming year for
the Company as a whole, as presented to the Board. The awarding of annual
incentive awards takes into consideration individual efforts as well as
performance of the Company as a whole. In evaluating performance of the Company
as a whole, several factors are examined, including productivity of research and
development programs, successful movement of development stage products toward
12
<PAGE>
commercialization, fostering development of successful corporate partnerships,
expense control, financing efforts and progress of the Company toward its
short-term and long-term goals.
Long-Term Incentive Compensation
Stock options and warrants are considered as long-term incentives and are
intended to link the interests of the executive with those of the stockholder.
Such securities will provide value to the grantee when the price of the
Company's stock increases.
The Compensation Committee conducts a formal review from time to time of
the stock option and warrant holdings and vesting schedule of each officer. The
Compensation Committee authorizes stock option grants (and, in some cases,
grants of warrants) to the executives with consideration to the growth and
performance of the Company, individual performance and contribution, total stock
option and warrant and vesting levels and length of service.
For their performance in the year ended December 31, 1998, the CEO and the
other Named Officers (as hereinafter defined) were awarded no warrants and were
awarded options to purchase an aggregate of 945,000 shares of common stock. See
"Option Grants for Fiscal 1998."
Deductibility of Compensation
The Compensation Committee has reviewed the impact of Section 162(m) of
the Internal Revenue Code of 1986, as amended (the "Code"), which, beginning in
1994, limits the deductibility of certain otherwise deductible compensation in
excess of $1 million paid to the Chief Executive Officer and the other Named
Officers (as hereinafter defined). It is the policy of the Company to attempt to
have its executive compensation plans treated as tax deductible compensation
whenever, in the judgment of the Compensation Committee, to do so would be
consistent with the objectives of that compensation plan.
Chief Executive Officer Compensation
The key elements of the compensation for the Chief Executive Officer are
base salary, annual incentive awards and stock options or warrants. In
evaluating Dr. Samuel Waksal's 1998 performance and in determining Dr. Waksal's
1998 compensation, the Compensation Committee, along with the full Board,
considered the performance of the Company in 1998. In 1998, the Company advanced
its cancer vaccine product, BEC2, into a Phase III clinical trial, which is the
Company's first Phase III trial and one of the first Phase III trials for any
cancer vaccine. C225, the Company's lead product under development, also
continued to advance with the Company obtaining FDA approval in January 1999 to
commence a Phase III trial for C225 in head and neck cancers. The financing of
C225 through development was also further strengthened with the closing of a
license and development agreement with Merck KGaA where the Company further
succeeded in retaining North American rights. Also considered was the continued
strength of the Company's research pipeline, particularly with respect to
anti-angiogenesis, a core area of the Company's research, as well as
pro-angiogenesis.
Compensation and Stock Option Committee
Robert F. Goldhammer, Chairman
Richard Barth
David M. Kies
Paul B. Kopperl
Compensation Committee Interlocks and Insider Participation
As of December 31, 1998, the members of the Compensation Committee were
Richard Barth, Robert F. Goldhammer (Chairman), David M. Kies and Paul B.
Kopperl, none of whom is an employee of the Company.
13
<PAGE>
SUMMARY COMPENSATION TABLE
The Summary Compensation Table sets forth the cash and non-cash
compensation awarded to, earned by, or paid to the Company's Chief Executive
Officer and the four most highly compensated officers (other than the Chief
Executive Officer) for the years ended December 31, 1998, 1997 and 1996 who were
serving as officers at December 31, 1998 and whose total salary and bonus
exceeded $100,000 for the year ended December 31, 1998 (the "Named Officers").
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation Awards
---------------------------------------------------- -------------------------
Year Salary Bonus Other Annual Securities Underlying All Other
($)(1) ($)(2) Compensation Options and Warrants Compensation
($)(3) (#)(4) ($)
---- ------ ----- ------------ --------------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Samuel D. Waksal 1998 $300,000 $400,000 -- 300,000 $10,435(7)
President and Chief 1997 225,000 280,000(5) -- 250,000(6) $10,435(7)
Executive Officer 1996 225,000 200,000(5) -- 45,000 $10,435(7)
Harlan W. Waksal 1998 250,000 $300,000 -- 250,000 --
Executive Vice 1997 195,000 250,000(8) -- 497,000(6)(9) --
President and Chief 1996 195,000 200,000(8) -- 40,000 --
Operating Officer
John B. Landes 1998 165,000 120,000 -- 135,000 --
Vice President, 1997 165,000 90,000 -- 25,000 --
Business Development 1996 165,000 50,000 -- 30,000 --
and General Counsel
Carl S. Goldfischer(10) 1998 175,000 75,000 -- 125,000 --
Vice President, Finance 1997 175,000 90,000 -- 25,000(6) --
and Chief Financial 1996 109,000 75,000 -- 225,000 --
Officer
John A. Gilly(11) 1998 175,000 -- -- 135,000(12) --
Vice President, 1997 165,000 100,000 -- 35,000(12) --
Biopharmaceutical 1996 165,000 100,000 -- 75,000(12) --
Operations
</TABLE>
(1) Amounts shown include compensation deferred pursuant to Section 401(k) of
the Internal Revenue Code of 1986, as amended (the "Code").
(2) Although the Company has no formal bonus plan, the Compensation Committee,
in its discretion, may award bonuses to officers of the Company. The
Company has paid bonuses based on individual and Company performance.
Amounts shown include awards paid relative to services rendered in each of
the last three fiscal years. All bonus awards for each of the last three
fiscal years were paid in cash. Bonuses are recorded for the period in
which they were earned.
(3) Excludes perquisites and other personal benefits for each Named Officer
which did not equal or exceed the lesser of $50,000 or 10% of such
individual's base salary and bonus for the years ended December 31, 1998,
1997 and 1996, respectively.
14
<PAGE>
(4) Options or warrants to purchase the number of shares of common stock shown
are recorded for the period in which they were granted, except as
discussed in footnote 6.
(5) During 1996, Dr. Samuel D. Waksal was paid a $100,000 bonus relating to
his 1996 performance. During 1996, the Compensation Committee determined
to consider the payment to him of an additional bonus, in an amount to be
determined, subject to the Company's completion by June 30, 1997 of a
corporate partnership, or similar arrangement, with acceptable terms. In
connection with the December 1997 amendment of the Company's BEC2 Research
and License Agreement with Merck KGaA and sale to Merck KGaA of
$40,000,000 of the Company's Series A preferred stock, the Compensation
Committee determined to extend the June 30, 1997 period, and Dr. Samuel D.
Waksal was paid a bonus of $100,000. This amount is reflected as a 1996
bonus.
(6) Options to purchase 250,000, 100,000 and 25,000 shares of common stock,
respectively, held by Drs. Samuel D. Waksal, Harlan W. Waksal and Carl S.
Goldfischer, respectively, were granted in January 1998 and relate to 1997
performance.
(7) Consists of premium payments on a term life insurance policy for Dr.
Samuel D. Waksal under which his daughters are the beneficiaries.
(8) During 1996, Dr. Harlan W. Waksal was paid a $100,000 bonus relating to
his 1996 performance. During 1996, the Compensation Committee determined
to consider the payment to him of an additional $100,000 bonus at the end
of the six month period ending June 30, 1997. In June 1997, the
Compensation Committee determined to award such additional bonus to Dr.
Harlan W. Waksal. This amount is reflected as a 1996 bonus.
(9) In March 1997, the Board extended the term of a warrant to purchase
397,000 shares of common stock held by Dr. Harlan W. Waksal which was due
to expire. The term was extended for a period of two years on the same
terms and conditions as the original grant. For purposes of this table,
this extension is treated as a new warrant grant. In April 1997, Dr.
Harlan W. Waksal exercised this warrant.
(10) Dr. Goldfischer commenced employment with the Company on May 20, 1996 and
has resigned from the Company with an expected effective date of the end
of May 1999.
(11) Dr. Gilly ceased employment with the Company as of December 31, 1998.
(12) These options terminated unexercised as to 135,000 shares, 0 shares and
75,000, respectively, in connection with Dr. Gilly's cessation of
employment with the Company as of December 31, 1998.
15
<PAGE>
OPTION GRANTS IN FISCAL 1998
The following table sets forth certain information relating to stock
option and warrant grants to the Named Officers during the year ended December
31, 1998.
<TABLE>
<CAPTION>
% of Total
Number of Options/
Securities Warrants Potential Realizable
Underlying Granted to Value at Assumed Annual Rates of
Options/ Employees Stock Price Appreciation
Warrants in Fiscal Exercise Price for Option/Warrant Term (3)
Name Granted Year(1) ($/share)(2) Expiration Date 0%($) 5%($) 10%($)
---- ------- ------- ------------ --------------- --------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Samuel D. Waksal 300,000(4) 15% $ 11.375 May 25, 2008 $ -- $ 1,321,719 $4,125,953
Harlan W. Waksal 250,000(4) 13% 11.375 May 25, 2008 -- 1,101,433 3,438,294
John B. Landes 135,000(4) 7% 11.375 May 25, 2008 -- 594,774 1,856,679
Carl S. Goldfischer 125,000(4) 6% 11.375 May 25, 2008 -- 550,716 1,719,147
John A. Gilly 135,000(5) 7% 11.375 -- -- -- --
</TABLE>
(1) The Company granted options to purchase a total of 1,949,250 shares of
common stock to employees during 1998. This number excludes options to
purchase a total of 375,000 granted in January 1998 to Drs. Samuel D.
Waksal, Harlan W. Waksal and Carl S. Goldfischer because they relate to
1997 performance and have previously been reported as 1997 compensation.
(2) All options were granted to purchase common stock at an exercise price
that equaled or exceeded the fair market value of the common stock on the
date of grant.
(3) The amounts set forth in the three columns represent hypothetical gains
that might be achieved by the holders if the respective options are
exercised at the end of their terms. These gains are based on assumed
rates of stock price appreciation of 0%, 5% and 10% compounded annually
from the dates the respective options were granted. The 0% appreciation
column is included because the options were granted with exercise prices
which equaled or exceeded the fair market value of the underlying common
stock on the date of grant, and thus will have no value unless the
Company's stock price increases above the exercise prices.
(4) These options vest and become exercisable as to 40% on May 26, 1999, as to
an additional 30% on May 26, 2000 and as to the remaining 30% on May 26,
2001, subject to the respective holder's continued employment with the
Company on the relevant vesting date.
(5) This option terminated in its entirety unexercised on December 31, 1998
due to Dr. Gilly's ceasing to be employed by the Company.
16
<PAGE>
OPTION AND WARRANT EXERCISES AND VALUES FOR FISCAL 1998
The following table sets forth option and warrant exercises during the
year ended December 31, 1998 by the Named Officers and the value of the options
and warrants held by such persons on December 31, 1998, whether or not
exercisable on such date.
<TABLE>
<CAPTION>
Shares Number of Shares Underlying Value of Unexercised
Acquired Unexercised Options/Warrants In-The-Money Options/Warrants at
on Value at December 31, 1998(#) December 31, 1998($)2
Name Exercise(#) Realized($)(1) Exercisable Unexercisable Exercisable Unexercisable
---- ---------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Samuel D. Waksal 87,305 $ 436,525 395,000 550,000 $ 1,247,050 $ 750,000
Harlan W. Waksal -- -- 380,680 350,000 2,578,715 300,000
John B. Landes 23,000 144,260 144,000 150,000 863,127 --
Carl S. Goldfischer -- -- 166,666 208,334 127,166 119,509
John A. Gilly(3) 50,000 202,939 -- -- -- --
</TABLE>
(1) The values realized were calculated by multiplying the closing market
price of the common stock on the date of exercise by the respective number
of shares exercised and subtracting the aggregate exercise price.
Accordingly, such values realized assume a sale of such common stock on
the date of exercise, which may not necessarily have occurred.
(2) The values were calculated by multiplying the closing market price of the
common stock on December 31, 1998 ($9.063 per share as reported by the
Nasdaq National Market on that date) by the respective number of shares
and subtracting the aggregate exercise price, without making any
adjustments for vesting, termination contingencies or other variables. If
the exercise price of an option or warrant is equal to or greater than
$9.063 the option or warrant is deemed to have no value.
(3) John A. Gilly ceased to be employed by the Company as of December 31,
1998. On this date all his unexercised options terminated in their
entirety.
Other Benefit Plans
The Company has no defined benefit or defined contribution retirement
plans other than the ImClone Systems Incorporated 401(k) Employee Savings Plan
(the "Plan") established under Section 401(k) of the Code. Contributions to the
Plan are voluntary, and substantially all full-time employees are eligible to
participate. For 1999, the Company has elected to make voluntary matching
contributions equal to 25% of the first 4% of an employee's eligible
compensation contributed by the employee, limited to $2,500 per employee. The
Company made such a matching contribution for 1998 which totaled $47,000. The
Company anticipates evaluating the level of its matching contribution, if any,
on an annual basis.
17
<PAGE>
STOCK PRICE PERFORMANCE
The graph below provides a comparison of the cumulative total return
(assuming reinvestment of dividends) for the Company (which paid no dividends),
The Nasdaq Stock Market (U.S. Companies) Total Return Index, and the Nasdaq
Pharmaceutical Stocks Total Return Index for the period from December 31, 1993
through December 31, 1998. The graph assumes $100 was invested in ImClone common
stock and each of the indexes at the beginning of such period. The Nasdaq Stock
Market (U.S. Companies) Total Return Index comprises all domestic common shares
traded on the Nasdaq National Market and the Nasdaq SmallCap Market. The Nasdaq
Pharmaceutical Stocks Total Return Index represents all companies, including
biotechnology companies, trading on Nasdaq classified under the Standard
Industrial Classification Code for pharmaceuticals.
COMPARISON OF FIVE YEAR TOTAL RETURN AMONG
IMCLONE, NASDAQ STOCK MARKET (U.S. COMPANIES) TOTAL RETURN INDEX AND NASDAQ
PHARMACEUTICAL STOCKS TOTAL RETURN INDEX
[The following information was depicted as a line graph in the printed material]
Date ImClone Systems Nasdaq Pharmaceutical
- ------------------ ----------------- ------------- ----------------
12/31/93 100 100 100
12/31/94 15 98 75
12/31/95 124 138 138
12/31/96 159 170 138
12/31/97 133 209 143
12/31/98 148 293 183
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PROPOSAL NO. 2
APPROVAL OF AMENDMENTS TO THE COMPANY'S 1996 INCENTIVE STOCK OPTION PLAN
In February 1996, the Company's Board adopted the 1996 ISO Plan in order
to enable the Company to attract and retain key executives and other employees
and to promote the interests of the Company. Subject to shareholder approval, on
March 29, 1999, the Board approved amendments to the 1996 ISO Plan to increase
the total number of shares of common stock which may be issued pursuant to
options granted under the 1996 ISO Plan from 3,000,000 to 4,000,000, which
number shall be reduced by the number of shares which have been or may be issued
pursuant to options granted under the 1996 Non-Qualified Plan.
The Board believes that a key ingredient in attracting, motivating and
retaining qualified executives and other employees is to offer significant
potential rewards based upon the Company's success through the issuance of stock
options. The amendment to the 1996 ISO Plan increasing the shares of common
stock authorized under the plan and presented to the stockholders for their
approval is designed to assist the Company in accomplishing this goal. Of the
3,000,000 shares of common stock currently authorized in the aggregate under the
1996 ISO Plan and the 1996 ISO Plan, at April 1, 1999 an aggregate of 58,592
shares remained available for future grants.
The following summary description of the 1996 ISO Plan is qualified in its
entirety by the full text of the 1996 ISO Plan which may be obtained by the
Company's stockholders upon request to the Secretary of the Company. The 1996
Non-Qualified Plan has been approved by the Board and by the shareholders.
The last sale price of a share of the Company's common stock as reported
by the Nasdaq National Market on April 8, 1999 was $17.
Purpose of the Plan. The purpose of the 1996 ISO Plan is to promote the
interests of the Company by affording key executives and other employees of the
Company 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.
Administration of the Plans. The 1996 ISO Plan is administered by the
Compensation Committee, comprised of not less than two persons. The members of
the Compensation Committee serve at the pleasure of the Board, which has the
power at all times to remove members from the Compensation Committee or to add
members thereto. Vacancies in the Compensation Committee, however caused, are
filled by action of the Board. All decisions or determinations of the
Compensation Committee are made by the majority vote or decision of all of its
members. The interpretation and construction by the Compensation Committee of
the provisions of the 1996 ISO Plan or of the options granted thereunder are
final unless otherwise determined by the Board.
Eligibility to Participate in the Plan. Key executives and other employees
of the Company are eligible for the grant of options under the 1996 ISO Plan.
Common Stock Subject to the Plan. Currently, the number of shares of
common stock to be issued or sold pursuant to options granted under the 1996 ISO
Plan may not exceed 3,000,000 shares, less the number of shares of common stock
to be issued or sold pursuant to options granted under the 1996 Non-Qualified
Plan. The shareholders are being asked to amend the 1996 ISO Plan (and the 1996
Non-Qualified Plan) at the meeting to increase this number to 4,000,000.
If any change is made in the shares of common stock subject to the 1996
ISO Plan or subject to any option granted under the 1996 ISO 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 the Compensation Committee as to the maximum number of shares subject to
the 1996 ISO 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 such determination made by the Compensation Committee shall
be final, binding and conclusive upon each participant.
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Amendments or Discontinuation of the1996 ISO Plan. The Board may make such
amendments, changes and additions to the 1996 ISO Plan, or may discontinue and
terminate the 1996 ISO Plan, as it may deem advisable from time to time;
provided, however, that no action may affect or impair any options theretofore
granted under such plan, and provided, further, however, that the affirmative
vote of the owners of a majority of the outstanding shares of common stock
present at a meeting in person or by proxy and entitled to vote at the meeting
shall be necessary to effect any amendment to the 1996 ISO Plan which would
increase the number of shares of common stock subject to options granted under
such plan or which would authorize incentive stock options at a price below the
fair market value (or 110% thereof, if the employee owns more than 10% of the
voting securities of the Company at the time of the grant) of the shares of
common stock subject to the option.
ERISA. The 1996 ISO Plan is not subject to any provision of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA").
Description of Options
Nontransferability. Options granted pursuant to the 1996 ISO Plan are not
transferable by the holder thereof, other than by will, the laws of descent and
distribution, or (if authorized in the applicable stock option agreement)
pursuant to a qualified domestic relations order, as defined by the Code or
Title I of ERISA or the rules thereunder.
Granting of Options. The Compensation Committee shall determine the key
executives and other employees to be granted options under the 1996 ISO Plan,
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 1996 ISO Plan. To the extent the aggregate fair market value of common
stock with respect to which incentive stock options are exercisable for the
first time by any holder during any calendar year (under all plans of the
Company and its parent and subsidiary corporations) exceeds $100,000 (based upon
the fair market value of such common stock on the date of the grant of such
options), those options exercisable with respect to those shares valued in
excess of $100,000 will be treated as non-qualified stock options. All stock
options granted pursuant to the 1996 ISO Plan shall be evidenced by stock option
agreements, which need not be identical, between the Company and the participant
in such form as the Compensation Committee shall from time to time approve,
subject to the terms of the 1996 ISO Plan. 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.
Life of the Plan. Options may be granted under the 1996 ISO Plan until
February 25, 2006.
Exercise Price. The price at which the shares of common stock subject to
each option granted under the 1996 ISO Plan may be purchased (the "option price"
or "exercise price") shall be determined by the Compensation Committee, 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. In no event may the exercise price of an option granted under the 1996
ISO Plan be less than 100% (110% in the case of 10% stockholders) of the fair
market value of the common stock on the date of the grant. The exercise price of
all options granted under the 1996 ISO Plan is payable in full upon the exercise
of such option, which payment shall be in cash, by check or in stock (that has
been owned by the participant for at least six months) or notes of the Company,
or, as agreed to by the Board, other consideration. 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 preceding date on which the
common stock traded.
Terms and Conditions of Exercise; Exercise Period. The terms and
conditions of any option granted under the 1996 ISO Plan and the exercise period
are governed by the option agreement between the holder of the option and the
Company. Subject to the limitations set forth in the 1996 ISO Option Plan, the
terms of such option agreements, including the exercise period, are determined
by the Compensation Committee and need not be uniform among recipients of
similar options. Options granted pursuant to the 1996 ISO Plan may be exercised
only if the
20
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participant was, at all times during the period beginning on the date the option
was granted and ending on the date of such exercise, an employee of the Company.
The right to exercise any unexercised portion of any option granted under the
1996 ISO Plan terminates on the date of termination of the relationship between
the participant and the Company, for any reason, without regard to cause, other
than by reason of death or disability except as otherwise provided in connection
with a particular option or a particular termination. 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 1996 ISO
Plan. In the event a participant dies or is disabled while he is an employee of
the Company, 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 right's under such option shall pass by will or the laws of descent
and distribution, and in the case of disability, by such participant or his
legal representatives and (b) if and to the extent that he was entitled to
exercise such option at the date of his death or disability except as otherwise
provided in connection with a particular option or a particular individual's
death or disability. The maximum option term under the 1996 ISO Plan is ten
years after the date of grant.
U.S. Federal Income Tax Consequences
The following is a summary of the U.S. Federal income tax consequences
under current tax law (without regard to any proposed changes, which may be
retroactive in effect) with respect to incentive stock options granted to U.S.
employees under the 1996 ISO Plan. For this purpose, it is assumed that the
shares acquired pursuant to the exercise of an option are held by the optionee
as a capital asset. Certain other rules not discussed herein apply to the use of
previously acquired shares of common stock in payment of the option exercise
price.
Options granted under the 1996 ISO Plan are intended to be "incentive
stock options" described in Section 422 of the Code.
Incentive Stock Options. In general, no taxable income will be recognized
by an optionee upon the grant or exercise of an incentive stock option. The
optionee's tax basis in the shares received on the exercise of such an option
will be equal to the option price paid by the optionee for such shares.
If the stock received upon exercise of an incentive stock option is held
more than one year after the date of transfer of such shares to the optionee and
more than two years from the date of grant of the option, any gain or loss
recognized by the optionee on the subsequent sale of the stock will be a
long-term capital gain or loss, as the case may be. If the shares received upon
the exercise of an incentive stock option are disposed of prior to the end of
such holding periods, an amount equal to the excess (if any) of (a) the lower of
the disposition price or the fair market value of such shares on the date of
exercise of the incentive stock option, over (b) the optionee's tax basis in
such shares will be treated as ordinary income, and any further gain will be a
short-term or long-term capital gain depending upon the period the shares were
held. Any loss on the disposition of such shares will be a short-term or
long-term capital loss depending upon the period the shares were held.
Cancellation or Surrender. Consideration received by an optionee upon the
surrender to, or cancellation by, the Company of an incentive stock option will
be taxable as ordinary income to the optionee and generally allowed as an income
tax deduction to the Company.
Alternative Minimum Tax. In addition to the Federal income tax
consequences described above, an optionee may be subject to the Federal
alternative minimum tax. In general, upon the exercise of any incentive stock
option an amount equal to the excess of the fair market value of the shares
acquired on the exercise date over the exercise price will be treated as an item
of adjustment for purposes of the alternative minimum tax. If, however, the
shares are disposed of in the same taxable year in which the exercise occurs,
the maximum amount that will be treated as an item of adjustment will be an
amount equal to the excess of the amount received upon such disposition over the
exercise price.
The forgoing does not purport to be a complete summary of the federal
income tax considerations that may be relevant to holders of options or to the
Company. It also does not reflect provisions of the income tax laws of any
21
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municipality, state or foreign country in which an optionee may reside, nor does
it reflect the tax consequences of an optionee's death.
New Plan Benefits
The benefits or amounts that will be received or allocated in the future
under the 1996 ISO Plan are not determinable.
The Board recommends a vote "FOR" approval of the amendment to the 1996
ISO Plan to increase the total number of shares of common stock which may be
issued pursuant to options which may be granted under the 1996 ISO Plan from
3,000,000 to 4,000,000, which number shall be reduced by the number of shares of
common stock which have been or may be issued pursuant to options granted under
the 1996 Non-Qualified Plan.
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<PAGE>
PROPOSAL NO. 3
APPROVAL OF AMENDMENTS TO THE 1996 NON-QUALIFIED STOCK OPTION PLAN, AS AMENDED
In February 1996, the Company's Board adopted the 1996 Non-Qualified Plan
in order to enable the Company to attract and retain key executives, other
employees, advisors, consultants and directors and to promote the interests of
the Company by affording such persons an opportunity to acquire a proprietary
interest in the Company. Subject to shareholder approval, on March 29, 1999, the
Board approved amendments to the 1996 Non-Qualified Plan to increase the total
number of shares of common stock which may be issued pursuant to options granted
under the 1996 Non-Qualified Plan from 3,000,000 to 4,000,000, which number
shall be reduced by the number of shares which have been or may be issued
pursuant to options granted under the 1996 ISO Plan.
The Board believes that a key ingredient in attracting, retaining and
motivating key executives and other employees, advisors, consultants and
directors is to offer significant potential rewards based upon the Company's
success through the issuance of stock options. The amendment to the 1996
Non-Qualified Plan increasing the shares of common stock authorized for issuance
presented herein to the stockholders for their approval is designed to assist
the Company in accomplishing this goal. Of the 3,000,000 shares of common stock
currently authorized under the 1996 Non-Qualified Plan and 1996 ISO Plan, at
April 1, 1999 an aggregate of 58,592 shares remained available for future
grants.
The following summary description of the 1996 Non-Qualified Plan is
qualified in its entirety by the full text of the 1996 Non-Qualified Plan which
may be obtained by the Company's stockholders upon request to the Secretary of
the Company. The 1996 Non-Qualified Plan has been approved by the Board and by
the shareholders.
The last sale price of a share of the Company's common stock as reported
by the Nasdaq National Market on April 8, 1999 was $17.
Purpose of the Plan. The purpose of the 1996 Non-Qualified Plan is to
promote the interests of the Company by affording key executives, other
employees, consultants, advisors and directors of the Company 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.
Administration of the Plan. The 1996 Non-Qualified Plan is administered by
the Compensation Committee and is comprised of not less than two persons who
shall be appointed by the Board from among the members of the Board. The members
of the Compensation Committee serve at the pleasure of the Board, which has the
power at all times to remove members from the Compensation Committee or to add
members thereto. Vacancies in the Compensation Committee, however caused, are
filled by action of the Board. All decisions or determinations of the
Compensation Committee are made by the majority vote or decision of all of its
members. The interpretation and construction by the Compensation Committee of
the provisions of the 1996 Non-Qualified Plan or of the options granted
thereunder are final unless otherwise determined by the Board.
Eligibility to Participate in the Plan. Key executives, other employees,
consultants, advisors and directors of the Company are eligible for the grant of
options under the 1996 Non-Qualified Plan.
Common Stock Subject to the Plan. Currently, the number of shares of
common stock to be issued or sold pursuant to options granted under the 1996
Non-Qualified Plan may not exceed 3,000,000 shares, less the number of shares of
common stock to be issued or sold pursuant to options granted under the 1996 ISO
Plan. The shareholders are being asked to amend the 1996 Non-Qualified Plan (and
the 1996 ISO Plan) at the meeting to increase this number to 4,000,000.
If any change is made in the shares of common stock subject to the 1996
Non-Qualified Plan or subject to any option granted under the 1996 Non-Qualified
Plan (through merger, consolidation, reorganization, recapitalization, stock
dividend, split-up, combination of shares, exchange of shares, issuance of
rights to subscribe,
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<PAGE>
or change in capital structure), appropriate adjustments shall be made by the
Compensation Committee as to the maximum number of shares subject to the 1996
Non-Qualified 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 such determination made by the Compensation Committee shall
be final, binding and conclusive upon each participant.
Amendments or Discontinuation of the Plans. The Board may make such
amendments, changes and additions to the 1996 Non-Qualified Plan, or may
discontinue and terminate the 1996 Non-Qualified Plan, as it may deem advisable
from time to time; provided, however, that no action may affect or impair any
options theretofore granted under such plan, and provided, further, however,
that the affirmative vote of the owners of a majority of the outstanding shares
of common stock present at a meeting in person or by proxy and entitled to vote
at the meeting shall be necessary to effect any amendment to the 1996
Non-Qualified Plan which would increase the number of shares of common stock
subject to options granted under such plan.
ERISA. The 1996 Non-Qualified Plan is not subject to any provision of
ERISA.
Description of Options
Nontransferability. Options granted pursuant to the 1996 Non-Qualified
Plan are not transferable by the holder thereof, other than by will, the laws of
descent and distribution, or (if authorized in the applicable stock option
agreement) pursuant to a qualified domestic relations order, as defined by the
Code or Title I of ERISA or the rules thereunder.
Granting of Options. The Compensation Committee shall determine the key
executives, other employees, consultants, advisors and directors to be granted
options under the 1996 Non-Qualified Plan, 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 1996 Non-Qualified Plan. All
stock options granted pursuant to the 1996 Non-Qualified Plan shall be evidenced
by stock option agreements, which need not be identical, between the Company and
the participant in such form as the Compensation Committee shall from time to
time approve, subject to the terms of the 1996 Non-Qualified Plan. 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.
The Non-Qualified Plan provides that annually, on February 15 of each of
the Company's fiscal years, any director of the Company who at the time is not a
full-time employee of the Company (a "Participating Director") will be
automatically granted an option for 2,500 shares of common stock (a
"Participating Director Option"). Each person who becomes a Participating
Director after the first day of the Company's fiscal year and within nine months
of that date will be granted, on the date that person becomes a Participating
Director, a Participating Director Option for a number of shares of common stock
determined by pro rating the normal 2,500 share annual amount based on the
period of time remaining in the fiscal year in which such person becomes a
Participating Director. No person who owns 10% or more of the outstanding common
stock of the Company (including shares of common stock issuable upon exercise of
outstanding options and warrants) will be granted Participating Director
Options. The shareholders are being asked pursuant to this Proposal No. 3 to
amend the 1996 Non-Qualified Plan at the meeting to increase the Participating
Director Option from 2,500 to 15,000 for Participating Directors (except the
Chairman) and from 2,500 to 30,000 for the Chairman, commencing with the
February 2000 Participating Director Option.
Life of the Plan. Options may be granted under the 1996 Non-Qualified Plan
until June 3, 2006.
Exercise Price. The price at which the shares of common stock subject to
each option (other than Participating Director Options) granted under the 1996
Non-Qualified Plan may be purchased (the "option price" or "exercise price")
shall be determined by the Compensation Committee, 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. Participating
Director Options have an exercise price equal to the fair market value of the
common stock on the date of the grant. The exercise price of all options granted
under the 1996 Non-Qualified Plan is payable in full upon the exercise of such
option, which payment shall be in cash, by check or in stock (that has been
owned by the participant for at least six months) or
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<PAGE>
notes of the Company, or, as agreed to by the Board, other consideration. 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
preceding date on which the common stock traded.
Terms and Conditions of Exercise; Exercise Period. The terms and
conditions of any option granted under the 1996 Non-Qualified Plan and the
exercise period are governed by the option agreement between the holder of the
option and the Company. Subject to the limitations set forth in the 1996
Non-Qualified Plan, the terms of such option agreements, including the exercise
period, are determined by the Compensation Committee and need not be uniform
among recipients of similar options. Options (other than Participating Director
Options) granted pursuant to the 1996 Non-Qualified 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, an advisor or
consultant to or director or employee of the Company. The right to exercise any
unexercised portion of any option (other than Participating Directors Options)
granted under the 1996 Non-Qualified Plan terminates on the date of termination
of the relationship between the participant and the Company, for any reason,
without regard to cause, other than by reason of death or disability, except as
otherwise provided in connection with a particular option or a particular
termination. 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 1996 Non-Qualified Plan. In the event a
participant dies or is disabled while he is an advisor or consultant to or a
director or employee of the Company, any options (other than Participating
Director 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 such option shall pass by will or the laws of descent and
distribution, and in the case of disability, by such participant or his legal
representatives and (b) if and to the extent that he was entitled to exercise
such option at the date of his death or disability except as otherwise provided
in connection with a particular option or a particular individual's death or
disability. Participating Director Options remain exercisable for ten years
after the date of grant and the option holder (or his legal representative or
that of his estate) may continue to exercise an option notwithstanding that the
holder ceases to be a Participating Director. The maximum option term under the
1996 Non-Qualified Plan is ten years after the date of grant.
U.S. Federal Income Tax Consequences
The following is a summary of the U.S. Federal income tax consequences
under current tax law (without regard to any proposed changes, which may be
retroactive in effect) with respect to non-qualified stock options granted to
U.S. key executives, other employees, advisors, consultants or directors under
the 1996 Non-Qualified Plan. For this purpose, it is assumed that the shares
acquired pursuant to the exercise of an option are held by the optionee as a
capital asset. Certain other rules not discussed here apply to the use of
previously acquired shares of common stock in payment of the option exercise
price.
The 1996 Non-Qualified Plan is not qualified under Section 401(a) of the
Code.
Non-Qualified Options. No taxable income will be recognized by an optionee
upon the grant of a non-qualified stock option. Upon the exercise of the option,
the excess of the fair market value of the shares at the time of such exercise
over the exercise price will be treated as compensation. Any amounts treated as
compensation (i) will be taxable as ordinary income to the optionee and (ii)
generally will be allowed as an income tax deduction to the Company. The
optionee's tax basis for shares acquired upon exercise of the option will be
increased by any amounts so treated as compensation.
Any gain or loss realized by an optionee on the subsequent sale of shares
acquired upon the exercise of a non-qualified stock option will be short-term or
long-term capital gain depending on the period the shares were held.
Cancellation or Surrender. Consideration received by an optionee upon the
surrender to, or cancellation by, the Company of a non-qualified stock option
will be taxable as ordinary income to the optionee and generally allowed as an
income tax deduction to the Company.
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New Plan Benefits
Other than option grants of Participating Director Options, the benefits
or amounts that will be received or allocated in the future under the 1996
Non-Qualified Plan are not determinable.
The Board recommends a vote "FOR" approval of amendments to the 1996
Non-Qualified Plan to (i) increase the number of shares of the Company's common
stock which may be issued pursuant to options which may be granted under the
1996 Non-Qualified Plan from 3,000,000 to 4,000,000, which number shall be
reduced by the number of shares of common stock which have been or may be issued
pursuant to options granted under the 1996 ISO Plan, and (ii) increase the
annual option grant made to non-employee members of the Board of Directors and
the non-employee Chairman under the 1996 Non-Qualified Plan from 2,500 to 15,000
and from 2,500 to 30,000, respectively. (Proposal No. 3 on your proxy card).
26
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PROPOSAL NO. 4
APPROVAL TO AMEND THE COMPANY'S CERTIFICATE OF INCORPORATION
TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
At present, the Company is authorized to issue two classes of capital
stock consisting of common stock with a par value of $.001 per share and
preferred stock with a par value of $1.00 per share. 45,000,000 shares of common
stock and 4,000,000 shares of preferred stock are currently authorized. As of
April 1, 1999, 400,000 shares of preferred stock were outstanding and had been
designated as Series A convertible preferred stock. As of April 1, 1999 there
were:
o 24,668,175 shares of common stock issued and outstanding.
o 4,559,099 shares of common stock reserved for issuance for options issued
and outstanding, including under the Company's various option plans.
o 2,263,590 shares of common stock reserved for issuance pursuant to
outstanding warrants.
o 761,557 shares of common stock reserved for issuance under the Company's
various option plans and 1998 Employee Stock Purchase Plan.
o 1,900,826 shares of common stock reserved for issuance pursuant to 400,000
shares of outstanding Series A preferred stock purchased in December 1997
for an aggregate or $40,000,000. 100,000 of the Series A preferred stock
could be immediately converted into shares of common stock beginning on
December 15, 1997. An additional 100,000 will be able to be converted into
shares of common stock on or after each of January 1, 2000, January 1,
2001 and January 1, 2002. Any Series A preferred stock converted into
common stock before January 1, 2000 will be converted at a conversion
price of $12.50 per share of common stock. After that, the number of
shares of common stock into which shares of Series A preferred stock are
convertible is not fixed. Instead, the conversion price is determined
under a formula based upon the market price of our common stock at
specified measurement dates, which are generally one year apart. Because,
except for the first tranche, the exact number of shares needed to be
reserved cannot be determined due to the fluctuating market price, the
Company has currently reserved a number of shares for the first tranche
equal to 800,000 and a number of shares for all subsequent tranches based
upon the market price at April 1, 1999. A different number of shares could
be required based on fluctuations in the price of the common stock.
o 1,652,892 shares of common stock reserved for issuance as shares of common
stock that may be issued in the event the Company achieves certain
milestones in the development of C225, our lead therapeutic product
pursuant to the terms of a Development and License Agreement entered into
with Merck KGaA in December 1998. Under this agreement, Merck KGaA is
paying to the Company, among other things, $30 million assuming the
Company achieves certain milestones for which Merck KGaA will receive
equity (the "Milestone Shares") in ImClone which will be priced at varying
premiums to the then market price of the common stock depending upon the
timing of the achievement of the respective milestones. Because the exact
number of shares needed to be reserved cannot be determined due to the
fluctuating market price, the Company has currently reserved a number of
shares based upon the market price at April 1, 1999. A different number of
shares could be required based on fluctuations in the price of the common
stock.
Accordingly, giving effect to such issuances and reserves, approximately
9,193,861 shares of common stock would remain available for issuance. If
Proposal Nos. 2, 3, 5 and 6 described herein are approved by shareholders at the
meeting, approximately 6,543,861 shares of common stock would remain available
for issuance.
The Board of Directors believes that it is in the best interests of the
Company to increase the authorized number of shares of common stock from
45,000,000 to 60,000,000, and on March 29, 1999 the Board voted unanimously to
submit to a vote of stockholders an amendment to the Company's certificate of
incorporation so increasing the authorized common stock. The Company has no
present agreement, commitment, plan or intent to issue any of the additional
shares of common stock provided for in this Proposal other than as discussed
above. If this Proposal is approved, the additional authorized common stock, as
well as the currently authorized but unissued common stock (but for those shares
which are reserved), would be immediately available in the future for such
corporate purposes as the Board deems advisable from time to time without
further action by the stockholders, unless
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<PAGE>
such action is required by applicable law or any stock exchange or securities
market upon which the Company's shares may be listed.
The additional authorized common stock resulting from the approval of this
Proposal will have the same terms and rights as the existing common stock.
Holders of the common stock of the Company do not presently have preemptive
rights nor will they as a result of the approval of this Proposal.
The Board anticipates that the authorized common stock in excess of those
shares outstanding and reserved for issuance (including, if authorized, the
additional common stock provided for in this Proposal) will be utilized for
general corporate purposes, including grants of stock options. These shares may
also be publicly sold or privately placed as part of financing transactions and
may be utilized by the Company in connection with acquisitions, commercial
agreements and stock splits. Such increase in shares also could be used to make
more difficult a change in control of the Company. Though the Company has no
current plan or intention to issue such shares as a takeover defense, the
additional authorized shares could be used to discourage persons from attempting
to gain control of the Company or make more difficult the removal of management.
Management is not currently aware of any specific effort to obtain control of
the Company by means of a merger, tender offer, solicitation in opposition to
management, or otherwise.
It should be noted that, subject to the limitations discussed above, all
of the types of Board action described in the preceding paragraphs can currently
be taken and the power of the Board to take such actions would not be enhanced
by the passage of this Proposal, although this Proposal would increase the
number of shares of common stock that are subject to such action.
If this Proposal is approved and the amendment to the certificate of
incorporation becomes effective, the first paragraph of Article Fourth of the
certificate of incorporation, which sets forth the Company's presently
authorized capital stock, will be amended to read as set forth below.
"FOURTH: The total number of shares of capital stock which the Corporation
shall have the authority to issue is sixty million (60,000,000) shares of
common stock with a par value of one tenth of one cent ($.001) per share
and four million (4,000,000) shares of preferred stock with a par value of
one dollar ($1.00) per share."
The Board recommends a vote "FOR" approval of the amendment to the
Company's certificate of incorporation to increase the total number of
authorized shares of common stock from 45,000,000 to 60,000,000 (Proposal No. 4
on your proxy card).
28
<PAGE>
PROPOSAL NO. 5
APPROVAL OF GRANT BY THE BOARD OF DIRECTORS TO THE PRESIDENT AND CHIEF
EXECUTIVE OFFICER OF AN OPTION TO PURCHASE COMMON STOCK
The Compensation Committee granted, subject to Board approval, shareholder
approval and a favorable opinion from an unaffiliated executive compensation
consulting firm, an option to Dr. Samuel D. Waksal, President and Chief
Executive Officer, for the purchase of 1,000,000 shares of common stock. The
Board approved the grant, subject to shareholder approval, on March 29, 1999.
The Compensation Committee and the Board have received a favorable opinion from
an unaffiliated executive compensation consulting firm as to the reasonableness
of the grant. The Compensation Committee and the Board determined that the
exercise price at which such shares could be purchased pursuant to the option
should be equal to the last reported sale price of the common stock on the date
of grant, which assuming shareholder approval of the grant, will be May 24, 1999
which is the date of the meeting. The last reported sale price of the common
stock as reported by the Nasdaq National Market on the date of Compensation
Committee approval, Board approval and April 1, 1999 as reported by Nasdaq was
$13 1/4, $15 1/8 and $16 1/2, respectively.
In evaluating the reasonableness of this grant the following was
considered:
o The critical importance of Dr. Waksal to the Company's ongoing
research and development initiatives.
o The difficulty of replacing this individual.
o The objective of providing strong incentive to Dr. Waksal consistent
with enhancing shareholder value.
o The vesting requirements placed on this grant.
o The multi-year nature of the award, which essentially serves as an
acceleration of grants that might otherwise be made in the future,
it being the intent of the Board that there be no additional option
grants to Dr. Waksal until 2003 at the earliest.
o The reasonable size of the awards compared to the Company's total
shares outstanding, both on a primary and fully-diluted basis.
Following is a description of the option, including certain federal income
tax consequences.
Description of Option and New Plan Benefits
The option will not be granted to Dr. Waksal unless and until shareholder
approval is obtained at the meeting on May 24, 1999. The exercise price will be
the last reported sale price of the common stock on May 24, 1999. The option
will vest in its entirety on May 24, 2006; except that the option may vest
earlier as follows:
- --------------------------------------------------------------------------------
Number of Shares Vesting Date Target Price of Stock
- --------------------------------------------------------------------------------
200,000 May 24, 2000 If for any ten consecutive trading
days from May 24, 1999 through
May 23, 2000 the last reported
sale price of the common stock
exceeds $25.
- --------------------------------------------------------------------------------
200,000 May 24, 2001 If for any ten consecutive trading
days from May 24, 2000 through
May 23, 2001 the last reported
sale price of the common stock
exceeds $34.
- --------------------------------------------------------------------------------
200,000 May 24, 2002 If for any ten consecutive trading
days from May 24, 2001 through
May 23, 2002 the last reported
sale price of the common stock
exceeds $47.
- --------------------------------------------------------------------------------
200,000 May 24, 2003 If for any ten consecutive trading
days from May 24, 2002 through
May 23, 2003 the last reported
sale price of the common stock
exceeds $62.
- --------------------------------------------------------------------------------
200,000 May 24, 2004 If for any ten consecutive trading
days from May 24, 2003 through
May 23, 2004 the last reported
sale price of the common stock
exceeds $75.
- --------------------------------------------------------------------------------
1,000,000
- --------------------------------------------------------------------------------
29
<PAGE>
Additionally, the option will vest on any given vesting date for which the
applicable target price was achieved as to any shares as to which the option did
not vest on any prior vesting date as a result of the target price not having
been achieved. For example, assume there are no ten consecutive trading days
during the period May 24, 1999 through May 23, 2000 that the last reported sale
price of the common stock exceeds $25, and that during the period May 24, 2000
through May 23, 2001 there is a ten consecutive trading day period during which
the last reported sale price of the common stock exceeds $34. Under this
scenario, Dr. Waksal's option vests as to no shares on May 24, 2000 and as to
400,000 shares on May 24, 2001.
The vesting of the option will accelerate in the event of an acquisition
of the Company where Dr. Waksal's position with the Company is terminated.
Once vested as to any shares, the option may be exercised in whole or in
part as to such shares from time to time until May 24, 2009 so long as Dr.
Waksal remains employed by the Company. Payment of the exercise price of the
option must be made in full in cash at the time of exercise. The option will
provide for certain adjustments in the event of certain mergers, consolidations,
reorganizations, recapitalizations, stock dividends, split-ups continuations or
similar events involving the Company or common stock.
The option will otherwise contain usual and customary terms which shall be
substantially the same as those contained in the Company's 1996 Non-Qualified
Plan discussed under Proposal No. 3.
It is the intent of the Board that this grant provides significant
retention value and incentive with respect to the continued employment of Dr.
Waksal over the next four years, and that there be no additional option grants
to Dr. Waksal until 2003 at the earliest.
The Company does not anticipate any particular events which would require
administration of the option. However, all decisions of the Company regarding
the option are expected to be made by the Board or a duly authorized committee
of the Board.
The option is not subject to any provision of ERISA.
The common stock which may be purchased by exercise of the option has not
been registered under the Securities Act of 1933, as amended (the "Securities
Act") and unless the Company registers the stock in the future, the stock
acquired by exercise of the option will be restricted stock and will not be
freely tradable. The Board may at any time elect to file a registration
statement under the Securities Act covering the stock, which would permit the
holder of the option to sell the stock freely after exercise. It is expected
that such a registration statement will be filed in the future.
U.S. Federal Income Tax Consequences
The following is a summary of the U.S. Federal income tax consequences
under current tax law (without regard to any proposed changes, which may be
retroactive in effect) with respect to the non-qualified stock option proposed
to be granted to Dr. Waksal. For this purpose, it is assumed that the shares
acquired pursuant to the exercise of the option are held as a capital asset.
The option will not be qualified under Section 401(a) of the Code.
No taxable income will be recognized by the optionee upon the grant of
the option. Upon the exercise of the option, the excess of the fair market value
of the shares at the time of such exercise over the exercise price will be
treated as compensation. Any amounts treated as compensation (i) will be taxable
as ordinary income to the optionee and (ii) generally will be allowed as an
income tax deduction to the Company. The optionee's tax basis for shares
acquired upon exercise of the option will be increased by any amounts so treated
as compensation.
30
<PAGE>
Any gain or loss realized by the optionee on the subsequent sale of shares
acquired upon the exercise of a non-qualified stock option will be short-term or
long-term capital gain depending on the period the shares were held.
Consideration received by the optionee upon the surrender to, or
cancellation by, the Company of the option will be taxable as ordinary income to
the optionee and generally allowed as an income tax deduction to the Company.
The Board recommends a vote "FOR" approval of the grant of the option to
purchase 1,000,000 shares of common stock to the Company's President and Chief
Executive Officer (Proposal No. 5 on your proxy card).
31
<PAGE>
PROPOSAL NO. 6
APPROVAL OF GRANT BY THE BOARD OF DIRECTORS TO THE EXECUTIVE VICE PRESIDENT
AND CHIEF OPERATING OFFICER OF AN OPTION TO PURCHASE COMMON STOCK
The Compensation Committee granted, subject to Board approval, shareholder
approval and a favorable opinion from an unaffiliated executive compensation
consulting firm, an option to Dr. Harlan W. Waksal, Executive Vice President and
Chief Operating Officer, for the purchase of 650,000 shares of common stock. The
Board approved the grant, subject to shareholder approval, on March 29, 1999.
The Compensation Committee and the Board have received a favorable opinion from
an unaffiliated executive compensation consulting firm as to the reasonableness
of the grant. The Compensation Committee and the Board determined that the
exercise price at which such shares could be purchased pursuant to the option
should be equal to the last reported sale price of the common stock on the date
of grant, which assuming shareholder approval of the grant, will be May 24, 1999
which is the date of the meeting. The last reported sale price of the common
stock as reported by the Nasdaq National Market on the date of Compensation
Committee approval, Board approval and April 1, 1999 as reported by Nasdaq was
$13 1/4, $15 1/8 and $16 1/2, respectively.
In evaluating the reasonableness of this grant the following was
considered:
o The critical importance of Dr. Waksal to the Company's ongoing
research and development initiatives.
o The difficulty of replacing this individual.
o The objective of providing strong incentive to Dr. Waksal consistent
with enhancing shareholder value.
o The vesting requirements placed on this grant.
o The multi-year nature of the award, which essentially serves as an
acceleration of grants that might otherwise be made in the future,
it being the intent of the Board that there be no additional option
grants to Dr. Waksal until 2003 at the earliest.
o The reasonable size of the awards compared to the Company's total
shares outstanding, both on a primary and fully-diluted basis.
Following is a description of the option, including certain federal income
tax consequences.
Description of Option and New Plan Benefits
The option will not be granted to Dr. Waksal unless and until shareholder
approval is obtained at the meeting on May 24, 1999. The exercise price will be
the last reported sale price of the common stock on May 24, 1999. The option
will vest in its entirety on May 24, 2006; except that the option may vest
earlier as follows:
- --------------------------------------------------------------------------------
Number of Shares Vesting Date Target Price of Stock
- --------------------------------------------------------------------------------
130,000 May 24, 2000 If for any ten consecutive trading
days from May 24, 1999 through
May 23, 2000 the last reported
sale price of the common stock
exceeds $25.
- --------------------------------------------------------------------------------
130,000 May 24, 2001 If for any ten consecutive trading
days from May 24, 2000 through
May 23, 2001 the last reported
sale price of the common stock
exceeds $34.
- --------------------------------------------------------------------------------
130,000 May 24, 2002 If for any ten consecutive trading
days from May 24, 2001 through
May 23, 2002 the last reported
sale price of the common stock
exceeds $47.
- --------------------------------------------------------------------------------
130,000 May 24, 2003 If for any ten consecutive trading
days from May 24, 2002 through
May 23, 2003 the last reported
sale price of the common stock
exceeds $62.
- --------------------------------------------------------------------------------
130,000 May 24, 2004 If for any ten consecutive trading
days from May 24, 2003 through
May 23, 2004 the last reported
sale price of the common stock
exceeds $75.
- --------------------------------------------------------------------------------
650,000
- --------------------------------------------------------------------------------
32
<PAGE>
Additionally, the option will vest on any given vesting date for which the
applicable target price was achieved as to any shares as to which the option did
not vest on any prior vesting date as a result of the target price not having
been achieved. For example, assume there are no ten consecutive trading days
during the period May 24, 1999 through May 23, 2000 that the last reported sale
price of the common stock exceeds $25, and that during the period May 24, 2000
through May 23, 2001 there is a ten consecutive trading day period during which
the last reported sale price of the common stock exceeds $34. Under this
scenario, Dr. Waksal's option vests as to no shares on May 24, 2000 and as to
260,000 shares on May 24, 2001.
The vesting of the option will accelerate in the event of an acquisition
of the Company where Dr. Waksal's position with the Company is terminated.
Once vested as to any shares, the option may be exercised in whole or in
part as to such shares from time to time until May 24, 2009 so long as Dr.
Waksal remains employed by the Company. Payment of the exercise price of the
option must be made in full in cash at the time of exercise. The option will
provide for certain adjustments in the event of certain mergers, consolidations,
reorganizations, recapitalizations, stock dividends, split-ups continuations or
similar events involving the Company or common stock.
The option will otherwise contain usual and customary terms which shall be
substantially the same as those contained in the Company's 1996 Non-Qualified
Plan discussed under Proposal No. 3.
It is the intent of the Board that this grant provides significant
retention value and incentive with respect to the continued employment of Dr.
Waksal over the next four years, and that there be no additional option grants
to Dr. Waksal until 2003 at the earliest.
The Company does not anticipate any particular events which would require
administration of the option. However, all decisions of the Company regarding
the option are expected to be made by the Board or a duly authorized committee
of the Board.
The option is not subject to any provision of ERISA.
The common stock which may be purchased by exercise of the option has not
been registered under the Securities Act and unless the Company registers the
stock in the future, the stock acquired by exercise of the option will be
restricted stock and will not be freely tradable. The Board may at any time
elect to file a registration statement under the Securities Act covering the
stock, which would permit the holder of the option to sell the stock freely
after exercise. It is expected that such a registration statement will be filed
in the future.
U.S. Federal Income Tax Consequences
The following is a summary of the U.S. Federal income tax consequences
under current tax law (without regard to any proposed changes, which may be
retroactive in effect) with respect to the non-qualified stock option proposed
to be granted to Dr. Waksal. For this purpose, it is assumed that the shares
acquired pursuant to the exercise of the option are held as a capital asset.
The option will not be qualified under Section 401(a) of the Code.
No taxable income will be recognized by the optionee upon the grant of the
option. Upon the exercise of the option, the excess of the fair market value of
the shares at the time of such exercise over the exercise price will be treated
as compensation. Any amounts treated as compensation (i) will be taxable as
ordinary income to the optionee and (ii) generally will be allowed as an income
tax deduction to the Company. The optionee's tax basis for shares acquired upon
exercise of the option will be increased by any amounts so treated as
compensation.
Any gain or loss realized by the optionee on the subsequent sale of shares
acquired upon the exercise of a non-qualified stock option will be short-term or
long-term capital gain depending on the period the shares were held.
33
<PAGE>
Consideration received by the optionee upon the surrender to, or
cancellation by, the Company of the option will be taxable as ordinary income to
the optionee and generally allowed as an income tax deduction to the Company.
The Board recommends a vote "FOR" approval of the grant of the option to
purchase 650,000 shares of common stock to the Company's Executive Vice
President and Chief Operating Officer (Proposal No. 6 on your proxy card).
34
<PAGE>
PROPOSAL NO. 7
RATIFICATION OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board has selected KPMG LLP as independent certified public
accountants for the Company for the year ending December 31, 1999. KPMG LLP has
served as the Company's auditor since 1988. The ratification of the selection of
independent certified public accountants is to be voted upon at the Meeting, and
it is intended that the persons named in the accompanying proxy will vote for
KPMG LLP. Representatives of KPMG LLP are expected to attend the Meeting, to
have an opportunity to make a statement if they desire to do so and to be
available to respond to appropriate questions.
The Board recommends a vote "FOR" the ratification of the selection of
KPMG LLP to act as the Company's certified public accountants for the year
ending December 31, 1999 (Proposal No. 7 on your proxy card).
STOCKHOLDERS' PROPOSALS
A stockholder proposal intended to be presented at the Company's Annual
Meeting of Stockholders to be held in 2000 must be received by the Company on or
before December 25, 1999 in order to be included in the Company's proxy
statement and form of proxy relating to that meeting.
Please complete, sign and date the enclosed proxy card, which is revocable
as described herein, and mail it promptly in the enclosed postage-paid envelope.
By Order of the Board of Directors
John B. Landes
Secretary
New York, New York
April __, 1999
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. WE URGE YOU TO FILL IN,
SIGN AND RETURN THE ACCOMPANYING PROXY CARD, NO MATTER HOW LARGE OR SMALL YOUR
HOLDINGS MAY BE.
35
<PAGE>
IMCLONE SYSTEMS INCORPORATED
Dear Stockholder:
Please take note of the important information enclosed with this Proxy Ballot.
There are a number of issues related to the management and operation of your
Company that require your immediate attention and approval.
These are discussed in detail in the enclosed proxy materials.
Your vote counts, and you are strongly encouraged to exercise your right to vote
your shares.
Please mark the boxes on this proxy card to indicate how your shares shall be
voted, then sign the card, detach it and return your proxy vote in the enclosed
postage paid envelope.
Your vote must be received prior to the Annual Meeting of Shareholders, May 24,
1999.
Thank you in advance for your prompt consideration of these matters.
Sincerely,
ImClone Systems Incorporated
36
<PAGE>
Appendix B
IMCLONE SYSTEMS INCORPORATED
1996 INCENTIVE STOCK OPTION PLAN, AS AMENDED(1)
ARTICLE 1
Purpose of Plan
1.1 General Purpose. The purpose of this Incentive Stock Option Plan (the
"Plan") is to promote the interests of ImClone Systems Incorporated, and any
subsidiaries of such company, as from time to time may be formed or acquired
(collectively, the "Company"), by affording key executives and 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 employees increased
personal interest in its continued success.
1.2 Statutory Stock Option. Options granted under the Plan are intended to
be "incentive stock options" to which Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code"), applies.
ARTICLE II
Shares Subject to Plan
(1) This plan was adopted by the Board on February 25, 1996 and approved by the
stockholders on June 3, 1996; it was amended by the Board on April 3, 1997 and
such amendments were ratified by the stockholders on June 3, 1997; it was
amended by the Board on March 29, 1999 subject to shareholder approval.
<PAGE>
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 4,000,000 shares; provided, that such number shall be
reduced by the number of shares which have been sold under, or may be sold
pursuant to options granted from time to time under, the Company's 1996
Non-Qualified Stock Option Plan (the "Non-Qualified Plan"), to the same extent
as if such sales had been made or options had been granted pursuant to this
Plan.
2.2 Restoration of Unpurchased Shares. Any shares subject to an option
granted hereunder or under the Non-Qualified Plan 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 Committee, the Stock Option Committee (which is a subcommittee of
the Compensation Committee) (collectively, the "Committees") or the Company's
Board of Directors (the "Board"). The Committees shall be comprised of not less
than two persons who shall be appointed by the Board from among the members of
the Board. Members of the Committees shall not be eligible to become
participants under the Plan while they are members of the Committees or for a
period of three months thereafter.
2
<PAGE>
3.2 Duration; Removal; Etc. The members of the Committees shall serve at
the pleasure of the Board, which shall have the power at all times to remove
members from the Committees or to add members thereto. Vacancies in the
Committees, however caused, shall be filled by action of the Board.
3.3 Meetings; Actions of Committees. Each of the Committees and the Board
may select one of its members as its Chairman and shall hold its meetings at
such times and places as it may determine. All decisions or determinations of
each of the Committees 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 it had been made at a meeting
duly called and held. Each of the Committees and the Board may make such rules
and regulations for the conduct of its business not inconsistent herewith as it
may deem advisable.
3.4 Interpretation. The interpretation and construction by any of the
Committees or the Board of the provisions of the Plan or of the options granted
hereunder shall be final, unless in the case of the Committees otherwise
determined by the Board. No member of the Board or of the Committees shall be
liable for any 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, and
provided, further, however, that the affirmative vote of the owners of a
majority of the outstanding shares of Common Stock present at a meeting in
3
<PAGE>
person or by proxy and entitled to vote at the meeting shall be necessary to
effect any amendment to the Plan which would (a) increase the number of shares
of Common Stock subject to options granted under the Plan, or (b) authorize the
granting of options at a price below the minimum price established by Section
5.3 hereof.
ARTICLE IV
Participants; Maximum Grant; Duration of Plan
4.1 Eligibility and Participation. Options shall be granted only to
persons ("Participants") who at the time of granting are key executives or key
employees of the Company. Subject to the provisions of Section 4.3 hereof, the
Committees or the Board shall determine the key executives and key 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.
4.2 Guidelines for Participation. In selecting Participants and
determining the numbers of shares of Common Stock for which options are to be
granted the Committees or the Board shall consult with officers and directors of
the Company, and shall take into account the duties of the respective employees,
their present and potential contributions to the success of the Company, and
such other factors as any of the Committees or the Board shall deem relevant.
4.3 Maximum Grant. Notwithstanding anything to the contrary in the Plan,
the aggregate fair market value (determined as of the time the option is
granted) of the Common Stock for which any Participant may be granted options in
any calendar year (under all plans, including the
4
<PAGE>
Plan, providing for the grant of incentive stock options of the Company and its
parent and subsidiaries) shall not exceed $100,000.
4.4 Duration of Plan. All options under the Plan shall be granted within
ten years from the date the Plan is adopted, or the date the Plan is approved by
the shareholders of the Company, whichever is earlier.
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 Committees 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 any of the Committees 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 the term of the option,
or in such installments at such times during said term as any of the Committees
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. A previously granted incentive stock
5
<PAGE>
option shall be treated as outstanding until it is exercised in full or expires
by reason of the lapse of time. 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. Any of the Committees 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 determined by any of the Committees or the Board,
which shall have 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, but in no case shall the original exercise price of any option be less
than 100% of the fair market value of such shares on the date the option is
granted, as determined by any of the Committees or the Board in accordance with
applicable Treasury Regulations. Notwithstanding anything contained to the
contrary herein, no option shall be granted to any employee who, at the time the
option is granted, owns more than 10% of the total combined voting power of all
classes of stock of the Company or of its parent or subsidiary unless, at the
time option is granted, the exercise price of the option is at least 110% of the
fair market value of the shares of Common Stock subject to the option and such
option by its terms is not exercisable after the expiration of five years from
the date such option is granted. For purposes of determining the ownership of
stock of the Company, the rules of Section 424(d) of the Code shall be applied.
6
<PAGE>
5.4 Method of Exercising Option; Full Payment. Subject to Section 6.1 and
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, an employee of the Company,
a parent or subsidiary of the Company, or a corporation or a parent or
subsidiary of such corporation issuing or assuming a stock option in respect of
such option in a transaction to which Section 424(a) of the Code applies.
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 thereto,
shall be appropriately endorsed and returned to the Participant; (b) payment of
the full purchase price of such shares, which payment shall be in cash, by check
or in stock of the Company that has been owned by the participant for at least
six months, or notes of the Company or, as agreed to by the Board, other
consideration; and (c) 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
7
<PAGE>
such date, then on the next 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. Any of
the Committees 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; provided that this sentence shall not be
determinative of whether any such amendment constitutes a new grant for purposes
of qualification as an Incentive Stock Option.
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 stock
certificates 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 any
of the Committees 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.
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ARTICLE VI
Termination of Employment; Transferability
6.1 Termination of Employment. 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 immediately upon termination of the employment relationship between
the Participant and the Company (or its parent or subsidiary, as the case may
be), for any reason, without regard to cause, other than by reason that the
Participant dies or becomes disabled (as defined in the Code). 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 in the employ
of the Company or of a parent or subsidiary of the Company, any options
theretofore granted to him shall be exercisable only within the next 12 months
immediately succeeding such death or disability and then only in the case of
death (a) by the person or persons to whom the Participant's 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.
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
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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.
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 any of the Committees 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; provided, however, that any such adjustment shall comply with
the rules of Section 424(a) of the Code and provided further that in no event
shall any adjustment be made that would cause any option granted hereunder to be
considered other than an incentive stock option. Any determination made by any
of the Committees or the Board under this Article VII shall be final, binding
and conclusive upon each Participant.
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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 be immediately transferable:
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 sales, 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 executives and
employees of the Company and its subsidiaries 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
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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 Employment. Nothing contained in the
Plan or in a Stock Option Agreement shall confer upon any Participant any right
to be continued in the employ of the Company or of any subsidiary of the
Company, or interfere in any way with the right of the Company, or such
subsidiary, to terminate his employment 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.
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9.4 Effectiveness of Plan. The Plan shall become effective upon its
adoption by the shareholders of the Company. Options may be granted under the
Plan prior to the approval of the Plan by the Shareholders, 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 for the
benefit of its parents' or its subsidiaries' executives and/or employees.
9.6 Company Records. Records of the Company as to a Participant's period
of employment, termination of employment and the reason therefor, leaves of
absence, re-employment, and other matters will be conclusive for all purposes
hereunder.
9.7 Tax Requirement. The exercise or surrender of any option under this
Plan shall constitute a Participant's full and complete consent to whatever
action the Committee elects to satisfy the Federal and state withholding
requirements, if any, which the Committee in its discretion deems applicable to
such exercise.
9.8 Interpretations and Adjustments. To the extent permitted by law, an
interpretation of the Plan and a decision on any matter within any of the
Committees' or 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.
9.9 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
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necessary or required by any of the Committees or the Board to perform its
duties and functions under the Plan.
9.10 Notice of Disqualifying Disposition. If a Participant sells or
otherwise disposes of any share of Common Stock transferred to him pursuant to
the exercise of an option granted hereunder within two years from the date of
the granting of the option or within one year of the transfer of such shares to
him (i.e., a "disqualifying disposition"), the Participant, within ten days
thereafter, shall furnish to any of the Committees or the Board at the principal
offices of the Company, written notice of such sale or other disposition.
9.11 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.
9.12 Certain Definitions.
9.12.1 "Parent". The term "parent" shall mean a "parent corporation"
as defined in Section 424(e) of the Code.
9.12.2 "Subsidiary". The term "subsidiary" shall mean a "subsidiary
corporation" as defined in Section 424(f) of the Code.
9.12.3 "Incentive Stock Option". The term "incentive stock option"
shall mean an option described in Section 422(b) of the code.
9.12.4 "Disabled." The term "disabled" shall have the definition set
forth in Section 22(a)(3) of the Code.
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Appendix C
IMCLONE SYSTEMS INCORPORATED
1996 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, directors and 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 VIII 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 4,000,000 shares; provided,
- ----------
(1) This plan was adopted by the Board on February 25, 1996 and approved by the
stockholders on June 3, 1996; it was amended by the Board on April 3, 1997 and
such amendments were ratified by the stockholders on June 3, 1997; it was
amended by the Board on March 29, 1999 subject to shareholder approval.
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that such number shall be reduced by the number of shares which have been sold
under, or may be sold pursuant to options granted from time to time under, the
Company's 1996 Incentive Stock Option Plan (the "Incentive Stock Option Plan")
to the same extent as if such sales had been made or options had been granted
pursuant to this Plan.
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 Committee, the Stock Option Committee (which is a subcommittee of
the Compensation Committee) (collectively, the "Committees") or the Board of
Directors of the Company (the "Board"). The Committees shall be comprised of not
less than two persons who shall be appointed by the Board from among the members
of the Board. Members of the Committees and the Board shall be eligible to
become participants under the Plans and may receive discretionary and
non-discretionary grants of options.
3.2 Duration; Removal; Etc. The members of the Committees shall serve at
the pleasure of the Board, which shall have the power at all times to remove
members from the Committees or to add members thereto. Vacancies in the
Committees, however caused, shall be filled by action of the Board.
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3.3 Meetings; Actions of Committee. Each of the Committees may select one
of its members as its Chairman and shall hold its meetings at such times and
places as it may determine. All decisions or determinations of the Committees
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. Each of the Committees and the Board may make such rules and
regulations for the conduct of its business not inconsistent herewith as it may
deem advisable.
3.4 Interpretation. The interpretation and construction by any of the
Committees or the Board of the provisions of the Plan or of the options granted
hereunder shall be final, unless in the case of the Committees otherwise
determined by the Board. No member of the Board or of the Committees 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, and
provided, further, however, that the affirmative vote of the owners of a
majority of the outstanding shares of Common Stock present at a meeting in
person or by proxy and entitled to vote shall be necessary to effect any
amendment to the Plan which would increase the number of shares of Common Stock
subject to options granted under the Plan.
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ARTICLE IV
Participants; Maximum Grant; 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, directors or employees of the Company. Any of the Committees or the
Board shall determine the key consultants, advisors, directors and 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.
4.2 Guidelines for Participation. In selecting Participants and
determining the numbers of shares of Common Stock for which options are to be
granted, any of the Committees 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 as any of the Committees or the Board shall
deem relevant.
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 shareholders of the Company.
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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 Committees 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 any of the Committees or the Board shall,
subject to the terms of Article VII hereof, 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 any of the Committees 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. Subject to the terms of Article VII hereof, any of the
Committees 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.
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5.3 Option Price. Subject to the terms of Article VII hereof, 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 determined by
any of the Committees 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
Article VII hereof and 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, director or employee of the
Company. 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 in
cash, by check or in stock of the Company that has been owned by the Participant
for at least six months, or notes of the Company 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
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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 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 IX hereof. Any of the Committees 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 any
of the Committees 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.
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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 between the Participant and the Company,
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. Such restrictions shall not apply to the options
granted pursuant to Article VII which shall be exercisable in accordance with
the terms thereof.
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, director or employee of the Company, 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. Such restrictions shall not apply to the options of Participating
Directors which shall be exercisable in accordance with the terms set forth in
Article VII hereof.
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
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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.
ARTICLE VII
Directors' Grants
7.1 Eligibility. Annually, on February 15 of each of the Company's Fiscal
Years, any Director of the Company who at the time is not a full-time employee
of the Company (a "Participating Director"), shall be granted an option for
15,000 shares of Common Stock, except that the Chairman who is not a full-time
employee of the Company shall be granted an option for 30,000 shares of Common
Stock. Each person who becomes a Participating Director after the first day of
the Company's fiscal year and within nine months of that date shall be granted,
on the date that person becomes a Participating Director, an option for a number
of shares of Common Stock determined by pro rating the normal 15,000 share
annual amount (or 30,000 if the Chairman) based on the period of time remaining
in the fiscal year in which such person becomes a Participating Director. No
person who owns 10% or more of the outstanding Common Stock of the Company
(including shares of Common Stock issuable upon exercise of outstanding options
and warrants), shall be granted options under this Article. Options under this
Article are non-discretionary.
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7.2 Options Terms. Options granted under this Article VII shall not be
exercisable until the date upon which the option holder has provided one year of
continuous service as a Participating Director following the date of grant of
such option. Options granted pursuant to this Article shall have an exercise
price equal to the Fair Market Value (as hereinafter defined) of the Common
Stock on the date of the grant. 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 preceding date on which the Common Stock traded. Notwithstanding any
other provisions of this Plan, options granted under this Article shall remain
exercisable for ten years after the date of grant and the option holder (or his
legal representative or that of his estate) may continue to exercise an option
notwithstanding that the holder ceases to be a Participating Director.
7.3 Other Provisions. In all other respects, Options granted under this
Article VII shall be subject to the other provisions of the Plan, including but
not limited to those governing method of exercise, exercise payment, tax
withholding, and transferability. Notwithstanding any other provisions of this
Plan, the provisions of this Article VII may not be amended more than once every
six months, other than to comport with changes in the Code.
ARTICLE VIII
Capital Adjustments
8.1 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,
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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 any of the
Committees 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 any of the Committees or the Board under this Article VIII
shall be final, binding and conclusive upon each Participant.
ARTICLE IX
Legal Requirements, Etc.
9.1 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.
9.2 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:
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
11
<PAGE>
amended, applicable rules and regulations of the Securities and Exchange
Commission and any applicable state securities laws.
9.3 Private Offering. The options to be granted under the Plan are
available only to a limited number of present and future key consultants,
advisors, directors and 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.
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ARTICLE X
General
10.1 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.
10.2 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, director or employee of the
Company, or interfere in any way with the right of the Company to terminate such
relationship for any reason whatsoever, with or without cause, at any time.
10.3 No Obligation to Exercise. The granting of an option hereunder shall
impose no obligation upon the Participant to exercise such option.
10.4 Effectiveness of Plan. The Plan shall become effective upon its
adoption by the Board. Options may be granted under the Plan prior to the
approval of the Plan by the Shareholders, but no such option may be exercised
prior to such approval.
10.5 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.
10.6 Tax Requirements. The exercise or surrender of any option under this
Plan shall constitute a Participant's full and complete consent to whatever
action any of the Committees or
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the Board elect to satisfy the Federal and state withholding requirements, if
any, which the Committee in its discretion deems applicable to such exercise.
10.7 Interpretations and Adjustments. To the extent permitted by Law, an
interpretation of the Plan and a decision on any matter within any of the
Committees' 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.
10.8 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 necessary or required by any of the
Committees or the Board to perform its duties and functions under the Plan.
10.9 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.
10.10 Certain Definitions.
10.10.1 "Parent". The term "parent" shall mean a "parent corporation" as
defined in Section 424(e) of the Code.
10.10.2 "Subsidiary". The term "subsidiary" shall mean a "subsidiary
corporation" as defined in Section 424(f) of the Code.
10.10.3 "Disabled". The term "disabled" shall have the definition set
forth in Section 22(a) (3) of the Code.
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Appendix A
PLEASE MARK VOTES AS IN
X THIS EXAMPLE
- ---
ImClone Systems Incorporated
Mark box at right if an address change or comment has been noted on the reverse
side of this card. ______
RECORD DATE SHARES:
1) ELECTION OF DIRECTORS. For: _____ Withhold: _____ For All Except: _____
Nominees:
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
Samuel D. Waksal
NOTE: If you do not wish your shares voted "For" a particular nominee, mark the
"For All Except" box and strike a line through the name(s) of the nominee(s).
Your shares shall be voted for the remaining nominee(s).
2) To approve an amendment to the Company's 1996 Incentive Stock Option Plan,
as amended (the "1996 ISO Plan") to increase the number of shares of the
Company's common stock which may be issued pursuant to options which may
be granted under the 1996 ISO Plan from 3,000,000 to 4,000,000, which
number shall be reduced by the number of shares of common stock which have
been or may be issued pursuant to options granted under the Company's 1996
Non-Qualified Stock Option Plan, as amended (the "1996 Non-Qualified
Plan").
For: _____ Against: _____ Abstain: _____
3) To approve amendments to the 1996 Non-Qualified Plan to (i) increase the
number of shares of the Company's common stock which may be issued
pursuant to options which may be granted under the 1996 Non-Qualified Plan
from 3,000,000 to 4,000,000, which number shall be reduced by the number
of shares of common stock which have been or may be issued pursuant to
options granted under the 1996 ISO Plan, and (ii) increase the annual
option grant made to non-employee members of the Board of Directors and
the non-employee Chairman under the 1996 Non-Qualified Plan from 2,500 to
15,000 and from 2,500 to 30,000, respectively.
For: _____ Against: _____ Abstain: _____
4) To approve an amendment to the Company's certificate of incorporation to
increase the number of shares of common stock the Company is authorized to
issue from 45,000,000 to 60,000,000.
For: _____ Against: _____ Abstain: _____
5) To approve the grant of an option to the President and Chief Executive
Officer by the Board to purchase 1,000,000 shares of the Company's common
stock.
For: _____ Against: _____ Abstain: _____
6) To approve the grant of an option to the Executive Vice President and
Chief Operating Officer by the Board to purchase 650,000 shares of the
Company's common stock.
For: _____ Against: _____ Abstain: _____
<PAGE>
7) To ratify the appointment of KPMG LLP to serve as the Company's
independent certified public accountants for the fiscal year ending
December 31, 1999.
For: _____ Against: _____ Abstain: _____
8) To consider and act upon any other business as may come before the meeting
or any adjournment thereof.
Please be sure to sign and date this Proxy. Date:
______________________________________________________________
Stockholder sign here Co-owner sign here
IMCLONE SYSTEMS INCORPORATED
Proxy for the Meeting of Stockholders, May 24, 1999
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Robert F. Goldhammer, John B. Landes and Samuel
D. Waksal as Proxies each with power of substitution and hereby authorizes each
of them to represent and to vote, as designated below, all the shares of Common
Stock of ImClone Systems Incorporated held of record by the undersigned on April
7, 1999 at the Annual Meeting of Stockholders to be held on May 24, 1999 or any
adjournment thereof.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY TO STATE STREET BANK AND TRUST
COMPANY. THE COMPANY'S TRANSFER AGENT, TO BE RECEIVED NO LATER THAN MAY 21,
1999.
This Proxy when properly executed will be voted in the manner directed herein by
the undersigned stockholder. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR PROPOSALS 1, 2, 3, 4, 5, 6 AND 7.
PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN
PROMPTLY IN THE ENCLOSED ENVELOPE
NOTE: Please sign exactly as your name(s) appear(s) on this card. All joint
owners should sign. When signing as executor, administrator, attorney, trustee
or guardian or as custodian for a minor, please give full title as such. If a
corporation, please sign in full corporate name and indicate the signer's
office. If a partner, sign the partnership name.
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
________________________________ ___________________________________
________________________________ ___________________________________
________________________________ ___________________________________
