SCHEDULE 1A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
American Biogenetic Sciences, Inc.
----------------------------------
(Name of Registrant as Specified in Its Charter)
---------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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4) Date Filed:
<PAGE>
AMERICAN BIOGENETIC SCIENCES, INC.
1375 AKRON STREET
COPIAGUE, NEW YORK 11726
--------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
--------------------
June 18, 1998
--------------------
NOTICE IS HEREBY GIVEN that the 1998 Annual Meeting of Stockholders
of American Biogenetic Sciences, Inc., a Delaware corporation (the "Company"),
will be held at Boston University, 595 Commonwealth Avenue, Boston,
Massachusetts, on Thursday, June 18, 1998 at 3:00 p.m., Eastern Daylight Savings
Time. The following matters are to be presented for consideration at the
meeting:
1. The election of seven directors to serve until the next
annual meeting of stockholders and until their respective successors
are elected and qualified;
2. A proposal to approve an amendment to the Company's 1996
Stock Option Plan to increase the number of shares of Class A Common
Stock which may be issued thereunder from 1,000,000 to 2,000,000
shares;
3. A proposal to ratify the selection of Arthur Andersen LLP
as the Company's independent auditors for the year ending December
31, 1998; and
4. The transaction of such other business as may properly come
before the meeting or any adjournments or postponements thereof.
The close of business on April 20, 1998 has been fixed as the record
date for the determination of stockholders entitled to notice of, and to vote
at, the meeting and any adjournments or postponements thereof. A list of such
stockholders will be open for examination by any stockholder for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting at the Boston offices of the Company, 801 Albany
Street, Boston, Massachusetts.
By Order of the Board of Directors,
Timothy J. Roach
Secretary
Copiague, New York
May 15, 1998
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND SIGN
THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE IN ORDER TO
ASSURE REPRESENTATION OF YOUR SHARES. NO POSTAGE IS NEEDED IF MAILED IN THE
UNITED STATES.
<PAGE>
AMERICAN BIOGENETIC SCIENCES, INC.
1375 Akron Street
Copiague, New York 11726
--------------------
PROXY STATEMENT
--------------------
This Proxy Statement is furnished to the holders of Class A Common
Stock ("Class A Common Stock") and to the sole holder of Class B Common Stock
("Class B Common Stock") of American Biogenetic Sciences, Inc. (the "Company")
in connection with the solicitation by the Board of Directors of the Company of
proxies in the accompanying form ("Proxy" or "Proxies") to be used at the 1998
Annual Meeting of Stockholders of the Company (the "Meeting") to be held on
Thursday, June 18, 1998, at 3:00 p.m., Eastern Daylight Savings Time, at Boston
University, 595 Commonwealth Avenue, Boston, Massachusetts, and at any
adjournments and postponements thereof, for the purposes set forth in the
accompanying Notice of Annual Meeting. It is anticipated that this Proxy
Statement and the Proxies will be mailed to stockholders on or about May 15,
1998. The cost of preparing, assembling and mailing the Notice of Annual
Meeting, this Proxy Statement and Proxies is to be borne by the Company. The
Company will also reimburse brokers who are holders of record of Class A Common
Stock for their expenses in forwarding Proxies and Proxy soliciting materials to
the beneficial owners of such shares. In addition to the use of the mails,
Proxies may be solicited without extra compensation by directors, officers and
employees of the Company by telephone, telecopy, telegraph or personal
interview. Proxies properly executed and received in time for the Meeting will
be voted. A stockholder who signs and returns a Proxy has the power to revoke it
at any time before it is exercised by giving written notice of revocation to the
Company, 1375 Akron Street, Copiague, New York 11726, Attention: Secretary, by a
duly executed proxy of later date, or by voting in person at the Meeting.
The close of business on April 20, 1998 has been fixed as the record
date for the determination of stockholders entitled to notice of, and to vote
at, the Meeting (the "Record Date"). There were outstanding, as of the close of
business on that date, 19,635,645 shares of Class A Common Stock and 1,725,500
shares of Class B Common Stock. A majority of the total of such outstanding
shares of Class A Common Stock and Class B Common Stock, represented in person
or by Proxy at the Meeting, is required to constitute a quorum for the
transaction of business at the Meeting. Holders of Class A Common Stock have one
vote for each share thereof held of record and the holder of Class B Common
Stock has ten votes for each share thereof held of record. The Class A Common
Stock and Class B Common Stock will vote as one class on all matters proposed
herein to be submitted to stockholders at the Meeting. Proxies submitted which
contain abstentions or broker nonvotes will be deemed present at the Meeting in
determining the presence of a quorum. Shares subject to abstentions with respect
to any matter are considered shares entitled to, and voted, with respect to that
matter. Shares subject to broker nonvotes with respect to any matter are not
considered as shares entitled to vote with respect to that matter. Therefore,
abstentions will, in effect, be deemed negative votes on each proposal, but
broker nonvotes will not affect the results of any of the matters proposed
herein to be submitted to stockholders at the Meeting.
Unless otherwise specified, all Proxies received will be voted for
the election of all nominees named herein to serve as directors, in favor of
approval of the amendment to the Company's 1996 Stock Option Plan to increase
the number of shares of Class A Common Stock which may be issued thereunder, and
to ratify the selection of Arthur Andersen LLP as the Company's independent
auditors. The Board of Directors does not intend to bring before the Meeting any
matter other than those specifically described above and knows of no matters
other than the foregoing to come before the Meeting. If any other matters or
motions come before the Meeting, it is the intention of the persons named in the
accompanying Proxy to vote such Proxy in accordance with their judgment on such
matters or motions, including any matters dealing with the conduct of the
Meeting.
<PAGE>
SECURITY HOLDINGS OF CERTAIN
STOCKHOLDERS, MANAGEMENT AND NOMINEES
The following table sets forth information as at the Record Date
with respect to the beneficial ownership of the Company's Class A Common Stock
and Class B Common Stock by (i) each person known by the Company to beneficially
own more than 5% of the outstanding shares of Class A Common Stock or Class B
Common Stock, (ii) each director of the Company, (iii) each executive officer
named in the Summary Compensation Table under the caption "Executive
Compensation" and (iv) all executive officers and directors of the Company as a
group. Each share of Class A Common Stock is entitled to one vote per share
while each share of Class B Common Stock is entitled to ten votes per share. The
Company understands that, except as noted below, each beneficial owner has sole
voting and investment power with respect to all shares attributable to such
owner.
Class A Common Stock(1) Class B Common Stock
----------------------- --------------------
Percent Percent
Beneficial Owner No. Shares of Class No. Shares of Class
- ----------------- ------------ -------- ---------- --------
Alfred J. Roach(2) 3,668,750(2) 16.3% 1,725,500 100%
Stephen H. Ip 71,668(3) * -- --
Ellena M. Byrne 200,000(3)(4) 1.0% -- --
Timothy J. Roach 595,000(3) 2.9% -- --
Gustav V. R. Born 20,000(3) * -- --
Joseph C. Hogan 50,000(3) * -- --
William G. Sharwell 55,000(3) * -- --
All executive officers
and directors as a group
(10 persons, including
the foregoing) 4,930,918(5) 20.8% 1,725,500 100%
- ---------------------------
(1) Asterisk indicates less than one percent. Shares of Class A Common Stock
subject to issuance upon conversion of Class B Common Stock into Class A
Common Stock and upon exercise of options that were exercisable on, or
become exercisable within 60 days after, the Record Date are considered
owned by the holder thereof and outstanding for purposes of computing the
percentage of outstanding Class A Common Stock that would be owned by such
person, but (except for the computation of beneficial ownership by all
executive officers and directors as a group) are not considered
outstanding for purposes of computing the percentage of outstanding Class
A Common Stock owned by any other person.
(2) The address of Mr. Roach is Route 2 - Kennedy Avenue, Guaynabo, Puerto
Rico 00657. Beneficial ownership of Class A Common Stock includes
1,725,500 shares of Class A Common Stock issuable upon conversion of the
same number of shares of Class B Common Stock on a share for share basis
and 1,160,000 shares of Class A Common Stock subject to outstanding
options.
(Footnotes continued on next page)
-2-
<PAGE>
(3) Includes shares of Class A Common Stock subject to options as follows:
Stephen H. Ip, 66,668; Ellena M. Byrne, 165,000 (including 10,000 shares
subject to options held by her husband); Timothy J. Roach, 595,000; Gustav
V.R. Born, 20,000; Joseph C. Hogan, 40,000; and William G. Sharwell,
45,000.
(4) Includes 10,000 shares owned by Ms. Byrne's son. The inclusion of these
amounts should not be construed as an admission that Ms. Byrne is the
beneficial owner of these shares.
(5) Includes 1,725,500 shares of Class A Common Stock issuable upon conversion
of the same number of shares of Class B Common Stock and 2,336,668 shares
of Class A Common Stock subject to outstanding options.
PROPOSAL 1.
ELECTION OF DIRECTORS
The Company's By-Laws provide that the number of members of the
Board of Directors shall be not less than three or more than nine, the exact
number to be fixed by resolution of the Board of Directors. The Board of
Directors presently consists of seven members. Each of the nominees, other than
Stephen H. Ip (who was elected as a director by the Board in January 1998), has
been previously elected by stockholders of the Company.
Unless authority to do so is withheld, Proxies will be voted at the
Meeting for the election of each of the nominees named below to serve as
directors of the Company until the next annual meeting of stockholders and until
their respective successors are elected and qualified. In the event that any of
the nominees should become unavailable or unable to serve for any reason, the
holders of Proxies have discretionary authority to vote for one or more
alternate nominees designated by the Board of Directors. The Company believes
that all of the nominees are available to serve as directors.
BACKGROUND OF NOMINEES
Alfred J. Roach, 82, has been Chairman of the Board of Directors of
the Company since its organization in September 1983 and, from September 1983
until October 1988, also served as President of the Company. Mr. Roach has
served as Chairman of the Board and/or President of TII Industries, Inc.
("TII"), a corporation engaged in manufacturing and marketing telecommunications
products, and its predecessor since its founding in 1964. Mr. Roach devotes a
majority of his time to the business of the Company.
Stephen H. Ip, Ph.D., 51, joined the Company in January 1997 as
Executive Vice President and Chief Operating Officer and was elected President
and a director, in addition to continuing as Chief Operating Officer, in January
1998. Prior to joining the Company, Dr. Ip served as Vice President, Corporate
and Business Development of Paracelsian, Inc., a publicly-held company engaged
in clinical and pre-clinical development of drugs and supplements for the
treatment of AIDS and cancer, from February, 1996. From 1990 through December
1995, Dr. Ip served as President, Chief Operating Officer and director of
CytoMed, Inc., a biopharmaceutical company engaged in the research and
development of synthetic chemical drugs and recombinant proteins for the
treatment of acute and chronic diseases. From 1984 through 1989, he was Vice
President and a scientific co-founder of T Cell Sciences, Inc., a biotechnology
company.
Ellena M. Byrne, 47, has been Executive Vice President and a
director of the Company since March 1995. From January 1986 until December 1991,
Ms. Byrne served as Vice President-Administration of the Company and, from
December 1991 until March 1995, Ms. Byrne served in various capacities with the
Company, including Director of Operations for Europe and Asia.
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<PAGE>
Timothy J. Roach, 51, has been Treasurer, Secretary and a director
of the Company since September 1983. He has also been affiliated with TII since
1974, serving as its President since July 1980, Chief Operating Officer since
May 1987, Vice Chairman of the Board since October 1993, Chief Executive Officer
since January 1995 and a director since January 1978. Mr. Roach devotes such
time as is necessary to the business of the Company to discharge his duties as
Treasurer, Secretary and a director. Timothy J. Roach is the son of Alfred J.
Roach.
Gustav Victor Rudolf Born, M.D., D.Phil., F.R.S., 76, has been a
director of the Company since January 1997. Since 1988, Dr. Born has been
Research Director of The William Harvey Research Institute at St. Bartholomew's
Hospital Medical College, London, England and Emeritus Professor of Pharmacology
in the University of London. Among Dr. Born's distinctions, appointments and
activities are: Fellowship and Royal Medal of the Royal Society; and Foundation
President of the British Society for Thrombosis and Haemostasis.
Joseph C. Hogan, Ph.D., 75, has been a director of the Company since
December 1983. Dr. Hogan served as Dean of the College of Engineering of the
University of Notre Dame from 1967 to 1981, following which he performed various
services for the University of Notre Dame until 1985, where he remains Dean
Emeritus. From 1985 until his retirement in 1987, Dr. Hogan was Director of
Engineering Research and Resource Development at Georgia Institute of Technology
("Georgia Tech"). Dr. Hogan is a director of TII.
William G. Sharwell, D.C.S., 77, has been a director of the Company
since October 1986. Dr. Sharwell was President of Pace University in New York
from 1984 until his retirement in 1990. He was Senior Vice President of American
Telephone & Telegraph Company between 1976 and 1984, and previously served as
Executive Vice President of Operations of New York Telephone Company. Dr.
Sharwell serves on the Board of Directors of TII and as an independent general
partner of Equitable Capital Partners, L.P. and Equitable Capital Partners
(Retirement Fund), L.P., registered investment companies under the Investment
Company Act of 1940.
MEETINGS OF THE BOARD OF DIRECTORS
During the year ended December 31, 1997, the Board of Directors held
two meetings and acted by unanimous written consent on ten occasions following
informal discussions. Each director was present at all of the meetings of the
Board of Directors and committees of the Board on which such director served
that were held during the period in 1997 such person served as a director,
except that Dr. Born was not present at one of the two Board meetings held
during 1997.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has an Audit and Compensation Committee, but
does not have a nominating committee.
The Audit Committee, which consists of Messrs. Hogan and Sharwell,
is authorized to examine and consider matters related to the audit of the
Company's accounts, the financial affairs and accounts of the Company, the scope
of the independent auditors' engagement and their compensation, the effect on
the Company's financial statements of any proposed changes in generally accepted
accounting principles, disagreements, if any, between the Company's independent
auditors and management, and matters of concern to the independent auditors
resulting from the audit, including the results of the independent auditors'
review of internal accounting controls. This committee is also authorized to
nominate independent auditors, subject to approval by the Board of Directors.
The Audit Committee held two meetings during 1997.
-4-
<PAGE>
The Compensation Committee is authorized to consider and recommend
to the Board of Directors the salaries, bonuses and other compensation
arrangements with respect to the executive officers of the Company. This
Committee is also empowered to grant all options under, and administer, the
Company's stock option plans. The Compensation Committee is further empowered to
examine, administer and make recommendations to the full Board with respect to
other employee benefit plans and arrangements of the Company. The Compensation
Committee presently consists of Messrs. Joseph C. Hogan and William G. Sharwell.
The Compensation Committee acted by unanimous written consent on twelve
occasions during 1997 following informal discussions.
REMUNERATION OF DIRECTORS
Directors receive no compensation for service on the Board. Each
director serving on the Audit Committee receives a fee of $600 for each meeting
of the committee attended by that director in person and not telephonically. All
directors are reimbursed for travel expenses incurred in attending Board and
committee meetings.
The Company's 1993 Non-Employee Director Stock Option Plan, approved
by stockholders at the Company's 1993 Annual Meeting of Stockholders, provides
for the automatic grant of an option to purchase 10,000 shares of the Company's
Class A Common Stock to each non-employee director holding office immediately
after each annual meeting of stockholders. The exercise price for each option is
equal to the fair market value of the Company's Class A Common Stock on the date
of grant. All options have a term of five years and are exercisable, on a
cumulative basis, at the rate of one quarter of the number of shares subject to
the option in each year commencing one year after the date of the grant.
See "Executive Compensation" for information concerning the
compensation of Mr. Alfred J. Roach and Dr. Stephen H. Ip for their services as
executive officers of the Company. The Company is also a party to an employment
agreement dated October 1, 1996 with Ms. Ellena M. Byrne, pursuant to which Ms.
Byrne is serving as Executive Vice President of the Company. The Employment
Agreement provides for a term extending, subject to certain terms and
conditions, until September 30, 2001. Ms. Byrne's current annual salary is U.S.
$18,200 and (pound)50,000 Irish Pounds (approximately U.S. $68,000 at March 31,
1998). Dr. Born serves as a consultant to the Company for which he receives
compensation at the rate of $12,000 per annum.
REQUIRED VOTE
A plurality of the votes cast at the Meeting by the holders of Class
A Common Stock and Class B Common Stock voting together as one class, with Class
A Common Stock having one vote per share and Class B Common Stock having ten
votes per share, will be required for the election of directors. The Board of
Directors recommends that stockholders vote FOR each of Alfred J. Roach, Stephen
H. Ip, Ellena M. Byrne, Timothy J. Roach, Gustav V.R. Born, Joseph C. Hogan and
William G. Sharwell to serve as directors of the Company.
EXECUTIVE OFFICERS
The executive officers of the Company, in addition to Alfred J.
Roach, Stephen H. Ip, Timothy J. Roach and Ellena M. Byrne (whose backgrounds
are described under the caption "Election of Directors - Background of Nominees"
above), are:
Emer Leahy, Ph.D., 32, rejoined the Company in December 1997,
serving as Senior Vice President- Business Development. From April 1995 to
December 1997, Dr. Leahy was employed by AMBI, Inc., a biotechnology and
nutraceutical company, as Vice President-Product Development and
Director-Business Development, where she coordinated licensing technologies and
products as well as participating in corporate acquisitions. From April 1994 to
April 1995, Dr. Leahy was Vice President-Neuroscience and, from August
-5-
<PAGE>
1993 to April 1994, was Vice President-Regulatory Affairs of the Company. From
February 1992 until August 1993, Dr. Leahy was employed by Boehringer Ingelheim,
GmbH, a multinational pharmaceutical company, where she coordinated clinical
trials in Ireland. In addition, from October 1991 to August 1993, Dr. Leahy was
lecturer in Pharmacology at the Royal College of Surgeons of Ireland.
James H. McLinden, Ph.D., 47, has been Vice President - Molecular
Biology of the Company since November 1991. Prior thereto (and since joining the
Company in January 1987), Dr. McLinden served as Director of Molecular Biology
of the Company.
Josef C. Schoell, 48, joined the Company in July 1992 as its
Controller and was elected Vice President- Finance and Chief Financial Officer
of the Company in July 1995. Mr. Schoell is a Certified Public Accountant in the
State of New York.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning the annual and
long-term compensation for services in all capacities to the Company during
1995, 1996 and 1997 of the Company's chief executive officer and the executive
officers of the Company whose annual cash compensation for 1997 exceeded
$100,000:
ANNUAL LONG-TERM
COMPENSATION COMPENSATION
NAME AND ----------------- ------------
PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS
------------------ ---- ----------------- -------
Alfred J. Roach, Chairman 1997 $250,000 -- --
of the Board and Chief 1996 $250,000 -- --
Executive Officer 1995 $250,000 -- 135,000
Stephen H. Ip, Executive Vice 1997 $146,000 $ 25,000 200,000
President and Chief Operating
Officer (1)
Josef C. Schoell, Vice President- 1997 $103,000 -- 25,000
Finance 1996 $ 95,000 -- 10,000
1995 $ 76,000 -- 60,000
Paul E. Gargan, Former President 1997 $137,000 -- --
1996 $162,000 -- --
1995 $150,000 -- 31,500
- --------------------
(1) Dr. Ip joined the Company in January 1997 and was elected President of the
Company in January 1998.
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<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table contains information concerning options to
purchase shares of the Company's capital stock granted by the Company during the
year ended December 31, 1997 to the executive officers named in the Summary
Compensation Table. No stock appreciation rights have been granted by the
Company.
<TABLE>
<CAPTION>
INDIVIDUAL OPTIONS POTENTIAL
------------------------------------------------------- REALIZABLE VALUE
PERCENT AT ASSUMED ANNUAL
NUMBER OF OF TOTAL RATES OF STOCK
SHARES OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM (2)
OPTIONS EMPLOYEES IN PRICE EXPIRATION -------------------
NAME GRANTED(1) FISCAL YEAR PER SHARE(1) DATE 5% 10%
---- ---------- ----------- ------------ ----------- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Stephen H. Ip 200,000 21.8% $3.66 1/02/2007 $460,351 $1,166,619
Josef C. Schoell 25,000 2.7% $3.47 1/20/2007 $ 54,557 $ 138,257
</TABLE>
- -------------
(1) Exercisable as to 25% of the number of shares of Class A Common Stock
underlying the option commencing six months after the date of grant, on a
cumulative basis. The exercise price of each of the options granted to
Messrs. Ip and Schoell is the market value of the Class A Common Stock on
the date of grant.
(2) These are hypothetical values using assumed compound growth rates
prescribed by the Securities and Exchange Commission and are not intended
to forecast possible future appreciation, if any, in the market price of
the Company's Class A Common Stock.
OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END VALUES
No options to purchase shares of the Company's capital stock were
exercised during 1997 by the executive officers named in the Summary
Compensation Table. The following table contains information concerning the
number of shares of Class A Common Stock underlying unexercised options held at
December 31, 1997 by the executive officers named in the Summary Compensation
Table.
VALUE OF VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS HELD AT OPTIONS HELD AT
FISCAL YEAR-END (#) FISCAL YEAR-END($)
(EXERCISABLE/ (EXERCISABLE/
NAME UNEXERCISABLE) UNEXERCISABLE(1)
---- ------------------- ----------------
Alfred J. Roach 1,160,000/ 0 $ 0/$ 0
Stephen H. Ip 0 /200,000 $ 0/$ 0
Josef C. Schoell 95,000/130,000 $ 9,375/$ 0
Paul E. Gargan(2) 164,000/ 0 $ 4,922/$ 0
- --------------
(1) The closing price of the Company's Class A Common Stock The Nasdaq Stock
Market's National Market on December 31, 1997 less the exercise price of
each option.
(2) Excludes options held by Dr. Gargan's wife.
-7-
<PAGE>
EMPLOYMENT AGREEMENTs
The Company is a party to an employment agreement with Dr. Stephen
H. Ip, dated December 16, 1996, under which Dr. Ip is serving as President of
the Company. The agreement provides for a term expiring December 31, 1999, with
the Company and Dr. Ip having the right to terminate the agreement without cause
on thirty and sixty days' notice, respectively. In the event of termination of
the agreement by the Company without cause, Dr. Ip is to remain as a consultant
to the Company at his then existing compensation for a period of one year,
provided that the consulting and compensation arrangement is to terminate if Dr.
Ip enters into full-time employment with a third party. Under the agreement, Dr.
Ip's current annual salary is $175,000 per annum. Dr. Ip recieved a one-time
$25,000 bonus in connection with his entering into the agreement and is entitled
to an annual bonus of up to 20% of his annual salary based on goals mutually
agreed upon between the Company and Dr. Ip.
The Company is also a party to an employment agreement with Dr. Emer
Leahy, dated November 12, 1997, under which Dr. Leahy is serving as Senior Vice
President-Business Development of the Company. The agreement provides for a term
expiring November 30, 2001. Under the agreement, Dr. Leahy's current annual
salary is $150,000 per annum. Dr. Leahy is entitled to annual bonuses and salary
increases based upon performance, as well as reimbursement for tuition fees for
an Executive MBA program.
As part of their respective employment agreements, Drs. Ip and Leahy
have agreed not to disclose confidential information about the Company during or
after employment and not to compete with the Company during their term of
employment and, in certain instances, following employment.
REPORT OF COMPENSATION COMMITTEE CONCERNING EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors, consisting of
Messrs. Joseph C. Hogan and William G. Sharwell, "non-employee" directors,
within the meaning of Rule 16b-3 promulgated by the Securities and Exchange
Commission under the Securities Exchange Act of 1934, and "outside directors",
within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as
amended ("Section 162(m)"), is authorized to consider and recommend to the Board
of Directors salaries, bonuses and other compensation arrangements for executive
officers and to grant all options under, and administer, the Company's employee
stock option plans.
The Compensation Committee believes that the Company, as a
development stage company, should create compensation packages to attract and
retain executives who can bring the experience and skills to the Company
necessary for the development of the Company and development and marketing of
its products. To date, this has been accomplished by utilizing salary as the
base compensation and stock options to promote long-term incentives and, in one
case, a bonus as an inducement to an executive to join the Company. As the
Company grows, other forms of annual and long-term compensation arrangements may
be developed to provide appropriate incentives and to reward specific
accomplishments.
In determining base salaries, the Compensation Committee examines,
among other factors, the executive's performance, degree of responsibility and
experience, as well as general employment conditions, competition and economic
factors. No specific weights are assigned to any of the factors employed by the
Compensation Committee. In 1997, the salaries of certain executive officers were
increased, using subjective standards, to recognize their performance.
The Compensation Committee also makes use of stock options to
provide long-term incentive compensation to many of the Company's employees,
including executive officers, enabling them to benefit, along
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<PAGE>
with all stockholders, if the market price for Class A Common Stock rises. The
Compensation Committee believes that the use of stock options ties employee
interests to those of the Company's stockholders through stock ownership and
potential stock ownership, while also providing the Company with a means of
compensating employees using a method which enables the Company to conserve its
available cash for operations and product development. To assure the long-term
nature of the incentive, options granted have generally not become exercisable
during the first year after grant and thereafter have become exercisable over a
period of two to four years. Decisions of the Compensation Committee as to
option grants are based, in large measure, upon a review of such factors as the
executive's level of responsibility, other compensation, accomplishments and
goals, and when the last option was granted to such executive, as well as
recommendations and evaluations of the executive's performance and prospective
contributions by the Company's Chief Executive Officer. Determinations have been
made subjectively without giving weight to specific factors.
Chief Executive Officer Compensation. The salary of Alfred J. Roach,
the Company's Chief Executive Officer has remained unchanged for the past five
years, although he was granted options to purchase shares of the Company's Class
A Common Stock during 1995 under the Company's 1986 Stock Option Plan in
recognition of his efforts on behalf of the Company. No options were granted to
Mr. Roach in 1996 or 1997.
Certain Tax Legislation. Section 162(m) precludes a public company
from taking a federal income tax deduction for annual compensation in excess of
$1,000,000 paid to its chief executive officer or any of its four other most
highly compensated executive officers. Certain "performance based compensation"
is excluded from the deduction limitation. Any compensation resulting from the
exercise of stock options granted by the Company should be eligible for
exclusion since all options were either granted prior to the adoption of Section
162(m) or under a plan approved by the Company's stockholders which was designed
to conform to regulations for determining whether options are deemed
"performance based compensation." The Committee believes that the limitations on
compensation deductibility under Section 162(m) will have no effect on the
Company in the foreseeable future, and intends to take such action as may be
necessary, including obtaining stockholder approval where required, in order for
compensation not to be subject to the limitation on deductibility imposed by
Section 162(m) of the Code.
Respectfully submitted,
Joseph C. Hogan
William G. Sharwell
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<PAGE>
PERFORMANCE GRAPH
The following graph compares the cumulative return to stockholders of
Class A Common Stock from December 31, 1992 (the first point shown in the
following graph) through December 31, 1997 with the Nasdaq Market Index and the
Dow Jones Industry Group BTC - Biotechnology Index for the same period. The
comparison assumes $100 was invested on December 31, 1992 in Class A Common
Stock and in each of the comparison groups, and assumes reinvestment of
dividends (the Company paid no dividends during the periods):
[GRAPHIC OMITTED]
- --------------------------------------------------------------------------------
At December 31, 1992 1993 1994 1995 1996 1997
- --------------------------------------------------------------------------------
American Biogenetic Sciences 100 89 27 50 74 35
Peer Group Index 100 94 83 144 149 160
NASDAQ Market Index 100 120 126 163 203 248
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act requires the Company's
executive officers and directors, and persons who beneficially own more than 10%
of the Company's Class A Common Stock, to file initial reports of ownership, and
reports of changes of ownership, of the Company's equity securities with the
Securities and Exchange Commission and furnish copies of those reports to the
Company. Based solely on a review of copies of the reports furnished to the
Company, or written representation that no reports were required, the Company
believes that all reports required to be filed by such persons with respect to
the Company's year ended December 31, 1997 were timely filed.
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<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On January 17, 1997, November 26, 1997, December 15, 1997, December
30, 1997 and May 4, 1998, Mr. Alfred J. Roach purchased 100,000, 50,000,
100,000, 100,000 and 50,000 shares, respectively, of the Company's Class B
Common Stock for $343,750, or $3.4375 per share; $109,375, or $2.1875 per share;
$168,800, or $1.688 per share; $156,250, or $1.5625 per share; and $81,250, or
$1.625 per share, respectively, the closing bid prices of the Company's Class A
Common Stock (into which the Company's Class B Common Stock is convertible on a
share-for-share basis) on The Nasdaq Stock Market's National Market on the
respective dates.
PROPOSAL 2.
APPROVAL OF AN AMENDMENT OF THE COMPANY'S 1996
STOCK OPTION PLAN TO INCREASE THE NUMBER OF SHARES
OF CLASS A COMMON STOCK ISSUABLE THEREUNDER
At the Company's 1996 annual meeting, stockholders approved the
Company's 1996 Stock Option Plan (the "Plan") to provide an incentive to
employees of, and consultants to, the Company and its present and future
subsidiaries and to offer an additional inducement in obtaining the services of
such persons through the grant of options to purchase shares of the Company's
Class A Common Stock within the limits and subject to the terms and conditions
of the Plan. The Plan is the only plan of the Company that presently permits the
grant of options to employees of, or consultants to, the Company.
The Plan, as adopted, presently authorizes the grant of options to
purchase a maximum of 1,000,000 shares of Class A Common Stock. As of April 30,
1998, options to purchase an aggregate of 906,000 shares of Class A Common Stock
are outstanding, leaving only 94,000 shares (together with any shares subject to
options which become available for grant in the event of any expiration,
cancellation or termination of unexercised options) available for future grant.
The Board of Directors believes that the Plan serves the purposes
for which it was intended and has authorized an amendment to increase the number
of shares of Class A Common Stock authorized for issuance under the Plan by an
aggregate of 1,000,000 shares (subject to possible adjustments as described
below under "Adjustment in the Event of Capital Changes").
The following summary of certain material features of the 1996 Plan.
SHARES SUBJECT TO THE OPTION PLAN AND ELIGIBILITY
The Plan authorizes the grant of options to purchase a maximum of
1,000,000 shares (which will be increased to 2,000,000 shares if the proposed
amendment to the Plan is approved by stockholders at the Meeting) of the
Company's Class A Common Stock (subject to adjustment as described below) to
employees of, and to consultants to (including officers and directors who are
employees or consultants), the Company or any of its present and future
subsidiaries. Upon expiration, cancellation or termination of unexercised
options, the shares of the Company's Class A Common Stock subject to such
options will again be available for the grant of options under the Plan.
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<PAGE>
TYPE OF OPTIONS
Options granted under the Plan may either be incentive stock options
("ISOs"), within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"), or nonqualified stock options which do not
qualify as ISOs ("NQSOs"). ISOs, however, may only be granted to employees.
ADMINISTRATION
The Plan is to be administered by the Board of Directors or, to the
extent the Board may determine, a committee of the Board (the "Committee")
consisting of at least two members of the Board, each of whom is a "non-employee
director" within the meaning of Rule 16b-3 promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). It is also intended that
each member of the Committee will be an "outside director" within the meaning of
Section 162(m) of the Code. The Plan is currently being administered by the
Compensation Committee of the Board. References in the following discussion to
powers and actions that may be taken by the Committee include powers and actions
that may also be taken by the Board of Directors.
Among other things, the Committee is empowered to determine, within
any express limits contained in the Plan, the employees and consultants to be
granted options, whether an option granted to an employee is to be an ISO or an
NQSO, the number of shares of Class A Common Stock to be subject to each option,
the exercise price of each option, the term of each option, the date each option
shall become exercisable as well as any terms, conditions or installments
relating to the exercisability of each option, whether to accelerate the date of
exercise of any option or installment and the form of payment of the exercise
price, to construe each stock option contract ("Contract") between the Company
and an optionee and, with the consent of the optionee, to cancel (which could be
in conjunction with the grant of a new option at a lower exercise price or on
different terms and conditions) or modify an option. The Committee is also
authorized to prescribe, amend and rescind rules and regulations relating to the
Plan and make all other determinations necessary or advisable for administering
the Plan.
TERMS AND CONDITIONS OF OPTIONS
Options granted under the Plan are subject to, among other things,
the following terms and conditions:
(a) The exercise price of each option will be determined by the
Committee; provided, however, that the exercise price of an ISO may not be less
than the fair market value of the Company's Common Stock on the date of grant
(110% of such fair market value, in the case of an ISO, if the optionee owns (or
is deemed to own) more than 10% of the voting power of the Company).
(b) Options may be granted for terms determined by the Committee;
provided, however, that the term of an ISO may not exceed ten years (five years,
in the case of an ISO, if the optionee owns (or is deemed to own) more than 10%
of the voting power of the Company).
(c) The maximum number of shares of the Company's Class A Common
Stock for which options may be granted to an employee in any calendar year is
150,000. In addition, the aggregate fair market value of shares with respect to
which ISOs may be granted to an employee under all option plans of the Company
which are exercisable for the first time during any calendar year may not exceed
$100,000.
(d) The exercise price of each option is payable in full upon
exercise or, if the applicable Contract permits, in installments. Payment of the
exercise price of an option may be made in cash, or, if the applicable Contract
permits, in shares of the Company's Class A Common Stock or any combination
thereof.
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<PAGE>
(e) Options may not be transferred other than by will or by the
laws of descent and distribution, and may be exercised during the optionee's
lifetime only by the optionee.
(f) Except as may otherwise be provided in the applicable
Contract, if the optionee's relationship with the Company as an employee or
consultant is terminated for any reason other than death or disability, the
option may be exercised, to the extent exercisable at the time of termination of
such relationship, within three months thereafter, but in no event after the
expiration of the term of the option; provided, however, that if the
relationship is terminated either for cause or without the consent of the
Company, the option will terminate immediately. Options are not affected by a
change in the status of an optionee so long as the optionee continues to be an
employee of, or a consultant to, the Company. In the case of the death of an
optionee while an employee or consultant (or, generally, within three months
after termination of such relationship, or within one year after termination of
employment by reason of disability), except as otherwise provided in the
Contract, the optionee's legal representative or beneficiary may exercise the
option, to the extent exercisable on the date of death, within one year after
such date, but in no event after the expiration of the term of the option. An
optionee whose relationship with the Company is terminated by reason of
disability may exercise the option, to the extent exercisable at the time of
such termination, within one year thereafter, but not after the expiration of
the term of the option.
(g) The Company may withhold cash and/or shares of the Company's
Class A Common Stock having an aggregate value equal to the amount which the
Company determines is necessary to meet its obligations to withhold any federal,
state and/or local taxes or other amounts incurred by reasons of the grant or
exercise of an option or the disposition of shares acquired upon the exercise of
the option. Alternatively, the Company may require the optionee to pay the
Company such amount, in cash, promptly upon demand.
ADJUSTMENT IN EVENT OF CAPITAL CHANGES
Appropriate adjustments will be made in the number and kind of
shares available under the Plan, in the number and kind of shares subject to
each outstanding option and the exercise prices of such options, as well as the
limitation on the number of shares that may be granted to any employee in any
calendar year, in the event of any change in the Company's Class A Common Stock
by reason of any stock dividend, split-up, combination, reclassification,
recapitalization, spin-off, merger in which the Company is not the surviving
corporation, exchange of shares or the like. In the event of the liquidation or
dissolution of the Company, or a merger in which the Company is not the
surviving corporation or a consolidation, any outstanding options shall
terminate upon the earliest of any such event, unless other provision is made
therefor in the transaction.
DURATION AND AMENDMENT OF THE PLAN
No option may be granted under the Plan after March 28, 2006.
However, the Board of Directors may at any time terminate or amend the Plan;
provided that, without the approval of the Company's stockholders, no amendment
may be made which would (a) except as a result of the anti-dilution adjustments
described above, increase the maximum number of shares available for the grant
of options or increase the maximum number of shares covered by options that may
be granted to an employee in any calendar year, (b) materially increase the
benefits accruing to participants, or (c) change the eligibility requirements
for persons who may receive options. No termination or amendment may adversely
affect the rights of an optionee with respect to an outstanding option without
the optionee's consent.
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<PAGE>
FEDERAL INCOME TAX TREATMENT
The following is a general summary of the federal income tax
consequences under current tax law of NQSOs and ISOs. It does not purport to
cover all of the special rules, including the exercise of an option with
previously-acquired shares, or the state or local income or other tax
consequences inherent in the ownership and exercise of stock options and the
ownership and disposition of the underlying shares.
An optionee does not recognize taxable income for federal income tax
purposes upon the grant of a NQSO or an ISO.
Upon the exercise of a NQSO, the optionee recognizes ordinary income
in an amount equal to the excess, if any, of the fair market value of the shares
acquired on the date of exercise over the exercise price thereof, and the
Company generally is entitled to a deduction for such amount at that time. If
the optionee later sells shares acquired pursuant to the exercise of a NQSO, he
or she recognizes long-term or short-term capital gain or loss, depending on the
period for which the shares were held. Long-term capital gain is generally
subject to more favorable tax treatment than ordinary income or short-term
capital gain.
Upon the exercise of an ISO, the optionee does not recognize taxable
income. If the optionee disposes of the shares acquired pursuant to the exercise
of an ISO more than two years after the date of grant and more than one year
after the transfer of the shares to him or her, the optionee recognizes
long-term capital gain or loss and the Company is not be entitled to a
deduction. However, if the optionee disposes of such shares within the required
holding period, all or a portion of the gain is treated as ordinary income and
the Company generally is entitled to deduct such amount.
In addition to the federal income tax consequences described above,
an optionee may be subject to the alternative minimum tax, which is payable to
the extent it exceeds the optionee's regular tax. For this purpose, upon the
exercise of an ISO, the excess of the fair market value of the shares over the
exercise price therefor is an adjustment which increases alternative minimum
taxable income. In addition, the optionee's basis in such shares is increased by
such excess for purposes of computing the gain or loss on the disposition of the
shares for alternative minimum tax purposes. If an optionee is required to pay
an alternative minimum tax, the amount of such tax which is attributable to
deferral preferences (including the ISO adjustment) is allowed as a credit
against the optionee's regular tax liability in subsequent years. To the extent
the credit is not used, it is carried forward.
OPTIONS GRANTED DURING LAST FISCAL YEAR TO EMPLOYEES AND CONSULTANTS
The grant of options is within the discretion of the Committee.
Accordingly, the Company is unable to determine future options, if any, that may
be granted to the persons or groups to which the following table pertains. Set
forth under the caption "Executive Compensation - Option Grants in Last Fiscal
Year", above, is information concerning options granted during the Company's
fiscal year ended December 31, 1997 to the persons named in the Summary
Compensation Table, each of which options was granted under the Plan. The
following table sets forth the number of shares underlying options that were
granted under the Plan during the Company's fiscal year ended December 31, 1997
to (i) all current executive officers as a group and (ii) all other current
employees as a group, including current officers who are not executive officers:
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<PAGE>
NUMBER OF SHARES
CATEGORY OF OPTIONEE UNDERLYING OPTIONS GRANTED
- -------------------- --------------------------
Current executive officers as a group (6 persons, 420,000
including the persons named in the Summary
Compensation Table)
Other employees as a group (18 persons) 166,000
The Company's three non-employee directors, who were each granted
options to purchase 10,000 shares of Class A Common Stock under the Company's
1993 Non-Employee Director Stock Option Plan in 1997 (see "Election of Directors
- - Remuneration of Directors"), are not entitled to participate in the Plan.
The exercise price of all of the foregoing options was at least 100%
of the market value of the underlying shares on the date of grant. The foregoing
table does not include any dollar value that may arise from a future increase in
the market value of the Company's Class A Common Stock. On May 8, 1998, the
closing price of the Company's Class A Common Stock on The Nasdaq Stock Market's
National Market was $1.563 per share.
REQUIRED VOTE
Approval of the proposed amendment to the Plan requires the
affirmative vote of a majority of the shares of Class A Common Stock and Class B
Common Stock present, in person or by proxy, at the Meeting and entitled to vote
on this proposal, voting together as one class, with Class A Common Stock having
one vote per share and Class B Common Stock having ten votes per share. The
Board of Directors recommends a vote FOR approval of this proposal.
PROPOSAL 3.
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected the firm of Arthur Andersen LLP
as the independent auditors of the Company for the year ending December 31,
1998. Arthur Andersen LLP has acted for the Company in such capacity since 1989.
The Board proposes that the stockholders ratify such selection at the Meeting.
Representatives of Arthur Andersen LLP are expected to be present at
the Meeting and will be afforded an opportunity to make a statement if they so
desire and to respond to appropriate questions.
REQUIRED VOTE
The affirmative vote of a majority of the shares of Class A Common
Stock and Class B Common Stock present, in person or by proxy, at the Meeting
and entitled to vote on this proposal, voting together as one class, with Class
A Common Stock having one vote per share and Class B Common Stock having ten
votes per share, will be required to adopt this proposal. The Board of Directors
recommends that stockholders vote FOR approval of this proposal.
-15-
<PAGE>
MISCELLANEOUS
STOCKHOLDER PROPOSALS
From time to time stockholders may present proposals which may be
proper subjects for inclusion in the proxy statement and form of proxy relating
to that meeting. In order to be considered, such proposals must be submitted in
writing on a timely basis. Stockholder proposals intended to be included in the
Company's proxy statement and form of proxy relating to the Company's next
Annual Meeting of Stockholders must be received at 1375 Akron Street, Copiague,
New York 11726, by January 15, 1999. Any such proposals, as well as any
questions relating thereto, should be directed to the Secretary of the Company.
ANNUAL REPORT ON FORM 10-K
A copy of the Company's Annual Report on Form 10-K for the year
ended December 31, 1997, which has been filed with the Securities and Exchange
Commission, is also available, without charge, to stockholders who are
interested in more detailed information about the Company. Requests for a copy
of that report should be addressed to Timothy J. Roach, Treasurer, at 1375 Akron
Street, Copiague, New York 11726.
By Order of the Board of Directors,
Timothy J. Roach
Secretary
May 15, 1998
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<PAGE>
AMERICAN BIOGENETIC SCIENCES, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS - JUNE 18, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints, as proxies for the undersigned, AIDA
PADILLA, TIMOTHY J. ROACH and LEONARD W. SUROFF, or any one or more of them,
with full power of substitution, to vote all shares of the capital stock of
American Biogenetic Sciences, Inc. (the "Company") which the undersigned is
entitled to vote at the Annual Meeting of Stockholders of the Company to be held
on Thursday, June 18, 1998, at 3:00 P.M., Eastern Daylight Savings Time, at
Boston University, 595 Commonwealth Avenue, Boston, Massachusetts, and at any
adjournments or postponements thereof, receipt of Notice of which meeting and
the Proxy Statement accompanying the same being hereby acknowledged by the
undersigned, upon the matters described in the Notice of Meeting and Proxy
Statement and upon such other business as may properly come before the meeting
and any adjournments or postponements thereof, hereby revoking any proxies
heretofore given.
EACH PROPERLY EXECUTED PROXY WILL BE VOTED IN ACCORDANCE WITH THE
SPECIFICATIONS MADE BELOW AND ON THE REVERSE SIDE HEREOF. IF NO SPECIFICATIONS
ARE MADE, THE PROXIES WILL BE VOTED FOR EACH LISTED NOMINEE TO SERVE AS A
DIRECTOR AND FOR PROPOSALS 2 AND 3.
A VOTE FOR EACH NOMINEE AND FOR PROPOSALS 2 AND 3 IS RECOMMENDED BY THE
BOARD OF DIRECTORS.
1. Election of Directors (check one box only)
[_] FOR EACH NOMINEE LISTED BELOW [_] WITHHOLD AUTHORITY
(except as marked to the contrary below): to vote for all nominees
listed below
ALFRED J. ROACH, ELLENA M. BYRNE, STEPHEN H. IP, TIMOTHY J. ROACH,
GUSTAV V. R. BORN, JOSEPH C. HOGAN and WILLIAM G. SHARWELL
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE, CIRCLE THAT
NOMINEE'S NAME IN THE ABOVE LIST)
(continued and to be signed on reverse side)
<PAGE>
2. To approve an amendment to the Company's 1996 Stock Option Plan to
increase the number of shares of Class A Common Stock that may be issued
thereunder from 1,000,000 shares to 2,000,000 shares.
FOR AGAINST ABSTAIN
[_] [_] [_]
3. To ratify the selection of Arthur Andersen LLP as independent auditors for
the Company.
FOR AGAINST ABSTAIN
[_] [_] [_]
Dated:____________________, 1998
________________________________
(SIGNATURE OF STOCKHOLDER)
________________________________
(SIGNATURE OF STOCKHOLDER)
NOTE: PLEASE SIGN YOUR NAME OR
NAMES EXACTLY AS SET FORTH
HEREON. FOR JOINTLY OWNED
SHARES, EACH OWNER SHOULD SIGN.
IF SIGNING AS ATTORNEY,
EXECUTOR, ADMINISTRATOR, TRUSTEE
OR GUARDIAN, PLEASE INDICATE THE
CAPACITY IN WHICH YOU ARE
ACTING. PROXIES EXECUTED BY
CORPORATIONS SHOULD BE SIGNED BY
A DULY AUTHORIZED OFFICER AND
SHOULD BEAR THE CORPORATE SEAL.
PLEASE DATE AND SIGN THIS PROXY AND MAIL IT PROMPTLY
IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED
IN THE UNITED STATES.
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