<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
- --------------------------------------------------------------------------------
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
Entremed, Inc.
--------------------------------------------------
(Name of Registrant as Specified in Its Charter)
--------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule O-11
(Set forth the amount on which the filing fee is calculated and state how it
was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
--------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
--------------------------------------------------------
<PAGE> 2
ENTREMED, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 25, 1998
To the Stockholders:
Notice is hereby given that the Annual Meeting of the Stockholders of
EntreMed, Inc. (the "Company") will be held on June 25, 1998 at 10:00 a.m. local
time at the Gaithersburg Hilton, 620 Perry Parkway, Gaithersburg, Maryland
20877. The Annual Meeting is called for the following purposes:
1. To elect to the board three directors;
2. To approve an amendment to the Amended and Restated Certificate of
Incorporation of the Company to increase the number of shares of the
Company's Common Stock, par value $.01 per share, authorized for issuance
by the Company from 20 million to 35 million;
3. To approve and ratify an amendment to the Company's Amended and
Restated 1996 Stock Option Plan, increasing from 1,266,667 to 1,750,000 the
number of shares of Common Stock reserved for issuance;
4. To approve and ratify the appointment of Ernst & Young LLP as the
independent auditors of the Company; and
5. To consider and take action upon such other matters as may properly
come before the meeting or any adjournment thereof.
The close of business on May 20, 1998 has been fixed as the record date for
the determination of stockholders entitled to notice of, and to vote at, the
Annual Meeting.
All stockholders are cordially invited to attend the Annual Meeting.
Whether or not you expect to attend, you are respectfully requested by the Board
of Directors to sign, date and return the enclosed proxy promptly. Stockholders
who execute proxies retain the right to revoke them at any time prior to the
voting thereof. A return envelope which requires no postage if mailed in the
United States is enclosed for your convenience.
By Order of the Board of Directors,
John W. Holaday, Ph.D.
Chairman, President and Chief
Executive Officer
Dated: May 22, 1998
<PAGE> 3
ENTREMED, INC.
9610 MEDICAL CENTER DRIVE, SUITE 200
ROCKVILLE, MARYLAND 20850
(301) 217-9858
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 25, 1998
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of EntreMed, Inc., a Delaware corporation (the
"Company"), for the Annual Meeting of Stockholders to be held at the
Gaithersburg Hilton, 620 Perry Parkway, Gaithersburg, Maryland 20877 on June 25,
1998, at 10:00 a.m. and for any adjournment or adjournments thereof, for the
purposes set forth in the accompanying Notice of Annual Meeting of Stockholders.
Any stockholder giving such a proxy has the power to revoke it at any time
before it is voted. Written notice of such revocation should be forwarded
directly to the Secretary of the Company at the above stated address. Attendance
at the Annual Meeting will not have the effect of revoking the proxy unless such
written notice is given or the stockholder votes by ballot at the Annual
Meeting.
If the enclosed proxy is properly executed and returned, the shares
represented thereby will be voted in accordance with the directions thereon and
otherwise in accordance with the judgement of the persons designated as proxies.
Any proxy on which no direction is specified will be voted in favor of the
actions described in this Proxy Statement, including the election of the
director nominees set forth under the caption "Election of Directors", the
approval of an amendment to the Company's Amended and Restated Certificate of
Incorporation, the approval and ratification of an amendment to the Amended and
Restated 1996 Stock Option Plan (the "1996 Plan") and the approval and
ratification of the appointment of Ernst & Young LLP as the independent auditors
of the Company.
The approximate date on which this Proxy Statement and the accompanying
form of proxy will first be mailed or given to the Company's stockholders is May
22, 1998.
Your vote is important. Accordingly, you are urged to sign and return the
accompanying proxy card whether or not you plan to attend the Annual Meeting. If
you do attend, you may vote by ballot at the Annual Meeting, thereby canceling
any proxy previously given.
<PAGE> 4
VOTING SECURITIES
Holders of record of shares of Common Stock, par value $.01 per share (the
"Shares"), as of the close of business on May 20, 1998, are entitled to notice
of and to vote at the Annual Meeting on all matters. On the record date there
were issued and outstanding 12,514,696 Shares. Each outstanding Share is
entitled to one vote upon all matters to be acted upon at the Annual Meeting. A
majority of the outstanding Shares entitled to vote on any matter and
represented at the Annual Meeting in person or by proxy shall constitute a
quorum.
Abstentions and broker non-votes are counted for purposes of determining
the presence or absence of a quorum for the transaction of business. If a
stockholder, present in person or by proxy, abstains on any matter, the
stockholder's Shares will not be voted on such matter. Thus, an abstention from
voting on any matter has the same legal effect as a vote "against" the matter,
even though the stockholder may interpret such action differently. Except for
determining the presence or absence of a quorum and whether the proposed
amendment to the Company's Amended and Restated Certificate of Incorporation has
been approved, broker non-votes are not counted for any purpose in determining
whether a matter has been approved. With respect to the proposed amendment to
the Company's Amended and Restated Certificate of Incorporation, however, broker
non-votes will have the effect of a vote "against" the proposal.
Assuming a quorum is present, (i) the affirmative vote of a plurality of
the Shares so represented and entitled to vote is required to elect the director
nominees, (ii) the affirmative vote of a majority of the outstanding Shares is
required to approve the amendment to the Company's Amended and Restated
Certificate of Incorporation, (iii) the affirmative vote of a majority of the
Shares so represented and entitled to vote, excluding broker non-votes, is
necessary to ratify the amendment to the Company's Amended and Restated 1996
Stock Option Plan and (iv) to approve and ratify the appointment of Ernst &
Young LLP as the independent auditors of the Company.
2
<PAGE> 5
PRINCIPAL STOCKHOLDERS
The following table sets forth, as of May 7, 1998 (except as otherwise
footnoted below), certain information concerning stock ownership of all persons
known by the Company to own beneficially more than 5% of the Shares, each
director or director nominee, each executive officer named under "Executive
Compensation and Other Matters" and all directors and executive officers of the
Company as a group.
<TABLE>
<CAPTION>
AMONG AND NATURE OF PERCENTAGE OF
NAME OF STOCKHOLDER(1) BENEFICIAL OWNERSHIP(1) OUTSTANDING CLASS
- ---------------------- ------------------------ -----------------
<S> <C> <C>
John W. Holaday, Ph.D. .................................. 1,144,734(2) 9.02%
Carl R. Alving, M.D. .................................... 635,235(3) 5.13%
Donald S. Brooks......................................... 51,001(4) *
R. Nelson Campbell....................................... 50,000(5) *
Samuel R. Dunlap, Jr. ................................... 410,236(6) 3.30%
Jerry Finkelstein........................................ 76,500(7) *
Edward R. Gubish, Ph.D. ................................. 150,166(8) 1.20%
Lee F. Meier............................................. 50,334(9) *
Mark C. M. Randall....................................... 56,667(10) *
Wendell M. Starke........................................ 292,336(11) 2.36%
John C. Thomas, Jr. ..................................... 151,667(12) 1.22%
Bristol-Myers Squibb Company............................. 874,999 7.06%
P.O. Box 4000
Princeton, New Jersey 08543
D. H. Blair Investment Banking Corp. .................... 1,000,000(13) 8.07%
44 Wall Street
New York, New York 10005
All executive officers and directors of the Company as a
group (10 persons)..................................... 2,433,641(14) 18.68%
</TABLE>
- ---------------
* Less than 1%
(1) Beneficial ownership is defined in accordance with the rules of the
Securities and Exchange Commission ("SEC") and generally means the power to
vote and/or to dispose of the securities regardless of any economic interest
therein.
(2) Includes 437,502 shares issuable upon exercise of options and warrants which
are exercisable within 60 days and 126,666 shares held by a limited
partnership of which Dr. Holaday is the general partner. Does not include
304,167 shares issuable upon exercise of options not exercisable within 60
days.
(3) Includes 15,002 shares issuable upon exercise of options which are
exercisable within 60 days.
(4) Includes 51,001 shares issuable upon exercise of options which are
exercisable within 60 days.
(5) Consists of 50,000 shares issuable upon exercise of options which are
exercisable within 60 days. Does not include 75,000 shares issuable upon
exercise of options not exercisable within 60 days.
(6) Includes 409,334 shares issuable upon exercise of options and warrants which
are exercisable within 60 days. Does not include 33,334 shares issuable upon
exercise of options not exercisable within 60 days.
(7) Includes 40,000 shares issuable upon exercise of options which are
exercisable within 60 days. Does not include 5,000 shares owned by various
family members of Mr. Finkelstein, as to which Mr. Finkelstein disclaims
beneficial ownership.
(8) Includes 149,166 shares issuable upon exercise of options which are
exercisable within 60 days. Does not include 135,834 shares issuable upon
exercise of options not exercisable within 60 days.
(9) Includes 17,000 shares issuable upon exercise of options which are
exercisable within 60 days and 33,334 shares issuable upon exercise of
warrants which are exercisable within 60 days held by an entity the general
partner of which is an entity in which Mr. Meier serves as Managing
Director.
3
<PAGE> 6
(10) Includes 56,667 shares issuable upon exercise of options which are
exercisable within 60 days. Does not include 13,334 shares issuable upon
exercise of options not exercisable within 60 days.
(11) Includes 102,551 shares issuable upon exercise of options and warrants
which are exercisable within 60 days. Does not include 40,761 shares owned
by various family members of Mr. Starke, as to which Mr. Starke disclaims
beneficial ownership.
(12) Includes 149,835 shares issuable upon exercise of options and warrants
which are exercisable within 60 days. Does not include 56,500 shares
issuable upon exercise of options not exercisable within 60 days.
(13) Based on a Form 13-G filed by Mr. J. Morton Davis and D. H. Blair
Investment Banking Corp. ("Blair") filed on February 3, 1998. Excludes
21,600 shares held by Mrs. Rosalind Davidowitz, Mr. Davis' wife, which Mr.
Davis disclaims beneficial ownership. Mr. Davis is deemed to beneficially
own the 1,000,000 shares held by D. H. Blair Investment Banking
Corporation.
(14) Includes 1,492,824 shares issuable upon exercise of options and warrants
which are exercisable within 60 days. Does not include 643,169 shares
issuable upon exercise of options not exercisable within 60 days.
4
<PAGE> 7
PROPOSAL 1
ELECTION OF DIRECTORS
The Company's Board of Directors is divided into three classes, as nearly
equal in number as reasonably possible, with terms currently expiring at the
Annual Meeting, the annual meeting of stockholders to be held in 1999 and the
annual meeting of stockholders to be held in 2000. At the Annual Meeting, two
directors will be elected by the stockholders to serve a three-year term and one
director will be elected by the stockholders to serve a one year term to fill
the vacancy of Dr. Bart Chernow, whose term was to expire in 1999. Management
recommends that the persons named below be elected as directors of the Company
and it is intended that the accompanying proxy will be voted for the election as
directors of the three persons named below, unless the proxy contains contrary
instructions. The Company has no reason to believe that any of the nominees will
not be a candidate or will be unable to serve. However, in the event that any of
the nominees should become unable or unwilling to serve as a director, the
persons named in the proxy have advised that they will vote for the election of
such person or persons as shall be designated by management.
The following sets forth the names and ages as of May 20, 1998 of the three
nominees for election to the Board of Directors as well as the Directors whose
terms will continue, their respective principal occupations or employment during
the past five years and the period during which each has served as a director of
the Company.
<TABLE>
<CAPTION>
DIRECTOR PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE
NAME AGE SINCE DURING THE PAST FIVE YEARS
- ---- --- -------- --------------------------------------------
<S> <C> <C> <C>
NOMINEES FOR TERMS EXPIRING IN 2001
Donald S. Brooks.......... 62 1996 Mr. Brooks has been a director of the Company since
April 1996. Since July 1993, Mr. Brooks has been a
practicing attorney with the law firm Carella Byrne
Bain Gilfillan Cecchi Stewart & Olstein, Roseland,
New Jersey, which represents the Company on certain
matters. Prior thereto, Mr. Brooks was employed by
Merck & Co., Inc. for 27 years, most recently, from
1986 to 1993, as Senior Counsel. From 1980 to 1985,
Mr. Brooks served as a U.S. employer delegate to
the Chemical Industries Committee, International
Labor Organization in Geneva, Switzerland.
Lee F. Meier.............. 50 1997 Mr. Meier has been a director of the Company since
July 1997. Mr. Meier has over twenty years of
experience in the equipment financing industry. He
has been affiliated with US Leasing Corporation,
The Chemical Bank of New York and Steiner Financial
Corporation, a privately held, tax motivated
lessor. Since 1984 Mr. Meier has served as founder
and managing director of Meier Mitchell & Company,
an investment banking firm specializing in
providing debt and lease financing products. Meier
Mitchell & Company targets clients in the
biotechnology and electronics industries and has
arranged or provided well over $1 billion in
financing to both private and public companies in
these sectors.
</TABLE>
5
<PAGE> 8
<TABLE>
<CAPTION>
DIRECTOR PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE
NAME AGE SINCE DURING THE PAST FIVE YEARS
- ---- --- -------- --------------------------------------------
<S> <C> <C> <C>
NOMINEE AND CONTINUING DIRECTORS FOR TERM EXPIRING 1999
NOMINEE
Jerry Finkelstein......... 82 1998 Mr. Finkelstein has been a director of the Company
since April 1998. Mr. Finkelstein has been a senior
advisor to Apollo Advisors, L. P., a fund manager,
since March 1994, and the Chairman of the Board of
News Communications, Inc., a consortium of 23
publications, since August 1993, as well as
Chairman of The Hill Newspaper, a weekly newspaper,
since September 1994. Mr. Finkelstein has been the
former publisher of the New York Law Journal, a
daily newspaper. He has been a member of the Boards
of Rockefeller Center, Chicago Milwaukee
Corporation, Chicago Milwaukee Railroad
Corporation, Bank of North America, Struthers Wells
Corporation, and PATH Railroad. Mr. Finkelstein has
also held the following positions: member of Task
Force Committee on the sale of the World Trade
Center; Chairman of the New York City Planning
Commission, and Commissioner of the Port Authority
of New York and New Jersey, as well as numerous
civic, social and political appointments.
CONTINUING DIRECTORS
Samuel R. Dunlap, Jr...... 48 1992 Mr. Dunlap has been a director of the Company since
August 1992 and has served as an Executive Advisor
to the Company since August 1992. Mr. Dunlap also
has (i) served as Chairman of Dunlap & Partners,
Ltd., a financial consulting firm in Atlanta,
Georgia, since October 1988, (ii) served as a
director of Credit Depot Corporation, of which he
was a founder, from December 1986 until 1997, (iii)
served as Vice President of MEDigital, Inc. since
August 1996, (iv) from 1992 through 1996 served as
a director to First Pacific Networks, Inc., a
publicly-held telecommunications company, (v)
served as a director and a consultant of Golf
Training Systems, Inc., a public company, from
August 1994 until December 1995 and (vi) served as
a director from July 1991 until February 1994 and
an Executive Advisor from July 1991 until November
1994 of Tapistron International, Inc. From April
1986 until December 1988, Mr. Dunlap served as
Executive Vice President and director of CytRx
Corporation, a publicly-held pharmaceutical company
of which he was a founder. Mr. Dunlap also served
as Executive Vice President of Elan Pharmaceutical
Research Corp., a publicly-held company, from
August 1982 to December 1983 and President and a
director of such entity from January 1984 to
January 1985.
</TABLE>
6
<PAGE> 9
<TABLE>
<CAPTION>
DIRECTOR PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE
NAME AGE SINCE DURING THE PAST FIVE YEARS
- ---- --- -------- --------------------------------------------
<S> <C> <C> <C>
Mark C. M. Randall........ 35 1996 Mr. Randall has been a director of the Company
since April 1996. Since 1985, Mr. Randall has been
associated with Sarasin International Securities
Limited, London, England, a wholly-owned subsidiary
of Bank Sarasin & Cie, a private bank based in
Switzerland, where he has been Director since 1994.
CONTINUING DIRECTORS FOR TERM EXPIRING 2000
John W. Holaday, Ph.D..... 52 1992 Dr. Holaday is a co-founder of the Company and has
served as its President and Chief Executive Officer
and a director since August 1992 and its Chairman
of the Board since November 1995. Prior thereto,
from May 1989 to August 1992, he was a co-founder
of Medicis Pharmaceutical Corp. where he served as
Scientific Director, Senior Vice President for
Research and Development and director. Dr. Holaday
also serves as a director for CytImmune Sciences,
Inc., a privately held research diagnostics
company. From 1968 to 1989, he served at the Walter
Reed Army Institute of Research, where he founded
the Neuropharmacology Branch in 1980. He serves as
an officer and fellow in several biomedical
societies and has authored and edited numerous
scientific articles in journals and books. His
current academic positions include Associate
Professor of Anesthesiology and Critical Care
Medicine and Senior Lecturer in Medicine at The
Johns Hopkins University of Medicine, Baltimore,
Maryland; Adjunct Professor of Pharmacology and
Psychiatry at the Uniformed Services University
School of Medicine, Bethesda, Maryland; and
Clinical Assistant Professor of Surgery at the
University of Connecticut Health Center,
Farmington, Connecticut.
Wendell M. Starke......... 56 1994 Mr. Starke has been a director of the Company since
April 1994. Mr. Starke is a Chartered Financial
Analyst and a Chartered Investment Counselor. Mr.
Starke was President of INVESCO Capital Management,
Inc. from 1979 to 1991. In 1992, he became Chairman
of INVESCO, Inc., the parent company of INVESCO
Capital Management and other INVESCO money
management subsidiaries in the United States. Mr.
Starke also serves as a member of the Board and as
Global Chief Investment Officer of AMVESCAP, PLC.
the London-based parent company of the worldwide
INVESCO organization.
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE NOMINATED
DIRECTORS, AND SIGNED PROXIES WHICH ARE RETURNED WILL BE SO VOTED UNLESS
OTHERWISE INSTRUCTED ON THE PROXY CARD.
BOARD AND COMMITTEE MEETINGS
The Board of Directors of the Company held three meetings during the fiscal
year ended December 31, 1997 ("fiscal 1997"). Each of the directors attended at
least 75% of the meetings of the Board of Directors
7
<PAGE> 10
and the committees thereof on which such director served that were held during
fiscal 1997, except for Mr. Dunlap who missed one meeting because of a
scheduling conflict.
The Board of Directors has had three standing committees. These are the
Executive Committee, the Audit Committee and the Compensation Committee.
The Executive Committee acts as a liaison between management and the Board
of Directors and is responsible for all matters that arise between regular
meetings of the Board of Directors, to the extent permitted by Delaware law. The
Executive Committee which currently consists of three directors, Messrs.
Holaday, Dunlap and Starke, held six meetings during fiscal 1997 and took action
by unanimous written consent on one occasion.
The Audit Committee reviews, with the Company's independent auditors, the
scope and timing of their audit services and any other services they are asked
to perform, their report on the Company's financial statements following
completion of their audit and the Company's policies and procedures with respect
to internal accounting and financial controls. In addition, the Audit Committee
makes annual recommendations to the Board of Directors for the appointment of
independent public accountants for the ensuing year. The Audit Committee, which
currently consists of two directors, Messrs. Meier and Randall, held one meeting
during fiscal 1997.
The Compensation Committee reviews and recommends to the Board of Directors
the compensation and benefits of all officers of the Company, reviews general
policy matters relating to compensation and benefits of employees of the Company
and administers the Company's stock option plans. The Compensation Committee,
which currently consists of three directors, Messrs. Brooks, Dunlap and Meier,
held one meeting during fiscal 1997 and took action by unanimous written consent
on one occasion.
COMPENSATION OF DIRECTORS
Directors of the Company receive a fee of $2,000 per in-person meeting
attended and are reimbursed for expenses actually incurred in connection with
attending such meetings. Directors are also awarded initial grants of
non-qualified stock options to purchase 15,000 shares of Common Stock upon
joining the Board of Directors and annual grants of non-qualified stock options
to purchase 5,000 shares of Common Stock. In addition, each member of the Audit
Committee and the Compensation Committee will receive annual grants of
non-qualified stock options to purchase 1,000 shares of Common Stock and each
member of the Executive Committee will receive annual grants of non-qualified
stock options to purchase 5,000 shares of Common Stock. All such automatic
grants will be awarded on July 1, 1998.
The Company entered into a three year consulting agreement with Samuel R.
Dunlap, Jr. commencing January 1, 1996 that provides for annual payments of
$90,000. See "Certain Transactions".
8
<PAGE> 11
EXECUTIVE COMPENSATION AND OTHER MATTERS
The following summary compensation table sets forth the aggregate
compensation paid or accrued by the Company to the Chief Executive Officer and
to executive officers whose annual compensation exceeded $100,000 for fiscal
1997 (collectively, the "named executive officers") for services during the
fiscal years ended December 31, 1997, 1996 and 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
SECURITIES
UNDERLYING ALL OTHER
ANNUAL BONUS OPTIONS/SARS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) ($) (NO.) ($)
- --------------------------- ---- --------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C>
John W. Holaday, Ph.D...................... 1997 275,000 -- 260,000 18,883(1)
Chairman, President and Chief 1996 250,000 80,000 105,000 18,221
Executive Officer 1995 200,000 100,000 270,001 18,369
Edward R. Gubish, Ph.D..................... 1997 165,000 50,000 100,000 6,332(2)
Vice President, Regulatory 1996 140,000 42,000 75,000 5,670
and Clinical Development 1995 126,600 10,750 70,000 5,818
R. Nelson Campbell......................... 1997 133,718 25,000 50,000 1,301(2)
Chief Financial Officer 1996 -- -- -- --
1995 -- -- -- --
Leo Einck, Ph.D............................ 1997 105,105 -- -- 6,332(2)
Vice President, Extramural Programs 1996 100,100 21,500 20,000 5,670
1995 91,000 10,750 10,000 5,818
John C. Thomas, Jr......................... 1997 120,000 25,000 50,000 --
Secretary/Treasurer 1996 96,880 21,500 38,000 --
1995 48,220 3,170 6,667 5,818
</TABLE>
- ---------------
(1) $12,551 of such amount represents the premiums paid by the Company with
respect to a split-dollar life insurance policy on the life of Dr. Holaday.
Premiums paid by the Company on such policy are treated as non-interest
bearing advances to the insured for the policy. The initial proceeds of any
death benefit are required to be used to repay the indebtedness, and the
balance of the insurance proceeds are payable as designated by the insured.
See "Employment Contracts and Termination of Employment and Change-in-
Control Arrangements". The remaining amount represents group health
insurance premiums paid on behalf of such officer.
(2) Includes group health insurance premiums paid on behalf of such officer.
The following table sets forth certain information with respect to
individual grants of stock options and warrants made during the fiscal year
ended December 31, 1997 to each of the named executive officers.
9
<PAGE> 12
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
NUMBER OF VALUE AT ASSUMED
SECURITIES % OF TOTAL ANNUAL RATES OF STOCK
UNDERLYING OPTIONS/SARS PRICE APPRECIATION FOR
OPTIONS/ GRANTED TO EXERCISE OR OPTION TERM(1)
SARS EMPLOYEES IN BASE PRICE EXPIRATION -----------------------
NAME GRANTED FISCAL YEAR ($/SH) DATE 5%($) 10%($)
- ---- ---------- ------------ ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
John W. Holaday, Ph.D. ..... 10,000 1.16% 12.00 07/01/07 195,467 311,249
250,000 29.02% 10.00 11/20/07 4,072,238 6,484,355
Edward R. Gubish, Ph.D. .... 100,000 11.61% 10.00 11/20/07 1,628,895 2,593,742
R. Nelson Campbell.......... 50,000 5.80% 10.00 11/20/07 814,448 1,296,871
Leo Einck, Ph.D. ........... -- -- -- -- -- --
John C. Thomas, Jr. ........ 50,000 5.80% 10.00 11/20/07 814,448 1,296,871
</TABLE>
- ---------------
(1) Calculated by multiplying the exercise price by the annual appreciation rate
shown (as prescribed by S.E.C. rules and compounded for the term of the
options), subtracting the exercise price per share and multiplying the gain
per share by the number of shares covered by the options. These amounts are
not intended to forecast possible future appreciation, if any, of the price
of the Company's Shares. The actual value realized upon exercise of the
options to purchase Company Shares will depend on the fair market value of
the Company's Shares on the date of exercise.
The following table sets forth information concerning all option holdings
for the fiscal year ended December 31, 1997 for each of the named executive
officers. None of the named executive officers exercised options during 1997.
AGGREGATED OPTION AND WARRANT/EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/VALUE
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT FY-END AT FY-END($)
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---- ------------------------------ -------------------------
<S> <C> <C>
John W. Holaday, Ph.D. ....................... 437,502/116,667 2,200,320/350,002
Edward R. Gubish, Ph.D. ...................... 149,166/135,834 510,622/244,379
R. Nelson Campbell............................ 50,000/75,000 20,313/60,938
Leo Einck, Ph.D. ............................. 70,000/33,334 320,000/122,504
John C. Thomas, Jr. .......................... 149,835/56,500 1,031,576/60,938
</TABLE>
- ---------------
(1) Calculated by multiplying the number of unexercised options outstanding at
December 31, 1997 by the difference between the fair market value of the
Company's Shares at December 31, 1997 ($11.625) and the option exercise
price.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT
AND CHANGE-IN-CONTROL ARRANGEMENTS
In April 1996, effective as of January 1, 1996, the Company entered into a
three-year employment agreement with John W. Holaday, Ph.D., Chairman and Chief
Executive Officer of the Company. The agreement provides for an annual base
salary of $250,000 per year. The Company may terminate the agreement without
cause and, upon such termination, Dr. Holaday will be entitled to receive his
base salary through the end of the initial term of the agreement (subject to an
offset for salary received from subsequent employment). The agreement contains
confidentiality and non-competition provisions.
The Company maintains a $2,000,000 split-dollar life insurance policy on
the life of Dr. Holaday at an annual cost of approximately $12,551. Premiums
paid by the Company on such policy are treated as non-interest bearing advances
to the insured for the policy. The initial proceeds of any death benefit are
required to
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<PAGE> 13
be used to repay the indebtedness, and the balance of the insurance proceeds are
payable as designated by the insured.
Each of the Company's employees has entered into a Proprietary Information
and Invention Assignment Agreement providing, among other things, that such
employee will not disclose any confidential information or trade secrets in any
unauthorized manner and that all inventions of such officer relating to the
Company's current or anticipated business during the term of employment become
the Company's property.
In the event of certain transactions, including those which may result a
change in control, as defined under the Company's 1996 Plan, unvested
installments of options to purchase Shares of the Company may become immediately
exercisable.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the 1934 Act requires the Company's executive officers,
directors and persons who beneficially own more than 10% of a registered class
of the Company's equity securities to file with the S.E.C. initial reports of
ownership and reports of changes in ownership of common stock and other equity
securities of the Company. Such executive officers, directors, and greater than
10% beneficial owners are required by S.E.C. regulation to furnish the Company
with copies of all Section 16(a) forms filed by such reporting persons.
Based solely on the Company's review of such forms furnished to the Company
and written representation from certain reporting persons, the Company believes
that all filing requirements applicable to the Company's executive officers,
directors and greater than 10% beneficial owners were complied with.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 1997, the members of the Compensation Committee were: Donald
S. Brooks, Samuel R. Dunlap, Jr., and Wendell M. Starke.
The Company has in the past maintained a consulting arrangement with Mr.
Dunlap and in January 1996 entered into a new three year consulting agreement
with Mr. Dunlap that provides for annual payments of $90,000.
Donald S. Brooks is of counsel to the law firm Carella Byrne Bain Gilfillan
Cecchi Stewart & Olstein, which provides certain legal services to the Company.
Wendell M. Starke is the Chairman of INVESCO, Inc. and serves as a member
of the Board and Global Chief Investment Officer of AMVESCAP, the London-based
parent company of the worldwide INVESCO organization, which provides certain
investment advisory services to the Company.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The goal of the Company's executive compensation policy is to ensure that
an appropriate relationship exists between executive compensation and the
creation of stockholder value, while at the same time attracting, motivating and
retaining senior management. The Compensation Committee's informal executive
compensation philosophy (which applies generally to all Company management,
including the President and Chief Executive Officer, John W. Holaday, Ph.D.)
considers a number of factors, which may include:
- Providing levels of compensation competitive with companies at a
comparable stage of development and in the Company's geographic area;
- Integrating management's compensation with the achievement of performance
goals;
- Rewarding above average corporate performance; and
- Recognizing and providing incentive for individual initiative and
achievement.
The compensation structure of the Company's executive officers, including
its President and Chief Executive Officer, is based on competitive, market-based
pay practices, performance evaluations and generally includes a combination of
base salary, discretionary bonuses and stock options. In setting compensation
levels,
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<PAGE> 14
the Compensation Committee considers data regarding compensation practices from
a group of approximately 10 biotechnology and pharmaceutical companies that are
believed to be generally comparable to the Company. The companies comprising
this group are not necessarily included within the peer group index reflected in
the performance graph on page 13.
Base salary is not targeted at any particular level within the group of
companies considered. Instead, total salary is determined based on a subjective
assessment of the executive's performance and the Company's needs.
Cash bonuses are within the discretion of the Compensation Committee and
are based, in part, on achieving certain business and financial objectives and
the Compensation Committee's subjective assessment of individual performance
during the year.
Consistent with its belief that equity ownership by senior management is
beneficial in aligning the interests of senior management with those of the
stockholders', the Company provides potentially significant long-term incentive
opportunities to its senior management through discretionary grants of stock
options, thereby emphasizing the potential creation of long-term stockholder
value. The Compensation Committee considers stock options effective long-term
incentives because an executive can profit only if the value of the Common Stock
increases. In making these grants, the Compensation Committee considers its
subjective assessment of the Company's past financial performance and future
prospects, an executive officer's current level of ownership of the Common
Stock, the period during which an executive officer has been in a key position
with the Company, individual performance and competitive practices within the
comparative group of companies. Dr. Holaday's option grants are determined based
on the same criteria as those applicable to other executive officers.
Section 162(m) of the Internal Revenue Code generally denies a deduction to
any publicly held corporation for compensation paid to its chief executive
officer and its four other highest-paid executive officers to the extent that
any such individual's compensation exceeds $1 million, subject to certain
exceptions, including one for "performance-based compensation". The Compensation
Committee believes that none of the Company's executive officers received
compensation in 1997, which was nondeductible under Section 162(m) of the
Internal Revenue Code.
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<PAGE> 15
STOCK PRICE PERFORMANCE PRESENTATION
The following chart compares the cumulative total stockholder return on the
Company's Shares with the cumulative total stockholder return of the NASDAQ
Market -- U.S. Index, NASDAQ Pharmaceuticals Index and the Hambrecht & Quist
Biotechnology Index.
In future proxy statements, the Company intends to replace the Hambrecht &
Quist Biotechnology Index with the NASDAQ Pharmaceuticals Index because the
Company believes that the NASDAQ index more accurately reflects the Company's
peer group and is readily accessible by the Company's stockholders.
COMPARISON OF CUMULATIVE TOTAL RETURN CHART
<TABLE>
<CAPTION>
6/12/96 6/96 9/96 12/96 3/97 6/97 9/97 12/97
<S> <C> <C> <C> <C> <C> <C> <C> <C>
EntreMed, Inc. 100.00 100.00 108.33 108.33 85.00 80.00 66.25 77.50
NASDAQ Stock Market -- US 100.00 96.01 99.43 104.32 98.71 116.80 136.56 128.07
NASDAQ Pharmaceuticals 100.00 91.00 93.06 90.10 85.71 92.53 103.80 93.27
Hambrecht & Quist Biotechnology 100.00 92.19 98.44 95.81 95.00 97.34 103.65 95.15
</TABLE>
(1) Assumes $100 invested on June 12, 1996 and assumes dividends reinvested.
Measurement points begin with the date of the Company's initial public
offering ("IPO") and include the last day of each quarter beginning with the
month in which the IPO occurred, through and including December 31, 1997.
The material in this chart is not soliciting material, is not deemed filed
with the S.E.C. and is not incorporated by reference in any filing of the
Company under the Securities Act of 1993, as amended, (the "1993 Act") or
the 1934 Act, whether made before or after the date of this proxy statement
and irrespective of any general incorporation language in such filing.
13
<PAGE> 16
CERTAIN TRANSACTIONS
The Company entered into a three year consulting agreement with Samuel R.
Dunlap, Jr. commencing January 1, 1996 that provides for annual payments of
$90,000.
Leon E. Rosenberg, M.D., a director of the Company until March 3, 1998, was
the Senior Vice President, Scientific Affairs of Bristol-Myers Squibb Company.
In December 1995, the Company and Bristol-Myers Squibb entered into a
collaboration to develop and commercialize certain antiangiogenesis
therapeutics. Pursuant to this collaboration, Bristol-Myers Squibb paid to the
Company during fiscal 1997 an aggregate of approximately $3,670,000 in research
funding and reimbursements for certain clinical trials and certain research and
development and know-how.
Donald S. Brooks, a director nominee of the Company, is of counsel to the
law firm Carella, Byrne, Bain, Gilfillan, Cecchi , Stewart & Olstein, which
provides certain legal services to the Company.
Wendell M. Starke, a director of the Company, is the Chairman of INVESCO,
Inc. and serves as a member of the Board and Global Chief Investment Officer of
AMVESCAP, the London-based parent company of the worldwide INVESCO organization,
which provides certain investment advisory services to the Company.
In April 1995, the Company entered into a sale/leaseback transaction with
respect to certain of its equipment with MMC/GATX Partnership No. 1
("MMC/GATX"). The general partner of MMC/GATX is Meier Mitchell & Company, an
entity in which Lee F. Meier, a director nominee, is the founder and Managing
Director. During fiscal 1997, the Company paid lease payments to MMC/GATX in the
amount of approximately $148,000 and in 1997 purchased the leased equipment for
a total of $263,000.
14
<PAGE> 17
PROPOSAL 2
APPROVAL OF AMENDMENT TO INCREASE NUMBER OF SHARES OF
COMMON STOCK AUTHORIZED FOR ISSUANCE UNDER THE COMPANY'S
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
The Company's Amended and Restated Certificate of Incorporation (the
"Certificate of Incorporation") currently provides for the authority of the
Company to issue up to 20 million Shares. As of May 20, 1998, the Company had
12,514,696 Shares issued and outstanding and had reserved 2,233,333 Shares for
possible future issuance in connection with the Company's 1992 Stock Option Plan
and the Amended and Restated 1996 Stock Option Plan.
The Board of Directors believes that an increase in the authorized but
unissued Shares is in the best interests of the Company and, therefore, has
adopted a proposed amendment to the Certificate of Incorporation increasing the
number of authorized Common Shares from 20 million to 35 million. The proposed
amendment would amend the first paragraph and paragraph (A) of the Certificate
of Incorporation to read as follows:
"IV.
The total number of shares of capital stock which the Company is
authorized to issue is Forty Million (40,000,000) divided into two classes
as follows:
(A) Common Stock. Thirty-Five Million (35,000,000) shares of common
stock, $.01 par value per share ("Common Stock"), the holder of
which shall be entitled to one vote for each share on all
matters required or permitted to be voted on by stockholders of
the Company, and"
The proposed amendment would not affect the terms of the 5,000,000 shares
of authorized Preferred Stock.
The additional Shares for which authorization is being sought will have the
same terms and rights as the Shares now authorized. No preemptive rights would
be attached to these Shares. If the proposed amendment is approved, the
additional authorized Shares will be available for issuance for capital
formation, share splits or dividends, franchise expansion, and other corporate
purposes at the discretion of the Board of Directors. Except as may be required
by applicable law or regulation at the time of issuance, the shares may be
issued without further action by the shareholders. The Board of Directors
believes that the proposed increase in the number of authorized Shares will
provide the Company with the flexibility it will need in conducting its business
and in meeting future contingencies.
Currently there are no commitments to issue any of the additional Shares to
be authorized by the proposed amendment. Issuance of such Shares or other
authorized but unissued Shares, under certain circumstances, could discourage or
make more difficult an attempt to gain control of the Company. The Board of
Directors presently has no intention of issuing authorized but unissued Shares
for that purpose and knows of no ongoing attempt to gain control of the Company.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSED AMENDMENT TO THE
CERTIFICATE OF INCORPORATION INCREASING THE NUMBER OF AUTHORIZED SHARES OF
COMMON STOCK.
PROPOSAL 3
APPROVAL AND RATIFICATION OF THE
AMENDMENT TO THE AMENDED AND RESTATED 1996 STOCK OPTION PLAN
In April 1998, the Board of Directors of the Company adopted an amendment
to the Company's Amended and Restated 1996 Stock Option Plan (the "1996 Plan"),
which increases the authorized number of Shares available for option grants
pursuant to the 1996 Plan from 1,266,667 to 1,750,000 (the "1996 Plan
Amendment"). The Board of Directors is requesting and recommends to the
stockholders ratification and
15
<PAGE> 18
approval of the 1996 Plan Amendment to ensure that an adequate supply of
authorized unissued Shares is reserved for issuance of option grants to attract
and retain executive personnel, key employees, directors, consultants and
advisors and to provide additional incentive by permitting certain individuals
to participate in the ownership of the Company.
The 1996 Plan, as amended, provides for the grant by the Company of options
to purchase up to an aggregate of 1,750,000 shares of the Company's authorized
but unissued Common Stock (in each case subject to adjustment in certain cases
including stock splits, recapitalizations and reorganizations) to officers,
directors, employees, consultants and independent contractors of the Company.
The purposes of the 1996 Plan are to ensure the retention of existing executive
personnel, key employees, directors and consultants and to provide additional
incentive to all such persons by permitting them to participate in the ownership
of the Company. The 1996 Plan terminates in April 2006.
The 1996 Plan is administered by the Board of Directors or a committee of
the Board of Directors. Options granted under the 1996 Plan may be either
incentive options or non-qualified options. Incentive options granted under the
1996 Plan are exercisable for a period of up to 10 years from the date of grant
at an exercise price which is not less than the fair market value of the Common
Stock on the date of the grant, except that the term of an incentive option
granted under the 1996 Plan to a stockholder owning more than 10% of the
outstanding voting power may not exceed five years and its exercise price may
not be less than 110% of the fair market value of the Common Stock on the date
of the grant. To the extent that the aggregate fair market value, as of the date
of grant, of the shares for which incentive options become exercisable for the
first time by an optionee during the calendar year exceeds $100,000, the portion
of such option which is in excess of the $100,000 limitation will be treated as
a non-qualified option. Additionally, the aggregate number of shares of Common
Stock that may be subject to options granted to any person in a calendar year
shall not exceed 25% of the maximum number of shares of Common Stock which may
be issued from time to time under the 1996 Plan. Options granted under the 1996
Plan to officers, directors or employees of the Company generally may be
exercised only while the optionee is employed or retained by the Company or
within 90 days of the date of termination of the employment relationship or
directorship. However, options which are exercisable at the time of termination
by reason of death or permanent disability of the optionee may be exercised
within 12 months of the date of termination of the employment relationship or
directorship. Upon the exercise of an option, payment may be made by cash or by
any other means that the Board of Directors or the committee determines.
Options may be granted only to such employees, officers and directors of,
and consultants and advisors to, the Company or any subsidiary of the Company as
the Board of Directors or the committee shall select from time to time in its
sole discretion, provided that only employees of the Company or a subsidiary of
the Company shall be eligible to receive incentive options. As of April 30,
1998, the number of employees, officers and directors of the Company eligible to
receive grants under the 1996 Plan was approximately 51 persons. The number of
consultants and advisors to the Company eligible to receive grants under the
1996 Plan is not determinable. An optionee may be granted more than one option
under the 1996 Plan. The Board of Directors or the committee will, in its
discretion, determine (subject to the terms of the 1996 Plan) who will be
granted options, the time or times at which options shall be granted, the number
of shares subject to each option and whether the options are incentive options
or non-qualified options. In making such determination, consideration may be
given to the value of the services rendered by the respective individuals, their
present and potential contributions to the success of the Company and its
subsidiaries and such other factors deemed relevant in accomplishing the
purposes of the 1996 Plan.
An optionee will not recognize income on the grant or exercise of an
incentive option. However, the difference between the exercise price and the
fair market value of the stock on the date of exercise is an adjustment item for
purposes of the alternative minimum tax. If an optionee does not exercise an
incentive stock option within certain specified periods after termination of
employment, the option will recognize ordinary income on the exercise of an
incentive stock option in the same manner as on the exercise of a nonstatutory
stock option, as described below.
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<PAGE> 19
The general rule is that gain or loss from the sale or exchange of shares
acquired on the exercise of an incentive option will be treated as capital gain
or loss. If certain holding period requirements are not satisfied, however, the
optionee generally will recognize ordinary income at the time of disposition.
Gain recognized on the disposition in excess of the ordinary income resulting
therefrom will be capital gain, and any loss recognized will be capital loss. If
an optionee recognizes ordinary income on exercise of an incentive option or as
a result of a disposition of the shares acquired on exercise, the Company will
be entitled to a deduction in the same amount.
An optionee will not recognize income at the time of grant of a
non-qualified option. At the time of a non-qualified option, an optionee will
recognize ordinary income equal to the excess of the fair market value of the
shares at the time of exercise over the aggregate exercise price paid for the
shares, regardless of whether the exercise price is paid in cash, in stock, or
in part with a note. The Company will be entitled to a deduction in the amount
of ordinary income so recognized.
The rules governing the tax treatment of options and the receipt of shares
in connection with such grants are quite technical, so that the above
description of tax consequences is necessarily general in nature and does not
purport to be complete. Moreover, statutory provisions are subject to change, as
are their interpretations, and their application may vary in individual
circumstances. Finally, the tax consequences under applicable state law may not
be the same as under the federal income tax laws.
In October 1995, the Financial Accounting Standards Board (FASB) issued
FASB Statement No. 123 "Accounting for Stock-Based Compensation" ("FAS No.
123"). This statement defines a fair value based method of measuring and
recording compensation cost associated with employee stock compensation plans.
Under the fair value based method, compensation cost is measured at the grant
date based on the value of the award and is recognized in income over the
service periods. FAS No. 123 encourages adoption of this method of accounting;
however, it also allows an entity to continue to measure compensation cost using
the method of accounting prescribed by APB Opinion No. 25, "Accounting for Stock
Issued to Employees" ("APB No. 25"). Entities electing to continue using the
accounting method in APB No. 25, as the Company has elected, must make pro forma
disclosures of net income and earnings per share as if the fair value based
method prescribed under FAS No. 123 had been applied.
Under APB No. 25, as applied by the Company, neither the grant nor the
exercise of an incentive stock option or a nonstatutory stock option under the
1997 Plan with an exercise price not less than the fair market value of Common
Stock at the date of grant requires a charge against earnings.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE AMENDMENT TO
THE 1996 PLAN, AND SIGNED PROXIES WHICH ARE RETURNED WILL BE SO VOTED UNLESS
OTHERWISE INSTRUCTED ON THE PROXY CARD.
PROPOSAL 4
APPROVAL AND RATIFICATION OF THE
APPOINTMENT OF INDEPENDENT AUDITORS
The Management of the Company recommends a vote for the approval and
ratification of the appointment of Ernst & Young LLP, Certified Public
Accountants, as the Company's independent auditors for the fiscal year ending
December 31, 1998. Ernst & Young LLP have been the Company's auditors for the
past fiscal year and has no direct or indirect financial interest in the
Company. A representative of Ernst & Young LLP is expected to be present at the
Annual Meeting of Stockholders with the opportunity to make a statement if he or
she desires to do so, and shall be available to respond to appropriate
questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF ERNST & YOUNG LLP AND FOR THE ADOPTION OF PROPOSAL 4.
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<PAGE> 20
GENERAL
The Management of the Company does not know of any matters other than those
stated in this Proxy Statement which are to be presented for action at the
meeting. If any other matters should properly come before the meeting, it is
intended that proxies in the accompanying form will be voted on any such other
matters in accordance with the judgment of the persons voting such proxies.
Discretionary authority to vote on such matters is conferred by such proxies
upon the persons voting them.
The Company will bear the cost of preparing, printing, assembling, and
mailing the proxy, Proxy Statement and other material which may be sent to
stockholders in connection with this solicitation. It is contemplated that
brokerage houses will forward the proxy materials to beneficial owners at the
request of the Company. In addition to the solicitation of proxies by use of the
mails, officers and regular employees of the Company may solicit by telephone
proxies without additional compensation. The Company does not expect to pay any
compensation for the solicitation of proxies.
The Proxy Statement is accompanied by a copy of the Company's Annual Report
to Stockholders. The Company will provide without charge to each person being
solicited by the Proxy Statement, on the written request of any such person, a
copy of the Annual Report of the Company on Form 10-K for the fiscal year ended
December 31, 1997 (as filed with the S.E.C.) including the financial statements
thereto. All such requests should be directed to the Secretary of the Company,
John C. Thomas, Jr., EntreMed, Inc., 9610 Medical Center Drive, Suite 200,
Rockville, Maryland 20850.
STOCKHOLDER PROPOSALS
The Annual Meeting of Stockholders for the fiscal year ending December 31,
1998 is expected to be held in June 1999. All proposals intended to be presented
at the Company's next Annual Meeting of Stockholders must be received at the
Company's executive office not later than January 31, 1999, for inclusion in the
Proxy Statement and form of proxy related to that meeting.
By Order of the Board of Directors,
John W. Holaday, Ph.D.
Chairman, President and Chief
Executive Officer
Dated: May 22, 1998
18
<PAGE> 21
ENTREMED, INC.
ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John W. Holaday, Ph.D. and John C.
Thomas Jr., and each of them, as proxy (each of whom shall have full power of
substitution) to represent the undersigned at the Annual Meeting of
Stockholders to be held at the Gaithersburg Hilton, 620 Perry Parkway,
Gaithersburg, Maryland 20877 on June 25, 1998 at 10:00 a.m. and at any
adjournment thereof, and to vote the shares of common stock the undersigned
would be entitled to vote if personally present, as indicated below.
1. Election of Directors.
FOR all nominees listed below [ ] WITHHOLD AUTHORITY [ ]
(except as marked to the contrary below) to vote for all nominees
listed below
Donald S. Brooks, Lee F. Meier, and Jerry Finkelstein
(INSTRUCTION: To withhold authority to vote for any individual nominee, print
that nominee's name on the line provided below.)
- --------------------------------------------------------------------------------
2. Approval of an amendment to Article IV of the Amended and Restated
Certificate of Incorporation of the Company to increase the number of shares
of the Company's common stock, par value $.01 per share, authorized for
issuance by the Company from 20 million to 35 million.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. Approval of an amendment to the Company's Amended and Restated 1996 Stock
Option Plan to increase the number of shares of Common Stock reserved for
issuance thereunder from 1,266,667 to 1,750,000.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
4. Approval and ratification of the appointment of Ernst & Young L.L.P. as
independent auditors for the Company.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
5. In their discretion upon such other business as may properly come before the
meeting.
<PAGE> 22
THE SHARES OF COMMON STOCK REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED.
IF NO CONTRARY INSTRUCTION IS GIVEN, THE SHARES OF COMMON STOCK WILL BE VOTED
FOR THE ELECTION OF THE DIRECTOR NOMINEES, FOR THE AMENDMENT TO THE AMENDED AND
RESTATED CERTIFICATE OF INCORPORATION, FOR THE AMENDMENT TO THE 1996 STOCK
OPTION PLAN AND FOR THE APPROVAL AND RATIFICATION OF THE APPOINTMENT OF ERNST &
YOUNG LLP AS THE INDEPENDENT AUDITORS OF THE COMPANY.
DATED:____________________________, 1998
----------------------------------
Signature
----------------------------------
Signature if held jointly.
(Please date, sign as name appears at the above, and return
promptly. If the Shares are registered in the names of two
or more persons, each should sign. When signing as
Corporate Officer, Partner, Executor, Administrator,
Trustee or Guardian, please give full title. Please note
any changes in your address alongside the address as it
appears in the proxy.)
