<PAGE>
SCHEDULE 14A
(Rule 14a-101)
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[x] Preliminary Proxy Statement [ ] Confidential, for use of
[ ] Definitive Proxy Statement the Commission only
[ ] Definitive Additional Materials (as permitted by Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to
Rule 14a-ll(c) or Rule 14a-12
ENAMELON, INC.
(Name of Registrant as Specified In Its Charter)
ENAMELON, INC.
(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:________________________
(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-ll(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>
ENAMELON, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
to be held on May 18, 1999
To the Stockholders of Enamelon, Inc.:
Enamelon, Inc. will hold its Annual Meeting of Stockholders on May 18,
1999, at the Brunswick Hilton, Three Tower Center Boulevard, East Brunswick, New
Jersey 08816, at 9:00 a.m., for the following purposes:
1. To elect three Class II Directors to the Board of Directors to
hold office for a two-year term and until their successors are
duly elected and qualified;
2. To approve an amendment to the Company's Certificate of
Incorporation to increase the number of authorized shares of
the Company's common stock from 30,000,000 shares to
50,000,000 shares;
3. To approve the issuance upon conversion of the Company's
series B convertible preferred stock of more than 2,046,932
shares of the Company's common stock, representing 20% of the
outstanding shares of common stock on the date of the sale of
the Series B Convertible Preferred Stock, as required by
Nasdaq rules;
4. To approve the adoption of the Company's 1999 Incentive Stock
Option Plan;
5. To ratify the appointment of BDO Seidman, LLP, as the
Company's independent public accountants for the year ending
December 31, 1999; and
6. To transact such other business as may properly come before
the Annual Meeting or any adjournment or adjournments thereof.
Only Stockholders of record at the close of business on April 9, 1999,
are entitled to notice of and to vote at the Annual Meeting or any adjournments
thereof.
By Order of the Board of Directors,
Norman Usen, Secretary
Yonkers, New York
April 16, 1999
- --------------------------------------------------------------------------------
IMPORTANT
Whether or not you plan to attend the Annual Meeting, please promptly
complete, sign and date the enclosed proxy card, which is solicited by the Board
of Directors, and return it to the Company in the enclosed envelope. A
stockholder may revoke its proxy at any time before the proxy is voted.
Stockholders executing proxies may attend the Annual Meeting and vote in person
should they so desire.
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<S> <C>
INFORMATION ABOUT THE ANNUAL MEETING 1
Information about the Annual Meeting and the Proposals 1
Stockholders Entitled to Vote 1
Required Votes 2
Stockholders' List 2
ACTIONS TO BE TAKEN AT THE ANNUAL MEETING 2
PROPOSAL 1. ELECTION OF THREE DIRECTORS 2
Biographical Information about Nominees 3
Biographical Information about Directors 4
INFORMATION ABOUT THE BOARD OF DIRECTORS, COMMITTEES
OF THE BOARD, AND EXECUTIVE OFFICERS 4
Meetings of the Board of Directors and Information Regarding
Committees 4
Compensation of Directors 5
Executive Officers 5
Compliance with Section 16(a) of the Exchange Act 6
EXECUTIVE COMPENSATION 6
Summary Compensation Table 6
Option Grants in Last Fiscal Year 8
Aggregated Option Exercises in Last Fiscal Year And Fiscal
Year End Option Values 8
Employment Contracts and Termination of Employment
and Change of Control Arrangements 8
Employee Benefits Plans 9
Incentive Compensation Plan 10
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 10
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 12
PROPOSAL 2. AMENDMENT OF THE CERTIFICATE OF INCORPORATION TO
INCREASE THE NUMBER OF SHARES OF COMMON STOCK
AUTHORIZED TO BE ISSUED FROM 30,000,000 SHARES to
50,000,000 SHARES 12
PROPOSAL 3. APPROVAL OF THE ISSUANCE OF MORE THAN 2,046,932
SHARES OF COMMON STOCK UPO N CONVERSION OF THE
COMPANY'S SERIES B CONVERTIBLE PREFERRED STOCK
Terms of the Series B Convertible Preferred Stock 13
Shares Issuable on Conversion 13
Limitations on Conversion 13
Consequences of Failure to Approve Proposal 3 14
PROPOSAL 4. APPROVAL BY STOCKHOLDERS OF THE COMPANY'S
1999 INCENTIVE STOCK OPTION PLAN 14
General 14
Eligibility for Participation 15
Administration 15
Terms of Options 15
Termination, Modification and Amendment of the Plan 17
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Adjustments Upon Changes in Capitalization 17
Federal Income Tax Consequences 17
1999 Plan Benefits. 19
PROPOSAL 5. RATIFICATION OF THE APPOINTMENT OF BDO SEIDMAN, LLP
AS THE COMPANY'S INDEPENDENT PUBLIC ACCOUNTANTS. 19
EXPENSES 19
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS 19
AVAILABLE INFORMATION 19
EXHIBIT A-Amendment to Certificate of Incorporation
EXHIBIT B-1999 Incentive Stock Option Plan
</TABLE>
<PAGE>
ENAMELON, INC.
15 Kimball Avenue
Yonkers, New York 10704
914-237-1308
-----------------------
PROXY STATEMENT
---------------
INFORMATION ABOUT THE ANNUAL MEETING
Information about the Annual Meeting and the Proposals
The Board of Directors of Enamelon, Inc. (the "Company") presents this
Proxy Statement to all Stockholders of the Company and solicits their proxies
for the Annual Meeting of Stockholders to be held at 9:00 a.m. on May 18, 1999,
at the Brunswick Hilton, Three Tower Center Boulevard, East Brunswick, New
Jersey 08816. The persons named as proxies will vote on all matters presented at
the Annual Meeting in accordance with the instructions given in the proxy card.
In the absence of specific instructions, the named proxies will vote as follows:
o FOR the named nominees for election to the Company's Board of
Directors;
o FOR the amendment to the Company's amended Certificate of
Incorporation to increase the number of authorized shares of the
Company's Common Stock to 50 million shares;
o FOR the approval of the issuance of more than 2,046,932 shares,
of common stock on the conversion of the Company's series B
convertible preferred stock;
o FOR the 1999 Incentive Stock Option Plan;
o FOR the ratification of BDO Seidman, LLP as the Company's
independent public accountants.
The Board of Directors anticipates that all of the nominees will be
available for election and does not know of any other matter that may be brought
before the Annual Meeting. If any other matter comes before the Annual Meeting
or any nominee is not available for election, the persons named in the enclosed
proxy card will have discretionary authority to vote all proxies not marked to
the contrary with respect to such matter in accordance with their best judgment.
A stockholder may revoke the proxy at any time before it is voted in any of the
following ways:
o by sending a written notice of revocation to the Company's
Secretary;
o by providing a later dated proxy;
o by voting in person at the Annual Meeting.
This Proxy Statement is being mailed on or about April 16, 1999.
Stockholders Entitled to Vote
A total of 10,285,253 shares of the Company's common stock, $0.001 par
value, were outstanding as of April 9, 1999. The common stock is the only
outstanding class of securities of the Company entitled to vote. Each
<PAGE>
share of common stock has one vote. Only stockholders of record as of the close
of business on April 9, 1998 will be entitled to vote at the Annual Meeting or
any adjournment or adjournments of the Annual Meeting. Stockholders may vote at
the Annual Meeting in person or by proxy. A stockholder who is not the record
owner of his shares may vote in person at the Annual Meeting only if he presents
a proxy from his broker or other nominee naming him as proxy.
Required Votes
The presence at the Annual Meeting, in person or by proxy, of a
majority of issued and outstanding shares of common stock on April 8, 1999, is
required for a quorum to conduct business. Stockholders may approve the
proposals described in this Proxy Statement as follows:
o The Company will elect three directors at the Annual Meeting by
a plurality of the shares of common stock represented at the
Annual Meeting, which means that the three nominees receiving
the greatest number of votes will be elected;
o The affirmative vote by holders of a majority of the shares
present at the Annual Meeting and entitled to vote is required
for the approval of the Company's 1999 Incentive Stock Option
Plan, for the approval of the issuance of more than 20% of the
outstanding common stock upon conversion of the series B
convertible preferred stock and for the ratification of BDO
Seidman, LLP as the Company's independent public accountants;
o The affirmative vote by holders of a majority of the outstanding
shares of common stock is required to approve the amendment to
the Company's Certificate of Incorporation to increase the
number of authorized shares of the Company's Common Stock to 50
million shares.
Shares represented by proxies that are marked "abstain" with respect to
all matters other than the election of directors and proxies that are marked to
deny discretionary authority on all other matters will only be counted for the
purpose of determining the presence of a quorum. Votes withheld in connection
with the election of one or more nominees for director will not be counted as
votes cast for such individuals. In addition, where brokers are prohibited from
exercising discretionary authority for beneficial owners who have not provided
voting instructions (commonly referred to as "broker non-votes"), those shares
will not be included in the vote totals. Abstentions and broker non-votes,
however, will have the effect of negative votes on the proposal to amend the
Company's Certificate of Incorporation.
Stockholders' List
A list of stockholders entitled to vote at the Annual Meeting will be
available at the Company's office, 15 Kimball Avenue, Yonkers, New York, during
business hours, for ten days before the Annual Meeting for examination by any
stockholder. The list of stockholders will also be available at the Annual
Meeting.
ACTIONS TO BE TAKEN AT THE ANNUAL MEETING
PROPOSAL 1. ELECTION OF THREE DIRECTORS
The Company's Board of Directors currently consists of six directors.
Three Class I directors were elected at the 1998 Annual Meeting of Stockholders
to serve for a two-year term until the 2000 Annual Meeting and two Class II
Directors were elected for a one-year term expiring at the 1999 Annual Meeting.
In accordance with the Company's by-laws, the Board of Directors appointed
Walter W. Williams as a Class II Director on January 11, 1998. The Board of
Directors has nominated Mr. Williams and Dr. Bert D. Gaster and Richard
Gotterer, both incumbent Class II Directors, for re-election. Each Class II
Director will serve until the 2001 Annual Meeting of Stockholders and until
their successors are duly elected and qualified.
2
<PAGE>
The persons named in the accompanying proxy card will vote for the
election of the nominees for director, unless the proxy contains contrary
instructions. Proxies cannot be voted for a greater number of persons than the
number of nominees named in the Proxy Statement.
The following table sets forth information concerning the nominees and
their current positions with the Company.
Name Age Position with the Company Director Since
- ---- --- ------------------------- --------------
Dr. Bert D. Gaster 71 Director 1992
Richard A. Gotterer 35 Director 1992
Walter W. Williams 64 Director 1999
Biographical Information about Nominees
Bert D. Gaster, D.D.S., M.S.D., has been a director of the Company
since November 1992 and has been a tenured Associate Professor at New York
University's College of Dentistry since 1984. Dr. Gaster has held various
faculty positions with New York University's College of Dentistry since 1970,
including that of Senior Module Clinical Director for 18 years and a director of
the Student Faculty Planning Committee. Dr. Gaster is a past president of the
American College of Prosthodontics, New York section, has served on the Budget
Policy Development Committee and currently is President of the New York
University Dental Alumni Association. Dr. Gaster is currently an attending
Prosthodontist with three hospitals in the New York metropolitan area.
Richard A. Gotterer has been a director of the Company since November
1992 and has been a portfolio manager of fixed income securities at Schroder
Capital Management Inc., since September 1993. Mr. Gotterer was a private
investor from June 1990 through August 1993. Mr. Gotterer was the Vice President
of Finance and Chief Financial Officer of Channel America LPTV Holdings, Inc.,
an entertainment company, from February 1988 to May 1990. He was a financial
analyst with Oppenheimer & Co., Inc., an investment banking firm, from October
1985 to October 1987.
Walter W. Williams has been a self-employed consultant since 1991. Mr.
Williams was previously employed by Rubbermaid Inc. in various capacities from
1987 until 1991, including Chairman and Chief Executive Officer. From 1956 to
1987 he was employed by General Electric Company in various capacities. Mr.
Williams is a member of the Board of Directors of the Stanley Works, Corrpro
Companies, Inc. and Paxar Corporation.
The terms of the following three Class I Directors do not expire until
the 2000 Annual Meeting, and accordingly, they are not standing for re-election
at this Annual Meeting. All of the following directors are incumbents who were
previously elected by the stockholders.
Name Age Position with the Company Director Since
- ---- --- ------------------------- --------------
Steven R. Fox 45 Chairman of the Board, Chief 1992
Executive Officer and Director
S.N. Bhasker 76 Director 1994
Eric Horodas 45 Director 1992
3
<PAGE>
Biographical Information about Directors
Steven R. Fox, D.D.S., F.I.C.D., F.A.C.D., is the founder of the
Company, and has been the Chairman of the Board of Directors and Chief Executive
Officer of the Company since June 1992. Dr. Fox served as the Company's
President from June 1992 through December 1995 and as its Treasurer from June
1992 through August 1996. Dr. Fox is a member of the faculty of the Harvard
School of Dental Medicine. Dr. Fox practiced dentistry from July 1978 until
November 1997. He is currently retired from the practice of dentistry. Dr. Fox
was an Assistant Clinical Professor at New York University's College of
Dentistry from 1979 to 1987. Dr. Fox has been active in various professional
organizations, including the International Dental Research Society, the American
Dental Association and the Ethics Committee of the Ninth District Dental
Society.
S.N. Bhaskar, D.D.S., M.S., Ph.D., Major General U.S. Army (Ret.), has
been a director of the Company since August 1994 and the Chairman of the
Company's Scientific Advisory Board since August 1992. Since 1980, Dr. Bhaskar
has been in a private dental practice in Monterey and Salinas, California. From
January 1955 to November 1978, Dr. Bhaskar served in the United States Army and
was a Major General and Chief of the Dental Corps. He is an Honorary Fellow of
the Academy of General Dentistry, a Diplomat to the American Board of Oral
Medicine and the American Board of Oral Pathology, and a member of the Dental
Research Advisory Committee to the United States Army. Dr. Bhaskar is a former
Vice Chairman of Atrix Laboratories, Inc. and a consultant to the Board of
Directors at Vipont, Inc., a publicly-traded company engaged in the development
and marketing of oral care products.
Eric D. Horodas has been a director of the Company since November 1992.
Mr. Horodas has been President of Markev Realty Corporation since 1994 and Vice
President and Secretary of Baco Realty Corporation since June 1995, both of
which are actively engaged in originating, managing and servicing commercial
real estate and mortgage investments. He has formerly acted as a consultant to
various insurance regulators and insurance industry members in connection with
the restructuring and rehabilitation of financially troubled insurance companies
from November 1993 through May 1995. Mr. Horodas was a founding partner and
member of the Management Committee of the law firm of Rubinstein & Perry from
February 1988 until October 1993.
INFORMATION ABOUT THE BOARD OF DIRECTORS, COMMITTEES OF THE BOARD, AND
EXECUTIVE OFFICERS
Meetings of the Board of Directors and Information Regarding Committees
The Board of Directors held five meetings in 1998. All directors
attended at least 75% of the total number of Board meetings and of the meetings
of Committees on which each director served.
The Board of Directors has two standing committees, an Audit Committee
and a Compensation Committee. The Board of Directors does not have a Nominating
Committee.
The Audit Committee is composed of Mr. Gotterer (Chairman) and Dr.
Bhaskar. The duties of the Audit Committee include recommending the engagement
of independent auditors, reviewing and considering actions of management in
matters relating to audit functions, reviewing with independent auditors the
scope and results of its audit engagement, reviewing reports from various
regulatory authorities, reviewing the system of internal controls and procedures
of the Company, and reviewing the effectiveness of procedures intended to
prevent violations of law and regulation. The Audit Committee held two meetings
in 1998.
The Compensation Committee is composed of Mr. Horodas (Chairman) and
Dr. Gaster. The duties of this Committee include recommending to the Board
remuneration for officers of the Company, determining the number and issuance of
options pursuant to the Company's stock option plans and recommending the
establishment of and monitoring compensation programs for all executives of the
Company. The Compensation Committee held two meetings in 1998.
4
<PAGE>
Compensation of Directors
Each non-employee member of the Board of Directors presently receives
$500 plus reimbursement of expenses for each Board meeting attended and an
annual grant of options to purchase 5,000 shares of Common Stock. Each member of
the Audit Committee and the Compensation Committee receives $250 for each
Committee meeting attended together with reimbursement of expenses. Board
members have the right to waive their directors' fees and accept additional
options having an equivalent value.
Executive Officers
In addition to Dr. Fox, the following individuals serve as the
Company's executive officers:
Kim D. Hardingham, age 48, has been the President and Chief Operating
Officer since February 1999. From May 1996 to February 1999, Mr. Hardingham was
founder and proprietor of Princeton Dental Products, a consulting firm
specializing in the selling and marketing of tooth cleaning products. He was
General Manager, Personal Care Products and Managing Director of International
Consumer Products at Church & Dwight from August 1994, to May 1996. Prior to
that time, he was President of Church & Dwight Ltd. (Canada) from August 1992 to
August 1994.
Norman Usen, age 57, has been the Vice President-Product Development
and Secretary since May 1995. Mr. Usen had been the Vice President-Research and
Development, Vice President-Product Development and Secretary from July 1993
through May 1995. Mr. Usen specializes in consumer product development and has
over thirty years experience. From 1992 to April 1995, Mr. Usen, was the
President and sole stockholder of Nu-Products, Inc., was an independent
consultant. From August 1993 through April 1995, Nu-Products was retained by the
Company as a consultant on a part-time basis to coordinate product development.
Anthony E. Winston, age 54, has been the Vice President-Technology and
Clinical Research since January 1995. Mr. Winston has over 25 years of
technology development and clinical research experience most recently as
Technical Director for Church & Dwight Co., Inc., a consumer products
manufacturer, where he was responsible for technology development, clinical
research, ADA and FDA technical issues, claim substantiation and patent
protection for Arm & Hammer's baking soda toothpastes, including Peroxy Care(R).
Mr. Winston was employed at Church & Dwight Co., from 1970 to 1995. Mr. Winston
is the holder or co-holder of more than 60 United States patents, of which 16
are for toothpaste products, with several additional oral care patents pending.
Edwin Diaz, age 36, has been the Chief Financial Officer, Vice
President-Finance and Treasurer since August 1996. Prior to joining the Company,
Mr. Diaz was the Corporate Controller of NYCOR, Inc., a manufacturer of devices
used in heating and cooling systems, from September 1994 to August 1996. He was
the Controller of Lancer Industries, Inc., a company specializing in the
acquisition of distressed and under-performing companies, from 1990 until August
1994. Mr. Diaz was also employed by the Alfieri Organization, a real estate
development company, and by the accounting firm of Arthur Young & Company. Mr.
Diaz is a certified public accountant.
Tae Andrews, age 36, has been the Vice President of Marketing since
April 1998. Prior to that time he was the Director of Marketing for the Company
from January 1997 to April 1998. He was the Senior Product Manager at Kraft
Foods from July 1994 to January 1997 and before that he was the Product Manager
for Carter Products from July 1993 to June 1994.
Thomas J. Duncan, age 51, has been the Vice President-Operations since
May 1997. Beginning in November 1996, Mr. Duncan served as Director of
Manufacturing. Mr. Duncan has over 20 years' experience in manufacturing and
engineering at consumer product companies. Mr. Duncan was a project Manager in
Corporate Engineering at Church & Dwight Co., Inc. from 1982 through 1995. Mr.
Duncan was a Division Engineer at Boyle-Midway Division of American Home
products from May 1978 through October 1981.
5
<PAGE>
Louis M. Machin, age 43, has been Vice President-Sales since July 1998.
Prior to that time he was the Vice President of Sales for GOJO Industries of
Akron, Ohio from April 1996 to April 1998. From July 1987 to April 1996 he
worked as a the National Business Manager for Ciba Consumer Pharmaceuticals.
Compliance with Section 16(a) of the Exchange Act
Pursuant to Section 16 of the Securities Exchange Act of 1934, the
Company's Directors and executive officers and beneficial owners of more than
10% of the Company's Common Stock are required to file reports with the SEC and
the Company, within specified time periods, indicating their holdings of and
transactions in the common stock and derivative securities. Based solely on a
review of reports provided to the Company and written representations from
persons required to file regarding the necessity to file such reports, the
Company is not aware of any failures to file reports or report transactions in a
timely manner during the Company's fiscal year ended December 31, 1998, except
that Mr. Usen and Mr. Horodas each failed to file a timely report of a purchase
of common stock.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table summarizes the compensation paid by the Company to
its Chief Executive Officer and its four most highly compensated execution
officers for the year ended December 31, 1998, and for the two immediately
preceding years if they served as executive officers. The terms of the Company's
employment agreements with Dr. Fox and Messrs. Winston, Usen and Diaz are
described under Employment and Termination of Employment Agreements and Change
in Control Arrangements, below. Each of the five individuals listed below is
sometimes referred to in this Proxy Statement as a "Named Executive."
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
------------------- ----------------------
Securities Underlying
Name and Principal Position Year Salary ($) Bonus ($) Options (#)
- --------------------------- ---- ---------- --------- -----------
<S> <C> <C> <C> <C>
Steven R. Fox 1998 $267,500 $100,000 192,750
Chairman of the Board and 1997 $250,000 $100,000 150,000
Chief Executive Officer 1996 $175,000 $ 75,000 50,000
D. Brooks Cole (1) 1998 $185,500 $ 13,913 65,000
President and Chief 1997 $175,000 $ 26,250 22,000
Operating Officer 1996 $150,000 $ 22,500 50,000
Anthony E. Winston 1998 $151,000 $ 11,325 38,000
Vice President-Technology and 1997 $143,000 $ 21,450 13,000
Clinical Research 1996 $135,000 $ 20,250 -
Norman Usen 1998 $147,700 $ 11,078 38,000
Vice President-Product 1997 $129,600 $ 9,375 13,000
Development 1996 $115,000 $ 17,000 -
Edwin Diaz (2) 1998 $112,700 $ 8,453 38,000
Vice President-Finance, 1997 $ 92,750 $ 14,700 25,000
Treasurer and Chief Financial 1996 $ 37,083 $ 6,675 25,000
Officer
</TABLE>
(1) Mr. Cole resigned as the Company's President and Chief Operating
Officer effective January 31, 1999.
(2) Mr. Diaz was appointed Vice President-Finance, Treasurer and Chief
Financial Officer effective August 1, 1996.
6
<PAGE>
Option Grants in Last Fiscal Year
The following table shows the individual grants of stock options made
during the fiscal year ended December 31, 1998 to each of the Named Executives.
Except for 192,750 options granted to Dr. Fox, all options were granted on
December 17, 1998, vest 25% per year beginning on December 17,1999, and have an
exercise price equal to the fair market value of the Company's common stock on
the date of grant. The Company granted Dr. Fox 100,000 options that vested
immediately, 82,580 options that vest 23,187 per year over three years and
13,019 in the fourth year, and 10,170 options that were ISO's that have an
exercise price of 110% of the fair market value on the date of grant. The
Company granted a total of 558,000 options to all employees in the fiscal year
ended December 31, 1998.
<TABLE>
<CAPTION>
Percent of Total
Number of Securities Options Granted to
Underlying Options Employees in Exercise or Base Expiration
Name Granted (#)(1) Fiscal Year(2) Price ($/Sh) Date
---- -------------- -------------- ------------- -------
<S> <C> <C> <C> <C>
Steven R. Fox 182,580 32.7% $ 8.938 12/16/08
10,170 1.8% $ 9.832 12/16/03
D. Brooks Cole 65,000 (1) 11.6% $ 8.938 12/16/08
Anthony E. Winston 38,000 6.8% $ 8.938 12/16/08
Norman Usen 38,000 6.8% $ 8.938 12/16/08
Edwin Diaz 38,000 6.8% $ 8.938 12/16/08
</TABLE>
- ----------
(1) All options granted to Mr. Cole expired on January 31, 1999 in
connection with the termination of his employment as President and
Chief Operating Officer.
Stock options granted under the Company's 1993 Employee Stock Option
Plan and 1997 Incentive Stock Option Plan are intended to qualify as incentive
stock options under Section 422 of the Internal Revenue Code of 1986. Under the
terms of the 1993 Plan and the 1997 Plan, ISO's may be granted to officers and
other key employees of the Company for a maximum term of 10 years. The price per
share of an ISO may not be less than the fair market value of the Company's
shares on the date of grant. However, ISO's granted to persons owning more than
10% of the Company's Common Stock may not have a term of more than five years
and may not have an option price less than 110% of the fair market value per
share of the Company's shares on the date of grant. The total exercise price of
all ISO's first exercisable in any year cannot exceed $100,000. Any options
granted in excess of the $100,000 limitation would not qualify as ISO's under
the Internal Revenue Code.
7
<PAGE>
Aggregated Option Exercises in Last Fiscal Year And Fiscal Year End Option
Values
The following table shows the number and value of options that each
Named Executive held at December 31, 1998. No Named Executive exercised options
in 1998. At December 31, 1998, the market price of the Company's Common Stock as
$5.812 per share.
<TABLE>
<CAPTION>
Number of Securities Underlying Value of Unexercised In-The-
Unexercised Options at FY-End (#) Money Options at FY-End ($)
Name Exercisable / Unexercisable Exercisable / Unexercisable
- ---- --------------------------- ---------------------------
<S> <C> <C>
Steven R. Fox 612,500 / 230,250 1,265,400 / 0
D. Brooks Cole 108,000 / 106,500 (1) 217,930 / 0
Anthony E. Winston 163,250 / 47,750 690,420 / 0
Norman Usen 179,072 / 47,750 494,243 / 0
Edwin Diaz 31,250 / 56,750 0 / 0
</TABLE>
- ----------
(1) All of Mr. Cole's unexercisable options terminated on January 31, 1999,
in connection with the termination of his employment.
Employment Contracts and Termination of Employment and Change of Control
Arrangements
Steven R. Fox Employment Agreement. The Company entered into a
five-year employment agreement with Dr. Steven R. Fox, which began on January 1,
1999, upon expiration of his previous employment agreement. The Company has
agreed to employ Dr. Fox as Chairman and Chief Executive Officer, and he has
agreed to devote his full time, attention and efforts to performing his duties
for the Company in those capacities. Dr. Fox's salary under the agreement will
be $350,000 for 1999 and will increase by a minimum of 10% in each subsequent
year. Dr. Fox will also be entitled to receive 50% of all amounts allocated to
the Company's Incentive Compensation Plan for officers, which is described
below. If there is a change in control of the Company that both Dr. Fox and a
majority of the Company's Board oppose and Dr. Fox terminates his employment, he
will be entitled to receive a lump-sum payment of 2.9 times the sum of his base
annual salary at that time plus any amounts due to him under the Company's
Incentive Compensation Plan. If there is a change in control of the Company that
Dr. Fox opposes, but a majority of the Board does not oppose, and Dr. Fox
terminates his employment, he will be entitled to receive a lump-sum payment of
2.5 times the sum of his base annual salary at that time plus any amounts due to
him under the Company's Incentive Compensation Plan. A payment on a change of
control may not exceed the maximum payment permitted by Section 280G of the
Internal Revenue Code. On signing the agreement, the Company granted Dr. Fox
10-year options to purchase 100,000 shares of the Company's common stock
exercisable immediately at $8.938 per share.
Norman Usen Employment Agreement. The Company entered into a
three-year employment agreement with Norman Usen, which began on May 1, 1995,
and was extended in 1997 to June 30, 1999. The Company has agreed to employ Mr.
Usen as Vice President-Development, and he has agreed to devote his full time,
attention and efforts to performing his duties for the Company in that capacity.
Mr. Usen's annual salary is $156,500 for 1999. Mr. Usen will also be entitled to
receive 12.5% of all amounts allocated to the Company's Incentive Compensation
Plan. If the Company terminates Mr. Usen's employment without cause prior to the
expiration of the term of the agreement, it will be required to pay him his
salary and benefits until the end of the term. On signing the agreement in 1995,
the Company granted Mr. Usen seven-year options to purchase 90,000 shares of
common stock exercisable immediately at $1.33 per share.
8
<PAGE>
Anthony Winston Employment Agreement. The Company entered into a
two-year employment agreement with Anthony Winston, which began on January 17,
1995, and was extended in 1997 to January 17, 2000. The Company has agreed to
employ Mr. Winston as Vice President-Technology and Clinical Research, and he
has agreed to devote his full time, attention and efforts to performing his
duties for the Company in those capacities. Mr. Winston's annual salary under
the agreement will be $160,000 until January, 2000. Mr. Winston will also be
entitled to receive 10% of all amounts allocated to the Company's Incentive
Compensation Plan. If the Company terminates Mr. Winston's employment without
cause prior to the expiration of the term of the agreement, it will be required
to pay him his salary and benefits until the end of the term. On signing the
agreement in 1995, the Company granted Mr. Winston ten-year options to purchase
150,000 shares of common stock exercisable immediately at $1.33 per share.
Edwin Diaz Employment Agreement. The Company entered into an employment
agreement with Edwin Diaz effective July 29, 1996. The Company has agreed to
employ Mr. Diaz as Vice President-Finance, Treasurer and Chief Financial
Officer, and he has agreed to devote his full time, attention and efforts to
performing his duties for the Company in that capacity. Mr. Diaz's annual salary
under the agreement will be $133,000 in 1999. Mr. Diaz will also be entitled to
receive not less than 5% of all amounts allocated to the Company's Incentive
Compensation Plan. Mr. Diaz and the Company may each terminate the agreement
without cause at any time. If the Company terminates Mr. Diaz's employment
without cause, it will be required to pay him his salary and benefits for six
months after termination. If the Company or Mr. Diaz terminates the agreement
after a change of control, the Company will be required to pay Mr. Diaz's salary
and benefits for one year. On signing the agreement, the Company granted Mr.
Diaz five-year options to purchase 25,000 shares of common stock exercisable at
$7.00 per share.
Employee Benefits Plans
1993 Stock Option Plan
In July 1993, the Board of Directors adopted the Enamelon, Inc. 1993
Stock Option Plan, which the Company's Stockholders approved in September 1993.
The 1993 Plan provides for the grant to qualified employees of the Company,
including officers and directors, of the Company of options to purchase common
stock. A total of 1,500,000 shares were reserved for issuance upon exercise of
stock options granted under the 1993 Plan. The 1993 Plan is administered by the
Board of Directors or a committee of the Board of Directors (either, the
"Committee") whose members are not entitled to receive options under the 1993
Plan (excluding options granted exclusively for directors fees). The Committee
has complete discretion to select the optionee and to establish the terms and
conditions of each option, subject to the provisions of the 1993 Plan. The
Committee may grant "incentive stock options" or `non-qualified stock options"
under the Internal Revenue Code. The exercise price of both ISO's and NQSO's
granted may not be less than 100% of the fair market value of the Common Stock
as of the date of grant except that ISO's granted to an employee who owns more
than 10% of the outstanding common stock must have an exercise price of not less
than 110% of the fair market value of common stock on the date of grant. Options
may not have a term of more than 10 years, except that ISO's (five years if the
grant is an Incentive Option to any employee who owns more than 10% of the
outstanding Common Stock). Options granted under the 1993 Plan are not
transferable and may be exercised only by the grantees during their lifetimes or
by their heirs, executors or administrators in the event of death. Under the
1993 Plan, shares that are the subject of canceled or terminated options are
reserved for subsequently granted options. The number of options outstanding and
their exercise price thereof will be adjusted on transactions such as mergers,
recapitalizations, stock splits or stock dividends.
1997 Stock Option Plan
In May 1997, the Board of Directors adopted the Enamelon, Inc. 1997
Stock Option Plan, which was approved by the Company's Stockholders in May 1997.
The 1997 Plan provides for the grant to qualified employees (including officers
and directors) of the Company of options to purchase shares of Common Stock. A
total of 750,000 options to purchase shares of Common Stock have been reserved
for issuance upon exercise of stock options granted under the 1997 Plan. The
1997 Plan is administered by the Board of Directors or a committee of the Board
of Directors (the "Committee") whose members are not entitled to receive options
under the 1997 Plan (excluding
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<PAGE>
options granted exclusively for directors fees). The Committee has
complete discretion to select the optionee and to establish the terms and
conditions of each option, subject to the provisions of the 1997 Plan. Options
granted under the 1997 Plan may or may not be "incentive stock options" as
defined in Section 422 of the Internal Revenue Code ("Incentive Options")
depending upon the terms established by the Committee at the time of grant, but
the exercise price of options granted may not be less than 100% of the fair
market value of the Common Stock as of the date of grant (110% of the fair
market value if the grant is an Incentive Option granted to an employee who owns
more than 10% of the outstanding Common Stock). Options may not be exercised
more than 10 years after the grant (five years if the grant is an Incentive
Option to any employee who owns more than 10% of the outstanding Common Stock).
Options granted under the 1997 Plan are not transferable and may be exercised
only by the respective grantees during their lifetimes or by their heirs,
executors or administrators in the event of death. Under the 1997 Plan, shares
that are the subject of canceled or terminated options are reserved for
subsequently granted options. The number of options outstanding and the exercise
price thereof are subject to adjustment in the case of certain transactions such
as mergers, recapitalizations, stock splits or stock dividends.
Outstanding and Available Options
As of March 18, 1999, the Company had granted options under the 1993
Plan and the 1997 Plan to purchase a total of 2,211,485 shares of common stock,
net of terminations, at prices ranging between $1.33 and $17.50 per share.
Participants in the Company's existing Stock Option Plans had exercised 369,965
options, and a total of 1,841,520 options were outstanding. The Company had
38,515 options available for grant under the existing Stock Option Plans.
Incentive Compensation Plan
The Company has established a five-year incentive compensation program
to award officers and key employees for their efforts on behalf of the Company
as measured by yearly increases in the net income (before income taxes and
extraordinary items) generated by the Company. The program provides for
incentive compensation utilizing an objective formula based upon guidelines in
accordance with the Company's goals. The Company will establish a yearly bonus
pool for 1998 equal to five percent of its net income before income taxes,
including the amount provided for by the incentive compensation plan and
extraordinary items ("ICP Income"), to be distributed to officers and key
employees. For the subsequent three fiscal years, such bonus pool shall only be
established in the event the Company's ICP Income equals or exceeds by at least
5% the Company's ICP Income for the prior fiscal year. Amounts remaining in the
yearly bonus pool that are not distributed do not carry over into the subsequent
year's pool. The maximum amount an executive or key employee may receive from
the bonus pool is limited to two times such person's salary.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table shows how many shares of common stock was
beneficially owned, as of March 18, 1999, by (1) each person known by the
Company to be the owner or more than 5% of the outstanding shares of common
stock, (2) each director, (3) the Chief Executive Officer and each other Named
Executive and (4) all directors and executive officers as a group. In general,
"beneficial ownership" includes those shares a person has the power to vote or
the power to transfer, as well as stock options and other rights to acquire
common stock that are exercisable currently or become exercisable within 60
days. Except as indicated otherwise, the persons named in the table below have
sole voting and investment power with respect to all shares shown as
beneficially owned by them. The calculation of the percentage owned was based on
10,285,253 shares outstanding on March 18, 1999. The address of each of the
directors and executive officers listed below is c/o Enamelon, Inc., 15 Kimball
Avenue, Yonkers, New York 10704.
10
<PAGE>
<TABLE>
<CAPTION>
Amount and
Nature of Percentage of
Name and Address Beneficial Outstanding Shares
of Beneficial Owners Ownership Owned
-------------------- --------- ------------------
<S> <C> <C>
Dr. Steven R. Fox .............................. 3,114,240(1) 28.6%
Mr. D. Brooks Cole ............................. 46,600(2) *
Mr. Anthony E. Winston ......................... 163,250(3) 1.6%
Mr. Norman Usen ................................ 180,512(4) 1.7%
Mr. Edwin Diaz ................................. 31,250(5) *
Dr. Bert Gaster ................................ 22,253(6) *
Mr. Richard Gotterer ........................... 87,512(7) *
Mr. Eric Horodas ............................... 100,811(8) 1.0%
Dr. S.N. Bhaskar ............................... 67,256(9) *
Mr. Walter Williams ............................ 30,000(10) *
All directors and executive officers as a group
(13 persons) ................................ 3,881,243(11) 34.0%
</TABLE>
- ----------
* Represents less than 1% of the outstanding Common Stock of the Company.
(1) Includes 36,348 shares held in trust for the benefit of Dr. Fox's minor
children. Also includes 612,500 shares issuable upon exercise of
currently exercisable stock options, but does not include options to
purchase 230,250 shares that have not vested. Shares owned directly by
Dr. Fox are owned jointly with his wife.
(2) Mr. Cole resigned as President and Chief Operating Officer effective
January 31, 1999.
(3) Represents 163,250 shares issuable upon exercise of currently
exercisable stock options, but does not include options to purchase
47,750 shares that have not vested.
(4) Includes 179,012 shares issuable upon exercise of currently exercisable
stock options, but does not include 47,750 shares that have not vested.
(5) Represents 31,250 shares issuable upon exercise of currently exercisable
stock options, but does not include options to purchase 56,750 shares
that have not vested.
(6) Includes 12,000 shares issuable upon exercise of currently exercisable
stock options.
(7) Includes 12,000 shares issuable upon exercise of currently exercisable
stock options.
(8) Includes 12,000 shares issuable upon exercise of currently exercisable
stock options and 50 shares owned by Mr. Horodas as custodian for his
son, as to which he disclaims beneficial ownership.
(9) Includes 8,500 shares issuable upon exercise of currently exercisable
stock options.
(10) Represents 30,000 shares issuable upon exercise of currently exercisable
stock options.
(11) Includes 1,125,720 shares issuable upon exercise of currently
exercisable stock options.
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<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has subleased its office facilities without a written
agreement, since December 1, 1992, from Dr. Steven R. Fox, the Chairman of the
Board, at a rent of $600 per month. Commencing January 1, 1996 for a period of
one year, the Company entered into a lease with a relative of Dr. Fox for
additional office facilities at a rent of $2,500 per month.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE
NOMINEES LISTED IN PROPOSAL 1.
PROPOSAL 2. AMENDMENT OF THE CERTIFICATE OF INCORPORATION TO INCREASE
THE NUMBER OF SHARES OF COMMON STOCK AUTHORIZED TO BE ISSUED
FROM 30,000,000 SHARES TO 50,000,000 SHARES.
The Board of Directors has approved an amendment to the Company's
Certificate of Incorporation to authorize the Company to issue up to 50,000,000
shares of common stock. The text of the proposed amendment is annexed as Exhibit
A.
The Company is presently authorized to issue 30,000,000 shares of
common stock and 5,000,000 shares of preferred stock, par value $.01 per share.
As of March 18, 1999, 10,285,253 shares of common stock were issued and
outstanding, and approximately 1,880,095 shares of common stock were reserved
for issuance under the existing Stock Option Plans. If Proposal 4 is approved,
500,000 additional shares of common stock will also be reserved for issuance
under the Company's 1999 Incentive Stock Option Plan. In addition, approximately
753,508 shares of Common Stock are reserved for issuance upon the exercise of
currently exercisable warrants, and 1,777,768 shares of common stock are
reserved for issuance on conversion of the Company's series B convertible
preferred stock.
The increased capitalization to be authorized would provide needed
flexibility for future financial and capital requirements so that the Company
could take proper advantage of propitious market conditions and possible
business acquisitions. Shares of common stock would also be available to the
Company for stock dividends or splits should the Board of Directors decide that
it would be desirable, in light of market conditions then prevailing, to broaden
the public ownership of, and to enhance the market for, the shares of the
Company's common stock. The additional shares would be available for issuance
for these and other purposes, subject to Delaware laws and Nasdaq rules, at the
discretion of the Company's Board of Directors without, in most cases, the
delays and expenses attendant to obtaining further stockholder approval. To the
extent required by Delaware law or Nasdaq rules the Company will solicit,
stockholder approval in the event shares of stock are to be issued in connection
with a merger.
Although the Company's Board of Directors does not consider the
proposed amendment to the Company's Certificate of Incorporation to be an
antitakeover proposal, the ability to issue additional shares of common stock
could also be used to discourage hostile takeover attempts of the Company. Among
other things, the additional shares could be privately placed, thereby diluting
the stock ownership of persons seeking to obtain control of the Company, or the
Board could implement a stockholders' rights plan that would provide for the
issuance of additional shares of common stock in the event of certain purchases
not approved by the Board of Directors.
The Board of Directors has no current plans to issue any of the
additional shares of Common Stock to be authorized under the proposed amendment
to its Certificate of Incorporation.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR"
PROPOSAL 2.
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<PAGE>
PROPOSAL 3. APPROVAL OF THE ISSUANCE OF MORE THAN 2,046,932 SHARES OF
COMMON STOCK UPON CONVERSION OF THE COMPANY'S SERIES B
CONVERTIBLE PREFERRED STOCK.
Terms of the Series B Convertible Preferred Stock
On December 18, 1998, the Company sold 500 shares of its series B
convertible preferred stock, $.01 par value, to three purchasers for an
aggregate purchase price of $5,000,000. Each share of Series B Convertible
Preferred Stock has a stated value of $10,000, plus an accrual amount equal to
6% per annum, payable on conversion in cash or common stock at the Company's
option. The number of shares of common stock that each preferred stockholder can
acquire on conversion of its series B convertible preferred stock will vary with
changes in the market price of the common stock. The series B convertible
preferred stock is convertible at a Conversion Price equal to the lower of the
Variable Price of the common stock on the date of conversion or the Base Price.
The Variable Price is equal to the average of the five lowest closing sale
prices of the common stock in the 40 trading days immediately preceding the
conversion. The Base Price is $7.19, which is 120% of the average of the closing
prices of the common stock on the last five trading days of February 1999. Both
the Variable Price and the Base Price will be reduced if the Company does not
comply with certain obligations in the Certificate of Designations establishing
the series B convertible preferred stock. The number of shares of common stock
issuable on conversion of each share of series B convertible preferred stock is
equal to the sum of $10,000 plus an accrual amount equal to 6% per annum divided
by the Conversion Price. The preferred stockholders are required to convert
their shares of series B convertible preferred stock by December 18, 2001.
Shares Issuable on Conversion
On March 18, 1999, the Variable Price was $4.581. Since the Conversion
Price was lower than the Base Price, the Variable Price would have been the
Conversion Price. The 6% accrual amount on that date would have been $147.95 per
share for the 90 days that the series B convertible preferred stock was
outstanding. Therefore, if a holder of series B convertible preferred stock had
converted on that date, it would have received approximately 2,215 shares of
common stock for each share of series B convertible preferred stock, determined
by dividing $10,147.95 by $4.581. If holders of all shares of series B
convertible preferred stock had converted on that date, the Company would have
issued approximately 1,107,836 shares of common stock.
The minimum number of shares of common stock issuable on conversion of
each share of series B convertible preferred stock at the Base Price is
approximately 1,391 shares, plus approximately 0.2286 shares for each day that
the series B convertible preferred stock is outstanding. If holders of all
shares of the series B convertible preferred stock had converted on March 18,
1999 at the Base Price, the Company would have issued a total of approximately
705,699 shares of common stock. Although the Base Price is the maximum
Conversion Price, there is no minimum Conversion Price. Consequently, the lower
the market price of the common stock, the greater number of shares the Company
will be required to issue on conversion of the series B convertible preferred
stock.
The conversion of the series B convertible preferred stock, including
conversion at a discount to the prevailing market price, and the immediate
public resale of the shares of common stock acquired on conversion may depress
the market price of the common stock. It will also dilute existing holders of
the common stock.
Limitations on Conversion
In general, a preferred stockholder may not convert if, after giving
effect to the conversion, it and its affiliates would own more than 4.99% of the
issued and outstanding common stock. Any preferred stockholder could, however,
sell shares to reduce its beneficial ownership, which would permit it to convert
additional shares of series B convertible preferred stock without violating the
4.99% limitations. As required by its agreement with the preferred stockholders,
the Company has filed a registration statement that will permit the preferred
stockholders to sell their common stock publicly upon conversion. As of March
18, 1999, no preferred stockholder group could convert into more than 540,189
shares of common stock without first selling shares.
A preferred stockholder may also not convert if, after conversion, it
and its affiliates have acquired on conversion 10% of the Company's issued and
outstanding common stock during any 60-day period after giving
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<PAGE>
effect to the conversion. As of March 18, 1999, no preferred stockholder group
could convert into more than 1,142,805 shares of common stock during any 60-day
period.
The Company also has the right to notify the preferred stockholders
that it will redeem the series B preferred stock for 105% of the sum of the
$10,000 stated value plus the 6% accrual amount if the preferred stockholders
convert when the closing bid price of the Company's common stock is less than
approximately $6.48. To exercise this right, the Company is required to have
sufficient cash on hand or immediately available credit to pay the required
amount.
The Company is also not required to issue shares of common stock on
conversion of the series B convertible preferred stock if, after the issuance,
the total number of shares of common stock issued on conversion would equal or
exceed 2,047,596 shares without violating Nasdaq rules. In general, Nasdaq rules
require the Company to obtain stockholder approval for the issuance of
securities involving the sale of 20% or more if its common stock other than a
sale for cash in a public offering. The Company has agreed with the preferred
stockholders to seek that approval at this Annual Meeting.
Consequences of Failure to Approve Proposal 3
The Company's failure to obtain stockholder approval will have no
effect if it is required to issue less than a total of 2,047,596 shares on
conversion of all shares of series B convertible preferred stock. Whether the
Company will be required to issue a greater number will depend on the Variable
Price at the time of conversion. For example, if the preferred stockholders were
to convert all of their shares on June 18, 1999, the amount to be converted
would be the $5,000,000 stated value plus $150,000 as the 6% accrual amount.
Therefore, the Variable Price would have to be less than $2.515 before the
Company would have to issue more than 2,047,596 shares.
If the Company does not obtain Stockholder approval to issue more than
2,047,596 shares of its common stock, the preferred stockholders would still
have the right to receive 2,047,596 shares of common stock on conversion.
However, the preferred stockholders can, among other things, require the Company
to pay them in cash for each share that cannot be converted into common stock as
a result of the limitation the greater of (1) $12,500 plus the 6% accrual amount
or (2) the closing bid price of the common stock on the date of conversion
multiplied by the shares of common stock that would have been issued but for the
limitation. The Company's ability to make those cash payments will depend on its
available cash resources at the time of conversion. The payment of such amounts
may adversely affect the liquidity and financial condition of the Company.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR"
PROPOSAL 3.
14
<PAGE>
PROPOSAL 4. APPROVAL BY STOCKHOLDERS OF THE COMPANY'S 1999 INCENTIVE STOCK
OPTION PLAN
The Board of Directors has adopted, subject to the approval of
stockholders, the Company's 1999 Incentive Stock Option Plan, which authorizes
the grant of options to purchase 500,000 shares of common stock.
General
The Board of Directors has deemed it in the best interest of the
Company to establish the 1999 Plan to provide employees and other persons
involved in the continuing development and success of the Company an opportunity
to acquire a proprietary interest in the Company by means of grants of options
to purchase common stock. Persons eligible to receive grants of options under
the 1999 Plan are referred to below as "Participants." The Plan supplements the
Company's existing Stock Option Plans. It is the opinion of the Board of
Directors that by rewarding the Company's employees and other individuals
contributing to the Company with the opportunity to acquire an equity investment
in the Company, the Stock Option Plans will maintain and strengthen their desire
to remain with the Company, stimulate their efforts on the Company's behalf, and
also attract other qualified personnel to provide services on behalf of the
Company.
The following description summarizes some of the provisions of the 1999
Plan. Interested persons should refer to the full text of the 1999 Plan for more
detail. Copies of the 1999 Plan are available for examination on the SEC's web
site at www.sec.gov and at the Company's principal office, 15 Kimball Avenue,
Yonkers, New York 10704.
The 1999 Plan allows the Company to grant incentive stock options, as
defined in Section 422(b) of the Internal Revenue Code of 1986, Non-Qualified
Stock Options not intended to qualify under Section 422(b) of the Code, and
Stock Appreciation Rights. ISO's, NQSO's, and SAR's are collectively referred to
below as "Options". The 1999 Plan is not subject to ERISA.
Eligibility for Participation
The Company may grant ISO's separately or in tandem with SAR's to
employees of the Company, including officers, but excluding directors who are
not employees of the Company. The Company may grant NQSO's separately or in
tandem with SAR's to employees of the Company, officers, directors, independent
contractors, consultants and other individuals who are not employees, but are
involved in the continuing development and success of the Company. The total
exercise price of all ISO's granted under all of the Company's Stock Option
Plans may not exceed $100,000 in the year in which they vest. Any Options
granted in excess of the $100,000 limitation would be NQSO's. Furthermore, the
Company may not grant more than 100,000 Options to a Participant in any calendar
year. The Company presently, has 48 employees (including one director-employee),
and five outside directors who are eligible for grants of one or more types of
Options under the 1999 Plan. The Company cannot presently determine the number
of non-employees who may be entitled to NQSO's under the Plan.
Administration
The 1999 Plan may be administered by the Board of Directors, by the
Board's Compensation Committee, or by another Board Committee of composed solely
of at least two "outside directors" (as defined under Section 162(m) of the
Code). The Compensation Committee administers the existing Stock Option Plans
and is expected to administer the 1999 Plan as well. The administrator of the
1999 Plan is referred to below as the "Committee." The Committee has the
authority to make the following determinations:
o the persons who will receive Option grants;
o whether the Options re ISO's or NQSO's and whether they are
granted in tandem with SAR's;
o how participants may exercise their Options;
o how participants may pay the exercise price;
15
<PAGE>
o the number of Options granted.
Terms of Options
The Committee will determine the terms of Options granted under the
1999 Plan as long as the terms are not inconsistent with the limitations of the
1999 Plan. The terms will be subject to the conditions described below.
Term of Option. No Option may have a term of more than ten years from
the date of grant. In the case of ISO's granted to employees who also directly
or indirectly own more than 10% of the Company's common stock ("10% Owners"), an
Option may not have a term of more than five years.
Vesting. In general, Options must vest over a period of not longer than
five years and at a rate of not less than 20% per year. The Committee may also
grant Options that vest on the Participant's or the Company's attainment of
specified performance goals.
Exercise Price. The exercise price of NQSO's may not be less than 85%
of the fair market value of the Company's common stock on the date of grant. The
exercise price of ISO's may not be less than the fair market value of the
Company's common stock on the date of grant. In the case of 10% Owners, the
exercise price must be at least 110% of the fair market value on the date of
grant.
Payment of Exercise Price. Participants may pay the exercise price in
cash or by check. The Committee also has the discretion to permit full or
partial payment of the exercise price by delivery of an interest-bearing
promissory note or shares of the Company's common stock having a fair market
value equal to the exercise price. In the case of NQSO's, the Committee may also
permit the Participant to have the Company withhold from the common stock to be
issued on exercise that number of shares having a fair market value equal to the
exercise price and/or the tax withholding due.
Termination of Employment. Unless a Participant's option agreement
provides otherwise, a Participant may exercise his vested Options within three
months after termination of his employment or consulting agreement. AllOptions
will immediately terminate on a Participant's termination for cause.
Death or Disability. Unless a Participant's option agreement provides
otherwise, if a Participant dies while employed or within three months after
termination of his employment without cause, his personal representatives can
exercise his Options for six months after his death. If a Participant becomes
disabled while employed, he or his personal representatives may exercise his
Options at any time within six months after the termination of his employment
due to the disability.
Non-transferability of Options. A Participant may not transfer or grant
any interest in ISO's, except by will or under the laws of intestacy. The
Committee has the discretion to permit Participants to transfer or otherwise
grant interests in NQSO's.
Termination, Modification and Amendment of the Plan
The 1999 Plan will terminate ten years after the date of its adoption
by the Board of Directors. No Option will be granted after termination of the
1999 Plan. The terms of Options, however, may extend beyond the expiration of
the 1999 Plan.
The Board of Directors of the Company may terminate the 1999 Plan at
any time prior to its expiration date. It may also make such modifications or
amendments of the 1999 Plan as it deems advisable. However, the Board may not,
without stockholder approval, increase the maximum number of shares as to which
Options may be granted under the 1999 Plan, materially change the standards of
eligibility under the 1999 Plan, or adopt a new plan.
16
<PAGE>
No termination, modification or amendment of the 1999 Plan may
adversely affect the terms of any outstanding options without the consent of the
holders of those Options. In the event of the proposed dissolution or
liquidation of substantially all of the assets of the Company all outstanding
Options will automatically terminate, unless otherwise provided by the Board of
Directors.
Adjustments Upon Changes in Capitalization
If the number of outstanding shares of Common Stock of the Company is
changed by reason of recapitalization, reclassification, stock split, stock
dividend, combination, exchange of shares, or similar transaction, the Board of
Directors of the Company will make an appropriate adjustment in the total number
of shares of common stock available under the 1999 Plan, the number of shares
reserved for issuance upon the exercise of outstanding Options, and the exercise
prices of outstanding Options.
Federal Income Tax Consequences
The following discussion summarizes the federal income tax consequences
of grant and exercise of Options granted under the 1999 Plan. The law is subject
to change, including retroactive change. In addition, the tax consequences may
vary depending on the particular circumstances of a Participant. A Participant
may also be subject to state or local income tax consequences that differ from
those described below.
ISO's. The grant and exercise of ISO's and the subsequent sale of
shares will have the following federal income tax treatment.
o A Participant will not realize taxable income on either the
grant or the exercise of an ISO .
o The difference between fair market value of the common stock
on the date of exercise and the exercise price will be
included in alternative minimum taxable income.
o If the Participant sells the shares issued on exercise of his
Option more than two years after the date of grant and more
than one year after the exercise of the Option, the difference
between the net proceeds of the sale of shares issued on
exercise and the exercise price will be capital gain or loss.
o If the Participant sells the shares issued on exercise of his
Option less than two years after the date of grant or less
than one year after the exercise of the Option, the sale will
be a disqualifying disposition. The Participant will recognize
ordinary income equal to the difference between the fair
market value of the shares issued on the date of exercise and
the exercise price.
o The Company may not deduct any amounts in connection with the
exercise of an Option or the sale of shares issued on
exercise.
NQSO's. The grant and exercise of NQSO's and the subsequent sale of
shares will have the following federal income tax treatment.
o The Participant will not recognize income on the grant of a
NQSO.
o The Participant will recognize ordinary income on the exercise
of a NQSO equal to the difference between the fair market
value of the common stock on the date of grant and the
exercise price.
o The ordinary income recognized on exercise may be compensation
income subject to withholding under federal and state law.
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o The Company would be entitled to deduct as a compensation
expense the amount of compensation income recognized by the
Participant.
o The Participant will have a tax basis in the shares issued on
exercise equal to the fair market value of the common stock on
the date of exercise.
o On sale of the shares issued, the Participant will recognize
capital gain or loss equal to the difference between the net
proceeds of the sale and the fair market value of the common
stock on the date of exercise.
The Company's deduction of income recognized by a Participant on
exercise of his Option may be subject to Section 162(m) of the Code, which
limits to $1 million the amount a publicly held corporation may deduct with
respect to remuneration paid to an executive officer of the corporation.
Generally, the income that an executive officer recognizes on exercise of a NQSO
will be treated as remuneration and included in the $1 million limitation. The
rule does not apply, however, if the option plan limits the number of options
that the corporation may grant during any year. The 1999 Plan limits the number
of Options that the Company may grant in any year to 100,000 Options. Therefore,
the Company believes that it will not be subject to the $1 million limitation
under Section 162(m) of the Code.
SAR's. The grant of an SAR is generally not a taxable event for the
Participant. Upon the exercise of an SAR, the Participant will recognize
ordinary income equal to the amount of cash and the fair market value of any
common stock received upon exercise, and the Company will be entitled to a
deduction equal to the same amount. 1999 Plan Benefits.
1999 Plan Benefits
No options to purchase shares of Common Stock have been granted or
allocated under the 1999 Plan.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR"
PROPOSAL 4.
PROPOSAL 5. RATIFICATION OF THE APPOINTMENT OF BDO SEIDMAN, LLP AS THE COMPANY'S
INDEPENDENT PUBLIC ACCOUNTANTS.
BDO Seidman, LLP have been the Company's independent public accountants
since 1995. They have no financial interest, either direct or indirect, in the
Company. Selection of independent public accountants has been recommended by the
Audit Committee of the Company's Board of Directors and has been approved by the
entire Board of Directors, subject to stockholder ratification. A representative
of BDO Seidman is expected to attend the Annual Meeting and to have an
opportunity to make a statement or respond to appropriate questions from
stockholders.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR"
PROPOSAL 5.
EXPENSES
The Company will bear the entire cost of preparing, assembling,
printing and mailing this Proxy Statement, the enclosed proxy card and other
materials. The Company will request banks and brokers to solicit their customers
who beneficially own shares listed of record in names of nominees, and will
reimburse those banks and brokers for the reasonable out-of-pocket expenses of
those solicitations. The original solicitation of proxies by mail may be
supplemented by telephone and telecopier by officers and other regular employees
of the Company, but the Company will not pay them additional compensation.
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DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
If a stockholder desires to submit a proposal for possible inclusion in
the proxy statement for the Company's next Annual Meeting of Stockholders, the
Company must receive it no later than December 14, 1999. Stockholders should
mail proposals to Secretary, Enamelon, Inc., 15 Kimball Avenue, Yonkers, New
York 10704. If the Company changes the date of that meeting by more than 30
calendar days from the date it is scheduled to be held under the Company's
By-Laws, or if the proposal is to be presented at any meeting other than the
next Annual Meeting of Stockholders, the Company must receive the proposal a
reasonable time before the solicitation of proxies for that meeting is made. In
addition, the Company's by-laws specify procedures for notifying the Company of
nominations for directors and other business to be properly brought before any
meeting of stockholders. Stockholders may obtain a copy of the Company's by-laws
from the Secretary.
AVAILABLE INFORMATION
Stockholders can obtain copies of the Company's Annual Report on Form
10-KSB for the fiscal year ended December 31, 1998, as filed with the SEC,
including the financial statements, without charge upon written request to
Secretary, Enamelon, Inc., 15 Kimball Avenue, Yonkers, New York 10704.
Stockholders can also find the Company's Annual Report on Form 10-KSB on the
SEC's web site at http://www.sec.gov.
By Order of the Board of Directors
Norman Usen, Secretary
Yonkers, New York
April 16, 1998
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Amendment to Certificate of Incorporation
EXHIBIT A
FOURTH: The total number of shares of all classes of capital stock
that the Corporation shall have the authority to issue is
55,000,000 shares, divided into two classes, of which
5,000,000 shares shall be designated Preferred Stock, $.001
par value, and 50,000,000 shares shall be designated Common
Stock, $.001 par value.
<PAGE>
EXHIBIT B
ENAMELON, INC.
1999 INCENTIVE STOCK OPTION PLAN
1. Purposes.
The ENAMELON, INC. 1999 INCENTIVE STOCK OPTION PLAN (the "Plan") is
intended to provide the employees, directors, independent contractors and
consultants of Enamelon Corporation (the "Company") and/or any subsidiary or
parent thereof with an added incentive to commence and/or continue their
services to the Company and to induce them to exert their maximum efforts toward
the Company's success. By thus encouraging employees, directors, independent
contractors and consultants and promoting their continued association with the
Company, the Plan may be expected to benefit the Company and its stockholders.
The Plan allows the Company to grant Incentive Stock Options ("ISOs") (as
defined in Section 422(b) of the Internal Revenue Code of 1986, as amended (the
"Code"), Non-Qualified Stock Options ("NQSOs") not intended to qualify under
Section 422(b) of the Code and Stock Appreciation Rights ("SARs") (collectively
the "Options"). The vesting of one or more Options granted hereunder may be
based on the attainment of specified performance goals of the participant or the
performance of the Company, one or more subsidiaries, parent and/or division of
one or more of the above.
2. Shares Subject to the Plan.
The total number of shares of Common Stock of the Company, $.001 par value
per share, that may be subject to Options granted under the Plan shall be five
hundred thousand (500,000) in the aggregate, subject to adjustment as provided
in Paragraph 8 of the Plan; however, the grant of an ISO to an employee together
with a tandem SAR or any NQSO to an employee together with a tandem SAR shall
only require one share of Common Stock available subject to the Plan to satisfy
such joint Option. The Company shall at all times while the Plan is in force
reserve such number of shares of Common Stock as will be sufficient to satisfy
the requirement of outstanding Options granted under the Plan. In the event any
Option granted under the Plan shall expire or terminate for any reason without
having been exercised in full or shall cease for any reason to be exercisable in
whole or in part, the unpurchased shares subject thereto shall again be
available for granting of Options under the Plan.
3. Eligibility.
All employees of the Company or of a "subsidiary" or "parent" of the
Company, as the quoted terms are defined within Section 424 of the Code are
eligible to receive ISO's or ISO's in tandem with SAR's (provided the SAR meets
the requirements set forth in Temp. Reg. Section 14a.422A-1, A-39 (a) through
(e) inclusive). ISO's or ISO's in tandem with SAR's (provided the SAR meets the
requirements set forth in Temp. Reg. Section 14a.422A-1, A-39 (a) through (e)
inclusive) may be granted from time to time under the Plan to one or more
employees of the Company or of a "subsidiary" or "parent" of the Company, as the
quoted terms are defined within
<PAGE>
Section 424 of the Code. An Officer is an employee for the above purposes.
However, a director of the Company who is not otherwise an employee is not
deemed an employee for such purposes. NQSOs and NQSO's in tandem with SARs may
be granted from time to time under the Plan to one or more employees of the
Company, Officers, members of the Board of Directors, independent contractors,
consultants and other individuals who are not employees of, but are involved in
the continuing development and success of the Company and/or of a subsidiary of
the Company, including persons who have previously been granted Options under
the Plan.
4. Administration of the Plan.
(a) The Plan shall be administered by the Board of Directors of the Company
as such Board of Directors may be composed from time to time and/or by a Stock
Option Committee or Compensation Committee (the "Committee") which shall be
comprised of solely of at least two Outside Directors (as such term is defined
in regulations promulgated from time to time with respect to Section
162(m)(4)(C)(i) of the Code) appointed by such Board of Directors of the
Company. As and to the extent authorized by the Board of Directors of the
Company, the Committee may exercise the power and authority vested in the Board
of Directors under the Plan. Within the limits of the express provisions of the
Plan, the Board of Directors or Committee shall have the authority, in its
discretion, to determine the individuals to whom, and the time or times at
which, Options shall be granted, the character of such Options (whether ISOs,
NQSOs, and/or SARs in tandem with NQSOs, and/or SARs in tandem with ISOs) and
the number of shares of Common Stock to be subject to each Option, the manner
and form in which the optionee can tender payment upon the exercise of his
Option, and to interpret the Plan, to prescribe, amend and rescind rules and
regulations relating to the Plan, to determine the terms and provisions of
Option agreements that may be entered into in connection with Options (which
need not be identical), subject to the limitation that agreements granting ISOs
must be consistent with the requirements for the ISOs being qualified as
"incentive stock options" as provided in Section 422 of the Code, and to make
all other determinations and take all other actions necessary or advisable for
the administration of the Plan. In making such determinations, the Board of
Directors and/or the Committee may take into account the nature of the services
rendered by such individuals, their present and potential contributions to the
Company's success, and such other factors as the Board of Directors and/or the
Committee, in its discretion, shall deem relevant. The Board of Directors'
and/or the Committee's determinations on the matters referred to in this
Paragraph shall be conclusive.
(b) Notwithstanding anything contained herein to the contrary, at anytime
during the period the Company's Common Stock is registered pursuant to Section
12(g) of the Securities Exchange Act of 1934 (the "1934 Act), the Committee, if
one has been appointed to administer all or part of the Plan, shall have the
exclusive right to grant Options to Covered Employees as defined under Section
162(m)(3) of the Code (generally executive officers subject to Section 16 of the
1934 Act) and set forth the terms and conditions thereof. With respect to
persons subject to Section 16 of the 1934 Act, transactions under the Plan are
intended, to the extent possible, comply with all applicable conditions of Rule
16b-3, as amended from time to time, (and its successor provisions, if any)
under the 1934 Act and Section 162(m)(4)(C) of the Code of 1986, as amended. To
the
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<PAGE>
extent any provision of the Plan or action by the Board of Directors or
Committee fails to so comply, it shall be deemed null and void, to the extent
permitted by law and deemed advisable by the Board of Directors and/or such
Committee.
5. Terms of Options.
Within the limits of the express provisions of the Plan, the Board of
Directors or the Committee may grant either ISOs or NQSOs or SARs in tandem with
NQSOs or SARs in tandem with ISOs. An ISO or an NQSO enables the optionee to
purchase from the Company, at any time during a specified exercise period, a
specified number of shares of Common Stock at a specified price (the "Option
Price"). The optionee, if granted a SAR in tandem with a NQSO or ISO, may
receive from the Company, in lieu of exercising his option to purchase shares
pursuant to his NQSO or ISO, at one of the certain specified times during the
exercise period of the NQSO or ISO as set by the Board of Directors or the
Committee, the excess of the fair market value upon such exercise (as determined
in accordance with subparagraph (b) of this Paragraph 5) of one share of Common
Stock over the Option Price per share specified upon grant of the NQSO or
ISO/SAR multiplied by the number of shares of Common Stock covered by the SAR so
exercised. The character and terms of each Option granted under the Plan shall
be determined by the Board of Directors and/or the Committee consistent with the
provisions of the Plan, including the following:
(a) An Option granted under the Plan must be granted within 10 years from
the date the Plan is adopted, or the date the Plan is approved by the
stockholders of the Company, whichever is earlier.
(b) The Option Price of the shares of Common Stock subject to each ISO and
each SAR issued in tandem with an ISO shall not be less than the fair market
value of such shares of Common Stock at the time such ISO is granted. Such fair
market value shall be determined by the Board of Directors and, if the shares of
Common Stock are listed on a national securities exchange or traded on the
over-the-counter market, the fair market value shall be the closing price on
such exchange, or the mean of the closing bid and asked prices of the shares of
Common Stock on the over-the-counter market, as reported by the Nasdaq Stock
Market, the National Association of Securities Dealers OTC Bulletin Board or the
National Quotation Bureau, Inc., as the case may be, on the day on which the
Option is granted or, if there is no closing price or bid or asked price on that
day, the closing price or mean of the closing bid and asked prices on the most
recent day preceding the day on which the Option is granted for which such
prices are available. If an ISO or SAR in tandem with an ISO is granted to any
individual who, immediately before the ISO is to be granted, owns (directly or
through attribution) more than 10% of the total combined voting power of all
classes of capital stock of the Company or a subsidiary or parent of the
Company, the Option Price of the shares of Common Stock subject to such ISO
shall not be less than 110% of the fair market value per share of the shares of
Common Stock at the time such ISO is granted.
(c) The Option Price of the shares of Common Stock subject to an NQSO
or an SAR in tandem with a NQSO granted pursuant to the Plan shall be determined
by the Board of Directors or
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the Committee, in its sole discretion, but in no event less than 85% of the fair
market value per share of the shares of Common Stock at the time of grant.
(d) In no event shall any Option granted under the Plan have an expiration
date later than 10 years from the date of its grant, and all Options granted
under the Plan shall be subject to earlier termination as expressly provided in
Paragraph 6 hereof. If an ISO or an SAR in tandem with an ISO is granted to any
individual who, immediately before the ISO is granted, owns (directly or through
attribution) more that 10% of the total combined voting power of all classes of
capital stock of the Company or of a subsidiary or parent of the Company, such
ISO shall by its terms expire and shall not be exercisable after the expiration
of five (5) years from the date of its grant.
(e) An SAR may be exercised at any time during the exercise period of the
ISO or NQSO with which it is granted in tandem and prior to the exercise of such
ISO or NQSO. Notwithstanding the foregoing, the Board of Directors and/or the
Committee shall in their discretion determine from time to time the terms and
conditions of SAR's to be granted, which terms may vary from the afore-described
conditions, and which terms shall be set forth in a written stock option
agreement evidencing the SAR granted in tandem with the ISO or NQSO. The
exercise of an SAR granted in tandem with an ISO or NQSO shall be deemed to
cancel such number of shares subject to the unexercised Option as were subject
to the exercised SAR. The Board of Directors or the Committee has the discretion
to alter the terms of the SARS if necessary to comply with Federal or state
securities law. Amounts to be paid by the Company in connection with an SAR may,
in the Board of Director's or the Committee's discretion, be made in cash,
Common Stock or a combination thereof.
(f) An Option granted under the Plan shall become exercisable, in whole at
any time or in part from time to time, but in no event may an Option (i) be
exercised as to less than one hundred (100) shares of Common Stock at any one
time, or the remaining shares of Common Stock covered by the Option if less than
one hundred (100), and (ii) except with respect to performance based Options,
become fully exercisable more than five years from the date of its grant nor
shall less than 20% of the Option become exercisable in any of the first five
years of the Option, if not terminated as provided in Section 6 hereof. The
Board of Directors or the Committee, if applicable, shall, in the event it so
elects in its sole discretion, set one or more performance standards with
respect to one or more Options upon which vesting is conditioned (which
performance standards may vary among the Options).
(g) An Option granted under the Plan shall be exercised by the delivery by
the holder thereof to the Company at its principal office (to the attention of
the Secretary) of written notice of the number of full shares of Common Stock
with respect to which the Option is being exercised, accompanied by payment in
full, which payment at the option of the optionee shall be in the form of (i)
cash or certified or bank check payable to the order of the Company, of the
Option Price of such shares of Common Stock, or, (ii) if permitted by the
Committee or the Board of Directors, as determined by the Committee or the Board
of Directors in its sole discretion at the time of the grant of the Option with
respect to an ISO and at or prior to the time of exercise with respect to a
NQSO,
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<PAGE>
by the delivery of shares of Common Stock having a fair market value equal
to the Option Price or the delivery of an interest-bearing promissory note
having an original principal balance equal to the Option Price and an interest
rate not below the rate which would result in imputed interest under the Code
(provided, in order to qualify as an ISO, more than one year shall have passed
since the date of grant and one year from the date of exercise), or (iii) at the
option of the Committee or the Board of Directors, determined by the Committee
or the Board of Directors in its sole discretion at the time of the grant of the
Option with respect to an ISO and at or prior to the time of exercise with
respect to a NQSO, by a combination of cash, promissory note and/or such shares
of Common Stock (subject to the restriction above) held by the employee that
have a fair market value together with such cash and principal amount of any
promissory note that shall equal the Option Price, and, in the case of a NQSO,
at the discretion of the Committee or Board of Directors by having the Company
withhold from the shares of Common Stock to be issued upon exercise of the
Option that number of shares having a fair market value equal to the exercise
price and/or the tax withholding amount due, or otherwise provide for
withholding as set forth in Paragraph 9(c) hereof, or in the event an employee
is granted an ISO or NQSO in tandem with an SAR and desires to exercise such
SAR, such written notice shall so state such intention. To the extent allowed by
applicable Federal and state securities laws, the Option Price may also be paid
in full by a broker-dealer to whom the optionee has submitted an exercise notice
consisting of a fully endorsed Option, or through any other medium of payment as
the Board of Directors and/or the Committee, in its discretion, shall authorize.
(h) The holder of an Option shall have none of the rights of a stockholder
with respect to the shares of Common Stock covered by such holder's Option until
such shares of Common Stock shall be issued to such holder upon the exercise of
the Option.
(i) All ISOs or SARs in tandem with ISOs granted under the Plan shall not
be transferable otherwise than by will or the laws of descent and distribution
and may be exercised during the lifetime of the holder thereof only by the
holder. The Board or the Committee, in its sole discretion, shall determine
whether an Option other than an ISO or SAR in tandem with an ISO shall be
transferable. No Option granted under the Plan shall be subject to execution,
attachment or other process.
(j) The aggregate fair market value, determined as of the time any ISO or
SAR in tandem with an ISO is granted and in the manner provided for by
Subparagraph (b) of this Paragraph 5, of the shares of Common Stock with respect
to which ISOs granted under the Plan are exercisable for the first time during
any calendar year and under incentive stock options qualifying as such in
accordance with Section 422 of the Code granted under any other incentive stock
option plan maintained by the Company or its parent or subsidiary corporations,
shall not exceed $100,000. Any grant of Options in excess of such amount shall
be deemed a grant of a NQSO.
(k) Notwithstanding anything contained herein to the contrary, an SAR which
was granted in tandem with an ISO shall (i) expire no later than the expiration
of the underlying ISO; (ii) be for no more than 100% of the spread at the time
the SAR is exercised; (iii) shall only be
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<PAGE>
transferable when the underlying ISO is transferable; (iv) only be exercised
when the underlying ISO is eligible to be exercised; and (v) only be exercisable
when there is a positive spread.
(l) In no event shall an employee be granted Options for more than 100,000
shares of Common Stock during any calendar year period; provided, however, that
the limitation set forth in this Section 5(l) shall be subject to adjustment as
provided in Section 8 herein.
6. Death or Termination of Employment/Consulting Relationship.
(a) Except as provided herein, or otherwise determined by the Board of
Directors or the Committee in its sole discretion, upon termination of
employment with the Company voluntarily by the employee or termination of a
consulting relationship with the Company prior to the termination of the term
thereof, a holder of an Option under the Plan may exercise such Options to the
extent such Options were exercisable as of the date of termination at any time
within thirty (30) days after termination, subject to the provisions of
Subparagraph (d) of this Paragraph 6. Except as provided herein, or otherwise
determined by the Board of Directors or the Committee in its sole discretion, if
such employment or consulting relationship shall terminate for any reason other
than death, voluntary termination by the employee or for cause, then such
Options may be exercised at anytime within three (3) months after such
termination. Notwithstanding anything contained herein to the contrary, unless
otherwise determined by the Board of Directors or the Committee in its sole
discretion, any options granted hereunder to an Optionee and then outstanding
shall immediately terminate in the event the Optionee is terminated for cause,
and the other provisions of this Section 6 shall not be applicable thereto. For
purposes of this Section 6, termination for cause shall be deemed the decision
of the Company, in its sole discretion, that Optionee has not adequately
performed the services for which he/she/it was hired.
(b) If the holder of an Option granted under the Plan dies (i) while
employed by the Company or a subsidiary or parent corporation or while providing
consulting services to the Company or a subsidiary or parent corporation or (ii)
within three (3) months after the termination of such holder's
employment/consulting, such Options may, subject to the provisions of
subparagraph (d) of this Paragraph 6, be exercised by a legatee or legatees of
such Option under such individual's last will or by such individual's personal
representatives or distributees at any time within such time as determined by
the Board of Directors or the Committee in its sole discretion, but in no event
less than six months after the individual's death, to the extent such Options
were exercisable as of the date of death or date of termination of employment,
whichever date is earlier.
(c) If the holder of an Option under the Plan becomes disabled within the
definition of section 22(e)(3) of the Code while employed by the Company or a
subsidiary or parent corporation, such Option may, subject to the provisions of
subparagraph (d) of this Paragraph 6, be exercised at any time within six months
less one day after such holder's termination of employment due to the
disability.
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(d) Except as otherwise determined by the Board of Directors or the
Committee in its sole discretion, an Option may not be exercised pursuant to
this Paragraph 6 except to the extent that the holder was entitled to exercise
the Option at the time of termination of employment, consulting relationship or
death, and in any event may not be exercised after the original expiration date
of the Option. Notwithstanding anything contained herein which may be to the
contrary, such termination or death prior to vesting shall, unless otherwise
determined by the Board of Directors or Committee, in its sole discretion, be
deemed to occur at a time the holder was not entitled to exercise the Option.
(e) The Board of Directors or the Committee, in its sole discretion, may at
such time or times as it deems appropriate, if ever, accelerate all or part of
the vesting provisions with respect to one or more outstanding options. The
acceleration of one Option shall not infer that any Option is or to be
accelerated.
7. Leave of Absence.
For the purposes of the Plan, an individual who is on military or sick
leave or other bona fide leave of absence (such as temporary employment by the
Government) shall be considered as remaining in the employ of the Company or of
a subsidiary or parent corporation for ninety (90) days or such longer period as
such individual's right to reemployment is guaranteed either by statute or by
contract.
8. Adjustment Upon Changes in Capitalization.
(a) In the event that the outstanding shares of Common Stock are hereafter
changed by reason of recapitalization, reclassification, stock split-up,
combination or exchange of shares of Common Stock or the like, or by the
issuance of dividends payable in shares of Common Stock, an appropriate
adjustment shall be made by the Board of Directors, as determined by the Board
of Directors and/or the Committee, in the aggregate number of shares of Common
Stock available under the Plan, in the number of shares of Common Stock issuable
upon exercise of outstanding Options, and the Option Price per share. In the
event of any consolidation or merger of the Company with or into another
company, where the Company is not the surviving entity, or the conveyance of all
or substantially all of the assets of the Company to another company for solely
stock and/or securities, each then outstanding Option shall upon exercise
thereafter entitle the holder thereof to such number of shares of Common Stock
or other securities or property to which a holder of shares of Common Stock of
the Company would have been entitled to upon such consolidation, merger or
conveyance; and in any such case appropriate adjustment, as determined by the
Board of Directors of the Company (or successor entity) shall be made as set
forth above with respect to any future changes in the capitalization of the
Company or its successor entity. In the event of the proposed dissolution or
liquidation of the Company, or, except as provided in (b) below, the sale of
substantially all the assets of the Company for other than stock and/or
securities, all outstanding Options under the Plan will automatically terminate,
unless otherwise provided by the Board of Directors of the Company or any
authorized committee thereof.
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(b) Any Option granted under the Plan, may, at the discretion of the Board
of Directors of the Company and said other corporation, be exchanged for options
to purchase shares of capital stock of another corporation which the Company,
and/or a subsidiary thereof is merged into, consolidated with, or all or a
substantial portion of the property or stock of which is acquired by said other
corporation or separated or reorganized into. The terms, provisions and benefits
to the optionee of such substitute option(s) shall in all respects be identical
to the terms, provisions and benefits of optionee under his Option(s) prior to
said substitution. To the extent the above may be inconsistent with Sections
424(a)(1) and (2) of the Code, the above shall be deemed interpreted so as to
comply therewith.
(c) Any adjustment in the number of shares of Common Stock shall apply
proportionately to only the unexercised portion of the Options granted
hereunder. If fractions of shares of Common Stock would result from any such
adjustment, the adjustment shall be revised to the next higher whole number of
shares of Common Stock.
9. Further Conditions of Exercise.
(a) Unless the shares of Common Stock issuable upon the exercise of an
Option have been registered with the Securities and Exchange Commission pursuant
to the Securities Act of 1933, as amended, prior to the exercise of the Option,
an optionee must represent in writing to the Company that such shares of Common
Stock are being acquired for investment purposes only and not with a view
towards the further resale or distribution thereof, and must supply to the
Company such other documentation as may be required by the Company, unless in
the opinion of counsel to the Company such representation, agreement or
documentation is not necessary to comply with said Act.
(b) The Company shall not be obligated to deliver any shares of Common
Stock until they have been listed on each securities exchange on which the
shares of Common Stock may then be listed or until there has been qualification
under or compliance with such state or federal laws, rules or regulations as the
Company may deem applicable.
(c) The Board of Directors or Committee may make such provisions and take
such steps as it may deem necessary or appropriate for the withholding of any
taxes that the Company is required by any law or regulation of any governmental
authority, whether federal, state or local, domestic or foreign, to withhold in
connection with the exercise of any Option, including, but not limited to, (i)
the withholding of payment of all or any portion of such Option and/or SAR until
the holder reimburses the Company for the amount the Company is required to
withhold with respect to such taxes, or (ii) the cancelling of any number of
shares of Common Stock issuable upon exercise of such Option and/or SAR in an
amount sufficient to reimburse the Company for the amount it is required to so
withhold, (iii) the selling of any property contingently credited by the Company
for the purpose of exercising such Option, in order to withhold or reimburse the
Company for the amount it is required to so withhold, or (iv) withholding the
amount due from such employee's wages if the employee is employed by the Company
or any subsidiary thereof.
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10. Termination, Modification and Amendment.
(a) The Plan (but not Options previously granted under the Plan) shall
terminate ten (10) years from the earliest of the date of its adoption by the
Board of Directors, or the date the Plan is approved by the stockholders of the
Company, or such date of termination, as hereinafter provided, and no Option
shall be granted after termination of the Plan.
(b) The Plan may from time to time be terminated, modified or amended by
the affirmative vote of the holders of a majority of the outstanding shares of
capital stock of the Company entitled to vote thereon.
(c) The Board of Directors of the Company may at any time, prior to ten
(10) years from the earlier of the date of the adoption of the Plan by such
Board of Directors or the date the Plan is approved by the stockholders,
terminate the Plan or from time to time make such modifications or amendments of
the Plan as it may deem advisable; provided, however, that the Board of
Directors shall not, without approval by the affirmative vote of the holders of
a majority of the outstanding shares of capital stock of the Company entitled to
vote thereon, increase (except as provided by Paragraph 8) the maximum number of
shares of Common Stock as to which Options or shares may be granted under the
Plan, or materially change the standards of eligibility under the Plan. Any
amendment to the Plan which, in the opinion of counsel to the Company, will be
deemed to result in the adoption of a new Plan, will not be effective until
approved by the affirmative vote of the holders of a majority of the outstanding
shares of capital stock of the Company entitled to vote thereon.
(d) No termination, modification or amendment of the Plan may adversely
affect the rights under any outstanding Option without the consent of the
individual to whom such Option shall have been previously granted.
11. Effective Date of the Plan.
The Plan shall become effective upon adoption by the Board of Directors of
the Company. The Plan shall be subject to approval by the affirmative vote of
the holders of a majority of the outstanding shares of capital stock of the
Company entitled to vote thereon within one year before or after adoption of the
Plan by the Board of Directors.
12. Not a Contract of Employment.
Nothing contained in the Plan or in any option agreement executed pursuant
hereto shall be deemed to confer upon any individual to whom an Option is or may
be granted hereunder any right to remain in the employ of the Company or of a
subsidiary or parent of the Company or in any way limit the right of the
Company, or of any parent or subsidiary thereof, to terminate the employment of
any employee.
9
<PAGE>
13. Other Compensation Plans.
The adoption of the Plan shall not affect any other stock option plan,
incentive plan or any other compensation plan in effect for the Company, nor
shall the Plan preclude the Company from establishing any other form of stock
option plan, incentive plan or any other compensation plan.
10
<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
ENAMELON, INC.
ANNUAL MEETING OF STOCKHOLDERS
The undersigned stockholder of ENAMELON, INC., a Delaware
corporation, hereby acknowledges receipt of the Notice of Annual Meeting of
Stockholders and Proxy Statement, each dated April 16, 1999, and hereby appoints
Dr. Steven R. Fox and Norman Usen, and each of them, on behalf and in the name
of the undersigned to represent the undersigned at the Annual Meeting of
Stockholders of ENAMELON, INC., to be held on May 18, 1999 at 9:00 a.m., at the
Brunswick Hilton, Three Tower Center Boulevard, East Brunswick, New Jersey
08816, and any adjournment or adjournments thereof, and to vote all shares of
Common Stock that the undersigned would be entitled to vote if then and there
personally present, on the matters set forth below.
(To be Signed on Reverse Side)
<PAGE>
1. ELECTION OF DIRECTORS, as provided in the Company's Proxy
Statement:
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY to
vote for all nominees listed below. (Instructions: TO WITHHOLD
AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE A LINE
THROUGH OR OTHERWISE STRIKE OUT HIS NAME BELOW)
Bert D. Gaster, Richard A. Gotterer and Walter W. Williams
2. To approve a proposed amendment to the Company's Certificate
of Incorporation, to increase the number of shares of common
stock that the Company is authorized to issue from 30,000,000
shares to 50,000,000 shares.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. To approve the issuance upon conversion of the Company's
series B convertible preferred stock of more than 2,046,932
shares of common stock, representing 20% of the outstanding
shares of common stock on the date of the sale of the issuance
of the series B convertible preferred stock, as required by
Nasdaq rules.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. To approve the adoption of the Company's 1999 Incentive Stock
Option Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. To ratify the appointment of BDO Seidman, LLP, as the
Company's independent auditors for the year ending December
31, 1999.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
6. Upon such other matters as may properly come before the
meeting or any adjournments thereof.
The undersigned hereby revokes any other proxy to vote at such Annual
Meeting, and hereby ratifies and confirms all that said attorneys and proxies,
and each of them, may lawfully do by virtue hereof. With respect to matters not
known at the time of the solicitations hereof, said proxies are authorized to
vote in accordance with their best judgment.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED, OR, IF
NO CONTRARY DIRECTION IS INDICATED, WILL BE VOTED FOR THE ELECTION OF DIRECTORS,
FOR THE ADOPTION OF PROPOSALS 2, 3, 4 AND 5 AND AS SAID PROXIES SHALL DEEM
ADVISABLE ON SUCH OTHER BUSINESS AS MAY COME BEFORE THE MEETING.
Please mark, sign, date and return the Proxy Card promptly using the
enclosed envelope.
Date:____________________,1999 ______________________________________
Signature(s) of Stockholder(s)
NOTE: (This proxy should be marked, dated and signed by the shareholder(s)
exactly as his name appears hereon, and returned promptly in the
enclosed envelope. Persons signing in a fiduciary should so indicate.
If shares are held by joint tenants or as community property, both must
sign.)
