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SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|X| Preliminary Proxy Statement
|_| Confidential, For Use of the Commission Only (as permitted by Rule 14a-
6(e)(2))
|_| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
MEDAREX, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
N/A
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed pursuant
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paid previously. Identify the previous filing by registration statement
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(4) Date Filed:
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<PAGE>
MEDAREX, INC.
707 State Road #206
Princeton, New Jersey 08540
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders of
Medarex, Inc. (the "Company"). The meeting will be held at 10:00 a.m., on May
18, 2000, at The Waldorf -Astoria Hotel located at 301 Park Avenue New York, New
York 10022. The formal notice of the meeting follows on the next page. The
notice identifies the four proposals to be voted upon at the meeting. We have
also enclosed a proxy statement explaining the matters to be voted on and a
separate proxy card on which you can cast your vote by mail.
Management will report on the Company's activities since the last annual meeting
of shareholders held on Thursday, May 20, 1999 and shareholders will have an
opportunity to ask questions.
Your interest in the affairs of the Company is welcomed and encouraged. It is
very important that you promptly cast your votes on the matters to be considered
at the Annual Meeting, regardless of the size of your holdings. Even if you plan
to attend the Annual Meeting in person, we urge you to complete, sign and return
the enclosed proxy as soon as possible. If you do this, your shares will be
voted as you direct, even if you are unable to attend the meeting. Even if you
send in your proxy, you can still attend the meeting and vote however you wish
in person.
Sincerely yours,
DONALD L. DRAKEMAN
President and Chief Executive Officer
April 10, 2000
<PAGE>
MEDAREX, INC.
707 State Road # 206
Princeton, New Jersey 08540
NOTICE OF ANNUAL MEETING
To Be Held at 10:00 a.m. on May 18, 2000
To Our Shareholders:
Our Annual Meeting of Shareholders will be held at The Waldorf-Astoria
Hotel, located at 301 Park Avenue New York, New York 10022, on May 18, 2000 at
10:00 a.m. The purpose of the meeting is to vote on the following matters:
1. To elect two (2) Class I Directors each for a term to expire in
2003;
2. To approve our 2000 Stock Option Plan;
3. To consider and act upon a proposal to amend our Restated
Certificate of Incorporation to increase the number of authorized
shares of our Common Stock from 40,000,000 to 100,000,000 and the
number of authorized shares of our Preferred Stock from 2,000,000
to 10,000,000;
4. To ratify the appointment of Ernst & Young LLP as our independent
auditors for the fiscal year ending December 31, 2000; and
5. To transact any other business that may properly come before the
meeting or any adjournments thereof.
Only shareholders of record at the close of business on March 31, 2000
may vote at the meeting. A list of the shareholders entitled to vote at the
meeting will be available for inspection at the meeting and for a period of ten
(10) days prior to the meeting during regular business hours at our corporate
headquarters at 707 State Road #206, Princeton, New Jersey 08540. A Proxy
Statement explaining the matters to be acted upon at the Annual Meeting follows.
Please read it carefully.
Whether or not you expect to be personally present at the meeting,
please be sure that the enclosed Proxy is properly completed, dated, signed and
returned without delay in the enclosed envelope. Any Proxy may be revoked at any
time before it is exercised by following the instructions set forth on page two
of the accompanying Proxy Statement.
BY ORDER OF THE BOARD OF DIRECTORS,
MICHAEL A. APPELBAUM
Executive Vice President-Finance and Administration,
Chief Financial Officer and Treasurer
April 10, 2000
<PAGE>
MEDAREX, INC.
PROXY STATEMENT
INFORMATION ABOUT THE ANNUAL MEETING AND VOTING
Why Did You Send Me this Proxy Statement?
We sent you this Proxy Statement and the enclosed proxy card because
the Board of Directors is soliciting your proxy to vote at the Annual Meeting of
Shareholders. The Annual Meeting will be held on May 18, 2000. This Proxy
Statement summarizes the information you need to know regarding the proposals to
be voted upon at the Annual Meeting. However, you do not need to attend the
meeting to vote your shares. Instead, you may simply complete, sign and return
the enclosed proxy card.
On or about April 10, 2000, we will begin sending this Proxy Statement,
the attached Notice of Annual Meeting and the enclosed proxy card to all
shareholders entitled to vote at the Annual Meeting. Shareholders who owned our
Common Stock as of the close of business on March 31, 2000 are entitled to vote
at the Annual Meeting. On this record date, there were [ ] shares of our Common
Stock outstanding. Common Stock is our only class of voting stock.
What Matters Are to Be Voted Upon at the Annual Meeting?
Four proposals are being presented at the Annual Meeting for
shareholder approval.
Proposal 1: Election of Two (2) Class I Directors
The term of our current Class I Directors, Dr. Donald L. Drakeman,
Charles R. Schaller and Robert Iggulden will expire at the Annual Meeting. We
have nominated Dr. Drakeman and Mr. Schaller for re-election as Class I
directors for new three-year terms ending at the 2003 annual meeting. Mr.
Iggulden has determined not to stand for re-election at the Annual Meeting.
Proposal 2: Approval of Our 2000 Stock Option Plan
The second proposal is to approve the 2000 Stock Option Plan. A
detailed description of the 2000 Stock Option Plan, including the federal income
tax consequences of the Plan, begins on page 21 of this Proxy Statement.
Proposal 3: Approval of Increase in the Number of Authorized Shares
The proposal is to amend our Restated Certificate of Incorporation to
increase the number of our authorized shares of Common Stock from 40,000,000 to
100,000,000 and the number of our authorized shares of Preferred Stock from
2,000,000 to 10,000,000.
<PAGE>
Proposal 4: Ratification of Appointment of Independent Auditors
We have selected Ernst & Young LLP as our independent auditors for the
current fiscal year. Although shareholder approval of this selection is not
legally required, we are asking our shareholders to ratify the appointment of
Ernst & Young LLP.
As of the date of this Proxy Statement, these four proposals are the
only matters which we intend to present at the Annual Meeting. We do not know of
any other business to be presented at the Annual Meeting. If other business is
brought before the Annual Meeting, the persons named on the enclosed proxy card
will vote according to their best judgment.
How Many Votes Do I Have?
Each share of Common Stock that you own entitles you to one vote on
each matter voted upon at the Annual Meeting.
How Do I Vote by Proxy?
Whether you plan to attend the Annual Meeting or not, we urge you to
complete, sign and date the enclosed proxy card and to return it promptly in the
envelope provided. Returning the proxy card will not affect your right to attend
the Annual Meeting and vote in person.
If you properly fill in your proxy card and send it to us in time to
vote, your "proxy" (one of the individuals named on your proxy card) will vote
your shares as you have directed. If you sign the proxy card but do not make a
specific choice, your proxy will vote your shares as recommended by the Board.
How Do I Revoke My Proxy?
If you send in a signed proxy, you may revoke it at any time before it
is exercised. You may revoke your proxy in any one of three ways:
o You may send in another proxy with a later date.
o You may notify our corporate Secretary in writing before the
Annual Meeting that you have revoked your proxy.
o You may vote in person at the Annual Meeting.
How Do I Vote in Person?
If you plan to attend the Annual Meeting and vote in person, we will
give you a ballot when you arrive. However, if your shares are held in the name
of your broker, bank or other nominee, you must bring an account statement or
letter from the nominee indicating that you were the beneficial owner of the
shares on March 31, 2000, the record date for voting.
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What Vote is Required to Approve Each Proposal?
Quorum: The presence, in person or by proxy, of the holders
of a majority of the outstanding shares entitled to
vote, i.e., ____________ shares, will constitute a
quorum for the Annual Meeting. If less than this
number are present at the Annual Meeting, no business
can be conducted other than the adjournment of the
meeting. If you submit a properly executed proxy
card, even if you abstain from voting, then you will
be considered part of the quorum.
Approval of
the Proposals: Other than the election of directors, which requires
a plurality of the votes cast, each matter to be
submitted to the shareholders requires the
affirmative vote of a majority of the votes cast at
the meeting for approval.
The Effect of Broker
Non-Votes and
Abstentions: For the purposes of determining the number of votes
cast at the meeting, only those cast "For" or
"Against"are included. Abstentions and broker
non-votes are counted only for purposes of
determining whether a quorum is present at the
meeting. Under the rules of the National Association
of Securities Dealers, Inc., absent instructions from
the beneficial owners, brokers who hold shares in
street name for beneficial owners have the authority
to vote on the election of directors, the approval of
the 2000 Stock Option Plan and the designation of
auditors, but not the proposal to amend our restated
Certificate of Incorporation.
How Does the Board Recommend I Vote on the Proposals?
The Board recommends that you vote as follows:
o "FOR" the election of Dr. Drakeman and Mr. Schaller as Class I
directors to serve as directors until the 2003 Annual Meeting of
Shareholders;
o "FOR" the 2000 Stock Option Plan;
o "FOR" the proposal to amend our Restated Certificate of
Incorporation to increase the number of authorized shares of our
Common Stock and Preferred Stock; and
o "FOR" the ratification of Ernst & Young LLP as our independent
auditors for the current fiscal year.
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PROPOSAL 1 - ELECTION OF TWO CLASS I DIRECTORS
Our Board of Directors is divided into three classes - Class I, Class
II and Class III - in a manner providing for staggered three-year terms of
classes. That is, one class is elected at each annual meeting of shareholders to
serve for a three-year term. The Board is currently comprised of nine (9)
members.
At the 2000 Annual Meeting of Shareholders, the terms of our three (3)
current Class I Directors, Dr. Donald L. Drakeman, Charles R. Schaller and
Robert Iggulden are expiring. We have nominated Dr. Drakeman and Mr. Schaller
each to serve as a director for a new three-year term, ending at the 2003 Annual
Meeting of Shareholders. Mr. Iggulden has determined not to stand for
re-election at the Annual Meeting.
Unless you properly mark the proxy card accompanying this Proxy
Statement to withhold authority to vote for a nominee, your votes will be cast
FOR the election of each of the nominees, or FOR one or more substitute nominees
recommended by the Board of Directors in the event that one or more of our
nominees should become unavailable for election.
The following is a brief biography of each nominee for election as a
director, the six (6) directors whose terms of office extend beyond the Annual
Meeting and our executive officers.
Nominees for Election as Class I Directors - Terms Expiring in 2003.
Charles R. Schaller (age 64), Mr. Schaller has been a Director since
-------------------
our inception in 1987, and was Chairman of our Board of Directors until May 18,
1997. Since 1989, Mr. Schaller has been a chemical industry management
consultant and is currently a Director of Astro Power, Inc., a publicly traded
company engaged in the commercialization of silicon film solar cells. Mr.
Schaller holds a bachelor's degree in Engineering from Yale University and is a
graduate of the program in management development at Harvard Business School.
Donald L. Drakeman Ph.D. (age 45), Dr. Drakeman has been our President,
------------------------
Chief Executive Officer and a Director since our inception in 1987. Dr. Drakeman
also serves as Chairman of the Board and Chief Executive Officer of our
wholly-owned subsidiary GenPharm International, Inc. Dr. Drakeman graduated from
Dartmouth College and holds a law degree from Columbia University, where he was
a Harlan Fiske Stone scholar, and a Ph.D. in the humanities from Princeton
University, where he has served as a member of the faculty.
Incumbent Class III Directors - Terms Expiring in 2001.
Julius A. Vida Ph.D. (age 70), Dr. Vida has been a Director since
--------------------
February 9, 1994. Since 1993, Dr. Vida has been a self-employed pharmaceutical
consultant with VIDA International Pharmaceutical Consultants, Inc. From 1975
until his retirement in 1993, Dr. Vida held various positions at Bristol-Myers
Squibb Co. and its predecessors. From 1991 to 1993, Dr. Vida was Vice President,
Business Development, Licensing and Strategic Planning, and from 1985 to 1991,
he was Vice President, Licensing. Dr. Vida graduated from Pazmany Peter
University, Budapest, Hungary, holds an M.S. and a Ph.D. in Organic Chemistry
from Carnegie Institute of Technology, was a
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Postdoctoral Fellow at Harvard University, and holds an M.B.A. from Columbia
University. Dr. Vida is also a director of Biomatrix, Inc., Supergen, Inc., and
Orphan Medical, Inc., publicly traded biotechnology companies.
Irwin Lerner (age 69), Mr. Lerner has been a Director since September
------------
8, 1995. On May 19, 1997 Mr. Lerner became Chairman of the Board of Directors.
Mr. Lerner served as Chairman of the Board of Directors and of the Executive
Committee of Hoffmann-La Roche, Inc., a pharmaceutical and health care company,
from January 1993 until his retirement in September 1993, and also served as
President and Chief Executive Officer from 1980 through December 1992. Mr.
Lerner served for 12 years on the Board of the Pharmaceutical Manufacturers'
Association, where he chaired the Association's FDA Issues Committee. Mr. Lerner
received a B.S. and an M.B.A. from Rutgers University. He is currently
Distinguished Executive-in-Residence at Rutgers University Graduate School of
Management. Mr. Lerner is also a director of Public Service Enterprise Group
Incorporated, a publicly traded diversified public utility holding company,
Humana Inc., a publicly traded health care company, Covance, Inc., a publicly
traded contract research organization, Axys, a publicly traded biopharmaceutical
company, and V.I. Technologies, Inc., a publicly traded biotechnology company.
Dr. W. Leigh Thompson, Jr. (age 61), Dr. Thompson has been a Director
--------------------------
since April 12, 1996. Dr. Thompson is currently the President and Chief
Executive Officer of Profound Quality Resources Ltd., consultants to the health
care industry. During 1994, Dr. Thompson served as the Chief Scientific Officer
of Eli Lilly and Company. From 1982 until 1994, Dr. Thompson held various
management positions with Lilly Research Laboratories, a subsidiary of Eli Lilly
and Company, including Executive Director, Clinical Investigation and Regulatory
Affairs from 1982 until 1986, Vice President from 1986 until 1988, Group Vice
President from 1988 until 1993 and Executive Vice President from 1993 until 1994
in charge of all of that company's pharmaceutical and animal health research
except process chemistry. Dr. Thompson was also a Professor of Medicine at
Indiana University from 1984 to 1995. Dr. Thompson received a B.S. from the
College of Charleston, M.S. and Ph. D. in Pharmacology from the Medical
University of South Carolina and an M.D. from The Johns Hopkins University. Dr.
Thompson is a director of BAS, Inc., DepoMed, Inc., Ophidian Pharmaceuticals,
Inc., and Orphan Medical, Inc., publicly traded biotechnology companies.
Incumbent Class II Directors - Terms Expiring in 2002.
Dr. Michael W. Fanger (age 58), Dr. Fanger has been a Director and
---------------------
Chairman of our Scientific Advisory Board since our inception in 1987 and was
our Secretary from May 18, 1990 to April 3, 1991. Dr. Fanger has been Chairman
of the Department of Microbiology at Dartmouth Medical School since July 1992
and a Professor of Microbiology and Medicine since 1981. Dr. Fanger is a
graduate of Wabash College and received a Ph.D. degree in Biochemistry from Yale
University.
Michael A. Appelbaum (age 53), Mr. Appelbaum has been a Director since
--------------------
April 3, 1991. Mr. Appelbaum is our Executive Vice President -Finance and
Administration, Treasurer and Chief Financial Officer. Mr. Appelbaum is also the
President and Chief Operating Officer of our wholly owned subsidiary GenPharm.
Mr. Appelbaum joined us on a full-time basis on July 29, 1991. Mr. Appelbaum,
who has been employed as a certified public accountant with Ernst & Young LLP,
is
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<PAGE>
also an attorney. He graduated from Fairleigh Dickinson University and Suffolk
University School of Law.
Dr. Frederick B. Craves (age 53), Dr. Craves has been a director since
-----------------------
August 4, 1998. In June 1997, Dr. Craves founded Bay City Capital Management
LLC, a merchant bank providing advisory services and investing in life science
companies, and has served as chairman and managing director since that company's
inception. In November 1996, Dr. Craves founded the Craves Group LLC; and in
January 1994, Dr. Craves co-founded Burrill & Craves. Dr. Craves is Chairman of
the Board of Epoch Pharmaceuticals, Chairman of the Board of NeoRx Corporation
and is a director of Incyte Pharmaceuticals, Inc., publicly traded biotechnology
companies. Dr. Craves holds a Ph.D. degree in Pharmacology and Experimental
Toxicology from the University of California San Francisco Medical Center.
Board Committees.
The Board of Directors has established three (3) permanent committees:
the Audit Committee, the Stock Option Committee and the Compensation Committee.
None of the directors who serve on any of these three (3) committees are
employees of our company or employees of our subsidiaries. The Audit Committee
is currently comprised of Mr. Schaller, Mr. Lerner and Dr. Fanger. The Stock
Option Committee is currently comprised of Mr. Lerner and Dr. Fanger. The
Compensation Committee is currently comprised of Mr. Lerner, Mr. Schaller and
Dr. Vida.
The functions of our Audit Committee include recommending the
engagement and discharge of the independent auditors, directing and supervising
special investigations, reviewing with the independent auditors the plan and
results of our procedures for internal auditing, reviewing the independence of
the independent auditors, considering the range of audit fees and reviewing the
adequacy of our system of internal accounting controls. The Audit Committee held
one meeting in 1999.
The functions of our Stock Option Committee are to administer our stock
option plans (the "Plans") and to review and determine the officers, directors
(excluding committee members), employees and consultants to whom stock options
should be granted, the number of options and the option price to be paid. Our
Stock Option Committee acted 44 times in 1999.
The functions of our Compensation Committee are to review and determine
salaries for officers and key employees as well as review and determine bonuses
and other special awards of employee compensation and benefits. The Compensation
Committee held [two] meetings in 1999.
We currently have no executive committee or standing nominating
committee. There are no arrangements or understandings with any director
pursuant to which he has been elected a director.
Our Board of Directors held ten meetings in 1999. Each of the directors
attended at least 90% of the total of the Board and their committee meetings
held during 1999.
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Compensation of Director.
Our non-employee directors receive $1,000 per meeting, as compensation
for their attendance at regular and special meetings of the Board. In addition,
all directors are reimbursed for their reasonable out-of-pocket expenses
incurred in connection with their duties to us. During 1999, no director
received any other compensation for services rendered to us as a director.
Other Compensation Paid to Our Directors During 1999.
During 1999, Mr. Schaller was paid for services rendered to us as a
management consultant and Dr. Fanger was paid for services rendered to us as a
scientific and technical consultant. In addition, Dr. Vida, Dr. W. Leigh
Thompson, Jr. and Mr. Lerner were paid for services rendered to us as business
development consultants. These fees did not exceed $40,000 individually or
$104,000 in the aggregate.
Executive Officers.
Our executive officers are Dr. Donald L. Drakeman-President and Chief
Executive Officer, Michael A. Appelbaum-Executive Vice President - Finance and
Administration, Treasurer and Chief Financial Officer, Dr. Randall T. Curnow -
Senior Vice President and Chief Medical Officer, Dr. Yashwant M. Deo-Senior Vice
President - Operations, Research and Development and Regulatory Compliance, Dr.
Lisa N. Drakeman-Senior Vice President - Business Development, Dr. Nils Lonberg
- - Senior Vice President - Scientific Director of GenPharm and W. Bradford
Middlekauff - Vice President, General Counsel and Secretary.
Set forth below is certain information concerning Dr. Curnow, Dr. Deo,
Dr. Drakeman, Dr. Lonberg and Mr. Middlekauff.
Dr. Randall T. Curnow (age 56), Dr. Curnow is our Senior Vice President
---------------------
and Chief Medical Officer. Dr. Curnow joined us on May 20, 1996. Prior to
joining us, Dr. Curnow held several positions at Glaxo, Inc. including Vice
President, Health Science Affairs from September 1993 until September 1995 and
Vice President, Regulatory Affairs from December 1990 until September 1993. Dr.
Curnow received both his B.S. degree and M.D. degree from the University of
Nebraska.
Yashwant M. Deo, Ph.D. (age 45), Dr Deo is our Senior Vice
----------------------
President-Operations, Research and Development and Regulatory Compliance. Dr.
Deo joined us on July 15, 1993. Dr. Deo served as Vice President of Process
Development from June 1992 until July 1993 and as Director of Cell Culture R&D
at Centocor Inc. from July 1988 until June 1992. Dr. Deo received his Bachelor
of Science degree from the University of Poona (India), Master of Science degree
from G.B. Pant University (India) and Ph.D. degree in Fermentation Technology
from the University of Calgary (Canada), where he was an I.W. Killam Scholar.
Dr. Lisa N. Drakeman (age 45), Dr. Drakeman is our Senior Vice
--------------------
President-Business Development. Dr. Drakeman joined us in 1989 on a part-time
basis and on a full-time basis in 1991. Dr. Drakeman is also Chief Executive
Officer of Genmab A/S, a Danish company formed to
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develop and commercialize a portfolio of fully humanized antibodies derived from
our HuMAbTM Mouse technology. We have a 45% equity ownership interest in Genmab.
Dr. Drakeman graduated from Mount Holyoke College, received an M.A. degree from
Rutgers University, and a Ph.D. in the humanities from Princeton University.
Dr. Nils Lonberg, Ph.D. (age 44), Dr. Lonberg is the Senior Vice
-----------------------
President-Scientific Director of our wholly-owned subsidiary, GenPharm. Dr.
Lonberg joined GenPharm in 1990 as a Senior Scientist and was promoted to
Director, Molecular Biology in 1994. Prior to joining GenPharm, Dr. Lonberg was
a Post-Doctoral Fellow at Memorial Sloan-Kettering Cancer Center in Manhattan.
He received his Ph.D. in Biochemistry and Molecular Biology from Harvard
University in 1985.
W. Bradford Middlekauff (age 38), Mr. Middlekauff is our Vice
-----------------------
President, General Counsel and Secretary. Mr. Middlekauff joined us on March 2 ,
2000. Prior to joining us, Mr. Middlekauff was Vice President, Business
Development and General Counsel at Algos Pharmaceutical Corporation from August
1998 until February 2000. From September 1993 until July 1998, Mr. Middlekauff
was an associate with the law firm of Cooley Godward LLP, where he advised life
science companies on business and legal aspects of research and development,
corporate partnering and licensing, product commercialization and corporate
financing. Mr. Middlekauff received an A.B. degree from Brown University and a
J.D. degree from Yale Law School.
Dr. Donald L. Drakeman and Dr. Lisa N. Drakeman are husband and wife.
There are no other family relationships among any of our directors or executive
officers.
Compensation of Executive Officers.
Report of the Compensation and Stock Option Committees on Executive
Compensation.
Compensation Philosophy and Policies. Our fundamental executive
compensation philosophy is to enable us to attract and retain key executive
personnel and to motivate those executives to achieve our objectives. We are
still in the research and development phase and have not yet achieved
profitability; therefore, some of the traditional methods of evaluating
executive performance, such as profit levels and return on equity, would be
inappropriate. Accordingly, assessment of each executive's performance is based
on attainment of his or her specific personal objectives in light of our overall
annual strategic goals. Among other things, we examine three (3) specific areas
in formulating the compensation packages of our executive officers. These areas,
followed by specific inquiries made by the Committees within such areas, are as
follows:
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Our Company's Performance:
- --------------------------
o The extent to which our key research, clinical, product
manufacturing and financial objectives have been met during the
preceding fiscal year.
o The development, acquisition and licensing of key technology.
o Our achievement of certain milestones, whether specified in
agreements with third party collaborators or determined
internally.
Executive Performance:
- ----------------------
o An executive's involvement in and responsibility for the
development and implementation of strategic plans and the
attainment of our strategic and operating objectives, along with
achievement of agreed upon personal objectives.
o The participation by an executive in the relationship between us
and the investment community.
o The involvement of an executive in personnel recruitment,
retention and morale.
o The responsibility of the executive in working within the budgets,
controlling costs and other aspects of expense management.
Other Factors:
- --------------
o The necessity of being competitive with companies in the
biotechnology industry, taking into account relative company size,
stage of development, performance and geographic location as well
as individual responsibilities and performance.
Each executive officer's compensation package is reviewed annually and
is comprised of up to three (3) components: base salary, cash bonuses and stock
options. In addition to these components, executive officers are eligible to
participate in all employee benefit programs generally available to all of our
other employees.
Base Salary. In setting the base levels for each executive officer, the
Compensation Committee reviews surveys and other available information on the
base salaries of executive officers in comparable positions in other
biotechnology companies. Factors considered include, but are not limited to,
company size, stage of development of a company's products and geographic
location. The Compensation Committee also considers the individual experience
level and actual performance of each executive officer in light of our needs and
objectives.
Bonus Awards. We do not have formal incentive or bonus plans for
executives. As part of the review and setting of annual compensation, annual
cash bonuses tied to the achievement of certain specific personal and corporate
objectives and milestones have, to date, been awarded to all of our executive
officers. Awards have been, and are expected to continue to be, based on our
attainment of annual milestones and accomplishments identified by the Board of
Directors and are granted at the discretion of the Compensation Committee.
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Stock Option Plans. Subject to the terms of the Plans, the Stock Option
Committee has the authority to determine all terms and provisions under which
options are granted under the Plans, including the individuals to whom such
options may be granted. The Plans may be amended by our shareholders. They may
also be amended by the Board of Directors without approval by the shareholders
except to the extent that shareholders' approval is required to ensure favorable
tax treatment for incentive stock options or to ensure qualification of the
Plans under federal securities laws. Options generally vest at various times in
excess of six months from their date of grant, and are intended as incentive and
motivation for our executive officers, as well as to align the interest of those
officers more closely with those of our shareholders in advancing corporate
objectives. All executive officers have been awarded stock options under the
Plans.
In addition to incentive stock options granted under the Plans, the
Stock Option Committee also has the authority to grant, at its discretion,
non-qualified options as well as other stock based awards to certain
individuals, including executive officers. To date, non-qualified options have
been granted to all executive officers. Awards of restricted stock have also
been granted under the Plans. All options granted under the Plans were granted
with exercise prices equal to or greater than the fair market value of our
Common Stock on the date of grant.
Compensation of the Chief Executive Officer. During 1999, Dr. Donald L.
Drakeman's annual base salary was $373,000, an increase of approximately 4% from
1998. This increase in Dr. Drakeman's base salary was determined in accordance
with the criteria outlined above, the Compensation Committee's evaluation of our
overall performance as well as Dr. Drakeman's individual performance. Also, in
March 2000, Dr. Drakeman was awarded a cash bonus of $200,000 based upon the
evaluation by the Compensation Committee of the achievement of product
development and other specific strategic milestones set by the Compensation
Committee in connection with the review of Dr. Drakeman's compensation for 1999.
Based on its evaluation of Dr. Drakeman's performance, the Compensation and
Stock Option Committees believe that Dr. Drakeman's compensation level is
appropriate and in line with his peers in the industry.
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Compensation and Stock Option Committees of the Board of Directors.
Stock Option Committee Compensation Committee
---------------------- ----------------------
Irwin Lerner Irwin Lerner
Dr. Michael W. Fanger Charles R. Schaller
Dr. Julius A. Vida
The report of the Compensation and Stock Option Committees shall not be
deemed incorporated by reference by any general statement of incorporation by
reference of this proxy statement into any filing under the Securities Act of
1933 (the "Securities Act") or under the Securities Exchange Act of 1934 (the
"Exchange Act"), except to the extent that we specifically incorporate this
report by reference.
Compensation Committee and Stock Option Committee Interlocks and Insider
Participation.
The Stock Option Committee is comprised of Irwin Lerner and Dr. Michael
W. Fanger. The Compensation Committee is comprised of Irwin Lerner, Charles R.
Schaller and Dr. Julius A. Vida. None of these directors has been an officer or
employee of the company during the past three (3) years. No Compensation
Committee and Stock Option Committee interlocks exist between us and another
entity.
11
<PAGE>
EXECUTIVE COMPENSATION TABLES
Summary Compensation Table. The following Summary Compensation Table
provides the annual and long-term compensation paid to our chief executive
officer, Dr. Donald L. Drakeman, and our six (6) most highly paid executive
officers other than Dr. Donald L. Drakeman for the years ended December 31,
1997, 1998 and 1999.
<TABLE>
<CAPTION>
Summary Compensation Table
Annual Compensation Long Term Compensation
------------------- ----------------------
Long
Restricted Stock Term
Name and Principal Stock Option/ Incentive All Other
------------------
Position Year Salary Bonus/1/ Awards/2/ SARs/3/ Payouts Compensation/4/
-------- ---- ------ ----- ------ ---- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Donald L. Drakeman 1999 $373,000 $200,000 $568,750 112,000 $ - $ 3,200/5/
President and Chief 1998 359,000 100,000 - 30,000 - 3,200
Executive Officer 1997 335,000 97,500 - 71,000 - 3,200
Michael A. Appelbaum 1999 295,000 125,000 568,750 112,000 - 3,200/6/
Executive Vice 1998 282,500 80,000 - 20,000 - 14,756/7/
President - Finance and 1997 252,500 75,000 - 64,000 - 3,200
Administration,
Treasurer and Chief
Financial Officer
Yashwant M. Deo 1999 305,000 90,000 - 50,000 - 3,200
Senior Vice President - 1998 294,000 80,000 - 15,000 - 39,296/8/
Operations, Research 1997 280,709 80,000 - 29,000 - 21,822/9/
and Development and
Regulatory Compliance
Randall T. Curnow 1999 278,000 60,000 - 25,000 - 86,234/10/
Senior Vice President - 1998 270,500 60,000 - 10,000 - 73,877/11/
Chief Medical Officer 1997 256,500 60,000 - 8,000 - 80,429/12/
Lisa N. Drakeman 1999 159,000 85,000 568,750 112,000 - 3,200
Senior Vice President - 1998 148,500 48,000 - 15,000 - 3,200
Business Development 1997 129,793 40,000 - 57,000 - 3,180
Nils Lonberg 1999 167,250 80,000 568,750 112,000 - 3,200
Senior Vice President - 1998 160,161 102,792 - - - 247,975/13/
Scientific Director 1997 111,585/14/ - - - - -
GenPharm International,
Inc.
W. Bradford 1999 200,000/15/ - - 50,000/16/ - -
Middlekauff
Vice President, General
Counsel and Secretary
</TABLE>
- -----------------------------
(1) A portion of each of the named executive officer's cash compensation for
each year shown was paid in the first quarter of the year following the
year shown and is reported in this table as bonus.
(2) On November 1, 1999 certain executive officers were granted restricted
stock awards under our Plans of 25,00 shares each. On December 17, 1999
these executive officers received 25,000 shares of common stock with an
aggregate value of $568,750, based on the fair market value price of
$22.75 on December 17, 1999, the date the restrictions lapsed.
(3) We have not granted any stock appreciation rights (SARs) or made any long
term incentive payouts.
(4) Unless otherwise specified, represents matching funds under our 401(k)
Plan.
(5) Excludes $1,967,070 of deferred compensation.
(6) Excludes $103,530 of deferred compensation.
12
<PAGE>
(7) Includes $3,200 of matching funds under our 401(k) Plan and reimbursement
in the amount of $111,556 for certain relocation expenses.
(8) Includes $3,200 of matching funds under our 401(k) Plan and reimbursement
in the amount of $36,096 for certain living expenses.
(9) Includes $3,200 of matching funds under our 401(k) Plan and reimbursement
in the amount of $18,622 for certain living expenses.
(10) Includes $3,200 of matching funds under our 401(k) Plan and reimbursement
in the amount of $83,034 for certain living expenses.
(11) Includes $3,200 of matching funds under our 401(k) Plan and reimbursement
in the amount of $70,677 for certain living expenses.
(12) Includes $3,200 of matching funds under our 401(k) Plan and reimbursement
in the amount of $77,229 for certain living expenses.
(13) Includes $3,012 of matching funds under our 401(k) Plan and $244,963 in
the form of a GenPharm stock bonus payable in connection with our
acquisition of GenPharm.
(14) Represents Dr. Lonberg's 1997 stated salary. Dr. Lonberg began employment
with us on October 21, 1997, the date of our acquisition of GenPharm and
received $21,387 in salary from us in 1997.
(15) Represents Mr. Middlekauff's 2000 stated salary. Mr. Middlekauff began
employment with us on March [2] , 2000.
(16) Represents shares granted to Mr. Middlekauff in connection with his
employment with us.
Stock Option Table. The following table sets forth information
concerning stock options granted during the year ended December 31, 1999 to each
of the executive officers named in the Summary Compensation Table. In addition,
in accordance with the rules of the SEC, the table shows the hypothetical gains
for such options based on assumed rates of annual compound stock price
appreciation of 5% and 10% from the date the options were granted over the full
option term.
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of Stock
Option Grants in Last Fiscal Year Price Appreciation for
Individual Grants Option Term/1/
------------------------------------------------------------- ----------------------
% of Total
Options/SARs
Options/SARs Granted to Exercise or
Granted Employees in Base Price Expiration
Name (#)/2/ Fiscal Year ($/Share)/3/ Date 5% ($) 10% ($)
---- ------------------- ------------ ------------ ------------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Donald L. Drakeman 112,000 12% $ 6.86 10/31/09 $ 483,192 $1,224,504
Michael A. Appelbaum 112,000 12 6.86 10/31/09 483,192 1,224,504
Yashwant M. Deo 50,000 5 6.86 10/31/09 215,711 546,654
Randall T. Curnow 25,000 3 6.86 10/31/09 107,855 273,327
Lisa N. Drakeman 113,000 12 6.86 10/31/09 483,192 1,224,504
Nils Lonberg 112,000 12 6.86 10/31/09 483,192 1,224,504
</TABLE>
- ---------------------
(1) The "potential realizable value" shown will be achieved only if the options
have been held for the full ten years and the stock price has appreciated
at the assumed rate. For the named executive officers, the value is
calculated from the option price per share of options granted in fiscal
year 1999. Potential realizable value is listed for illustration purposes
only. The values disclosed are not intended to be and should not be
interpreted as representations or projections of future value of our stock
or of the stock price.
(2) All options may be exercised at any time before the expiration date so long
as employment with us continues; provided, however, that the options may be
exercised within twelve months after the death of the optionee or three
months after the termination of the optionee's employment as the result of
disability. We have granted no SARs under the Plans.
(3) All grants were made at 100% of fair market value as of the date of
grant.
Aggregate Option/SAR Exercises in Last Fiscal Year and Fiscal Year End
Option/SAR Values. The following table presents the number and value of
unexercised options held by each of
13
<PAGE>
the executive officers named in the Summary Compensation Table at December 31,
1999, distinguishing between options that are exercisable and those that are not
exercisable.
<TABLE>
<CAPTION>
Aggregate Option/SAR Exercises in Last Fiscal Year and Fiscal Year End Option/SAR Values/1/
Shares
Acquired Number of Unexercised Value of Unexercised In-
on Value Options/SARs at the-Money Options/SARs
Exercise Realized/2/ Fiscal Year End at Fiscal Year End ($)/3/
----------------- -----------------------
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
---- ----- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Donald L. Drakeman 399,000 $1,967,228 221,000 112,000 $7,252,000 $3,403,680
Michael A. Appelbaum 171,000 2,906,988 40,000 112,000 1,232,400 3,403,680
Yashwant M. Deo -- -- 252,400 50,000 8,286,550 1,519,000
Randall T. Curnow 18,000 130,800 120,000 25,000 3,472,800 759,750
Lisa N. Drakeman 27,500 930,148 77,000 112,000 2,506,350 3,403,680
Nils Lonberg -- -- 25,000 112,000 795,250 3,403,680
</TABLE>
- ---------------------------------
(1) All options were granted at 100% of fair market value on the date of
grant. Optionees may satisfy the exercise price by submitting currently
owned shares and/or cash. Income tax withholding obligations may be
satisfied by electing to have us withhold shares otherwise issuable under
the option with a fair market value equal to such obligations.
(2) Fair market value of underlying securities at exercise minus the exercise
price.
(3) Based upon the last reported sale price of our Common Stock on the Nasdaq
National Market of $37.25 on December 31, 1999.
We have not deferred payment of any cash compensation payable to
executive officers for services rendered during the last fiscal year. No
executive officer received compensation not reported in the Summary Compensation
Table, other than pursuant to the Plans, in excess of $50,000 or 10% of the
compensation reported in the Summary Compensation Table.
EMPLOYMENT AND CONSULTING AGREEMENTS
Dr. Donald L. Drakeman. We have entered into an employment agreement
with Dr. Donald L. Drakeman pursuant to which he is employed as our President
and Chief Executive Officer. Dr. Drakeman's current annual salary is $373,000,
which may be periodically increased by the Board of Directors. The agreement
expires on October 1, 2000, and is automatically renewed for successive one year
terms unless, we or Dr. Drakeman elect not to renew. If the agreement is not
renewed by us, Dr. Drakeman is entitled to one (1) year's severance pay, subject
to reduction if Dr. Drakeman finds alternative employment during that period.
The agreement contains prohibitions against disclosure of any confidential
information concerning our business, accounts, or finances. It also contains
covenants not to compete which are subject to differing qualifications upon
termination with cause, without cause, non-renewal and upon a change of control.
If we terminate Dr. Drakeman's employment without cause, Dr. Drakeman is
entitled to two (2) full years' severance pay, depending on the date of
termination. In the event of a change in control of Medarex, Dr. Drakeman has
the right to terminate the agreement on 90 days' written notice to us. In such
event, we will pay Dr. Drakeman an amount equal to one (1) full year's salary.
Dr. Drakeman has the right to resign voluntarily upon giving us 90 days' prior
notice, in which case he will be subject to a
14
<PAGE>
noncompetition covenant for a period of one (1) year from the date of
termination. If Dr. Drakeman elects not to renew his employment for the 2001 or
2002 calendar year, he will be subject to a noncompetition covenant for a period
of one (1) year from the date he gives notice of nonrenewal. If Dr. Drakeman
elects not to renew his employment beyond the 2002 calendar year, or if we elect
not to renew Dr. Drakeman's employment beyond the 2000 calendar year, Dr.
Drakeman will not be subject to a noncompetition covenant.
Mr. Michael A. Appelbaum. We have entered into an employment agreement
with Michael A. Appelbaum pursuant to which he is employed as our Executive Vice
President - Finance and Administration, Chief Financial Officer and Treasurer.
Mr. Appelbaum's current annual salary is $295,000 which may be periodically
increased by the Board of Directors. The agreement expires on October 1, 2000
and is automatically renewed for successive one (1) year terms unless the
Company or Mr. Appelbaum elects not to renew. If the agreement is not renewed by
us, Mr. Appelbaum is entitled to one (1) year's severance pay subject to
reduction if Mr. Appelbaum finds alternative employment during that period. The
agreement contains prohibitions against disclosure of any confidential
information concerning our business, accounts, or finances. It also contains
covenants not to compete which are subject to differing qualifications upon
termination with cause, without cause, non-renewal, and upon a change of
control. If we terminate Mr. Appelbaum's employment without cause, Mr. Appelbaum
is entitled to two (2) full years' severance pay, depending on the date of
termination. In the event of a change in control of Medarex, Mr. Appelbaum has
the right to terminate the agreement on 90 days' written notice to us. In such
event, we will pay Mr. Appelbaum an amount equal to one (1) full year's salary.
Mr. Appelbaum has the right to resign voluntarily upon giving us 90 days' prior
notice, in which case he will be subject to a noncompetition covenant for a
period of one (1) year from the date he gives notice of nonrenewal. If Mr.
Appelbaum elects not to renew his employment beyond the 2002 calendar year, or
if we elect not to renew Mr. Appelbaum's employment beyond the 2000 calendar
year, Mr. Appelbaum will not be subject to a noncompetition covenant.
Dr. Yashwant M. Deo. We have entered into an employment agreement with
Dr. Yashwant M. Deo pursuant to which he is employed as our Senior Vice
President-Operations, Research and Development and Regulatory Compliance. Dr.
Deo's current salary is $305,000 and may be periodically increased by the Board
of Directors. The agreement expires on October 1, 2000 and is automatically
renewed for successive one (1) year terms unless we or Dr. Deo elect not to
renew. If the agreement is not renewed by us, Dr. Deo is entitled to one (1)
year's severance pay, subject to reduction if Dr. Deo finds alternative
employment during that period. The agreement contains prohibitions against
disclosure of any confidential information concerning our business, accounts or
finances. It also contains covenants not to compete which are subject to
differing qualifications, upon termination with cause, without cause,
non-renewal, and upon a change of control. If we terminate Dr. Deo's employment
without cause, Dr. Deo is entitled to two (2) full years' severance pay,
depending on the date of termination. In the event of a change in control of
Medarex, Dr. Deo has the right to terminate the agreement on 90 days' written
notice to us. In such event, we will pay Dr. Deo an amount equal to one (1) full
years; salary. Dr. Deo has the right to resign voluntarily upon giving us 90
days' prior notice, in which case he will be subject to a noncompetition
covenant for a period of one (1)year from the date of termination. If we or Dr.
Deo elect not to renew his employment beyond October 1, 2000, Dr. Deo will not
be subject to a noncompetition covenant .
15
<PAGE>
Dr. Randall T. Curnow. We have entered into an employment agreement
with Dr. Randall T. Curnow pursuant to which he is employed as our Senior Vice
President and Chief Medical Officer. Dr. Curnow's current salary is $278,000
which may be periodically increased by the Board of Directors. The agreement
expires on October 1, 2000 and is automatically renewed for successive one (1)
year terms unless we or Dr. Curnow elects not to renew. If the agreement is not
renewed by us, Dr. Curnow is entitled to one (1) year's severance pay. The
agreement contains prohibitions against the disclosure of any confidential
information concerning our business, accounts or finances. It also contains
covenants not to compete which are subject to differing qualifications, upon
termination with cause, without cause, non-renewal, and upon a change of
control. If we terminate Dr. Curnow's employment without cause, Dr. Curnow is
entitled to two (2) full years' severance pay, depending on the date of
termination. In the event of a change of control of Medarex, Dr. Curnow has the
right to terminate the agreement on 90 days' written notice to us. In such
event, we will pay Dr. Curnow an amount equal to one (1) full years' salary. Dr.
Curnow has the right to resign voluntarily upon giving us 90 days' prior notice,
in which case he will be subject to a noncompetition covenant for a period of
one (1) year from the date of termination. If we or Dr. Curnow elect not to
renew his employment beyond October 1, 2000, Dr. Curnow will not be subject to a
noncompetition covenant.
W. Bradford Middlekauff. We have entered into an employment agreement
with W. Bradford Middlekauff pursuant to which he is employed as our Vice
President, General Counsel and Secretary. Mr. Middlekauff's current annual
salary is $200,000 and may be periodically increased by the Board of Directors.
The agreement expires on December 31, 2002 and is automatically renewed for
successive one (1) year terms unless we or Mr. Middlekauff elect not to renew.
If the agreement is not renewed by us, Mr. Middlekauff is entitled to one (1)
year's severance pay. The agreement contains prohibitions against the disclosure
of any confidential information concerning our business, accounts or finances.
It also contains covenants not to compete which are subject to differing
qualifications, upon termination with cause, without cause, non-renewal, and
upon a change of control. If we terminate Mr. Middlekauff's employment without
cause, Mr. Middlekauff is entitled to two (2) full years' severance pay,
depending on the date of termination. In the event of a change of control of
Medarex, Mr. Middlekauff has the right to terminate the agreement on 90 days'
prior written notice. In such event, we will pay Mr. Middlekauff an amount equal
to one (1) full years' salary. Mr. Middlekauff has the right to resign
voluntarily upon giving us 90 days' prior written notice, in which case he will
be subject to a noncompetition covenant for a period of one (1) year from the
date of termination. If Mr. Middlekauff elects not to renew his employment
beyond December 31, 2002, Mr. Middlekauff will not be subject to a
noncompetition covenant.
Dr. Michael W. Fanger. We have entered into a consulting agreement with
Dr. Michael W. Fanger, one of our scientific founders, pursuant to which Dr.
Fanger has agreed to perform certain consulting services for us and agreed that
any of his future inventions relating to our core technology would be assigned
to us. The term of this agreement expires in July of each calendar year, and is
automatically extended indefinitely for additional one (1) year-terms unless
notice is given by either party of its election not to so extend the agreement.
Dr. Julius A. Vida. We maintain a consulting agreement with Dr. Julius
A. Vida pursuant to which Dr. Vida has agreed to perform certain consulting
services relating to the development of corporate partnerships and licensing
programs. Under the terms of this agreement, Dr. Vida will receive $1,600 per
month plus $1,600 per day for each day of service in excess of 12 days per
calendar year. Dr. Vida will also be reimbursed for all reasonable out-of-pocket
expenses incurred
16
<PAGE>
in connection with services provided at our request. The agreement will be
automatically renewed for so long as Dr. Vida remains a member of our Board of
Directors.
Irwin Lerner. We maintain a consulting agreement with Irwin Lerner,
pursuant to which Mr. Lerner has agreed to perform certain consulting services
relating to strategic planning and the development of corporate partnerships.
Under the terms of this agreement, Mr. Lerner will receive $2,500 per month
during the term of the agreement. Mr. Lerner will also be reimbursed for all
reasonable out-of-pocket expenses incurred in connection with services provided
at our request. The agreement will be automatically renewed for so long as Mr.
Lerner remains a member of our Board of Directors.
Dr. W. Leigh Thompson, Jr. We maintain a consulting agreement with Dr.
W. Leigh Thompson, Jr., pursuant to which Dr. Thompson has agreed to perform
certain consulting services relating to strategic planning and the development
of corporate partnerships. Under the terms of this agreement, Dr. Thompson will
receive $1,200 per month during the term of the agreement. Dr. Thompson will
also be reimbursed for all reasonable out-of-pocket expenses incurred in
connection with services provided at our request. The agreement will be
automatically renewed for so long as Dr. Thompson remains a member of our Board
of Directors.
Mr. Charles R. Schaller. We maintain an arrangement with Charles R.
Schaller pursuant to which Mr. Schaller provides business and strategic planning
services. It is not anticipated that he will receive more than $2,000 per month
in connection with this arrangement. Mr. Schaller will also be reimbursed for
all reasonable out-of-pocket expenses incurred in connection with services
provided at our request.
We require our employees to execute confidentiality and nondisclosure
agreements upon the commencement of employment with us. The agreements provide
that all inventions or discoveries by the employee related to our business and
all confidential information developed or made known to the employee during the
term of employment shall be our exclusive property and shall not be disclosed to
third parties without our prior approval. As indicated above, however, public
policy limitations and the difficulty of obtaining injunctive relief may impair
our ability to enforce the non- competition and nondisclosure covenants made by
our employees.
17
<PAGE>
STOCK PRICE PERFORMANCE GRAPH
The graph and table below compare the cumulative total stockholder
return (stock price appreciation plus reinvested dividends, if any) on an annual
basis for our Common Stock against the cumulative total returns on the Nasdaq
Stock Market Index (U.S.) and a peer group we selected for the period from
December 31, 1994 through December 31, 1999. The peer group consists of the
following biotechnology companies: Abgenix, Inc.; Imclone Systems, Inc.; Protein
Design Labs, Inc.; Xoma Corporation; Cytogen Corporation; Idec Pharmaceuticals
Corporation; Immunogen, Inc.; Cantab Pharmaceuticals plc; NeoRx Corporation; and
Immunomedics, Inc. The relevant information with respect to the peer group was
furnished by Research Data Group.
[LINE GRAPH]
<TABLE>
<CAPTION>
12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
<S> <C> <C> <C> <C> <C> <C>
Medarex, Inc.......................... $100 $248 $243 $183 $105 $1,296
New Peer Group........................ $100 $189 $231 $227 $204 $618
Old Peer Group........................ $100 $184 $232 $228 $204 $506
Nasdaq Stock Market Index (U.S.)...... $100 $141 $174 $213 $300 $542
</TABLE>
The above graph and table assume $100 invested on December 31, 1994,
with all dividends reinvested, in each of our Common Stock, the Nasdaq Stock
Market Index (U.S.) and the peer group. Information with respect to the old peer
group does not include Abgenix, Inc.
18
<PAGE>
MEDAREX STOCK OWNED BY PRINCIPAL STOCKHOLDERS AND MANAGEMENT
The following table sets forth as of March 31, 2000, the number of
shares and percentage of our Common Stock held by (i) each person who owns of
record or who is known by us to "beneficially own" more than 5% of our Common
Stock, (ii) each of our executive officers and directors, and (iii) all of our
officers and directors as a group. As of March 31, 2000, we had [ ] shares of
Common Stock issued and outstanding.
"Beneficial ownership" is broadly defined by the SEC to mean more than
ownership in the usual sense. So, for example, a person "beneficially" owns our
Common Stock not only if he or she holds it directly, but also if he or she
indirectly (through a relationship, a position as a director or trustee, or a
contract or understanding), has (or shares) the power to vote the stock, or to
sell it, or if he or she has the right to acquire it within 60 days.
<TABLE>
<CAPTION>
Amount and Nature of
Beneficial Percent
Officers, Directors and Principal Stockholders Ownership/(1)/ Owned
- ---------------------------------------------- -------------- -----
<S> <C> <C>
BCC Acquisition I LLC /(2)/............................................... 4,176,673
c/o Bay City Capital
750 Battery Street, Suite 600
San Francisco, CA 94111
Dr. Donald L. Drakeman /(3)/.............................................. 928,128
Dr. Michael Fanger /(4)/.................................................. 523,637
Michael A. Appelbaum /(5)/................................................ 174,432
Charles R. Schaller /(6)/................................................. 166,636
Dr. Yashwant M. Deo /(7)/................................................. 192,400 *
Dr. Frederick B. Craves /(8)/ ............................................ 173,390 *
Dr. Lisa N. Drakeman /(9)/................................................ 928,128 *
Dr. Randall T. Curnow /(10)/.............................................. 145,000 *
Dr. Nils Lonberg /(11)/................................................... 165,553 *
Irwin Lerner /(12)/....................................................... 135,000 *
Dr. Julius A. Vida /(13)/................................................. 71,665 *
Dr. W. Leigh Thompson, Jr. /(14)/......................................... 53,000 *
Robert Iggulden /(15)/.................................................... 53,000 *
W. Bradford Middlekauff .................................................. - *
All officers and directors as a group (fourteen persons)/(16)/............ 2,781,944
</TABLE>
19
<PAGE>
- -----------------------------------
(1) The persons named in the table above have sole voting and investment power
with respect to all shares of our Common Stock shown as beneficially owned
by them subject to community property laws where applicable and the
information contained in this table and these notes.
(2) Includes 454,796 shares issuable pursuant to immediately exercisable
warrants.
(3) Includes 15,000 shares held by Dr. Donald L. Drakeman's wife, Dr. Lisa N.
Drakeman, 154,000 shares issuable pursuant to immediately exercisable
options held by Dr. Lisa N. Drakeman, and 15,536 shares held in trusts for
the benefit of Cynthia and Amy Drakeman. Dr. Lisa N. Drakeman is the
trustee of such trusts. Also includes 330,000 shares issuable pursuant to
immediately exercisable options and 391,067 phantom stock units..
(4) Includes 30,000 shares issuable pursuant to immediately exercisable
options and 80,000 shares held by Dr. Fanger's wife. Also includes 102,917
phantom stock units.
(5) Includes 152,000 shares issuable pursuant to immediately exercisable
options and 20,582 phantom stock units.
(6) Includes 106,300 shares issuable pursuant to immediately exercisable
options and 14,211 phantom stock units.
(7) Represents 192,400 shares issuable pursuant to immediately exercisable
options.
(8) Includes 109,954 shares held by BCC Acquisition I LLC ("BCC Acquisition"),
13,436 shares issuable pursuant to immediately exercisable warrants held
by BCC Acquisition. Dr. Craves disclaims beneficial ownership of such
shares. Includes 50,000 shares issuable pursuant to immediately
exercisable options.
(9) Includes 19,525 shares, 333,000 shares issuable pursuant to immediately
exercisable options and 391,067 phantom stock units held by Dr. Donald L.
Drakeman, Dr. Lisa N. Drakeman's husband. Includes 15,536 shares of the
Company's Common Stock held in trust for the benefit of Cynthia and Amy
Drakeman, Dr. Drakeman's minor children. Dr. Lisa N. Drakeman is the
trustee of such trusts. Includes 154,000 shares issuable pursuant to
immediately exercisable options.
(10) Represents 145,000 shares issuable pursuant to immediately exercisable
options.
(11) Includes 137,000 shares issuable pursuant to immediately exercisable
options.
(12) Includes 120,000 shares issuable pursuant to immediately exercisable
options.
(13) Includes 67,500 shares issuable pursuant to immediately exercisable
options. Also includes 1,165 shares held by Dr. Vida's wife.
(14) Represents 53,000 shares issuable pursuant to immediately exercisable
options.
(15) Represents 53,000 shares issuable pursuant to immediately exercisable
options.
(16) Includes 1,606,636 shares issuable pursuant to immediately exercisable
options and warrants and 528,777 phantom stock units.
* Less than 1%.
SECTION 16(a) REPORTING
Under the securities laws of the United States, our directors, our
executive officers (and certain other officers), and any persons holding ten
percent (10%) or more of our Common Stock are required to report their ownership
of our Common Stock and any changes in that ownership to the SEC. Specific due
dates for these reports have been established and we are required to report in
this Proxy Statement any failure to file by these dates during 1999. All of
these filing requirements were satisfied by our directors and executive officers
during 1999.
20
<PAGE>
PROPOSAL 2 - APPROVAL OF THE 2000 STOCK OPTION PLAN
The Board has unanimously approved the 2000 Stock Option Plan and has
directed that it be submitted for the approval of the shareholders at the Annual
Meeting. The 2000 Stock Option Plan will become effective on the date of
shareholder approval (the "Effective Date").
The following description of the 2000 Stock Option Plan is only a
summary of the important provisions of the 2000 Stock Option Plan and does not
contain all of the terms and conditions of the 2000 Stock Option Plan. You can
obtain a copy of the full text of the 2000 Stock Option Plan, without charge,
upon request to our corporate Secretary.
What Is the Purpose of the 2000 Stock Option Plan?
The purpose of the 2000 Stock Option Plan is to help us hire and keep
directors, consultants, officers and other employees of outstanding ability and
to motivate employees to exert their best efforts on our behalf. In addition, we
expect to benefit from the added interest which the optionees will have in our
welfare as a result of their ownership or increased ownership of our Common
Stock.
What Types of Options and Awards Can be Granted Under the 2000 Stock Option
Plan?
Options and other awards authorized under the 2000 Stock Option Plan
include:
o incentive stock options ("ISOs") which are intended to satisfy the
requirements of Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code");
o stock options which are "non-qualified" for federal income tax
purposes ("NQOs"), to which the provisions of the Code pertaining
to ISOs do not apply;
o restricted stock awards, which are awards of stock that are subject
to forfeiture in the event of premature termination of employment,
our failure to meet certain performance objectives, or other
conditions;
o stock appreciation rights ("SARs"), which enable a recipient to
profit immediately from the difference between the exercise price
of an option and the fair market value of the stock;
o deferred stock awards, which are awards of stock that are not
distributed to the participant until after a specified deferral
period;
o and other stock-based awards permitted under the 2000 Stock Option
Plan (including, but not limited to, performance shares and
convertible debentures).
Each award described above is sometimes referred to in this Proxy
Statement as an "Award", and all such awards are sometime collectively referred
to in this Proxy Statement as "Awards".
The 2000 Stock Option Plan is not subject to any provisions of the
Employee Retirement Income Security Act of 1974, as amended.
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How Will the 2000 Stock Option Plan Be Administered?
o The 2000 Stock Option Plan will be administered by the Stock Option
Committee, which shall consist of at least two (2) directors,
appointed by the Board, who are "Non- Employee Directors" as
defined by the SEC under Rule 16b-3.
o The term of office of the Stock Option Committee members will be as
fixed from time to time by the Board of Directors. The Board may
from time to time remove members from the Stock Option Committee,
with or without cause, or add members to the Stock Option
Committee. Vacancies in the Stock Option Committee, however caused,
will be filled by the Board.
o Subject to the express terms and conditions of the 2000 Stock
Option Plan, the Stock Option Committee will have full power to
make Awards, to construe or interpret the 2000 Stock Option Plan,
to prescribe, amend and rescind rules and regulations relating to
it and to make all other determinations necessary or advisable for
its administration. Except as otherwise provided in the 2000 Stock
Option Plan, the Stock Option Committee may also determine which
persons shall be granted Awards, the nature of the Awards granted,
the number of shares subject to Awards and the time at which Awards
shall be made. Such determinations will be final and binding.
How Much Stock Will Be Available Under the 2000 Stock Option Plan?
o The only class of stock subject to an Award is Common Stock. The
maximum number of shares of Common Stock with respect to which
Awards may be granted is 1,000,000 shares, however, this number is
subject to adjustment in the event of a recapitalization,
reorganization or similar event.
o The maximum number of shares of Common Stock with respect to which
Awards may be granted to any participant in any year under the 2000
Stock Option Plan is 200,000 shares.
o Shares may consist, in whole or in part, of authorized and unissued
shares or treasury shares, except that treasury shares must be used
in the case of Awards of restricted stock.
Any shares represented by Awards which are cancelled, forfeited,
terminated or expire unexercised will again be available for grants
and issuance under the 2000 Stock Option Plan.
Who Is Eligible to Participate in the 2000 Stock Option Plan?
o Persons eligible for Awards under the 2000 Stock Option Plan will
be limited to directors, consultants, officers and other employees
of Medarex and our subsidiaries who are responsible for the
management, growth, profitability and protection of the business of
Medarex and our subsidiaries ("Eligible Persons").
o The Stock Option Committee will select who will receive Awards and
the amount and nature of such Awards.
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What Happens If the Number of Outstanding Shares Changes Because of a Merger,
Consolidation, Recapitalization or Reorganization?
o In the event that our outstanding shares of Common Stock are
increased, decreased or changed or converted into other securities
by reason of merger, reorganization, consolidation,
recapitalization, stock dividend, extraordinary cash dividend or
other change in our corporate structure affecting the stock, the
number of shares that may be delivered under the 2000 Stock Option
Plan and the number and/or the option price of shares subject to
outstanding options and any other Awards under the 2000 Stock
Option Plan may be adjusted in the sole discretion of the Stock
Option Committee to the extent that the Stock Option Committee
determines to be appropriate, provided, however, that the number of
shares subject to any Awards will always be a whole number, and
provided further that, in the case of ISOs, no such adjustment will
be authorized to the extent that it would constitute a
"modification" as defined in Section 424(h)(3) of the Code or would
cause the 2000 Stock Option Plan to violate Section 422(b)(1) of
the Code or any successor provision thereto.
o The adjusted option price will also be used to determine the amount
payable to us upon the exercise of any SAR associated with any
option.
When Will the 2000 Stock Option Plan Terminate?
The 2000 Stock Option Plan will expire on May 17, 2010, but the Board
of Directors may terminate the 2000 Stock Option Plan at any time prior to that
date and Awards granted prior to such termination may extend beyond such date.
Termination of the 2000 Stock Option Plan will not alter or impair, without the
consent of the optionee or grantee, any of the rights or obligations of any
Award made under the 2000 Stock Option Plan.
What Changes Can the Board Make to the 2000 Stock Option Plan?
The Board may from time to time alter, amend, suspend or discontinue
the 2000 Stock Option Plan; however, no such action of the Board may alter the
provisions of the 2000 Stock Option Plan so as to alter any outstanding Awards
to the detriment of the optionee or participant without such participant's
consent, and no amendment to the 2000 Stock Option Plan may be made without
stockholder approval if such amendment would materially increase the benefits to
participants in the 2000 Stock Option Plan, materially increase the number of
shares issuable under the 2000 Stock Option Plan, reduce below 100% (110% in the
case of a 10% Owner) of the fair market value on the date of grant the price per
share of which any option may be granted, extend the terms of the 2000 Stock
Option Plan or the period during which option may be granted or exercised or
materially modify requirements as to eligibility to participate in the 2000
Stock Option Plan.
What Are the Important Provisions of the Plan With Respect to Each Type of
Award?
A. Options
-------
Option Price. The Stock Option Committee shall determine the option
price of all NQOs and all ISOs; provided however, the option price shall not be
less than 100% of the fair market value of the Common Stock on the date the
option is granted and, provided, further, that in the case of a
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participant who owns more than 10% of our issued and outstanding stock on the
date of grant, the option price of an ISO shall be at least 110% of the fair
market value of the Common Stock on the date the option is granted. The
aggregate fair market value of the Common Stock with respect to which an ISO is
exercisable for the first time by an optionee during any calendar year shall not
exceed $100,000.
Option Term. The Stock Option Committee shall determine the expiration
date of each Option; provided, however, no ISO shall be exercisable after the
expiration of ten (10) years and (1) one day from the date the option was
granted, and, provided, further, that ISOs granted to employees who are 10%
owners on the date of grant shall expire no later than five (5) years from the
date of grant. Options may terminate earlier as provided elsewhere herein.
Exercisability of Options. The Stock Option Committee shall determine
when Options are exercisable, in whole or in part, provided, however, that,
except as provided in the 2000 Stock Option Plan, or unless otherwise determined
by the Stock Option Committee at or subsequent to the date of grant, Options
will not be exercisable until the first anniversary date of the granting of the
Option. Options granted under the 2000 Stock Option Plan are subject to
provisions regarding acceleration of exercise in the event of a Change of
Control (as defined in the 2000 Stock Option Plan), including exercise by
officers, directors and 10% Owners, and termination of employment due to
retirement, death, disability, termination without cause and voluntary
termination with our consent.
Method of Exercise. Options may be exercised, in whole or in part, by
giving us written notice of exercise specifying the optionee's election to
purchase shares subject to option or to receive cash payment. Upon exercise of
Options and payment of the exercise price, we will issue shares out of the
amount so authorized under the 2000 Stock Option Plan. The exercise price of an
Option shall be paid for in full (i) with cash (either by certified or bank
check), or (ii) at the sole discretion of the Stock Option Committee, in the
equivalent fair market value of shares of unrestricted Common Stock already
owned by the optionee, properly endorsed, or (iii) in the case of NQOs and at
the sole discretion of the Stock Option Committee, in the equivalent fair market
value of restricted Common Stock already owned by the optionee, or deferred
stock subject to an Award under our Plans. The Stock Option Committee may
require any person entitled to receive payment in respect of an Award to remit
to us, prior to such payment, an amount sufficient to satisfy any federal, state
or local tax withholding requirements.
Unless the Stock Option Committee determines otherwise at the time of
grant, during the 60-day period after a Change of Control, and with respect only
to Options that are unaccompanied by an SAR, each optionee (other than (i) a
member of the Stock Option Committee or (ii) an optionee who initiated a Change
of Control in a capacity other than as one of our officers or directors) shall
have the right to elect, by giving us written notice, to surrender all or part
of the Option to us and to receive in cash (in lieu of exercising the Option) an
amount equal to the amount by which the fair market value per share of the
Common Stock on the date of exercise exceeds the exercise price per share under
the Option multiplied by the number of shares of Common Stock granted under the
Option as to which such right is exercised.
However, any officer, director or 10% Owner of our capital stock
(collectively, an "Insider") may only settle such right by either (A) making an
election to settle such right to the extent the election during such 60-day
period falls within one of four (4) ten-day periods, each period
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beginning on the third business day following the release of our quarterly or
annual financial summary statements of sales and earnings (the "Summary
Statements"), as the case may be, and ending on the twelfth business day
following each such date (each such period being a "Window Period"), provided
that we shall have been subject to and met all reporting requirements under the
Exchange Act, for at least one (1) year prior to such settlement, or (B)
pursuant to an irrevocable election to settle the right no earlier than six (6)
months after the date of such election, which election need not occur during a
Window Period, provided that the change of control transaction was approved by
our shareholders (excluding Insider shareholders).
The fair market value of the Common Stock attributable to any such
right associated with an ISO is calculated on the same basis of determining the
fair market value on the date of exercise of the ISO. The fair market value of
the Common Stock attributable to any such right associated with an NQO is the
higher of (i) the highest reported sale price of our Common Stock on the Nasdaq
National Market for the 60-day period preceding the Change of Control and (ii)
the highest per share price paid in any Change of Control transaction.
Restrictions on Transferability. The Stock Option Committee, in its
absolute discretion, may impose such restrictions on the transferability of the
Options granted under the 2000 Stock Option Plan as it deems appropriate. Any
such restrictions shall be set forth in the Stock Option Agreement with respect
to such Options and may be referred to on the certificates evidencing such
shares. ISOs may not be transferred by an optionee other than by will or by laws
of descent and distribution.
Effect of Termination of Employment, Death, Retirement or Permanent
Disability. Except as hereinafter provided, every Option granted pursuant to the
2000 Stock Option Plan shall terminate on the earlier to occur of (i) the fixed
expiration date set forth in the Option Agreement; and (ii) (a) if an employee
ceases to be employed by us by reason of retirement or permanent disability,
then three (3) years after such cessation of employment, to the extent that the
employee was entitled to exercise it on the date of his cessation of employment,
or (b) if an employee dies while employed by us or within three (3) years of his
termination of employment by reason of retirement or permanent disability, then
by his legal representative at any time within fifteen (15) months after his
death in the event the optionee died while employed by us or within twelve (12)
months of his death in the event the optionee died after retirement or permanent
disability. Such Option exercises may only be made after the date of such
termination for the full number of shares subject to the Option.
If an optionee's relationship or employment by us terminates for any
reason other than death, permanent disability or retirement, every Option
granted to the optionee pursuant to the 2000 Stock Option Plan shall thereupon
terminate; provided, however, that if such employment is terminated by our
action (other than for reason of willful violation by the optionee of our
rules), or by voluntary resignation of the optionee, in either case within
eighteen (18) months following a Change of Control, Options held by such
optionee may be exercised in full until the earlier of their expiration in
accordance with their terms and six (6) months and one (1) day from such
termination.
If an optionee's employment is terminated for any reason other than the
foregoing, the Option shall thereupon terminate. Transfers of employees among
our affiliates and authorized leaves of absence are not deemed terminations of
employment.
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If an optionee holding ISOs does not exercise the Option within three
(3) months after termination of such optionee's employment (one (1) year if such
optionee's employment was terminated due to disability) the Option shall cease
to be an ISO and shall be treated as an NQO for federal income tax purposes. In
the event that an optionee's employment is terminated by reason of such
optionee's death any ISOs shall continue to be treated as ISOs regardless of
when they are exercised.
Option Buyout. The Stock Option Committee may at any time offer to
repurchase an Option, based on such terms and conditions as the Stock Option
Committee shall establish at the time of such offer.
B. Stock Appreciation Rights
-------------------------
Grant and Exercise. SARs enable a recipient to profit immediately from
the disparity between the exercise price of the option and the fair market value
of the stock. SARs may be granted as part of an Award (i) in the case of an NQO,
at the time of the grant or thereafter, and (ii) in the case of an ISO, at the
time of the grant only. SARs generally terminate upon the exercise of the
related option and, unless exercised in connection with the death or permanent
disability of the participant, are subject to the exercise conditions imposed on
Insiders by Section 16 of the Exchange Act. SARs granted in connection with ISOs
may be exercised only when the market price of the stock subject to the ISO
exceeds the option price of the ISO.
Method of Exercise. Upon exercise of the SAR, the optionee shall
receive in cash or stock, as determined by the Stock Option Committee, the
difference between the fair market value of the stock at the time of exercise
and the exercise price of the option, multiplied by the number of shares in
respect of which the SAR has been exercised. However, for 60 days following a
Change of Control, an SAR unaccompanied by an ISO shall be valued at the higher
of (a) the highest reported sales price on the Nasdaq National Market (or on
such other exchange as our stock may then be listed) and (b) the highest price
paid per share of our stock in such Change of Control transaction.
C. Restricted Stock, Deferred Stock And Other Stock Based Awards
-------------------------------------------------------------
Grant. The Stock Option Committee may, in its discretion, award to a
recipient either restricted stock, deferred stock or other stock based awards
(collectively the "Stock Awards"). The Stock Awards will be evidenced by an
agreement and provide that the stock subject to the Stock Award is not
transferable for a specified period, or, in the case of an Award of deferred
stock, not issuable for a specified period. In the case of a deferred stock
Award, the Stock Option Committee may require a minimum payment at the end of
the restrictive period or completion of a specified performance period and, in
the event of a Change of Control, Stock Awards will be immediately issued to the
recipient. Each recipient of a Stock Award will be a stockholder and have all
the rights of a stockholder with respect to such shares, including the right to
vote and receive all dividends or other distributions made or paid with respect
to such shares. Subject to the provisions of the 2000 Stock Option Plan and each
agreement, each recipient of the Stock Award will be entitled to receive
currently or on a deferred basis, interest or dividends, or equivalents thereof,
with respect to such Award and the Stock Option Committee may provide that such
amounts shall be deemed to be reinvested in additional stock or otherwise
reinvested. Any stock based Award shall be issued for no cash consideration and
any underlying securities of such Award shall be priced at no less than 50% of
the fair market value of the stock on the date of grant.
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If the recipient of a Stock Award ceases to be an employee for any
reason, then the Stock Award is subject to forfeiture, except as provided in the
particular agreement, and except as such forfeiture may be waived by the Stock
Option Committee when it, in its discretion, determines that such waiver is in
our best interests.
In the event of a participant's retirement, permanent disability or
death, or in cases of special circumstances, the Stock Option Committee may
waive any or all of the remaining restrictions and limitations imposed under the
2000 Stock Option Plan with respect to any Stock Awards.
Restrictions on Transferability. Shares of restricted stock and
deferred stock Awards may not be sold, exchanged, transferred, pledged,
hypothecated, or otherwise disposed of until such time as the stated
restrictions, or deferral period, as the case may be, lapse. The Stock Option
Committee, in its absolute discretion, may impose such restrictions on the
transferability of the Stock Awards granted this 2000 Stock Option Plan as it
deems appropriate. Any such restrictions shall be set forth in the Stock Option
Agreement with respect to such Stock Awards and may be referred to on the
certificates evidencing such shares. Shares of restricted stock will be
evidenced by a certificate that bears a restrictive legend.
What are the Federal Income Tax Consequences of the 2000 Stock Option Plan?
The following discussion is a summary of the Federal income tax
consequences to recipients of Awards and to us with respect to Awards granted
under the 2000 Stock Option Plan. The 2000 Stock Option Plan is not qualified
under Section 401(a) of the Code.
Incentive Stock Options (ISOs). No income is generally recognized by an
optionee when an ISO is granted or exercised. If the stock obtained upon
exercise of an ISO is sold more than one (1) year after exercise and two (2)
years after grant, the difference between the option price and the amount
realized on the sale will be treated as long-term capital gain, which presently
is subject to tax at a maximum rate of 20%. We are not entitled to a deduction
as a result of the grant or exercise of an ISO or the sale of the stock acquired
upon exercise thereof if the stock is held by the optionee for the requisite
periods.
If, however, the stock acquired upon exercise of an ISO is sold less
than one (1) year after exercise or less than two (2) years after grant, the
lesser of (i) the difference between the fair market value on the date of
exercise and the option price or (ii) the difference between the amount realized
on the sale and the option price will be treated as ordinary income, which
presently is subject to tax at a maximum rate of 39.6%, and we will be entitled
to a corresponding deduction. The excess of the amount realized on the sale over
the fair market value on the date of exercise, if any, will be treated as
long-term or short-term capital gain, depending on the length of time the stock
is held.
The excess of the fair market value of the stock over the option price
on the date of exercise of an ISO will constitute an adjustment for alternative
minimum tax purposes which may result in the optionee being subject to the
alternative minimum tax.
Nonqualified Stock Options (NQOs). No income is recognized by an
optionee when an NQO is granted. Except as described below, upon exercise of an
NQO an optionee is treated as having received ordinary income at the time of
exercise in the amount equal to the difference between the option price paid and
the then fair market value of the Common Stock acquired. We
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will be required to withhold tax thereon and will be entitled to a deduction at
the same time and in an amount corresponding to such difference. The optionee's
basis in the Common Stock acquired upon exercise of an NQO will be equal to the
option price plus the amount of ordinary income recognized, and any gain or loss
thereafter recognized upon disposition of the Common Stock is generally treated
as capital gain or loss.
$100,000 Exercise Limitation for ISOs. If the aggregate fair market
value of stock (determined at the date of grant) with respect to which ISOs
granted after December 31, 1986 become exercisable, whether by passing of an
anniversary date, acceleration or otherwise, during any one (1) calendar year
exceeds $100,000, the excess will be treated for tax purposes as NQOs, with
options being taken into account therefor in the order of grant.
Payment with Common Stock. The 2000 Stock Option Plan allows an
optionee to deliver Common Stock he already owns in payment of the option price.
For any shares of Common Stock so exchanged, an amount equal to the fair market
value thereof on the date tendered will be credited against the option price. In
general, an optionee will not recognize gain with respect to any shares
delivered to us in exchange for new shares acquired in the exercise of an
Option.
In the event Common Stock is used to pay the option price for an NQO,
gain or loss will not be recognized in connection with such exchange to the
extent that the number of shares of stock received on exercise does not exceed
the number of shares of stock surrendered. The optionee's basis in the new
shares will be equal to the basis of the stock surrendered and the holding
period thereof will include the holding period of the shares exchanged. The fair
market value of any additional shares received upon exercise of an NQO in
exchange for stock (less any cash or other property paid in connection with the
exercise), will constitute compensation to the optionee taxable as ordinary
income. The optionee's basis in these additional shares will be equal to the
amount of compensation included in income plus any cash or value of other
property paid upon exercise, and the holding period therefor will begin on the
date of the exchange.
In the event Common Stock is used to pay the option price for an ISO,
gain or loss normally will not be recognized in connection with such exchange.
To the extent that the number of shares of stock received on exercise does not
exceed the number of shares surrendered, proposed Treasury Regulations provide
that the optionee's basis in these shares will be equal to the basis of the
stock surrendered and, except as provided below, has the same holding period as
the stock surrendered. To the extent the optionee receives a number of shares in
excess of the number of shares surrendered, the optionee's basis in such
additional shares will be zero (plus any gain recognized and any cash paid in
connection with the exercise) and the holding period for such additional shares
will begin on the date of such exchange.
If Common Stock acquired upon the exercise of an ISO is delivered in
payment of the option price upon the exercise of a second ISO before the stock
was held for the requisite holding period, then the stock so delivered will not
be eligible for tax-free treatment in the exchange, but instead the optionee
generally will be required to recognize ordinary income at the time such stock
is delivered as described above under "Incentive Stock Options."
There are special complex rules relating to the allocation of basis and
the holding period of ISO stock acquired by payment with previously held Common
Stock. For example, the disposition of such shares prior to the end of the
required holding period may result in a greater portion of the
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proceeds of disposition being treated as ordinary compensation income than might
otherwise be expected.
Stock Appreciation Rights (SARs). No tax is imposed on an optionee
pursuant to a grant of an SAR. Upon exercise of an SAR, the optionee will
recognize ordinary income equal to the amount of cash he receives, and we will
be entitled to a compensation deduction. SAR payments are wages subject to
withholding at the regular withholding rates applicable to the optionee's salary
income. For a salaried optionee, the amount received upon settlement of an SAR
is a "supplemental wage payment" subject to a flat 28% withholding obligation.
Temporary and Proposed Treasury Regulations provide that an alternative
right to receive a taxable cash payment for the cancellation or surrender of an
ISO does not disqualify the Option as an ISO if the exercise of the right has
the same economic and tax consequences as the exercise of the Option followed by
the immediate sale of the underlying shares. Accordingly, the grant of an SAR
linked to an ISO under the 2000 Stock Option Plan will not cause the ISO to lose
its preferential tax treatment because the SAR will result in the same economic
and income tax consequences to the optionee as if the optionee had exercised the
ISO and sold the stock received upon exercising the ISO.
Restricted Stock. Restricted Stock awarded to an employee may be
subject to any number of restrictions (including deferred vesting, limitations
on transfer, and forfeitability) imposed by the Stock Option Committee. In
general, the receipt of Restricted Stock will not result in the recognition of
income by an employee until such time as the shares are either not forfeitable
or are freely transferable. Upon the lapse of such restrictions, the employee
will be required to include as ordinary income the difference between the amount
paid for the Restricted Stock, if any, and the fair market value of such stock
on the date the restrictions lapse, and we will be entitled to a corresponding
deduction. In addition, any dividends paid with respect to the Restricted Stock
prior to the lapse of the restrictions will be treated as compensation income by
the employee and will be deductible by us. Employees receiving Restricted Stock
Awards may elect to include the value of such stock (less any amounts paid for
such stock) as ordinary income at the time the Award is made. Employees making
this election would treat any gain or loss realized on a sale of the Restricted
Stock as capital gain or loss, but would not be entitled to any loss deduction
if they forfeited the Restricted Stock pursuant to the restrictions imposed by
the Stock Option Committee.
Deferred Stock. Deferred Stock awarded to an employee will not be
delivered to the employee until after a specified period of time (the "Deferral
Period"). Upon delivery of the shares after the Deferral Period, the employee
may be required to make a minimum payment for the shares and/or the shares may
be subject to restrictions similar to those imposed on Restricted Stock Awards.
In general, an employee will be required to include the Deferred Stock Award as
compensation income (and we will receive a deduction) at the earliest time such
shares have been delivered and are freely transferable or are no longer subject
to a substantial risk of forfeiture. The amount of compensation income (and our
deduction) will be the difference between the amount paid for the Deferred
Stock, if any, and the fair market value of the Deferred Stock at the time such
restrictions lapse. Any dividends paid with respect to the Deferred Stock prior
to the time that the employee has included such stock as compensation income
will be treated as additional compensation income and will be deductible by us.
Employees receiving a Deferred Stock Award may elect to include the value of
such stock (less any amount paid for such stock) as compensation at the time the
Award is made. Employees making this election would treat any gain or loss
realized on a sale of the Deferred
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Stock as capital gain or loss, but would not be entitled to any loss deduction
if they forfeited the Deferred Stock pursuant to the restrictions imposed by the
Stock Option Committee.
Other Stock Based Awards. The Stock Option Committee may issue other
stock based Awards, including performance shares and convertible debentures.
These Awards may be subject to such restrictions as may be imposed by the Stock
Option Committee. In general, employees receiving such Awards will be required
to include the fair market value of the Award in income as additional
compensation on the date that the Award becomes freely transferable or is no
longer subject to a substantial risk of forfeiture, and we will be entitled to a
corresponding deduction.
In view of the complexity of the tax aspects of transactions involving
the grant and exercise of ISOs, NQOs, and SARs, and the receipt and disposition
of shares of Common Stock in connection with those and other Awards under the
2000 Stock Option Plan, and because the impact of taxes will vary depending on
individual circumstances, each employee receiving an Award under the 2000 Stock
Option Plan should consult their own tax advisor to determine the tax
consequences in such employee's particular circumstances.
Cap on Company Deductions for Certain Compensation. Under Section
162(m) of the Code, certain compensation payments in excess of $1 million are
subject to a cap on deductibility by us. 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 chief executive officer of the corporation or
any one (1) of the other four (4) highest paid executives. Certain
performance-based compensation is not subject to the cap on deductibility.
Although certain stock-based compensation can qualify for this performance-based
exception, Awards granted under the 2000 Stock Option Plan do not qualify. We do
not presently anticipate the payment of compensation that would exceed the
limitation imposed by Section 162(m) of the Code.
Registration with the Commission
We intend to file a Registration Statement on Form S-8 covering the
2000 Stock Option Plan if the 2000 Stock Option Plan is approved by the
shareholders.
PROPOSAL 3 - APPROVAL OF INCREASE IN NUMBER OF AUTHORIZED SHARES
The Board has unanimously approved the proposal to amend Article THIRD
of our Restated Certificate of Incorporation to increase the number of our
authorized shares of capital stock from 42,000,000 shares, consisting of
40,000,000 shares of Common Stock and 2,000,000 shares of Preferred Stock, to
110,000,000 shares, consisting of 100,000,000 shares of Common Stock and
10,000,000 shares of Preferred Stock. The amendment will read and provide
substantially as follows:
"THIRD: The aggregate number of shares of capital stock which the
Corporation shall have authority to issue is 110,000,000 shares, of which
100,000,000 shares shall be Common Stock, par value $.01 per share (the "Common
Stock"), and 10,000,000 shares shall be Preferred Stock, par value $1.00 per
share (the "Preferred Stock"). Shares of Preferred Stock may be issued in one or
more series. The number of shares included in any series of Preferred Stock and
the full or limited voting powers, if any, designations, preferences and
relative participation, optional and other special rights, and the
qualifications, limitations or restrictions, of Preferred Stock or any series of
Preferred
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Stock shall be stated in the resolution or resolutions providing for the
issuance of the Preferred Stock or such series of Preferred Stock adopted by the
Board of Directors of the Corporation; and the Board of Directors is hereby
expressly vested with authority to fix such designations, preferences and
relative participation, optional or other special rights or qualifications,
limitations or restrictions for each series, including, but not by way of
limitation, the power to fix the redemption and liquidation preferences, the
rate of dividends payable and the time for and the priority of payment thereof
and to determine whether such dividends shall be cumulative or not and to
provide for and fix the terms of conversion of such Preferred Stock of any
series thereof into Common Stock of the Corporation and fix the voting power, if
any, of shares of Preferred Stock or any series thereof."
What Are the Principal Reasons for the Increase in the Number of Our Authorized
Shares?
o As of March 31, 2000, we had _________ shares of Common Stock issued
and outstanding or reserved for issuance upon exercise of options or
warrants, leaving only _______ shares of Common Stock available for
future issuance. No shares of Preferred Stock are currently issued and
outstanding.
o The additional 60,000,000 shares of authorized Common Stock and
8,000,000 shares of authorized Preferred Stock will provide us with
increased flexibility for future growth and the opportunity for
enhanced marketability of our shares. We need sufficient readily
available shares to maintain our financing and capital raising
flexibility, for stock splits and stock dividends, acquisitions and
mergers, employee benefit plans and other business purposes.
o The increase in the number of authorized shares of Common Stock and
Preferred Stock would permit us to issue such shares in connection with
potential acquisitions, as well as to raise additional capital to
finance our anticipated growth. The share increase would also allow us
to issue additional shares of Common Stock under employee stock option
plans to attract and retain qualified personnel. Having such additional
authorized shares available will give us greater flexibility by
permitting such shares to be issued without the expense or delay of
holding a special meeting of shareholders. Such delay might deprive us
of flexibility in effectively using our shares.
What Else Should I Know About the Proposed Increase in the Number of Authorized
Shares?
o If the proposal is approved, the additional shares of Common Stock and
Preferred Stock will be available to us for issuance without further
action by the shareholders, unless such action is required by law or
the rules of the National Association of Securities Dealers, Inc.
o The additional shares of Common Stock and Preferred Stock, when issued,
would become part of the existing classes of Common Stock and Preferred
Stock. The additional shares of Common Stock would have the same rights
and privileges as the shares of Common Stock presently outstanding. The
additional shares of Preferred Stock, like our existing Preferred
Stock, could be issued in different series having different terms and
rights as decided by the Board when the shares are issued.
o You will not have any "preemptive rights" with respect to the
additional shares of Common Stock or Preferred Stock. This means that
if we issue any of the additional shares of
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Common Stock or Preferred Stock, for example, in connection with an
acquisition or to raise capital, you would not have the right to
participate in the purchase of any of the shares.
What Are the Possible Considerations Against the Proposal?
o If the Board were to issue additional shares, it could have a dilutive
effect on our per share earnings and on your voting power.
o The authorized but unissued shares of Common Stock and Preferred Stock
could be used to make a change in control of our company more
difficult. For example, such shares could be sold to purchasers who
might side with the Board of Directors in opposing a takeover bid that
the Board determines not to be in our company's or our shareholders'
best interests. Such a sale could have the effect of discouraging an
attempt by another person or entity, through the acquisition of a
substantial number of shares of Common Stock and/or Preferred Stock to
acquire control of our company, since the issuance of new shares could
be used to dilute the stock ownership of such person or entity. We are
not aware, however, of any pending or threatened efforts to obtain
control of our company.
Will I Have Any Dissenter's Right of Appraisal for My Shares If the Proposal Is
Approved?
o Under New Jersey law, shareholders have the right to "dissent" from
certain corporate actions. In such cases, the dissenting shareholders
are entitled to have their shares appraised and receive the fair value
of their shares in cash, provided that they follow certain procedures.
However, the proposal is not one of the special corporate actions from
which a shareholder may dissent.
o Even if you vote against the proposal and the proposal is approved, you
will not have any dissenter's right of appraisal for your shares of
Common Stock.
PROPOSAL 4 - APPROVAL OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors seeks from the shareholders an indication of
their approval or disapproval of our appointment of Ernst & Young LLP as our
independent auditors for 2000.
The firm of Ernst & Young LLP acted as our independent auditors for the
fiscal year ended December 31, 1999 and has been selected by the Audit Committee
of the Board of Directors to act as our independent auditors for the current
fiscal year. Although the selection and appointment of independent auditors is
not required to be submitted to a vote of shareholders, the directors have
decided to ask the shareholders to ratify the appointment.
If the appointment of Ernst & Young LLP as independent auditors for
2000 is not approved by the shareholders, the adverse vote will be considered a
direction to the Board of Directors to consider other auditors for next year.
However, because of the difficulty in making any substitution of auditors so
long after the beginning of the current year, the appointment for the year 2000
will stand unless the Board finds other good reason for making a change.
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Representatives of Ernst & Young LLP are expected to be present at the
Annual Meeting. They will have the opportunity to make a statement if they so
desire and will be available to respond to appropriate questions.
OTHER MATTERS
General
The Board of Directors knows of no other matters to come before the
Annual Meeting, other than that which is set forth herein and in the
accompanying Notice of Annual Meeting. However, if any other matters should
properly come before the Meeting, it is the intention of the persons named in
the accompanying Proxy to vote such Proxies as in their discretion they may deem
advisable.
Expenses of Solicitation
The cost of soliciting proxies will be borne by us, including expenses
in connection with the preparation and mailing of this Proxy Statement and all
papers which now accompany or may hereafter supplement it. The solicitation will
be made by mail. We will supply brokers or persons holding shares of record in
their names or in the names of their nominees for other persons, as beneficial
owners, with such additional copies of proxies, proxy materials and Annual
Reports as may reasonably be requested in order for such record holders to send
one (1) copy to each beneficial owner, and will, upon request of such record
holders, reimburse them for their reasonable expenses in mailing such material.
Certain of our directors, officers and employees, not especially employed
for this purpose, may solicit proxies, without additional remuneration therefor,
by mail, telephone, telegraph, facsimile or personal interview.
Shareholders' Proposals for Next Annual Meeting
Shareholders' proposals submitted pursuant to Rule 14a-8 of the Exchange
Act intended to be presented at our 2001Annual Meeting of Shareholders,
tentatively scheduled for Thursday, May 17, 2001 must be received by us at our
offices shown on the first page of this Proxy Statement by December 1, 2000, for
inclusion in our proxy statement and form of proxy relating to such meeting.
ANNUAL REPORT
Our 1999 Annual Report to Shareholders (which includes financial
statements for the fiscal year ended December 31, 1999) accompanies this Proxy
Statement but is not to be deemed part of this Proxy Statement. A copy of our
Annual Report on Form 10-K for the fiscal year ended December 31, 1999 filed
with the SEC is available to shareholders without charge upon written request to
our principal offices to the attention of the Secretary.
By Order of the Board of Directors
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MICHAEL A. APPELBAUM
Executive Vice President - Finance and Administration,
Chief Financial Officer and Treasurer
Princeton, New Jersey
April 10, 2000
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MEDAREX, INC.
707 State Road #206
Princeton, New Jersey 08450
PROXY FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD
MAY 18, 2000
This Proxy is solicited on behalf of the Board of Directors.
The undersigned hereby appoints DONALD L. DRAKEMAN and MICHAEL A. APPELBAUM
and each of them, attorneys and proxies, with full power of substitution, and
authorizes them to vote all shares of Common Stock of Medarex, Inc. held of
record by the undersigned on March 31, 2000, at the Annual Meeting of
Shareholders to be held on May 18, 2000, and any adjournments thereof, hereby
revoking all previous proxies, with all powers the undersigned would possess if
present, on all matters mentioned in the Notice of Annual meeting dated April
10, 2000, as follows:
INSTRUCTIONS: MARK ONLY ONE BOX FOR EACH NUMBERED MATTER
The following matters have been proposed by the Company:
(1) The election of two Class I Directors to serve for a term to expire in 2003
- - Nominees: Dr. Donald L. Drakeman and Charles R. Schaller.
[_] FOR nominee listed [_] WITHHOLD AUTHORITY to vote for nominee
(Instruction: To withhold authority to vote for any individual nominee(s), write
the name(s) on the line below).
- --------------------------------------------------------------------------------
(2) The approval of the Company's 2000 Stock Option Plan.
[_] FOR [_] AGAINST [_] ABSTAIN
(3) The amendment of the Company's Restated Certificate of Incorporation to
increase the number of authorized shares of the Company's Common Stock from
40,000,000 to 100,000,000 and the number of authorized shares of the Company's
Preferred Stock from 2,000,000 to 10,000,000.
[_] FOR [_] AGAINST [_] ABSTAIN
(4) The ratification of the appointment of Ernst & Young LLP as independent
auditors for the current fiscal year.
[_] FOR [_] AGAINST [_] ABSTAIN
(5) In their discretion, to vote upon such other business as may properly come
before the Annual Meeting.
UNLESS OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED "FOR" ITEMS 1,2, 3, AND 4.
<PAGE>
Please mark, date, sign and return this Proxy promptly, using the enclosed
envelope.
Dated:__________________, 2000
Month Day
Signature:_______________________
Please sign exactly as name appears hereon,
indicating official position or representative
capacity, if any. If shares are held jointly,
both owners must sign.
I plan to attend the meeting.
[_] YES [_] NO
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
