<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. __)
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for use of the Commission only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
CADUS PHARMACEUTICAL CORPORATION
------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
CADUS PHARMACEUTICAL CORPORATION
------------------------------------------------------------------------
(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)(1) and 0-11
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
- - -------
1 Set forth the amount on which the filing fee is calculated and state how it
was determined.
<PAGE>
CADUS PHARMACEUTICAL CORPORATION
777 Saw Mill River Road
Tarrytown, New York 10591-6705
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
to be held on June 19, 1997
To the Stockholders of Cadus Pharmaceutical Corporation:
Notice is hereby given that the Annual Meeting of Stockholders (the
'Meeting') of Cadus Pharmaceutical Corporation (the 'Company') will be held on
Thursday, June 19, 1997, at the offices of the Company, 777 Old Saw Mill River
Road, Tarrytown, New York 10591-6705, at 9:30 a.m. local time.
The Meeting will be held for the following purposes:
1. To elect twelve directors of the Company to serve until the next
annual meeting of stockholders or until their successors are duly
elected and qualified.
2. To consider and act upon a proposal to approve an amendment to the
Cadus Pharmaceutical Corporation 1996 Incentive Plan (the 'Plan')
that: (a) increases the maximum number of shares of common stock,
$.01 par value per share (the 'Common Stock'), that may be the
subject of awards under the Plan by 500,000 shares, and (b)
provides that directors of the Company will be eligible to receive
awards under the Plan.
3. To ratify the previous grant of stock options to purchase an
aggregate of 108,000 shares of Common Stock to certain non-employee
directors of the Company.
4. To transact such other business as may properly come before the
Meeting or any and all adjournments thereof.
The Board of Directors of the Company fixed the close of business on May
12, 1997 as the record date for the determination of stockholders entitled to
notice of and to vote at the Meeting and at any and all adjournments thereof.
Consequently, only stockholders of record at the close of business on May 12,
1997 are entitled to notice of and to vote at the Meeting and at any and all
adjournments thereof.
Whether or not you plan to attend the Meeting, please complete, date and
sign the enclosed proxy card, and return it promptly in the enclosed envelope to
ensure your representation at the Meeting. You are cordially invited to attend
the Meeting and, if you do so, you may personally vote, regardless of whether
you have signed a proxy.
Tarrytown, New York
May 16, 1997
By Order of the Board of Directors
James S. Rielly
Secretary
<PAGE>
CADUS PHARMACEUTICAL CORPORATION
777 Old Saw Mill River Road
Tarrytown, New York 10591
(914) 345-3344
-----------------------------------------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
-------------------------------------------------
This Proxy Statement and the accompanying proxy card are being furnished in
connection with the solicitation of proxies by and on behalf of the Board of
Directors (the 'Board') of Cadus Pharmaceutical Corporation (the 'Company'), to
be used at the Annual Meeting of Stockholders of the Company (the 'Meeting') to
be held on Thursday, June 19, 1997, at 9:30 a.m. local time, at the offices of
the Company, 777 Old Saw Mill River Road, Tarrytown, New York, 10591-6705, and
at any and all adjournments thereof. This Proxy Statement and the accompanying
proxy card are first being mailed to the holders of record of the Company's
common stock, $.01 par value per share (the 'Common Stock'), on or about May 16,
1997.
Stockholders of the Company represented at the Meeting will consider and
vote upon (i) the election of twelve directors to serve until the next annual
meeting of stockholders or until their successors have been duly elected and
qualified; (ii) the approval of an amendment to the Company's 1996 Incentive
Plan (the 'Plan') that increases the maximum number of shares of Common Stock
that may be the subject of awards under the Plan by 500,000 and provides that
directors of the Company will be eligible to receive awards under the Plan;
(iii) the ratification of the previous grant of stock options to purchase an
aggregate of 108,000 shares of Common Stock to certain non-employee directors of
the Company; and (iv) such other business as may properly come before the
Meeting or any and all adjournments thereof. The Company is not aware of any
other business to be presented for consideration at the Meeting.
VOTING AND SOLICITATION OF PROXIES
Only holders of record of shares of Common Stock at the close of business
on May 12, 1997 (the 'Record Date') are entitled to vote at the Meeting. As of
the Record Date, 12,155,357 shares of Common Stock were outstanding. Each
stockholder is entitled to one vote for each share of Common Stock held of
record on the Record Date for each proposal submitted for stockholder
consideration at the Meeting. The presence, in person or by proxy, of the
holders of a majority of the shares of Common Stock entitled to vote at the
Meeting is necessary to constitute a quorum for the conduct of business at the
Meeting. The election of each nominee for director requires a plurality of the
total votes cast. The other proposals being presented at the Meeting require the
approval of a majority of the total votes cast. Abstentions will be considered
shares present for purposes of determining whether a quorum is present at the
Meeting and, therefore, will have the same legal effect as a vote against a
motion presented at the Meeting. Broker non-votes will be considered as shares
not entitled to vote and will, therefore, not be considered in the tabulation of
votes.
All shares represented by properly executed proxies will, unless such
proxies have previously been revoked, be voted at the Meeting in accordance with
the directions on the proxies. A proxy may be revoked at any time prior to final
tabulation of the votes at the Meeting. Stockholders may revoke proxies by
written notice to the Secretary of the Company, by delivery of a proxy bearing a
later date, or by personally appearing at the Meeting and casting a contrary
vote. If no direction is indicated, the shares represented by properly executed
proxies will be voted in favor of the Board's nominees for director, for
approval of the amendment to the Plan that increases the maximum number of
shares of Common Stock that may be the subject of awards under the Plan by
500,000 and provides that directors of the Company will be eligible to receive
awards under the Plan, and for the ratification of the previous grant of stock
options to purchase an aggregate of 108,000 shares of Common Stock to certain
non-employee directors of the Company, as listed in this Proxy Statement. The
persons named in the proxies will have discretionary authority to vote all
proxies with respect to additional matters that are properly presented for
action at the Meeting.
<PAGE>
The executive officers and directors of the Company as a group own or may
be deemed to control approximately 64.95% of the outstanding shares of Common
Stock of the Company. Each of the executive officers and directors has indicated
his or her intent to vote all shares of Common Stock owned or controlled by him
or her in favor of each item set forth herein.
The proxy solicitation is made by and on behalf of the Board. Solicitation
of proxies for use at the Meeting may be made in person or by mail, telephone or
telegram, by officers and regular employees of the Company. Such persons will
receive no additional compensation for any solicitation activities. Copies of
solicitation materials will be furnished to banks, brokerage houses, fiduciaries
and custodians holding in their names shares of Common Stock beneficially owned
by others to forward to such beneficial owners. The Company may reimburse
persons representing beneficial owners of Common Stock for their costs of
forwarding solicitation materials to such beneficial owners. The Company will
bear the entire cost of the solicitation of proxies, including the preparation,
assembly, printing and mailing of this Proxy Statement, the proxy card and any
additional information furnished to stockholders.
COMMON STOCK OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of April 14, 1997, with respect to (i) each
person known by the Company to be the beneficial owner of more than 5% of the
Common Stock, (ii) each of the Company's directors, (iii) each Named Executive
Officer (as defined below under 'EXECUTIVE COMPENSATION-Summary Compensation')
and (iv) all directors and executive officers as a group. All information is
based upon ownership filings made by such persons with the Securities and
Exchange Commission (the 'Commission') or upon information provided by such
persons to the Company.
<TABLE>
<CAPTION>
NUMBER OF SHARES
AMOUNT AND NATURE PERCENTAGE OF OUTSTANDING
NAME AND ADDRESS OF BENEFICIAL OWNER(1) OF BENEFICIAL OWNERSHIP OWNED(2)
- - ---------------------------------------------------------------- ----------------------- -------------------------
<S> <C> <C>
Carl C. Icahn** ................................................ 3,361,216(3) 27.73%
767 Fifth Avenue
New York, New York 10153
Bristol-Myers Squibb ........................................... 2,061,673 17.01%
P.O. Box 4000
South 206 and Province Line Road
Princeton, New Jersey 08543-4000
Physica B.V. ................................................... 1,599,942 13.20%
C.J. van Houtenlaan 36
1381 CP Weesp
The Netherlands
International Biotechnology Trust plc .......................... 850,000(4) 7.01%
c/o Rothschild Asset Management Limited
Five Arrows House
St. Swithins Lane
London EC4N 8NR
United Kingdom
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF SHARES
AMOUNT AND NATURE PERCENTAGE OF OUTSTANDING
NAME AND ADDRESS OF BENEFICIAL OWNER(1) OF BENEFICIAL OWNERSHIP OWNED(2)
- - ---------------------------------------------------------------- ----------------------- -------------------------
<S> <C> <C>
The Global Health Sciences Fund ................................ 729,395(5) 6.02%
c/o INVESCO Trust Company
7800 East Union Avenue, Suite 800
Denver, Colorado 80237
Jeremy M. Levin, D.Phil., MB.BCHIR**............................ 315,071(6) 2.53%
Philip N. Sussman............................................... 33,334(7) *
David R. Webb, Ph.D............................................. 16,666(8) *
Arlindo L. Castelhano, Ph.D..................................... 3,333(9) *
James S. Rielly................................................. 3,534(10) *
Theodore Altman**............................................... -- --
Harold First**.................................................. 8,334 *
Peter S. Liebert, M.D.**........................................ 8,334 *
Robert J. Mitchell**............................................ -- --
Lawrence D. Muschek, Ph.D**..................................... 1,599,942(11) 13.20%
Mark H. Rachesky, M.D.**........................................ 190,683 1.57%
Leon E. Rosenberg, M.D.**....................................... 2,061,673(12) 17.01%
Nicole Vitullo**................................................ 850,000(13) 7.01%
Samuel D. Waksal, Ph.D**........................................ 8,334 *
Jack G. Wasserman**............................................. -- --
All executive officers and directors as a group (16 persons).... 8,460,454(14) 67.72%
</TABLE>
- - ------------------
* Less than one percent
** Nominee for election to the Board
(1) Except as otherwise indicated above, the address of each stockholder
identified above is c/o the Company, 777 Old Saw Mill River Road,
Tarrytown, NY 10591-6705. Except as indicated in the other footnotes to
this table, the persons named in this table have sole voting and investment
power with respect to all shares of Common Stock.
(2) Share ownership in the case of each person listed above includes shares
issuable upon the exercise of options held by such person as of April 14,
1997, that may be exercised within 60 days after such date for purposes of
computing the percentage of Common Stock owned by such person, but not for
purposes of computing the percentage of Common Stock owned by any other
person.
(3) Includes 2,258,790 shares of Common Stock held by High River Limited
Partnership. Mr. Icahn is the sole shareholder of the sole general partner
of High River Limited Partnership.
(4) Consists of 850,000 shares of Common Stock held by the International
Biotechnology Trust plc ('IBT'). Rothschild Asset Management acts as the
investment manager to IBT and therefore may be deemed to share beneficial
ownership of these shares.
(Footnotes continued on next page)
3
<PAGE>
(Footnotes continued from previous page)
(5) Consists of 729,395 shares of Common Stock held by The Global Health
Sciences Fund. INVESCO Trust Company acts as the investment adviser to The
Global Health Sciences Fund and therefore may be deemed to share beneficial
ownership of these shares.
(6) Consists of 315,071 shares of Common Stock which Dr. Levin currently has
the right to acquire upon the exercise of stock options.
(7) Consists of 33,334 shares of Common Stock which Mr. Sussman currently has
the right to acquire upon the exercise of stock options.
(8) Consists of 16,666 shares of Common Stock which Dr. Webb currently has the
right to acquire upon the exercise of stock options.
(9) Consists of 3,333 shares of Common Stock which Dr. Castelhano currently has
the right to acquire upon the exercise of stock options.
(10) Includes 3,334 shares of Common Stock which Mr. Rielly currently has the
right to acquire upon the exercise of stock options.
(11) Consists of 1,599,942 shares of Common Stock held by Physica B.V., an
indirect wholly-owned subsidiary of Solvay S.A. Dr. Muschek is the Senior
Vice President for Research and Development of the Human Health Division of
Solvay S.A. Dr. Muschek may be deemed the beneficial owner of the 1,599,942
shares of Common Stock held by Physica B.V., but disclaims such beneficial
ownership.
(12) Consists of 2,061,673 shares of Common Stock held by Bristol-Myers Squibb.
Dr. Rosenberg is Senior Vice President of Scientific Affairs of
Bristol-Myers Squibb. Dr. Rosenberg may be deemed the beneficial owner of
the 2,061,673 shares of Common Stock held by Bristol-Myers Squibb, but
disclaims such beneficial ownership.
(13) Consists of 850,000 shares of Common Stock held by IBT. Ms. Vitullo is
Senior Vice President of Rothschild Asset Management Ltd., the investment
manager for IBT. Ms. Vitullo may be deemed the beneficial owner of the
850,000 shares of Common Stock held by IBT, but disclaims such beneficial
ownership.
(14) Includes (a) 368,405 shares of Common Stock issuable upon exercise of
options, (b) 2,061,673 shares of Common Stock held by Bristol-Myers Squibb,
(c) 1,599,942 shares of Common Stock held by Physica B.V., and (d) 850,000
shares of Common Stock held by IBT. See footnotes (3), (6), (7), (8), (9),
(10), (11), (12) and (13).
4
<PAGE>
PROPOSAL 1
ELECTION OF DIRECTORS
The directors to be elected at the Meeting will serve until the next Annual
Meeting of Stockholders or until their successors are duly elected and
qualified. Proxies not marked to the contrary will be voted 'FOR' the election
to the Board of each nominee. Management has no reason to believe that any of
the nominees will not be a candidate or will be unable to serve. However, in the
event that any of the nominees should become unable or unwilling to serve as a
director, the proxy will be voted for the election of such person or persons as
shall be designated by the current directors. The nominees for the Board of the
Company are as follows:
<TABLE>
<S> <C>
Jeremy M. Levin Lawrence D. Muschek
Carl C. Icahn Mark H. Rachesky
Theodore Altman Leon E. Rosenberg
Harold First Nicole Vitullo
Peter S. Liebert Samuel D. Waksal
Robert J. Mitchell Jack G. Wasserman
</TABLE>
Information about the foregoing nominees is set forth under 'MANAGEMENT'
below.
THE BOARD RECOMMENDS THAT YOU VOTE 'FOR' THE ELECTION TO THE BOARD OF ALL
NOMINEES NAMED ABOVE.
BOARD MEETINGS AND COMMITTEES
The Board held seven meetings in 1996. Each director other than Mark H.
Rachesky (during the period in which each such director served) attended at
least seventy-five percent (75%) of the aggregate of (i) the total number of
meetings of the Board, plus (ii) the total number of meetings held by all
committees of the Board on which the director served.
The Board has two committees, an Audit Committee and a Compensation
Committee. It does not have a Nominating Committee or any committee performing a
similar function. The Audit Committee is composed of Harold First, Robert J.
Mitchell and Samuel D. Waksal. 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 their 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 regulations. The Audit
Committee held two meetings in 1996. The Company's Compensation Committee is
composed of Harold First and Jack G. Wasserman. The duties of this committee are
to recommend to the Board remuneration for officers of the Company and to
determine the number, issuances and types of options and/or stock appreciation
rights pursuant to the Company's 1996 Incentive Plan. The Compensation Committee
held four meetings in 1996.
The non-employee directors receive $1,000 for each meeting of the Board
attended and $500 for each meeting of a committee of the Board attended.
PROPOSAL 2
AMENDMENT TO THE COMPANY'S 1996 INCENTIVE PLAN
GENERAL
The Cadus Pharmaceutical Corporation 1996 Incentive Plan (the 'Plan') was
adopted by the Board and approved by the stockholders of the Company in May
1996, prior to the Company's initial public offering of Common Stock in July
1996. On December 12, 1996, the Board amended the Plan to, among other things,
5
<PAGE>
(i) increase the maximum number of shares of Common Stock that may be the
subject of awards under the Plan by 500,000, from 333,334 shares to 833,334
shares and (ii) provide that directors of the Company will be eligible to
receive awards under the Plan. Pursuant to the Plan, the above-described
amendments require stockholder approval. The material features of the Plan as
currently in effect are described in 'Description of the Plan as Currently in
Effect' below.
REASONS AND PRINCIPAL EFFECTS OF THE PROPOSAL
Increase in Number of Shares. As of December 15, 1996, only 13,470 shares
of Common Stock remained available for future awards under the Plan, without
giving effect to the proposed amendment. One purpose of the proposal to increase
by 500,000 shares the aggregate number of shares of Common Stock that may be
issued under the Plan is to continue the Plan. If the proposal is adopted, the
employees of the Company and other persons who are eligible to participate in
the Plan could receive more benefits under the Plan than they could if the
proposal is not adopted. The Board believes that the continued availability of
awards under the Plan will help to attract, motivate and retain employees and
other persons who contribute to the Company.
Directors as Eligible Participants. Rule 16b-3 under the Securities
Exchange Act of 1934, as amended (the 'Exchange Act'), provides certain
exemptions from the operation of Section 16(b) of the Exchange Act, the
'short-swing profits rule.' Recent amendments to Rule 16b-3 permit the grant of
stock options under the Plan to any and all directors without jeopardizing the
applicability of Rule 16b-3. Accordingly, the Board has proposed to amend the
Plan to provide that directors of the Company will be eligible to receive awards
under the Plan. If the proposal is adopted, directors will be able to receive
awards under the Plan, while they will not be able to receive awards under the
Plan if the proposal is not adopted. The Board believes that the ability to
grant stock options to directors of the Company, thereby providing them with the
opportunity to acquire an equity investment in the Company, will maintain and
strengthen their desire to remain with the Company, stimulate their efforts on
the Company's behalf, and also attract other qualified persons to serve as
directors of the Company.
NEW PLAN BENEFITS
The Board and the Compensation Committee each has the discretion to
determine the awards, if any, to be granted to any eligible person under the
Plan. Accordingly, the awards that will be granted to any individual is not
determinable. The following table sets forth, as of April 14, 1997, (a) the
options granted under the Plan, subject to stockholder approval of the proposal
to increase the maximum number of shares of Common Stock that may be the subject
of awards under the Plan, to each Named Executive Officer, all current executive
officers as a group, all current non-executive officer directors as a group and
all non-executive officer employees as a group; and (b) the per share exercise
price of such options:
<TABLE>
<CAPTION>
SECURITIES
UNDERLYING EXERCISE PRICE
NAME OF INDIVIDUAL OR GROUP OPTIONS GRANTED ($/SHARE)
- - --------------------------------------------------------------------------------- --------------- --------------
<S> <C> <C>
Jeremy M. Levin ................................................................. 25,000 6.625(1)
President and Chief Executive Officer 200,000 13.375(1)
100,000 20.00(2)
Philip N. Sussman ............................................................... 25,000 6.625(1)
Vice President of Corporate Development
David R. Webb ................................................................... -- --
Vice President of Research and Chief Scientific Officer
6
<PAGE>
Arlindo L. Castelhano, Ph.D. ................................................... -- --
Executive Director of Chemistry
James S. Rielly ................................................................. -- --
Director of Finance, Controller, Treasurer and Secretary
All current executive officers as a group (5 persons)......................... 350,000 14.304(3)
All current non-executive officer directors as a group (11 persons)........... -- --
All non-executive officer employees as a group (85 persons)................... -- --
</TABLE>
- - ------------------
(1) The exercise price of the option represents the last reported sale price of
the Common Stock on the date the option was granted, as quoted on the Nasdaq
National Market.
(2) The exercise price of the option is $6.625 higher than the last reported
sale price of the Common Stock on the date the option was granted, as quoted
on the Nasdaq National Market.
(3) $14.304 represents the average exercise price of such options.
DESCRIPTION OF THE PLAN AS CURRENTLY IN EFFECT
Shares Subject to the Plan. The maximum number of shares of Common Stock
that may be the subject of awards under the Plan is 333,334. In December 1996,
the Board amended the Plan, subject to approval by the stockholders of the
Company, to increase the maximum number of shares of Common Stock that may be
the subject of awards under the Plan by 500,000, from 333,334 to 833,334 (plus
any shares that are the subject of canceled or forfeited awards).
Administration. The Plan is administered by the Board and the Compensation
Committee, which have the power and authority under the Plan to determine which
of the Company's employees and consultants will receive awards, the time or
times at which awards will be made, the nature and amount of the awards, the
exercise or purchase price, if any, of such awards, and such other terms and
conditions applicable to awards as it determines to be appropriate or advisable.
Type of Stock Options. Stock options granted under the Plan may be either
non-qualified stock options or options intended to qualify as incentive stock
options under Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"). The term of incentive stock options granted under the Plan cannot
extend beyond ten years from the date of grant (or five years in the case of a
holder of more than 10% of the total combined voting power of all classes of
stock of the Company on the date of grant).
Share Awards. Shares of Common Stock may either be awarded or sold under
the Plan and may be issued or sold with or without vesting and other
restrictions, as determined by the Compensation Committee or the Board.
Vesting. Under the Plan, the Board or Compensation Committee may establish
with respect to each option or share awarded or sold such vesting provisions as
it determines to be appropriate or advisable. Unvested options will
automatically terminate within a specified period of time following the
termination of the holder's relationship with the Company and in no event beyond
the expiration of the term. The Company may either repurchase unvested shares of
Common Stock at their original purchase price upon the termination of the
holder's relationship with the Company or cause the forfeiture of such shares,
as determined by the Compensation Committee or the Board. All options granted
and shares sold under the Plan to employees of the Company may, in the
discretion of the Board or the Compensation Committee, become fully vested upon
the occurrence of certain corporate transactions if the holders thereof are
terminated in connection therewith.
7
<PAGE>
Exercise Price. The exercise price of options granted and the purchase
price of shares sold under the Plan are determined by the Compensation Committee
or the Board, but may not, in the case of incentive stock options, be less than
the fair market value of the Common Stock on the date of grant (or, in the case
of incentive stock options granted to a holder of more than 10% of the total
combined voting power of all classes of stock of the Company on the date of
grant, 110% of such fair market value), as determined by the Compensation
Committee or the Board.
Participation. Awards may be granted to employees of and consultants to
the Company. In December 1996, the Board amended the Plan, subject to approval
by the stockholders of the Company, to permit the grant of awards to directors
of the Company. As of April 14, 1997, there were 90 employees and 11
non-employee directors of, and 10 consultants to, the Company.
Stock Appreciation Rights. The Board or the Compensation Committee may
also grant, in combination with non-qualified stock options and incentive stock
options, stock appreciation rights ('Tandem SARs'), or may grant Tandem SARs as
an addition to outstanding non-qualified stock options. A Tandem SAR permits the
participant, in lieu of exercising the corresponding option, to elect to receive
any appreciation in the value of the shares subject to such option directly from
the Company in shares of Common Stock. The amount payable by the Company upon
the exercise of a Tandem SAR is measured by the difference between the market
value of such shares at the time of exercise and the option exercise price.
Generally, Tandem SARs may be exercised at any time after the underlying option
vests. Upon the exercise of a Tandem SAR, the corresponding portion of the
related option must be surrendered and cannot thereafter be exercised.
Conversely, upon exercise of an option to which a Tandem SAR is attached, the
Tandem SAR may no longer be exercised to the extent that the corresponding
option has been exercised. Nontandem stock appreciation rights ('Nontandem
SARs') may also be awarded by the Compensation Committee or the Board. A
Nontandem SAR permits the participant to elect to receive from the Company that
number of shares of Common Stock having an aggregate market value equal to the
excess of the market value of the shares covered by the Nontandem SAR on the
date of exercise over the aggregate base price of such shares as determined by
the Compensation Committee or the Board. With respect to both Tandem and
Nontandem SARs, the Compensation Committee or the Board may determine to cause
the Company to settle its obligations arising out of the exercise of such rights
in cash or a combination of cash and shares, in lieu of issuing shares only.
Tax Offset Payments. Under the Plan, the Compensation Committee or the
Board may also award tax offset payments to assist employees in paying income
taxes incurred as a result of their participation in the Plan. The amount of the
tax offset payments will be determined by applying a percentage established from
time to time by the Compensation Committee or the Board to all or a portion of
the taxable income recognizable by the employee upon: (i) the exercise of a
non-qualified stock option or an SAR; (ii) the disposition of shares received
upon exercise of an incentive stock option; (iii) the lapse of restrictions on
restricted shares; or (iv) the award of unrestricted shares.
Antidilution. The number and class of shares available under the Plan may
be adjusted by the Compensation Committee or the Board to prevent dilution or
enlargement of rights in the event of various changes in the capitalization of
the Company. At the time of grant of any award, the Compensation Committee or
the Board may provide that the number and class of shares issuable in connection
with such award be adjusted in certain circumstances to prevent dilution or
enlargement of rights.
Amendment and Termination. The Board may suspend, amend, modify or
terminate the Plan. However, the Company's stockholders must approve any
amendment that would (i) materially increase the aggregate number of shares
issuable under the Plan, (ii) materially increase the benefits accruing to
employees under the Plan or (iii) materially modify the requirements for
eligibility to participate in the Plan. Awards made prior to the termination of
the Plan shall continue in accordance with their terms following such
termination. No amendment,
8
<PAGE>
suspension or termination of the Plan shall adversely affect the rights of an
employee or consultant in awards previously granted without such employee's or
consultant's consent.
As of April 14, 1997, an aggregate of 656,472 shares of Common Stock were
subject to outstanding stock options granted under the Plan, including the
350,000 shares of Common Stock subject to outstanding stock options granted
under the Plan to two officers, subject to approval of the amendment to the Plan
to increase the maximum number of shares of Common Stock that may be the subject
of awards under the Plan. As of April 14, 1997, stock options to purchase 27,501
shares were exercisable at $6.625 per share. The last sale price of the Common
Stock reported on the Nasdaq National Market on April 14, 1997 was $10.125 per
share.
In February 1997, the Company registered the shares issuable upon exercise
of stock options granted or which may be granted under the Plan, as amended to
increase the maximum number of shares that may be the subject of awards under
the Plan to 833,334, pursuant to a registration statement on Form S-8.
UNITED STATES FEDERAL INCOME TAX ASPECTS OF THE PLAN
Non-Statutory Stock Options and Stock Appreciation Rights. As a general
rule, no federal income tax is imposed on the optionee upon the grant of a
non-statutory stock option (i.e., an option other than an incentive stock
option, which is described below), regardless of whether it includes an SAR. In
addition, the Company is not entitled to a tax deduction by reason of such a
grant. Generally, upon the exercise of a non-statutory stock option, the
optionee will be treated as receiving compensation taxable as ordinary income in
the year of exercise in an amount equal to the excess of the fair market value
of the shares on the date of exercise over the option price paid for such
shares. In the case of the exercise of an SAR, the recipient of such award will
be treated as receiving compensation taxable as ordinary income in the year of
exercise in an amount equal to the cash received plus the fair market value of
the shares distributed to the recipient. Upon a subsequent disposition of the
shares received upon exercise of a non-statutory stock option or an SAR, any
appreciation after the date of exercise should qualify as capital gain.
Upon the exercise of a non-statutory stock option or an SAR, the Company
may claim a deduction for compensation paid at the same time and in the same
amount as compensation income is recognized to the award recipient assuming any
federal income tax withholding requirements are satisfied.
Incentive Stock Options. The incentive stock options under the Plan are
intended to constitute 'incentive stock options' within the meaning of Section
422 of the Code. Incentive stock options are subject to special federal income
tax treatment. No federal income tax is imposed on the optionee upon the grant
of an incentive stock option and the Company is not entitled to a tax deduction
by reason of such a grant. No federal income tax is imposed on the optionee upon
the exercise of an incentive stock option if the optionee does not dispose of
shares acquired pursuant to the exercise within the two-year period beginning on
the date the option was granted and within the one-year period beginning on the
date the option was exercised (collectively, the 'holding period'). If these
conditions are met and no tax is imposed on the optionee, then the Company would
not be entitled to any deduction for federal income tax purposes in connection
with the exercise of the option or the disposition of the underlying shares.
However, the difference between the fair market value of the shares on the date
of exercise of an incentive stock option and the exercise price generally must
be included in the optionee's alternative minimum taxable income.
Upon disposition of the shares received upon exercise of an incentive stock
option after the holding period, the difference between the amount realized and
the exercise price should constitute a long-term capital gain or loss. If an
optionee disposes of shares acquired pursuant to his or her exercise of an
incentive stock option prior to the end of the holding period, the optionee will
be treated as having received, at the time of disposition, compensation taxable
as ordinary income. In such event, the Company may claim a deduction for
compensation paid at the same time and in the same amount as compensation is
treated as received by the optionee. The amount treated as compensation is the
excess of the fair market value of the shares at the time of exercise (or in the
case
9
<PAGE>
of a sale in which a loss would be recognized, the amount realized on the sale,
if less than the fair market value of the shares at the time of exercise) over
the exercise price, and any amount realized in excess of the fair market value
of the shares at the time of exercise would be treated as short-term or
long-term capital gain, depending on the holding period of the shares.
Section 162(m) of the Code. Section 162(m) precludes a public corporation
from taking a deduction for compensation in excess of $1 million paid to its
chief executive officer or any of its four other highest-paid officers. However,
compensation that qualifies under Section 162(m) as 'performance-based' is
specifically exempt from the deduction limit. Based on Section 162(m) and the
regulations issued thereunder, the Company believes that the income generated in
connection with the exercise of stock options and SARs granted under the Plan
should qualify as performance-based compensation and, accordingly, the Company's
deduction for such compensation should not be limited by Section 162(m).
The Plan is not qualified under Section 401(a) of the Code.
REQUIRED AFFIRMATIVE VOTE
The affirmative vote of at least a majority of the outstanding shares of
Common Stock present at the meeting or by proxy is required for approval of the
amendment to the Plan that increases the maximum number of shares of Common
Stock that may be the subject of awards under the Plan by 500,000 from 333,334
shares to 833,334 shares and provides that directors will be eligible to receive
awards under the Plan. If the amendment is not approved, the amendment will not
become effective, conditional options granted to two officers of the Company
will not become exercisable, and the Company will not be able to grant stock
options to directors under the Plan.
THE BOARD RECOMMENDS THAT YOU VOTE 'FOR' THE AMENDMENT TO THE CADUS
PHARMACEUTICAL CORPORATION 1996 INCENTIVE PLAN THAT INCREASES THE MAXIMUM NUMBER
OF SHARES OF COMMON STOCK THAT MAY BE THE SUBJECT OF AWARDS UNDER THE PLAN BY
500,000 FROM 333,334 SHARES TO 833,334 SHARES AND THAT PROVIDES THAT DIRECTORS
WILL BE ELIGIBLE TO RECEIVE AWARDS UNDER THE PLAN.
PROPOSAL 3
GRANT OF STOCK OPTIONS
GENERAL
On November 15, 1996, the Company granted to each of ten non-employee
directors then in office (Theodore Altman, Harold First, Carl C. Icahn, Peter
Liebert, Robert J. Mitchell, Mark H. Rachesky, William A. Scott, Thomas Shenk,
Samuel D. Waksal and Jack G. Wasserman) non-qualified stock options to purchase
12,000 shares of Common Stock at an exercise price of $6.75 per share, pursuant
to stock option agreements with each such director. The stock option granted to
Thomas Shenk has terminated. Accordingly, the Board is submitting for
ratification by the stockholders the grant of stock options to the nine
remaining persons set forth above to acquire an aggregate of 108,000 shares of
Common Stock. The material features of the Stock Option Agreements are described
in 'Description of Stock Option Agreements' below.
REASONS AND PRINCIPAL EFFECTS OF THE PROPOSAL
The stock options were granted in consideration for services rendered by
the non-employee directors, in recognition of the greater responsibilities of
serving as a director of a public company and as incentive for the continuation
of such services to the Company. The Board is submitting to the stockholders for
ratification the grant of stock options to the aforementioned nine persons to
acquire an aggregate of 108,000 shares of Common Stock. Such stockholder
ratification is necessary in order to list on the Nasdaq National Market the
Common Stock issuable upon the exercise of such stock options.
10
<PAGE>
DESCRIPTION OF STOCK OPTION AGREEMENTS
Exercise Price, Vesting and Expiration. The exercise price of the stock
options is $6.75 per share. Each stock option vests in four cumulative annual
installments of 3,000 shares commencing on November 15, 1997. Each stock option
may be exercised as to all or a portion of the vested shares, at any time until
the close of business on November 14, 2006.
Termination of Stock Options. The stock options terminate (a) immediately
if the director voluntarily ceases serving as director or is removed as a
director for cause, (b) five years from the date the director ceases to serve as
a director due to death or disability and (c) four years from the date the
director ceases to serve as a director by reason of not being reelected or being
removed without cause. Notwithstanding the foregoing, the Compensation Committee
has the authority to accelerate the vesting schedule and/or extend the
termination date and the time for exercise of all or any part of such stock
options in any such event. None of the foregoing, however, can extend the
exercisability of the stock options beyond the close of business on November 14,
2006.
Non-Transferability. The stock option is not transferable by the director
other than by will or the laws of descent and distribution.
Adjustment of Shares. If any change is made in the Common Stock due to,
among other things, a merger, consolidation, reorganization, recapitalization,
stock dividend, stock split, subdivision or combination of shares, or exchange
of shares, such adjustments or substitutions will be made by the Board to the
shares issuable upon exercise of the stock options, as the Board determines is
appropriate and equitable to prevent dilution or enlargement of the director's
rights under the Stock Option Agreement.
Lock-Up Agreement. If requested by the Company or an underwriter of Common
Stock or other securities of the Company, the director will agree not to sell,
grant any option or right to buy or sell, or otherwise transfer or dispose of in
any manner, any shares held by him or which he has the right to acquire during
the 180-day period following the effective date of a registration statement of
the Company, or such shorter period as such underwriter shall permit.
Registration. In February 1997, the Company registered the shares issuable
upon exercise of stock options granted under the Stock Option Agreements
pursuant to a registration statement on Form S-8.
UNITED STATES FEDERAL INCOME TAX ASPECTS OF THE PLAN
The stock options granted under the Stock Option Agreements are
non-qualified options. The income tax consequences to the optionees and the
Company from the grant and exercise of non-qualified stock options and from the
disposition of the underlying shares is described in PROPOSAL 2-AMENDMENT TO
THE COMPANY'S 1996 INCENTIVE PLAN-United States Federal Income Tax Aspects
of the Plan.
REQUIRED AFFIRMATIVE VOTE
The affirmative vote of at least a majority of the shares of Common Stock
present at the Meeting in person or by proxy and entitled to vote is required to
ratify the grant of the non-employee director stock options.
THE BOARD RECOMMENDS THAT YOU VOTE 'FOR' RATIFICATION OF THE GRANT OF THE
NON-EMPLOYEE DIRECTOR STOCK OPTIONS TO PURCHASE AN AGGREGATE OF 108,000 SHARES
OF COMMON STOCK.
11
<PAGE>
MANAGEMENT
Information with respect to the executive officers, directors, key
employees and consultants of the Company as of April 14, 1997 is set forth
below:
<TABLE>
<CAPTION>
NAME AGE POSITION
- - ------------------------------------------------ --- ------------------------------------------------
<S> <C> <C>
Jeremy M. Levin, D.Phil., MB.BCHIR**............ 43 Chief Executive Officer, President and Chairman
of the Board
David R. Webb, Ph.D............................. 52 Vice President of Research and Chief Scientific
Officer
Philip N. Sussman............................... 45 Vice President of Corporate Development
Arlindo L. Castelhano, Ph.D..................... 43 Executive Director of Chemistry
James R. Broach, Ph.D........................... 49 Director of Research
John C. Cambier, Ph.D........................... 48 Director of Immunology
Gary L. Johnson, Ph.D........................... 47 Director of Cell Biology
Algis Anilionis, Ph.D........................... 46 Director of Intellectual Property
James S. Rielly................................. 33 Director of Finance, Controller, Treasurer and
Secretary
Jennifer LaVin.................................. 31 Director of Corporate Communications & Business
Strategy
O. Prem Das..................................... 43 Director of Business Development
Carl C. Icahn**................................. 61 Director
Theodore Altman**............................... 55 Director
Harold First (1)(2)**........................... 60 Director
Peter S. Liebert, M.D.**........................ 61 Director
Robert J. Mitchell (2)**........................ 50 Director
Lawrence D. Muschek, Ph.D.**.................... 53 Director
Mark H. Rachesky, M.D.**........................ 38 Director
Leon E. Rosenberg, M.D.**....................... 64 Director
Nicole Vitullo**................................ 39 Director
Samuel D. Waksal, Ph.D. (2)**................... 49 Director
Jack G. Wasserman (1)**......................... 60 Director
</TABLE>
- - ------------------
** Nominee for election to the Board
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
Jeremy M. Levin, D.Phil., MB.BCHIR, Chief Executive Officer, President and
Chairman of the Board, joined the Company in December 1992 as its Chief
Executive Officer and became a Director in January 1993. In May 1995, Dr. Levin
became a Co-Chairman of the Board and in May 1996, Dr. Levin became Chairman of
the Board of the Company. From December 1990 to December 1992, Dr. Levin was
Vice President of Corporate Development for Genzyme Corp.'s majority-owned
subsidiary, IG Laboratories, Inc., a public laboratory testing company. Prior to
that Dr. Levin served in a number of positions at biotechnology companies and at
major teaching hospitals in Europe. Dr. Levin is a member of the Board of
Physiome Sciences, Inc., a private
12
<PAGE>
biotechnology company. Dr. Levin holds a D.Phil. in Molecular Biology from the
University of Oxford and an MB.BCHIR from University of Cambridge.
David R. Webb, Ph.D., Vice President of Research and Chief Scientific
Officer, joined the Company in such capacities in July 1995. From January 1987
to July 1995, Dr. Webb was a Distinguished Scientist at Syntex Inc., a public
pharmaceutical company, in the Department of Molecular Immunology. From April
1990 to January 1995, Dr. Webb was also Director of Syntex Inc.'s Institute of
Immunology and Biological Sciences. Prior to that Dr. Webb was a member of the
Department of Cell Biology at the Roche Institute of Molecular Biology. From
January 1989 to the present, Dr. Webb has also been a Consulting Professor of
Cancer Biology at Stanford University. Dr. Webb holds a Ph.D. in Microbiology
from Rutgers University and an M.A. and a B.A. in Biology from California State
University at Fullerton.
Philip N. Sussman, Vice President of Corporate Development, joined the
Company in such capacity in September 1993. From December 1990 to September
1993, Mr. Sussman was Director of Strategy and Business Development for the
Pharmaceuticals Division of Ciba-Geigy Corporation, a public pharmaceutical
company. Mr. Sussman holds an S.M. in Finance from the Sloan School of
Management at the Massachusetts Institute of Technology and a B.S. in Physics
from the State University of New York at Stony Brook.
Arlindo L. Castelhano, Ph.D., has been Executive Director of Chemistry of
the Company since June 1996 and Director of Chemistry from September 1995 to
June 1996. He was a scientist at Syntex Inc., a public pharmaceutical company,
from 1982 to 1995 and served as Principal Scientist from 1993 to 1995. He
received his Ph.D. in Chemistry from McMaster University and his B.A. from
University of Toronto.
James R. Broach, Ph.D., a scientific founder of the Company and inventor of
the Company's yeast-based drug discovery technology, has been Director of
Research of the Company since its inception. He is and has been since 1984 a
Professor at Princeton University in the Department of Molecular Biology. In
1984, Dr. Broach and his collaborators were the first ones to demonstrate that
human genes could be successfully implanted into yeast cells. He received his
Ph.D. in Biochemistry from University of California at Berkeley and his B.S.
from Yale University.
John C. Camber, Ph.D., inventor of certain of the Company's signal
transduction technologies, has been Director of Immunology of the Company since
November 1994. He is Chief of the Division of Basic Sciences in the Department
of Pediatrics at the National Jewish Center for Immunology and Respiratory
Medicine. Dr. Camber is also Professor of Immunology at the University of
Colorado Health Sciences Center. He is internationally known for his work on
transmembrane signal transduction, especially antigen and immunoglobulin Fc
receptors. Dr. Camber conducted his postdoctoral training at the University of
Texas Southwestern Medical School, completed his Ph.D. in Immunology and
Virology at the University of Iowa, and received his B.S. from Southwest
Missouri State University.
Gary L. Johnson, Ph.D., inventor of certain of the Company's signal
transduction technologies, has been Director of Cell Biology of the Company
since November 1994. He is Director of the Program in Molecular Signal
Transduction at the National Jewish Center for Immunology and Respiratory
Medicine. He is also Professor of Pharmacology at the University of Colorado
School of Medicine and a Senior Member of its Cancer Center where he serves on
the executive board. Dr. Johnson's research focuses on receptor activation of G
proteins and the integration of signal transduction pathways regulated by G
proteins and tyrosine kinases. He received his Ph.D. in Pharmacology from the
University of Colorado and his B.S. from California State University.
Algis Anilionis, Ph.D., has been Director of Intellectual Property of the
Company since November 1994. He was Patent Manager at Oncogene Science Inc., a
public biotechnology company, from 1991 to 1994 and Manager of Molecular Biology
and Genetics Research at Praxis Biologics, Inc. (now known as Lederle/Praxis, a
division of American Home Products), a public vaccine manufacturer and research
and development company, from 1986
13
<PAGE>
to 1991. Dr. Anilionis has nine issued U.S. patents and four granted European
patents. He is a registered Patent Agent. He received his Ph.D. in Molecular
Biology from Edinburgh University and a B.A. Hons. degree from University of
Oxford.
James S. Rielly, Director of Finance, Controller, Treasurer and Secretary,
joined the Company in September 1992 as its Controller, became its Treasurer and
Secretary in September 1993 and became its Director of Finance in February 1996.
From November 1989 to September 1992, Mr. Rielly was the Controller and
Treasurer of Baring Brothers & Co., Inc., an investment banking firm. Mr. Rielly
is a certified public accountant and holds a B.S.B.A. from Bucknell University.
Jennifer LaVin, Director of Corporate Communications & Business Strategy,
joined the Company in September 1996. From December 1992 to September 1996, Ms.
LaVin was an equity analyst and Assistant Vice President at Merrill Lynch & Co.,
Inc. focusing on the pharmaceutical industry. Prior to that, she was an internal
consultant and served in diversified research positions at biotechnology and
pharmaceutical companies. Ms. LaVin received her MBA from Columbia Business
School and her B.A. in Biochemistry from the University of Pennsylvania.
O. Prem Das., Ph.D., Director of Business Development, joined the Company
in September 1996. Dr. Das was President of Heartland BioTechnologies, Inc. from
May 1995 to September 1996, and its Vice President from April 1994 to May 1995.
From April 1994 to September 1996, he was also Director of Research at
Heartland. Prior to that, Dr. Das completed several postdoctoral fellowships in
biochemistry, molecular biology and genetics at Rutgers University, the
University of Minnesota and Georgetown University. Dr. Das received his Ph.D. in
Biological Chemistry from MIT, an M.Sc. from the Indian Institute of Technology
and a B.Sc. from Loyola College, Madras University.
Carl C. Icahn became a director of the Company in July 1993. He was a
Co-Chairman of the Board from May 1995 to May 1996. Mr. Icahn has been Chairman
of the Board and Chief Executive Officer of ACF Industries Incorporated, a
privately-held railcar leasing and manufacturing company, since 1984, ACF
Industries Holding Corp., a privately-held holding company for ACF Industries
Incorporated since August 1993, and, since 1968, Icahn & Co., Inc., a registered
broker-dealer and until 1995 a member firm of the New York Stock Exchange, Inc.
Since November 1990, Mr. Icahn has been Chief Executive Officer and Chairman of
the Board of American Property Investors, Inc., the general partner of American
Real Estate Partners, L.P., a public limited partnership that invests in real
estate. From before 1990, Mr. Icahn has been Chief Executive Officer and
Chairman of the Board of Starfire Holding Corporation, a privately-held holding
company. From before 1991 to January 1993, Mr. Icahn was Chief Executive Officer
and Chairman of the Board of Trans World Airlines, Inc., a public airline
company. Mr. Icahn was the Chief Executive Officer and Chairman of the Board of
Trans World Airlines, Inc. when it filed for reorganization under Chapter 11 of
the United States Bankruptcy Code, as amended, in January 1992. Mr. Icahn
received his B.A. from Princeton University.
Theodore Altman became a director of the Company in May 1996. For the past
five years, Mr. Altman has been a senior partner in the law firm of Gordon
Altman Butowsky Weitzen Shalov & Wein, concentrating his areas of practice in
securities law and litigation. Mr. Altman received a B.A. from Bucknell
University and an LL.B. from New York University.
Harold First became a director of the Company in April 1995. Mr. First has
been since January 1993 an independent financial consultant. He has been a
director of Tel-Save Holdings, Inc., a public long-distance telephone service
company, since September 1995. From December 1990 through January 1993, Mr.
First served as Chief Financial Officer of Icahn Holding Corp., a privately-held
holding company, and related entities. He was a director of Trump Taj Mahal
Realty Corp., a privately-held real estate company, from October 1991 until
September 1996; a member of the Supervisory Board of Memorex Telex N.V., a
public technology company, from February 1992 until February 1997; a director of
Trans World Airlines, Inc., a public airline company, from December 1990 through
January 1993; a director of ACF Industries, Inc., a privately-held railcar
leasing and
14
<PAGE>
manufacturing company, from February 1991 through December 1992; and Vice
Chairman of the Board of American Property Investors, Inc., the general partner
of American Real Estate Partners, L.P., a public limited partnership that
invests in real estate, from March 1991 through December 1992. Mr. First was a
director of Trans World Airlines, Inc. when it filed for reorganization under
Chapter 11 of the United States Bankruptcy Code, as amended, in January 1992. He
is a certified public accountant and holds a B.S. from Brooklyn College.
Peter S. Liebert, M.D., became a director of the Company in April 1995. Dr.
Liebert has been a pediatric surgeon in private practice since 1968 and is
affiliated with Babies Hospital of Columbia Presbyterian. He is also Clinical
Associate Professor of Surgery, College of Physicians and Surgeons, Columbia
University. Dr. Liebert holds an M.D. from Harvard University Medical School and
a B.A. from Princeton University.
Robert J. Mitchell became a director of the Company in May 1996. Mr.
Mitchell has been Senior Vice President-Finance of ACF Industries Incorporated
since March 1995 and was Treasurer of ACF Industries Incorporated from December
1984 to March 1995. Mr. Mitchell has also served as President and Treasurer of
ACF Industries Holdings Inc. since August 1993 and as Vice President, Liaison
Officer of Icahn & Co., Inc. since November 1984. From 1987 to January 1993, Mr.
Mitchell served as Treasurer of Trans World Airlines, Inc. and was the Treasurer
of Trans World Airlines, Inc. when it filed for reorganization under Chapter 11
of the United States Bankruptcy Code, as amended, in January 1992. Mr. Mitchell
has been a director of National Energy Group, Inc., a public company involved in
the exploration of oil and gas reserves, since August 1996.
Lawrence D. Muschek, Ph.D., became a director of the Company in February
1996. Dr. Muschek has been the Senior Vice President for Research and
Development of the Human Health Division of Solvay S.A., a public Belgian
chemical and pharmaceutical company, since 1994 and has worldwide
responsibilities for research and development for Solvay S.A. From April 1990 to
January 1994, Dr. Muschek served as the Senior Vice President for Research and
Development of Solvay Pharmaceuticals, Inc., a U.S. pharmaceutical subsidiary of
Solvay S.A. Prior to joining Solvay Pharmaceuticals, Inc., Dr. Muschek spent 18
years in pharmaceutical research and development at Johnson & Johnson, a public
manufacturer of health care products. Dr. Muschek conducted post-doctoral
research in Pharmacology at Michigan State University and holds a Ph.D. in
Biochemistry from Michigan State University and a B.Sc. from The Philadelphia
College of Pharmacy and Science.
Mark H. Rachesky, M.D., became a director of the Company in July 1993.
Since June 1996, Dr. Rachesky has been the President of MHR Fund Management,
LLC, an investment manager of a distressed securities investment fund. From
February 1990 until June 1996, Dr. Rachesky was employed by Icahn Holding
Corporation where he initially served as a senior investment officer and, for
the last three years, as its sole Managing Director and, in that capacity, acted
as Carl C. Icahn's chief investment advisor. Dr. Rachesky has been a director of
Samsonite Corp., a public luggage manufacturing company, since June 1993 and a
director of Culligan Water Technologies, Inc., a public water purification
company, since its spin-off from Samsonite Corp. in December 1995. From June
1987 to February 1990, Dr. Rachesky was employed by an affiliate of the Robert
M. Bass Group, Inc., a privately-held financial company. Dr. Rachesky received
an M.D. and an M.B.A. from Stanford University and his B.S. from the University
of Pennsylvania. Dr. Rachesky has agreed to tender his resignation as a director
of the Company if so requested by Carl Icahn.
Leon E. Rosenberg, M.D., became a Director of the Company in March 1997.
Dr. Rosenberg has been Senior Vice President, Scientific Affairs of
Bristol-Myers Squibb Company since January 1997. From September 1991 to January
1997, Dr. Rosenberg was President of Bristol-Myers Squibb Pharmaceutical
Research Institute. From July 1984 to September 1991, he served as Dean of the
Yale University School of Medicine. Dr. Rosenberg currently serves on the Boards
of Directors of Somatix Therapy Corporation, SEQ, Ltd., EntreMed, Inc., and
Research!America. He received both his M.D. and his B.A. from the University of
Wisconsin.
Nicole Vitullo became a director of the Company in January 1997. Ms.
Vitullo has been Senior Vice President of Rothschild International Asset
Management since November 1996 and Vice President thereof from November 1992
until November 1996. From July 1991 to November 1992, Ms. Vitullo served as
Director of
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<PAGE>
Corporate Communications and Investor Relations at Cephalon, Inc., a
public biotechnology company. From June 1979 to July 1991, she held various
positions at Eastman Kodak, including Manager of Venture Capital Development of
the Healthcare Group. Ms. Vitullo serves as a director of Cytel Corporation,
Anergen, Inc. and Corvas International, public biotechnology companies. Ms.
Vitullo received her MBA from the University of Rochester's William E. Simon
School of Business and her B.S. in Mathematics/Statistics from the University of
Rochester.
Samuel D. Waksal, Ph.D., a founder of the Company, has been a director of
the Company since its inception and was a Co-Chairman of the Board from May 1995
to May 1996. Dr. Waksal was Chief Executive Officer of the Company from June
1992 to December 1992 and was its Chairman of the Board from June 1992 to May
1995. Dr. Waksal has been the Chief Executive Officer and a director of ImClone
Systems Incorporated, a public biotechnology company, since 1985. Dr. Waksal is
a member of the Board of Somatix Therapy Corporation, a public biotechnology
company. Dr. Waksal received his Ph.D. in Immunology from Ohio State University
College of Medicine.
Jack G. Wasserman became a director of the Company in May 1996. For the
past five years, Mr. Wasserman has been a senior partner in Wasserman, Schneider
& Babb, a New York law firm which concentrates its practice in legal matters
relating to international trade. Mr. Wasserman is a director of American
Property Investors, Inc., the general partner of American Real Estate Partners,
L.P., a public limited partnership. Mr. Wasserman received a B.A. from Adelphi
University, a J.D. from Georgetown University and a Diploma from the Johns
Hopkins University School of Advanced International Studies.
16
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION
The following table sets forth certain information concerning the
compensation paid or accrued by the Company for services rendered to the Company
in all capacities for the fiscal years ended December 31, 1996, 1995 and 1994,
by its Chief Executive Officer and each of the Company's other executive
officers whose total salary and bonus exceeded $100,000 during such fiscal year
(collectively, the 'Named Executive Officers'):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION SECURITIES
------------------------ UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) OPTIONS (#) COMPENSATION
- - --------------------------------------------- ---- ---------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Jeremy M. Levin ............................. 1996 225,000 45,000 25,000 --
President and Chief Executive Officer 1995 175,260 65,000 -- --
1994 163,333 35,000 101,737 --
Philip N. Sussman ........................... 1996 149,375 -- 65,000 --
Vice President of Corporate 1995 110,260 70,000 33,334 --
Development 1994 103,333 40,000 -- --
David R. Webb ............................... 1996 175,000 17,500 17,500 --
Vice President of Research and Chief 1995 94,868(1) 30,000 66,667 128,021(2)
Scientific Officer 1994 -- -- -- --
Arlindo L. Castelhano, Ph.D. ............... 1996 105,833 15,000 11,666 --
Executive Director of Chemistry 1995 -- -- -- --
1994 -- -- -- --
James S. Rielly ............................. 1996 100,846 15,000 16,666 --
Director of Finance, Controller, 1995 -- -- -- --
Treasurer and Secretary 1994 -- -- -- --
</TABLE>
- - ------------------
(1) Dr. Webb joined the Company in June 1995 and receives a salary at the rate
of $175,000 per annum.
(2) All Other Compensation includes: (i) $121,754 of relocation expenses, (ii)
$5,880 in healthcare premiums and reimbursements paid by the Company and
(iii) $387 in short term and long'term disability premiums and life
insurance premiums paid by the Company.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
Dr. Jeremy M. Levin--Dr. Levin is employed as Chief Executive Officer under
a two-year employment agreement with the Company entered into effective as of
December 12, 1995. Pursuant to his agreement, Dr. Levin receives a minimum
annual base salary of $225,000, is guaranteed an annual bonus equal to 20% of
his base salary, and is eligible to receive an additional annual bonus at the
discretion of the Compensation Committee. If the Company terminates Dr. Levin's
employment without 'cause,' as defined in his employment agreement, or if the
Company fails to renew his employment agreement upon terms acceptable to him and
Dr. Levin terminates his employment with the Company after December 12, 1997,
the Company will pay to Dr. Levin a lump sum severance payment equal to one
year's base salary then in effect and guaranteed bonus and all unvested stock
options issued to him will immediately vest as of the date of termination. If
Dr. Levin's employment with the Company is terminated under certain
circumstances in connection with a 'change in
17
<PAGE>
control' (as defined in the employment agreement), the Company will pay to
Dr. Levin a lump sum severance payment equal to one year's base salary then in
effect and guaranteed bonus and all unvested stock options issued to him will
immediately vest as of the date of termination.
Philip N. Sussman--Mr. Sussman is an employee at will but has a severance
agreement with the Company which provides that if he is terminated without cause
(i) the Company will continue to pay him his then salary and provide him with
medical benefits until the earlier of twelve months from the date of termination
or his commencement of comparable new employment with another company and (ii)
all unvested stock options issued to him will immediately vest as of the date of
termination.
Dr. David R. Webb--Dr. Webb is an employee at will but has a severance
agreement with the Company which provides that if he is terminated without cause
he will receive severance equal to (i) one year's salary if such termination is
within twelve months of commencement, (ii) 9 months' salary if such termination
is after 12 months but before the 25th month after commencement, (iii) 6 months'
salary if such termination is after 24 months but before the 37th month after
commencement, or (iv) whatever is deemed appropriate for other officers of the
Company at the time of termination if such termination is more than 36 months
after commencement.
James S. Rielly--Mr. Rielly is an employee at will but has a severance
agreement with the Company which provides that if he is terminated without cause
the Company will continue to pay him his then salary and provide him with
medical benefits until the earlier of six months from the date of termination or
his commencement of new employment.
OPTION GRANTS
The following table sets forth certain information regarding options
granted during the fiscal year ended December 31, 1996 by the Company to the
Named Executive Officers:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------------- POTENTIAL REALIZABLE VALUE
PERCENT OF AT ASSUMED ANNUAL RATES
TOTAL OF STOCK PRICE
SECURITIES OPTIONS APPRECIATION FOR OPTION
UNDERLYING GRANTED TO EXERCISE TERMS ($)
OPTIONS EMPLOYEES IN PRICE EXPIRATION ------------------------
NAME GRANTED (#) FISCAL YEAR ($/SHARE) DATE 5% 10%
- - --------------------------------- ----------- ------------ ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Jeremy M. Levin.................. 25,000 6.88 6.625 12/18/06 104,161 263,964
Philip N. Sussman................ 25,000 6.88 6.625 12/18/06 104,161 263,964
40,000 11.01 6.625 12/13/06 166,657 422,342
David R. Webb.................... 17,500 4.82 6.625 12/13/06 72,912 184,775
Arlindo L. Castelhano............ 11,666 3.21 6.625 12/13/06 48,606 123,176
James S. Rielly.................. 16,666 4.59 6.625 12/13/06 69,438 175,969
</TABLE>
OPTION EXERCISES AND HOLDINGS
The following table sets forth certain information concerning each exercise
of stock options, during the fiscal year ended December 31, 1996, by the Named
Executive Officers and unexercised stock options held by the Named Executive
Officers as of the end of such fiscal year.
18
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES AGGREGATE DECEMBER 31, 1996 (#) DECEMBER 31, 1996 ($) (1)
ACQUIRED ON VALUE ---------------------------- ----------------------------
NAME EXERCISE REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - ---------------------------- ----------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Jeremy M. Levin............. -- -- 281,159 58,912 2,052,269 298,987
Philip N. Sussman........... -- -- 33,334 98,334 227,420 328,380
David R. Webb............... -- -- 16,666 67,501 108,329 362,194
Arlindo L. Castelhano....... -- -- 3,333 21,667 21,665 89,797
James S. Rielly............. -- -- 8,334 21,666 57,788 61,165
</TABLE>
- - ------------------
(1) Based on the difference between the closing price of the underlying shares
of Common Stock on December 31, 1996 as reported by the Nasdaq National
Market ($8.75) and the option exercise price.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Compensation Committee is composed of Harold First and Jack
G. Wasserman. Neither Mr. First nor Mr. Wasserman is or was an officer or
employee of the Company.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Introduction
The Compensation Committee of the Board is responsible for determining and
administering the Company's compensation policies for the remuneration of the
Company's officers. The Compensation Committee annually evaluates individual and
corporate performance from both a short-term and long-term perspective.
Philosophy
The Company's executive compensation program seeks to encourage the
achievement of business objectives and superior corporate performance by the
Company's executives. The program enables the Company to reward and retain
highly qualified executives and to foster a performance-oriented environment
wherein management's long-term focus is on maximizing stockholder value through
equity-based incentives. The program calls for consideration of the nature of
each executive's work and responsibilities, unusual accomplishments or
achievements on the Company's behalf, years of service, the executive's total
compensation and the Company's financial condition generally.
Components of Executive Compensation
Historically, the Company's executive employees have received cash-based
and equity-based compensation.
Cash-Based Compensation. Base salary represents the primary cash component
of an executive employee's compensation, and is determined by evaluating the
responsibilities associated with an employee's position at the Company and the
employee's overall level of experience. In addition, the Committee, in its
discretion, may award bonuses. The Compensation Committee and the Board believe
that the Company's management and employees are best motivated through stock
option awards and cash incentives.
Equity-Based Compensation. Equity-based compensation principally has been
in the form of stock options. The Compensation Committee and the Board believe
that stock options represent an important component of a well-balanced
compensation program. Because stock option awards provide value only in the
event of share price appreciation, stock options enhance management's focus on
maximizing long-term stockholder value and thus provide a direct relationship
between an executive's compensation and the stockholders' interests. No specific
formula is used to determine stock option awards for an employee. Rather,
individual award levels are based upon the subjective evaluation of each
employee's overall past and expected future contributions to the success of the
Company.
19
<PAGE>
Compensation of the Chief Executive Officer
The philosophy, factors and criteria of the Compensation Committee
generally applicable to the Company's officers are also applicable to the Chief
Executive Officer. The Chief Executive Officer's salary and cash bonus for 1996
were based on his existing employment agreement with the Company. The stock
option to purchase 25,000 shares of Common Stock granted to the Chief Executive
Officer in December 1996 was in recognition of his significant contributions to
the Company.
Harold First
Jack G. Wasserman
COMPARATIVE STOCK PERFORMANCE GRAPH
The following graph provides a comparison of the cumulative total return*
for the Nasdaq U.S. Stock Market Index, the Nasdaq Pharmaceutical Index and the
Company since the Company's initial public offering on July 17, 1996.
Cadus Nasdaq Nasdaq Pharmaceutical Index
----- ------ ---------------------------
6/30/96
7/31/96 114.286 99.498 99.060
8/31/96 89.286 105.073 106.236
9/30/96 89.286 113.115 113.668
10/31/96 100.000 111.876 108.559
11/29/96 91.071 118.809 106.952
12/31/96 125.000 116.434 110.054
Corresponding index values and the Company's Common Stock price values are
given below:
<TABLE>
<CAPTION>
7/17/96 7/31/96 8/31/96 9/30/96 10/31/96 11/30/96 12/31/96
-------- ------- ------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Cadus.............................. $100.000 114.286 89.286 89.286 100.000 91.071 125.000
Nasdaq............................. 100.000 99.498 105.073 113.115 111.876 118.809 116.434
Nasdaq Pharmaceutical Index........ 100.000 99.060 106.236 113.668 108.559 106.952 110.054
Cadus Closing Stock Price.......... $ 7.000 8.000 6.250 6.250 7.000 6.375 8.750
</TABLE>
- - ------------------
* $100 invested July 17, 1996 in the Company's Common Stock or in the index
indicated, including reinvestment of dividends.
20
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In December 1996, the Company contributed a $150,000 promissory note,
payable on December 26, 1998, to Laurel Partners Limited Partnership ('Laurel'),
a limited partnership of which Carl Icahn is the general partner, for a limited
partnership interest in Laurel. In addition, the Company purchased for $160,660
a limited partnership interest in Laurel from Tortoise Corp., a corporation
wholly-owned by Carl Icahn. At the time of the transactions, Laurel's assets
consisted of cash and securities and Laurel had no liabilities. The percentage
interest acquired by the Company in Laurel is equal to the percentage of the
fair market value of Laurel's assets at the time of the transactions represented
by the purchase price paid by the Company for its limited partnership interest
in Laurel. Laurel's purpose is to invest, directly or indirectly, in securities
of biotechnology companies. Laurel may seek to control or acquire the businesses
of such companies and may invest directly or as a partner, investor or joint
venturer with others. The Company has the right to require Carl Icahn to match
any future investment made by the Company in Laurel up to an aggregate
investment on the part of Carl Icahn of $5,000,000. This right expires on the
earlier of December 31, 1999 or such time that neither Carl Icahn nor one of his
affiliates is the general partner of Laurel. The Company is not required to make
any additional investment in Laurel.
In July 1996, Bristol-Myers Squibb purchased 355,000 shares of the
Company's Common Stock at $7.00 per share in the Company's initial public
offering. For the year ended December 31, 1996, the Company received $5 million
in cash for research funding from Bristol-Myers Squibb and recorded $4 million
as revenue, which constituted 61.5% of the Company's gross revenues in 1996, and
$1 million as deferred revenue. Leon E. Rosenberg, a director of the Company, is
the Senior Vice President of Scientific Affairs of Bristol-Myers Squibb.
In July 1996, Physica B.V. purchased 715,000 shares of the Company's Common
Stock at $7.00 per share in the Company's initial public offering. For the year
ended December 31, 1996, the Company received $2.5 million in cash for research
funding from Solvay Duphar, an affiliate of Physica B.V., which constituted
38.5% of the Company's gross revenues in 1996. Lawrence D. Muschek, a director
of the Company, is the Senior Vice President for Research and Development of the
Human Health Division of Solvay Duphar.
INDEPENDENT AUDITORS
The Board selected KPMG Peat Marwick LLP as the Company's independent
auditors for its fiscal year ending December 31, 1997. Representatives of KPMG
Peat Marwick LLP will be present at the Meeting, will be afforded an opportunity
to make a statement, and will be available to respond to appropriate inquiries
from stockholders.
COMPLIANCE WITH 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors, executive officers, and persons who own more than ten
percent of the Common Stock (the 'Ten Percent Stockholders') to file with the
Securities and Exchange Commission initial reports of beneficial ownership on
Form 3 and reports of changes in beneficial ownership on Form 4 or Form 5.
Directors, executive officers and Ten Percent Stockholders are required to
furnish the Company with copies of all such forms that they file. Based
solely on the review of such forms furnished to the Company, the Company
believes that during 1996, the Company's directors, executive officers and Ten
Percent Stockholders complied with all applicable Section 16(a) filing
requirements.
21
<PAGE>
STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
Stockholders who wish to present proposals at the 1998 annual meeting of
stockholders and who wish to have their proposals presented in the proxy
statement distributed by the Board in connection with such annual meeting must
submit their proposals in writing, to the attention of the Secretary of the
Company, on or before January 15, 1998.
ADDITIONAL INFORMATION
The Company's Annual Report, including certain financial statements, is
being mailed concurrently with this Proxy Statement to all persons who were
stockholders of record at the close of business on May 12, 1997, which is the
record date for voting purposes. The Annual Report does not constitute a part of
the proxy soliciting material.
Upon the written request of any stockholder, the Company will provide,
without charge, a copy of the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1996. Written requests for such report should be
directed to the Investor Relations Department of the Company, 777 Old Saw Mill
River Road, Tarrytown, New York 10591-6705.
GENERAL
The Board knows of no other matters which are likely to be brought before
the Meeting. If, however, any other matters are properly brought before the
Meeting, the persons named in the enclosed proxy or their substitutes shall vote
thereon in accordance with their judgment pursuant to the discretionary
authority conferred by the form of proxy.
By Order of the Board of Directors
JAMES S. RIELLY
Secretary
Tarrytown, New York
May 16, 1997
22
<PAGE>
PROXY
CADUS PHARMACEUTICAL CORPORATION
777 Old Saw Mill River Road, Tarrytown, New York 10591
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD
<TABLE>
<S> <C>
The undersigned hereby appoints Jeremy M. Levin and/or James S. Rielly as Proxies, each with the power to appoint his
substitute, and hereby authorizes them to represent and to vote, as designated below, all the shares of the Common Stock of
Cadus Pharmaceutical Corporation held of record by the undersigned on May 12, 1997, at the Annual Meeting of Stockholders to be
held on June 19, 1997 or at any adjournment thereof.
</TABLE>
<TABLE>
<S> <C>
1. Election of Jeremy M. Levin, Carl C. Icahn, Theodore Altman, Harold First, Peter S. Liebert, Robert J. Mitchell, Lawrence
D. Muschek, Mark H. Rachesky, Leon E. Rosenberg, Nicole Vitullo, Samuel D. Waksal and Jack G. Wasserman as directors.
/ / FOR all twelve nominees listed (except as marked to the contrary above) / / WITHHOLD AUTHORITY
(INSTRUCTION: To withhold authority to vote for any of the nominees, strike a line through the nominee's name in the list
above.)
2. Approval of amendment to the Cadus Pharmaceutical Corporation 1996 Incentive Plan (the 'Plan') that (a) increases the
maximum number of shares of Common Stock that may be the subject of awards under the Plan by 500,000, from 333,334 shares to
833,334 shares and (b) provides that directors will be eligible to receive awards under the Plan.
/ / FOR / / AGAINST / / ABSTAIN
3. Ratification of the grant of stock options to nine non-employee directors to purchase an aggregate of 108,000 shares of Common
Stock.
/ / FOR / / AGAINST / / ABSTAIN
</TABLE>
THIS PROXY IS CONTINUED ON THE REVERSE SIDE.
<PAGE>
4. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting. This proxy, when properly
executed, will be voted in the manner directed herein by the undersigned
stockholder. If no direction is given, this proxy will be voted FOR each of
the three proposals.
Receipt of Notice of Annual Meeting and Proxy Statement dated May 16, 1997 is
hereby acknowledged.
Dated:____________________, 1997
________________________________
Signature:
________________________________
Signature if held jointly:
Please sign exactly as name
appears hereon. When shares are
held by joint tenants, both
should sign. When signing as
attorney, executor,
administrator, trustee or
guardian, please give full title
as such. If a corporation,
please sign in full corporate
name by President or other
authorized officer. If a
partnership, please sign in
partnership name by authorized
person.
PLEASE MARK, DATE, SIGN AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED
PRE-PAID ENVELOPE OR DELIVER TO: The Herman Group, Inc., 2121 San Jacinto
Street, 26th Floor, Dallas, Texas 75201. Facsimile copies of the Proxy, properly
completed and duly executed, will be accepted at (214) 999-9323 or (214)
999-9348. If you have any questions, please call The Herman Group, Inc. at (800)
555-2657.
