May 21, 1997
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders
of VIMRX Pharmaceuticals Inc., which will be held at The Equitable Companies,
Inc., 787 Seventh Avenue, 49th Floor, New York, New York on June 24, 1997. The
meeting will begin promptly at 9:30 a.m. Eastern Daylight Time.
The accompanying Proxy Statement, which you are urged to read
carefully, provides important information regarding matters that will be
considered and voted upon at the Annual Meeting. In addition to electing
directors of the Company and ratifying the appointment of the independent
auditors, stockholders will consider and vote upon (i) approving certain
amendments to VIMRX's 1990 Incentive and Non-Incentive Stock Option Plan (the
"1990 Plan Amendments") to conform the Plan to certain statutory and regulatory
developments and to provide the Board of Directors and the Compensation
Committee with greater flexibility in determining the terms and conditions of
options, and (ii) approving the adoption of VIMRX's 1997 Incentive and
Non-Incentive Stock Option Plan (the "1997 Plan") providing for the award of
options to purchase 1,000,000 shares of Common Stock.
The 1990 Plan Amendments and the 1997 Plan will assist the Company in
attracting persons of outstanding ability to its service. The 1990 Plan, as
amended, and the 1997 Plan (collectively, the "Plans") provide greater
flexibility to the Company in administering the Plans than was available under
the 1990 Plan prior to the amendments.
You are requested to complete, date and sign the enclosed proxy card
and promptly return it in the enclosed envelope, whether or not you plan to
attend the Annual Meeting. If you do attend the Annual Meeting, you may vote in
person even if you have submitted a proxy card. Due to space limitations,
attendance at the Annual Meeting will be limited to stockholders of record,
their proxies, beneficial owners of Common Stock who have presented to the
Company satisfactory evidence of such ownership and brokers. Proper business
attire is required.
On behalf of the Board of Directors, I look forward to seeing you on
June 24th.
Sincerely,
Donald G. Drapkin
Chairman
<PAGE>
VIMRX PHARMACEUTICALS INC.
2751 Centerville Road
Suite 210, Little Falls II
Wilmington, Delaware 19808
(302) 998-1734
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS To Be Held on June
24, 1997
To the Stockholders of VIMRX PHARMACEUTICALS INC.
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders
("Annual Meeting") of VIMRX Pharmaceuticals Inc. (the "Company") will be held at
The Equitable Companies, Inc., 787 Seventh Avenue, 49th Floor, New York, New
York on Tuesday, June 24, 1997 at 9:30 a.m., Eastern Daylight Time, to consider
and act upon the following proposals:
1. To elect a Board of eight directors.
2. To approve amendments to the Company's 1990
Incentive and Non-Incentive Stock Option Plan.
3. To approve the Company's 1997 Incentive and
Non-Incentive Stock Option Plan providing for the
award of options to purchase 1,000,000 shares of
Common Stock thereunder.
4. To ratify the appointment of KPMG Peat Marwick LLP
as independent auditors of the Company for the
year ending December 31, 1997.
5. To transact such other business as may properly
come before the Annual Meeting or any adjournment
or postponement thereof.
A proxy statement describing the matters to be considered at
the Annual Meeting is attached to this notice. Only holders of record of the
Company's Common Stock at the close of business on May 2, 1997, the Record Date
for the Annual Meeting, are entitled to notice of and to vote at the Annual
Meeting. Due to space limitations, attendance at the Annual Meeting will be
limited to stockholders of record, their proxies, beneficial owners who have
presented evidence of such ownership satisfactory to the Company, and brokers.
Proper business attire is required.
By Order of the Board of Directors,
Lowell S. Lifschultz
Secretary
Wilmington, Delaware
May 21, 1997
STOCKHOLDERS WHO DO NOT EXPECT TO ATTEND THE ANNUAL MEETING
ARE REQUESTED TO DATE, SIGN AND PROMPTLY RETURN THE ENCLOSED
PROXY IN THE ENCLOSED POSTAGE-PREPAID ENVELOPE.
<PAGE>
VIMRX Pharmaceuticals Inc.
2751 Centerville Road
Suite 210, Little Falls II
Wilmington, Delaware 19808
(302) 998-1734
PROXY STATEMENT
Annual Meeting of Stockholders
To Be Held On June 24, 1997
INTRODUCTION
General
This Proxy Statement is being furnished to holders of Common Stock, par
value $.001 per share (the "Common Stock"), of VIMRX Pharmaceuticals Inc., a
Delaware corporation (the "Company"), in connection with the solicitation of
proxies by the Board of Directors of the Company for use at its Annual Meeting
of Stockholders to be held on Tuesday, June 24, 1997, at The Equitable
Companies, Inc., 787 Seventh Avenue, 49th Floor, New York, New York on Tuesday,
June 24, 1997 at 9:30 a.m., Eastern Daylight Time, and any and all adjournments
or postponements thereof (the "Meeting"). The cost of the solicitation will be
borne by the Company. This Proxy Statement is being first mailed to holders of
the Common Stock on or about May 21, 1997.
Matters to be Considered at the Meeting
At the Meeting, the stockholders will be asked to consider and vote
upon the following proposals:
<PAGE>
1. To elect a Board of eight directors;
2. To approve certain amendments (the "1990 Plan Amendments") to
the Company's 1990 Incentive and Non-Incentive Stock Option
Plan (the "1990 Plan") to conform the 1990 Plan to certain
statutory and regulatory developments and to provide the Board
of Directors and the Compensation Committee with greater
flexibility in determining the terms and conditions of
options; a copy of the 1990 plan is attached hereto as Exhibit
A;
3. To approve the 1997 Stock Option Plan (the "1997 Plan"),
providing for the award of options to purchase 1,000,000
shares of Common Stock thereunder;
4. To ratify the appointment of KPMG Peat Marwick LLP as
independent auditors of the Company for the year ending
December 31, 1997; and
5. To transact such other business as may properly come
before the Annual Meeting or any adjournment or
postponement thereof.
Voting at the Meeting
<PAGE>
Only holders of record of Common Stock at the close of business on May
9, 1997 (the "Record Date") are entitled to notice of and to vote at the
Meeting, each such holder of record being entitled to one vote per share of
Common Stock on each matter to be considered at the Meeting. On the Record Date,
there were 54,642,437 shares of Common Stock issued and outstanding.
The presence, in person or by properly executed proxy, of the holders
of a majority of the outstanding shares of Common Stock entitled to vote at the
Meeting (27,321,219 shares of the 54,642,437 shares outstanding) is necessary to
constitute a quorum at the Meeting. The election of each of the eight nominees
identified in this Proxy will require the affirmative vote of a plurality of the
shares of Common Stock present in person or represented by proxy at the Meeting
and entitled to vote. The approval of the 1990 Plan Amendments and the 1997 Plan
and the ratification of the appointment of KPMG Peat Marwick LLP as independent
auditors of the Company for the year ending December 31, 1997 will require the
affirmative vote of the holders of a majority of the shares of Common Stock
present in person or represented by proxy at the Meeting and entitled to vote.
If the enclosed proxy card is properly executed and returned to the
Company prior to voting at the Meeting, the shares represented thereby will be
voted in accordance with the instructions marked thereon, subject to the
following conditions:
Election of Directors. Shares represented by a proxy which is marked
"WITHHOLD AUTHORITY" to vote for (i) all eight nominees or (ii) any individual
nominee(s) for election as directors and are not otherwise marked "FOR" the
other nominees will not be counted in determining whether a plurality vote has
been received for the election of directors. In the absence of instructions,
shares represented by a proxy will be voted FOR all of the eight nominees. In
instances where brokers are prohibited from exercising discretionary authority
for beneficial owners who have not returned proxies ("broker non-votes"), those
shares will be disregarded and therefore will have no effect on the outcome of
the vote.
Other Proposals. Shares represented by a proxy which is marked
"ABSTAIN" on any other proposal will not be counted in determining whether the
requisite vote has been received for such proposal. In the absence of
instructions, shares represented by a proxy will be voted FOR all of the
proposals set forth in the Notice of Annual Meeting and at the discretion of the
proxies on any other matters that may properly come before the Meeting. In
instances where brokers are prohibited from exercising discretionary authority
for beneficial owners who have not returned proxies ("broker non-votes"), those
shares will not be included in the vote totals, and therefore will have no
effect on the vote for the approval of the 1990 Plan Amendments and the 1997
Plan or ratification of the appointment of the independent auditors.
At any time prior to its exercise, a proxy may be revoked by the holder
of the Common Stock granting it by delivering written notice of revocation or a
duly executed proxy bearing a later date to the Secretary of the Company at the
address of the Company set forth on the first page of this Proxy Statement or by
attending the Meeting and voting in person.
2
<PAGE>
Table of Contents
Page
Security Ownership of Certain Beneficial
Owners and Management.............................................. 4
Election of Directors................................................ 6
Executive Compensation .............................................. 8
Certain Transactions................................................. 13
Stock Price Performance Comparison................................... 15
Approval of Amendments to 1990 Incentive and
Non-Incentive Stock Option Plan and 1997 Incentive
and Non-Incentive Stock Option Plan ............................... 16
Ratification of Reappointment of Independent
Auditors........................................................... 22
Other Business....................................................... 22
Stockholder Proposals................................................ 23
3
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of the Record Date, information with
respect to the beneficial ownership of the Common Stock by (i) each person known
by the Company to own beneficially five percent or more of the outstanding
Common Stock, together with their respective addresses, (ii) each director and
nominee for election as director, (iii) each executive officer named in the
Summary Compensation Table under "Executive Compensation - Summary Compensation"
on page 9 of this Proxy Statement and (iv) all executive officers and directors
as a group:
<TABLE>
<CAPTION>
Shares Percent
Name Beneficially Owned Outstanding
<S> <C> <C>
Richard L. Dunning................................. 257,256(1) *
Francis M. O'Connell............................... 50,000(2) *
Alfonso, J. Tobia, Ph.D. .......................... 75,000(2) *
Donald G. Drapkin ................................. 462,500(3)(4) *
Laurence D. Fink .................................. 450,000(3)(5) *
Jerome Groopman, M.D. ............................. 50,000(3) *
Linda G. Robinson ................................. 183,333(3) *
Eric A. Rose, M.D. ................................ 584,900(6) *
Lindsay A. Rosenwald, M.D. ........................ 6,114,999(3)(7) 10.8%
787 Seventh Avenue
New York, New York 10019
Michael Weiner, M.D. .............................. 62,410(3) *
Paramount Capital Asset
Management, Inc.................................. 4,049,999(8) 7.4%
c/o Lindsay A. Rosenwald, M.D.
787 Seventh Avenue
New York, New York 10019
Mellon Bank Corporation............................ 2,865,000(9) 5.2%
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258
All directors and executive 8,311,737(10) 14.4%
officers as a group (12) persons) ...............
</TABLE>
- --------------------
4
<PAGE>
* Less than one percent.
(1) Consists of currently exercisable options to purchase 253,661 shares
owned by Mr. Dunning, 2,095 shares owned by a daughter of Mr. Dunning,
and 500 shares owned by each of Mr. Dunning's spouse, son and another
daughter, respectively. Mr. Dunning disclaims beneficial ownership of
the shares held by his spouse, son and daughters.
(2) Consists of currently exercisable options.
(3) Includes 100,000 shares for Mr. Drapkin and 50,000 shares for each of
Mr. Fink, Dr. Groopman, Ms. Robinson, Dr. Rosenwald and Dr. Weiner of
restricted stock which vests at the rate of 25% per year commencing
June 20, 1997, provided the respective individual continues to serve as
a director of the Company, and subject to a non-lapsing right of first
refusal by the Company.
(4) Includes currently exercisable options to purchase 362,500 shares.
(5) Includes 66,666 shares owned by a family trust for the benefit of Mr.
Fink's children. Mr. Fink disclaims beneficial ownership of the shares
held by the family trust.
(6) Includes currently exercisable options to purchase 262,500 shares.
(7) Includes currently exercisable options to purchase 2,015,000 shares
owned by Dr. Rosenwald, and the 4,049,999 shares beneficially owned by
Paramount Capital Asset Management, Inc. ("PCAM") (see note (8) below).
Dr. Rosenwald serves as President and is sole shareholder of PCAM. Dr.
Rosenwald disclaims beneficial ownership of the shares beneficially
owned by PCAM.
(8) Information is from a Schedule 13D dated December 23, 1996 filed by
PCAM which is the investment manager of The Aries Trust (the "Aries
Trust") and the general partner of Aries Domestic Fund, L.P. (the
"Aries Limited Partnership"), and reports shared voting and dispositive
power of 5,964,999 shares and 2,750,000 shares, respectively, by the
Aries Trust and the Aries Limited Partnership.
(9) Information is from a Schedule 13G dated January 24, 1997, filed by
Mellon Bank Corporation, which reflects sole voting power with respect
to 2,865,000 shares and sole dispositive power with respect to
2,750,000 shares.
(10) See notes (1) - (7).
5
<PAGE>
ELECTION OF DIRECTORS
At the Meeting, the entire Board of Directors is to be elected, to hold
office until the next Annual Meeting of Stockholders and until their successors
are duly elected and qualified. Unless otherwise specifically directed by
stockholders executing proxies, it is intended that all proxies in the
accompanying form received in time for the Meeting will be voted FOR the
election of the eight nominees named below. All nominees are currently directors
of the Company.
In the event any nominee should become unavailable for election for any
presently unforeseen reason, it is intended that the proxies will be voted for
such substitute nominee as may be designated by the present Board of Directors.
The election of each of the eight nominees identified in the Proxy will
require the affirmative vote of a plurality vote of the shares of Common Stock
present or represented by proxy at the Meeting and entitled to vote. In
instances where brokers are prohibited from exercising discretionary authority
for beneficial owners who have not returned proxies ("broker non-votes"), those
shares will be disregarded and therefore will have no effect on the outcome of
the vote. The Board of Directors recommends that stockholders vote FOR each of
the eight nominees.
Each nominee's name, age, office with the Company, if any, the year
first elected as a director, if currently a director, and certain biographical
information are set forth below:
Name Age Position
Donald G. Drapkin 49 Chairman
Richard L. Dunning 51 President, Chief
Executive Officer and
Director
Laurence D. Fink 44 Director
Jerome Groopman, M.D. 45 Director
Linda G. Robinson 44 Director
Eric A. Rose, M.D. 46 Director
Lindsay A. Rosenwald, M.D. 42 Director
Michael Weiner, M.D. 51 Director
DONALD G. DRAPKIN was elected Chairman of the Board in March 1996. Mr.
Drapkin has served as a director of the Company since November 17, 1995. Since
March 1987, Mr. Drapkin has been Vice Chairman and a director of MacAndrews &
Forbes Holdings Inc., and was a partner in the law firm of Skadden, Arps, Slate,
Meagher & Flom in New York City for more than five years prior thereto. Mr.
Drapkin also serves as a director of the following corporations which file
reports pursuant to the Securities Exchange Act of 1934 (the "Exchange Act"):
Andrews Group, Incorporated, The Coleman Company, Inc., Coleman Holdings Inc.,
Coleman Worldwide Corporation, Marvel Entertainment Group, Inc., Marvel Holdings
Inc., Marvel (Parent) Holdings Inc., Marvel III Holdings Inc., Revlon Consumer
Products Corporation, Revlon, Inc., Revlon Worldwide Corporation, Toy Biz, Inc.
and Algos Pharmaceutical Corporation.
6
<PAGE>
RICHARD L. DUNNING has been President and Chief Executive Officer of
the Company since April 1996, and a director of the Company since June, 1996.
Prior to joining the Company, Mr. Dunning served as Executive Vice President and
Chief Financial Officer of the DuPont Merck Pharmaceutical Company since 1991.
Mr. Dunning also serves as a director of the following corporations which file
reports pursuant to the Securities Exchange Act of 1934: Epoch Pharmaceuticals,
Inc. and Innovir Laboratories, Inc.
LAURENCE D. FINK has been Chairman and Chief Executive Officer and
Director of BlackRock Financial Management (investment advisor) since 1988. Mr.
Fink is a director of the closed end funds for which BlackRock serves as
investment advisor. Mr. Fink has been a director of the Company since June,
1996. Mr. Fink also serves as a director of the following corporation which
files reports pursuant to the Securities Exchange Act of 1934: Innovir
Laboratories, Inc.
JEROME GROOPMAN, M.D. has been a professor of Medicine at Harvard
Medical School since 1993. Dr. Groopman has been an attending physician and
member of the executive committee of New England Deaconess Hospital since 1989.
Dr. Groopman has been a director of the Company since June, 1996. Dr. Groopman
is director of the following corporations which file reports pursuant to the
Exchange Act: Advanced Tissue Sciences.
LINDA G. ROBINSON has been Chairman, Chief Executive Officer and
Partner of Robinson Lerer Montgomery (strategic communications) for more than
the past five years. Ms. Robinson has been a director of the Company since June,
1996. Ms. Robinson is a director of the following corporations which file
reports pursuant to the Exchange Act: Revlon, Inc.
ERIC A. ROSE, M.D. was elected a director of the Company on November
17, 1995. Dr. Rose is a Surgeon-In-Chief at Columbia Presbyterian Medical Center
in New York, a position he has held since August 1994, has served as Chairman of
the Department of Surgery at the College of Physicians and Surgeons of Columbia
University since 1994 and prior thereto as Director of the Division of
Cardiothoracic Surgery of the Department since 1990. Dr. Rose is a past
president of the International Society for Heart and Lung Transplantation.
LINDSAY A. ROSENWALD, M.D. has been the Chairman and Chief Executive
Officer of Paramount Capital, Incorporated (investment bank) since 1992. Dr.
Rosenwald is also chairman of The Castle Group. Dr. Rosenwald serves as a
director of the following corporations which file reports pursuant to the
Exchange Act: Ansan, Inc., Atlantic Pharmaceuticals, Inc., BioCryst
Pharmaceuticals, Inc., Interneuron Pharmaceuticals, Inc., Neose Technologies,
Inc., Sparta Pharmaceuticals, Inc., Titan Pharmaceuticals, Inc. and Xenometrix,
Inc. Dr. Rosenwald has been a director of the Company since June, 1996.
MICHAEL WEINER, M.D. has been the Hellinger Professor of Clinical
Pediatrics at Columbia University College of Physicians and Surgeons since
January 1996 and has been an attending pediatrician at Columbia Presbyterian
Medical Center since January 1996. Dr. Weiner has served as Associate Director
of Pediatric Hematology/Oncology and Associate Attending Physician of Hackensack
Medical Center and an Associate Attending Pediatrician UMDNJ Division of
Pediatric Hematology/Oncology, since 1987. Dr. Weiner has been a director of the
Company since June, 1996.
7
<PAGE>
Meetings and Committees
During 1995, there were seven meetings of the Board of Directors which
were attended by all directors, except for Mr. Donald G. Drapkin and Dr. Eric A.
Rose, who were absent from two meetings, and Dr. Jerome Groopman, who was absent
from one meeting. Additionally, the Board took action by unanimous written
consent without a meeting on five occasions in 1996.
The Compensation Committee, which also acts as the Stock Option
Committee, currently consists of Mr. Donald G. Drapkin, Mr. Richard L. Dunning,
Dr. Eric A. Rose and Dr. Lindsay A. Rosenwald. The Compensation Committee met
one time and took action by unanimous written consent on one occasion during
1996. The Compensation Committee sets and recommends to the Board yearly
executive compensation and conditions of employment and administers the
Company's stock option plans.
The Audit Committee, which consists of Mr. Richard L. Dunning, Mr.
Laurence D. Fink, Ms. Linda G. Robinson and Dr. Michael Weiner, did not meet
during 1996. The Audit Committee reviews the audit and financial procedures of
the Company and recommends any changes with respect thereto to the Board of
Directors.
The Company does not have a standing nominating committee.
EXECUTIVE COMPENSATION
Summary Compensation
The following table sets forth a summary of the compensation for 1994,
1995 and 1996 earned by the Company's Principal Executive Officer and by each
other executive officer whose compensation exceeded $100,000 during 1996.
8
<PAGE>
<TABLE>
<CAPTION>
Summary Compensation Table
Annual Compensation Awards Long-Term
Compensation
Name and Year Salary Bonus Options Other
Principal Position Compensation
<S> <C> <C> <C> <C> <C>
------------------ ------------
M.S. Koly 1996 -- $1,750(1)
Former Chairman and Chief 1995 $37,000 -- 200,000(3) $4,003(1)
Executive Officer(2)
1994 -- -- -- $20,450(1)
Richard L. Dunning 1996 $133,833 $40,000 800,000(3) $4,500(4)
President and Chief Executive 1995 -- -- -- --
Officer(5)
1994 -- -- -- --
Alfonso J. Tobia, Ph.D. 1996 $147,272 $50,000 -- --
Executive Vice President 1995 $130,000 $12,500 -- --
1994 $59,696 -- 150,000(6) $25,000(7)
Francis M. O'Connell 1996 $123,800 $35,000 -- --
Vice President, Finance and Chief 1995 $96,125 -- 100,000(8)
Financial Officer
1994
</TABLE>
- ---------------
(1) Consists of director fees in 1996 and 1995; and $7,050 of director fees,
$2,000 for consulting services, and $11,400 paid to Venkol Ventures, Ltd.
for consulting services rendered by Mr. Koly to the Company in 1994. Mr.
Koly is a principal shareholder and advisor to Venkol Ventures, Ltd.
(2) Mr. Koly was Acting Chief Executive Officer from September 1, 1995 until
April 1996. Mr. Koly resigned as Chairman of the Board in March 1996.
(3) Number of shares of Common Stock purchasable. See Option Grant Table
below for exercise price and vesting terms.
9
<PAGE>
(4) Reimbursement of personal medical and health care insurance.
(5) Mr. Dunning was elected President and Chief Executive Officer in April,
1996.
(6) Number of shares of Common Stock purchasable at $.69 per share.
(7) Consists of a one-time relocation fee.
(8) Number of shares of Common Stock purchasable at $.44 per share.
The nominees for director have received grants of 50,000 restricted
shares of Common Stock under the 1996 Non-Employee Director Restricted Stock
Award Plan, except that Mr. Drapkin, as Chairman, received a grant of 100,000
shares, and Mr. Dunning, as an employee of the Company, received no grant.
Option Grant Table
The following table sets forth certain information concerning options
granted in 1996 to the individuals named in the Summary Compensation Table:
Option Grants in the Last Fiscal Year
-------------------------------------
Name Number of % of Total Exercise Expiration
Securities Options Price Per Date
Underlying Granted to Share
Options Employees in
Granted Fiscal Year
---------- ------------- --------- -----------
Richard L. Dunning 800,000(1) 54.4 $2.56 4/2/2001(2)
4/2/2006(2)
(1) Granted pursuant to Mr. Dunning's employment agreement. See "Employment
Arrangements" below.
(2) Incentive stock options to purchase 156,064 shares expire on 4/2/2001;
non-incentive stock options to purchase 643,946 shares expire 4/2/2006.
Mr. Dunning was granted an Incentive stock option to purchase 156,064 shares
under the Company's 1990 Incentive and Non-Incentive Stock Option Plan (the
"1990 Plan"), which at the time of issue provided that incentive stock options
must have a five-year term. Mr. Dunning was also granted a non-Incentive stock
option to purchase 643,936 shares under the 1990 Plan; pursuant to his amended
and restated employment agreement, the term of these options was extended to ten
years from the date of grant, and they became exercisable cumulatively in three
substantially equal annual increments.
10
<PAGE>
Option Exercise and Value Table
The following table sets forth certain information concerning options
exercised during 1996, and the number of unexercised options as at December 31,
1996 held, by the individuals named in the Summary Compensation Table:
Option Exercises and Values at December 31, 1996
------------------------------------------------
<TABLE>
<CAPTION>
Name Shares Value Number of Value of
acquired realized Unexercised Unexercised
on (1) Options at In-the-Money
exercise December 31, Options at
1996 December 31,
Exercisable (E)/ 1996(1)
Unexercisable
(U)
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
M.S. Koly -- -- 200,000(E) $525,000
Richard L. Dunning 800,000(U) $650,000
Alfonso J. Tobia, Ph.D. 75,000(E) $201,375
75,000(U) $201,375
Francis M. O'Connell 25,000(E) $73,438
75,000(U) $220,313
</TABLE>
(1) Based upon the $3 3/8 closing price of the Common Stock on The Nasdaq
Stock Market on December 31, 1996.
Employment Arrangements
In October 1996, the Company entered into a restated employment
agreement with Richard L. Dunning, effective March 27, 1996, pursuant to which
Mr. Dunning serves as President and Chief Executive Officer of the Company. The
agreement provides for a base annual salary of $200,000, which may be increased
at the discretion of the Board of Directors or the Compensation Committee, and
an annual cash bonus based on performance criteria, with an initial cash bonus
targeted to be at least 33% of Mr. Dunning's base compensation. Mr. Dunning is
entitled to four weeks' vacation and to participate in the Company's medical,
dental, life and long-term disability insurance and other benefit programs.
Pursuant to the agreement, Mr. Dunning was granted both incentive and
non-incentive stock options to purchase an aggregate of 800,000 shares of Common
Stock at an exercise price of $2.56 per share, the incentive options becoming
exercisable cumulatively at the rate of 25% per annum, and the non-incentive
options becoming exercisable cumulatively at the rate of 33-1/3% per annum,
commencing March 28, 1997 (one year from the date of grant). Pursuant to the
agreement, the expiration date of the incentive options is 4/2/2001, and that of
the non-incentive options is 4/2/2006. Mr. Dunning's employment may be
terminated by the Company for cause, or without cause upon 60 days' notice by
either the Company or Mr. Dunning. In the event Mr. Dunning's employment is
terminated by the Company without cause, or in the event Mr. Dunning terminates
his employment following certain actions by the Company (including a material
reduction in Mr. Dunning's duties or a relocation of the Company's principal
executive offices), Mr. Dunning is entitled to a severance payment equal to six
months' of his base salary, payable in monthly installments. The agreement
contains certain non-competition and confidentiality provisions, and provides
that the Company may obtain "key man" life insurance on the life of Mr. Dunning
for the Company's benefit. Mr. Dunning received a $40,000 signing bonus upon
execution of the agreement.
11
<PAGE>
In June 1994, the Company entered into an employment agreement with
Alfonso J. Tobia, Senior (now, Executive) Vice President of the Company,
effective July 1, 1994, providing for a base annual salary of $125,000, to be
increased to $150,000 upon the redemption by the Company of its outstanding
Class A Warrants, and eligibility for a discretionary bonus up to $25,000. The
agreement provides that Dr. Tobia is eligible to receive options to purchase
150,000 shares of Common Stock (which were granted on August 24, 1994), and is
eligible to participate in the Company's benefit programs, which currently
include a medical program, dental/vision insurance and group life insurance.
M.S. Koly, former Chief Executive Officer of the Company and former
Chairman of the Board, was paid $3,000 per month commencing June 1995 for his
services as Chairman, which position he held until March 1996, and was paid
$7,000 per month for services as Acting Chief Executive Officer, from September
1995 to April 1996, to which he devoted two business days per week.
Compensation Committee Report
The Compensation Committee is responsible for setting the
Company's policy regarding the compensation of the Company's senior executive
officers, including the Chief Executive Officer, and administering the Company's
stock option plans. The Company's policy is to establish a compensation program
that will attract, retain and motivate qualified members of senior management in
a manner that is competitive with other companies in the biotechnology industry.
The key elements in this policy are salary, stock options, and availability of a
cash bonus. As the Company is still in the development stage, revenues and
profits are presently inapplicable as factors in determining compensation of the
Chief Executive Officer and other executives of the Company. Rather, the
Compensation Committee looks to qualitative factors, including the officers'
efforts to build the organization, to expand the Company's potential product
line (through acquiring new technologies or otherwise), to expand the range of
applications therefor, and to intensify the Company's research and development
efforts for its potential products. In determining the cash bonus for 1996 for
Richard L. Dunning, the Company's Chief Executive Officer, the Compensation
Committee considered a number of significant positive developments including,
among other factors, the completion in June, 1996 of the March 21, 1996
Subscription Agreement, the redemption of the Class A and Class B Warrants, and
his overall efforts in building the Company's organization, including the
acquisition of Ribonetics GmbH, the acquisition of a controlling interest in
Innovir and the recruitment of several key executives.
The Compensation Committee
Donald G. Drapkin
Richard L. Dunning
Eric A. Rose, M.D.
Lindsay A. Rosenwald, M.D.
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The above report shall not be deemed incorporated by reference into any
filing under the Securities Act or under the Exchange Act, by any general
statement incorporating by reference this proxy statement, except to the extent
the Company specifically incorporates this information by reference, and shall
not otherwise be deemed filed under such Acts.
Section 16 Proxy Statement Disclosure
Section 16 of the Securities Exchange Act of 1934, as amended, requires
that officers, directors and holders of more than 10% of the Common Stock
(collectively, "Reporting Persons") file reports of their trading in Company
equity securities with the Securities and Exchange Commission. Based on a review
of Section 16 forms filed by the Reporting Persons during the last fiscal year,
David A. Jackson, Executive Vice President and Chief Scientific Officer of the
Company, filed his Form 3, reporting his initial beneficial ownership of
securities of the Company, approximately three and one-half months late, Francis
M. O'Connell, Vice President-Finance and Chief Financial Officer, filed a Form
4, reporting changes in beneficial ownership of securities of the Company,
approximately one week late, Eric Rose, M.D., a director of the Company, filed
his Form 5 reporting the exercise of warrants approximately one month late. The
Company believes that the Reporting Persons otherwise complied with all
applicable Section 16 filing requirements.
CERTAIN TRANSACTIONS
In August 1995, the Company entered into a consulting agreement with
Lindsay A. Rosenwald, M.D., who was elected a director of the Company in June
1996, pursuant to which Dr. Rosenwald has agreed to act as a financial
consultant to the Company pursuant to the terms thereof and the Company granted
Dr. Rosenwald an option to purchase 2,000,000 shares of Common Stock at $.53125
per share (the closing bid price of the Common Stock on The Nasdaq Small-Cap
Market on the date preceding the date of grant), exercisable through August 6,
1998. In June 1996, Dr. Rosenwald transferred 85,000 of the underlying option
shares to other persons.
In November 1995, the Company, under the Company's 1995 Non-Employee
Director Stock Option Plan, issued options to purchase 100,000 shares of the
Company's common stock, at an exercise price of $.9375 per share, to each of Mr.
Drapkin and Dr. Rose. Such options may be exercised at any time prior to
November, 2000, or if earlier, twelve months following cessation of service as a
director.
In November 1995, the Company entered into an arrangement with Donald
G. Drapkin, a director of the Company, pursuant to which Mr. Drapkin agreed to
make available to the Company his business and financial acumen for a five-year
period, and the Company granted Mr. Drapkin an option to purchase 650,000 shares
at $.9375 per share (the closing bid price of the Common Stock on The Nasdaq
Small Cap Market on the date preceding the date of grant), exercisable at the
rate of 25% of the aggregate number of underlying shares per annum commencing
one year from the date of grant. Concurrently, the Company entered into a
five-year consulting arrangement with Eric A. Rose, M.D., a director of the
Company, pursuant to which Dr. Rose agreed to provide scientific consulting
services to the Company, and the Company granted Dr. Rose an option to purchase
650,000 shares at $.9375 per share, exercisable at the rate of 25% of the
aggregate number of underlying shares per annum commencing one year from the
date of grant.
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In March 1996, Lindsay A. Rosenwald, M.D. and Donald G. Drapkin entered
into a Guaranty Agreement with the Company pursuant to which Dr. Rosenwald and
Mr. Drapkin have each agreed to pay up to $1,000,000 of the Company's ordinary
operating expenses and in exchange for such obligation Dr. Rosenwald and Mr.
Drapkin were each granted options to purchase 100,000 shares of Common Stock at
an exercise price of $1.47 per share. Such options are exercisable for ten
years.
On June 21, 1996, the Company completed a private placement pursuant to
a subscription agreement dated March 21, 1996 (the "Subscription Agreement") to
a group of investors including the following directors or persons or entities
affiliated with such directors: (i) Laurence D. Fink, a director of the Company,
purchased 266,667 shares of Common Stock and 133,333 Common Stock Purchase
Warrants for $400,000, and a family trust of Mr. Fink purchased 66,666 shares of
Common Stock and 33,333 Common Stock Purchase Warrants for $100,000; (ii) Linda
G. Robinson, a director of the Company, purchased 133,333 shares of Common Stock
and 66,666 Common Stock Subscription Warrants for $200,000; and (iii) The Aries
Trust Fund, a Cayman Island trust (the "Aries Trust"), and The Aries Domestic
Fund, L.P., a Delaware limited partnership ("The Aries Limited Partnership" and,
together with the Aries Trust, the "Aries Funds"), entities affiliated with
Lindsay A. Rosenwald, M.D. and Jerome Groopman, M.D., directors of the Company,
in the manner described below, purchased an aggregate of 666,666 shares of
Common Stock and 333,333 Common Stock Subscription Warrants for an aggregate of
$1,000,000. Lindsay A. Rosenwald, M.D., a director of the Company, serves as
President and is sole shareholder of the investment manager of the Aries Trust,
and serves as President and is the sole shareholder of the general partner of
the Aries Limited Partnership. Jerome Groopman, M.D., a director of the
Registrant, is an interested party in the Aries Funds.
On December 23, 1996, the Company acquired an approximate 66% ownership
interest in Innovir Laboratories, Inc. ("Innovir") pursuant to an agreement
dated November 21, 1996, as amended, among the Company and the Aries Funds and
an agreement dated November 21, 1996 between the Company and Innovir. Pursuant
to the agreements, as amended (i) the Aries Funds, which owned 4 million shares
of Innovir's common stock prior to the transaction, exercised warrants and unit
purchase options to purchase an additional 6 million shares, thereby providing
$3 million in cash to Innovir and resulting in the Aries Funds owning 10 million
shares of Innovir's common stock; (ii) the Company acquired 9.5 million shares
of Innovir's common stock from the Aries Funds for $3,000,000 in cash and
3,000,000 newly issued shares of the Company's Common Stock, and (iii) the
Company exchanged all of the capital stock of its wholly-owned subsidiary, VIMRX
Holdings Ltd., a Delaware corporation ("VHL") (to which, prior to closing, the
Company had made a capital contribution of $4,000,000), for 8.7 million shares
of Innovir's convertible preferred stock (convertible into 8.7 million shares of
Innovir's common stock), plus five-year warrants to purchase an additional 2
million shares of Innovir's common stock (1 million shares at an exercise price
of $1.00 per share and 1 million shares at an exercise price of $2.00 per
share). The Company has agreed to file a registration statement (the
"Registration Statement") with the Securities and Exchange Commission (the
"Commission") for the public resale of the 3,000,000 shares of Common Stock
issued to the Aries Funds, to use its best efforts to cause the Registration
Statement to be declared effective by the Commission under the Securities Act as
soon as practicable and to use its best efforts to keep the Registration
Statement effective until the earlier of the date such shares shall have been
disposed of or the date on which all of such shares are eligible for sale
pursuant to Rule 144 under the Securities Act (December 23, 1998). The
acquisition of the 9.5 million shares of Innovir stock from the Aries Funds was
negotiated at arms' length with the Aries Funds and an opinion was issued by an
independent investment banking firm that the transaction was fair from a
financial point of view to the Company and its public shareholders.
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<PAGE>
On March 7, 1997, the Company entered into a research agreement with
Columbia University ("Columbia") whereby the Company, through a newly
established subsidiary, VIMRX Genomics, Inc. ("Genomics"), 90%-owned by the
Company and 10%-owned by Columbia University, will provide $30 million in
funding to the Columbia Genome Center established by Columbia, with $4.7 million
to be paid during the first year in quarterly installments. In exchange,
Genomics will receive an exclusive license to develop, manufacture, use, sell or
market products resulting from any invention or research product developed by
the Columbia Genome Center and funded under the agreement. Following an initial
five-year term, the agreement automatically will renew for successive two-year
terms and, in the absence of an agreement to the contrary, the amount of funding
will be increased at a rate of 9% for every additional year. Under the
agreement, the Company agreed to issue Columbia a one-time payment of 200,000
shares of Common Stock, and granted Columbia "piggyback" registration rights
with respect to such shares during the period April 1, 1997 to April 1, 1999. On
March 26, 1997, in a separate transaction, the Company acquired an exclusive
worldwide license from Columbia University with respect to Blood Factor IXai
protein in consideration for $100,000 and future royalties. Concurrently, the
Company entered into a research agreement to provide Columbia $2.7 million in
funding in quarterly installments over a three-year period for the research and
development of Blood Factor IXai. One of the individuals directing research
under such agreement is Eric A. Rose, M.D. a director of the Company. Dr. Rose
is a Surgeon-In-Chief at Columbia Presbyterian Medical Center in New York, an
affiliate of Columbia, and has served as Chairman of the Department of Surgery
at the College of Physicians and Surgeons of Columbia since 1994 and as a
Director of the Division of Cardiothoracic Surgery of the Department since 1990.
Michael Weiner, M.D., a director of the Company, is the Hellinger Professor of
Clinical Pediatrics at Columbia's College of Physicians and Surgeons and is an
attending physician at Columbia Presbyterian Medical Center.
The Company believes that the terms of the Subscription Agreement were
no more favorable to the investors than could have been obtained from unrelated
parties, that the consulting arrangements with Dr. Rosenwald, Mr. Drapkin and
Dr. Rose are on terms no less favorable than could have been negotiated with
unrelated third parties of similar expertise, and the agreements with Columbia
were negotiated on an arm's length basis.
STOCK PRICE PERFORMANCE COMPARISON
The Stock Price Performance Graph below compares cumulative total
return of the Company's Common Stock with the cumulative total return of (i) the
Index for the NASDAQ Stock Market (U.S. Companies) (the "NASDAQ Index") and (ii)
an industry peer group index consisting of the NASDAQ Pharmaceutical Index (the
"Peer Index"). The Graph assumes $100 was invested on January 1, 1992, in (i)
the Company's Common Stock, (ii) the stocks comprising the NASDAQ Index and (ii)
the stocks comprising the Peer Index, and the reinvestment of dividends.
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[Insert performance graph described in Item 402(l) of Regulation S-K]
The graph above shall not be deemed incorporated by reference into any
filing under the Securities Act or under the Exchange Act, by any general
statement incorporating by reference this proxy statement, except to the extent
the Company specifically incorporates this information by reference, and shall
not otherwise be deemed filed under such Acts.
APPROVAL OF AMENDMENTS TO 1990 INCENTIVE AND
NON-INCENTIVE STOCK OPTION PLAN
and
ADOPTION OF 1997 INCENTIVE AND
NON-INCENTIVE STOCK OPTION PLAN
General
In 1990, the Company adopted the 1990 Plan under which an aggregate of
500,000 shares of Common Stock were reserved for issuance upon exercise of
options granted thereunder, increased to 1,200,000 shares in 1991 and to
2,400,000 shares in 1996. In February 1997, the Board of Directors adopted the
1997 Plan, subject to stockholder approval, under which an aggregate of
1,000,000 shares of Common Stock are reserved for issuance upon exercise of
options granted thereunder. The purpose of the 1990 Plan and of the 1997 Plan is
to further the growth and development of the Company by encouraging selected
employees, directors and other persons who contribute and are expected to
contribute materially to the Company's success to obtain a proprietary interest
in the Company through the ownership of its stock, thereby providing such
persons with an added incentive to promote the best interests of the Company and
affording the Company a means of attracting persons of outstanding ability to
its service.
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<PAGE>
As of the Record Date, options to purchase an aggregate of 1,952,500
shares of Common Stock had been granted and were outstanding, and a balance of
196,900 shares are reserved for issuance under the 1990 Plan for options
subsequently granted thereunder. No options have been granted under the 1997
Plan.
1990 Plan and Proposed Amendments
On February 6, 1997, the Board of Directors adopted, subject to
stockholder approval, amendments to the 1990 Plan (the "1990 Plan Amendments").
The purpose of the 1990 Plan Amendments is to conform the 1990 Plan to certain
statutory and regulatory developments, and to provide the Board of Directors and
the Compensation Committee with greater flexibility in determining the terms and
conditions of employee options than was available under the 1990 Plan prior to
the amendments, thereby assisting the Company in attracting to its service
persons of outstanding ability. Following is a summary of the provisions of and
the amendments to the 1990 Plan:
1. Administration. Prior to amendment, the 1990 Plan provided for
administration (i.e. granting of options and interpretation of the 1990
Plan) by a committee (the "Committee") of the Board of Directors (the
"Board"), and for amendment or termination of the 1990 Plan by the
Board. As amended, the Board may exercise the powers of the Committee
described below, and thus administer the Plan directly.
2. Composition of Committee. Prior to amendment, the 1990 Plan provided
that the Committee be comprised of "disinterested directors" as defined
in Rule 16b-3 and "outside directors" as defined in the Internal
Revenue Code (the "Code"). As amended, to comply with recent revisions
to Rule 16b-3, the Committee will be comprised, to the extent
practicable, of "non-employee directors" as defined by new Rule 16b-3
"outside directors" as defined in the Code. Mr. Drapkin, Mr. Dunning,
Dr. Rose and Dr. Rosenwald currently constitute the members of the
Committee.
3. Powers of the Committee. The Committee selects the optionees and
determines (i) whether the respective option is to be a non-incentive
stock option or an incentive stock option qualifying under Section
422(a) of the Code, (ii) the number of shares of Common Stock
purchasable under the option, which may not exceed 800,000 shares for
any individual, and (iii) the exercise price, which cannot be less than
50% of the fair market value of the Common Stock on the date of grant
for non-incentive stock options or 100% of such fair market value for
incentive stock options. With respect to the granting of a
non-incentive stock option, the Committee further determines (i) the
time or times when the option becomes exercisable, and (ii) its
duration, which may not exceed ten years from the date of grant.
As amended, in addition to the powers described above, the Committee
shall determine the expiration dates of options (not to exceed ten
years from the date of grant) and, for non-incentive stock options,
whether such options will have limited transferability. The Committee
also shall have the power to accelerate exercisability, extend the term
of exercisability and otherwise amend the provisions of outstanding
options, subject to the terms of the 1990 Plan, as amended.
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<PAGE>
4. Eligibility for Option Grants. Non-incentive options may be granted to
employees, directors, consultants, agents, independent contractors and
such other persons as the Committee determines will assist the
Company's endeavors. This provision has not been amended.
5. Exercise Price of Options. With respect to incentive stock options, the
fair market value, determined as of the date the option was granted, of
shares first exercisable by an optionee in any calendar year may not
exceed $100,000. The maximum number of shares of Common Stock that may
be subject to options granted to an executive officer during any
calendar year is 800,000 shares. This provision has not been amended.
6. Term of Incentive Stock Options. Prior to amendment, the 1990 Plan
provided limited the term of incentive stock options to five years from
the date of grant. As amended, the terms of both incentive and
non-incentive options may be as long as ten years, as determined by the
Committee at the date of grant.
7. Exercisability of Incentive Stock Options. Prior to amendment, the 1990
Plan provided that incentive stock options be exercisable at the rate
of 25% per annum commencing one year from the date of grant. As
amended, the Committee will determine the exercisability of each
option, provided, however, that no option will be exercisable for a
period of six months from the date of grant (the same limitation being
applicable to non-incentive stock options).
8. Acceleration of Exercisability of Options. Prior to amendment, the 1990
Plan made no provision for the acceleration of exercisability of
outstanding options. As amended, the 1990 Plan provides that the
Committee, in its discretion, may accelerate the exercisability of
outstanding options, subject to the $100,000 per annum market value
limitation for incentive stock options.
9. Cashless Exercises. Prior to amendment, the 1990 Plan required exercise
of options by delivery of cash in the amount of the exercise price. As
amended, the 1990 Plan permits, to the extent determined by the
Committee for individual option grants, exercisability by the delivery
of previously owned shares or the withholding of shares otherwise
issuable upon exercise of the option (so-called "cashless exercises").
10. Extension of Exercisability. Prior to amendment, the 1990 Plan provided
that an option automatically terminate three months following the date
of the optionee's termination of employment or engagement with the
Company, and one year following an employee's death or disability, but
in no event subsequent to the expiration date of the option. As
amended, the Committee, in its discretion, may extend the term of
exercise of an outstanding non-incentive stock option, but not beyond
ten years from the date of the non-incentive stock option's grant.
11. Transferability. Prior to amendment, the 1990 Plan provided that no
option be transferable other than by will or the laws of descent and
distribution. As amended, the Committee may provide for limited
transferability (i.e. to family members or family trusts) of
non-incentive stock options.
12. Change in Control. Prior to amendment, the 1990 Plan provided that upon
a change in control of the Company, the 1990 Plan and all outstanding
options automatically would terminate unless provided otherwise by the
Committee at the time of grant. As amended, upon a change in control,
the exercisability of all outstanding options shall be accelerated and
such options shall become immediately fully exercisable.
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13. Option Adjustments. The 1990 Plan contains a customary anti-dilution
provision which provides that in the event of any change in the
Company's outstanding capital stock by reason of stock dividend,
recapitalization, merger, consolidation, split-up, combination or
exchange of shares and the like, the aggregate number of shares of
Common Stock subject to outstanding options and the option price are to
be appropriately adjusted by the Committee, whose determination thereon
shall be conclusive. This provision was not amended.
14. Subsequent Amendments to 1990 Plan. Prior to amendment, the 1990 Plan
provided that the Board may make modifications or amendments to the
1990 Plan, provided, however, that (i) no change may be made in the
aggregate number of shares of Common Stock subject to the 1990 Plan,
(ii) no termination, modification or amendment may adversely affect the
rights of a holder under a previously granted option, (iii) no material
modification may be made to the requirements for eligibility for
participation in the 1990 Plan, and (iv) no material increase may be
made in the benefits accruing to participants in the 1990 Plan. As
amended, the Board will be empowered to amend the 1990 Plan, provided,
however, that shareholder approval shall be required (i) to increase
the number of shares reserved for issuance under the 1990 Plan, (ii) to
materially increase the benefits accruing to participants in the 1990
Plan, (iii) to materially modify the requirements for eligibility for
participation under the 1990 Plan, or (iv) if otherwise required to
comply with the incentive stock option provisions or Section 162(m) of
the Code or the listed company requirements of The Nasdaq Stock Market
or of a national securities exchange on which the Common Stock is
traded, and provided, further, that no amendment may adversely affect
the rights of a holder of an outstanding option without such holder's
written consent.
Options Granted or to be Granted Under the 1990 Plan
As of the Record Date, options to purchase an aggregate of 1,952,500
shares of Common Stock had been granted and were outstanding, including an
incentive option to purchase 156,064 shares granted and a non-incentive option
to purchase 643,936 shares to Richard L. Dunning, the Company's President and
Chief Executive Officer. See "Executive Compensation - Employment Arrangements."
Dr. David A. Jackson, Executive Vice President and Chief Scientific Officer has
been issued incentive options to purchase 120,752 shares, and non-incentive
options to purchase 379,248 shares. Other than Mr. Dunning and Dr. Jackson,
current executive officers (consisting of Dr. Richard Kouri, Senior Vice
President - Research, Francis M. O'Connell, Vice President-Finance and Chief
Financial Officer, and Dr. Alfonso J. Tobia, Executive Vice President), hold
incentive stock options under the 1990 Plan to purchase an aggregate of 325,000
shares, which were granted as follows: (i) on March 27, 1995, an option to Mr.
O'Connell to purchase 100,000 shares at an exercise price of $.428 per share,
under which 50,000 shares are currently exercisable; (ii) on August 24, 1994, an
option to Dr. Tobia to purchase 150,000 shares at an exercise price of $.69 per
share, under which 75,000 shares are currently exercisable; and (iii) on May 5,
1997, an option to Dr. Kouri to purchase 75,000 shares at an exercise price of
$2.125 per share, none of which are currently exercisable.
On May 14, 1997, the most recent practical date prior to the printing
of this Proxy Statement, the closing sale price per share of Common Stock as
reported by The Nasdaq National Market was $2.66.
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1997 Plan
The 1997 Plan is substantially identical to the 1990 Plan, with the
following exceptions:
1. The 1997 Plan was adopted in February, 1997 and provides that options
may be granted thereunder until February, 2007; Options under the 1990
Plan may be granted only until July, 2000.
2. One Million (1,000,000) shares are authorized for issuance under the
1997 Plan; Two Million Four Hundred Thousand (2,400,000) shares are
authorized for issuance under the 1990 Plan.
3. No options have yet been issued under the 1997 Plan.
Federal Income Tax Consequences
The following is based upon federal tax laws and regulations as
presently in effect and does not purport to be a complete description of the
federal income tax aspects of the 1990 Plan and the 1997 Plan (collectively, the
"Plans"). Also, the specific state tax consequences to each participant under
the Plans may vary, depending upon the laws of the various states and the
individual circumstances of each participant.
Incentive Stock Options
No taxable income is recognized by the optionee upon the grant of an
incentive stock option under the Plans. Further, no taxable income will be
recognized by the optionee upon exercise of an incentive stock option granted
under the Plans and no expense deduction will be available to the Company.
Generally, if the optionee holds shares acquired upon the exercise of incentive
stock options for at least two (2) years from the date of grant of the option
and for at least one (1) year from the date of exercise, any gain on a
subsequent sale of such shares will be considered as long-term capital gain. The
gain recognized upon the sale of the shares is equal to the excess of the amount
realized upon the sale, selling price of the shares over the exercise price.
Therefore, the net federal income tax effect on the holders of incentive stock
options is to defer, until the shares are sold, taxation of any increase in the
value of the shares from the date of grant and to treat such gain, at the time
of sale, as capital gain rather than ordinary income. However, in general, if
the optionee sells the shares prior to expiration of either the two-year or
one-year period, referred to as a "disqualifying disposition," the optionee will
recognize taxable income at ordinary tax rates in an amount equal to the lesser
of (i) the value of the shares on the date of exercise, less the exercise price;
or (ii) the amount realized on the date of sale, less the exercise price, and
the Company will receive a corresponding business expense deduction. The balance
of the gain recognized on the disqualifying disposition will be long-term or
short-term capital gain depending upon the holding period of the optioned
shares. The two-year and one-year holding period rules do not apply to optioned
shares which are disposed of by the optionee's estate or a person who acquired
such shares by reason of the death of the optionee.
An employee may be subject to an alternative minimum tax upon exercise
of an incentive stock option since the excess of the fair market value of the
optioned stock at the date of exercise over the exercise price must be included
in alternative minimum taxable income, unless the acquired shares are disposed
of in the same year that the option was exercised.
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Non-Incentive Stock Options
As in the case of incentive stock options, the grant of non-incentive
stock options will not result in any taxable income to the optionee. However,
unlike incentive stock options, generally the optionee will recognize ordinary
income in the year in which the option is exercised in the amount by which the
fair market value of the purchased shares on the date of exercise exceeds the
exercise price.
The fair market value of the shares on the date income is required to
be recognized will constitute the tax basis thereof for computing gain or loss
on any subsequent sale. Any gain or loss recognized by the optionee upon the
subsequent disposition of the shares will be treated as capital gain or loss and
will qualify as long-term capital gain or loss if the shares are held for more
than twelve months prior to disposition.
Generally, the Company will be entitled to a business expense deduction
equal to the amount of ordinary income recognized by the optionee at the date of
exercise. The income recognized by the optionee will be treated as compensation
income and will be subject to income tax withholding by the Company.
Section 162(m) of the Code
Under Section 162(m) of the Internal Revenue Code of 1986, as amended
(the "Code"), certain compensation payments in excess of $1 million are subject
to a limitation on deductibility for the Company. The limitation on
deductibility applies with respect to that portion of a compensation payment for
a taxable year in excess of $1 million to either the Company's Chief Executive
Officer or any one of the Company's other four most highly compensated executive
officers. Certain performance-based compensation is not subject to the
limitation on deductibility. Options can qualify for this performance-based
exception, but only if they are granted at fair market value, the total number
of shares that can be granted to an executive for a specified period is stated,
and shareholder and Board approval of the plan under which they are granted is
obtained. The Plans allow compliance with those performance-based criteria
except that non-qualified stock options granted with an exercise price less than
the fair market value of the Common Stock on the date of grant will not meet
such performance-based criteria and, accordingly, the compensation attributable
to such options will be subject to the deductibility limitations contained in
Section 162(m) of the Code.
At the date of this Proxy Statement, long-term capital gain is taxed to
individuals at a maximum preferential rate of 28%, while items of ordinary
income are currently taxed to individuals at a maximum rate of 39.6%.
Required Vote
Approval of the amendments to the 1990 Plan and of the adoption of the
1997 Plan will require the affirmative vote of the holders of a majority of the
outstanding shares of Common Stock present in person or represented by proxy at
the Meeting and entitled to vote. In instances where brokers are prohibited from
exercising discretionary authority for beneficial owners who have not returned
proxies ("broker non-votes"), those shares will not be included in the vote
totals, and therefore will have no effect on the vote for the approval of the
1990 Plan Amendments or the approval of the adoption of the 1997 Plan. Unless
marked to the contrary, proxies received will be voted FOR approval of the 1990
Plan Amendments and FOR approval of the adoption of the 1997 Plan.
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The Board of Directors recommends that stockholders vote FOR the
approval of the 1990 Plan Amendments and FOR approval of the adoption of the
1997 Plan.
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
Subject to ratification by the stockholders, the Board of Directors has
appointed KPMG Peat Marwick LLP as independent auditors for the year ending
December 31, 1997.
For more than the two most recent fiscal years of the Company, the
independent auditors of the Company have been Richard A. Eisner & Company, LLP,
who have been dismissed upon recommendation of the Audit Committee on May 15,
1997 At no time did any report on the financial statements of the Company by
Richard A. Eisner & Company, LLP contain an adverse opinion or a disclaimer of
opinion, or a qualification or modification as to uncertainty, audit scope or
accounting principles. The decision to change accountants was occasioned by the
developments of the past year, and not by any disagreement or advice given on
any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure. In particular, in light of the
acquisition by the Company of a controlling interest in Innovir Laboratories,
Inc. the Audit Committee concluded that it would be most efficient and in the
best interests of both Innovir and the Company for the same auditors to audit
both companies. The Company solicited proposals from four auditing firms,
including Richard A. Eisner & Company, LLP. KPMG Peat Marwick LLP was chosen as
a result of this process, and was engaged by the Company as its principal
auditors on May 15, 1997.
The ratification of the appointment of KPMG Peat Marwick LLP will
require the affirmative vote of a majority of the shares of Common Stock present
in person or represented by proxy at the Meeting and entitled to vote. In
instances where brokers are prohibited from exercising discretionary authority
for beneficial owners who have not returned proxies ("broker non-votes"), those
shares will not be included in the vote totals and therefore will have no effect
on the ratification of the reappointment of the independent auditors.
It is anticipated that a representative of KPMG Peat Marwick LLP will
be present at the Meeting to answer questions within such firm's field of
expertise.
The Board of Directors recommends that stockholders vote FOR the
appointment of KPMG Peat Marwick LLP as independent auditors for the year ending
December 31, 1997.
OTHER BUSINESS
Management does not know of any matter to be brought before the Meeting
other than as described above. In the event any other matter properly comes
before the Meeting, the persons named in the accompanying form of proxy have
discretionary authority to vote on such matters.
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STOCKHOLDER PROPOSALS
Any stockholder proposal to be considered for inclusion in the
Company's proxy soliciting material for the next Annual Meeting of Stockholders
must be received by the Company at its principal office by December 31, 1997.
Dated: May 21,1997
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EXHIBIT A
AMENDED AND RESTATED
1990 INCENTIVE AND NON-INCENTIVE
STOCK OPTION PLAN
OF
VIMRx PHARMACEUTICALS INC.
(AS AMENDED JULY 15, 1991, AUGUST 31, 1995 MAY 13, 1996
AND FEBRUARY 6, 1997)
1. Purpose of Plan.
The purpose of this Incentive and Non-Incentive Stock Option
Plan ("Plan") is to further the growth and development of VIMRx Pharmaceuticals
Inc. ("Company") and any subsidiaries thereof by encouraging selected employees,
directors and other persons who contribute and are expected to contribute
materially to the Company's success to obtain a proprietary interest in the
Company through the ownership of stock, thereby providing such persons with an
added incentive to promote the best interests of the Company and affording the
Company a means of attracting to its service persons of outstanding ability.
2. Stock Subject to the Plan.
An aggregate of 2,400,000 shares of the Company's Common
Stock, $.001 par value ("Common Stock") subject, however, to adjustment or
change pursuant to paragraph 12 hereof, shall be reserved for issuance upon the
exercise of options which may be granted from time to time in accordance with
the Plan ("Options"). Such shares may be, in whole or in part, authorized but
unissued shares or issued shares which have been reacquired by the Company. If,
for any reason, an Option shall lapse, expire or terminate without having been
exercised in full, the unpurchased shares covered thereby shall again be
available for purposes of the Plan.
3. Administration.
(a) Except as provided in paragraph (c) below, the Plan shall
be administered by the Committee. The Board of Directors shall appoint the
Committee from among its members. Such Committee shall be composed of two or
more Directors who, to the extent practicable, shall be "outside directors" as
defined in regulations under Section 162(m) of the Internal Revenue Code of
1986, as amended (the "Code"), and "non-employee directors" as defined by
Regulation 240.16b-3 under the Securities Exchange Act of 1934, as amended. Such
Committee shall have and may exercise any and all of the powers relating to the
administration of the Plan and the grant of Options thereunder as are set forth
in subparagraph 3(b) hereof as the Board of Directors shall confer and delegate.
The Board of Directors shall have power at any time to fill vacancies in, to
change the membership of, or to discharge such Committee. The Committee shall
select one of its members as its chairman and shall hold its meetings at such
time and at such places as it shall deem advisable. A majority of such Committee
shall constitute a quorum and such majority shall determine its action. Any
action may be taken without a meeting by written consent of all the members of
the Committee. The Committee shall keep minutes of its proceedings and shall
report the same to the Board of Directors at the meeting next succeeding.
(b) The Committee shall administer the Plan and, subject to
the provisions of the Plan, shall have sole authority in its discretion to
determine the persons to whom, and the time or times at which, Options shall be
granted; the number of shares to be subject to each such Option; the provisions
regarding exercisability of each Option; the expiration date of each Option;
whether the Option shall contain a "cashless exercise" provision; whether all or
any portion of the Options shall be incentive stock options ("Incentive
Options") qualifying under Section 422A of the Code or stock options which do
not so qualify ("Non-Incentive Options"); whether a Non-Incentive Option shall
have limited transferability as permitted under the Plan; and whether a
Non-Incentive Option granted to a non-employee shall terminate following the
non-employee's termination of engagement in performing services for the Company
or its subsidiaries pursuant to Section 9 of the Plan. Both Incentive Options
and Non-Incentive Options may be granted to the same person at the same time
provided each type of Option is clearly designated. In making such
determinations, the Committee may take into account the nature of the services
rendered by such persons, their present and potential contribution to the
Company's success and such other factors as the Committee in its sole discretion
may deem relevant. Subject to the express provisions of the Plan, the Committee
shall also have authority to interpret the Plan; to prescribe, amend and rescind
rules and regulations relating thereto; to determine the terms and provisions of
the respective Option Agreements, which shall be substantially in the forms
attached hereto as Exhibit A and Exhibit B; to amend the provisions of
outstanding Options to provide for accelerated exercisability or the extension
of the expiration date of such Options; and to make all other determinations
necessary or advisable for the administration of the Plan, all of which
determinations shall be conclusive and not subject to review.
(c) The Board of Directors may administer the Plan, in lieu of
and with the same powers as the Committee, with respect to any Options granted
or to be granted under the Plan, provided that such administration is consistent
with the provisions of Section 162(m) of the Code.
4. Eligibility for Receipt of Options.
(a) Incentive Options. Incentive Options may be granted only
to employees (including officers) of the Company and/or any of its subsidiaries.
A director of the Company or any subsidiary who is not an employee of the
Company or of one of its subsidiaries is not eligible to receive Incentive
Options under the Plan. Further, Incentive Options may not be granted to any
person who, at the time the Incentive Option is granted, owns (or is considered
as owning within the meaning of Section 425(d) of the Code) stock possessing
more than 10% of the total combined voting power of all classes of stock of the
Company or any subsidiary (10% Owner), unless at the time the Incentive Option
is granted to the 10% Owner, the option price is at least 110% of the fair
market value of the Common Stock subject thereto and such Incentive Option by
its terms is not exercisable subsequent to five years from the date of grant.
The aggregate fair market value (determined as of the time an Incentive Option
is granted) of the shares of the Company's Common Stock initially purchasable
upon exercise of an Incentive Option during any calendar year may not exceed
$100,000.
(b) Non-Incentive Options. Non-Incentive Options may be
granted to any employees (including employees who have been granted Incentive
Options), directors, consultants, agents, independent contractors and other
persons whom the Board of Directors (or Committee) determines will contribute to
the Company's success.
(c) The maximum number of shares that may be subject to
options under this Plan granted during any calendar year to any executive
officer of the Company is 800,000 shares.
(d) In the event on outstanding Incentive Option or a portion
thereof no longer qualifies as an incentive stock option under Section 422A of
the Code, such Option or portion thereof, as applicable, thereafter shall be
deemed a Non-Incentive Option under the Plan.
5. Option Price.
The purchase price of the shares of Common Stock under each
Option shall be determined by the Committee, which determination shall be
conclusive and not subject to review, but in no event shall the purchase price
be less than 100% of the fair market value of the Common Stock on the date of
grant in the case of Incentive Options (110% of fair market value in the case of
Incentive Options granted to a 10% Owner) and 50% of the fair market value of
the Common Stock on the date of the grant in the case of Non-Incentive Options.
For purposes of the Plan, unless the Committee determines
otherwise, the "fair market value" of a share of Common Stock as of a certain
date shall be the closing sale price of the Common Stock on The Nasdaq Stock
Market or, if the Common Stock is not then traded on The Nasdaq Stock Market,
such national securities exchange on which the Common Stock is then traded, on
the trading date immediately preceding the date fair market value is being
determined. The Committee may make such other determination of fair market
value, based on other factors, as it shall deem appropriate.
For purposes of the Plan, the date of grant of an Option shall
be the date on which the Committee shall by resolution duly authorize such
Option.
6. Term of Options.
The term of each Option shall be such number of years as the
Committee shall determine, subject to earlier termination as herein provided,
but in no event more than ten years from the date such Option is granted.
7. Exercise of Options.
(a) Each Option shall be exercisable to the extent determined
by the Committee, but in no event shall an Option be exercisable until at least
six months from the date of grant.
(b) An Option may not be exercised for fractional shares of
the Company's Common Stock.
(c) Except as provided in paragraphs 9, 10 and 11 hereof, and
unless determined otherwise by the Committee with respect to Non-Incentive
Options granted to non-employees, no Option shall be exercisable unless the
holder thereof shall have been an employee, director, consultant, agent,
independent contractor or other person employed by or engaged in performing
services for the Company and/or a subsidiary continuously from the date of grant
to the date of exercise.
(d) The exercise of an Option shall be contingent upon receipt
from the holder thereof of a written representation that at the time of such
exercise it is the optionee's then present intention to acquire the Option
shares for investment and not with a view to the distribution or resale thereof
(unless a Registration Statement covering the shares purchasable upon exercise
of the Options shall have been declared effective by the Securities and Exchange
Commission) and upon receipt by the Company of cash, or a check to its order,
for the full purchase price of such shares. The Committee may, in its
discretion, include a "cashless exercise" provision in the applicable Option
Agreement, in which event the optionee will be permitted (i) to deliver
previously owned shares of Common Stock with a fair market value equal to the
exercise price in payment of the full purchase price of such shares, or (ii) to
request that the Company withhold shares of Common Stock issuable upon exercise
of such Option with a fair market value equal to the exercise price of the
shares being purchased under the Option (thereby reducing the number of shares
issuable upon exercise of the Option).
(e) The holder of an Option shall have none of the rights of a
stockholder with respect to the shares purchasable upon exercise of the Option
until a certificate for such shares shall have been issued to the holder upon
due exercise of the Option.
(f) The proceeds received by the Company upon exercise of an
Option shall be added to the Company's working capital and be available for
general corporate purposes.
8. Transferability of Options.
No Option granted pursuant to the Plan shall be transferable
otherwise than by will or the laws of descent or distribution and an Option may
be exercised during the lifetime of the holder only by such holder, provided,
however, that the Committee may provide for transferability of a Non-Incentive
Option to an optionee's family members or family trusts.
9. Termination of Employment or Engagement.
(a) Except as provided in paragraph (b) below, In the event
the employment of the holder of an Option shall be terminated by the Company or
a subsidiary for any reason other than by reason of death or disability, or the
engagement of a non-employee holder of a Non-Incentive Option shall be
terminated by the Company or a subsidiary for any reason, such holder may,
within three months from the date of such termination, exercise such Option to
the extent such Option was exercisable by such holder at the date of such
termination. Notwithstanding the foregoing, no Option may be exercised
subsequent to the date of its expiration. Absence on leave approved by the
employer corporation shall not be considered an interruption of employment for
any purpose under the Plan. In addition, at the discretion of the Committee, the
exercisability of an outstanding Non-Incentive Option may be extended to a date
determined by the Committee but not beyond ten years from the date of grant.
(b) The Committee may, in its discretion, at the time of grant
or by amending the applicable outstanding Non-Incentive Option, delete the
foregoing termination provision with respect to a Non-Incentive Option granted
to a non-employee of the Company or its subsidiaries.
(c) Nothing in the Plan or in any Option Agreement granted
hereunder shall confer upon any Optionholder any right to continue in the employ
of the Company or any subsidiary or obligate the Company or any subsidiary to
continue the engagement of any Optionholder or interfere in any way with the
right of the Company or any such subsidiary to terminate such Optionholder's
employment or engagement at any time.
10. Disability of Holder of Option.
If the employment of the holder of an Option shall be
terminated by reason of such holder's disability, such holder may, within twelve
months from the date of such termination, exercise such option to the extent
such Option was exercisable by such holder at the date of such termination.
Notwithstanding the foregoing, no Option may be exercised subsequent to the date
of its expiration.
11. Death of Holder of Option.
If the holder of any Option shall die while in the employ of,
or while performing services for, the Company or one or more of its subsidiaries
(or within six months following termination of employment due to disability),
the Option theretofore granted to such person may be exercised, but only to the
extent such Option was exercisable by the holder at the date of death (or, with
respect to employees, the date of termination of employment due to disability)
by the legatee or legatees of such person under such person's Last Will, or by
such person's personal representative or distributees, within twelve months from
the date of death but in no event subsequent to the expiration date of the
Option.
12. Adjustments Upon Changes in Capitalization.
If at any time after the date of grant of an Option, the
Company shall by stock dividend, split-up, combination, reclassification or
exchange, or through merger or consolidation or otherwise, change its shares of
Common Stock into a different number or kind or class of shares or other
securities or property, then the number of shares covered by such Option and the
price per share thereof shall be proportionately adjusted for any such change by
the Committee whose determination thereon shall be conclusive.
13. Acceleration of Exercisability Upon Change in Control.
Upon the occurrence of a "change in control" of the Company
(as defined below), all outstanding Options shall become immediately fully
exercisable. For purposes of the Plan, a "change in control" of the Company
shall mean (i) the acquisition at any time by a "person" or "group" (as such
terms are used Sections 13(d) and 14(d)(2) of the Exchange Act of beneficial
ownership (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities representing 50% or more of the combined voting power
in the election of directors of the then outstanding securities of the Company
or any successor or the Company; (ii) the termination of service of directors,
for any reason other than death, disability or retirement from the Board of
Directors, during any period of two consecutive years or less, of individuals
who at the beginning of such period constituted a majority of the Board of
Directors, unless the election of or nomination for election of each new
director during such period was approved by a vote of at least two-thirds of the
directors still in office who were directors at the beginning of the period;
(iii) approval by the stockholders of the Company of any merger, consolidation,
or statutory share exchange as a result of which the Common Stock shall be
changed, converted or exchanged (other than a merger, consolidation or share
exchange with a wholly-owned Subsidiary) or liquidation of the Company or any
sale or disposition of 80% or more of the assets or earning power or the
Company; or (iv) approval by the stockholders of the Company of any merger,
consolidation, or statutory share exchange to which the Company is a party as a
result of which the persons who were stockholders immediately prior to the
effective date of the merger, consolidation or share exchange shall have
beneficial ownership of less than 50% of the combined voting power in the
election of directors of the surviving corporation; provided, however, that no
change in control shall be deemed to have occurred if, prior to such time as a
change in control would otherwise be deemed to have occurred, the Company's
Board of Directors deems otherwise.
<PAGE>
14. Vesting of Rights Under Options.
Neither anything contained in the Plan nor in any resolution
adopted or to be adopted by the Committee, the Board of Directors or the
stockholders of the Company shall constitute the vesting of any rights under any
Option. The vesting of such rights shall take place only when a written Option
Agreement, substantially in the form of the Incentive Stock Option Agreement
attached hereto as Exhibit A or the Non-Incentive Stock Option Agreement
attached hereto as Exhibit B, shall be duly executed and delivered by and on
behalf of the Company and the person to whom the Option shall be granted.
15. Withholding Taxes.
Whenever under the Plan shares are to be issued in
satisfaction of the exercise of Options granted thereunder, the Company shall
have the right to require the recipient to remit to the Company an amount
sufficient to satisfy federal, state and local withholding tax requirements
prior to the delivery of any certificate or certificates for such shares.
16. Termination and Amendment.
The Plan, which was adopted by the Board of Directors on July
10, 1990 and approved by the shareholders of the Company, shall terminate on
July 9, 2000 and no Option shall be granted under the Plan after such date. The
Board of Directors may at any time prior to such date terminate the Plan or make
such modifications or amendments thereto as it shall deem advisable, provided,
however, that shareholder approval shall be required:
(i) to increase the number of shares reserved for issuance under
the Plan;
(ii) to materially increase the benefits accruing to participants
under the Plan;
(iii) to materially modify the requirements of eligibility for
participation in the Plan; or
(iv) if otherwise required to comply with the incentive stock
option provisions of Section 162(m) of the Code or the listed
company requirements of The Nasdaq Stock Market or of a
national securities exchange on which the Common Stock is then
traded,
and, provided, further, that no modification or amendment shall adversely affect
the rights of a holder of an Option previously granted under the Plan without
such holder's written consent.
<PAGE>
EXHIBIT A TO 1990 PLAN
VIMRx PHARMACEUTICALS INC.
INCENTIVE STOCK OPTION AGREEMENT
----------------------
To:
We are pleased to notify you that by the determination of the
Stock Option Plan Committee (hereinafter the "Committee") an incentive stock
option to purchase shares of the Common Stock of VIMRx Pharmaceuticals Inc.
(herein called the "Company") at a price of $ per share has this day of
been granted to you under the Company's 1990 Incentive and
Non-Incentive Stock Option Plan (herein called the "Plan"). This option may be
exercised only upon the terms and conditions set forth below.
<PAGE>
1. Purpose of Option.
The purpose of the Plan under which this incentive stock
option has been granted is to further the growth and development of the Company
and its subsidiaries by encouraging key employees, directors, consultants,
agents, independent contractors and other persons who contribute and are
expected to contribute materially to the Company's success to obtain a
proprietary interest in the Company through the ownership of stock, thereby
providing such persons with an added incentive to promote the best interests of
the Company, and affording the Company a means of attracting to its service
persons of outstanding ability.
2. Acceptance of Option Agreement.
Your execution of this incentive stock option agreement will
indicate your acceptance of and your willingness to be bound by its terms; it
imposes no obligation upon you to purchase any of the shares subject to this
option. Your obligation to purchase shares can arise only upon your exercise of
the option in the manner set forth in paragraph 4 hereof.
3. When Option May Be Exercised.
(a) The option granted you hereunder may not be exercised for
a period of six months from the date of its grant by the Committee as set forth
above. Thereafter, this option shall be exercisable as follows:
[Insert exercisability provisions. A typical example, although not required
under the Plan, is as follows:]
[(i) at the end of one year from the date of grant, up to 25% of the total
shares subject to the option;
(ii) at the end of the second year from the date of grant, up to 50%;
(iii) at the end of the third year from the date of grant, up to 75%;
(iv) at the end of the fourth year from the date of grant, up to 100%.]
This option may not be exercised for less than ten shares at any one time (or
the remaining shares then purchasable if less than ten) and expires at the end
of ________ years [insert number of years; maximum up ten] from the date of
grant whether or not it has been duly exercised (hereinafter, the "Option
Expiration Date"), unless sooner terminated as provided in paragraphs 5, 6 or 7
hereof.
4. How Option May Be Exercised.
This option is exercisable by a written notice signed by you
and delivered to the Company at its executive offices, signifying your election
to exercise the option. The notice must state the number of shares of Common
Stock as to which your option is being exercised, must contain a statement by
you (in a form acceptable to the Company) that such shares are being acquired by
you for investment and not with a view to their distribution or resale (unless a
Registration Statement covering the shares purchasable has been declared
effective by the Securities and Exchange Commission) and must be accompanied by
cash or a check to the order of the Company for the full purchase price of the
shares being purchased [if "cashless exercise" is permitted, add the following
phrase:] [, unless exercised pursuant to the following "cashless exercise"
provision.]
[Insert the following "cashless exercise" provision, if granted by the
Committee:] [In lieu of paying for the shares purchasable under this option by
cash or check, you may (i) deliver previously owned shares of Common Stock with
a fair market value equal to the full purchase price of the shares being
purchased under this option, or (ii) request that the Company withhold shares of
Common Stock issuable upon exercise of this option with a fair market value
equal to the full purchase price of the shares being purchased under this option
(thereby reducing the number of shares issuable upon exercise of this option).
For purposes of this option, unless the Committee determines otherwise, the
"fair market value" of a share of Common Stock as of a certain date shall be the
closing sale price of the Common Stock on The Nasdaq Stock Market or, if the
Common Stock is not then traded on The Nasdaq Stock Market, such national
securities exchange on which the Common Stock is then traded, on the trading
date immediately preceding the date fair market value is being determined. The
Committee may make such other determination of fair market value, based on other
factors, as it shall deem appropriate.]
If notice of the exercise of this option is given by a person
or persons other than you, the Company may require, as a condition to the
exercise of this option, the submission to the Company of appropriate proof of
the right of such person or persons to exercise this option.
Certificates for shares of the Common Stock so purchased will
be issued as soon as practicable. The Company, however, shall not be required to
issue or deliver a certificate for any shares until it has complied with all
requirements of the Securities Act of 1933, the Securities Exchange Act of 1934,
any stock exchange on which the Company's Common Stock may then be listed and
all applicable state laws in connection with the issuance or sale of such shares
or the listing of such shares on said exchange. Until the issuance of the
certification for such shares, you or such other person as may be entitled to
exercise this option shall have none of the rights of a stockholder with respect
to shares subject to this option.
The Company shall have the right to require you, or such other
person as may be permitted to exercise this option, to remit to the Company an
amount sufficient to satisfy federal, state and local withholding tax
requirements prior to the delivery of any certificate or certificates for shares
of Common Stock issuable upon exercise of this option.
5. Termination of Employment.
If your employment with the Company (or a subsidiary thereof)
is terminated for any reason other than by death or disability, you may
exercise, within three months from the date of such termination, that portion of
the option which was exercisable by you at the date of such termination,
provided, however, that such exercise occurs no later than the Option Expiration
Date.
6. Disability.
If your employment with the Company (or a subsidiary thereof)
is terminated by reason of your disability, you may exercise, within twelve
months from the date of such termination, that portion of this option which was
exercisable by you at the date of such termination, provided, however, that such
exercise occurs no later than the Option Expiration Date.
7. Death.
If you die while employed by the Company (or a subsidiary
thereof) or within six months after termination of your employment due to
disability, that portion of this option which was exercisable by you at the date
of your death may be exercised by your legatee or legatees under your Will, or
by your personal representatives or distributees, within twelve months from the
date of your death, but in no event after the Option Expiration Date.
8. Non-Transferability of Option.
This option shall not be transferable except by Will or the
laws of descent and distribution, and may be exercised during your lifetime only
by you.
9. Adjustments upon Changes in Capitalization.
If at any time after the date of grant of this option, the
Company shall, by stock dividend, split-up, combination, reclassification or
exchange, or through merger or consolidation, or otherwise, change its shares of
Common Stock into a different number or kind or class of shares or other
securities or property, then the number of shares covered by this option and the
price of each such share shall be proportionately adjusted for any such change
by the Committee, whose determination shall be conclusive.
10. Acceleration of Exercisability Upon Change in Control.
Upon the occurrence of a "change in control" of the Company
(as defined below), this option shall become immediately fully exercisable. For
purposes of this option, a "change in control" of the Company shall mean (i) the
acquisition at any time by a "person" or "group" (as such terms are used
Sections 13(d) and 14(d)(2) of the Exchange Act of beneficial ownership (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities representing 50% or more of the combined voting power in the election
of directors of the then outstanding securities of the Company or any successor
or the Company; (ii) the termination of service of directors, for any reason
other than death, disability or retirement from the Board of Directors, during
any period of two consecutive years or less, of individuals who at the beginning
of such period constituted a majority of the Board of Directors, unless the
election of or nomination for election of each new director during such period
was approved by a vote of at least two-thirds of the directors still in office
who were directors at the beginning of the period; (iii) approval by the
stockholders of the Company of any merger, consolidation, or statutory share
exchange as a result of which the Common Stock shall be changed, converted or
exchanged (other than a merger, consolidation or share exchange with a
wholly-owned Subsidiary) or liquidation of the Company or any sale or
disposition of 80% or more of the assets or earning power or the Company; or
(iv) approval by the stockholders of the Company of any merger, consolidation,
or statutory share exchange to which the Company is a party as a result of which
the persons who were stockholders immediately prior to the effective date of the
merger, consolidation or share exchange shall have beneficial ownership of less
than 50% of the combined voting power in the election of directors of the
surviving corporation; provided, however, that no change in control shall be
deemed to have occurred if, prior to such time as a change in control would
otherwise be deemed to have occurred, the Company's Board of Directors deems
otherwise.
11. Subject to Terms of the Plan.
This incentive stock option agreement shall be subject in all
respects to the terms and conditions of the Plan and in the event of any
question or controversy relating to the terms of the Plan, the decision of the
Committee shall be conclusive.
Sincerely yours,
VIMRx PHARMACEUTICALS INC.
By:
Name:
Title:
Agreed to and accepted this
day of , 199 .
Signature of Optionee
<PAGE>
EXHIBIT B TO 1990 PLAN
VIMRx PHARMACEUTICALS INC.
NON-INCENTIVE STOCK OPTION AGREEMENT
---------------------------------------
To:
We are pleased to notify you that by the determination of the
Stock Option Plan Committee (herein called the "Committee") a non-incentive
stock option to purchase shares of the Common Stock of VIMRx Pharmaceuticals
Inc. (herein called the "Company") at a price of $ per share has this day of
been granted to you under the Company's 1990 Incentive and
Non-Incentive Stock Option Plan (herein called the "Plan"). This option may be
exercised only upon the terms and conditions set forth below.
<PAGE>
1. Purpose of Option.
The purpose of the Plan under which this non-incentive stock
option has been granted is to further the growth and development of the Company
and its subsidiaries by encouraging key employees, directors, consultants,
agents, independent contractors and other persons who contribute and are
expected to contribute materially to the Company's success to obtain a
proprietary interest in the Company through the ownership of stock, thereby
providing such persons with an added incentive to promote the best interests of
the Company, and affording the Company a means of attracting to its service
persons of outstanding ability.
2. Acceptance of Option Agreement.
Your execution of this non-incentive stock option agreement
will indicate your acceptance of and your willingness to be bound by its terms;
it imposes no obligation upon you to purchase any of the shares subject to this
option. Your obligation to purchase shares can arise only upon your exercise of
the option in the manner set forth in paragraph 4 hereof.
3. When Option May Be Exercised.
The option granted you hereunder shall be exercisable as
follows: [set forth terms and expiration date of Option, but in no event shall
the Option be exercisable until at least six months from the date of grant].
This option may not be exercised for less than ten shares at
any one time (or the remaining shares then purchasable if less than ten) and
expires at the end of ________ years [insert number of years; maximum up ten]
from the date of grant whether or not it has been duly exercised (hereinafter,
the "Option Expiration Date"), unless sooner terminated as provided in
paragraphs 5, 6 or 7 hereof.
4. How Option May Be Exercised.
This option is exercisable by a written notice signed by you
and delivered to the Company at its executive offices, signifying your election
to exercise the option. The notice must state the number of shares of Common
Stock as to which your option is being exercised, must contain a statement by
you (in a form acceptable to the Company) that such shares are being acquired by
you for investment and not with a view to their distribution or resale (unless a
Registration Statement covering the shares purchased has been declared effective
by the Securities and Exchange Commission) and must be accompanied by cash or a
check to the order of the Company for the full purchase price of the shares
being purchased, plus such amount, if any, as is required for withholding taxes.
[If "cashless exercise" is permitted, add the following phrase:]
[Notwithstanding the foregoing, this option may also be exercised pursuant to
the following "cashless exercise" provision.]
[Insert the following "cashless exercise" provision, if granted by the
Committee:] [In lieu of paying for the shares purchasable under this option by
cash or check, you may (i) deliver previously owned shares of Common Stock with
a fair market value equal to the full purchase price of the shares being
purchased under this option, or (ii) request that the Company withhold shares of
Common Stock issuable upon exercise of this option with a fair market value
equal to the full purchase price of the shares being purchased under this option
(thereby reducing the number of shares issuable upon exercise of this option).
For purposes of this option, unless the Committee determines otherwise, the
"fair market value" of a share of Common Stock as of a certain date shall be the
closing sale price of the Common Stock on The Nasdaq Stock Market or, if the
Common Stock is not then traded on The Nasdaq Stock Market, such national
securities exchange on which the Common Stock is then traded, on the trading
date immediately preceding the date fair market value is being determined. The
Committee may make such other determination of fair market value, based on other
factors, as it shall deem appropriate.] .
If notice of the exercise of this option is given by a person
or persons other than you, the Company may require, as a condition to the
exercise of this option, the submission to the Company of appropriate proof of
the right of such person or persons to exercise this option.
Certificates for shares of the Common Stock so purchased will
be issued as soon as practicable. The Company, however, shall not be required to
issue or deliver a certificate for any shares until it has complied with all
requirements of the Securities Act of 1933, the Securities Exchange Act of 1934,
any stock exchange on which the Company's Common Stock may then be listed and
all applicable state laws in connection with the issuance or sale of such shares
or the listing of such shares on said exchange. Until the issuance of the
certificate for such shares, you or such other person as may be entitled to
exercise this option shall have none of the rights of a stockholder with respect
to shares subject to this option.
The Company shall have the right to require you, or such other
person as may be permitted to exercise this option, to remit to the Company an
amount sufficient to satisfy federal, state and local withholding tax
requirements prior to the delivery of any certificate or certificates for shares
of Common Stock issuable upon exercise of this option.
5. Termination of Employment or Engagement.
[The Committee may determine to delete this provision, at the
time of grant or by amendment, to non-employees, in which event the words
"Intentionally omitted" should be inserted.] If your employment with the Company
(or a subsidiary thereof) is terminated for any reason other than by death or
disability, or if a you are not an employee of the Company and your engagement
by the Company (or a subsidiary) is terminated for any reason, you may exercise,
within three months from the date of such termination, that portion of this
option which was exercisable by you at the date of such termination, provided,
however, that such exercise occurs prior to the Option Expiration Date.
6. Disability.
If your employment with the Company (or a subsidiary thereof)
is terminated by reason of your disability, you may exercise, within twelve
months from the date of such termination, that portion of this option which was
exercisable by you at the date of such termination, provided, however, that such
exercise occurs prior to the Option Expiration Date.
7. Death.
If you die while employed by the Company (or a subsidiary
thereof) or within six months after termination of your employment due to
disability, that portion of this option which was exercisable by you at the date
of your death may be exercised by your legatee or legatees under your Will, or
by your personal representatives or distributees, within twelve months from the
date of your death, but in no event after the Option Expiration Date.
8. Non-Transferability of Option.
This option shall not be transferable except by Will or the
laws of descent and distribution, and may be exercised during your lifetime only
by you.
[Alternative Section 8, if provided for by the Committee:]
[8. Limited Transferability of Option.
This option shall not be transferable except to members of
your family or to your family trust(s), and by Will or the laws of descent and
distribution.]
9. Adjustments upon Changes in Capitalization.
If at any time after the date of grant of this option, the
Company shall, by stock dividend, split-up, combination, reclassification or
exchange, or through merger or consolidation, or otherwise, change its shares of
Common Stock into a different number or kind or class of shares or other
securities or property, then the number of shares covered by this option and the
price of each such share shall be proportionately adjusted for any such change
by the Committee, whose determination shall be conclusive.
10. Acceleration of Exercisability Upon Change in Control.
Upon the occurrence of a "change in control" of the Company
(as defined below), this option shall become immediately fully exercisable. For
purposes of this option, a "change in control" of the Company shall mean (i) the
acquisition at any time by a "person" or "group" (as such terms are used
Sections 13(d) and 14(d)(2) of the Exchange Act of beneficial ownership (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities representing 50% or more of the combined voting power in the election
of directors of the then outstanding securities of the Company or any successor
or the Company; (ii) the termination of service of directors, for any reason
other than death, disability or retirement from the Board of Directors, during
any period of two consecutive years or less, of individuals who at the beginning
of such period constituted a majority of the Board of Directors, unless the
election of or nomination for election of each new director during such period
was approved by a vote of at least two-thirds of the directors still in office
who were directors at the beginning of the period; (iii) approval by the
stockholders of the Company of any merger, consolidation, or statutory share
exchange as a result of which the Common Stock shall be changed, converted or
exchanged (other than a merger, consolidation or share exchange with a
wholly-owned Subsidiary) or liquidation of the Company or any sale or
disposition of 80% or more of the assets or earning power or the Company; or
(iv) approval by the stockholders of the Company of any merger, consolidation,
or statutory share exchange to which the Company is a party as a result of which
the persons who were stockholders immediately prior to the effective date of the
merger, consolidation or share exchange shall have beneficial ownership of less
than 50% of the combined voting power in the election of directors of the
surviving corporation; provided, however, that no change in control shall be
deemed to have occurred if, prior to such time as a change in control would
otherwise be deemed to have occurred, the Company's Board of Directors deems
otherwise.
11. Subject to Terms of the Plan.
This non-incentive stock option agreement shall be subject in
all respects to the terms and conditions of the Plan and in the event of any
question or controversy relating to the terms of the Plan, the decision of the
Committee shall be conclusive.
12. Tax Status.
This option does not qualify as an "incentive stock option"
under the provisions of Section 422A of the Internal Revenue Code of 1986, as
amended, and the income tax implications of your receipt of a non-incentive
stock option and your exercise of such an option should be discussed with your
tax counsel.
Sincerely yours,
VIMRx PHARMACEUTICALS INC.
By:
Name:
Title:
Agreed to and accepted this
day of , 199 .
Signature of Optionee
PROXY
VIMRX PHARMACEUTICALS INC.
THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Donald G. Drapkin and Eric A. Rose,
M.D., and each of them, proxies, each with the power of substitution, to vote
the shares of the undersigned at the Annual Meeting of Stockholders of VIMRX
Pharmaceuticals Inc. on June 24, 1997, and any adjournments and postponements
thereof, upon all matters as may properly come before the Meeting. Without
otherwise limiting the foregoing general authorization, the proxies are
instructed to vote as indicated herein.
Please complete, date and sign on the reverse side and mail in
the enclosed envelope.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR MATTERS (1), (2), (3), (4) and (5)
LISTED BELOW, TO COME BEFORE THE MEETING:
(1) Election of eight (8) directors: Nominees: Donald G. Drapkin,
Richard L. Dunning,
Eric A. Rose, M.D.,
Lawrence D. Fink,
Jerome Groopman, M.D.,
Linda G. Robinson,
Lindsay A. Rosenwald, M.D.,
Michael Weiner, M.D.
[ ] FOR [ ] WITHHELD
For, except withheld from the following nominees:
(2) To approve the amendment of the Company's 1990 Incentive and Non-Incentive
Stock Option Plan to read as set forth in Exhibit A.
[ ] FOR [ ] WITHHELD [ ] ABSTAIN
(3) To approve the adoption of Company's 1997 Incentive and Non-Incentive Stock
Option Plan.
[ ] FOR [ ] WITHHELD [ ] ABSTAIN
(4) To ratify the appointment of KPMG Peat Marwick LLP as independent auditors
of the Company for the year ending December 31, 1997.
[ ] FOR [ ] WITHHELD [ ] ABSTAIN
(5) Upon any and all other business that may come before the Meeting.
Check here if you plan to attend the Annual Meeting of Stockholders. [ ]
This Proxy, which is solicited on behalf of the Board of Directors, will be
voted FOR the matters described in paragraphs (1), (2), (3), and (4) unless
the stockholder specifies otherwise, in which case it will be voted as
specified.
SIGNATURE(S): DATE:
Note: Executors, Administrations, Trustees, Etc. should give full
title.
