<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
[X] Definitive Proxy Statement the Commission only
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14A-ll(c) or Rule 14a-12
CADUS PHARMACEUTICAL CORPORATION
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how
it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-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>
CADUS PHARMACEUTICAL CORPORATION
777 Old Saw Mill River Road
Tarrytown, New York 10591-6705
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
to be held on June 4, 1998
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 4, 1998, at the offices of the Company, 777 Old Saw Mill River
Road, Tarrytown, New York 10591-6705, at 10:00 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 increases the maximum number of shares of common
stock, $.01 par value per share, that may be the subject of
awards under the Plan by 1,000,000 shares.
3. 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
April 27, 1998 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 April 27, 1998 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 11, 1998
By Order of the Board of Directors
James S. Rielly
Secretary
<PAGE>
CADUS PHARMACEUTICAL CORPORATION
777 Old Saw Mill River Road
Tarrytown, New York 10591-6705
(914) 467-6200
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 4, 1998, at 10:00 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 11, 1998.
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 1,000,000;
and (iii) 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 April 27, 1998 (the "Record Date") are entitled to vote at the
Meeting. As of the Record Date, 12,403,753 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 proposal being presented at the Meeting
requires 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
<PAGE>
executed proxies will be voted in favor of the Board's nominees for director
and 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 1,000,000. 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.
The executive officers and directors of the Company as a group own or
may be deemed to control approximately 66.1% 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 23, 1998, 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 and nominees for
director, (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) Beneficial Ownership Owned(2)
- ---------------------------------------- --------------------- -------------------------
<S> <C> <C>
Carl C. Icahn**................................. 3,364,216(3) 27.12%
767 Fifth Avenue
New York, New York 10153
Bristol-Myers Squibb............................ 2,061,673 16.62%
P.O. Box 4000
Route 206 and Province Line Road
Princeton, New Jersey 08543-4000
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Number of Shares
Amount and Nature Percentage of Outstanding
Name and Address of Beneficial Owner (1) Beneficial Ownership Owned(2)
- ---------------------------------------- --------------------- -------------------------
<S> <C> <C>
Physica B.V. (4) ............................... 1,599,942 12.90%
C.J. van Houtenlaan 36
1381 CP Weesp
The Netherlands
International Biotechnology Trust plc........... 850,000(5) 6.85%
c/o Rothschild Asset Management Limited
Five Arrows House
St. Swithins Lane
London EC4N 8NR
United Kingdom
Jeremy M. Levin, D.Phil., MB.BChir.............. 290,071(6) 2.29%
c/o Physiome Sciences, Inc.
307 College Road East
Princeton, NJ 08540
Philip N. Sussman............................... 85,002(7) *
David R. Webb, Ph.D............................. 44,375(8) *
Arlindo L. Castelhano, Ph.D..................... 9,583(9) *
James S. Rielly................................. 6,034(10) *
Theodore Altman**............................... 3,000(11) *
James R. Broach**............................... 220,334(12) 1.76%
Harold First**.................................. 11,334(13) *
Russell D. Glass**.............................. --- *
William H. Koster, Ph.D.**...................... 2,061,673(14) 16.62%
Peter S. Liebert, M.D**......................... 11,334(15) *
Robert J. Mitchell**............................ 3,000(16) *
Mark H. Rachesky, M.D........................... 193,683(17) 1.56%
Siegfried G. Schaefer**......................... 1,599,942(18) 12.90%
Nicole Vitullo**................................ 853,000(19) 6.88%
Samuel D. Waksal, Ph.D**........................ 3,000(20) *
Jack G. Wasserman**............................. 3,000(21) *
All executive officers and directors as a....... 8,472,510(22) 66.82%
group (16 persons)
</TABLE>
- ------------
* Less than one percent
* * Nominee for election to the Board
3
<PAGE>
(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 23, 1998, 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. Also includes 3,000 shares
of Common Stock that Mr. Icahn currently has the right to acquire
upon the exercise of stock options.
(4) Physica B.V. is an affiliate of Solvay Pharmaceuticals B.V.
(5) 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.
(6) Consists of 290,071 shares of Common Stock which Dr. Levin currently
has the right to acquire upon the exercise of stock options.
(7) Consists of 85,002 shares of Common Stock which Mr. Sussman currently
has the right to acquire upon the exercise of stock options.
(8) Consists of 44,375 shares of Common Stock which Dr. Webb currently has
the right to acquire upon the exercise of stock options.
(9) Includes 2,917 shares of Common Stock which Dr. Castelhano currently
has the right to acquire upon the exercise of stock options.
(10) Includes 5,834 shares of Common Stock which Mr. Rielly currently has
the right to acquire upon the exercise of stock options.
(11) Consists of 3,000 shares of Common Stock which Mr. Altman currently
has the right to acquire upon the exercise of stock options.
(12) Includes (i) 110,667 shares of Common Stock which Dr. Broach
currently has the right to acquire upon the exercise of a stock
option and (ii) 16,666 shares of Common Stock owned by Dr. Broach's
children.
(13) Includes 3,000 shares of Common Stock which Mr. First currently has
the right to acquire upon the exercise of stock options.
(14) Consists of 2,061,673 shares of Common Stock held by Bristol-Myers
Squibb. Dr. Koster is Senior Vice President, Drug Discovery of
Bristol-Myers Squibb Pharmaceutical Research Institute. Dr. Koster
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.
(15) Includes 3,000 shares of Common Stock which Dr. Liebert currently
has the right to acquire upon the exercise of stock options.
4
<PAGE>
(16) Consists of 3,000 shares of Common Stock which Mr. Mitchell currently
has the right to acquire upon the exercise of stock options.
(17) Includes 3,000 shares of Common Stock which Dr. Rachesky currently
has the right to acquire upon the exercise of stock options.
(18) Consists of 1,599,942 shares of Common Stock held by Physica B.V., an
affiliate of Solvay Pharmaceuticals. Professor Schaefer is the head
of worldwide research at Solvay Pharmaceuticals. Professor Schaefer
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.
(19) Includes (a) 850,000 shares of Common Stock held by IBT and (b) 3,000
shares of Common Stock which Ms. Vitullo currently has the right to
acquire upon the exercise of stock options. Ms. Vitullo is Senior
Vice President of Rothschild Asset Management Inc., an affiliate 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.
(20) Consists of 3,000 shares of Common Stock which Dr. Waksal currently
has the right to acquire upon the exercise of stock options.
(21) Consists of 3,000 shares of Common Stock which Mr. Wasserman currently
has the right to acquire upon the exercise of stock options.
(22) Includes (a) 275,795 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), (7), (8), (9), (10), (11), (12), (13), (14), (15), (16), (17),
(18), (19), (20) and (21).
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:
Carl C. Icahn Peter S. Liebert
Theodore Altman Robert J. Mitchell
James R. Broach Siegfried G. Schaefer
Harold First Nicole Vitullo
Russell D. Glass Samuel D. Waksal
William H. Koster Jack G. Wasserman
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.
5
<PAGE>
Board Meetings and Committees
The Board held nine meetings in 1997. Each director other than Carl
C. Icahn, Theodore Altman, Mark H. Rachesky and Samuel D. Waksal (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 1997. The Company's
Compensation Committee is composed of Harold First, Nicole Vitullo 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 eleven
meetings in 1997.
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 1996, the Board amended the Plan to, among other
things, (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 the directors of the Company will be
eligible to receive awards under the Plan. The stockholders of the Company
approved such amendments to the Plan in June 1997. In December 1997, the Board
amended the Plan to increase the maximum number of shares of Common Stock that
may be the subject of awards under the Plan by 1,000,000, from 833,334 shares
to 1,833,334 shares. Pursuant to the Plan, the above-described amendment
requires 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 11, 1997, only 128,473
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 1,000,000 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
6
<PAGE>
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.
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 27, 1998, (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 (1).................................................... -- --
Philip N. Sussman...................................................... 75,000 6.375 (2)
Senior Vice President of Corporate Development
David R. Webb.......................................................... 45,000 6.375 (2)
Vice President of Research and Chief Scientific Officer
James S. Rielly........................................................ 15,000 6.375 (2)
Vice President of Finance, Treasurer and Secretary
Arlindo L. Castelhano, Ph.D............................................ 1,000 6.375 (2)
Executive Director of Chemistry
All current executive officers as a group (4 persons).................. 136,000 6.375 (3)
All current non-executive officer directors as a group (12
persons)............................................................... 7,500 6.375 (3)
All non-executive officer employees as a group (11 persons)............ 28,500 6.375 (3)
(1) Dr. Levin ceased being the President and Chief Executive Officer of the
Company on January 31, 1998.
(2) 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.
(3) $6.375 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 833,334. In December
1997, the Board amended the Plan, subject to approval by the stockholders of
the Company, to increase the maximum number of shares of Common Stock
7
<PAGE>
that may be the subject of awards under the Plan by 1,000,000, from 833,334 to
1,833,334 (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, consultants and directors 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.
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 and directors of and
consultants to the Company. As of April 23, 1998, there were 105 employees and
12 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
8
<PAGE>
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, suspension or termination of the Plan shall
adversely affect the rights of an employee, director or consultant in awards
previously granted without such employee's, director's or consultant's
consent.
As of April 23, 1998, an aggregate of 678,242 shares of Common Stock
were subject to outstanding stock options granted under the Plan, including
the 136,000 shares of Common Stock subject to outstanding stock options
granted under the Plan to four 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 23, 1998, stock options
to purchase 126,196 shares were exercisable at prices ranging from $5.75 to
$14.00 per share. The last sale price of the Common Stock reported on the
Nasdaq National Market on April 23, 1998 was $7.188 per share.
In December 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 1,833,334, pursuant to an amendment to a registration
statement on Form S-8.
United States Federal Income Tax Aspects of the Plan
9
<PAGE>
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 for purposes of computing an optionee's
alternative minimum tax liability.
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 either a "mid-term" capital
gain or loss (if the stock were owned for more than 12 months but not more
than 18 months) or long-term capital gain or loss (if the stock were owned for
more than 18 months). If an optionee disposes of shares acquired pursuant to
his or her exercise of an incentive stock option prior to the end of the
special holding period requirements for incentive stock options, 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 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, mid-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 in any year to its chief executive officer or any of its four other
highest-paid officers. Compensation paid under a qualified performance-based
compensation arrangement which (among other things) provides for compensation
based on pre-established performance goals established
10
<PAGE>
by a compensation committee that is composed solely of two or more "outside
directors" is not considered in determining whether an employee's compensation
exceeds $1,000,000 for these purposes. Whether an award of stock options and
SARs granted under the Plan will satisfy the requirements of Section 162(m) of
the Code for qualified performance-based compensation will depend upon the
specific facts and circumstances existing at the time of the issuance of the
option or SAR. Accordingly, depending upon those circumstances, the income
recognized in connection with the awards under the Plan may be excluded from a
covered employee's compensation for purposes of determining whether such
person's compensation exceeds $1,000,000, in which event 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 1,000,000
from 833,334 shares to 1,833,334 shares. If the amendment is not approved, the
amendment will not become effective and conditional options granted to three
directors, four officers and certain non-executive officer employees of the
Company may not become exercisable.
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 1,000,000 FROM 833,334 SHARES TO 1,833,334 SHARES.
11
<PAGE>
MANAGEMENT
Information with respect to the executive officers, directors and
nominees for director, key employees and consultants of the Company as of
April 23, 1998 is set forth below:
</TABLE>
<TABLE>
<CAPTION>
Name Age Position
<S> <C> <C>
Philip N. Sussman..................................46 Senior Vice President of Corporate Development
David R. Webb, Ph.D................................53 Vice President of Research and Chief Scientific
Officer
James S. Rielly....................................34 Vice President of Finance, Treasurer and Secretary
Arlindo L. Castelhano, Ph.D........................45 Executive Director of Chemistry
James R. Broach, Ph.D**............................50 Director of Research and Director
John C. Cambier, Ph.D..............................49 Director of Immunology
Gary L. Johnson, Ph.D..............................48 Director of Cell Biology
Algis Anilionis, Ph.D..............................47 Director of Intellectual Property
Jennifer LaVin.....................................32 Director of Corporate Communications
O. Prem Das, Ph.D..................................44 Director of Business Development
Carl C. Icahn**....................................62 Director
Theodore Altman**..................................56 Director
Harold First (1)(2)**..............................61 Director
Russell D. Glass**.................................35 Nominee for Director
William H. Koster, Ph.D.**.........................54 Director
Peter S. Liebert, M.D**............................62 Director
Robert J. Mitchell (2)**...........................51 Director
Mark H. Rachesky, M.D..............................39 Director
Professor Siegfried G. Schaefer**..................49 Director
Nicole Vitullo (1)**...............................40 Director
Samuel D. Waksal, Ph.D. (2)**......................50 Director
Jack G. Wasserman (1)**............................61 Director
</TABLE>
** Nominee for Election to the Board.
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
12
<PAGE>
Philip N. Sussman, Senior Vice President of Corporate Development,
joined the Company in September 1993 in the capacity of Vice President of
Corporate Development. 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. He is a member of
the Review Panel for the Innovative Technology Research Grant Program, Center
for Biotechnology, New York State Science and Technology Foundation. He is
also a member of the New York Venture Capital Forum, Inc. and a director of
the M.I.T. Enterprise Forum of New York. He is a member of the Board of
Directors of Axiom Biotechnologies, Inc., a private biotechnology company. Mr.
Sussman holds an S.M., with a concentration in Finance, from the Sloan School
of Management at the Massachusetts Institute of Technology. He also holds a
B.S. from the State University of New York at Stony Brook and is currently a
candidate for an M.S. degree in Biotechnology from Manhattan College.
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 is a member of the Board of
Directors of Axiom Biotechnologies, Inc., a private biotechnology company. 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.
James S. Rielly, Vice President of Finance, Treasurer and Secretary,
joined the Company in September 1992 as its Controller, became its Treasurer
and Secretary in September 1993 and became its Vice President of Finance in
December 1997. 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.
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.S. from University of Toronto.
James R. Broach, Ph.D., a 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 and a director of the Company since April
1998. 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. Cambier, 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. Cambier 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. Cambier 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.
13
<PAGE>
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 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.
Jennifer LaVin, Director of Corporate Communications, 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. Ms. LaVin received her M.B.A. 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 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 of Directors from May 1995 to May 1996. Mr. Icahn has
been Chairman of the Board and Chief Executive Officer of ACF Industries Inc.,
a privately held railcar leasing and manufacturing company, since 1984, ACF
Industries Holding Corp., a privately held holding company for ACF Industries
Inc. 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. He has been a director of both Marvel
Entertainment Group, Inc., a public company that publishes comic books and
develops, sells and licenses comic book and other characters, and Toy Biz,
Inc., a public company that markets and sells toys, since June 1997. 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 received his A.B. 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
14
<PAGE>
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. 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 has been 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 Directors of Memorex Telex N.V., a public technology
company, from February 1992 until February 1997; a director of Tel-Save
Holdings, Inc., a public long-distance telephone service company, since
September 1995; a director of both Marvel Entertainment Group, Inc., a public
company that publishes comic books and develops, sells and licenses comic book
and other characters, and Toy Biz, Inc., a public company that markets and
sells toys, since June 1997; and a director of Panaco, Ltd., an oil and gas
drilling company, since September 1997. Mr. First was 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 manufacturing company, from February 1991 through December 1992;
and Vice Chairman of the Board of Directors 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. He is a certified public accountant and holds a B.S. from
Brooklyn College.
Russell D. Glass is a nominee for director. Mr. Glass has been
President of Icahn Associates Corp. and Starfire Holding Corporation,
privately held holding companies, since April 1998. From March 1996 to March
1998, he was a partner in Relational Investors LLC, an investment management
firm. From 1988 to March 1996, Mr. Glass was President of Premier Partners
Inc., a private investment firm. Mr. Glass is a director of the A.G. Spanos
Companies, a privately held national real estate development company and owner
of the NFL San Diego Chargers. Mr. Glass received his B.A. from Princeton
University and an M.B.A. from the Stanford University Graduate School of
Business.
William H. Koster, Ph.D., became a director of the Company in April
1998. Dr. Koster has been Senior Vice President, Drug Discovery of
Bristol-Myers Squibb Pharmaceutical Research Institute since July 1997. From
1990 until July 1997, he was a Vice President of Bristol-Myers Squibb
Pharmaceutical Research Institute. Dr. Koster received a Ph.D. in Organic
Chemistry from Tufts University and a B.A. from Colby 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
Clinical Associate Professor of Surgery, College of Physicians and Surgeons,
Columbia University. He is also Chairman of the Board of Rx Vitamins, Inc. 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 Inc. since
March 1995 and was Treasurer of ACF Industries Inc. from December 1984 to
March 1995. Mr. Mitchell has also served as President and Treasurer of ACF
Industries Holdings Corp. 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. 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. He has been a
director of both Marvel Entertainment Group, Inc., a public company that
publishes comic books and develops, sells and licenses comic book and other
characters, and Toy Biz, Inc., a public company that markets and sells toys,
since June 1997. He received his B.S. degree
15
<PAGE>
in Business Administration from St. Francis college.
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, the investment manager of three investment partnerships. 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 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 November 1990 to June 1996, Dr. Rachesky served as a
director and officer 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 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.
Professor Siegfried G. Schaefer became a director of the Company in
January 1998. Dr. Schaefer has been head of worldwide research at Solvay
Pharmaceuticals since July 1997 and the head of research at a Dutch division
of Solvay Pharmaceuticals from May 1996 to July 1997. From September 1992 to
July 1997 Dr. Schaefer was a department head for project management at an
affiliate of Solvay Pharmaceuticals. Dr. Schaefer has a B.S. in Biology from
the University of Bochum and a Doctorate in Pharmacology from the University
of Munich. Dr. Schaefer is currently a Professor at the University of Hamburg
in the Department of Pharmacology and Toxicology.
Nicole Vitullo became a director of the Company in December 1996. 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 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., Onyx Pharmaceuticals, Inc. and Corvas
International, public biotechnology companies. Ms. Vitullo received her M.B.A.
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
of Directors 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 of Directors 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 and President since March 1987. From 1982 to
1985, Dr. Waksal was a member of the faculty of the Mt. Sinai School of
Medicine as Associate Professor of Pathology and Director of the Division of
Immunotherapy within the Department of Pathology. He has served as visiting
investigator of the National Cancer Institute, Immunology Branch, Research
Associate of the Department of Genetics, Stanford University Medical School,
Assistant Professor of Pathology at Tufts University School of Medicine and
Senior Scientist for the Tufts Cancer Research Center. Dr. Waksal was a
scholar of the Leukemia Society of America from 1979 to 1984. He currently
serves as Chairman of the New York Council for the Humanities. Dr. Waksal
received his Ph.D. in Immunology from Ohio State University College of
Medicine.
16
<PAGE>
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 that 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 that invests in real estate. 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.
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, 1997, 1996
and 1995, 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 (1)........................... 1997 225,000 45,000 300,000 231,164
President and Chief Executive Officer 1996 225,000 45,000 25,000 -
1995 175,260 65,000 ---- -
Philip N. Sussman............................. 1997 160,000 20,000 75,000
Senior Vice President of Corporate 1996 149,375 - 65,000 -
Development 1995 110,260 70,000 33,334 -
David R. Webb................................. 1997 175,000 20,000 45,000
Vice President of Research and Chief 1996 175,000 17,500 17,500 -
Scientific Officer 1995 94,868(2) 30,000 66,667 128,021(3)
Arlindo L. Castelhano, Ph.D................... 1997 118,800 15,000 1,000 -
Executive Director of Chemistry 1996 105,833 15,000 11,666 -
1995 - - - -
James S. Rielly............................... 1997 95,000 20,000 15,000
Vice President of Finance 1996 100,846 15,000 16,666 -
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
1995 - - - -
</TABLE>
(1) Dr. Levin ceased being the President and Chief Executive Officer of the
Company on January 31, 1998. All other Compensation includes $231,164 in
accrued severance.
(2) Dr. Webb joined the Company in June 1995 and received a salary at the
rate of $175,000 per annum for 1995.
(3) 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
Agreements
Philip N. Sussman
Mr. Sussman is an employee at will but has a severance agreement with
the Company that 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 that provides that if he is terminated without cause he will receive
severance equal to (i) 6 months' salary if such termination is after 24 months
but before the 37th month after commencement, or (ii) 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 that 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 six months from the date of termination or his
commencement of new employment and (ii) all unvested stock options issued to
him will immediately vest as of the date of termination.
Option Grants
The following table sets forth certain information regarding options
granted during the fiscal year ended December 31, 1997 by the Company to the
Named Executive Officers:
Option Grants in Last Fiscal Year
18
<PAGE>
<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 ($/share) Date 5% 10%
---- ----------- ----------- --------- ------ -- ---
<S> <C> <C> <C> <C> <C> <C>
Jeremy M. Levin............ 100,000 15.34 20.00 2/4/07(1) 178,647 1,469,131
200,000 30.69 13.375 2/4/07(1) 1,682,293 4,263,261
Philip N. Sussman.......... 20,000 3.07 6.375 12/30/07 80,184 203,202
5,000 0.77 6.375 12/30/07 20,046 50,801
50,000 7.67 6.375 12/30/07 200,460 508,005
David R. Webb.............. 20,000 3.07 6.375 12/30/07 80,184 203,202
10,000 1.53 6.375 12/30/07 40,092 101,601
15,000 2.30 6.375 12/30/07 60,138 152,402
Arlindo L. Castelhano 1,000 0.15 6.375 12/30/07 4,009 10,160
James S. Rielly............ 15,000 2.30 6.375 12/30/07 60,138 152,402
</TABLE>
Option Exercises and Holdings
The following table sets forth certain information concerning each
exercise of stock options, during the fiscal year ended December 31, 1997 by
the Named Executive Officers and unexercised stock options held by the Named
Executive Officers as of the end of such fiscal year.
Aggregated Option Exercises in Last Fiscal Year and
Fiscal Year-End Option Values
<TABLE>
<CAPTION>
Number of
Securities Underlying Value of Unexercised
Unexercised Options at In-The-Money Options at
December 31, 1997 (#) December 31, 1997 ($)(2)
----------------------- -------------------------
Shares Aggregate
Acquired on Value
Name Exercise Realized ($) Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Jeremy M. Levin.......... 25,000 309,500 315,071 -- 1,424,713 --
Philip N. Sussman........ -- -- 85,002 121,666 213,090 46,248
David R. Webb............ 10,000 98,750 27,708 91,459 96,248 137,503
Arlindo L. 6,666 61,661 2,917 16,417 -- 27,506
Castelhano
James S. Rielly 8,334 93,872 5,834 30,832 4,626 9,249
- ------------
</TABLE>
(1) These options were canceled when Dr. Levin and the Company
determined, on December 29, 1997, not to renew his employment
agreement.
19
<PAGE>
(2) Based on the difference between the closing price of the underlying
shares of Common Stock on December 31, 1997 as reported by the NASDAQ
National Market ($6.375) and the option exercise price.
Compensation Committee Interlocks and Insider Participation
The Company's Compensation Committee is composed of Harold First,
Nicole Vitullo and Jack G. Wasserman. Neither Mr. First, Ms. Vitullo 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.
20
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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 1997 were based on his existing employment agreement with the Company. The
stock options to purchase an aggregate of 300,000 shares of Common Stock
granted to the Chief Executive Officer in February 1997 were granted in
anticipation of the renewal of his employment agreement with the Company and,
accordingly, were canceled when his employment agreement was not renewed.
Harold First
Nicole Vitullo
Jack G. Wasserman
21
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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.
Comparison of Cumulative Total Return
among Cadus Pharmaceutical Corporation,
the Nasdaq U.S. Stock Market Index and
the Nasdaq Pharmaceutical Index
[LINE CHART]
* $100 invested July 17, 1996 in the Company's Common Stock or in the
index indicated, including reinvestment of dividends.
Corresponding index values and the Company's Common Stock price values
are given below:
<TABLE>
<CAPTION>
7/17/96 9/30/96 12/31/96 3/31/97 6/30/97 9/30/97 12/31/97
------- ------- -------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Cadus $100.000 89.286 125.00 173.214 203.571 162.500 91.071
Nasdaq 100.000 113.115 118.674 112.290 132.873 155.349 145.691
Nasdaq Pharmaceutical 100.000 113.668 110.054 104.700 113.025 126.798 113.925
Index
Cadus Closing Stock Price $ 7.000 6.250 8.750 12.125 14.250 11.375 6.375
</TABLE>
22
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
For the year ended December 31, 1997, the Company received $3,115,275 in
cash for research funding from Bristol-Myers Squibb and recorded $4,115,275 as
revenue, which constituted 46% of the Company's gross revenues in 1997.
William H. Koster, a director of the Company, is the Senior Vice President,
Drug Discovery of Bristol-Myers Squibb Pharmaceutical Research Institute.
For the year ended December 31, 1997, the Company received $2,587,460 in
cash for research funding from Solvay Pharmaceuticals B.V., an affiliate of
Physica B.V., which constituted 29% of the Company's gross revenues in 1997.
Siegfried G. Schaefer, a director of the Company, is the head of worldwide
research at Solvay Pharmaceuticals.
INDEPENDENT AUDITORS
The Board selected KPMG Peat Marwick LLP as the Company's independent
auditors for its fiscal year ending December 31, 1998. 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 1997, the Company's directors, executive officers and Ten
Percent Stockholders complied with all applicable Section 16(a) filing
requirements.
STOCKHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Stockholders who wish to present proposals at the 1999 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, 1999.
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 April 27, 1998, 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, 1997. Written requests for such report should
be directed to the Investor Relations Department of the Company, 777 Old Saw
Mill River
23
<PAGE>
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 11, 1998
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PROXY
CADUS PHARMACEUTICAL CORPORATION
777 Old Saw Mill River Road, Tarrytown, New York 10591
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD
The undersigned hereby appoints Philip N. Sussman 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 on the reverse side,
all the shares of the Common Stock of Cadus Pharmaceutical Corporation held of
record by the undersigned on April 27, 1998, at the Annual Meeting of
Stockholders to be held on June 4, 1998 or at any adjournment thereof.
THIS PROXY IS CONTINUED ON THE REVERSE SIDE.
<PAGE>
A |X| Please mark your
votes as in this
example
1. ELECTION FOR all twelve Nominees:
OF nominees at right Carl C. Icahn
DIRECTORS (except as marked to WITHHOLD Theodore Altman
the contrary below) AUTHORITY James R. Broach
Harold First
|_| |_| Russell D. Glass
William H. Koster
(INSTRUCTION: To withhold authority for any of the Peter S. Liebert
nominees, strike a line through the nominee's name in Robert J. Mitchell
the list at right.) Siegfried G. Schaefer
Nicole Vitullo
Samuel K. Waksal
Jack G. Wasserman
2. Approval of amendment to the Cadus Pharmaceutical Corporation 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 1,000,000, from 833,334 shares to 1,833,334 shares.
|_| FOR |_| AGAINST |_| ABSTAIN
- -------------------------------------------------------------------------------
3. 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 two proposals.
Receipt of Notice of Annual Meeting and Proxy Statement dated
May __, 1998 is hereby acknowledged.
PLEASE MARK, DATE, SIGN AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED
PRE-PAID ENVELOPE OR DELIVER TO: American Stock Transfer & Trust Company, 40
Wall Street, New York, New York 10005. Facsimile copies of the Proxy, properly
completed and duly executed, will be accepted at (718) 236-4588. If you have
any questions, please call American Stock Transfer & Trust Company at (212)
936-5100.
Signature:____________ Signature if held jointly:_____________ Dated:____,1998
NOTE: 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.