<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:
/X/ Preliminary Proxy Statement
/ / 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 COMPANY
(Name of Person(s) Filing Proxy Statement)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 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:
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<PAGE> 2
PRELIMINARY COPY -- FOR USE OF THE SECURITIES AND EXCHANGE COMMISSION ONLY
[ORAVAX LOGO]
38 SIDNEY STREET
CAMBRIDGE, MASSACHUSETTS 02139
NOTICE OF 1998 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 30, 1998
The 1998 Annual Meeting of Stockholders of OraVax, Inc. (the "Company")
will be held at the offices of Hale and Dorr LLP, 26th Floor, 60 State Street,
Boston, Massachusetts, on Tuesday, June 30, 1998 at 10:00 a.m., local time, to
consider and act upon the following matters:
1. To elect one Class III Director for the ensuing three years.
2. To approve an amendment to the Company's Second Amended and Restated
Certificate of Incorporation to increase the number of shares of Common
Stock which the Company is authorized to issue from 25,000,000 shares
to 50,000,000 shares.
3. To approve an amendment to the Company's 1995 Employee Stock Purchase
Plan, providing for an increase from 100,000 to 225,000 in the number
of shares of Common Stock reserved for issuance thereunder.
4. To ratify the selection of Coopers & Lybrand L.L.P. as the Company's
independent accountants for the year 1998.
5. 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 May 15, 1998 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,
/s/ Lance K. Gordon, Ph.D.
LANCE K. GORDON, PH.D.,
President and Chief Executive
Officer
Cambridge, Massachusetts
May 29, 1998
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
PRELIMINARY COPY -- FOR USE OF THE SECURITIES AND EXCHANGE COMMISSION ONLY
ORAVAX, INC.
38 SIDNEY STREET
CAMBRIDGE, MASSACHUSETTS 02139
PROXY STATEMENT FOR THE 1998 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 30, 1998
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
1998 Annual Meeting of Stockholders to be held on June 30, 1998 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, 1997 is being
mailed to stockholders with the mailing of this Notice and Proxy Statement on or
about May 29, 1998.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 1997, 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 May 15, 1998, 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 11,127,400 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 meeting shall constitute a
quorum for the transaction of business at the 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 meeting is required for the election of the
Class III Director. The affirmative vote of the holders of a majority of the
shares of Common Stock outstanding and entitled to vote at the meeting is
required for the approval of the amendment to the Company's Second Amended and
Restated Certificate of Incorporation. 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 May 15, 1998,
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 May 15, 1998 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>
NUMBER OF
SHARES OF PERCENTAGE OF
COMMON PERCENTAGE OF TOTAL VOTING
STOCK COMMON CAPITAL
BENEFICIALLY STOCK STOCK
BENEFICIAL OWNER OWNED OUTSTANDING OUTSTANDING
---------------- ------------ ------------- -------------
<S> <C> <C> <C>
5% STOCKHOLDERS
Wellington Management Company, LLP(1)..................... 1,010,700 9.1% 9.1%
Vanguard Specialized Portfolios -- Health Care
Portfolio(2)............................................ 602,600 5.4% 5.4%
Medical Science Partners, L.P.(3)......................... 600,857 5.4% 5.4%
DIRECTORS
C. Boyd Clarke(4)......................................... 5,000 * *
Lance K. Gordon(5)........................................ 251,409 2.2% 2.2%
Andre L. Lamotte(6)....................................... 608,695 5.4% 5.4%
Douglas MacMaster(7)...................................... 18,600 * *
Allen Misher(8)........................................... 13,332 * *
OTHER EXECUTIVE OFFICERS
Keith S. Ehrlich(9)....................................... 141,639 1.3% 1.3%
Robert J. Gerety(10)...................................... 38,750 * *
Thomas P. Monath(11)...................................... 150,574 1.3% 1.3%
All directors and executive officers as a group(12)....... 1,227,999 10.5% 10.5%
</TABLE>
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* Less than 1%.
(1) The information reported is based on a Schedule 13G/A filed with the
Securities and Exchange Commission on February 10, 1998. The address of
this entity is 75 State Street, Boston, MA 02109.
(2) The information reported is based on a Schedule 13G/A filed with the
Securities and Exchange Commission on February 9, 1998. The address of this
entity is 100 Vanguard Boulevard, VM #V34, Malvern, PA.
(3) 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. The address of MSP is 20 Williams Street, Suite 250,
Wellesley, MA 02181.
2
<PAGE> 5
(4) Represents shares which Dr. Clarke may acquire upon the exercise of options
within 60 days after May 15, 1998.
(5) Includes 180,466 shares of Common Stock which Dr. Gordon has the right to
acquire within 60 days after May 15, 1998 upon exercise of outstanding
stock options.
(6) Includes 424,993 shares held by MSP, 26,320 shares held by MSP II-Co and
149,544 shares held by MSP II. Also includes 5,000 shares which Dr. Lamotte
may acquire within 60 days after May 15, 1998 upon exercise of outstanding
stock options. 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. The address of Dr. Lamotte
is c/o MSP, 20 Williams Street, Suite 250, Wellesley, MA 02181.
(7) Represents shares which Mr. MacMaster may acquire upon the exercise of
options within 60 days after May 15, 1998.
(8) Includes 6,666 shares which Dr. Misher may acquire upon the exercise of
options within 60 days after May 15, 1998.
(9) Includes 134,899 shares which Mr. Ehrlich may acquire upon the exercise of
options within 60 days after May 15, 1998. Mr. Ehrlich resigned as an
officer of the Company effective January 29, 1998.
(10) Includes 31,250 shares which Dr. Gerety may acquire upon the exercise of
options within 60 days after May 15, 1998.
(11) Includes 140,679 shares which Dr. Monath may acquire upon the exercise of
options within 60 days after May 15, 1998.
(12) Includes 519,326 shares which all directors and executive officers as a
group may acquire upon the exercise of options within 60 days after May 15,
1998.
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; the Class II Directors were elected at the 1997 Annual Meeting for a
three-year term expiring at the 2000 Annual Meeting; this year the Class III
Director will be elected for a three-year term expiring at the 2001 Annual
Meeting.
The persons named in the enclosed proxy will vote to elect as director
Lance K. Gordon, Ph.D., the Class III nominee 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 director the
Class III nominee named below. The nominee is currently a member of the Board of
Directors of the Company. The Class III nominee will be elected to hold office
until the 2001 Annual Meeting of Stockholders and until his successor is duly
elected and qualified. The nominee has indicated his willingness to serve, if
elected; however, if he 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.
3
<PAGE> 6
Set forth below are the name and age of each member of the Board of
Directors (including the nominee for election as Class III Director), 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 May 15, 1998, appears above under the heading "Stock Ownership
of Certain Beneficial Owners and Management."
NOMINEE FOR TERM EXPIRING IN 2001 (CLASS III DIRECTOR)
Lance K. Gordon, Ph.D., age 50, 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.
DIRECTORS WHOSE TERMS EXPIRE IN 2000 (CLASS II DIRECTORS)
C. Boyd Clarke, age 52, 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 66, 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 Phila 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. Seattle & Co., U.S. Healthcare, Inc., U.S.
Bioscience, 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.
4
<PAGE> 7
DIRECTORS WHOSE TERMS EXPIRE IN 1999 (CLASS I DIRECTORS)
Douglas MacMaster, age 67, 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 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 48, 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.
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 1997.
The members of the Audit Committee are Messrs. MacMaster and Clarke.
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, terms of any employment agreements and
arrangements with, and termination of, all corporate officers of the Company.
The Compensation Committee held two meetings during 1997. 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.
The Board of Directors held five meetings during 1997. 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
5
<PAGE> 8
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. Mr MacMaster received an option, effective March
6, 1993, to purchase 8,500 shares of Common Stock at an exercise price of $0.765
per share. The option became fully vested as of March 6, 1996. 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. In addition, on March 7, 1997, Mr. Clarke received
an option to purchase 10,000 shares of Common Stock at an exercise price of
$5.50 per share. The option vests in three equal annual installments commencing
one year after the date of grant. For a discussion of certain transactions
between the Company and affiliates of certain directors, see "Certain
Transactions."
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
6
<PAGE> 9
EXECUTIVE COMPENSATION
Summary Compensation Table. The following table sets forth certain
information with respect to the compensation paid by the Company during the
fiscal years ended December 31, 1995, 1996 and 1997 to the Company's Chief
Executive Officer and each of the Company's four other most highly compensated
executive officers whose cash compensation exceeded $100,000 in 1997 (the Chief
Executive Officer and such other executive officers are hereinafter referred to
as the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION(1) ------------
--------------------------------------- SECURITIES ALL OTHER
OTHER ANNUAL UNDERLYING COMPENSATION
YEAR SALARY BONUS(2) COMPENSATION(3) OPTIONS(#) ($)(4)
---- ------ -------- --------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Lance K. Gordon.......... 1997 $250,000 $62,500 $ 8,522 100,000 --
President and Chief 1996 $250,000 $56,250 $ 6,067 40,000 --
Executive Officer 1995 $220,500 $40,794 $ 7,009 -- $45,653
Thomas P. Monath......... 1997 $190,000 $52,500 $ 3,417 50,000 --
Vice President, Research 1996 $190,000 $42,750 $ 3,350 -- --
and Medical Affairs 1995 $157,500 $29,138 $ 5,034 -- --
Robert J. Gerety......... 1997 $188,815 $37,500 $43,855 125,000 --
Vice President of 1996 -- -- -- -- --
Development and 1995 -- -- -- -- --
Regulatory Affairs
Keith S. Ehrlich(5)...... 1997 $145,000 $36,250 $10,017 75,000 --
Vice President, Finance 1996 $145,000 $26,100 $ 799 10,000 --
and Administration 1995 $131,250 $24,938 $ 1,039 -- --
</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 $50,000 or
ten percent of the total annual salary and bonus for the Named Executive
Officer.
(3) Includes term-life insurance premiums and financial planning expenses paid
by the Company to the Named Executive Officer.
(4) Represents relocation allowances paid by the Company.
(5) Mr. Ehrlich resigned as an officer of the Company effective as of January
29, 1998.
7
<PAGE> 10
Option Grant Table. The following table sets forth certain information
regarding options granted by the Company to the Named Executive Officers during
the fiscal year ended December 31, 1997:
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE
NUMBER OF AT ASSUMED
SHARES OF PERCENT OF STOCK PRICE
COMMON TOTAL OPTIONS ANNUAL RATES OF
STOCK GRANTED TO APPRECIATION
UNDERLYING EMPLOYEES FOR OPTION TERM(1)
OPTIONS IN FISCAL EXERCISE EXPIRATION -------------------
NAME GRANTED(#) YEAR PRICE($/SH) DATE 5%($) 10%($)
---- ---------- ------------- ----------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Lance K. Gordon................. 100,000(2) 20.1% $2.50 3/24/07 $157,224 $398,436
Thomas P. Monath................ 50,000(2) 10.0% $2.50 3/24/07 $ 78,610 $199,220
Robert J. Gerety................ 125,000(3) 25.1% $3.00 4/3/07 $235,838 $597,653
Keith S. Ehrlich(4)............. 75,000 15.0% $2.50 3/24/07 $117,915 $298,830
</TABLE>
- ---------------
(1) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based on assumed rates of stock price appreciation of 5% and 10%
compounded annually from the date the respective options were granted to
their expiration date. This table does not take into account any
appreciation in the price of the Common Stock to date. Actual gains, if any,
on stock option exercises will depend on the future performance of the
Common Stock and the date at which the options are exercised.
(2) Option vests in 16 equal quarterly installments commencing on March 31,
1997.
(3) Option vests in four equal annual installments commencing on April 3, 1998.
(4) Mr. Ehrlich resigned as an officer of the Company effective January 29,
1998.
Year-End Option Table. The following table sets forth certain information
regarding stock options exercised during the year ended December 31, 1997 and
stock options held as of December 31, 1997, by the Named Executive Officers:
AGGREGATED OPTION EXERCISES IN LAST
FISCAL YEAR AND FISCAL YEAR-END
OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF
UNEXERCISED
NUMBER OF SHARES IN-THE-MONEY
NUMBER OF UNDERLYING UNEXERCISED OPTIONS AT
SHARES OF OPTIONS AT FISCAL
COMMON STOCK VALUE FISCAL YEAR-END(#) YEAR-END($)(2)
ACQUIRED ON REALIZED ------------------------- -------------------------
NAME EXERCISE(#) ($)(1) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ------------ -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Lance K. Gordon......... -- -- 159,966/149,260 $ 78,015/$0
Thomas P. Monath........ -- -- 134,429/62,630 $ 92,497/$0
Robert J. Gerety........ -- -- --/125,000 --/$0
Keith S. Ehrlich(3)..... -- -- 57,460/77,439 $ 0/$0
</TABLE>
- ---------------
(1) Represents the difference between the exercise price and the fair market
value on the date of exercise.
(2) Based on the fair value of the Common Stock on December 31, 1997 ($1.75),
less the option exercise price.
(3) Mr. Ehrlich resigned as an officer of the Company effective as of January
29, 1998.
8
<PAGE> 11
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 1997, or formerly, an officer or employee of the Company or any
subsidiary of the Company, nor has any member of the 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 1997, 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.
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,
all of whom are non-employee directors.
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 a
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.
9
<PAGE> 12
- 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 bonus awards will be
based on actual corporate and individual performance against targeted
performance and various objective performance criteria. Targeted performance
criteria, which 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.
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 1997 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 1997
remained at $250,000. Dr. Gordon also received bonus compensation of $62,500 in
1997. 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
10
<PAGE> 13
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 all such filings required to be
made by such Reporting Persons were timely made in accordance with the
requirements of the Exchange Act.
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 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. See "Certain
Transactions."
Under the terms of an employment agreement dated October 18, 1991, Dr.
Monath serves as Vice President of Research and Medical Affairs and is entitled
to receive an annual base salary as determined by the Board of Directors and to
participate in the bonus program for the Company's executive officers. 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,
vesting over a four-year period, and reimbursed Dr. Monath for expenses
associated with his relocation to the Boston, Massachusetts area. See "Certain
Transactions."
Under the terms of an employment agreement dated April 3, 1997, Dr. Gerety
serves as Vice President of Development and Regulatory Affairs and is entitled
to receive an annual base salary as determined by the Board of Directors and to
participate in the bonus program for the Company's executive officers. Pursuant
to the employment agreement, the Company granted Dr. Gerety an option to
purchase 125,000 shares of the Company's Common Stock at $3.00 per share,
vesting over a four-year period. See "Certain Transactions."
Each of the employment agreements with Drs. Monath and Gerety is for an
initial period of three years and is thereafter automatically renewable for
successive twelve-month periods unless terminated by either party by giving
six-months' prior written notice to the other. The employment of Drs. Monath and
Gerety is terminable by the Company, by giving prior written notice, at any
time, with or without "cause" (as defined in their employment agreements). In
the event the Company terminates Dr. Monath's or Dr. Gerety's employment without
"cause," the terminated party is entitled to receive his then current salary for
a period of six months following such termination. In addition, Drs. Monath and
Gerety have agreed, for a period of three years, 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. Drs. Monath and Gerety have also entered
into Confidential Information and Invention Assignment Agreements with the
Company pursuant to which each of them 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.
11
<PAGE> 14
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, 1997 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 (assuming the
investment of $100 in the Company's Common Stock, the Nasdaq Composite Index and
the Nasdaq Pharmaceutical Index on June 8, 1995 and reinvestment of all
dividends). Measurement points are on June 8, 1995 and the last trading day of
the years ended December 31, 1995, 1996 and 1997. Prior to June 8, 1995, the
Company's Common Stock was not registered under the Securities Exchange Act of
1934.
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
CRSP
Nasdaq CRSP
Measurement Period Composite Pharmaceutical
(Fiscal Year Covered) Index Index OraVax, Inc.
<S> <C> <C> <C>
6/8/95 100.00 100.00 100.00
12/31/95 120.32 159.71 117.50
12/31/96 148.00 159.88 52.50
12/31/97 181.59 165.22 17.50
</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.
12
<PAGE> 15
APPROVAL OF AMENDMENT TO THE COMPANY'S
SECOND AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
The Board of Directors has approved, subject to stockholder approval, an
amendment to the Company's Second Amended and Restated Certificate of
Incorporation (the "Certificate of Incorporation") to increase the number of
shares of Common Stock which the Company is authorized to issue from 25,000,000
shares to 50,000,000 shares. If this amendment is approved by the Company's
stockholders, the first paragraph of Article FOURTH of the Certificate of
Incorporation will read as follows:
"The total number of shares of all classes of stock which the Corporation
shall have authority to issue is 52,000,000 shares, consisting of (i)
50,000,000 shares of Common Stock, $.001 par value per share ("Common
Stock"), and (ii) 2,000,000 shares of Preferred Stock, $.001 par value per
share ("Preferred Stock")."
SUMMARY OF AUTHORIZED AND OUTSTANDING CAPITAL STOCK
The Company's authorized capital stock currently consists of 25,000,000
shares of Common Stock and 2,000,000 shares of Preferred Stock. The Certificate
of Incorporation provides that the Company's Preferred Stock may be divided into
any number of series, and that the Board of Directors may fix the number of, and
determine the rights, preferences, privileges and restrictions granted to or
imposed upon, any such series.
As of May 15, 1998, 11,127,400 shares of Common Stock and 5,099 shares of
Preferred Stock were issued and outstanding. Accordingly, the total number of
shares of Common Stock available for future issuance, whether upon the
conversion of outstanding convertible securities of the Company, the exercise of
outstanding options to purchase shares of Common Stock, or otherwise, is
13,872,600 shares, and the total number of shares of Preferred Stock available
for future issuance is 1,994,901 shares. If the proposed amendment to the
Certificate of Incorporation is approved by the Company's stockholders, the
Company will have available for issuance 38,872,600 shares of Common Stock and
1,994,901 shares of Preferred Stock.
PURPOSES AND EFFECT OF THE PROPOSED AMENDMENT
The Board of Directors believes that it is desirable and essential for the
Company to have available additional authorized but unissued shares of Common
Stock to provide the Company with shares of Common Stock to be used for general
corporate purposes and to provide flexibility for raising capital to fund the
Company's operations. The Company has recently been exploring alternative
methods of raising capital, including public or private offerings of equity
securities, and expects to pursue such alternatives if market conditions are
appropriate. Approval of the proposed amendment to the Certificate of
Incorporation will provide the Company with the flexibility to consummate
potential equity financings in a timely manner and to take advantage of other
favorable financial opportunities. If the Company's stockholders fail to approve
the proposed amendment to the Certificate of Incorporation, the Company will be
limited in its ability to act promptly with respect to potential financing
opportunities which are presented to it. If the Company cannot obtain adequate
funds when needed, the Company will be required to delay, scale-back or
eliminate preclinical and clinical testing of its product candidates and one or
more of its research and development programs. Inadequate funding also could
impair the Company's ability to operate. In particular, if the Company is unable
to secure adequate financing by the second half of 1998, it will have to begin
substantially reducing its operating plans in order to continue its operations.
In addition, if the Company fails to meet the Nasdaq National Market listing
requirement that the Company have net tangible assets in excess of $4 million,
the Company will be subject to delisting. If delisted from the Nasdaq National
Market, the Company would attempt to become listed on another stock exchange
where it is able to meet the listing requirements or arrange for the Common
Stock to be traded on the Nasdaq electronic bulletin board.
13
<PAGE> 16
Although an increase in the number of authorized shares of Common Stock
could, under certain circumstances, be viewed as having an anti-takeover effect,
the proposal to amend the Certificate of Incorporation is not in response to any
effort to accumulate the Company's stock or to obtain control of the Company.
The Board of Directors is not aware of any present efforts or attempt to
takeover, or otherwise gain control of, the Company through a public tender
offer, proxy contest or any other means.
Although, as stated above, the purpose of seeking an increase in the number
of authorized shares of Common Stock is not intended for anti-takeover purposes,
Securities and Exchange Commission rules require disclosure of charter, by-law
and other provisions that could have an anti-takeover effect. These include (i)
a Rights Agreement dated as of April 2, 1997 (the "Rights Agreement") between
the Company and The First National Bank of Boston, as Rights Agent, (ii) Board
authority under the Certificate of Incorporation to issue one or more series of
Preferred Stock up to a maximum of 2,000,000 shares, of which 200,000 shares
have been designated Series A Junior Participating Preferred Stock in connection
with the Rights Agreement, and (iii) a classified board of directors with
staggered terms of office.
The Rights Agreement provides that each share of the Company's Common Stock
outstanding as of April 15, 1997 has associated with it one right to purchase
one one-thousandth of a share of the Series A Junior Participating Preferred
Stock at a purchase price, subject to adjustment, of $35 per share. The rights
will be exercisable only if a person or group has acquired or obtained the right
to acquire beneficial ownership of 20% or more of the Company's outstanding
Common Stock, or after the commencement of a tender offer or an exchange offer
that would result in a person or group beneficially owning 30% or more of the
Company's outstanding Common Stock. If anyone acquires 20% or more of the
Company's outstanding Common Stock, the rights generally would entitle
stockholders (other than the 20% acquiror) to purchase for $35 the number of
shares of the Company's Common Stock which would have a market value of $70. In
the event that the Company is acquired in a merger or other business
combination, the rights generally would entitle the stockholders (other than the
acquiror) to purchase securities of the surviving company at a similar discount.
The Rights Agreement expires on April 15, 2007.
The Board of Directors unanimously recommends a vote FOR the proposal to
amend the Second Amended and Restated Certificate of Incorporation to increase
the number of shares which the Company is authorized to issue from 25,000,000
shares to 50,000,000 shares.
APPROVAL OF AMENDMENT TO THE
COMPANY'S 1995 EMPLOYEE STOCK PURCHASE PLAN
Under the terms of the Company's 1995 Employee Stock Purchase Plan (the
"1995 Purchase Plan"), the Company is authorized to issue up to 100,000 shares
of Common Stock to employees of the Company and its subsidiaries. The purpose of
the 1995 Purchase Plan is to ensure that the Company may continue to attract and
retain employees who are expected to contribute to the Company's growth and
success.
The Board of Directors has adopted, subject to stockholder approval, an
amendment (the "Purchase Plan Amendment") to the 1995 Purchase Plan providing
for an increase from 100,000 to 225,000 in the number of shares of Common Stock
available for issuance thereunder.
The following is a material summary of the 1995 Purchase Plan:
GENERAL
The 1995 Purchase Plan currently authorizes the issuance of up to a total
of 100,000 shares of Common Stock to participating employees. As of May 15,
1998, a total of 15,307 shares remained available for purchase under the 1995
Purchase Plan.
14
<PAGE> 17
All employees of the Company, including directors of the Company who are
employees, and all employees of any participating subsidiaries whose customary
employment is more than 20 hours per week and for more than five months in any
calendar year are eligible to participate in the 1995 Purchase Plan. Employees
who would immediately after the grant own 5% or more of the total combined
voting power or value of the stock of the Company or any subsidiary are not
eligible to participate. As of May 15, 1998, approximately 53 of the Company's
employees were eligible to participate in the 1995 Purchase Plan.
On the first day of a designated payroll deduction period (the "Offering
Period"), the Company grants to each eligible employee who has elected to
participate in the 1995 Purchase Plan an option to purchase shares of Common
Stock as follows: the employee may authorize an amount (a whole percentage from
1% to 15% of such employee's regular pay) to be deducted by the Company from
such pay during the Offering Period. On the last day of the Offering Period, the
employee is deemed to have exercised the option, at the option exercise price,
to the extent of accumulated payroll deductions. Under the terms of the 1995
Purchase Plan, the option price is an amount equal to 85% of the fair market
value per share of the Common Stock on either the first day or the last day of
the Offering Period, whichever is lower. In no event may an employee purchase in
any one Offering Period a number of shares which is more than 15% of the
employee's annualized base pay divided by 85% of the market value of a share of
Common Stock on the commencement date of the Offering Period. The Compensation
Committee may, in its discretion, choose an Offering Period of 12 months or less
for each of the Offerings and choose a different Offering Period for each
Offering.
If an employee is not a participant on the last day of the Offering Period,
such employee is not entitled to exercise an option, and the amount of such
employee's accumulated payroll deductions will be refunded. An employee's rights
under the 1995 Purchase Plan terminate upon voluntary withdrawal from the 1995
Purchase Plan at any time, or when such employee ceases employment for any
reason, except that upon termination of employment because of death, the
employee's beneficiary has certain rights to elect to exercise the option to
purchase the shares which the accumulated payroll deductions in the
participant's account would purchase at the date of death.
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the United States federal income tax
consequences that generally will arise with respect to purchases made under the
1995 Purchase Plan and with respect to the sale of Common Stock acquired under
the 1995 Purchase Plan.
Tax Consequences to Participants. In general, a participant will not
recognize taxable income upon enrolling in the 1995 Purchase Plan or upon
purchasing shares of Common Stock at the end of an offering. Instead, if a
participant sells Common Stock acquired under the 1995 Purchase Plan at a sale
price that exceeds the price at which the participant purchased the Common
Stock, then the participant will recognize taxable income in an amount equal to
the excess of the sale price of the Common Stock over the price at which the
participant purchased the Common Stock. A portion of that taxable income will be
ordinary income, and a portion may be capital gain.
If the participant sells the Common Stock more than one year after
acquiring it and more than two years after the date on which the offering
commenced (the "Grant Date"), then the participant will be taxed as follows. If
the sale price of the Common Stock is higher than the price at which the
participant purchased the Common Stock, then the participant will recognize
ordinary compensation income in an amount equal to the lesser of:
(i) fifteen percent of the fair market value of the Common Stock on
the Grant Date; and
15
<PAGE> 18
(ii) the excess of the sale price of the Common Stock over the price
at which the participant purchased the Common Stock.
Any further income will be long-term capital gain. If the sale price of the
Common Stock is less than the price at which the participant purchased the
Common Stock, then the participant will recognize long-term capital loss in an
amount equal to the excess of the price at which the participant purchased the
Common Stock over the sale price of the Common Stock.
If the participant sells the Common Stock within one year after acquiring
it or within two years after the Grant Date (a "Disqualifying Disposition"),
then the participant will recognize ordinary compensation income in an amount
equal to the excess of the fair market value of the Common Stock on the date
that it was purchased over the price at which the participant purchased the
Common Stock. The participant will also recognize capital gain in an amount
equal to the excess of the sale price of the Common Stock over the fair market
value of the Common Stock on the date that it was purchased, or capital loss in
an amount equal to the excess of the fair market value of the Common Stock on
the date that it was purchased over the sale price of the Common Stock. This
capital gain or loss will be a long-term capital gain or loss if the participant
has held the Common Stock for more than one year prior to the date of the sale
and will be a short-term capital gain or loss if the participant has held the
Common Stock for a shorter period.
Tax Consequences to the Company. The offering of Common Stock under the
1995 Purchase Plan will have no tax consequences to the Company. Moreover, in
general, neither the purchase nor the sale of Common Stock acquired under the
1995 Purchase Plan will have any tax consequences to the Company except that the
Company will be entitled to a business-expense deduction with respect to any
ordinary compensation income recognized by a participant upon making a
Disqualifying Disposition. Any such deduction will be subject to the limitations
of Section 162(m) of the Internal Revenue Code of 1986, as amended.
BOARD RECOMMENDATION
The Board of Directors unanimously recommends a vote FOR the proposal to
amend the 1995 Purchase Plan to increase the number of shares of Common Stock
available for issuance thereunder from 100,000 to 225,000 shares.
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.
16
<PAGE> 19
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.
DEADLINE FOR SUBMISSION OF STOCKHOLDER PROPOSALS FOR THE 1999 ANNUAL MEETING
Proposals of stockholders intended to be presented at the 1999 Annual
Meeting of Stockholders must be received by the Company at its principal office
in Cambridge, Massachusetts not later than December 19, 1998 for inclusion in
the proxy statement for that meeting.
By Order of the Board of Directors,
/s/ Lance K. Gordon
LANCE K. GORDON, PH.D.
President and Chief Executive
Officer
Cambridge, Massachusetts
May 29, 1998
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.
17
<PAGE> 20
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 Company that require your immediate
attention and approval. These are discussed in detail in the enclosed proxy
statement.
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 June 30, 1998.
Thank you in advance for your prompt consideration of these matters.
Sincerely,
OraVax, Inc.
[X] Please mark votes as in this example.
This proxy when properly executed will be voted in the manner directed by
the undersigned stockholder(s). If no other indication is made, the proxies
shall vote "For" proposals number 1, 2 and 3. A vote FOR the director
nominee and FOR proposals number 1, 2 and 3 is recommended by the Board of
Directors.
1) Election of Class III Director.
Nominee: Lance K. Gordon
____ For ____ Withheld
2) Approval of an amendment to the Company's Second Amended and Restated
Certificate of Incorporation to increase the number of shares of Common
Stock which the Company is authorized to issue from 25,000,000 shares to
50,000,000 shares.
____ For ____ Against ____ Abstain
3) Approval of an amendment to the Company's 1995 Employee Stock Purchase
Plan, providing for an increase from 100,000 to 225,000 in the number of
shares of Common Stock reserved for issuance thereunder.
____ For ____ Against ____ Abstain
4) Ratification of selection of independent accountants.
____ For ____ Against ____ Abstain
Mark box 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:_______
<PAGE> 21
ORAVAX, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
Annual Meeting of Stockholders - June 30, 1998
P Those signing on the reverse side, revoking any prior proxies,
R hereby appoint(s) Lance K. Gordon and John M. Westcott, Jr., or each or
O either of them with full power of substitution, as proxies for those
X signing on the reverse side to act and vote all shares of stock of
Y OraVax, Inc. (the "Company") which the undersigned would be entitled to
vote if personally present at the Annual Meeting of Stockholders of the
Company to be held on June 30, 1998 and at any adjournments thereof as
indicated upon all matters 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?
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CONTINUED AND TO BE SIGNED ON REVERSE SIDE
