<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
FILED BY THE REGISTRANT [X] FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
- --------------------------------------------------------------------------------
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
ORAVAX, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
[ORAVAX LOGO]
38 SIDNEY STREET
CAMBRIDGE, MASSACHUSETTS 02139
NOTICE OF 1997 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY 8, 1997
The 1997 Annual Meeting of Stockholders of OraVax, Inc. (the "Company")
will be held at the offices of Hale and Dorr LLP, 31st Floor, 60 State Street,
Boston, Massachusetts, on Tuesday, July 8, 1997 at 10:00 a.m., local time, to
consider and act upon the following matters:
1. To elect two Class II Directors for the ensuing three years.
2. To approve an amendment to the Company's 1995 Stock Option Plan,
providing for an increase from 300,000 to 1,300,000 in the number of
shares of Common Stock reserved for issuance thereunder.
3. To ratify the selection of Coopers & Lybrand L.L.P. as the Company's
independent accountants for the year 1997.
4. To transact such other business as may properly come before the meeting
or any adjournment thereof.
Stockholders of record at the close of business on June 2, 1997 are
entitled to notice of, and to vote at, the meeting. The stock transfer books of
the Company will remain open for the purchase and sale of the Company's Common
Stock.
All stockholders are cordially invited to attend the meeting.
By Order of the Board of Directors,
[SIGNATURE]
KEITH S. EHRLICH, Secretary
Cambridge, Massachusetts
June 13, 1997
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND
SIGN THE ENCLOSED PROXY CARD AND PROMPTLY MAIL IT IN THE ENCLOSED ENVELOPE IN
ORDER TO ASSURE REPRESENTATION OF YOUR SHARES AT THE MEETING. NO POSTAGE NEED BE
AFFIXED IF THE PROXY CARD IS MAILED IN THE UNITED STATES.
<PAGE> 3
ORAVAX, INC.
38 SIDNEY STREET
CAMBRIDGE, MASSACHUSETTS 02139
PROXY STATEMENT FOR THE 1997 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY 8, 1997
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of OraVax, Inc. (the "Company") for use at the
1997 Annual Meeting of Stockholders to be held on July 8, 1997 and at any
adjournment or adjournments of that meeting. All proxies will be voted in
accordance with the instructions contained therein, and if no choice is
specified, the proxies will be voted in favor of the matters set forth in the
accompanying Notice of Meeting. Any proxy may be revoked by a stockholder at any
time before it is exercised by delivery of written revocation to the Secretary
of the Company.
The Company's Annual Report for the year ended December 31, 1996 is being
mailed to stockholders with the mailing of this Notice and Proxy Statement on or
about June 13, 1997.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 1996, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, EXCEPT
FOR EXHIBITS, WILL BE FURNISHED WITHOUT CHARGE TO ANY STOCKHOLDER UPON WRITTEN
REQUEST TO THE SECRETARY OF THE COMPANY, ORAVAX, INC., 38 SIDNEY STREET,
CAMBRIDGE, MASSACHUSETTS 01239.
VOTING SECURITIES AND VOTES REQUIRED
On June 2, 1997, the record date for the determination of stockholders
entitled to notice of and to vote at the meeting, there were outstanding and
entitled to vote an aggregate of 9,988,336 shares of Common Stock of the
Company, $.001 par value per share ("Common Stock"). Holders of Common Stock are
entitled to one vote per share.
Under the Company's By-laws, the holders of a majority of the shares of
Common Stock outstanding and entitled to vote at the Annual Meeting shall
constitute a quorum for the transaction of business at the Annual Meeting.
Shares of Common Stock represented in person or by proxy (including shares which
abstain or do not vote with respect to one or more of the matters presented for
stockholder approval) will be counted for purposes of determining whether a
quorum is present.
The affirmative vote of the holders of a plurality of votes cast by the
stockholders entitled to vote at the Annual Meeting is required for the election
of directors. The affirmative vote of the holders of a majority of the shares of
Common Stock voting on the matter is required for the approval of each of the
other matters to be voted upon.
Shares which abstain from voting as to a particular matter, and shares held
in "street name" by brokers or nominees, who indicate on their proxies that they
do not have discretionary authority to vote such shares as to a particular
matter, will not be counted as votes in favor of such matter, and will also not
be counted as votes cast or shares voting on such matter. Accordingly,
abstentions and "broker non-votes" will have no effect on the voting on a matter
that requires the affirmative vote of a certain percentage of the votes cast or
shares voting on a matter.
<PAGE> 4
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information, as of June 2, 1997,
with respect to the beneficial ownership of the Company's Common Stock by (i)
each person known by the Company to own beneficially more than 5% of the
outstanding shares of Common Stock; (ii) each director and nominee for director;
(iii) each executive officer named in the Summary Compensation Table under the
heading "Executive Compensation" below and (iv) all directors and executive
officers of the Company as a group.
The number of shares of Common Stock beneficially owned by each director or
executive officer is determined under the rules of the Securities and Exchange
Commission, and the information is not necessarily indicative of beneficial
ownership for any other purpose. Under such rules, beneficial ownership includes
any shares as to which the individual has sole or shared voting power or
investment power and also any shares which the individual has the right to
acquire within 60 days after June 2, 1997 through the exercise of any stock
option or other right. Unless otherwise indicated, each person has sole
investment and voting power (or shares such power with his or her spouse) with
respect to the shares set forth in the following table. The inclusion herein of
any shares deemed beneficially owned does not constitute an admission of
beneficial ownership of those shares.
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK PERCENTAGE OF
BENEFICIALLY COMMON STOCK
NAME AND ADDRESS OWNED OUTSTANDING
---------------- ------------ -------------
<S> <C> <C>
5% STOCKHOLDERS
Wellington Management Company, LLP(1)............................... 910,000 9.1%
Medical Science Partners, L.P.(2)................................... 600,857 6.0%
DIRECTORS
Lance K. Gordon(3).................................................. 192,690 1.9%
Jean J. Deleage(4).................................................. 336,281 3.4%
Andre L. Lamotte(5)................................................. 603,695 6.1%
Douglas MacMaster(6)................................................ 13,600 *
Allen Misher(7)..................................................... 3,333 *
C. Boyd Clarke...................................................... -- *
OTHER NAMED EXECUTIVE OFFICERS
Samuel K. Ackerman(8)............................................... 76,825 *
Keith S. Ehrlich(9)................................................. 39,008 *
Thomas P. Monath(10)................................................ 123,126 1.2%
Robert B. Rombauer(11).............................................. 82,733 *
All directors and executive officers as a group (10 persons)(12).... 1,457,228 14.0%
</TABLE>
- ---------------
* Less than 1%.
(1) The information reported is based on a Schedule 13G filed with the
Securities and Exchange Commission on January 24, 1997 by Wellington
Management Company, LLP.
(2) Includes 26,320 shares held by Medical Science II Co-Investment L.P. ("MSP
II-Co") and 149,544 shares held by Medical Science Partners II, L.P. ("MSP
II"). Medical Science Partners, L.P. ("MSP") is an affiliate of MSP II-Co
and MSP II and may be deemed to be the beneficial owner of shares held by
such entities.
(3) Includes 129,461 shares of Common Stock which Dr. Gordon has the right to
acquire within 60 days after June 2, 1997 upon exercise of outstanding
stock options.
2
<PAGE> 5
(4) Includes 281,523 shares held by Alta IV Limited Partnership ("Alta IV") and
51,361 shares held by C.V. Sofinnova Partners Five ("Sofinnova"). Burr,
Egan, Deleage & Co. ("Burr, Egan") serves as the investment advisor to Alta
IV and Sofinnova. Dr. Deleage is the Managing Partner of Burr, Egan and is
a General Partner of Alta IV Management Partners, L.P., the General Partner
of Alta IV, and may be deemed to share voting and investment powers for the
shares held by Alta IV and Sofinnova. Burr, Egan serves as an advisor to
Sofinnova. The principals of Burr, Egan disclaim beneficial ownership of
all such shares held by Alta IV and Sofinnova. The principals of Burr, Egan
disclaim beneficial ownership of all such shares held by Alta IV and
Sofinnova except to the extent of their proportionate pecuniary interest
therein. Dr. Deleage disclaims beneficial ownership of all the shares for
Alta IV and Sofinnova except to the extent of his proportionate pecuniary
interest therein.
(5) Includes 424,993 shares held by MSP, 26,320 shares held by MSP II-Co and
149,544 shares held by MSP II. Dr. Lamotte is the Managing General Partner
of Medical Science Ventures, the General Partner of MSP and is the Managing
General Partner of Medical Science Ventures II, the General Partner of MSP
II and MSP II-Co, and may be deemed to be the beneficial owner of the
shares held by Partner of MSP II and MSP II-Co, and may be deemed to be the
beneficial owner of the shares held by MSP, MSP II and MSP II-Co although
Dr. Lamotte disclaims beneficial ownership of such shares.
(6) Represents shares which Mr. MacMaster may acquire upon the exercise of
options within 60 days after June 2, 1997.
(7) Represents shares which Dr. Misher may acquire upon the exercise of options
within 60 days after June 2, 1997.
(8) Includes 72,225 shares which Dr. Ackerman may acquire upon the exercise of
options within 60 days after June 2, 1997. Dr. Ackerman resigned as an
officer of the Company effective as of January 31, 1997.
(9) Includes 34,982 shares which Mr. Ehrlich may acquire upon the exercise of
options within 60 days after June 2, 1997.
(10) Includes 117,176 shares which Dr. Monath may acquire upon the exercise of
options within 60 days after June 2, 1997.
(11) Includes 79,561 shares which Dr. Rombauer and his spouse may acquire upon
the exercise of options within 60 days after June 2, 1997.
(12) Includes 436,275 shares which all Directors and executive officers as a
group may acquire upon the exercise of options within 60 days after June 2,
1997.
ELECTION OF DIRECTORS
The Company has a classified Board of Directors consisting of two Class I
Directors, two Class II Directors and one Class III Director. At each annual
meeting of stockholders, directors are elected for a full term of three years to
succeed those whose terms are expiring. The Class I Directors were elected at
the 1996 Annual Meeting for a three-year term expiring at the 1999 Annual
Meeting; this year the Class II Directors will be elected for a three-year term
expiring at the 2000 Annual Meeting; and the Class III Director will be elected
at the 1998 Annual Meeting for a three-year term expiring at the 2001 Annual
Meeting.
The persons named in the enclosed proxy will vote to elect as directors C.
Boyd Clarke and Allen Misher, the Class II nominees named below, unless the
proxy is marked otherwise. If a stockholder returns a proxy without contrary
instructions, the persons named as proxies will vote to elect as directors the
two Class II nominees named below. Each of the nominees is currently a member of
the Board of Directors of the
3
<PAGE> 6
Company. Jean J. Deleage, who has been a director since 1991, has informed the
Board that he will resign from the Board at the end of his current term and
therefore will not be standing for re-election to the Board. Each Class II
nominee will be elected to hold office until the 2000 Annual Meeting of
Stockholders and until his successors is duly elected and qualified. All of the
nominees have indicated their willingness to serve, if elected; however, if any
nominee should be unable to serve, the shares of Common Stock represented by
proxies may be voted for a substitute nominee designated by the Board of
Directors.
There are no family relationships between or among any officers or
directors of the Company.
Set forth below are the name and age of each member of the Board of
Directors (including those who are nominees for election as Class II Directors),
and the positions and offices held by him, his principal occupation and business
experience during the past five years, the names of other publicly held
companies of which he serves as a director and the year of the commencement of
his term as a director of the Company. Information with respect to the number of
shares of Common Stock beneficially owned by each director, directly or
indirectly, as of June 2, 1997, appears above under the heading "Stock Ownership
of Certain Beneficial Owners and Management."
NOMINEES FOR TERMS EXPIRING IN 2000 (CLASS II DIRECTORS)
C. Boyd Clarke, age 51, has served as a Director of the Company since March
1997. Since September 1996, Mr. Clarke has served as President of U.S.
Bioscience, Inc., a pharmaceutical company specializing in the development and
commercialization of products for patients with cancer and AIDS. From January
1995 to May 1996, Mr. Clarke served as Vice President, Strategy, Alliance
Management and Development for Merck Vaccines, where he managed a global
alliance with Pasteur Merieux for the development of vaccines. Mr. Clarke served
in other capacities at various units of Merck since 1977. Mr. Clarke received a
B.S. in biochemistry and an M.A. in European History from the University of
Calgary and was a doctoral candidate in European History at University of
Wisconsin.
Allen Misher, Ph.D., age 65, has served as a Director of the Company since
January, 1996. He was elected by the Board of Directors to fill a vacancy
created by the resignation of Robert E. Curry as a Director. Dr. Misher is a
consultant. From 1984 to 1994, he served as President of Philadelphia College of
Pharmacy and Science. From 1982 to 1984, he was a Senior Vice President of
National Medical Care, Inc. From 1964 to 1982 he was employed by SmithKline &
French and SmithKline Corp. in a variety of positions in pharmacology and
research, including President of SmithKline Medical Diagnostics Group from 1978
to 1982 and Group Vice President of SmithKline Corp. from 1978 to 1982. He is
currently on the Board of Directors of G.D. Searle & Co., U.S. Healthcare, Inc.,
U.S. Bioscience, Inc., Litmus Concepts, Inc. and Cortech, Inc. Dr. Misher
received his B.Sc. from the Philadelphia College of Pharmacy and Science and his
Ph.D. in Physiology from the University of Pennsylvania.
DIRECTORS WHOSE TERMS EXPIRE IN 1999 (CLASS I DIRECTORS)
Douglas MacMaster, age 66, has served as a Director of the Company since
March 1993 and was elected Chairman of the Board of Directors in April 1994.
From July 1988 until his retirement in January 1992, Mr. MacMaster served as a
Senior Vice President of Merck & Co., Inc. ("Merck"), a pharmaceutical company,
with responsibility for worldwide chemical and pharmaceutical manufacturing,
worldwide construction, the Agvet division and the Speciality Chemicals Group.
From October 1985 to July 1988, Mr. MacMaster was President of the Merck Sharp &
Dohme Division, with responsibility for the United States human healthcare
business. Mr. MacMaster was an employee of Merck for 30 years. He is currently
on the Board of Directors of American Precision Industries, Inc., Martek
Biosciences Corp., Neose Pharmaceuticals, Inc., Phyto
4
<PAGE> 7
Pharmaceuticals Inc. and U.S. Bioscience, Inc. Mr. MacMaster received his A.B.
degree from St. Francis Xavier University (Canada) and his J.D. degree from
Boston College Law School.
Andre L. Lamotte, Sc.D., age 47, has served as a Director of the Company
since April 1990. Since April 1989, he has served as the Managing General
Partner of Medical Science Ventures, the General Partner of Medical Science
Partners L.P., and as Managing General Partner of Medical Science Ventures II,
the General Partner of Medical Science Partners II, L.P. and Medical Science II
Co-Investment L.P. Dr. Lamotte received a B.S. in General Engineering from Ecole
Centrale Paris, an M.S. in Chemical Engineering and an Sc.D. in Chemical
Engineering from the Massachusetts Institute of Technology, and a M.B.A. from
the Harvard Graduate School of Business Administration.
DIRECTOR WHOSE TERM EXPIRES IN 1998 (CLASS III DIRECTOR)
Lance K. Gordon, Ph.D., age 49, has served as the President and Chief
Executive Officer and a member of the Board of Directors of the Company since
June 1990. From January 1989 to June 1990, Dr. Gordon served as Senior Vice
President of North American Vaccine, Inc., a biopharmaceutical company. From
April 1988 to January 1989, he served as Chief Executive Officer of American
Vaccine Corporation and Selcore Laboratories, Inc., both of which are
biopharmaceutical companies. From 1987 to 1988, Dr. Gordon was Associate
Director, Infectious & Inflammatory Diseases, Clinical Pharmacology -- Drug
Medical Affairs, of E.R. Squibb & Sons, Inc., a pharmaceutical company. From
1981 to 1987, he was Director, Immunobiology Research at Connaught Laboratories,
Ltd., a pharmaceutical company. During his seven years with Connaught
Laboratories, Ltd., Dr. Gordon was responsible for both bacterial and viral
research and development programs. He was the inventor and Project Director of
the Connaught Haemophilus influenzae type b conjugate vaccine, ProHibit. Dr.
Gordon also serves on the advisory boards of the not-for-profit Albert Sabin
Foundation and BioSciences Contract Production, a private biopharmaceutical
services company. Dr. Gordon received a B.A. from the University of California
at Humboldt and a Ph.D. in Biomedical Science from the University of
Connecticut. Dr. Gordon completed his postdoctoral fellowship at the Howard
Hughes Medical Institute.
BOARD AND COMMITTEE MEETINGS
The Company has a standing Audit Committee of the Board of Directors, which
provides the opportunity for direct contact between the Company's independent
accountants and the Board. The Audit Committee has responsibility for
recommending the appointment of the Company's independent accountants, reviewing
the scope and results of audits and reviewing the Company's internal accounting
control policies and procedures. The Audit Committee held two meetings in 1996.
The members of the Audit Committee are Mr. MacMaster and Dr. Deleage.
The Company also has a standing Compensation Committee of the Board of
Directors, which provides recommendations to the Board regarding compensation
programs of the Company. The Compensation Committee is responsible for
establishing and modifying the compensation of all corporate officers of the
Company, adoption and amendment of all stock option and other employee benefit
plans, and the engagement of, arrangements with, and termination of, all
corporate officers of the Company. The Compensation Committee held two meetings
during 1996. The members of the Compensation Committee are Drs. Lamotte and
Misher and Mr. MacMaster. See "Report of the Compensation Committee" below.
The Company does not have a nominating committee or a committee serving a
similar function. Nominations are made by and through the full Board of
Directors.
5
<PAGE> 8
The Board of Directors held four meetings during 1996. Each director
attended at least 75% of the total number of meetings (including consents in
lieu of meetings) of the Board of Directors and all committees of the Board on
which he served.
DIRECTORS' COMPENSATION
Except as described below, the Company's Directors do not receive any cash
compensation for service on the Board of Directors or any committee thereof, but
are reimbursed for expenses actually incurred in connection with attending
meetings of the Board and any committee thereof. The Company pays reasonable
travel and out- of-pocket expenses incurred by non-employee Directors in
connection with attendance at meetings to transact the business of the Company
or attendance at meetings of the Board of Directors or any committee thereof. In
April 1994, the Company entered into an agreement with Mr. MacMaster, Chairman
of the Board of Directors, pursuant to which Mr. MacMaster receives an annual
retainer of $25,000 paid quarterly in advance, a fee of $2,000 per day for
attending meetings of the Board of Directors or other meetings attended at the
request of the Company's President or the Board of Directors, including monthly
advisory meetings, plus travel expenses. In 1996, Mr. MacMaster received $26,000
pursuant to this arrangement. In addition, Mr. MacMaster received an option,
effective February 6, 1995, to purchase 12,750 shares of Common Stock at an
exercise price of $3.529 per share. The option vests in five equal annual
installments commencing one year after the date of grant. In February 1996, the
Company entered into an agreement with Dr. Misher pursuant to which Dr. Misher
receives an annual retainer of $5,000 and a fee of $1,500 per meeting of the
Board of Directors attended. In addition, on February 5, 1996, Dr. Misher
received an option to purchase 10,000 shares of Common Stock at an exercise
price of $13.25 per share. The option vests in three equal annual installments
commencing one year after the date of grant. In March 1997, the Company entered
into an agreement with Mr. Clarke pursuant to which Mr. Clarke receives an
annual retainer of $5,000 and a fee of $1,500 per meeting of the Board of
Directors attended.
On March 24, 1997, the Board of Directors adopted a stock option policy
under which, effective as of May 1, 1997, each non-employee Director shall be
granted an option to purchase 15,000 shares of Common Stock for each three-year
term to which the Director is elected, such option to vest in three equal annual
installments commencing one year after the date of grant. In order to implement
the stock option policy for the remainder of the current terms of the existing
non-employee Directors, the Board of Directors (i) granted Dr. Lamotte an option
to purchase 10,000 shares of Common Stock at an exercise price of $2.50 per
share, such option to vest in two equal annual installments commencing on May 1,
1998; (ii) granted Mr. MacMaster an option to purchase 4,900 shares of Common
Stock at an exercise price of $2.50 per share, such option to vest in two equal
annual installments commencing on May 1, 1998; (iii) granted Dr. Misher an
option to purchase 3,333 shares of Common Stock at an exercise price of $2.50
per share, such option to vest in two equal annual installments commencing on
May 1, 1998; and (iv) granted Mr. Clarke an option to purchase 15,000 shares of
Common Stock at an exercise price of $2.50 per share, such option to vest in
three equal annual installments commencing on May 1, 1998.
For a discussion of certain transactions between the Company and affiliates
of certain Directors, see "Certain Transactions."
6
<PAGE> 9
EXECUTIVE COMPENSATION
Summary Compensation Table. The following table sets forth certain
information with respect to the annual and long-term compensation for the fiscal
year ending December 31, 1996 of the Company's President and Chief Executive
Officer and each of the Company's four other most highly compensated executive
officers (the Chief Executive and such other executive officers are hereinafter
referred to as the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION(1) ------------------
-------------------------------------- SECURITIES ALL OTHER
SALARY BONUS OTHER ANNUAL UNDERLYING OPTIONS COMPENSATION
YEAR ($) ($)(2) COMPENSATION(3) (#) ($)(4)
---- -------- ------- --------------- ------------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Lance K. Gordon.............. 1996 $250,000 $56,250 $ 6,067 40,000 --
President and Chief 1995 $220,500 $40,794 $ 7,009 -- $ 45,653
Executive Officer 1994 $180,159 $30,000 $ 5,099 90,023 $ 47,924
Samuel K. Ackerman(5)........ 1996 $231,525 $41,675 $ 4,408 -- --
Vice President, Development 1995 $220,500 $40,793 $ 6,722 -- --
and Regulatory Affairs 1994 $205,000 $54,286 $ 6,124 38,250 $229,356(6)
Thomas P. Monath............. 1996 $190,000 $42,750 $ 3,350 -- --
Vice President, Research 1995 $157,500 $29,138 $ 5,034 -- --
and Medical Affairs 1994 $142,500 $27,000 $ 2,221 55,012 --
Robert B. Rombauer........... 1996 $157,290 $23,594 $ 7,933 -- --
Vice President, Business 1995 $147,000 $25,725 $ 7,008 -- --
Development, Sales and 1994 $135,138 $26,000 $ 5,257 33,341 $ 10,000
Marketing
Keith S. Ehrlich............. 1996 $145,000 $26,100 $ 799 10,000 --
Vice President, Finance and 1995 $131,250 $24,938 $ 1,039 -- --
Administration, Treasurer 1994 $120,122 $26,833 $ 5,019 21,250 --
and Secretary
</TABLE>
- ---------------
(1) Includes amounts payable in a subsequent fiscal year for services rendered
by the Named Executive Officer in the fiscal year.
(2) Other compensation in the form of perquisites and other personal benefits
has been omitted because it constitutes less than the lesser of $50,000 or
ten percent of the total annual salary and bonus for the Named Executive
Officer.
(3) Includes term-life insurance premiums and financial planning expenses paid
by the Company to the Named Executive Officer.
(4) Represents relocation allowances paid by the Company.
(5) Dr. Ackerman resigned as an officer of the Company effective as of January
31, 1997.
(6) The $229,356 relocation reimbursement paid to Dr. Ackerman consists of
$47,922 in temporary living and commuting costs, $87,683 in moving and real
estate closing costs and $93,751 for reimbursement of related federal and
state income taxes.
7
<PAGE> 10
Option Grant Table. The following table sets forth certain information
regarding options granted by the Company to the Named Executive Officers during
the fiscal year ended December 31, 1996:
OPTION GRANTS IN FISCAL YEAR
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF PERCENT OF POTENTIAL REALIZABLE
COMMON TOTAL VALUE AT ASSUMED
STOCK OPTIONS STOCK PRICE
UNDERLYING GRANTED TO APPRECIATION FOR
OPTIONS EMPLOYEES EXERCISE OPTION TERM(2)
GRANTED IN FISCAL PRICE EXPIRATION --------------------
NAME (#)(1) YEAR ($/SH) DATE 5%($) 10%($)
---- ---------- ---------- -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Lance K. Gordon................. 40,000 31.35% $13.25 3/11/06 $333,314 $844,684
Keith S. Ehrlich................ 10,000 7.84% $13.25 3/11/06 $ 83,329 $211,711
</TABLE>
- ---------------
(1) Options vest in five equal annual installments commencing one year after the
date of grant.
(2) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based on assumed rates of stock price appreciation of 5% and 10%
compounded annually from the date the respective options were granted to
their expiration date. This table does not take into account any
appreciation in the price of the Common Stock to date. Actual gains, if any,
on stock option exercises will depend on the future performance of the
Common Stock and the date at which the options are exercised.
Year-End Option Table. The following table sets forth certain information
regarding stock options exercised during the year ended December 31, 1996 and
stock options held as of December 31, 1996 by the Named Executive Officers.
AGGREGATED OPTION EXERCISES IN LAST
FISCAL YEAR AND FISCAL YEAR-END
OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES
NUMBER OF UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-
SHARES OF OPTIONS AT THE-MONEY OPTIONS AT
COMMON STOCK VALUE FISCAL YEAR-END(#) FISCAL YEAR-END($)(1)
ACQUIRED ON REALIZED ------------------------- -------------------------
EXERCISE(#) ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
------------ -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Lance K. Gordon.......... -- -- 95,410/73,816 $ 358,022/226,222
Samuel K. Ackerman(2).... -- -- 72,225/44,200 $ 203,835/119,946
Thomas B. Monath......... -- -- 98,796/48,263 $ 402,221/152,391
Robert B. Rombauer....... -- -- 71,458/36,717 $ 295,731/125,846
Keith S Ehrlich.......... -- -- 28,294/21,605 $ 78,967/58,089
</TABLE>
- ---------------
(1) Based on the fair value of the Common Stock on December 31, 1996 ($5.25),
less the option exercise price.
(2) Dr. Ackerman resigned as an officer of the Company effective as of January
31, 1997.
8
<PAGE> 11
REPORT OF THE COMPENSATION COMMITTEE
The executive compensation program of the Company is administered by the
Compensation Committee, composed of Drs. Lamotte and Misher and Mr. MacMaster,
each of whom is a non-employee director.
The Company's executive compensation program is designed to retain and
reward executives who are capable of leading the Company in the achievement of
its business objectives. All decisions by the Compensation Committee relating to
the compensation of the Company's officers are reviewed by the full Board.
Compensation Philosophy
The objectives of the executive compensation program are (i) to align
compensation with business objectives and individual performance and (ii) to
attract, retain and reward executive officers who contribute to the long-term
success of the Company. The Company's executive compensation philosophy is based
on the principles of competitive and fair compensation and sustained
performance.
Competitive and Fair Compensation. The Company is committed to providing
an executive compensation program that helps attract and retain highly qualified
executives. To ensure that compensation is competitive, the Company compares its
compensation practices with those of other companies in the industry and sets
its compensation guidelines based on this review. The Company believes
compensation for its executive officers is within the range of compensation paid
to executives with comparable qualifications, experience and responsibilities in
companies with similar businesses and of comparable size and success. The
Company also strives to achieve equitable relationships both among the
compensation of individual officers and between the compensation of officers and
other employees throughout the organization.
Sustained Performance. Executive officers are rewarded based upon
corporate performance and individual performance. Corporate performance is
evaluated by reviewing the extent to which strategic and business plan goals are
met, including such factors as achievement of operating budgets, establishment
of strategic licensing and development alliances with third parties, timely
development of new processes and products, and performance relative to
competitors. Individual performance is evaluated by reviewing attainment of
specified individual objectives and the degree to which teamwork and company
values are fostered.
In evaluating each executive officer's performance, the Company generally
conforms to the following process:
- Company and individual goals and objectives generally will be set at the
beginning of the performance cycle.
- At the end of the performance cycle, the accomplishment of the
executive's goals and objectives and his contributions to the Company
will be evaluated.
- The executive's performance will then be compared with peers within the
Company and the results will be communicated to the executive.
- The comparative results, combined with comparative compensation practices
of other companies in the industry, will be then used to determine salary
and stock compensation levels.
Annual compensation for the Company's executives generally consists of
three elements -- salary, cash bonuses and stock options.
The salary for executives is generally set by reviewing compensation for
competitive positions in the market and the historical compensation levels of
the executives. Increases in annual salaries and payment of
9
<PAGE> 12
bonus awards will be based on actual corporate and individual performance
against targeted performance and various objective performance criteria.
Targeted performance criteria vary for each executive, are based on his area of
responsibility, and may include continued innovation and development of the
Company's technology and products, timely development of new products or
processes, implementation of financing strategies and establishment of strategic
licensing and developmental alliances with third parties. Subjective performance
criteria include an executive's ability to motivate others, develop the skills
necessary to grow as the Company matures, recognize and pursue new business
opportunities and initiate programs to enhance the Company's growth and success.
The Committee does not use a specific formula based on these targeted
performance and subjective criteria, but makes an evaluation of each executive
officer's contributions in light of all such criteria. The Company did not
increase the annual salaries of its executive officers for 1997.
Compensation at the executive officer level also includes the long-term
incentives offered by stock options. The stock option program is designed to
promote the identity of long-term interests between the Company's employees and
its shareholders and assist in the retention of executives. The size of option
grants is generally intended to reflect the executive's position with the
Company and his contributions to the Company, including his success in achieving
the individual performance criteria described above. The option program
generally uses a five-year vesting period to encourage key employees to continue
in the employ of the Company.
Executive officers of the Company are also eligible to participate in the
Company's 1995 Employee Stock Purchase Plan (the "Purchase Plan"). The Purchase
Plan is available to virtually all employees of the Company and generally
permits participants to purchase shares at a discount of approximately 15% of
the fair market value at the beginning or end of the applicable purchase period.
Compliance with Internal Revenue Code Section 162(m). Section 162(m) of
the Internal Revenue Code of 1986, as amended (the "Code"), enacted in 1993,
generally disallows a tax deduction to public companies for compensation over $1
million paid to the corporation's chief executive officer and four other most
highly compensated executive officers. Qualifying performance compensation will
not be subject to the deduction limit if certain requirements are met. The
Company intends to structure the performance-based portion of the compensation
of its executive officers in a manner that complies with the new statute to
mitigate any disallowance of deductions.
Dr. Gordon's 1996 Compensation. Dr. Gordon, President and Chief Executive
Officer of the Company, is eligible to participate in the same executive
compensation plans available to other executives. Dr. Gordon's salary for 1996
increased from $220,500 to $250,000. Dr. Gordon also received bonus compensation
of $56,250 in 1996. The Compensation Committee believes that Dr. Gordon's annual
compensation has been set at a level competitive with other companies in the
industry.
COMPENSATION COMMITTEE
Andre L. Lamotte
Allen Misher
Douglas MacMaster
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current members of the Compensation Committee are Drs. Lamotte and
Misher and Mr. MacMaster. No member of the Compensation Committee was at any
time during 1996, or formerly, an officer or employee of the Company or any
subsidiary of the Company, nor has any member of the
10
<PAGE> 13
Compensation Committee had any relationship with the Company requiring
disclosure under Item 404 of Regulation S-K under the Securities Exchange Act of
1934.
During 1996, no executive officer of the Company has served as a director
or member of the Compensation Committee (or other committee serving an
equivalent function) of any other entity, one of whose executive officers served
as a director of or member of the Compensation Committee of the Company.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely on its review of copies of reports filed pursuant to Section
16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
or written representations from persons required to file such reports
("Reporting Persons"), the Company believes that, except as follows, all such
filings required to be made by such Reporting Persons were timely made in
accordance with the requirements of the Exchange Act. In March 1996, Dr. Misher
filed his initial Form 3 more than 10 days after his election to the Board of
Directors.
EMPLOYMENT AGREEMENTS
Under the terms of an employment agreement dated July 19, 1990, Dr. Gordon
serves as President, Chief Executive Officer and a director of the Company and
is entitled to receive an annual base salary, as determined by the Board of
Directors, of $250,000 for 1997, plus a bonus based upon the achievement of
certain defined management objectives. The employment agreement automatically
renews for successive 12-month periods. Dr. Gordon's employment is terminable
(i) by the Company or Dr. Gordon at any time upon not less than six months'
prior written notice or (ii) by the Company, for "cause" (as defined in the
employment agreement), immediately upon written notice. In the event the Company
elects not to extend the employment agreement or terminates Dr. Gordon without
"cause," the Company must pay Dr. Gordon a one time severance payment equal to
fifty percent (50%) of his annual base salary in effect at the time. Dr. Gordon
has agreed, for a period of one year following termination of his employment,
not to engage in any business activity that directly or indirectly competes with
the Company or to provide any services to the Company's competition or its
clients. Dr. Gordon also has agreed not to disclose any of the Company's
proprietary information to third parties without the written approval of the
Company either during or after his employment. In connection with the execution
of his employment agreement, the Company agreed to sell, and Dr. Gordon agreed
to buy, 70,834 shares of the Company's Common Stock at a purchase price of
$0.235 per share.
Under the terms of an employment agreement dated October 18, 1991, Dr.
Monath serves as Vice President, Research and Development and is entitled to
receive an annual base salary of $190,000 for 1996. Pursuant to the employment
agreement, the Company granted Dr. Monath an option to purchase 39,006 shares of
the Company's Common Stock at $0.706 per share, now fully vested, and reimbursed
Dr. Monath for expenses associated with his relocation to the Boston,
Massachusetts area.
Under the terms of an employment agreement dated May 1, 1992, Dr. Rombauer
is entitled to receive an annual base salary of $157,290 for 1997. Pursuant to
the employment agreement, the Company granted to Dr. Rombauer an option to
purchase 27,625 shares of the Company's Common Stock at $0.706 per share, which
is now fully vested. The Company also agreed to reimburse Dr. Rombauer for
expenses associated with his relocation to the Boston, Massachusetts area.
Under the terms of an employment agreement dated October 8, 1993, Mr.
Ehrlich serves as the Vice President of Finance and Administration and Chief
Financial Officer and is entitled to receive an annual salary of $145,000 for
1997, plus a bonus based upon the achievement of certain defined management
objectives.
11
<PAGE> 14
Pursuant to the employment agreement, the Company granted to Mr. Ehrlich an
option to purchase 35,419 shares of Common Stock at $2.353 per share, vesting
over a four-year period.
The employment agreements with Drs. Monath and Rombauer and Mr. Ehrlich
(each an "Executive" and collectively, the "Executives") are each for an initial
period of three years and are thereafter automatically renewable for successive
twelve-month periods unless terminated by either party by giving six-months'
prior written notice to the other. Each of the Executives' employment is
terminable by the Company, by giving prior written notice, at any time, with or
without "cause" (as defined in each employment agreement). In the event the
Company terminates any Executive's employment without "cause," the Executive is
entitled to receive his then current salary for a period of six months following
such termination. In addition, each Executive has agreed, for a period of three
years in the case of Dr. Monath and one year for Drs. Rombauer and Ackerman and
Mr. Ehrlich, not to engage in any business activity that directly or indirectly
competes with the Company or to provide any services to the Company's
competition. Each Executive has also entered into a Confidential Information and
Invention Assignment Agreement with the Company pursuant to which each Executive
has agreed (i) not to disclose any of the Company's proprietary information to
third parties without the prior written approval of the Company either during or
after his employment and (ii) to assign to the Company his full right and title
in and to any inventions made during the course of his employment with the
Company.
12
<PAGE> 15
COMPARATIVE STOCK PERFORMANCE
The comparative stock performance graph below compares the cumulative
stockholder return on the Common Stock of the Company for the period from June
8, 1995 (the effective date of the initial public offering of the Company's
Common Stock) through December 31, 1996 with the cumulative total return on (i)
the Total Return Index for the Nasdaq Stock Market (U.S. Companies) (the "Nasdaq
Composite Index"), and (ii) the Nasdaq Pharmaceutical Index. This graph assumes
the investment of $100 in the Company's Common Stock, the Nasdaq Composite Index
and the Nasdaq Pharmaceutical Index on June 8, 1995 and assumes that all
dividends are reinvested. Measurement points are on June 8, 1995, December 29,
1995 and December 31, 1996. Prior to June 8, 1995, the Company's Common Stock
was not registered under the Exchange Act.
<TABLE>
<CAPTION>
Nasdaq
Measurement Period Nasdaq Composite Pharmaceutical
(Fiscal Year Covered) Index Index OraVax, Inc.
<S> <C> <C> <C>
6/8/95 100.00 100.00 100.00
12/29/95 120.32 159.71 117.50
12/31/96 148.00 159.88 52.50
</TABLE>
CERTAIN TRANSACTIONS
For a description of certain transactions between the Company and Mr.
MacMaster, Dr. Misher and Mr. Clarke, directors of the Company, see "Directors'
Compensation" above. For a description of certain employment and other
arrangements between the Company and its executive officers, see "Employment
Agreements" above.
The Company has a policy that all material transactions between the Company
and its officers, directors and other affiliates must (i) be approved by a
majority of the members of the Company's Board of Directors and by a majority of
the disinterested members of the Company's Board of Directors and (ii) be on
terms no less favorable to the Company than could be obtained from unaffiliated
third parties. In addition, this policy requires that any loans by the Company
to its officers, directors or other affiliates be for bona fide business
purposes only.
13
<PAGE> 16
APPROVAL OF AMENDMENT TO 1995 STOCK OPTION PLAN
Under the terms of the Company's 1995 Stock Option Plan (the "1995 Stock
Option Plan"), the Company is authorized to grant options to purchase up to
300,000 shares of Common Stock to employees, officers or directors of, and
consultants or advisors to, the Company and it subsidiaries. The Company may
grant options that are intended to qualify as incentive stock options within the
meaning of Section 422 of the Code ("incentive stock options") or nonstatutory
options not intended to qualify as incentive stock options. The purpose of the
1995 Stock Option Plan is to ensure that the Company may continue to attract and
retain key employees, officers, directors, consultants and advisors who are
expected to contribute to the Company's growth and success.
On March 24, 1997, the Board of Directors adopted, subject to stockholder
approval, an amendment (the "Option Plan Amendment") to the 1995 Stock Option
Plan increasing the number of shares of the Company's Common Stock available for
issuance under the 1995 Stock Option Plan from 300,000 shares to 1,300,000
shares.
The following is a summary of the material provisions of the 1995 Stock
Option Plan:
ADMINISTRATION AND ELIGIBILITY
The 1995 Stock Option Plan is administered by the Compensation Committee of
the Board of Directors. Subject to the provisions of the 1995 Stock Option Plan,
the Compensation Committee has authority to construe the respective option
agreements, to prescribe, amend and rescind rules and regulations relating to
the 1995 Stock Option Plan and to make all other determinations in the judgment
of the Compensation Committee necessary or desirable for the administration of
the 1995 Stock Option Plan.
Options may be granted to persons who are, at the time of grant, employees,
officers or directors of, or consultants or advisors to, the Company; provided
that incentive stock options may be granted only to persons who are eligible to
receive such options under Section 422 of the Code. The granting of options to
directors and officers shall be determined either (a) by the Board of Directors
of which all members shall be "disinterested persons" (as defined in the 1995
Stock Option Plan) or (b) by a committee of two or more directors having full
authority to act on the matter, of which all members shall be "disinterested
persons."
NUMBER OF SHARES AND EXERCISE PRICE
Subject to adjustment as provided in the 1995 Stock Option Plan, the
maximum number of shares of Common Stock of the Company which currently may be
issued and sold under the 1995 Stock Option Plan is 300,000 shares. As of June
2, 1997, options to purchase a total of 1,156,863 shares of Common Stock at a
weighted average exercise price of $3.22 per share were outstanding under the
1995 Stock Option Plan. The maximum number of shares of Common Stock with
respect to which an option may be granted to any participant under the 1995
Stock Option Plan is 100,000 per calendar year (subject to adjustment as
provided in the 1995 Stock Option Plan).
The Compensation Committee selects the exercise price per share of stock,
provided the exercise price cannot be less than (a) 110% of fair market value
for incentive stock options granted to a holder of more than 10% of the
Company's capital stock, (b) 100% of fair market value for incentive stock
options generally and (c) 50% of fair market value for nonstatutory options. The
option price may be paid in cash or shares of Common Stock owned by the optionee
as provided in the 1995 Stock Option Plan. The Compensation Committee shall also
determine the expiration of the option period, provided that (i) in the case of
incentive stock options, the date shall not be later than 10 years after the
date on which the option is granted, (ii) in the case of incentive stock options
granted to a holder of more than 10% of the Company's capital stock, such date
14
<PAGE> 17
shall not be later than five years after the date on which the option is granted
and (iii) in all cases, options shall be subject to earlier termination as
provided in the 1995 Stock Option Plan.
TERMS OF OPTIONS
Except as the Compensation Committee may otherwise determine or provide in
the applicable option agreement, all options are nontransferable other than by
will or the laws of descent and distribution, provided, however, that
nonstatutory options may be transferred by certain persons required to file
reports under Section 16(a) of the Exchange Act pursuant to a qualified domestic
relations order (as defined in Rule 16b-3 promulgated under the Exchange Act).
Holders of incentive stock options may generally exercise such options up to 90
days after termination of employment with the Company, unless termination
results from death or disability in which case such options may be exercised up
to one year after termination. Holders of nonstatutory options may exercise such
options after termination of employment with the Company during the period
specified in the applicable option agreement.
The Compensation Committee determines when options granted under the 1995
Stock Option Plan become exercisable (generally in installments at the rate of
25% per year). The Compensation Committee may accelerate the date on which any
option granted may be exercised or extend the period during which any particular
option may be exercised, provided that no such extension shall be permitted if
it would cause the 1995 Stock Option Plan to fail to comply with Section 422 of
the Code, or with Rule 16b-3 promulgated under the Exchange Act.
The Compensation Committee has the authority, with the consent of the
effected optionee, to cancel or amend any outstanding options under the 1995
Stock Option Plan and to grant in substitution therefor new options covering the
same or a different number of shares of Common Stock and having an exercise
price per share which may be lower or higher than the exercise price per share
of the outstanding options.
Subject to the prior approval of the Compensation Committee, an optionee
may elect to satisfy any tax withholding obligations with respect to shares
issued upon exercise of options by causing the Company to withhold shares of
Common Stock otherwise issuable upon the exercise of an option or by delivering
to the Company shares of Common Stock then owned by such optionee. The shares so
delivered or withheld shall have a fair market value equal to such withholding
obligation.
AMENDMENT AND TERMINATION
The Board of Directors may at any time modify or amend the 1995 Stock
Option Plan in any respect, except that if at any time the approval of the
stockholders of the Company is required under Section 422 of the Code or any
successor provision with respect to incentive stock options or under Rule 16b-3
promulgated under the Exchange Act with respect to options held by persons who
are required to file reports pursuant to Section 16(a) of the Exchange Act, the
Board of Directors may not effect such modification or amendment without such
approval. The termination or any amendment of the 1995 Stock Option Plan shall
not, without the consent of an optionee, effect his or her rights under an
option previously granted.
In the event of a consolidation or merger or sale of all or substantially
all of the assets of the Company in which outstanding shares of Common stock are
exchanged for securities, cash or other property of any other corporation or
business entity or in the event of a liquidation of the Company, the Board of
Directors of the Company or the board of directors of any corporation assuming
the obligations of the Company may, in its discretion, take any one or more of
the following actions as to outstanding options: (a) provide that such options
shall be assumed, or equivalent options shall be substituted, by the acquiring
or succeeding corporation (or an affiliate thereof), (b) provide that all
unexercised options will terminate immediately prior to the consummation of such
transaction unless exercised by the optionee within a specified period following
the date
15
<PAGE> 18
of such notice, (c) if the event involves a cash payment for each share
surrendered in the merger, make or provide for a cash payment to the optionees
equal to the difference between the merger consideration per share and the
exercise price per share for all then outstanding options and (d) provide that
all or any outstanding options shall become exercisable in full immediately
prior to such event.
The 1995 Stock Option Plan shall terminate with respect to incentive stock
options upon the earlier of February 28, 2005, or the date on which all shares
available for issuance under the 1995 Stock Option Plan shall have been issued
pursuant to the exercise or cancellation of options granted thereunder. The 1995
Stock Option Plan shall terminate with respect to nonstatutory options on
February 28, 2005.
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the United States federal income tax
consequences that generally will arise with respect to Awards granted under the
1995 Stock Option Plan and with respect to the sale of Common Stock acquired
under the 1995 Stock Option Plan.
Incentive Stock Options
In general, a participant will not recognize taxable income upon the grant
or exercise of an incentive stock option. Instead, a participant will recognize
taxable income with respect to an incentive stock option only upon the sale of
Common Stock acquired through the exercise of the option ("ISO Stock"). The
exercise of an incentive stock option may, however, subject the participant to
the alternative minimum tax.
Generally, the tax consequences of selling ISO Stock will vary with the
length of time that the participant has owned the ISO Stock at the time it is
sold. If the participant sells ISO Stock after having owned it for at least two
years from the date the option was granted (the "Grant Date") and one year from
the date the option was exercised (the "Exercise Date"), then the participant
will recognize long-term capital gain in an amount equal to the excess of the
sale price of the ISO Stock over the exercise price.
If the participant sells ISO Stock for more than the exercise price prior
to having owned it for at least two years from the Grant Date and one year from
the Exercise Date (a "Disqualifying Disposition"), then all or a portion of the
gain recognized by the participant will be ordinary compensation income and the
remaining gain, if any, will be a capital gain. This capital gain will be a
long-term capital gain if the participant has held the ISO Stock for more than
one year prior to the date of sale.
If a participant sells ISO Stock for less than the exercise price, then the
participant will recognize capital loss equal to the excess of the exercise
price over the sale price of the ISO Stock. This capital loss will be a
long-term capital loss if the participant has held the ISO Stock for more than
one year prior to the date of sale.
Nonstatutory Stock Options
As in the case of an incentive stock option, a participant will not
recognize taxable income upon the grant of a nonstatutory stock option. Unlike
the case of an incentive stock option, however, a participant who exercises of a
nonstatutory stock option generally will recognize ordinary compensation income
in an amount equal to the excess of the fair market value of the Common Stock
acquired through the exercise of the option ("NSO Stock") on the Exercise Date
over the exercise price.
With respect to any NSO Stock, a participant will have a tax basis equal to
the exercise price plus any income recognized upon the exercise of the option.
Upon selling NSO Stock, a participant generally will recognize capital gain or
loss in an amount equal to the excess of the sale price of the NSO Stock over
the participant's tax basis in the NSO Stock. This capital gain or loss will be
a long-term gain or loss if the participant has held the NSO stock for more than
one year prior to the date of the sale.
16
<PAGE> 19
Tax Consequences to the Company
The grant of an option under the 1995 Stock Option Plan will have no tax
consequences to the Company. Moreover, in general, neither the exercise of an
incentive stock option nor the sale of any Common Stock acquired under the 1995
Stock Option Plan will have any tax consequences to the Company. The Company
generally will be entitled to a business-expense deduction, however, with
respect to any ordinary compensation income recognized by a participant under
the 1995 Stock Option Plan, including as a result of the exercise of a
nonstatutory stock option or a Disqualifying Disposition. Any such deduction
will be subject to the limitations of Section 162(m) of the Code. The Company
will have a withholding obligation with respect to ordinary compensation income
recognized by participants with respect to nonstatutory stock options under the
1995 Stock Option Plan who are employees or otherwise subject to withholding.
BOARD RECOMMENDATION
The Board of Directors believes that the Option Plan Amendment is in the
best interests of the Company and its stockholders and therefore recommends that
the stockholders vote FOR this proposal.
RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
Subject to ratification by the stockholders, the Board of Directors, on the
recommendation of its Audit Committee, has selected the firm of Coopers &
Lybrand L.L.P. as the Company's independent accountants for the current year.
Coopers & Lybrand L.L.P. has served as the Company's independent accountants
since 1991. If the stockholders do not ratify the selection of Coopers & Lybrand
L.L.P. as the Company's independent accountants, the selection of such
accountants will be reconsidered by the Board of Directors.
Representatives of Coopers & Lybrand L.L.P. are expected to be present at
the Annual Meeting of Stockholders. They will have the opportunity to make a
statement if they desire to do so and will be available to respond to
appropriate questions from stockholders.
OTHER MATTERS
The Board of Directors does not know of any other matters which may come
before the meeting. However, if any other matters are properly presented to the
meeting, it is the intention of the persons named in the accompanying proxy to
vote, or otherwise act, in accordance with their judgment on such matters.
All costs of solicitation of proxies will be borne by the Company. In
addition to solicitations by mail, the Company's directors, officers and regular
employees, without additional remuneration, may solicit proxies by telephone,
telegraph and personal interviews. Brokers, custodians and fiduciaries will be
requested to forward proxy soliciting material to the owners of stock held in
their names, and the Company will reimburse them for their reasonable
out-of-pocket expenses incurred in connection with the distribution of proxy
materials.
17
<PAGE> 20
DEADLINE FOR SUBMISSION OF STOCKHOLDER PROPOSALS FOR THE 1998 ANNUAL MEETING
Proposals of stockholders intended to be presented at the 1998 Annual
Meeting of Stockholders must be received by the Company at its principal office
in Cambridge, Massachusetts not later than December 19, 1997 for inclusion in
the proxy statement for that meeting.
By Order of the Board of Directors,
[SIGNATURE]
KEITH S. EHRLICH, Secretary
June 13, 1997
THE BOARD OF DIRECTORS ENCOURAGES STOCKHOLDERS TO ATTEND THE MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE. A PROMPT RESPONSE WILL
GREATLY FACILITATE ARRANGEMENTS FOR THE MEETING AND YOUR COOPERATION WILL BE
APPRECIATED. STOCKHOLDERS WHO ATTEND THIS MEETING MAY VOTE THEIR STOCK
PERSONALLY EVEN THOUGH THEY HAVE SENT IN THEIR PROXIES.
18
<PAGE> 21
Appendix A
----------
ORAVAX, INC.
1995 STOCK OPTION PLAN
1. Purpose.
-------
The purpose of this plan (the "Plan") is to secure for OraVax, Inc. (the
"Company") and its stockholders the benefits arising from capital stock
ownership by employees, officers and directors of, and consultants or advisors
to, the Company and its subsidiary corporations who are expected to contribute
to the Company's future growth and success. Except where the context otherwise
requires, the term "Company" shall include all present and future subsidiaries
of the Company as defined in Sections 424(e) and 424(f) of the Internal Revenue
Code of 1986, as amended or replaced from time to time (the "Code"). Those
provisions of the Plan which make express reference to Section 422 shall apply
only to Incentive Stock Options (as that term is defined in the Plan).
2. Type of Options and Administration.
----------------------------------
(a) TYPES OF OPTIONS. Options granted pursuant to the Plan may be either
incentive stock options ("Incentive Stock Options") meeting the requirements of
Section 422 of the Code or Non-Statutory Options which are not intended to meet
the requirements of Section 422 of the Code ("Non-Statutory Options").
(b) Administration.
--------------
(i) The Plan will be administered by the Board of Directors of the
Company, whose construction and interpretation of the terms and provisions of
the Plan shall be final and conclusive. The Board of Directors may in its sole
discretion grant options to purchase shares of the Company's Common Stock
("Common Stock") and issue shares upon exercise of such options as provided in
the Plan. The Board shall have authority, subject to the express provisions of
the Plan, to construe the respective option agreements and the Plan, to
prescribe, amend and rescind rules and regulations relating to the Plan, to
determine the terms and provisions of the respective option agreements, which
need not be identical, and to make all other determinations which are, in the
judgment of the Board of Directors, necessary or desirable for the
administration of the Plan. The Board of Directors may correct any defect,
supply any omission or reconcile any inconsistency in the Plan or in any option
agreement in the manner and to the extent it shall deem expedient to carry the
Plan into effect and it shall be the sole and final judge of such expediency. No
director or person acting pursuant to authority delegated by the Board of
Directors shall be liable for any action or determination under the Plan made in
good faith.
(ii) The Board of Directors may, to the full extent permitted by or
consistent with applicable laws or regulations and Section 3(b) of this Plan
delegate
<PAGE> 22
any or all of its powers under the Plan to a committee (the "Committee")
appointed by the Board of Directors, and if the Committee is so appointed all
references to the Board of Directors in the Plan shall mean and relate to such
Committee.
(c) APPLICABILITY OF RULE 16b-3. Those provisions of the Plan which make
express reference to Rule 16b-3 promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), or any successor rule ("Rule 16b-3"), or
which are required in order for certain option transactions to qualify for
exemption under Rule 16b-3, shall apply only to such persons as are required to
file reports under Section 16(a) of the Exchange Act (a "Reporting Person").
3. Eligibility.
-----------
(a) GENERAL. Options may be granted to persons who are, at the time of
grant, employees, officers or directors of, or consultants or advisors to, the
Company; PROVIDED, that the class of employees to whom Incentive Stock Options
may be granted shall be limited to all employees of the Company. A person who
has been granted an option may, if he or she is otherwise eligible, be granted
additional options if the Board of Directors shall so determine. Subject to
adjustment as provided in Section 15 below, the maximum number of shares with
respect to which options may be granted to any employee under the Plan shall not
exceed 100,000 shares (after giving effect to the Company's stock dividend
declared effective as of March 31, 1995) of Common Stock during any calendar
year during the term of the Plan. For the purpose of calculating such maximum
number, (a) an option shall continue to be treated as outstanding
notwithstanding its repricing, cancellation or expiration and (b) the repricing
of an outstanding option or the issuance of a new option in substitution for a
cancelled option shall be deemed to constitute the grant of a new additional
option separate from the original grant of the option that is repriced or
cancelled.
(b) Grant of Options to Directors and Officers. From and after the
registration of the Common Stock of the Company under the Exchange Act, the
selection of a director or an officer (as the terms "director" and "officer" are
defined for purposes of Rule 16b-3) as a recipient of an option, the timing of
the option grant, the exercise price of the option and the number of shares
subject to the option shall be determined either (i) by the Board of Directors,
of which all members shall be "disinterested persons" (as hereinafter defined),
or (ii) by two or more directors having full authority to act in the matter,
each of whom shall be a "disinterested person." For the purposes of the Plan, a
director shall be deemed to be a "disinterested person" only if such person
qualifies as a "disinterested person" within the meaning of Rule 16b-3, as such
term is interpreted from time to time.
-2-
<PAGE> 23
4. Stock Subject to Plan.
---------------------
Subject to adjustment as provided in Section 15 below, the maximum number
of shares of Common Stock which may be issued and sold under the Plan is 300,000
shares (after giving effect to the Company's stock dividend declared effective
as of March 31, 1995). If an option granted under the Plan shall expire or
terminate for any reason without having been exercised in full, the unpurchased
shares subject to such option shall again be available for subsequent option
grants under the Plan. If shares issued upon exercise of an option under the
Plan are tendered to the Company in payment of the exercise price of an option
granted under the Plan, such tendered shares shall again be available for
subsequent option grants under the Plan; provided, that in no event shall such
shares be made available for issuance to Reporting Persons or pursuant to
exercise of Incentive Stock Options.
5. Forms of Option Agreements.
--------------------------
As a condition to the grant of an option under the Plan, each recipient of
an option shall execute an option agreement in such form not inconsistent with
the Plan as may be approved by the Board of Directors. Such option agreements
may differ among recipients.
6. Purchase Price.
--------------
(a) GENERAL. Subject to Section 3(b), the purchase price per share of stock
deliverable upon the exercise of an option shall be determined by the Board of
Directors, PROVIDED, HOWEVER, that in the case of an Incentive Stock Option, the
exercise price shall not be less than 100% of the fair market value of such
stock, as determined by the Board of Directors, at the time of grant of such
option, or less than 110% of such fair market value in the case of options
described in Section 11(b).
(b) PAYMENT OF PURCHASE PRICE. Options granted under the Plan may provide
for the payment of the exercise price by delivery of cash or a check to the
order of the Company in an amount equal to the exercise price of such options,
or, to the extent provided in the applicable option agreement, (i) by delivery
to the Company of shares of Common Stock of the Company already owned by the
optionee having a fair market value equal in amount to the exercise price of the
options being exercised or (ii) by any other means (including, without
limitation, by delivery of a promissory note of the optionee payable on such
terms as are specified by the Board of Directors) which the Board of Directors
determines are consistent with the purpose of the Plan and with applicable laws
and regulations (including, without limitation, the provisions of Regulation T
promulgated by the Federal Reserve Board). The fair market value of any shares
of the Company's Common Stock or other non-cash consideration which may be
delivered upon exercise of an option shall be determined by the Board of
Directors.
-3-
<PAGE> 24
7. Option Period.
-------------
Each option and all rights thereunder shall expire on such date as shall be
set forth in the applicable option agreement, except that, in the case of an
Incentive Stock Option, such date shall not be later than ten years after the
date on which the option is granted and, in all cases, options shall be subject
to earlier termination as provided in the Plan.
8. Exercise of Options.
-------------------
Each option granted under the Plan shall be exercisable either in full or
in installments at such time or times and during such period as shall be set
forth in the agreement evidencing such option, subject to the provisions of the
Plan.
9. Nontransferability of Options.
-----------------------------
Options shall not be assignable or transferable by the person to whom they
are granted, either voluntarily or by operation of law, except by will or the
laws of descent and distribution, and, during the life of the optionee, shall be
exercisable only by the optionee; provided, however, that Non-Statutory Options
may be transferred pursuant to a qualified domestic relations order (as defined
in Rule 16b-3).
10. Effect of Termination of Employment or Other Relationship.
---------------------------------------------------------
Except as provided in Section 11(d) with respect to Incentive Stock
Options, and subject to the provisions of the Plan, the Board of Directors shall
determine the period of time during which an optionee may exercise an option
following (i) the termination of the optionee's employment or other relationship
with the Company or (ii) the death or disability of the optionee. Such periods
shall be set forth in the agreement evidencing such option.
11. Incentive Stock Options.
-----------------------
Options granted under the Plan which are intended to be Incentive Stock
Options shall be subject to the following additional terms and conditions:
(a) EXPRESS DESIGNATION. All Incentive Stock Options granted under the Plan
shall, at the time of grant, be specifically designated as such in the option
agreement covering such Incentive Stock Options.
(b) 10% STOCKHOLDER. If any employee to whom an Incentive Stock Option is
to be granted under the Plan is, at the time of the grant of such option, the
owner of stock possessing more than 10% of the total combined voting power of
all classes of stock of the Company (after taking into account the attribution
of stock ownership
-4-
<PAGE> 25
rules of Section 424(d) of the Code), then the following special provisions
shall be applicable to the Incentive Stock Option granted to such individual:
(i) The purchase price per share of the Common Stock subject to such
Incentive Stock Option shall not be less than 110% of the fair market value of
one share of Common Stock at the time of grant; and
(ii) the option exercise period shall not exceed five years from the
date of grant.
(c) DOLLAR LIMITATION. For so long as the Code shall so provide, options
granted to any employee under the Plan (and any other incentive stock option
plans of the Company) which are intended to constitute Incentive Stock Options
shall not constitute Incentive Stock Options to the extent that such options, in
the aggregate, become exercisable for the first time in any one calendar year
for shares of Common Stock with an aggregate fair market value (determined as of
the respective date or dates of grant) of more than $100,000.
(d) TERMINATION OF EMPLOYMENT, DEATH OR DISABILITY. No Incentive Stock
Option may be exercised unless, at the time of such exercise, the optionee is,
and has been continuously since the date of grant of his or her option, employed
by the Company, except that:
(i) an Incentive Stock Option may be exercised within the period of
three months after the date the optionee ceases to be an employee of the Company
(or within such lesser period as may be specified in the applicable option
agreement), PROVIDED, that the agreement with respect to such option may
designate a longer exercise period and that the exercise after such three-month
period shall be treated as the exercise of a non-statutory option under the
Plan;
(ii) if the optionee dies while in the employ of the Company, or
within three months after the optionee ceases to be such an employee, the
Incentive Stock Option may be exercised by the person to whom it is transferred
by will or the laws of descent and distribution within the period of one year
after the date of death (or within such lesser period as may be specified in the
applicable option agreement); and
(iii) if the optionee becomes disabled (within the meaning of Section
22(e)(3) of the Code or any successor provision thereto) while in the employ of
the Company, the Incentive Stock Option may be exercised within the period of
one year after the date the optionee ceases to be such an employee because of
such disability (or within such lesser period as may be specified in the
applicable option agreement).
-5-
<PAGE> 26
For all purposes of the Plan and any option granted hereunder, "employment"
shall be defined in accordance with the provisions of Section 1.421-7(h) of the
Income Tax Regulations (or any successor regulations). Notwithstanding the
foregoing provisions, no Incentive Stock Option may be exercised after its
expiration date.
12. Additional Provisions.
---------------------
(a) ADDITIONAL OPTION PROVISIONS. The Board of Directors may, in its sole
discretion, include additional provisions in option agreements covering options
granted under the Plan, including without limitation restrictions on transfer,
repurchase rights, commitments to pay cash bonuses, to make, arrange for or
guaranty loans or to transfer other property to optionees upon exercise of
options, or such other provisions as shall be determined by the Board of
Directors; PROVIDED THAT such additional provisions shall not be inconsistent
with any other term or condition of the Plan and such additional provisions
shall not cause any Incentive Stock Option granted under the Plan to fail to
qualify as an Incentive Stock Option within the meaning of Section 422 of the
Code.
(b) ACCELERATION, EXTENSION, ETC. The Board of Directors may, in its sole
discretion, (i) accelerate the date or dates on which all or any particular
option or options granted under the Plan may be exercised or (ii) extend the
dates during which all, or any particular, option or options granted under the
Plan may be exercised.
13. General Restrictions.
--------------------
(a) INVESTMENT REPRESENTATIONS. The Company may require any person to whom
an option is granted, as a condition of exercising such option, to give written
assurances in substance and form satisfactory to the Company to the effect that
such person is acquiring the Common Stock subject to the option for his or her
own account for investment and not with any present intention of selling or
otherwise distributing the same, and to such other effects as the Company deems
necessary or appropriate in order to comply with federal and applicable state
securities laws, or with covenants or representations made by the Company in
connection with any public offering of its Common Stock.
(b) COMPLIANCE WITH SECURITIES LAWS. Each option shall be subject to the
requirement that if, at any time, counsel to the Company shall determine that
the listing, registration or qualification of the shares subject to such option
upon any securities exchange or under any state or federal law, or the consent
or approval of any governmental or regulatory body, or that the disclosure of
non-public information or the satisfaction of any other condition is necessary
as a condition of, or in connection with, the issuance or purchase of shares
thereunder, such option may not be exercised, in whole or in part, unless such
listing, registration,
-6-
<PAGE> 27
qualification, consent or approval, or satisfaction of such condition shall have
been effected or obtained on conditions acceptable to the Board of Directors.
Nothing herein shall be deemed to require the Company to apply for or to obtain
such listing, registration or qualification, or to satisfy such condition.
14. Rights as a Stockholder.
-----------------------
The holder of an option shall have no rights as a stockholder with respect
to any shares covered by the option (including, without limitation, any rights
to receive dividends or non-cash distributions with respect to such shares)
until the date of issue of a stock certificate to him or her for such shares. No
adjustment shall be made for dividends or other rights for which the record date
is prior to the date such stock certificate is issued.
15. Adjustment Provisions for Recapitalizations and Related Transactions.
--------------------------------------------------------------------
(a) GENERAL. If, through or as a result of any merger, consolidation, sale
of all or substantially all of the assets of the Company, reorganization,
recapitalization, reclassification, stock dividend, stock split, reverse stock
split (other than the Company's stock dividend declared effective as of March
31, 1995) or other similar transaction, (i) the outstanding shares of Common
Stock are increased, decreased or exchanged for a different number or kind of
shares or other securities of the Company, or (ii) additional shares or new or
different shares or other securities of the Company or other non-cash assets are
distributed with respect to such shares of Common Stock or other securities, an
appropriate and proportionate adjustment may be made in (x) the maximum number
and kind of shares reserved for issuance under the Plan, (y) the number and kind
of shares or other securities subject to any then outstanding options under the
Plan, and (z) the price for each share subject to any then outstanding options
under the Plan, without changing the aggregate purchase price as to which such
options remain exercisable. Notwithstanding the foregoing, no adjustment shall
be made pursuant to this Section 15 if such adjustment would cause the Plan to
fail to comply with Section 422 of the Code.
(b) BOARD AUTHORITY TO MAKE ADJUSTMENTS. Any adjustments under this Section
15 will be made by the Board of Directors, whose determination as to what
adjustments, if any, will be made and the extent thereof will be final, binding
and conclusive. No fractional shares will be issued under the Plan on account of
any such adjustments.
16. Merger, Consolidation, Asset Sale, Liquidation, etc.
---------------------------------------------------
(a) GENERAL. In the event of a consolidation or merger or sale of all or
substantially all of the assets of the Company in which outstanding shares of
Common Stock are exchanged for securities, cash or other property of any other
-7-
<PAGE> 28
corporation or business entity or in the event of a liquidation of the Company,
the Board of Directors of the Company, or the board of directors of any
corporation assuming the obligations of the Company, may, in its discretion,
take any one or more of the following actions, as to outstanding options: (i)
provide that such options shall be assumed, or equivalent options shall be
substituted, by the acquiring or succeeding corporation (or an affiliate
thereof), PROVIDED that any such options substituted for Incentive Stock Options
shall meet the requirements of Section 424(a) of the Code, (ii) upon written
notice to the optionees, provide that all unexercised options will terminate
immediately prior to the consummation of such transaction unless exercised by
the optionee within a specified period following the date of such notice, (iii)
in the event of a merger under the terms of which holders of the Common Stock of
the Company will receive upon consummation thereof a cash payment for each share
surrendered in the merger (the "Merger Price"), make or provide for a cash
payment to the optionees equal to the difference between (A) the Merger Price
times the number of shares of Common Stock subject to such outstanding options
(to the extent then exercisable at prices not in excess of the Merger Price) and
(B) the aggregate exercise price of all such outstanding options in exchange for
the termination of such options, and (iv) provide that all or any outstanding
options shall become exercisable in full immediately prior to such event.
(b) SUBSTITUTE OPTIONS. The Company may grant options under the Plan in
substitution for options held by employees of another corporation who become
employees of the Company, or a subsidiary of the Company, as the result of a
merger or consolidation of the employing corporation with the Company or a
subsidiary of the Company, or as a result of the acquisition by the Company, or
one of its subsidiaries, of property or stock of the employing corporation. The
Company may direct that substitute options be granted on such terms and
conditions as the Board of Directors considers appropriate in the circumstances.
17. No Special Employment Rights.
----------------------------
Nothing contained in the Plan or in any option shall confer upon any
optionee any right with respect to the continuation of his or her employment by
the Company or interfere in any way with the right of the Company at any time to
terminate such employment or to increase or decrease the compensation of the
optionee.
18. Other Employee Benefits.
-----------------------
Except as to plans which by their terms include such amounts as
compensation, the amount of any compensation deemed to be received by an
employee as a result of the exercise of an option or the sale of shares received
upon such exercise will not constitute compensation with respect to which any
other employee benefits of such employee are determined, including, without
limitation, benefits under any bonus, pension, profit-sharing, life insurance or
salary
-8-
<PAGE> 29
continuation plan, except as otherwise specifically determined by the Board of
Directors.
19. Amendment of the Plan.
---------------------
(a) The Board of Directors may at any time, and from time to time, modify
or amend the Plan in any respect, except that if at any time the approval of the
stockholders of the Company is required under Section 422 of the Code or any
successor provision with respect to Incentive Stock Options, or under Rule
16b-3, the Board of Directors may not effect such modification or amendment
without such approval.
(b) The termination or any modification or amendment of the Plan shall not,
without the consent of an optionee, affect his or her rights under an option
previously granted to him or her. With the consent of the optionee affected, the
Board of Directors may amend outstanding option agreements in a manner not
inconsistent with the Plan. The Board of Directors shall have the right to amend
or modify (i) the terms and provisions of the Plan and of any outstanding
Incentive Stock Options granted under the Plan to the extent necessary to
qualify any or all such options for such favorable federal income tax treatment
(including deferral of taxation upon exercise) as may be afforded incentive
stock options under Section 422 of the Code and (ii) the terms and provisions of
the Plan and of any outstanding option to the extent necessary to ensure the
qualification of the Plan under Rule 16b-3.
20. Withholding.
-----------
(a) The Company shall have the right to deduct from payments of any kind
otherwise due to the optionee any federal, state or local taxes of any kind
required by law to be withheld with respect to any shares issued upon exercise
of options under the Plan. Subject to the prior approval of the Company, which
may be withheld by the Company in its sole discretion, the optionee may elect to
satisfy such obligations, in whole or in part, (i) by causing the Company to
withhold shares of Common Stock otherwise issuable pursuant to the exercise of
an option or (ii) by delivering to the Company shares of Common Stock already
owned by the optionee. The shares so delivered or withheld shall have a fair
market value equal to such withholding obligation. The fair market value of the
shares used to satisfy such withholding obligation shall be determined by the
Company as of the date that the amount of tax to be withheld is to be
determined. An optionee who has made an election pursuant to this Section 20(a)
may only satisfy his or her withholding obligation with shares of Common Stock
which are not subject to any repurchase, forfeiture, unfulfilled vesting or
other similar requirements.
-9-
<PAGE> 30
(b) Notwithstanding the foregoing, in the case of a Reporting Person, no
election to use shares for the payment of withholding taxes shall be effective
unless made in compliance with any applicable requirements of Rule 16b-3 (unless
it is intended that the transaction not qualify for exemption under Rule 16b-3).
21. Cancellation and New Grant of Options, Etc.
------------------------------------------
The Board of Directors shall have the authority to effect, at any time and
from time to time, with the consent of the affected optionees, (i) the
cancellation of any or all outstanding options under the Plan and the grant in
substitution therefor of new options under the Plan covering the same or
different numbers of shares of Common Stock and having an option exercise price
per share which may be lower or higher than the exercise price per share of the
cancelled options or (ii) the amendment of the terms of any and all outstanding
options under the Plan to provide an option exercise price per share which is
higher or lower than the then-current exercise price per share of such
outstanding options.
22. Effective Date and Duration of the Plan.
---------------------------------------
(a) EFFECTIVE DATE. The Plan shall become effective when adopted by the
Board of Directors, but no option granted under the Plan shall become
exercisable unless and until the Plan shall have been approved by the Company's
stockholders. If such stockholder approval is not obtained within twelve months
after the date of the Board's adoption of the Plan, options previously granted
under the Plan shall not vest and shall terminate and no options shall be
granted thereafter. Amendments to the Plan not requiring stockholder approval
shall become effective when adopted by the Board of Directors; amendments
requiring stockholder approval (as provided in Section 19) shall become
effective when adopted by the Board of Directors, but no option granted after
the date of such amendment shall become exercisable (to the extent that such
amendment to the Plan was required to enable the Company to grant such option to
a particular person) unless and until such amendment shall have been approved by
the Company's stockholders. If such stockholder approval is not obtained within
twelve months of the Board's adoption of such amendment, any options granted on
or after the date of such amendment shall terminate to the extent that such
amendment was required to enable the Company to grant such option to a
particular optionee. Subject to this limitation, options may be granted under
the Plan at any time after the effective date and before the date fixed for
termination of the Plan.
(b) TERMINATION. Unless sooner terminated in accordance with Section 16,
the Plan shall terminate, with respect to Incentive Stock Options, upon the
earlier of (i) the close of business on the day next preceding the tenth
anniversary of the date of its adoption by the Board of Directors, or (ii) the
date on which all shares available
-10-
<PAGE> 31
for issuance under the Plan shall have been issued pursuant to the exercise or
cancellation of options or the final vesting of awards granted under the Plan.
Unless sooner terminated in accordance with Section 16, the Plan shall terminate
with respect to options which are not Incentive Stock Options and awards on the
date specified in (ii) above. If the date of termination is determined under (i)
above, then options outstanding on such date shall continue to have force and
effect in accordance with the provisions of the instruments evidencing such
options.
23. Provision for Foreign Participants.
----------------------------------
The Board of Directors may, without amending the Plan, modify awards or
options 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.
Adopted by the Board of Directors on March 1, 1995
-11-
<PAGE> 32
DETACH HERE Appendix B
----------
ORAVAX, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
ANNUAL MEETING OF STOCKHOLDERS - JULY 8, 1997
P
Those signing on the reverse side, revoking any prior proxies, hereby
R appoint(s) Lance K. Gordon, Keith S. Ehrlich and John M. Westcott, Jr., or
each or any of them with full power of substitution, as proxies for those
O signing on the reverse side to act and vote all shares of stock of OraVax,
Inc. (the "Company") which the undersigned would be entitled to vote if
X personally present at the 1997 Annual Meeting of Stockholders of the
Company and at any adjournments thereof as indicated upon all matters
Y referred to on the reverse side and described in the Proxy Statement for
the Meeting, and, in their discretion, upon any other matters which may
properly come before the Meeting. Attendance of the undersigned at the
Meeting or at any adjournment thereof will not be deemed to revoke this
proxy unless those signing on the reverse side shall revoke this proxy in
writing.
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
-------------------------------- -----------------------------------
-------------------------------- -----------------------------------
-------------------------------- -----------------------------------
-----------
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE
-----------
<PAGE> 33
ORAVAX, INC.
Dear Stockholder:
Please take note of the important information enclosed with this Proxy
Ballot. There are a number of issues related to the management and operation
of your Company that require your immediate attention and approval. These
are discussed in detail in the enclosed proxy materials.
Your vote counts, and you are strongly encouraged to exercise your right to
vote your shares.
Please mark the boxes on the proxy card to indicate how your shares shall be
voted. Then sign and date the card, detach it and return your proxy vote in
the enclosed postage paid envelope.
Your vote must be received prior to the Annual Meeting of Stockholders to be
held on July 8, 1997.
Thank you in advance for your prompt consideration of these matters.
Sincerely,
OraVax
DETACH HERE ORA 2F
<TABLE>
<S> <C>
[X] PLEASE MARK
VOTES AS IN
THIS EXAMPLE.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED BY THE UNDERSIGNED SHAREHOLDER(S). IF NO OTHER INDICATION
IS MADE, THE PROXIES SHALL VOTE "FOR" PROPOSALS NUMBER 1, 2 AND 3.
A VOTE FOR THE DIRECTOR NOMINEES AND FOR PROPOSALS NUMBER 2 AND 3 IS RECOMMENDED BY THE BOARD OF DIRECTORS.
FOR AGAINST ABSTAIN
1. Election of Class II Directors 2. Approval of an amendment to the [ ] [ ] [ ]
Company's 1995 Stock Option Plan,
NOMINEES: C. Boyd Clarke and Allen Misher providing for an increase from
FOR WITHHELD 300,000 to 1,300,000 in the number
[ ] [ ] of shares of Common Stock reserved
for issuance thereunder.
FOR AGAINST ABSTAIN
[ ] 3. Ratification of selection of indepen- [ ] [ ] [ ]
---------------------------------------- dent accountants.
For both nominees except as noted above
Mark here at right if comments or address change [ ]
have been made on the reverse side of this card
PLEASE VOTE, DATE AND SIGN BELOW AND RETURN
PROMPTLY IN ENCLOSED ENVELOPE.
Please sign this proxy exactly as your name appears hereon. Joint
owners should each sign personally. Trustees and other fiduciaries
should indicate the capacity in which they sign. If a corporation or
partnership, the signature should be that of an authorized officer
who should state his or her title.
Signature: Date: Signature: Date:
--------------------------------- ------------- ------------------------------ -------------
</TABLE>
