SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] 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):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] 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:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
AMERICAN BIOGENETIC SCIENCES, INC.
1375 AKRON STREET
COPIAGUE, NEW YORK 11726
--------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
--------------------
June 15, 1999
--------------------
NOTICE IS HEREBY GIVEN that the 1999 Annual Meeting of Stockholders of
American Biogenetic Sciences, Inc., a Delaware corporation (the "Company"), will
be held at the Huntington Hilton, 598 Broadhollow Road, Melville, New York, on
Tuesday, June 15, 1999 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 eight directors to serve until the next annual
meeting of stockholders and until their respective successors
are elected and qualified;
2. A proposal to amend the Company's Certificate of Incorporation
to increase the number of shares of Class A Common Stock which
the Company is authorized to issue from 50,000,000 to
100,000,000 shares.
3. Proposals to approve amendments to the Company's 1996 Stock
Option Plan to (a) increase the number of shares of Class A
Common Stock which may be issued thereunder from 2,000,000 to
4,000,000 shares and (b) increase the number of shares that
may be subject to options granted to any one optionee in any
calendar year from 150,000 to 500,000 shares;
4. A proposal to ratify the selection of Arthur Andersen LLP as
the Company's independent auditors for the year ending
December 31, 1999; and
5. 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, 1999 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 offices of the Company located at 1375
Akron Street, Copiague, New York.
By Order of the Board of Directors,
Timothy J. Roach
Secretary
Copiague, New York
May 14, 1999
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 1999
Annual Meeting of Stockholders of the Company (the "Meeting") to be held on
Tuesday, June 15, 1999, at 3:00 p.m., Eastern Daylight Savings Time, at the
Huntington Hilton, 598 Broadhollow Road, Melville, New York, 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 14,
1999.
The cost of preparing, assembling and mailing the Notice of Annual
Meeting, this Proxy Statement and Proxies will 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. The Company has retained W.F. Doring & Co., Inc., 150 Bay Street,
Jersey City, New Jersey 07302 to aid in the solicitation of Proxies. For its
services, W.F. Doring & Co., Inc. will receive a fee of $2,500 plus
reimbursement for certain out-of-pocket expenses. 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.
VOTING SECURITIES
The close of business on April 20, 1999 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, 36,031,841 shares of Class A Common Stock and 3,000,000
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 except that with respect
to the proposal to amend the Company's Certificate of Incorporation to increase
the number of shares of Class A Common Stock which the Company has authority to
issue (the "Charter Amendment"), holders of Class A Common Stock will also vote
as a separate class. Proxies submitted which contain abstentions or broker
nonvotes will be deemed present at the Meeting in determining the presence of a
quorum. Abstentions and broker nonvotes will have no effect on the outcome of
the election of directors. 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 except
that broker nonvotes will effectively be a negative vote with respect to the
proposal on the Charter Amendment (which, to be authorized, requires the
affirmative vote of a majority of all outstanding shares of Class A Common Stock
voting as a separate class, as well as a majority of the votes of the shares of
Class A Common Stock and Class B Common Stock voting as one class).
<PAGE>
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 Charter Amendment and both proposed amendments to the Company's
1996 Stock Option Plan, 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.
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.
<TABLE>
<CAPTION>
Class A Common Stock(1) Class B Common Stock
--------------------------- ---------------------------
Percent Percent
Beneficial Owner No. Shares of Class No. Shares of Class
- ----------------- ------------ -------- ---------- --------
<S> <C> <C> <C> <C>
Alfred J. Roach (2) 8,760,250 (2) 21.8% 3,000,000 100%
John S. North 7,000 (3) * --- ---
Ellena M. Byrne 421,250 (3)(4) 1.2% --- ---
Timothy J. Roach 630,000 (3) 1.7% --- ---
Gustav V. R. Born 37,500 (3) * --- ---
Glenna M. Crooks 0 * --- ---
Joseph C. Hogan 80,000 (3) * --- ---
William G. Sharwell 55,000 (3) * --- ---
Emer Leahy 176,500 (3) * --- ---
Josef C. Schoell 134,000 (3) * --- ---
All executive officers
and directors as a group
(12 persons, including
the foregoing) 10,463,250 (5) 25.2% 3,000,000 100%
</TABLE>
- --------------------
FOOTNOTES ARE ON THE FOLLOWING PAGE.
-2-
<PAGE>
(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
3,000,000 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 1,185,000 shares of Class A Common Stock subject to
outstanding options.
(3) Includes shares of Class A Common Stock subject to options as follows:
for Ellena M. Byrne, 181,250; for Timothy J. Roach, 620,000; for Gustav
V.R. Born, 37,500; for Joseph C. Hogan, 40,000; for William G.
Sharwell, 45,000; for Emer Leahy, 65,000; and for Josef C. Schoell,
125,000 shares.
(4) Includes 115,000 shares owned by Ms. Byrne's son and 21,250 shares
subject to options held by her husband. The inclusion of these amounts
should not be construed as an admission that Ms. Byrne is the
beneficial owner of these shares.
(5) Includes 3,000,000 shares of Class A Common Stock issuable upon
conversion of the same number of shares of Class B Common Stock and
2,442,500 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 eight members. Each of the nominees, other than John S.
North and Glenna M. Crooks. Ph.D. (who were elected as directors by the Board in
November 1998 and March 1999, respectively), 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, 83, has been Chairman of the Board of Directors of the
Company since its organization in September 1983 and, from September 1983 until
November 1998, also served as the Company's Chief Executive Officer. 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.
-3-
<PAGE>
JOHN S. NORTH, 54, has been President, Chief Executive Officer and
member of the Board of Directors of the Company since joining the Company in
November 1998. From April 1969 until he joined the Company, Mr. North was
employed by Eli Lilly and Company ("Lilly"), which develops, manufactures and
sells pharmaceutical products, in a number of management positions, including
Director of Marketing for Lilly's Dista Products Division in the United Kingdom
(from March 1982 until January 1984), Director of New Product Planning for
Europe and the Nordic Area (from January 1984 until October 1986), in which
geographic areas he was responsible for the launch of Lilly's antidepressant
Prozac, Manager of International Relations (from October 1986 until April 1993)
and Director of International Public and Government Affairs for Lilly's
pharmaceutical division (from April 1993 until joining ABS).
ELLENA M. BYRNE, 48, 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.
TIMOTHY J. ROACH, 52, 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., 77, 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.
GLENNA M. CROOKS, Ph.D., 49, has been a director of the Company since
March 1999. Dr. Crooks has been President of Strategic Health Policy
International, Inc., a health care consulting and planning firm that advises
governments, businesses and industry trade associations in the U.S. and overseas
on the development and application of business strategy, a company she formed in
October 1994. From January 1991 until September 1994, Dr. Crooks served as Vice
President - Worldwide Sales and Operations for the Vaccines Division of Merck &
Co., Inc., a pharmaceutical company that develops, manufactures and markets
human and animal health products.
JOSEPH C. HOGAN, Ph.D., 76, 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 until 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., 78, 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.
-4-
<PAGE>
MEETINGS OF THE BOARD OF DIRECTORS
During the year ended December 31, 1998, the Board of Directors held
seven meetings and acted by unanimous written consent on eighteen 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 1998 fiscal year, except that Dr. Born was not
present at four of the seven Board meetings held during 1998.
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 1998.
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. Hogan and Sharwell. The Compensation Committee
acted by unanimous written consent on fourteen occasions during 1998 following
informal discussions.
REMUNERATION OF DIRECTORS
Each non-employee director receives a fee of $1,000 for each meeting of
the Board of Directors attended by that director in person and not
telephonically. 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. Dr. Born serves as a consultant to the
Company for which he receives compensation at the rate of $12,000 per annum.
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.
-5-
<PAGE>
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, John S.
North, Ellena M. Byrne, Timothy J. Roach, Gustav V.R. Born, Glenna M. Crooks,
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,
John S. North, Timothy J. Roach and Ellena M. Byrne (whose backgrounds are
described under the caption "Election of Directors - Background of Nominees"
above), are:
GEORGE CHRISTOFFERSEN, Ph.D., 63, joined the Company in November 1997
as its Director of Research and Development and was elected Vice
President-Research and Development in June 1998. From June 1997 until November
1997, Dr. Christoffersen served as a biotechnology consultant. From September
1991 to May 1997, Dr. Christoffersen was employed by Genzyme Corporation, a
biotechnology company, as Senior Director Scientific Affairs, where he was
responsible for the identification, evaluation and licensing of new
technologies, as well as managing offsite research projects and establishing
university networks.
EMER LEAHY, Ph.D., 33, 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 until April 1995,
Dr. Leahy was Vice President-Neuroscience and, from August 1993 until 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 until August 1993, Dr. Leahy was
lecturer in Pharmacology at the Royal College of Surgeons of Ireland.
JAMES H. MCLINDEN, Ph.D., 48, 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, 49, 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.
-6-
<PAGE>
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
1996, 1997 and 1998 of each person who served as the Company's chief executive
officer during 1998 and each other person who served as an executive officer of
the Company during 1998 and whose annual cash compensation for 1998 exceeded
$100,000:
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
------------------------------------
LONG-TERM ALL
NAME AND OTHER ANNUAL COMPENSATION OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS COMPENSATION
------------------ ------ -------- -------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Alfred J. Roach, 1998 $250,000 ---- ---- 100,000 ----
Chairman of the Board (1) 1997 $250,000 ---- ---- ---- ----
1996 $250,000 ---- ---- ---- ----
John S. North, President and 1998 $ 25,000 ---- ---- 300,000 ----
Chief Executive Officer (2)
Stephen H. Ip, Executive 1998 $157,200 ---- ---- ---- $23,500
Vice President and Chief 1997 $146,000 $25,000 ---- 200,000 ----
Operating Officer (3)
Emer Leahy, Senior Vice 1998 $150,000 $15,000 $49,800 ---- ----
President - Business 1997 $ 8,700 ---- ---- 110,000 ----
Development (4) 1996 ---- ---- ---- 30,000 ----
Josef C. Schoell, Vice 1998 $120,000 ---- ---- --- ---
President Finance and 1997 $103,000 ---- ---- 25,000 ---
Chief Financial Officer 1996 $ 95,000 ---- ---- 10,000 ---
- --------------------
</TABLE>
(1) Mr. Roach served as the Company's Chief Executive Officer until November
16, 1998.
(2) Mr. North joined the Company as President and Chief Executive Officer on
November 16,1998. One- half of the options granted to Mr. North are
subject to stockholder approval at the Meeting of an amendment to the
Company's 1996 Stock Option Plan to increase the number of shares that
may be subject to options granted in any one calendar year above the
current 150,000 share maximum (see Proposal 4).
(3) Dr. Ip joined the Company in January 1997, was elected President of the
Company in January 1998 and resigned effective November 16, 1998. All
other compensation reflects post-termination consulting compensation.
(4) Dr. Leahy joined the Company as Senior Vice President - Business
Development on December 1, 1997. Compensation reflected in the foregoing
table for periods prior to December 1, 1997 were paid to Dr. Leahy as a
consultant. Other annual compensation consists of tuition fees
reimbursed in accordance with Dr. Leahy's employment agreement (see " --
Employment Agreements," below).
-7-
<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, 1998 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 FISCAL YEAR PER SHARE (1) DATE 5% 10%
---- ----------- ----------- ------------- -------------- ---- -----
<S> <C> <C> <C> <C> <C> <C>
Alfred J. Roach 100,000 (3) 13.5% $.275 10/27/2003 $7,598 $ 17,295
John S. North 300,000 (4) 40.5% $.25 11/02/2008 $20,721 $ 47,167
</TABLE>
- -------------
(1) The exercise price of the options granted to Messrs. Roach and North
was 110% and 100%, respectively, of 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.
(3) Exercisable as to 25% of the number of shares of Class A Common Stock
underlying the option during each six months commencing six months
after the date of grant, on a cumulative basis.
(4) Exercisable as to 25% of the number of shares of Class A Common Stock
underlying the option during each year commencing one year after the
date of grant, on a cumulative basis.
OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END VALUES
No options to purchase shares of the Company's capital stock were
exercised during 1998 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, 1998 by the executive officers named in the Summary Compensation
Table.
NUMBER OF SHARES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS HELD AT OPTIONS HELD AT
FISCAL YEAR-END FISCAL YEAR-END
NAME (EXERCISABLE/ (EXERCISABLE/
---- UNEXERCISABLE) UNEXERCISABLE) (1)
--------------------- ---------------------
Alfred J. Roach 1,185,000 / 75,000 $11,875 / $ 35,625
John S. North 0 / 300,000 $ 0 / $150,000
Emer Leahy 65,000 / 68,750 $ 0 / $ 0
Josef C. Schoell 125,000 / 5,000 $ 0 / $ 0
- --------------
(1) Represents the closing price of the Company's Class A Common Stock on
The Nasdaq Stock Market's National Market on December 31, 1998 less the
exercise price of each option.
-8-
<PAGE>
EMPLOYMENT AGREEMENTs
The Company is a party to an employment agreement with John S. North,
dated as of November 2, 1998, under which Mr. North is serving as President and
Chief Executive Officer of the Company. The agreement provides for a term
expiring November 15, 2001. The Company has the right to terminate the agreement
without cause on thirty days' notice. In the event of termination of the
agreement by the Company without cause, Mr. North 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 Mr.
North enters into full-time employment with a third party. Under the agreement,
Mr. North's current annual salary is $260,000 per annum, he recieved a one-time
$25,000 bonus in January 1999 and the Company agreed to lend him $100,000 on an
interest free basis. In January 1999, the Company loaned Mr. North $18,000 under
this arrangement. Loans under this arrangement are to be forgiven as to 25%
every six months provided Mr. North is still an employee of the Company. Mr.
North was also granted stock options to purchase an aggregate of 300,000 shares
of Class A Common Stock exercisable at $.25 per share, the market value of the
Company's Class A Common Stock on the date of grant. The options vest as to 25%
of the number of shares subject to the options annually, on a cumulative basis,
commencing one year after the date of grant. The options are for a term of ten
years, subject to earlier termination in certain events. Options with respect to
150,000 shares are subject to stockholder approval at the Meeting of an
amendment to the Company's 1996 Stock Option Plan to increase the number of
shares that may be subject to options granted in any one calendar year above the
current 150,000 share maximum.
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
under an Executive MBA program.
As part of their respective employment agreements, Mr. North and Dr.
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 conserve the Company's
available cash and, in certain cases, 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.
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<PAGE>
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 1998, 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 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,
including research and development and product development. To assure the
long-term nature of the incentive, options granted have generally not become
exercisable during the first six months to one 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 Chairman of the Board
and Chief Executive Officer. Determinations have been made subjectively without
giving weight to specific factors.
CHIEF EXECUTIVE OFFICER COMPENSATION. Mr. John S. North joined the
Company as President and Chief Executive Officer in November 1998. His base
salary of $260,000, bonus, stock option grant and other benefits (see " --
Employment Agreements," above) were negotiated in connection with Mr. North's
agreement to join the Company. Prior thereto, Alfred J. Roach, the Company's
Chairman of the Board of Directors, served as the Company's Chief Executive
Officer. The salary of Mr. Roach has remained unchanged for the past six years
and Mr. Roach had not been granted stock options since 1995. In lieu of any
additional cash compensation, the Compensation Committee determined to grant Mr.
Roach an option to purchase 100,000 shares of the Company's Class A Common Stock
under the Company's 1996 Stock Option Plan.
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. In this regard, one-half of the option to purchase
300,000 shares of the Company's Class A Common Stock granted to Mr. North is
subject to stockholder approval of an amendment to the Company's 1996 Stock
Option Plan (see Proposal 4).
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, 1993 (the first point shown in the
following graph) through December 31, 1998 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, 1993 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, 1993 1994 1995 1996 1997 1998
- --------------------------------------------------------------------------------
American Biogenetic Sciences 100 31 56 83 39 15
Peer Group Index 100 92 160 185 202 251
NASDAQ Market Index 100 105 136 169 207 392
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, 1998 were timely filed.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On May 4, 1998, October 1, 1998 and October 6, 1998, Alfred J. Roach
purchased directly from the Company 50,000, 500,000 and 724,500 shares,
respectively, of the Company's Class B Common Stock for $81,250 ($1.6250 per
share), $203,125 ($0.4063 per share) and $181,125 ($0.25 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. On
October 28, 1998 and March 8, 1999, Mr. Roach purchased directly from the
Company 4,000,000 and 440,000 shares, respectively, of the Company's Class A
Common Stock for $1,000,000 ($0.25 per share) and $440,000 ($1.1250 per share),
respectively.
-11-
<PAGE>
PROPOSAL 2.
APPROVAL OF AN AMENDMENT OF THE COMPANY'S
CERTIFICATE OF INCORPORATION TO INCREASE
THE AUTHORIZED CLASS A COMMON STOCK
On April 12, 1999, the Board of Directors unanimously adopted a
resolution approving a proposal to amend the Company's Certificate of
Incorporation to increase the number of shares of Class A Common Stock which the
Company is authorized to issue from 50,000,000 to 100,000,000 shares. The Board
of Directors determined that such amendment is advisable and directed that the
proposed amendment be considered at the Meeting. The additional 50,000,000
shares of Class A Common Stock, if and when issued, will have the same rights
and privileges as the shares of Class A Common Stock presently issued and
outstanding. Each holder of Class A Common Stock is entitled to one vote per
share, and each holder of Class B Common Stock is entitled to ten votes per
share, on all matters submitted to a vote of stockholders. Neither Class A
Common Stock nor Class B Common Stock have cumulative voting rights. The holders
of Class A Common Stock and Class B Common Stock share ratably on a per share
basis in any dividends when, as and if declared by the Board of Directors out of
funds legally available therefor and in all assets remaining after the payment
of liabilities in the event of the liquidation, dissolution or winding up of the
Company. There are no preemptive or other subscription rights, conversion rights
or redemption or sinking fund provisions with respect to the Class A Common
Stock or Class B Common Stock, except that each share of Class B Common Stock is
convertible into Class B Common Stock on a share for share basis.
PURPOSES AND CERTAIN POSSIBLE EFFECTS OF INCREASING THE
NUMBER OF AUTHORIZED SHARES OF CLASS A COMMON STOCK.
The Company's Certificate of Incorporation presently authorizes the
Company to issue 50,000,000 shares of Class A Common Stock, $.001 par value per
share, of which 36,031,841 shares were issued and outstanding as of April 20,
1998, and 3,000,000 shares of Class B Common Stock, $.001 par value per share,
all of which were outstanding on that date. In addition to the 36,031,841 shares
of Class A Common Stock outstanding, (i) 3,000,000 shares are reserved for
issuance upon conversion of the Class B Common Stock, (ii) 7,217,500 shares are
reserved for issuance upon the exercise of options under the Company's stock
option plans (of which 4,516,084 shares were subject to outstanding options at
exercise prices ranging from $0.25 to $10.00 per share), including the
additional 2,000,000 shares reserved for issuance under the Company's 1996 Stock
Option Plan, subject to approval of an amendment to that plan by stockholders at
the Meeting (see Proposal 3, below), and (iii) 1,259,445 shares are reserved for
issuance upon the exercise of warrants and options held by unaffiliated third
parties (which have exercise prices ranging from $0.75 to $5.50 per share).
Accordingly, assuming approval of the proposed amendment to the Company's 1996
Stock Option Plan, only 2,491,214 shares of the Company's Class A Common Stock
are unrestricted for future issuance.
The Company has historically either publicly offered or privately
placed its capital stock to raise funds to finance its operations, including
research and development and product development activities, and has issued
shares in connection with its acquisition of Stellar Bio Systems, Inc. and to
consultants. The Company expects to continue to make substantial expenditures
for research and product development, in the development of products being
commercially developed and for the marketing of products. Except for the
potential issuance of reserved shares, there are no present understandings or
arrangements as to the issuance or sale of any shares of Class A Common Stock.
However, the Company continues to periodically explore and negotiate the
additional financing that it will require. The Company also intends to seek
acquisitions of other companies, products and assets. These activities are
likely to require the Company to sell shares of Class A Common Stock or
securities convertible into or exchangeable for Class A Common Stock. The
Company has, at times in the past, sold shares at below the market price of its
Class A Common Stock at the date of issuance and may be required to do so in the
future in order to raise financing. The Board of Directors believes that the
increase in the number of
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<PAGE>
authorized shares of Class A Common Stock at this time will provide the Company
with the flexibility of having an adequate number of authorized but unissued
shares of Class A Common Stock available for future financing requirements,
including for funding research and product development, acquisitions and other
corporate purposes, without the expense or delay attendant in seeking
stockholder approval at any special or annual meeting. The proposed amendment
would provide additional authorized shares of Class A Common Stock that could be
used from time to time, without further action or authorization by the
stockholders (except as may be required by law or by any stock exchange or
over-the-counter market on which the Company's securities may then be listed).
Although it is not the purpose of the proposed amendment and the Board
of Directors is not aware of any pending or proposed effort to acquire control
of the Company, the authorized but unissued shares of Class A Common Stock also
could be used by the Board of Directors to discourage, delay or make more
difficult a change in control of the Company.
The proposed amendment will not affect the rights of existing holders
of Class A Common Stock except to the extent that further issuances of Class A
Common Stock will reduce each existing stockholder's proportionate ownership.
REQUIRED VOTE
Approval of the proposed amendment to the Certificate of Incorporation
requires the affirmative vote of both (a) a majority of the outstanding shares
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 and (b) a majority of the outstanding shares of Class
A Common Stock voting as a separate class, with each share of Class A Common
Stock having one vote per share. The Board of Directors recommends a vote FOR
approval of this proposal.
PROPOSALS 3 AND 4.
APPROVAL OF AMENDMENTS OF THE COMPANY'S
1996 STOCK OPTION PLAN
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. At the
Company's 1998 annual meeting, stockholders of the Company approved an amendment
to the Plan to increase the number of shares of Class A Common Stock issuable
thereunder from 1,000,000 to 2,000,000. In addition, the Plan, as adopted,
currently limits the number of shares of Class A Common Stock that may be
subject to options granted under the Plan to any one optionee in any calendar
year to 150,000 shares.
The Board of Directors has unanimously adopted, subject to stockholder
approval which will be requested at the Meeting, and recommended for submission
to stockholders, amendments to the Plan (the "Plan Amendments") to:
(i) Increase the number of shares reserved for issuance under the Plan
by 2,000,000 shares, subject to the Plan's antidilution provisions. Through
April 20, 1998, options to purchase 5,000 shares of Class A Common Stock had
been exercised under the Plan and options to purchase 1,661,084 shares were
subject to outstanding options held by 36 employees and 19 consultants, leaving
333,916 shares (together with shares subject to any such outstanding options
which may expire, terminate or be canceled unexercised) available for
-13-
<PAGE>
future grant under the Plan. The Board of Directors believes that the Plan has
been instrumental in attracting and retaining employees, officers and
consultants and that this objective will be furthered by providing additional
shares for future grants; and
(ii) Change the limit on the number of shares that may be subject to
options granted under the Plan to any one optionee in any calendar year (the
"Section 162(m) Maximum") from 150,000 to 500,000 shares, subject to the Plan's
antidilution provisions. In November 1998, as an inducement to John S. North to
join the Company, among other things, the Company agreed to grant Mr. North
stock options to purchase an aggregate of 300,000 shares of the Company's Class
A Common Stock. Since the Plan provided that the Section 162(m) Maximum is
150,000, the grant to Mr. North of options to purchase 150,000 of such shares is
subject to stockholder approval at the Meeting of an amendment to the Plan to
increase the Section 162(m) Maximum to accommodate the full option grant to Mr.
North.. The existing Section 162(m) Maximum was established as part of the Plan
in 1996 in order to enable options granted under the Plan to be considered
"qualified performance-based compensation" under Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code"), ensuring the deductibility of any
compensation expense that may arise from the exercise of options granted under
the Plan (see "Executive Compensation -- Report of the Compensation Committee",
above, and " -- Federal Income Tax Treatment", below). The proposed increase in
the Section 162(m) Maximum is designed to fulfill the Company's understanding
with Mr. North and to enable the Board and the Compensation Committee to utilize
a higher number of options annually in order to attract and retain key employees
while conserving the Company's cash position.
The Board of Directors believes that the Plan serves the purposes for
which it was intended and has authorized the Plan Amendments to further the
Plan's purpose
The following summary of certain material features of the 1996 Plan.
SHARES SUBJECT TO THE OPTION PLAN AND ELIGIBILITY
Currently, the Plan authorizes the grant of options to purchase a
maximum of 2,000,000 shares (which will be increased to 4,000,000 shares if the
proposed Plan Amendment with respect thereto 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 are again available for the grant of options under the Plan.
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.
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<PAGE>
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
presently 150,000 (which will be increased to 500,000 shares if the proposed
Plan Amendment with respect thereto is approved by stockholders at the Meeting).
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.
(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.
Except as provided in the applicable Contract, an optionee whose relationship
with the Company is terminated by reason of disability may
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<PAGE>
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 reason 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.
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
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<PAGE>
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, 1998 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, 1998
to (i) all current executive officers as a group, (ii) all other current
employees as a group, including current officers who are not executive officers
and (iii) all consultants as a group:
<TABLE>
<CAPTION>
NUMBER OF SHARES
CATEGORY OF OPTIONEE UNDERLYING OPTIONS GRANTED
- -------------------- --------------------------
<S> <C>
Current executive officers as a group (3 persons, including the 425,000
persons named in the Summary Compensation Table)
Other employees as a group (19 persons) 181,500
Consultants (5 persons) 135,000
</TABLE>
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 1998 (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 11, 1999, the
closing price of the Company's Class A Common Stock on The Nasdaq Stock Market's
National Market was $1.00 per share.
REQUIRED VOTE
Approval of each of the proposed Plan Amendments, which will be voted
upon separately, 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 these proposals, 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 each of the proposed Plan Amendments.
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PROPOSAL 5.
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, 1999.
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.
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 Board of
Directors' proxy statement and form of proxy relating to the Company's next
Annual Meeting of Stockholders must be received by January 16, 2000. As to any
proposals intended to be presented by a stockholder without inclusion in the
Board of Directors' proxy statement and form of proxy for the Company's next
Annual Meeting of Stockholders, the proxies named in the Board of Directors'
form of proxy for that meeting will be entitled to exercise discretionary
authority on that proposal unless the Company receives notice of the matter on
or before April 1, 2000. However, even if such notice is timely received, such
proxies nevertheless may be entitled to exercise discretionary authority on that
matter to the extent permitted by Securities and Exchange Commission
regulations. Any such proposals, as well as any questions relating thereto,
should be directed to the Secretary of the Company at 1375 Akron Street,
Copiague, New York 11726.
ANNUAL REPORT ON FORM 10-K
A copy of the Company's Annual Report on Form 10-K for the year ended
December 31, 1998, 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 Josef C. Schoell, Vice President-Finance,
at 1375 Akron Street, Copiague, New York 11726.
By Order of the Board of Directors,
Timothy J. Roach
Secretary
May 14, 1999
<PAGE>
AMERICAN BIOGENETIC SCIENCES, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS - JUNE 15, 1999
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 Tuesday, June 15, 1999, at 3:00 p.m., Eastern Daylight Savings Time, at the
Huntington Hilton, 598 Broadhollow Road, Melville, New York, 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, 3, 4 AND 5.
A VOTE FOR EACH NOMINEE AND FOR PROPOSALS 2 , 3, 4 AND 5 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 to vote for all nominees listed
below): below
ALFRED J. ROACH, JOHN S. NORTH, ELLENA M. BYRNE, TIMOTHY J.
ROACH, GUSTAV V. R. BORN, GLENNA M. CROOKS, 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 amend the Company's Certificate of Incorporation to increase the
number of shares of Class A Common Stock which the Company is authorized
to issue.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. 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.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. To approve an amendment to the Company's 1996 Stock Option Plan to
increase the number of shares that may be subject to options granted to
any one optionee in any calendar year.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
5. To ratify the selection of Arthur Andersen LLP as independent auditors
for the Company.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Dated: ________________, 1999
_______________________________
(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.
