<PAGE> 1
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
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 Rule 14a-11(c) or Rule 14a-12
EntreMed, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ X ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
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(4) Date filed:
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<PAGE> 2
ENTREMED, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 22, 2000
To Our Stockholders:
Notice is hereby given that the annual meeting of the stockholders of
EntreMed, Inc. (the "Company") will be held on June 22, 2000, at 10:00 a.m.
local time, at the Hyatt Regency Bethesda, One Bethesda Metro Center, Bethesda,
Maryland 20814 (the "Annual Meeting"). The Annual Meeting is called for the
following purposes:
1. To elect three directors of the Company;
2. To approve an amendment to the Company's 1999 Long-Term Incentive
Plan, increasing from 750,000 to 1,750,000 the number of shares of Common
Stock reserved for issuance;
3. To approve and ratify the appointment of Ernst & Young LLP as the
independent auditors of the Company; and
4. To consider and take action upon such other matters as may properly
come before the Annual Meeting or any postponement or adjournment thereof.
The Board of Directors has fixed April 24, 2000 as the record date for the
determination of stockholders entitled to notice of, and to vote at, the Annual
Meeting. Only stockholders of record at the close of business on that date will
be entitled to notice of, and to vote at, the Annual Meeting.
You 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
May 19, 2000
<PAGE> 3
COMMON QUESTIONS REGARDING PROXIES
Q: WHY AM I RECEIVING THIS PROXY STATEMENT AND PROXY CARD?
A: You are receiving a Proxy Statement and proxy card from us because you own
shares of Common Stock of the Company. This Proxy Statement describes issues on
which we would like you, as a stockholder, to vote. It also gives you
information on these issues so that you can make an informed decision.
When you sign the proxy card, you appoint John W. Holaday Ph.D. and James D.
Johnson Ph.D. as your representatives at the meeting. Dr. Holaday and Dr.
Johnson will vote your shares at the meeting as you have instructed them on the
proxy card. This way, your shares will be voted whether or not you attend the
Annual Meeting. Even if you plan to attend the meeting, it is a good idea to
complete, sign and return your proxy card in advance of the meeting just in case
your plans change. You can always decide to vote in person.
Q: WHAT IS THE RECORD DATE?
A: The record date is set for April 24, 2000. Only holders of Common Stock of
record as of the close of business on this date will be entitled to vote at the
Annual Meeting.
Q: HOW MANY SHARES ARE OUTSTANDING?
A: As of the record date, the Company had 15,559,543 shares of Common Stock
outstanding.
Q: WHAT AM I VOTING ON?
A: You are being asked to vote on the election of three directors, the approval
of an additional reservation of 1,000,000 shares of Common Stock for issuance
pursuant to the Company's 1999 Long-term Incentive Plan to be granted as
incentives to officers, directors, employees, and consultants of the Company,
and the approval and ratification of Ernst & Young LLP as the independent
auditors of the Company.
Q: HOW DO I VOTE?
A: You may either vote by mail or in person at the Annual Meeting. To vote by
mail, please sign your proxy card and mail it in the enclosed, prepaid and
addressed envelope. If you mark your voting instructions on the proxy card, your
shares will be voted in accordance with your instructions. If you return a
signed card but do not provide voting instructions, your shares will be voted
based on the recommendations of the Board of Directors. We will pass out written
ballots to anyone who wants to vote at the Annual Meeting. If you hold your
shares through a brokerage account and do not have a physical shares
certificate, you must request a legal proxy from your stockbroker in order to
vote at the Annual Meeting.
Q: WHAT DOES IT MEAN IF I RECEIVE MORE THAN ONE PROXY CARD?
A: It means that you have multiple accounts at the transfer agent and/or with
stockbrokers. Please sign and return all proxy cards to ensure that all your
shares are voted.
Q: HOW MANY VOTES DO YOU NEED TO HOLD THE MEETING?
A: A majority of the Company's outstanding shares of Common Stock as of the
record date must be present at the meeting in order to hold the Annual Meeting
and conduct business. This is called a quorum.
Q: WHAT IF I ABSTAIN FROM VOTING?
A: Abstentions with respect to a proposal are counted for purposes of
establishing a quorum. If a quorum is present, abstentions have no effect on the
outcome of the vote for directors, but will count as a vote against the proposed
reservation of additional shares for the 1999 Long-Term Incentive Plan and
selection of the Company's independent auditors.
Q: HOW MANY VOTES MUST THE NOMINEES HAVE TO BE ELECTED?
A: In order for a director to be elected, the affirmative vote of a plurality
of the shares voted must occur. If a proxy card does not indicate whether the
stockholder is voting for or against an item, the vote is not counted in
determining whether the matter has been approved once a quorum has been
established.
<PAGE> 4
Q: HOW ARE VOTES COUNTED?
A: Voting results will be tabulated and certified by our transfer agent,
American Stock Transfer & Trust Company.
Q: WHERE CAN I FIND THE VOTING RESULTS OF THE ANNUAL MEETING?
A: We will announce the voting results at the Annual Meeting. We will also
publish the results in our quarterly report on Form 10-Q for the second quarter
of 2000. We will file that report with the Securities and Exchange Commission
("SEC"), and you can get a copy by contacting:
- EntreMed corporate offices at (301) 217-9858;
- the SEC at (800) SEC-0330 for the location of the nearest public
reference room; or
- through the EDGAR system at www.sec.gov.
<PAGE> 5
ENTREMED, INC.
9640 MEDICAL CENTER DRIVE
ROCKVILLE, MARYLAND 20850
(301) 217-9858
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 22, 2000
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"), the principal executive offices of which are located at 9640 Medical
Center Drive, Rockville, Maryland 20850, for the Annual Meeting of Stockholders
to be held at the Hyatt Regency Bethesda, One Bethesda Metro Center, Bethesda,
Maryland 20814 on June 22, 2000, at 10:00 a.m. (local time) and for any
postponement, or adjournments thereof (the "Annual Meeting"), 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 judgment 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 the amendment to the 1999 Long-Term Incentive Plan (the "1999 Plan")
increasing the shares of common stock reserved for issuance, 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
19, 2000.
Your vote is important. Accordingly, we urge you 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.
VOTING SECURITIES
Holders of record of shares of the Company's Common Stock, par value $.01
per share (the "Shares"), as of the close of business on April 24, 2000 (the
"Record Date"), are entitled to notice of and to vote at the Annual Meeting on
all matters. On the Record Date the Company had 15,559,543 Shares outstanding.
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. Broker
non-votes are not counted for any purpose in determining whether a matter has
been approved.
Assuming a quorum is present, (i) the affirmative vote of a plurality of
the Shares cast in person or represented by proxy at the Annual Meeting and
entitled to vote on the election of directors is required to elect the director
nominees and (ii) the affirmative vote of a majority of the Shares cast in
person or represented by proxy at the Annual Meeting and entitled to vote on the
matter, excluding broker non-votes, is necessary to
<PAGE> 6
approve the amendment to the 1999 Plan and to approve and ratify the appointment
of Ernst & Young LLP as the independent auditors of the Company.
The Company is not currently aware of any matters that will be brought
before the Annual Meeting (other than procedural matters) that are not referred
to in the enclosed Notice of Annual Meeting.
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL HOLDERS
The following table sets forth, as of April 24, 2000 (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>
AMOUNT AND NATURE OF PERCENTAGE OF
NAME OF BENEFICIAL OWNER(1) BENEFICIAL OWNERSHIP OUTSTANDING CLASS
--------------------------- ----------------------- -----------------
<S> <C> <C>
John W. Holaday, Ph.D.(2)................................ 1,473,001 9.36%
Edward R. Gubish, Ph.D.(3)............................... 268,501 1.72%
Joanna C. Horobin, M.D.(4)............................... 47,000 *
Donald S. Brooks(5)...................................... 169,751 1.09%
R. Nelson Campbell(6).................................... 125,000 *
John C. Thomas, Jr.(7) (8)............................... 134,201 *
Jerry Finkelstein(9)..................................... 112,500 *
Lee F. Meier(10)......................................... 54,000 *
Mark C. M. Randall(11)................................... 123,001 *
Wendell M. Starke(12).................................... 533,103 3.43%
All executive officers and directors as a group (10
persons)(13)........................................... 3,040,058 19.03%
</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 764,969 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
172,500 shares issuable upon exercise of options not exercisable within 60
days.
(3) Includes 257,501 shares issuable upon exercise of options that are
exercisable within 60 days. Does not include 87,500 shares issuable upon
exercise of options not exercisable within 60 days.
(4) Includes 46,000 shares issuable upon exercise of options and warrants that
are exercisable within 60 days. Does not include 55,000 shares issuable
upon exercise of options not exercisable within 60 days.
(5) Includes 169,751 shares issuable upon exercise of options and warrants that
are exercisable within 60 days. Does not include 31,250 shares issuable
upon exercise of options not exercisable within 60 days.
(6) Includes 125,000 shares issuable upon exercise of options that are
exercisable within 60 days. Does not include 45,000 shares issuable upon
exercise of options not exercisable within 60 days.
(7) Mr. Thomas resigned as an executive officer as of November 1999.
(8) Includes 65,267 shares issuable upon exercise of options and warrants that
are exercisable within 60 days. Does not include 15,000 shares issuable
upon exercise of options not exercisable within 60 days.
(9) Includes 88,500 shares issuable upon exercise of options and warrants that
are exercisable within 60 days. Does not include 12,500 shares issuable
upon exercise of options not exercisable within 60 days. Does not include
shares owned by various family members of Mr. Finkelstein as to which Mr.
Finkelstein disclaims beneficial ownership.
2
<PAGE> 7
(10) Includes 44,000 shares issuable upon exercise of options which are
exercisable within 60 days and 10,000 shares issuable upon exercise of
warrants which are exercisable within 60 days held by an entity of which
Mr. Meier is a 50% stockholder.
(11) Includes 123,001 shares issuable upon exercise of options and warrants that
are exercisable within 60 days.
(12) Includes 312,429 shares issuable upon exercise of options and warrants
which are exercisable within 60 days and 21,819 shares held by a limited
partnership of which Mr. Starke is the general partner.
(13) Includes 1,996,418 shares issuable upon exercise of options and warrants
that are exercisable within 60 days. Does not include 418,750 shares
issuable upon exercise of options not exercisable within 60 days.
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 2001 and the
annual meeting of stockholders to be held in 2002. At the Annual Meeting, two
directors will be elected by the stockholders to serve a three-year term. A
third nominee is seeking election by the stockholders to serve a one-year term.
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
(unless authority has been withdrawn) for the election of such person or persons
as shall be designated by management.
Two of the three nominees currently serve as directors of the Company. All
nominees have consented to being named in this Proxy Statement and to serve if
elected.
The following sets forth the names and ages as of April 24, 2000 of the
three nominees for election to the Board of Directors, as well as the Directors
whose terms will continue, their respective positions and offices with the
Company, the period during which each has served as a director of the Company
and their principal occupations or employment during the past five years.
<TABLE>
<CAPTION>
NAME AGE POSITION DIRECTOR SINCE
---- --- --------------------------------------- --------------
<S> <C> <C> <C>
John W. Holaday, Ph.D. .............. 54 Chairman of the Board of Directors; 1992
President and Chief Executive Officer
Wendell M. Starke.................... 58 Vice Chairman of the Board of Directors 1994
Jerry Finkelstein(1)(2).............. 84 Director 1998
Mark C. M. Randall(1)(4)............. 37 Director 1996
Donald S. Brooks..................... 64 Director; Vice President, Legal Affairs 1996
Lee F. Meier(2)(3)................... 53 Director 1997
Peter S. Knight...................... 49 Director Nominee
</TABLE>
- ---------------
(1) Member of Audit Committee
(2) Member of Compensation Committee
(3) Chairman of Audit Committee
(4) Chairman of Compensation Committee
3
<PAGE> 8
NOMINEES FOR TERMS EXPIRING 2003
JOHN W. 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
Psychiatry at the Uniformed Services University School of Medicine, Bethesda,
Maryland.
WENDELL M. STARKE has been Vice Chairman of the Board of Directors since
June 1998 and 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. From 1992 to
1999, he served as Chairman of INVESCO, Inc., the parent company of INVESCO
Capital Management and other INVESCO money management subsidiaries in the United
States. Mr. Starke retired from INVESCO in June 1999.
NOMINEE AND CONTINUING DIRECTORS FOR TERMS EXPIRING 2001
DONALD S. BROOKS has been a director of the Company since April 1996 and
became a Vice President for the Company in 1998. From July 1993 until July 1998,
Mr. Brooks was a practicing attorney with the law firm Carella, Byrne, Bain,
Gilfillan, Cecchi, Stewart & Olstein, in Roseland, New Jersey. Since July 1998,
Mr. Brooks has continued to be of counsel to the law firm Carella, Byrne, Bain,
Gilfillan, Cecchi, Stewart & Olstein, which provides certain legal services to
the Company. 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.
PETER S. KNIGHT is a principal in Sage Venture Partners, a
telecommunications investment firm. He recently closed his legal practice where
he had been a partner in the law firm of Wunder, Knight, Forscey & DeVierno from
1991 to 1999. In 1996, at the request of President Clinton, Mr. Knight took a
leave of absence from his firm to serve as the National Campaign Manager for
Clinton/Gore '96. Prior to his partnership with the firm, Mr. Knight was the
General Counsel and Secretary of Medicis Pharmaceutical Corporation, a
pharmaceutical company specializing in dermatology. From 1977 to 1989, Mr.
Knight served as the Chief of Staff to Congressman and then Senator Al Gore
(D-TN). In 1988, Mr. Knight served as the campaign director for the Gore for
President Committee. He served as the Chief of Staff to the late Representative
Torbert H. Macdonald from 1975 to 1977. Prior to his service with the
Representative, he worked in the Antitrust Division at the United States
Department of Justice. Mr. Knight serves on the Board of Directors of two public
companies -- Whitman Education Group, providers of postsecondary education and
Medicis Pharmaceutical Corporation. He recently completed service on the boards
of two public companies that went through successful mergers -- Comstat, an
international telecommunications company and Healthworld, an international
marketing and communications company specializing in health care. Mr. Knight
also sits on the Board of the Schroder Family of Mutual Funds. He serves on the
Board of Directors for the Vice President's Residence Foundation and the Board
of Directors of the Center for National Policy. He holds a Juris Doctor degree
from Georgetown University Law Center and a Bachelor of Arts degree from Cornell
University. He is admitted to the practice of law in the District of Columbia.
LEE F. MEIER has been a director of the Company since July 1997. Mr. Meier
has over twenty-five 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
4
<PAGE> 9
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 $1.5 billion in financing to
both private and public companies in these sectors.
CONTINUING DIRECTORS FOR TERMS EXPIRING IN 2002
JERRY 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. Mr. Finkelstein is the former
publisher of the New York Law Journal, a daily legal 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, The Hill, 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.
MARK C. M. 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, of which he has been a Director since
1994.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE NOMINATED
DIRECTORS, AND SIGNED PROXIES THAT 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 five meetings during the fiscal
year ended December 31, 1999 ("fiscal 1999") Each of the directors attended at
least 75% of the meetings of the Board of Directors and the committees thereof
on which such director served that were held during fiscal 1999.
The Board of Directors has two standing committees. These are the Audit
Committee and the Compensation Committee.
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 auditors for the ensuing year. The Audit Committee, which
currently consists of three directors, Messrs. Finkelstein, Meier, and Randall,
held quarterly meetings during fiscal 1999.
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. Finkelstein, Meier, and
Randall, held numerous meetings during fiscal 1999.
COMPENSATION OF DIRECTORS
Prior to April 1999, the Company's directors received a fee of $2,000 per
in-person meeting attended and were reimbursed for expenses actually incurred in
connection with attending such meetings. As of April 1999, directors of the
Company no longer receive cash compensation for serving on the Board of
Directors or attending meetings thereof, except that the chairman of each
committee will receive an annual cash payment of $2,000. All directors continue
to be reimbursed for expenses actually incurred in connection with attending
such meetings. Each director receives automatic grants of non-qualified stock
options as follows: upon joining the Board of Directors, each new director will
be granted an option to purchase 15,000 shares of Common Stock; for services of
Vice Chairman of the Board, the Vice Chairman is granted an option to purchase
15,000 shares in addition to any options received in his capacity as a director;
and upon re-election to the
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<PAGE> 10
Board to a three-year term, each director will be granted an option to purchase
30,000 shares. In addition, following the annual meeting in June 1999, each
director with a continuing term was granted a one-time option to purchase 10,000
shares for each year remaining in their then-current term of office.
PROPOSAL 2
APPROVAL OF ADDITIONAL SHARES FOR ISSUANCE
UNDER 1999 LONG-TERM INCENTIVE PLAN, AMENDED
The Board has approved an amendment to the 1999 Plan, subject to
stockholder approval, to increase the aggregate number of shares authorized for
issuance under the 1999 Plan from a total of 750,000 shares to 1,750,000 shares.
The Board adopted the amendment to increase the number of shares authorized
for issuance under the 1999 Plan to ensure that the Company can continue to
grant stock-based awards to directors and employees of and consultants to the
Company at levels determined appropriate by the Board and a committee or
committees appointed by the Board. Management and the Board believe that the use
of stock-based compensation is important to the Company to recruit and retain
qualified persons.
The affirmative vote of the holders of a majority of the shares present in
person or represented by proxy and entitled to vote at the Annual Meeting will
be required to approve the 1999 Plan, as amended. Abstentions will be counted
toward the tabulation of votes cast on this proposal and will have the same
effect as negative votes. Broker non-votes are counted towards a quorum, but are
not counted for any purpose in determining whether this matter is approved.
DESCRIPTION OF THE 1999 PLAN
The following summary of the material features of the 1999 Plan is
qualified in its entirety by reference to the full text of the 1999 Plan, a copy
of which is available by writing the Company, Investor Relations, EntreMed,
Inc., 9640 Medical Center Drive, Rockville, Maryland 20850. Unless otherwise
specified, capitalized terms used herein have the meanings assigned to them in
the 1999 Plan.
ELIGIBILITY
The 1999 Plan authorizes the grant of stock options (including incentive
stock options and nonqualified stock options), stock appreciation rights,
restricted or unrestricted stock awards, phantom stock, performance awards, or
any combination of the foregoing to all persons who are at the time of the grant
of an award employees (including persons who may become employees), officers,
directors, and consultants of the Company, or of any Affiliate of the Company,
as may be selected from time to time. Only employees of the Company, or of any
Parent or Subsidiary of the Company, are eligible to receive grants of incentive
stock options. As of March 31, 2000, the number of employees, officers and
directors of the Company eligible to receive grants under the 1999 Plan was
approximately 85 persons. The number of consultants to the Company eligible to
receive grants under the 1999 Plan is not determinable.
ADMINISTRATION
The 1999 Plan is administered by the Board of Directors or by a committee
or committees appointed by the Board (all of which will hereinafter be referred
to as the "Administrator"). The Administrator has all the powers vested in it by
the terms of the 1999 Plan, including the authority to determine eligibility, to
grant awards, prescribe Grant Agreements evidencing such awards, establish
programs for granting awards, whether a stock option shall be an incentive stock
option or a nonqualified stock option, any exceptions to nontransferability, any
performance goals applicable to awards, the period during which Awards may be
exercised, and the period during which awards shall be subject to restrictions,
and otherwise administer the 1999 Plan. In making these determinations, the
Administrator may take into account the nature of the services rendered or to be
rendered by the award recipients, their present and potential contributions to
the success of
6
<PAGE> 11
the Company and its Affiliates, and such other factors as the Administrator in
its discretion shall deem relevant.
SHARES AVAILABLE FOR THE PLAN
If the stockholders approve the increase in the aggregate number of shares
authorized for issuance under the 1999 Plan, a maximum of 1,750,000 Shares will
be available for grants and awards, an increase of 1,000,000 shares.
At March 31, 2000, no shares (excluding any shares that might in the future
be returned to the 1999 Plan as a result of cancellations or expiration of
options) remained available for future grant under the 1999 Plan.
If an award expires or terminates unexercised or is forfeited, or if any
Shares are surrendered to the Company in connection with an award, the Shares
subject to such award and the surrendered Shares will become available for
further awards under the 1999 Plan. The number of Shares subject to the 1999
Plan (and the number of Shares and terms of any award) may be adjusted by the
Administrator in the event of any change in the outstanding Common Stock by
reason of any stock dividend, spin-off, split-up, reverse stock split,
recapitalization, reclassification, merger, consolidation, liquidation, business
combination or exchange of Shares and the like.
The maximum number of Shares that may be covered by awards of any
combination granted during a calendar year to an individual under the 1999 Plan
is limited to 150,000.
STOCK OPTIONS
The 1999 Plan authorizes the grant of incentive stock options and
nonqualified stock options. Incentive stock options are stock options that
satisfy the requirements of Section 422 of the Code. Nonqualified stock options
are stock options that do not satisfy the requirements of Section 422 of the
Code. Options granted under the 1999 Plan would entitle the grantee, upon
exercise, to purchase a specified number of Shares from the Company at a
specified exercise price per Share. The period of time during which an option
may be exercised, as well as any vesting schedule, is determined by the
Administrator, except that no option may be exercised more than 10 years after
the date of grant. Additionally, the exercise price per Share and manner of
payment for Shares purchased pursuant to options are determined by the
Administrator and, in the case of nonqualified stock options, options must have
an exercise price at least equal to the par value of the Common Stock.
Incentive stock options must comply with Section 422 of the Code. Incentive
stock options, thus, must have an exercise price at least equal to Fair Market
Value on the date of grant. Additionally, no incentive stock option may be
granted under the 1999 Plan to any person who, at the time of the grant, owns
(or is deemed to own) stock possessing more than 10% of the total combined
voting power of the Company or any affiliate of the Company, unless the option's
exercise price is at least 110% of the Fair Market Value of the stock subject to
the option on the date of grant, and the term of the option does not exceed five
years from the date of grant. For incentive stock options granted under the 1999
Plan, the aggregate Fair Market Value, determined at the time of the grant, of
the shares of Common Stock with respect to which such options are exercisable
for the first time by an optionee during any calendar year (under all such plans
of the Company and its affiliates) may not exceed $100,000.
OTHER AWARDS
In addition to stock options, the 1999 Plan authorizes the grant of stock
appreciation rights, stock awards, phantom stock and performance awards. The
Company has not issued any such awards and does not currently expect to issue
them under the 1999 Plan.
Subject to the terms of a particular grant, the exercise of a stock
appreciation right under the 1999 Plan would entitle the grantee to receive in
cash, Common Stock, or a combination thereof, as specified in the Grant
Agreement, the excess of the Fair Market Value of a specified number of Shares
on the date of exercise over the base price per Share specified in the Grant
Agreement. The 1999 Plan also authorizes the grant of
7
<PAGE> 12
restricted and unrestricted stock awards on terms and conditions, which terms
and conditions may condition the vesting or payment of such awards on the
achievement of one or more Performance Goals (as described below) established by
the Administrator.
In addition, the 1999 Plan authorizes the grant of phantom stock in the
form of awards denominated in stock-equivalent units on terms and conditions,
which terms and conditions may condition the vesting or payment of such awards
on the achievement of one or more Performance Goals (as described below),
established by the Administrator. An award of phantom stock may be settled in
cash, Common Stock, or a combination thereof, as specified in the Grant
Agreement.
Finally, the 1999 Plan authorizes the grant of performance awards, which
become payable upon attainment of one or more Performance Goals established by
the Administrator. Performance awards may be paid in cash, Common Stock, or a
combination thereof, as specified in the Grant Agreement.
The term "Performance Goals" means performance goals established by the
Administrator which may be based on one or more business criteria selected by
the Administrator that apply to an individual or group of individuals, a
business unit, or the Company and/or one or more of its Affiliates either
separately or together, over such performance period as the Administrator may
designate, including, but not limited to, business criteria based on operating
income, earnings or earnings growth, sales, return on assets, equity or
investment, regulatory compliance, satisfactory internal or external audits,
improvement of financial ratings, achievement of balance sheet or income
statement objectives, or any other objective goals established by the
Administrator, and may be absolute in their terms or measured against or in
relationship to other companies comparably, similarly or otherwise situated.
TRANSFERABILITY
Except as otherwise determined by the Administrator or provided in a Grant
Agreement, awards granted under the 1999 Plan are not transferable except by
will or the laws of descent and distribution or pursuant to a qualified domestic
relations order as defined in Code Section 414(p). Unless otherwise determined
by the Administrator, awards may be exercised only by the grantee or by
permitted transferees during the lifetime of the grantee or, in the event of
legal disability, by the grantee's guardian or legal representative.
AMENDMENT AND TERMINATION
The Board of Directors may amend, alter or terminate the 1999 Plan, or any
portion thereof, at any time. No award may be granted under the 1999 Plan after
the close of business on March 31, 2009. Subject to other applicable provisions
of the Plan, all awards made under the 1999 Plan prior to the termination of the
1999 Plan will remain in effect until those awards have been satisfied or
terminated.
NEW PLAN BENEFITS
The following table sets forth certain information regarding stock option
grants made under the 1999 Plan that are subject to stockholder approval of the
additional 1,000,000 Shares to be authorized for issuance thereunder.
1999 LONG-TERM INCENTIVE PLAN
<TABLE>
<CAPTION>
NUMBER OF SHARES EXERCISE PRICE PER SHARE
NAME AND POSITION SUBJECT TO OPTIONS ($)
----------------- ------------------ ------------------------
<S> <C> <C>
John W. Holaday, Ph.D. .................................. 80,000 25.625
Chairman, President and Chief Executive Officer
Edward R. Gubish, Ph.D. ................................. 50,000 25.625
Senior Vice President of Research and Development
Joanna C. Horobin, M.D. ................................. 50,000 25.625
Senior Vice President of Commercial Development
</TABLE>
8
<PAGE> 13
<TABLE>
<CAPTION>
NUMBER OF SHARES EXERCISE PRICE PER SHARE
NAME AND POSITION SUBJECT TO OPTIONS ($)
----------------- ------------------ ------------------------
<S> <C> <C>
Donald S. Brooks......................................... 25,000 25.625
Vice President, Legal Affairs
R. Nelson Campbell....................................... 30,000 25.625
Chief Financial Officer
John C. Thomas........................................... -- --
Secretary/Treasurer
Executive Group.......................................... 235,000 25.625
Non-Executive Director Group............................. -- --
Non-Executive Officer Employee Group..................... 75,100 *
</TABLE>
- ---------------
* Granted at exercise prices ranging from $25.625 to $93.50, depending on date
of grant.
SUMMARY OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following discussion briefly summarizes certain federal income tax
aspects of stock options, stock appreciation rights, stock awards, phantom
stock, and performance awards granted under the 1999 Plan. The rules governing
the tax treatment of awards and the receipt of Shares and/or cash in connection
with such awards are quite technical, so the following 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 and local law may not be
the same as under the federal income tax laws.
INCENTIVE STOCK OPTIONS
In general, a grantee is not required to recognize income on the grant or
exercise of an incentive stock option. However, the difference between the
exercise price and the Fair Market Value of the stock on the exercise date is an
adjustment item for purposes of the alternative minimum tax. Further, if a
grantee does not exercise an incentive stock option within certain specified
periods after termination of employment, the option is treated for federal
income tax purposes in the same manner as a nonqualified stock option, as
described below.
The general rule is that gain or loss from the sale or exchange of Shares
acquired on the exercise of an incentive stock option will be treated as capital
gain or loss. If certain holding period requirements are not met, however, the
grantee generally will recognize ordinary income at the time of the 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.
NONQUALIFIED STOCK OPTIONS, STOCK APPRECIATION RIGHTS, PHANTOM STOCK, AND
PERFORMANCE AWARDS
A grantee generally is not required to recognize income on the grant of a
nonqualified stock option, a stock appreciation right, or on the award of
phantom stock or a performance award. Instead, ordinary income generally is
required to be recognized on the date the nonqualified stock option or stock
appreciation right is exercised, or in the case of an award of phantom stock or
a performance award on the date of payment of such award in cash or Shares. In
general, the amount of ordinary income required to be recognized, (a) in the
case of a nonqualified stock option, is an amount equal to the excess, if any,
of the Fair Market Value of the Shares on the exercise date over the exercise
price, (b) in the case of a stock appreciation right, the amount of cash and the
Fair Market Value of any Shares received on the exercise date, and (c) in the
case of an award of phantom stock or a performance award, the amount of cash and
the Fair Market Value of any Shares received. In all three instances, ordinary
income also includes the amount of any taxes withheld upon payment of the award.
9
<PAGE> 14
RESTRICTED STOCK
Shares of restricted stock awarded under the 1999 Plan will be subject to a
substantial risk of forfeiture for the period of time specified in the award.
Unless a grantee of Shares of restricted stock makes an election under Section
83(b) of the Code as described below, the grantee generally is not required to
recognize ordinary income on the award of restricted stock. Instead, on the date
the substantial risk of forfeiture lapses, the grantee will be required to
recognize ordinary income in an amount equal to the excess, if any, of the Fair
Market Value of the Shares on such date over the amount, if any, paid for such
Shares. If a grantee makes a Section 83(b) election to recognize ordinary income
on the date the Shares are awarded, the amount of ordinary income required to be
recognized is an amount equal to the excess, if any, of the Fair Market Value of
the Shares on the date of award over the amount, if any, paid for such Shares.
In such case, the grantee will not be required to recognize additional ordinary
income when the substantial risk of forfeiture lapses.
UNRESTRICTED STOCK
In general, a grantee is required to recognize ordinary income on the date
of issuance of unrestricted Shares to the grantee equal to the excess, if any,
of the Fair Market Value of such Shares on such date over the amount, if any,
paid for such Shares.
GAIN OR LOSS ON SALE OR EXCHANGE OF 1999 PLAN SHARES
In general, gain or loss from the sale or exchange of Shares granted or
awarded under the 1999 Plan will be treated as capital gain or loss, provided
that the Shares are held as capital assets at the time of the sale or exchange.
However, if certain holding period requirements are not satisfied at the time of
a sale or exchange of Shares acquired upon exercise of an incentive stock option
(a "disqualifying disposition"), a grantee generally will be required to
recognize ordinary income upon such disposition.
DEDUCTIBILITY BY COMPANY
The Company generally is not allowed a deduction in connection with the
grant or exercise of an incentive stock option. However, if a grantee is
required to recognize income as a result of a disqualifying disposition, the
Company will be entitled to a deduction equal to the amount of ordinary income
so recognized. In general, in the case of a nonqualified stock option (including
an incentive stock option that is treated as a nonqualified stock option, as
described above), a stock appreciation right, a stock award, phantom stock, or a
performance award, the Company generally will be allowed a deduction in an
amount equal to the amount of ordinary income recognized by the grantee,
provided that certain income tax reporting requirements are satisfied.
PARACHUTE PAYMENTS
Where payments to certain employees that are contingent on a change in
control exceed limits specified in the Code, the employee generally is liable
for a 20% excise tax on, and the corporation or other entity making the payment
generally is not entitled to any deduction for, a specified portion of such
payments. If the Administrator, in its discretion, grants awards, the exercise
date of which is accelerated by a change in control of the Company, such
acceleration of the exercise date would be relevant in determining whether the
excise tax and deduction disallowance rules would be triggered with respect to
certain of the Company's employees.
PERFORMANCE-BASED COMPENSATION
Subject to certain exceptions, Section 162(m) of the Code disallows federal
income tax deductions for compensation paid by a publicly held corporation to
certain executives to the extent the amount paid to the executive exceeds $1
million for the taxable year. The 1999 Plan has been designed to allow the
Administrator to make awards under the 1999 Plan that qualify under an exception
to the deduction limit of Section 162(m) for "performance-based compensation."
10
<PAGE> 15
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE AMENDMENT
TO THE COMPANY'S 1999 PLAN, INCREASING FROM 750,000 TO 1,750,000 THE NUMBER OF
SHARES OF COMMON STOCK RESERVED FOR ISSUANCE, AND SIGNED PROXIES THAT ARE
RETURNED WILL BE SO VOTED UNLESS OTHERWISE INSTRUCTED ON THE PROXY CARD.
PROPOSAL 3
APPROVAL AND RATIFICATION
OF THE APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors 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, 2000
("fiscal 2000"). Ernst & Young LLP has 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 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 APPROVAL AND RATIFICATION
OF THE APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY'S AUDITORS FOR FISCAL
2000.
11
<PAGE> 16
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 the next most highly compensated executive officers whose annual compensation
exceeded $100,000 for fiscal 1999 (collectively, the "Named Executives") for
services rendered to the Company during the Company's fiscal years ended
December 31, 1999, 1998 and 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
------------
SECURITIES
ANNUAL UNDERLYING
SALARY BONUS OPTIONS/SARS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR ($) ($) (#) COMPENSATION
--------------------------- ---- ------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C>
John W. Holaday, Ph.D. ...................... 1999 325,000 125,000 110,000 21,506(1)
Chairman, President and Chief 1998 250,000 125,000 5,000 19,467
Executive Officer 1997 275,000 -- 260,000 18,883
Edward R. Gubish, Ph.D. ..................... 1999 202,700 85,000 50,000 8,955(2)
Senior Vice President of 1998 180,000 75,000 -- 6,916
Research and Development 1997 165,000 50,000 100,000 6,332
Joanna C. Horobin, M.D. ..................... 1999 195,000 75,000 50,000 6,715(2)
Senior Vice President of 1998 -- -- -- --
Commercial Development 1997 -- -- -- --
Donald S. Brooks............................. 1999 195,000 25,000 45,000 3,099(2)
Vice President, Legal Affairs 1998 81,975 37,500 80,000 855
1997 -- -- 6,000 --
R. Nelson Campbell........................... 1999 151,450 35,000 20,000 2,529(2)
Chief Financial Officer 1998 147,000 20,000 -- 1,849
1997 133,718 25,000 50,000 1,301
John C. Thomas, Jr. ......................... 1999 120,000 -- 5,000 --
Secretary/Treasurer 1998 126,000 10,000 -- 6,916(2)
1997 120,000 25,000 50,000 --
</TABLE>
- ---------------
(1) $12,551 of such amount represents the premiums paid by us with respect to a
split-dollar life insurance policy on the life of Dr. Holaday. Premiums paid
by us on such policy are treated as non-interest bearing advances to the
insured for the policy. The initial proceeds of any death benefit are
required to be used to repay the indebtedness, and the balance of the
insurance proceeds are payable as designated by the insured. See "Employment
Contracts and Termination of Employment and Change-in-Control Arrangements".
The remaining amount represents group health insurance premiums paid on
behalf of such officer.
(2) Consists of group health insurance premiums paid on behalf of such officer.
(3) Mr. Thomas resigned as an executive officer as of November 1999.
The following table sets forth certain information with respect to
individual grants of stock options and warrants made during the fiscal year
ended December 31, 1999 to each of the named executive officers.
12
<PAGE> 17
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
----------------------------------------- VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS/SARS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM(1)
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION -----------------------
NAME GRANTED FISCAL YEAR ($/SH) DATE 5%($) 10%($)
---- ------------ ------------ ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
John W. Holaday, Ph.D. ........ 50,000 7.13% 18.625 2/25/2009 1,516,908 2,415,422
60,000 8.55% 21.50 6/24/2009 2,101,275 3,345,927
Edward R. Gubish, Ph.D. ....... 25,000 3.56% 18.625 2/25/2009 758,454 1,207,711
25,000 3.56% 21.50 6/24/2009 875,531 1,394,136
Joanna C. Horobin, M.D. ....... 50,000 7.13% 12.875 2/10/2009 1,048,601 1,669,721
Donald S. Brooks............... 25,000 3.56% 18.625 2/25/2009 758,454 1,207,711
20,000 2.85% 21.50 6/24/2009 700,425 1,115,309
R. Nelson Campbell............. 10,000 1.43% 18.625 2/25/2009 303,382 483,084
10,000 1.43% 21.50 6/24/2009 350,212 557,655
John C. Thomas, Jr. ........... 5,000 .71% 18.625 2/25/2009 151,691 241,542
</TABLE>
- ---------------
(1) Calculated by multiplying the exercise price by the annual appreciation rate
shown (as prescribed by SEC 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 our shares. The actual value realized upon exercise of the options to
purchase our shares will depend on the fair market value of our shares on
the date of exercise.
The following table sets forth information concerning all option holdings,
as well as fiscal year-end values, for each of the named executive officers.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION/VALUE
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES VALUE FISCAL YEAR-END(#) FISCAL YEAR-END($)(1)
ACQUIRED ON REALIZED --------------------------- ---------------------------
NAME EXERCISE(#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John W. Holaday, Ph.D.(2)...... -- -- 719,169 137,500 12,176,437 1,393,563
Edward R. Gubish, Ph.D. ....... -- -- 232,501 62,500 3,460,769 599,125
Joanna C. Horobin, M.D. ....... -- -- 23,750 26,250 302,694 334,556
Donald S. Brooks(2)............ -- -- 157,251 18,750 863,732 131,156
R. Nelson Campbell............. -- -- 112,500 27,500 1,427,488 278,713
John C. Thomas, Jr.(2)......... -- -- 147,619 16,250 2,719,026 221,544
</TABLE>
- ---------------
(1) Calculated by multiplying the number of unexercised options outstanding at
December 31, 1999 by the difference between the fair market value of our
shares at December 31, 1999 ($25.625) and the option exercise price.
(2) Holdings include warrants issued in lieu of stock options.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND
CHANGE-IN-CONTROL ARRANGEMENTS
Effective January 1999, the Company entered into a three-year employment
agreement with John W. Holaday, Ph.D., Chairman and Chief Executive Officer with
an annual base salary of $325,000 per year and a minimal annual increase of 10%
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
13
<PAGE> 18
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 Dr. Holaday for the policy. The initial proceeds of any such death benefit
are required to be used to repay the indebtedness, and the balance of the
insurance proceeds are payable as designated by Dr. Holaday.
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 employee relating to our
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 1999 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 Securities and Exchange Act (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 SEC 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 SEC regulation to furnish the Company with copies of all Section
16(a) reports filed by such reporting persons.
Based solely on the Company's review of copies of such reports furnished to
the Company and written representations that no other reports were required
during fiscal 1998, the Company believes that all Section 16(a) 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 1999, the members of the Compensation Committee were: Lee F.
Meier, Mark C. M. Randall, and Jerry Finkelstein. In connection with the
Company's private placement of securities in July 1999, Mark C. M. Randall
received warrants to purchase 15,000 shares of the Company's common stock at an
exercise price of $20.362 per share as compensation for services rendered as a
placement agent. The warrants are exercisable for five years from the date of
issuance.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee is comprised of three independent, non-employee
directors. It is the Committee's responsibility to:
- Make recommendations and report to the board of directors concerning
matters of executive compensation;
- Administer the Company's executive incentive plans;
- Review compensation plans, programs and policies; and
- Monitor the performance and compensation of executive officers.
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
14
<PAGE> 19
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;
- Maintaining an appropriate balance between base salary and
performance-based compensation, with a higher proportion of compensation
being performance-based as salary grade increases; 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, the Compensation Committee considers data regarding compensation
practices from a group of 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 illustrated in this proxy.
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.
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. The Committee intends to take actions to minimize the Company's
exposure to nondeductible compensation expense under Section 162(m). While
keeping this goal in mind, the Committee also will try to maintain the
flexibility that the Committee believes to be an important element of the
Company's executive compensation program.
By the Compensation Committee:
Mark C. M. Randall, Chairman
Lee F. Meier
Jerry Finkelstein
15
<PAGE> 20
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
Stock Market -- U. S. Index, and the NASDAQ Pharmaceuticals Index.
[COMPARISON OF CUMULATIVE TOTAL RETURN LINE GRAPH]
<TABLE>
<CAPTION>
NASDAQ STOCK MARKET -
ENTREMED, INC. US NASDAQ PHARMACEUTICALS
-------------- --------------------- ----------------------
<S> <C> <C> <C>
6/12/96 $100.000 $100.000 $100.000
12/31/96 $108.333 $104.326 $90.263
12/31/97 $77.500 $127.825 $93.222
12/31/98 $140.000 $180.243 $118.596
12/31/99 $170.833 $334.108 $219.895
</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 year beginning with the
year in which the IPO occurred, through and including December 31, 1999. The
material in this chart is not soliciting material, is not deemed filed with
the SEC and is not incorporated by reference in any filing of the Company
under the Securities Act of 1933, as amended, (the "1933 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.
CERTAIN TRANSACTIONS
In December 1995 the Company entered into a collaboration agreement with
Bristol-Myers Squibb Company to develop and commercialize certain
antiangiogenesis therapeutics. On February 9, 1999, the original BMS
collaboration was modified such that the final payment of $611,667 under the
agreement was paid on June 5, 1999. As amended, BMS has no further funding
obligation to the Company as of August 9, 1999.
See also "Executive Compensation and Other Matters -- Compensation
Committee Interlocks and Insider Participation", regarding Mark C. M. Randall.
Donald S. Brooks, a director of the Company and our Vice President, Legal
Affairs is of counsel to the law firm of Carella, Byrne, Bain, Gilfillan,
Cecchi, Stewart & Olstein, which provided certain legal services to the Company
in 1999 and will continue to provide legal services.
16
<PAGE> 21
GENERAL
The Management of the Company does not know of any matters other than those
stated in this Proxy Statement that are to be presented for action at the Annual
Meeting. If any other matters should properly come before the Annual 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 that 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 proxies by
telephone without additional compensation. The Company does not expect to pay
any compensation for the solicitation of proxies.
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,
1999 (AS FILED WITH THE SEC, INCLUDING THE FINANCIAL STATEMENTS THERETO). ALL
SUCH REQUESTS SHOULD BE DIRECTED TO INVESTOR RELATIONS, ENTREMED, INC., 9640
MEDICAL CENTER DRIVE, ROCKVILLE, MARYLAND 20850.
STOCKHOLDER PROPOSALS
The annual meeting of stockholders for the fiscal year ending December 31,
2000 is expected to be held in June 2001 (the "Next Annual Meeting"). All
proposals intended to be presented at the Next Annual Meeting must be received
at the Company's executive offices, which are located at 9640 Medical Center
Drive, Rockville, Maryland 20850, Attention: Corporate Secretary, not later than
January 19, 2001, to receive consideration for inclusion in the Proxy Statement
and form of proxy related to that meeting.
Pursuant to the proxy rules under the 1934 Act, the Company's stockholders
are notified that the deadline for providing the Company with timely notice of
any stockholder proposal to be submitted outside of the Rule 14a-8 process for
consideration at the Next Annual Meeting will be April 3, 2001. As to all such
matters which the Company does not have notice on or prior to that date,
discretionary authority to vote on such proposal shall be granted to the persons
designated in the Company's proxy related to the Next Annual Meeting.
By Order of the Board of Directors,
John W. Holaday, Ph.D.
Chairman, President and Chief
Executive Officer
May 19, 2000
17
<PAGE> 22
ANNEX A
ENTREMED, INC.
1999 LONG-TERM INCENTIVE PLAN, AS AMENDED
1. PURPOSE AND TYPES OF AWARDS
EntreMed, Inc., a Delaware corporation (the "Corporation"), maintained
the EntreMed, Inc. Amended and Restated 1996 Stock Option Plan (the "Prior
Plan"). The Prior Plan has been replaced with the 1999 Long-Term Incentive Plan
as set forth herein, effective March 31, 1999, subject to the approval of the
stockholders of the Corporation within twelve months of such effective date (the
"Plan"). Notwithstanding anything herein to the contrary, nothing in this Plan
shall adversely affect the rights or obligations, under any Award granted under
the Prior Plan, of any grantee or holder of an Award without such person's
approval.
The purpose of the Plan is to promote the long-term growth and
profitability of the Corporation by: (i) providing key people with incentives to
improve stockholder value and to contribute to the growth and financial success
of the Corporation and (ii) enabling the Corporation to attract, retain and
reward the best-available persons.
The Plan permits the granting of stock options (including incentive stock
options qualifying under Code section 422 and nonqualified stock options), stock
appreciation rights, restricted or unrestricted stock awards, phantom stock,
performance awards, or any combination of the foregoing.
2. DEFINITIONS
Under this Plan, except where the context otherwise indicates, the
following definitions apply:
(a) "Administrator" shall have the meaning set forth in Section 3(a).
(b) "Affiliate" shall mean any entity, whether now or hereafter existing,
which controls, is controlled by, or is under common control with, the
Corporation (including, but not limited to, joint ventures, limited liability
companies, and partnerships). For this purpose, "control" shall mean ownership
of 50% or more of the total combined voting power or value of all classes of
stock or interests of the entity.
(c) "Award" shall mean any stock option, stock appreciation right, stock
award, phantom stock award, or performance award.
(d) "Board" shall mean the Board of Directors of the Corporation.
(e) "Code" shall mean the Internal Revenue Code of 1986, as amended, and
any regulations promulgated thereunder.
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(f) "Common Stock" shall mean shares of common stock of the Corporation,
$.01 par value.
(g) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(h) "Fair Market Value" of a share of the Corporation's Common Stock for
any purpose on a particular date shall mean the last reported sale price per
share of Common Stock, regular way, on such date or, in case no such sale takes
place on such date, the average of the closing bid and asked prices, regular
way, in either case as reported in the principal consolidated transaction
reporting system with respect to securities listed or admitted to trading on a
national securities exchange or included for quotation on the Nasdaq-National
Market, or if the Common Stock is not so listed or admitted to trading or
included for quotation, the last quoted price, or if the Common Stock is not so
quoted, the average of the high bid and low asked prices, regular way, in the
over-the-counter market, as reported by the National Association of Securities
Dealers, Inc. Automated Quotation System or, if such system is no longer in use,
the principal other automated quotations system that may then be in use or, if
the Common Stock is not quoted by any such organization, the average of the
closing bid and asked prices, regular way, as furnished by a professional market
maker making a market in the Common Stock as selected in good faith by the
Administrator or by such other source or sources as shall be selected in good
faith by the Administrator. If, as the case may be, the relevant date is not a
trading day, the determination shall be made as of the next preceding trading
day. As used herein, the term "trading day" shall mean a day on which public
trading of securities occurs and is reported in the principal consolidated
reporting system referred to above, or if the Common Stock is not listed or
admitted to trading on a national securities exchange or included for quotation
on the Nasdaq-National Market, any business day.
(i) "Grant Agreement" shall mean a written document memorializing the
terms and conditions of an Award granted pursuant to the Plan and shall
incorporate the terms of the Plan.
(j) "Participants" shall have the meaning set forth in Section 5.
(k) "Parent" shall mean a corporation, whether nor or hereafter existing,
within the meaning of the definition of "parent corporation" provided in Code
section 424(e), or any successor thereto.
(l) "Performance Goals" shall mean performance goals established by the
Administrator which may be based on one or more business criteria selected by
the Administrator that apply to an individual or group of individuals, a
business unit, or the Corporation and/or one or more of its Affiliates either
separately or together, over such performance period as the Administrator may
designate, including, but not limited to, business criteria based on operating
income, earnings or earnings growth, sales, return on assets, equity or
investment, regulatory compliance, satisfactory internal or external audits,
improvement of financial ratings, achievement of balance sheet or income
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<PAGE> 24
statement objectives, or any other objective goals established by the
Administrator, and may be absolute in their terms or measured against or in
relationship to other companies comparably, similarly or otherwise situated.
(m) "Subsidiary" and "subsidiaries" shall mean only a corporation or
corporations, whether now or hereafter existing, within the meaning of the
definition of "subsidiary corporation" provided in section 424(f) of the Code,
or any successor thereto.
(n) "Ten-Percent Stockholder" shall mean a grantee who (applying the
rules of Code section 424(d)) owns stock possessing more than 10% of the total
combined voting power or value of all classes of stock or interests of the
Corporation or an Affiliate.
3. ADMINISTRATION
(a) Administration of the Plan. The Plan shall be administered by the
Board or by such committee or committees as may be appointed by the Board from
time to time (the Board, committee or committees hereinafter referred to as the
"Administrator").
(b) Powers of the Administrator. The Administrator shall have all the
powers vested in it by the terms of the Plan, such powers to include authority,
in its sole and absolute discretion, to grant Awards under the Plan, prescribe
Grant Agreements evidencing such Awards and establish programs for granting
Awards.
The Administrator shall have full power and authority to take all other
actions necessary to carry out the purpose and intent of the Plan, including,
but not limited to, the authority to: (i) determine the eligible persons to
whom, and the time or times at which Awards shall be granted; (ii) determine the
types of Awards to be granted; (iii) determine the number of shares to be
covered by or used for reference purposes for each Award; (iv) impose such
terms, limitations, restrictions and conditions upon any such Award as the
Administrator shall deem appropriate, including, but not limited to, whether a
stock option shall be an incentive stock option or a nonqualified stock option,
any exceptions to nontransferability, any Performance Goals applicable to
Awards, any provisions relating to vesting, any circumstances in which the
Awards would terminate, the period during which Awards may be exercised, and the
period during which Awards shall be subject to restrictions; (v) modify, amend,
extend or renew outstanding Awards, accept the surrender of outstanding Awards
and substitute new Awards, or specify a lower or higher exercise price, or a
longer or shorter term, for any substituted Awards than the surrendered Awards,
or impose any other provisions that are authorized by this Plan (provided
however, that, except as provided in Section 7(f)(ii) of the Plan, any
modification that would materially adversely affect any outstanding Award shall
not be made without the consent of the holder); (vi) accelerate, extend (as long
as such extension shall not cause the Plan to fail to comply with Code section
422, if applicable) or otherwise change the time in which an Award may be
exercised or becomes payable and to waive or accelerate the lapse, in whole or
in part, of any restriction or condition with respect to such Award, including,
but not limited to, any restriction or condition with respect to the vesting or
exercisability of an Award due to termination of any
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<PAGE> 25
grantee's employment or other relationship with the Corporation; and (vii)
establish objectives and conditions, if any, for earning Awards and determining
whether Awards will be paid after the end of a performance period.
In making these determinations, the Administrator may take into account
the nature of the services rendered or to be rendered by the Award recipients,
their present and potential contributions to the success of the Corporation and
its Affiliates, and such other factors as the Administrator in its discretion
shall deem relevant. Subject to the provisions of the Plan, the Administrator
shall have full power and authority, in its sole and absolute discretion, to
administer and interpret the Plan and to adopt and interpret such rules,
regulations, agreements, guidelines and instruments for the administration of
the Plan and for the conduct of its business as the Administrator deems
necessary or advisable.
(c) Non-Uniform Determinations. The Administrator's determinations under
the Plan (including, without limitation, determinations of the persons to
receive Awards, the form, amount and timing of such Awards, the terms and
provisions of such Awards and the Grant Agreements evidencing such Awards) need
not be uniform and may be made by the Administrator selectively among persons
who receive, or are eligible to receive, Awards under the Plan, whether or not
such persons are similarly situated.
(d) Limited Liability. To the maximum extent permitted by law, no member
of the Administrator shall be liable for any action taken or decision made in
good faith relating to the Plan or any Award thereunder.
(e) Effect of Administrator's Decision. All actions taken and decisions
and determinations made by the Administrator on all matters relating to the Plan
pursuant to the powers vested in it hereunder shall be in the Administrator's
sole and absolute discretion and shall be conclusive and binding on all parties
concerned, including the Corporation, its stockholders, any Participants and any
other employee, consultant, or director of the Corporation, and their respective
successors in interest.
4. SHARES AVAILABLE FOR THE PLAN
(a) Maximum Issuable Shares. Subject to adjustments as provided in
Section 7(f), the shares of Common Stock that may be issued with respect to
Awards granted under the Plan shall not exceed an aggregate of 1,750,000 shares
of Common Stock. The Corporation shall reserve such number of shares for Awards
under the Plan, subject to adjustments as provided in Section 7(f). If any
Award, or portion of an Award, under the Plan expires or terminates unexercised,
becomes unexercisable or is forfeited or otherwise terminated, surrendered or
canceled as to any shares, or if any shares of Common Stock are surrendered to
the Corporation in connection with any Award (whether or not such surrendered
shares were acquired pursuant to any Award), the shares subject to such Award
and the surrendered shares shall thereafter be available for further Awards
under the Plan; provided, however, that any such shares that are surrendered to
the Corporation in connection with any Award or that are otherwise
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forfeited after issuance shall not be available for purchase pursuant to
incentive stock options intended to qualify under Code section 422.
(b) Maximum Awards. Subject to adjustments as provided in Section 7(f),
the maximum number of shares of Common Stock subject to Awards of any
combination that may be granted during any one calendar year of the Corporation
to any one individual under this Plan shall be limited to 150,000.
5. PARTICIPATION
Participation in the Plan shall be open to all persons who are at the time of
the grant of an Award employees (including persons who may become employees),
officers, directors, and consultants of the Corporation, or of any Affiliate of
the Corporation, as may be selected by the Administrator from time to time. A
Participant who has been granted an Award may, if he or she is otherwise
eligible, be granted additional Awards if the Administrator so determines.
6. AWARDS
The Administrator, in its sole discretion, establishes the terms of all
Awards granted under the Plan. All Awards shall be subject to the terms and
conditions provided in the Grant Agreement.
(a) Stock Options. The Administrator may from time to time grant to
eligible Participants Awards of incentive stock options as that term is defined
in Code section 422 or nonqualified stock options; provided, however, that
Awards of incentive stock options shall be limited to employees of the
Corporation or of any Parent or Subsidiary of the Corporation. Options intended
to qualify as incentive stock options under Code section 422 must have an
exercise price at least equal to Fair Market Value on the date of grant or at
least 110% of Fair Market Value in the case of a Ten-Percent Stockholder, [but
nonqualified stock options may be granted with an exercise price less than Fair
Market Value.] No stock option shall be an incentive stock option unless so
designated by the Administrator at the time of grant and such designation is
reflected in the Grant Agreement evidencing such stock option.
(b) Stock Appreciation Rights. The Administrator may from time to time
grant to eligible Participants Awards of Stock Appreciation Rights ("SARs"). A
SAR may be exercised in whole or in part as provided in the applicable Grant
Agreement and entitles the grantee to receive, subject to the provisions of the
Plan and the Grant Agreement, a payment having an aggregate value equal to the
product of (i) the excess of (A) the Fair Market Value on the exercise date of
one share of Common Stock over (B) the base price per share specified in the
Grant Agreement, multiplied by (ii) the number of shares covered by the SAR, or
portion thereof, which is exercised. Payment by the Corporation of the amount
receivable upon any exercise of a SAR may be made by the delivery of Common
Stock or cash, or any combination of Common Stock and cash, as specified in the
Grant Agreement. If upon settlement of the exercise of a SAR a grantee is to
receive a portion of such payment in shares of Common Stock, the number of
shares
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<PAGE> 27
shall be determined by dividing such portion by the Fair Market Value of a share
of Common Stock on the exercise date. No fractional shares shall be used for
such payment and the Administrator shall determine whether cash shall be given
in lieu of such fractional shares or whether such fractional shares shall be
eliminated.
(c) Stock Awards. The Administrator may from time to time grant
restricted or unrestricted stock Awards to eligible Participants in such
amounts, on such terms and conditions (which terms and conditions may condition
the vesting or payment of Stock Awards on the achievement of one or more
Performance Goals), and for such considerations, including no consideration or
such minimum consideration as may be required by law, as it shall determine.
(d) Phantom Stock. The Administrator may from time to time grant Awards
to eligible Participants denominated in stock-equivalent units ("Phantom Stock")
in such amounts and on such terms and conditions as it shall determine, which
terms and conditions may condition the vesting or payment of Phantom Stock on
the achievement of one or more Performance Goals. Phantom Stock units granted to
a Participant shall be credited to a bookkeeping reserve account solely for
accounting purposes and shall not require a segregation of any of the
Corporation's assets. An Award of Phantom Stock may be settled in Common Stock,
in cash, or in a combination of Common Stock and cash, as specified in the Grant
Agreement. Except as otherwise provided in the applicable Grant Agreement, the
grantee shall not have the rights of a stockholder with respect to any shares of
Common Stock represented by a Phantom Stock unit solely as a result of the grant
of a Phantom Stock unit to the grantee.
(e) Performance Awards. The Administrator may, in its discretion, grant
performance Awards, which become payable on account of attainment of one or more
Performance Goals established by the Administrator. Performance Awards may be
paid by the delivery of Common Stock or cash, or any combination of Common Stock
and cash, as specified in the Grant Agreement.
7. MISCELLANEOUS
(a) Investment Representations. The Administrator may require each person
acquiring shares of Common Stock pursuant to Awards hereunder to represent to
and agree with the Corporation in writing that such person is acquiring the
shares without a view to distribution thereof. The certificates for such shares
may include any legend that the Administrator deems appropriate to reflect any
restrictions on transfer. All certificates for shares issued pursuant to the
Plan shall be subject to such stock transfer orders and other restrictions as
the Administrator may deem advisable under the rules, regulations and other
requirements of the Securities and Exchange Commission, any stock exchange upon
which the Common Stock is then listed or interdealer quotation system upon which
the Common Stock is then quoted, and any applicable federal or state securities
laws. The Administrator may place a legend or legends on any such certificates
to make appropriate reference to such restrictions.
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<PAGE> 28
(b) Compliance with Securities Law. Each Award shall be subject to the
requirement that if, at any time, counsel to the Corporation shall determine
that the listing, registration or qualification of the shares subject to such an
Award upon any securities exchange or interdealer quotation system or under any
state or federal law, or the consent or approval of any governmental or
regulatory body, or that the disclosure of nonpublic information or the
satisfaction of any other condition is necessary in connection with the issuance
or purchase of shares under such an Award, such Award may not be exercised, in
whole or in part, unless such satisfaction of such condition shall have been
effected on conditions acceptable to the Administrator. Nothing herein shall be
deemed to require the Corporation to apply for or to obtain such listing,
registration or qualification, or to satisfy such condition.
(c) Withholding of Taxes. Grantees and holders of Awards shall pay to the
Corporation or its Affiliate, or make provision satisfactory to the
Administrator for payment of, any taxes required to be withheld in respect of
Awards under the Plan no later than the date of the event creating the tax
liability. The Corporation or its Affiliate may, to the extent permitted by law,
deduct any such tax obligations from any payment of any kind otherwise due to
the grantee or holder of an Award. In the event that payment to the Corporation
or its Affiliate of such tax obligations is made in shares of Common Stock, such
shares shall be valued at Fair Market Value on the applicable date for such
purposes.
(d) Loans. The Corporation or its Affiliate may make or guarantee loans
to grantees to assist grantees in exercising Awards and satisfying any
withholding tax obligations.
(e) Transferability. Except as otherwise determined by the Administrator
or provided in a Grant Agreement, no Award granted under the Plan shall be
transferable by a grantee except by will or the laws of descent and
distribution. Unless otherwise determined by the Administrator in accordance
with the provisions of the immediately preceding sentence, during the lifetime
of the grantee, the Award may be exercised only by the grantee, by such
permitted transferees or, during the period the grantee is under a legal
disability, by the grantee's guardian or legal representative. Except as
provided above, the Award may not be assigned, transferred, pledged,
hypothecated or disposed of in any way (whether by operation of law or
otherwise) and shall not be subject to execution, attachment or similar process.
(f) Adjustments; Business Combinations.
(i) Adjustments for Events Affecting Common Stock. In the event of
changes in the Common Stock of the Corporation by reason of any stock dividend,
spin-off, split-up, reverse stock split, recapitalization, reclassification,
merger, consolidation, liquidation, business combination or exchange of shares
and the like, the Administrator shall, in its discretion, make appropriate
substitutions for or adjustments to the maximum number and kind of shares
reserved for issuance or with respect to which Awards may be granted under the
Plan to any individual as provided in Section 4 of the Plan and to the number,
kind and price of shares covered to any individual by outstanding Awards
(without changing the aggregate purchase price as to which such Awards remain
A-7
<PAGE> 29
exercisable) and shall, in its discretion and without the consent of holders of
Awards, make any other substitutions for or adjustments in outstanding Awards,
including but not limited to reducing the number of shares subject to Awards or
providing or mandating alternative settlement methods such as settlement of the
Awards in cash or in shares of Common Stock or other securities of the
Corporation or of any other entity, or in any other matters which relate to
Awards as the Administrator shall, in its sole discretion, determine to be
necessary or appropriate.
(ii) Pooling of Interests Transaction. Notwithstanding anything in
the Plan to the contrary and without the consent of holders of Awards, the
Administrator, in its sole discretion, may make any modifications to any Awards,
including but not limited to cancellation, forfeiture, surrender or other
termination of the Awards in whole or in part regardless of the vested status of
the Award, in order to facilitate any business combination that is authorized by
the Board to comply with requirements for treatment as a pooling of interests
transaction for accounting purposes under generally accepted accounting
principles.
(iii) Adjustments for Other Events. The Administrator is authorized
to make, in its discretion and without the consent of holders of Awards,
adjustments in the terms and conditions of, and the criteria included in, Awards
in recognition of unusual or nonrecurring events affecting the Corporation, or
the financial statements of the Corporation or any Affiliate, or of changes in
applicable laws, regulations, or accounting principles, whenever the
Administrator determines that such adjustments are appropriate in order to
prevent dilution or enlargement of the benefits or potential benefits intended
to be made available under the Plan.
(g) Substitution of Awards in Merger and Acquisitions. Awards may be
granted under the Plan from time to time in substitution for Awards held by
employees or directors of entities who become or are about to become employees
or directors of the Corporation or an Affiliate as the result of a merger or
consolidation of the employing entity with the Corporation or an Affiliate, or
the acquisition by the Corporation or an Affiliate of the assets or stock of the
employing entity. The terms and conditions of any substitute Awards so granted
may vary from the terms and conditions set forth herein to the extent that the
Administrator deems appropriate at the time of grant to conform the substitute
Awards to the provisions of the awards for which they are substituted.
Substitute Awards shall not be counted toward the share limit imposed by Section
4(b).
(h) Foreign Participants. The Administrator may, without amending the
Plan, modify Awards granted to Participants who are foreign nationals or
employed outside the United States to recognize differences in laws, rules,
regulations or customs of such foreign jurisdictions with respect to tax,
securities, currency, employee benefit or other matters.
(i) Termination, Amendment and Modification of the Plan. The Board may
amend, alter or terminate the Plan, or portion thereof, at any time.
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<PAGE> 30
(j) Non-Guarantee of Employment or Service. Nothing in the Plan or in any
Grant Agreement shall confer on an individual any legal or equitable right
against the Corporation, any Affiliate or the Administrator, except as expressly
provided in the Plan or the Grant Agreement. Nothing in the Plan or in any Grant
Agreement thereunder shall (i) constitute inducement, consideration, or contract
for employment or service between an individual and the Corporation or any
Affiliate; (ii) confer any right on an individual to continue in the service of
the Corporation or any Affiliate; or (iii) shall interfere in any way with the
right of the Corporation or any Affiliate to terminate such service at any time
with or without cause or notice, or to increase or decrease compensation for
such service.
(k) Other Employee Benefits. Except as to plans that by their terms
include such amounts as compensation, the amount of any compensation deemed to
be received by a Participant as a result of the exercise of an Award or the sale
of shares received upon such exercise will not constitute compensation with
respect to which any other employee benefits of such Participant are determined,
including, without limitation, benefits under any bonus, pension,
profit-sharing, life insurance or salary continuation plan, except as otherwise
specifically determined by the Administrator.
(l) No Trust or Fund Created. Neither the Plan nor any Award shall create
or be construed to create a trust or separate fund of any kind or a fiduciary
relationship between the Corporation and a grantee or any other person. To the
extent that any grantee or other person acquires a right to receive payments
from the Corporation pursuant to an Award, such right shall be no greater than
the right of any unsecured general creditor of the Corporation.
(m) Governing Law. The validity, construction and effect of the Plan, of
Grant Agreements entered into pursuant to the Plan, and of any rules,
regulations, determinations or decisions made by the Administrator relating to
the Plan or such Grant Agreements, and the rights of any and all persons having
or claiming to have any interest therein or thereunder, shall be determined
exclusively in accordance with applicable federal laws and the laws of the State
of Delaware without regard to its conflict of laws principles.
(n) Effective Date, Termination Date. The Plan is effective as of March
31, 1999, the date on which the Plan, as a replacement to the Prior Plan, was
adopted by the Board, subject to the approval of the stockholders of the
Corporation within twelve months of such effective date. No Award shall be
granted under the Plan after the close of business on March 31, 2009. Subject to
other applicable provisions of the Plan, all Awards made under the Plan prior to
such termination of the Plan shall remain in effect until such Awards have been
satisfied or terminated in accordance with the Plan and the terms of such
Awards.
Date Approved by the Stockholders: June 24, 1999
Date Amendment No. 1 Approved by Stockholders: June __, 2000
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<PAGE> 31
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 James D.
Johnson, Ph.D. 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 Hyatt Regency Bethesda, One Bethesda Metro
Center, Bethesda, Maryland 20814 on June 22, 2000 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 on the reverse.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
<PAGE> 32
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF STOCKHOLDERS
ENTREMED, INC.
JUNE 22, 2000
- PLEASE DETACH AND MAIL IN THE ENVELOPE PROVIDED -
A [X] PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
<TABLE>
<S> <C> <C> <C>
FOR all nominees WITHHOLD
listed at right (except AUTHORITY
as marked to the To vote for all nominees
contrary below) listed at right
1. Election of [ ] [ ] NOMINEES: TERMS EXPIRING 2003
Directors John W. Holaday, Ph.D.
Wendell M. Starke
TERM EXPIRING 2001
Peter S. Knight
(INSTRUCTION: To withhold authority to vote for
any individual nominee, print that nominee's name
on the line provided below.)
- ------------------------------------------------
FOR AGAINST ABSTAIN
2. Approval of an amendment to the 1999 Long- [ ] [ ] [ ]
term Incentive Plan to increase from 750,000 to
1,750,000 the number of shares of common
stock reserved for issuance thereunder.
3. Approval and ratification of the appointment [ ] [ ] [ ]
of Ernst & Young LLP as independent auditors
for the Company.
4. In their discretion upon such other business as may properly come before the
meeting.
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 APPROVAL OF AN
AMENDMENT TO THE 1999 LONG-TERM INCENTIVE PLAN, AND FOR
THE APPROVAL AND RATIFICATION OF THE APPOINTMENT OF ERNST
& YOUNG LLP AS THE INDEPENDENT AUDITORS OF THE COMPANY.
Signature DATED ,2000
-------------------------------------- ----------------------------------- -----------
SIGNATURE IF HELD JOINTLY
NOTE: (Please date, sign as name appears 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.)
</TABLE>
