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 Section 240.14a-11(c) or Section
240.14a-12
ALEXION PHARMACEUTICALS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
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pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
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previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
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ALEXION PHARMACEUTICALS, INC.
25 Science Park
New Haven, Connecticut 06511
(203) 776-1790
October 27, 1998
Dear Fellow Stockholder:
You are cordially invited to attend the Company's Annual Meeting of
Stockholders to be held at 10:00 a.m., on Friday, December 4, 1998, at the Park
Avenue Room at the Hotel Inter-Continental, 111 East 48th Street, New York, New
York 10017.
This year, you are being asked to elect seven directors to the
Company's Board of Directors, constituting the entire Board of Directors, and to
approve an amendment to the Company's 1992 Stock Option Plan to increase the
number of shares which may be issued thereunder. In addition, I will be pleased
to report on the affairs of the Company and a discussion period will be provided
for questions and comments of general interest to stockholders.
We look forward to greeting personally those stockholders who are able
to be present at the meeting; however, whether or not you plan to be with us at
the meeting, it is important that your shares be represented. Accordingly, you
are requested to sign and date the enclosed proxy and mail it in the envelope
provided at your earliest convenience.
Thank you for your cooperation.
Very truly yours,
Leonard Bell, M.D.
President, Chief Executive Officer,
Secretary and Treasurer
ALEXION PHARMACEUTICALS, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
New Haven, Connecticut
October 27, 1998
Notice is hereby given that the Annual Meeting of Stockholders of
Alexion Pharmaceuticals, Inc. will be held on Friday, December 4, 1998, at 10:00
a.m., at the Park Avenue Room at the Hotel Inter-Continental, 111 East 48th
Street, New York, New York 10017 for the following purposes:
(1) To elect seven directors to serve for the ensuing year;
(2) To approve an amendment to the Company's 1992 Stock Option
Plan in order to increase the number of shares reserved for
issuance thereunder by 1,300,000 shares of Common Stock to an
aggregate of 3,100,000 shares; and
(3) To transact such other business as may properly come before
the Annual Meeting or any adjournment thereof.
Stockholders of record at the close of business on October 22, 1998
will be entitled to notice of and to vote at the Annual Meeting or any
adjournment thereof.
All stockholders are cordially invited to attend the Annual Meeting in
person. Stockholders who are unable to attend the Annual Meeting in person are
requested to complete and date the enclosed form of proxy and return it promptly
in the envelope provided. No postage is required if mailed in the United States.
Stockholders who attend the Annual Meeting may revoke their proxy and vote their
shares in person.
Leonard Bell, M.D.
Secretary
ALEXION PHARMACEUTICALS, INC.
25 Science Park
New Haven, Connecticut 06511
PROXY STATEMENT
GENERAL INFORMATION
Proxy Solicitation
This Proxy Statement is furnished to the holders of Common Stock, par
value $.0001 per share (the "Common Stock"), of Alexion Pharmaceuticals, Inc.
(the "Company") in connection with the solicitation by the Board of Directors of
the Company of proxies for use at the Annual Meeting of Stockholders to be held
on Friday, December 4, 1998, or at any adjournment thereof, pursuant to the
accompanying Notice of Annual Meeting of Stockholders. The purposes of the
meeting and the matters to be acted upon are set forth in the accompanying
Notice of Annual Meeting of Stockholders. The Board of Directors is not
currently aware of any other matter's which will come before the meeting.
Proxies will be mailed to stockholders on or about October 28, 1998 and
will be solicited chiefly by mail. The Company will make arrangements with
brokerage houses and other custodians, nominees and fiduciaries to send proxies
and proxy materials to the beneficial owners of the shares and will reimburse
them for their expenses in so doing. Should it appear desirable to do so in
order to ensure adequate representation of shares at the meeting, officers,
agents and employees of the Company may communicate with stockholders, banks,
brokerage houses and others by telephone, facsimile or in person to request that
proxies be furnished. All expenses incurred in connection with this solicitation
will be borne by the Company. The Company has no present plans to hire special
employees or paid solicitors to assist in obtaining proxies, but reserves the
option of doing so if it should appear that a quorum otherwise might not be
obtained.
Revocability and Voting of Proxy
A form of proxy for use at the Annual Meeting of Stockholders and a
return envelope for the proxy are enclosed. Stockholders may revoke the
authority granted by their execution of proxies at any time before their
effective exercise by filing with the Secretary of the Company a written notice
of revocation or a duly executed proxy bearing a later date, or by voting in
person at the meeting. Shares of the Company's Common Stock represented by
executed and unrevoked proxies will be voted in accordance with the choice or
instructions specified thereon. If no specifications are given, the proxies
intend to vote the shares represented thereby for all listed nominees for
director, for approval of the amendment of the Company's 1992 Stock Option Plan
and in accordance with their best judgment on any other matters which may
properly come before the meeting.
Record Date and Voting Rights
Only stockholders of record at the close of business on October 22,
1998 are entitled to notice of and to vote at the Annual Meeting or any and all
adjournments thereof. On October 22, 1998 there were 11,226,812 shares of Common
Stock outstanding; each such share is entitled to one vote on each of the
matters to be presented at the Annual Meeting. The holders of a majority of the
outstanding shares of Common Stock, present in person or by proxy and entitled
to vote, will constitute a quorum at the Annual Meeting. Under Delaware law,
abstentions and broker non-votes will be counted for purposes of determining the
presence or absence of a quorum but generally in most instances will not be
counted with respect to the specific matter being voted upon. However, the
effect of broker non-votes on a particular matter may also depend on whether the
matter is one as to which the broker or nominee has discretionary voting
authority under the applicable rule of the New York Stock Exchange. "Broker
non-votes" are shares held by brokers or nominees which are present in person or
represented by proxy, but which are not voted on a particular matter because
instructions have not been received from the beneficial owner. The effect of
broker non-votes on the specific items to be brought before the Annual Meeting
of Stockholders is discussed under each item.
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth certain information as of October 1,
1998 (except as otherwise noted in the footnotes) regarding the beneficial
ownership (as defined by the Securities and Exchange Commission (the "SEC")) of
the Company's Common Stock of: (i) each person known by the Company to own
beneficially more than five percent of the Company's outstanding Common Stock;
(ii) each director; (iii) each executive officer named in the Summary
Compensation Table (see "Executive Compensation"); and (iv) all directors and
named executive officers of the Company as a group. Except as otherwise
2
specified, the named beneficial owner has the sole voting and investment power
over the shares listed.
Number of Percentage of
Shares Outstanding
Name and Address Beneficially Shares of
of Beneficial Owner (1) Owned (2) Common Stock
----------------------- --------- ------------
BB Biotech AG
Vordergrasse 3
8200 Schaffhausen
CH/Switzerland (3) ................................... 1,824,113 16.2%
Scudder Kemper Investments, Inc.
345 Park Avenue
New York, NY 10154 (4) .............................. 911,000 8.1%
United States Surgical Corporation
150 Grover Avenue
Norwalk, Connecticut 06856 (5) ....................... 824,087 7.3%
OrbiMed Advisors, LLC (formerly Mehta
and Isaly Asset Management, Inc.)
767 Third Avenue, Sixth Floor
New York, NY 10017 (6) ............................ 773,500 6.9%
Eileen M. More (7) ........................................ 520,984 4.6%
Timothy F. Howe (8) ....................................... 454,129 4.0%
Leonard Bell, M.D. (9) .................................... 449,600 3.9%
Stephen P. Squinto, Ph.D. (10) ............................ 143,575 1.3%
David W. Keiser (11) ...................................... 126,050 1.1%
Louis A. Matis, M.D. (12) ................................. 111,025 1.0%
John H. Fried, Ph.D. (13) ................................. 88,636 *
Joseph A. Madri, Ph.D., M.D. (14) ......................... 55,100 *
3
Number of Percentage of
Shares Outstanding
Name and Address Beneficially Shares of
of Beneficial Owner (1) Owned (2) Common Stock
----------------------- --------- ------------
Max Link, Ph.D., (15) ..................................... 23,123 *
Leonard Marks, Jr., Ph.D. (16) ............................ 13,600 *
Directors and Executive Officers as a group
(10 persons) (17) ................................... 1,985,822 16.8%
- ------------------------
* Less than one percent.
(1) Unless otherwise indicated, the address of all persons is 25 Science
Park, Suite 360, New Haven, Connecticut 06511.
(2) To the Company's knowledge, except as set forth below, the persons
named in the table have sole voting and investment power with respect
to all shares of Common Stock shown as beneficially owned by them,
subject to community property laws where applicable and the information
contained in the footnotes in this table.
(3) This figure is based upon information set forth in Amendment No. 3 to
Schedule 13D dated May 27, 1998, filed jointly by BB Biotech AG and
Biotech Target, S.A.. Biotech Target, S.A., a Panamanian corporation,
is a wholly - owned subsidiary of BB Biotech AG. BB Biotech AG is a
holding company incorporated in Switzerland.
(4) This figure is based upon a Report on Form 13F for the quarter ended
June 30, 1998, filed by Scudder Kemper Investments, Inc. ("SKII") with
the Securities and Exchange Commission on August 14, 1998. Of these
shares, SKII claims sole voting authority for 207,900 shares, shared
voting authority for 572,900 shares, and no voting authority for
130,200 shares.
(5) This figure is based upon information set forth in Amendment No. 2 to
Schedule 13D dated December 12, 1997. United States Surgical
Corporation completed a merger with a subsidiary of Tyco International
Ltd. on October 1, 1998.
(6) This figure is based upon information set forth in Amendment No. 1 to
Schedule 13D dated July 25, 1997, filed by a group consisting of Samuel
D. Isaly, Viren Mehta and certain entities affiliated with these
individuals including Pharma/Health, M and I Investors, Inc., Caduceus
Capital, L.P., Caduceus Capital Management, Inc. and Worldwide Health
Services Portfolio.
(7) Includes 25,100 shares of Common Stock, which may be acquired upon the
exercise of options within 60 days of October 1, 1998 granted to Eileen
More. Also includes 484,977 shares owned by Oak Investment V Partners
and 10,907 shares owned by Oak Investment V Affiliates, two affiliated
limited partnerships (collectively, "Oak Investments"). Ms. More is a
General Partner at Oak Investments.
4
Excludes 3,700 shares obtainable through the exercise of options
granted to Ms. More, which are not exercisable within 60 days of
October 1, 1998.
(8) Includes shares of Common Stock beneficially owned by Collinson Howe
Venture Partners, Inc. ("CHVP") (see paragraph below). Includes 5,100
shares, which may be acquired upon the exercise of options within 60
days of October 1, 1998 granted to Timothy F. Howe. Excludes 3,700
shares obtainable through the exercise of options granted to Mr. Howe,
which are not exercisable within 60 days of October 1, 1998. Mr. Howe
disclaims beneficial ownership of shares held or beneficially owned by
CHVP.
CHVP is a venture capital investment management firm, which is the
managing member of Biotechnology Investment Group, L.L.C. ("BIG"), and
is the investment advisor to Schroders, Inc. As such, CHVP shares
beneficial ownership of 417,575 shares and 28,864 shares of Common
Stock owned by BIG and Schroders, Inc., respectively. Mr. Howe, a
director of the Company, is the Vice President and a minority
stockholder of CHVP. As such, he shares investment and voting power
over the shares beneficially owned by CHVP.
(9) Includes 290,000 shares of Common Stock that may be acquired upon the
exercise of options within 60 days of October 1, 1998 and 300 shares,
in aggregate, held in the names of Dr. Bell's three minor children.
Excludes 195,000 shares obtainable through the exercise of options,
granted to Dr. Bell, which are not exercisable within 60 days of
October 1, 1998 and 90,000 shares held in trust for Dr. Bell's children
of which Dr. Bell disclaims beneficial ownership. Also excludes 60,000
shares obtainable through the exercise of options granted to Dr. Bell
which are not exercisable within 60 days of October 1, 1998 and are
subject to shareholders' approval to increase the authorized number of
shares in the Company's 1992 Stock Option Plan. Dr. Bell disclaims
beneficial ownership of the shares held in the name of his minor
children.
(10) Includes 86,875 shares of Common Stock which may be acquired upon the
exercise of options granted to Dr. Squinto within 60 days of October 1,
1998 and 6,200 shares, in aggregate, held in the names of Dr. Squinto's
two minor children of which 6,000 shares are in two trusts managed by
his wife. Excludes 53,125 shares obtainable through the exercise of
options, granted to Dr. Squinto, which are not exercisable within 60
days of October 1, 1998. Also excludes 25,000 shares obtainable through
the exercise of options granted to Dr. Squinto which are not
exercisable within 60 days of October 1, 1998 and are subject to
shareholders' approval to increase the authorized number of shares in
the Company's 1992 Stock Option Plan. Dr. Squinto disclaims beneficial
ownership of the shares in the name of his minor children and the
foregoing trusts.
(11) Includes 83,750 shares of Common Stock which may be acquired upon the
exercise of options within 60 days of October 1, 1998 and 300 shares,
in aggregate, held in the names of Mr. Keiser's three minor children.
Excludes 66,250 shares obtainable through the exercise of options,
granted to Mr. Keiser, which are not exercisable within 60 days of
October 1, 1998. Also excludes 25,000 shares obtainable through the
exercise of options granted to Mr. Keiser which are not exercisable
within 60 days of October 1, 1998 and are subject to shareholders'
approval to increase the authorized number of shares in the Company's
1992 Stock Option Plan. Mr. Keiser disclaims beneficial ownership of
the shares held in the name of his minor children.
5
(12) Includes 96,875 shares of Common Stock which may be acquired upon the
exercise of options granted to Dr. Matis within 60 days of October 1,
1998 and 150 shares, in aggregate, held in the names of Dr. Matis's
three minor children. Excludes 53,125 shares obtainable through the
exercise of options, granted to Dr. Matis, which are not exercisable
within 60 days of October 1, 1998. Also excludes 25,000 shares
obtainable through the exercise of options granted to Dr. Matis which
are not exercisable within 60 days of October 1, 1998 and are subject
to shareholders' approval to increase the authorized number of shares
in the Company's 1992 Stock Option Plan. Dr. Matis disclaims beneficial
ownership of the shares held in the name of his minor children.
(13) Includes 12,600 shares of Common Stock that may be acquired on the
exercise of options that are exercisable within 60 days of October 1,
1998. Excludes 3,700 shares obtainable through the exercise of options,
granted to Dr. Fried, which are not exercisable within 60 days of
October 1, 1998.
(14) Includes 10,100 shares of Common Stock that may be acquired on the
exercise of options that are exercisable within 60 days of October 1,
1998. Excludes 3,700 shares obtainable through the exercise of options,
granted to Dr. Madri, which are not exercisable within 60 days of
October 1, 1998.
(15) Excludes 2,000 shares of Common Stock obtainable through the exercise
of options, granted to Dr. Link, which are not exercisable within 60
days of October 1, 1998.
(16) Includes 12,600 shares of Common Stock, which may be acquired upon the
exercise of options within 60 days of October 1, 1998. Excludes 3,700
shares obtainable through the exercise of options, granted to Dr.
Marks, which are not exercisable within 60 days of October 1, 1998.
(17) Consists of shares of Common Stock beneficially owned by Drs. Bell,
Fried, Link, Madri, Marks, Matis, and Squinto, and Mr. Keiser, Mr. Howe
and Ms. More. Includes 623,000 shares, which may be acquired upon the
exercise of warrants within 60 days of October 1, 1998. Excludes shares
beneficially owned by Dr. Bernadette Alford, a named executive officer,
who resigned from the Company in September 1998.
PROPOSAL NO.1 - ELECTION OF DIRECTORS
Seven directors (constituting the entire Board) are to be elected at the
Annual Meeting. Unless otherwise specified, the enclosed proxy will be voted in
favor of the persons named below to serve until the next annual meeting of
stockholders and until their successors shall have been duly elected and shall
qualify. In the event any of these nominees shall be unable to serve as a
director, the shares represented by the proxy will be voted for the person, if
any, who is designated by the Board of Directors to replace the nominee. All
nominees have consented to be named and have indicated their intent to serve if
elected. The Board of Directors has no reason to believe that any of the
nominees will be unable to serve or that any vacancy on the Board of Directors
will occur.
6
The nominees, their ages, the year in which each first became a director
and their principal occupations or employment during the past five years are:
Year First Principal Occupation During
Director Age Became Director The Past Five Years
---------- --- --------------- -------------------
John H. Fried, Ph.D ............. 69 1992 Chairman of the Board of Directors of the
Company since April 1992; President of Fried
& Co., Inc. since 1992; Vice Chairman of
Syntex Corp. from 1985 to January 1993 and
President of the Syntex Research Division
from 1976 to 1992. (1)(2)
Leonard Bell, M.D ............... 40 1992 President, Chief Executive Officer, Secretary
and Treasurer of the Company since January
1992; Assistant Professor of Medicine and
Pathology and Co-Director of the Program in
Vascular Biology at the Yale University School of
Medicine from 1991 to 1992; Attending Physician
at the Yale-New Haven Hospital and Assistant
Professor of the Department of Internal Medicine at
the Yale University School of Medicine from 1990 through 1992.
Timothy F. Howe ................. 40 1995 Principal of Collinson Howe Venture Partners,
Inc., a venture capital management firm
specializing in life sciences investments,
since 1990. (2)
Max Link, Ph.D .................. 58 1992 Retired; Chief Executive Officer of Corange
(Bermuda), the parent company of Boehringer
Mannheim Therapeutics, Boehringer Mannheim
Diagnostics and DePuy Orthopedics, from May
1993 to June 1994; Chairman of the Board of
Sandoz Pharma, Ltd. from 1992 to 1993 and
Chief Executive Officer of Sandoz Pharma,
Ltd. from 1987 to 1992. (1)(2)
Joseph A. Madri, Ph.D., M.D. .... 52 1992 Faculty Member of the Yale University School
of Medicine since 1980.
Leonard Marks, Jr., Ph.D ........ 77 1992 Independent Corporate Director and Management
. Consultant since 1985. (1)(2)
Eileen M. More 52 1993 General Partner of Oak Investment Partners, a
venture capital firm, since 1980.
- ------------------------------
(1) Member of the Audit Committee of the Board of Directors.
(2) Member of the Compensation Committee of the Board of Directors.
7
Dr. Fried is Chairman of the Board of Corvas International Incorporated.
Dr. Link is a director of Protein Design Labs, Inc., Cell Therapeutics, Inc.,
Procept, Inc. and Human Genome Sciences Inc. Dr. Marks is a director of Airlease
Management Services, which is a subsidiary of Bank of America, and Northern
Trust Bank of Arizona. Ms. More is a director of several high technology and
biotechnology companies including Instream Corporation, OraPharma, Inc., Femme
Pharma, Halox Technologies, and Teloquent Communication Corporation.
In February 1993, the Board formed an Audit Committee, which was
established to review the internal accounting procedures of the Company and to
consult with and review the Company's independent auditors and the services
provided by such auditors. Drs. Fried, Link and Marks are the current members of
the Audit Committee. During the fiscal year ended July 31, 1998, the Audit
Committee held one meeting.
In February 1993, the Board formed a Compensation Committee, which was
established to review compensation practices, to recommend compensation for
executives and key employees, and to administer the Company's 1992 Stock Option
Plan. Drs. Fried, Link, Marks and Mr. Howe are the current members of the
Compensation Committee. During the fiscal year ended July 31, 1998, the
Compensation Committee held four meetings.
During the fiscal year ended July 31, 1998, the Board of Directors held
six meetings and acted by unanimous written consent in lieu of a meeting four
times. Each director attended at least 75% of the meetings of the Board of
Directors held when he or she was a Director and of all committees of the Board
of Directors on which he or she served.
Certain Relationships and Related Transactions
In March 1998, BB Biotech, a single institutional investor, purchased
670,000 shares of the Company's Common Stock, par value $0.0001, in a private
placement at $13.175 per share, aggregating $8.827 million. At October 1, 1998,
BB Biotech beneficially owned 1,824,113 shares of Common Stock, or approximately
16.2%, of the Company's outstanding shares of common stock.
In September 1997, US Surgical and the Company modified the July 1995
Joint Development Agreement (described below). As part of the modification, US
Surgical made an additional $6.5 million payment to the Company for equity,
exclusive licensing rights, and certain manufacturing assets. Under the modified
agreement, the additional $6.5 million payment comprised: (i) a $3 million
equity investment in the Company through the purchase
8
of 166,945 shares of the Company's Common Stock at a price of $17.97 per share,
which represented a 25% premium over the market price on the day prior to the
date of closing and (ii) a $3.5 million payment to acquire technology and
certain xenograft manufacturing assets. Further, as part of the amended
agreement, US Surgical and the Company agreed that the pre-clinical milestone
payments in the original agreement are considered to have been satisfied. At
October 1, 1998, US Surgical beneficially owned an aggregate of 824,087 shares
of Common Stock or approximately 7.3% of the Company's outstanding shares of
common stock.
In September 1997, BB Biotech, a single institutional investor,
purchased 400,000 shares of Series B Preferred Stock at $25.00 per share,
convertible automatically in six months, or at the election of the holder at any
time after the date of issuance, into 935,782 shares of common stock at $10.686
per share. The conversion price represented a 3% premium to the closing bid of
$10.375 on the day of pricing. The Series B Preferred Stock would pay a dividend
of $2.25 per share of Series B Preferred Stock on March 4, 1998, payable in cash
or the Company's Common Stock at the discretion of the Company. In March 1998,
the Series B Preferred Stock was converted to 935,782 shares of the Company's
Common Stock, par value $0.0001, and the Company elected to pay the dividend on
the preferred stock in shares of common stock, aggregating 70,831 shares.
In July 1995, the Company entered into a series of agreements with US
Surgical relating to a collaboration for the development of non-human UniGraft
organ products designed for transplantation into humans. In furtherance of the
joint collaboration, US Surgical also purchased $4.0 million of the Company's
Common Stock, at a price of $8.75 per share and agreed to fund up to $7.5
million for the completion of pre-clinical research and development of the
UniGraft program, a portion of which is dependent on the achievement of
development milestones. US Surgical, a principal stockholder of the Company,
purchased approximately ten percent of the shares of Common Stock offered at the
Company's initial public offering. Through July 31, 1997, the Company has
received $4.0 million in research and development support under its
collaboration with US Surgical.
In June and October 1992, the Company entered into certain patent
licensing agreements with Oklahoma Medical Research Foundation ("OMRF") and Yale
University ("Yale"). The agreements provide that the Company agreed to pay such
institutions royalties based on sales of products incorporating technology
licensed thereunder and also license initiation fees, including annual minimum
royalties that increase in amount based on the status of product development and
the passage of time. Under policies of OMRF and Yale, the individual inventors
of patents are entitled to receive a percentage of the royalties and other
license fees received by the licensing institution. Certain founders of and
scientific
9
advisors to the Company are inventors under such patent and patent applications
(including Drs. Bell and Madri, directors of the Company, and Dr. Squinto, the
Senior Vice President and Chief Technology Officer of the Company, with respect
to patent applications licensed from Yale) and, therefore, entitled to receive a
portion of such royalties and other fees payable by the Company.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Exchange Act requires the Company's executive
officers and directors, and persons who beneficially own more than ten percent
of the Company's Common Stock, to file initial reports of ownership and reports
of changes in ownership with the SEC. Executive officers, directors and greater
than ten percent beneficial owners are required by the SEC to furnish the
Company with copies of all Section 16(a) forms they file.
Based upon a review of the copies of such forms furnished to the Company
and written representations from the Company's executive officers and directors,
the Company believes that the reporting requirements of Section 16(a) under the
Securities Exchange Act, as amended, applicable to its executive officers,
directors and greater than ten percent beneficial owners were complied with on a
timely basis, except that each of Louis A. Matis, Senior Vice President and
Chief Science Officer, and Stephen P. Squinto, Senior Vice President and Chief
Technology Officer, failed to timely report one transaction on Form 4. Each
transaction has been subsequently reported.
Vote Required
The seven nominees receiving the highest number of affirmative votes of
the shares present in person or represented by proxy and entitled to vote, a
quorum being present, shall be elected as directors. Only votes cast for a
nominee will be counted, except that the accompanying proxy will be voted for
all nominees in the absence of instruction to the contrary. Abstentions, broker
non-votes and instructions on the accompanying proxy card to withhold authority
to vote for one or more nominees will result in the respective nominees
receiving fewer votes. However, the number of votes otherwise received by the
nominee will not be reduced by such action.
THE BOARD OF DIRECTORS DEEMS "PROPOSAL NO. 1 - ELECTION OF DIRECTORS" TO BE
IN THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS AND RECOMMENDS A VOTE
"FOR" EACH NOMINEE.
10
EXECUTIVE COMPENSATION
The following table shows all the cash compensation earned as well as
certain other compensation earned during the fiscal years indicated to the
Chief Executive Officer of the Company and each of the four other most highly
compensated executive officers of the Company for such period in all capacities
in which they served.
SUMMARY COMPENSATION TABLE
Long Term
Annual Compensation Compensation
---------------------------------------------------------------
Fiscal Base Other Options
Name and Principal Position Year Salary Bonus(1) Compensation (number of shares)
--------------------------- ------ ------ -------- ------------ -----------------
Leonard Bell, M.D. 1998 $250,000 $50,000 $3,873 (2) 60,000 (3)
President, Chief Executive 1997 213,404 0 1,983 (2) 150,000
Officer, Secretary and Treasurer 1996 191,328 25,000 - 75,000
David W. Keiser 1998 $178,000 $30,000 $3,788 (2) 25,000 (3)
Executive Vice President and 1997 157,642 29,000 1,892 (2) 25,000
Chief Operating Officer 1996 151,580 15,000 50,000
Louis A. Matis, M.D. 1998 $165,000 $30,000 $2,400 (2) 25,000 (3)
Sr. Vice President and 1997 138,423 25,000 - 22,500
Chief Scientific Officer 1996 133,100 12,000 - 45,000
Stephen P. Squinto, Ph.D. 1998 $165,000 $30,000 - 25,000 (3)
Sr. Vice President and 1997 148,460 25,000 - 22,500
Chief Technical Officer 1996 133,100 12,000 - 45,000
Bernadette L. Alford, Ph.D. (4) 1998 $176,000 $30,000 - 0
Sr. Vice President of Regulatory 1997 150,801 30,000 - 22,500
Affairs and Project Development 1996 145,000 15,000 45,000
(1) Includes bonuses earned during the fiscal year which may have been paid in
the subsequent fiscal year.
(2) Represents the Company's matching contribution pursuant to its 401(k)
defined contribution plan.
(3) Subject to shareholders' approval of an increase in the number of shares
authorized under the Company's 1992 Stock Option Plan.
(4) Dr. Alford resigned from the Company in September 1998.
The following table sets forth information with respect to option grants in
1998 to the persons named in the Summary Compensation Table.
11
OPTION GRANTS IN LAST FISCAL YEAR
Potential Realized
% of Total Value at Assumed
Options Annual Rates of
Number of Granted to Stock Price
Securities Employees Exercise Market Appreciation for
Underlying in or Price on Option Term (3)
Options Fiscal Year Base Price Date of Expiration -----------------------
Name Granted(#)(1) (2) ($/sh) Grant Date 5% ($) 10% ($)
---- ------------- ----------- ---------- -------- ---------- -------- ----------
Leonard 60,000 (4)(5) 11.0 $9.00 $9.00 07/29/08 449,550 1,035,696
Bell, M.D.
David W. 25,000 (5) 4.6 9.00 9.00 07/29/08 187,312 431,540
Keiser
Louis A. 25,000 (5) 4.6 9.00 9.00 07/29/08 187,312 431,539
Matis, M.D.
Stephen P. 25,000 (5) 4.6 9.00 9.00 07/29/08 187,312 431,539
Squinto, Ph.D.
Bernadette L. 0 0 0 0 0 0 0
Alford, Ph.D. (6)
- ---------------------
(1) Options vest in four equal annual installments commencing on the
anniversary date of the grant unless otherwise indicated.
(2) Based upon options to purchase 547,000 shares granted to all employees
during fiscal 1998. This includes 267,500 shares available through the
exercise of options that are subject to shareholders' approval to increase
the authorized number of shares in the Company's 1992 Stock Option Plan.
(3) The 5% and 10% assumed rates of appreciation are specified by the rules of
the Securities and Exchange Commission and do not represent the Company's
estimate or projection of the future Common Stock price. There can be no
assurance that any of the values reflected in the table will be achieved.
(4) These options vest in three equal annual installments commencing on the
anniversary date of the grant.
(5) Granted options are subject to shareholders' approval to increase the
authorized number of shares in the Company's 1992 Stock Option Plan.
(6) Dr. Alford resigned from the Company in September 1998.
12
The following table sets forth information with respect to (i) stock options
exercised in 1998 by the persons named in the Summary Compensation Table and
(ii) unexercised stock options held by such individuals at July 31, 1998.
AGGREGATED OPTION EXERCISES
IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION VALUES
Number of Unexercised Value of Unexercised,
Shares Options Held at Fiscal In-the-Money Options at
Acquired on Value Year End Fiscal Year End ($)(1)
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
---- ------------ ------------ ----------- ------------- ----------- -------------
Leonard Bell, M.D. 0 0 290,000 255,000 $1,179,061 $527,497
David W. Keiser 0 0 83,750 91,250 414,840 210,152
Louis A. Matis, M.D. 0 0 96,875 78,125 541,325 141,325
Stephen P. Squinto, Ph.D. 0 0 86,875 78,125 463,201 141,325
Bernadette L. Alford, 0 0 0 0 0 0
Ph.D.
- ----------------------
(1) Based on the average of the high and low sale price per share of the Common
Stock on July 31, 1998 of $9.375.
Employment Agreements
Dr. Leonard Bell, President, Chief Executive Officer, Secretary and
Treasurer of the Company, has a three-year employment agreement with the Company
which expires April 1, 2000. The agreement provides that Dr. Bell will be
employed as the President and Chief Executive Officer of the Company and that
the Company will use its best efforts to cause Dr. Bell to be elected to the
Board of Directors for the term of the agreement. Dr. Bell currently receives an
annual base salary of $275,000. The contract provides that if (i) Dr. Bell is
dismissed for any reason other than cause (as defined in the employment
agreement) or (ii) Dr. Bell terminates the employment agreement for certain
reasons including (a) certain changes in control of the Company, (b) Dr. Bell's
loss of any material duties or authority, (c) if the Chief Executive Officer is
not the highest ranking officer of the Company, (d) an uncured material breach
of the employment agreement by the Company and (e) the retention of any senior
executive officer by the Company, or an offer to pay compensation to any senior
executive of the Company that in either case is unacceptable to Dr. Bell, in his
reasonable judgment, then Dr. Bell shall be entitled to receive a lump sum cash
payment equal to Dr. Bell's annual salary then in effect multiplied by the
number of years remaining in the term of the employment agreement. In addition,
upon such termination, all stock options
13
and stock awards vest and become immediately exercisable and remain exercisable
through their original terms. If, upon the termination of the employment
agreement on April 1, 2000, Dr. Bell shall cease to be employed by the Company
in the capacity of Chief Executive Officer by reason of the Company's decision
not to continue to employ Dr. Bell as Chief Executive Officer at least on terms
substantially similar to those set forth in the existing employment agreement,
then Dr. Bell will be entitled to a severance payment equal to his annual salary
during the final year of such employment agreement.
Mr. David W. Keiser, Executive Vice President and Chief Operating Officer,
has a three-year employment agreement with the Company which commenced in July
1997. Mr. Keiser currently receives an annual base salary of $190,460.
Dr. Stephen P. Squinto, Senior Vice President and Chief Technical Officer,
has a five-year employment agreement with the Company which commenced in March
1997. Dr. Squinto currently receives an annual base salary of $180,500.
Dr. Louis A. Matis, Senior Vice President and Chief Scientific Officer, has
a five-year employment agreement with the Company which commenced in August
1997. Dr. Matis currently receives an annual base salary of $180,500.
Under the employment agreements for each of Mr. Keiser and Drs. Squinto
and Matis, if any of them, respectively, is dismissed for any reason other than
cause (as defined in the employment agreement), death or disability, or if any
of them, respectively, terminates the employment agreement because of an uncured
material breach thereof by the Company, he shall be entitled to receive a lump
sum cash payment equal to the greater of (a) the annual salary for the remainder
of the then current year of employment and (b) six months salary at the annual
rate for the then current year of employment. In addition, upon such
termination, all stock options shall accelerate vesting such that the number of
such options vested on the day of termination shall be equal to the number of
such options vested if the executive were to have been continuously employed by
the Company until the date twelve months after the date of termination.
Dr. Bernadette Alford, Senior Vice-President of Regulatory Affairs and
Project Management, had been employed by the Company since September 1994. Dr.
Alford resigned from the Company in September 1998. Dr. Alford had received an
annual base salary of $180,000.
All the Company's employment agreements require acknowledgment of the
Company's possession of information created, discovered or developed by the
14
employee/executive and applicable to the business of the Company and any client,
customer or strategic partner of the Company. Each employee/executive also
agreed to assign all rights he/she may have or acquire in proprietary
information and to keep such proprietary information confidential and also
agreed to certain covenants not to compete with the Company.
Compensation of Directors
Directors may be granted options to purchase Common Stock under the
1992 Stock Option Plan and the 1992 Outside Directors' Stock Option ("The
Directors' Option Plan") Plan. During February 1996, Drs. Fried, Link and Marks,
independent members of the Board and the members of the Company's audit and
compensation committees, became entitled to receive an annual accrued stipend of
$25,000, $8,000 and $8,000, respectively, which began to accrue on November 1,
1994. Per meeting fees were paid in the amounts of $1,500, $750, and $750 to
Drs. Fried, Link and Marks, respectively. These per meeting fees were deducted
from the accrued stipends, which were paid during 1996. Effective September 9,
1996, all non-employees, non-Chairman members of the Board became entitled, with
75% attendance at Board meetings, to receive an annual accrued stipend of up to
$8,000. The Chairman of the Board is entitled, with 75% attendance at Board
meetings, to receive an annual accrued stipend of up to $25,000. Per meeting
fees are paid in the amounts of $1,500 and $750 to the Chairman of the Board and
non-employee members of the Board, respectively. These per meeting fees are
deducted from the maximum annual accrued stipends, which are to be paid in
October of the following year. Each of Drs. Fried, Madri, Marks, Link, Ms. More
and Mr. Howe all attended at least 75% of the meetings of the Company's Board
and received their full annual stipend.
The Company's Directors' Option Plan was adopted by the Board of
Directors in August 1992 and approved by its stockholders in September 1992. The
Directors' Option Plan was amended in November 1995. The Directors' Option Plan
provides for the automatic grant of options to purchase shares of Common Stock
to directors of the Company who are not officers, nor employees, nor consultants
of the Company or any of its subsidiaries (other than the Chairman of the Board
of Directors of the Company who shall be eligible) ("Outside Directors").
Subject to the provisions of the Directors' Option Plan, the Board has the power
and authority to interpret the Directors' Option Plan, to prescribe, amend and
rescind rules and regulations relating to the Directors' Option Plan and to make
all other determinations deemed necessary or advisable for the administration of
the Directors' Option Plan. No participant may participate in any determination
of the Board concerning options granted to such Participant under the Directors'
Option Plan.
15
Under the Directors' Option Plan, each Outside Director receives an
option to purchase 7,500 shares of Common Stock on the date of his or her
election to the Board. In addition, on the date of each annual meeting of
stockholders at which a director is reelected, such director, if he or she is
still an Outside Director on such date and has attended, either in person or by
telephone, at least seventy-five percent (75%) of the meetings of the Board of
Directors that were held while he or she was a director since the prior annual
meeting of stockholders, will be granted an option to purchase an additional
2,000 shares of the Company's Common Stock. All options granted under the
Directors' Option Plan will have an exercise price equal to the fair market
value on the date of grant. Options granted under the Directors' Option Plan
vest in three equal annual installments beginning on the anniversary of the date
of grant.
Compensation Committee Report to Stockholders
The report of the Compensation Committee shall not be deemed
incorporated by reference by any general statement incorporating by reference
this proxy statement into any filing under the Securities Act of 1933, as
amended (the "Securities Act") or under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), except to the extent that the Company specifically
incorporates this information by reference, and shall not otherwise be deemed
filed under such Acts.
The Compensation Committee is currently comprised of four directors. It
is the responsibility of the Compensation Committee to determine the most
effective total executive compensation strategy based on the Company's business
and consistent with stockholders' interests. The Committee's specific duties
entail reviewing the Company's compensation practices, recommending compensation
for executives and key employees, making recommendations to the Board of
Directors with respect to major compensation and benefit programs and
administering the Company's stock option plans.
Compensation Philosophy
The Company's overall compensation philosophy is to offer competitive
salaries, cash incentives, stock options and benefit plans consistent with the
Company's financial position. Rewarding capable employees who contribute to the
continued success of the Company plus equity participation and a strong
alignment to stockholder's interests are key elements of the Company's
compensation policy. One of the Company's strengths, contributing to its
success, is the strong management team - many of whom have been with the Company
for a significant period of time. The Company's executive compensation policy is
to attract and retain key executives necessary for the Company's short and
long-term success by
16
establishing a direct link between executive compensation and the performance of
the Company by rewarding individual initiative and the achievement of annual
corporate goals through salary and cash bonus awards; and by providing equity
awards based upon present and expected future performance to allow executives to
participate in maximizing shareholder value.
In awarding salary increases and bonuses, the Compensation Committee
did not relate the various elements of corporate performance to each element of
executive compensation. Rather, the Compensation Committee considered whether
the compensation package as a whole adequately compensated each executive for
the Company's performance during the past year and executive's contribution to
such performance.
Under the Omnibus Budget Reconciliation Act ("OBRA") which was enacted
in 1993, publicly held companies may be prohibited from deducting as an expense
for federal income tax purposes total remuneration in excess of $1 million paid
to certain executive officers in a single year. However, OBRA provides an
exception for "performance based" remuneration, including stock options. The
Company expects to keep "nonperformance based" remuneration within the $1
million limit in order that all executive compensation will be fully deductible.
Nevertheless, although the Committee considers the net cost to the Company in
making all compensation decisions (including, for this purpose, the potential
limitation on deductibility of executive compensation), there is no assurance
that compensation realized with respect to any particular award will qualify as
"performance based" remuneration.
Base Salary
Base salary represents the fixed component of the executive
compensation program. The Company's philosophy regarding base salaries is
conservative, maintaining salaries at approximately competitive industry
average. Determinations of base salary levels are established on an annual
review of marketplace competitiveness with similar biopharmaceutical companies,
and on the Company's existing compensation structure. Periodic increases in base
salary relate to individual contributions to the Company's overall performance,
relative marketplace competitiveness levels, length of service and the
industry's annual competitive pay practice movement. No specific performance
targets were established for fiscal year 1997, which was the base year for
determining the salary increases awarded during 1998. In determining appropriate
levels of base salary, the Compensation Committee relied in part on several
biopharmaceutical industry compensation surveys.
Bonus
17
Bonuses represent the variable component of the executive compensation
program that is tied to individual achievement and the Company's performance.
The Company's policy is to base a significant portion of its senior executives'
cash compensation on bonus. In determining bonuses, the Compensation Committee
considers factors such as the individual's contribution to the Company's
performance and relative performance of the Company during the year.
Stock Options
The Compensation Committee, which administers the Company's stock
option plans, believes that one important goal of the executive compensation
program should be to provide executives, key employees and consultants -- who
have significant responsibility for the management, growth and future success of
the Company -- with an opportunity to increase their ownership and potentially
gain financially from the Company's stock price increases. This approach ensures
that the best interests of the stockholders, executives and employees will be
closely aligned. Therefore, executive officers and other key employees of the
Company are granted stock options from time to time, giving them a right to
purchase shares of the Company's Common Stock at a specified price in the
future. The grant of options is based primarily on an employee's potential
contribution to the Company's growth and financial results. In determining the
size of option grants, the Compensation Committee considers the number of
options owned by such employee, the number of options previously granted and
currently outstanding and the aggregate size of the current option grants.
Options generally are granted at the prevailing market value of the Company's
Common Stock and will only have value if the Company's stock price increases.
Generally, grants of options vest in equal amounts over four years and the
individual must be employed by the Company for such options to vest.
1998 Compensation to Chief Executive Officer
In reviewing and recommending Dr. Bell's salary and bonus and in
awarding him stock options for fiscal year 1998 and for his future services, the
Compensation Committee followed its compensation philosophy. Dr. Bell's annual
salary was increased to $275,000 in August 1998. For the 1998 fiscal year, Dr.
Bell was not paid a cash bonus; however, he did earn a $50,000 bonus, which was
paid in August 1998. The Compensation Committee recommended this salary and
bonus in recognition of Dr. Bell's achievements in raising additional capital
for the Company, advancing the Company's research efforts and advancing the
Company's clinical programs. In 1998, Dr. Bell was granted options, subject to
shareholders' approval of an increase in the number of shares authorized in the
Company's
18
1992 Stock Option Plan, to purchase 60,000 shares of the Company's Common Stock
at an exercise price of $9.00, the fair market value on the date of grant, under
the terms of the 1992 Stock Option Plan. The options will become exercisable in
equal installments over three years on the anniversary date of the date of
grant. The Compensation Committee recommended this option grant, to secure the
long-term services of the Company's Chief Executive Officer and to further align
the Chief Executive Officer's compensation with stockholder interests.
COMPENSATION COMMITTEE
John H. Fried, Ph.D., Timothy F. Howe, Max Link, Ph.D. and Leonard Marks, Jr.,
Ph.D.
19
The Company's Performance
The following Stock Price Performance Graph shall not be deemed
incorporated by reference by any general statement incorporating by reference
this proxy statement into any filing under the Securities Act or under the
Exchange Act, except to the extent the Company specifically incorporates this
information by reference, and shall not otherwise be deemed filed under such
Acts. The following graph compares cumulative total return of the Company's
Common Stock with the cumulative total return of (i) the Nasdaq Stock
Market-United States, and (ii) the Hambrecht & Quist Biotechnology Index. The
graph assumes (a) $100 was invested on February 28, 1996 in each of the
Company's Common Stock, the stocks comprising the NASDAQ Stock Market-United
States and the stocks comprising the Hambrecht & Quist Biotechnology Index, and
(b) the reinvestment of dividends.
STOCK PERFORMANCE GRAPH
[GRAPHIC]
20
Cumulative Total Return
-----------------------------------------------
2/96 4/96 7/96 10/96 1/97 4/97
---- ---- ---- ----- ---- ----
Alexion
Pharmaceuticals, Inc. 100.0 107.58 72.73 121.21 146.97 106.06
Nasdaq Stock
Market (U.S.) . 100.0 108.66 98.86 111.14 126.29 115.00
Hambrecht & Quist
Biotechnology Index 100.0 96.11 83.90 92.71 98.10 84.47
----------------------------------------
7/97 10/97 1/98 4/98 7/98
---- ----- ---- ---- ----
Alexion
Pharmaceuticals, Inc. 127.27 142.42 160.61 163.64 116.67
Nasdaq Stock
Market (U.S.) . 145.88 146.28 149.21 172.10 172.18
Hambrecht & Quist
Biotechnology Index 95.66 94.66 91.94 102.78 102.58
PROPOSAL NO.2 - AMENDMENT TO 1992 STOCK OPTION PLAN
On July 29, 1998, the Board of Directors unanimously adopted, subject
to stockholder approval, an amendment to the Company's 1992 Stock Option Plan
(the "Plan") which would increase the aggregate number of shares of Common Stock
which may be issued thereunder from 1,800,000 to 3,100,000 shares, all of which
would be available for the grant of either "incentive stock options", as defined
in section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), or
options which do not qualify as incentive stock options ("Non-ISOs"). The
primary features of the Plan are summarized below. The full text of the Plan and
the proposed amendment thereto are set forth in Appendix A to this Proxy
Statement, and the following discussion is qualified by reference thereto.
The Board of Directors believes that approval of the amendment will
serve the best interests of the Company and its stockholders by permitting the
Company to continue to utilize stock options as a means to attract and retain
key employees and consultants who are in a position to contribute materially to
the successful conduct of the business and affairs of the Company and, in
addition, to stimulate in such individuals an increased desire to render greater
service to the Company. In addition, the availability of shares for grant under
the Plan is important in that it provides the Company an alternative or
additional means of
21
compensating key employees and consultants. As of October 1, 1998, there were
approximately 83,000 shares available for future grants under the Plan.
The Plan is administered by the Compensation Committee (the
"Committee") appointed by the Board of Directors, which has the authority to
select optionees, designate the number of shares to be covered by each option
and, specify other terms and conditions of the options. The Committee presently
consists of Drs. Fried, Link and Marks, and Mr. Howe all of whom are directors
of the Company. Options may be granted by the Committee from time to time
through February 26, 2002, the termination date of the Plan, to key employees of
or consultants to the Company or a subsidiary of the Company (a "Subsidiary"),
within the meaning of Section 424(f) of the Code, and to directors of the
Company or a Subsidiary who are not employees or consultants. The Plan limits
the maximum option grant to an employee in any calendar year to 200,000 shares.
All employees are eligible to participate in the Plan, and, as of October 1,
1998, approximately 79 employees, directors, and consultants held outstanding
options under the Plan.
The exercise price for shares covered by an incentive stock option may
not be less than 100% of the fair market value (as defined in the Plan) of the
Common Stock on the date of grant (110% in the case of a grant to an employee
who owns stock possessing more than 10% of the combined voting power of all
classes of stock of the Company or Subsidiary entitled to vote (a "10%
Stockholder")). The exercise price for shares covered by a Non-ISO may not be
less than the par value of the Common Stock on the date of the grant. Unless
terminated sooner, options must expire no later than ten years (five years in
the case of an incentive stock option granted to a 10% Stockholder) from the
date of grant.
The Plan provides that all outstanding options will become exercisable
in the event of an Exchange Transaction (as defined below) and any outstanding
options not exercised before consummation of an Exchange Transaction will
thereupon terminate. However, in the event of an Exchange Transaction in which
the shareholders of the Company receive capital stock of another corporation
("Exchange Stock") and, if the Board, in its sole discretion, so directs, then
all outstanding options will be converted into options to purchase shares of
Exchange Stock at an amount and price determined on the same basis as the number
of shares of Exchange Stock that holders of Common Stock will receive in the
Exchange Transaction. An Exchange Transaction means a merger (other than a
merger of the Company in which the holders of the Common Stock immediately prior
to the merger have the same proportionate ownership of Common Stock in the
surviving corporation immediately after the merger), consolidation, acquisition
of property or stock, separation, reorganization (other than a mere
re-incorporation or the creation of a holding company) or liquidation of the
Company, as a result of which the shareholders of the Company receive cash,
stock or other
22
property in exchange for or in connection with their shares of Common Stock. The
number of shares that may be issued under the Plan, individually in any year or
in the aggregate, and the number of shares and exercise price per share covered
by outstanding options will be adjusted, as appropriate, in the event of a stock
dividend or similar capital charge involving the Company's Common Stock.
Any option outstanding on February 26, 2002 will remain in effect until
it is exercised, terminates or expires in accordance with its terms.
The Board of Directors may amend or terminate the Plan, subject to
stockholder approval in certain cases, e.g., amendments that would increase the
number of shares issuable under the Plan or change the class of employees
eligible to receive options or effect a material increase of benefits under the
Plan.
The table below indicates stock options which were authorized for
issuance, subject to stockholder approval of Proposal No.2 of this Proxy
Statement, to (i) each person named in then Summary Compensation Table appearing
earlier in this Proxy Statement, (ii) all current executive officers of the
Company as a group, (iii) all current directors who are not executive officers
as a group and (iv) all employees of the Company, including all current officers
of the Company who are not executive officers of the Company, as a group:
1992 Stock Option Plan Benefits
Name and Position Dollar Value (1) Number of Options
- ----------------- ---------------- -----------------
Leonard Bell, President and CEO $540,000 60,000
David Keiser, Executive V.P. and COO $225,000 25,000
Louis Matis, Sr. V.P. and CSO $225,000 25,000
Stephen Squinto, Sr. V.P. and CTO $225,000 25,000
Executive Officers as a Group (4 persons) $1,215,000 135,000
Non-Executive Officer Director Group (0 persons) 0 0
Non-Executive Officer Employee Group (13 persons) $1,190,250 132,250
- --------------------------------
(1) Amounts are determined by multiplying the number of options granted by the
exercise price of the option which was $9.00, the market closing price of a
share of the Company's Common Stock on July 29, 1998, the grant date.
23
Federal Income Tax Consequences
Following is a summary of the salient Federal income tax consequences
associated with options granted under the Plan.
An optionee will not realize taxable income upon the grant of the
option. In general, the holder of a Non-ISO will recognize ordinary income when
the option is exercised equal to the excess of the value of the stock over the
exercise price (i.e., the option spread), and the Company receives a
corresponding deduction (subject to the $1 million limitation of deductibility
of executive compensation). (If a Non-ISO is exercised within six months after
the date of grant and if the optionee is subject to the six-month restrictions
on sale of Common Stock under Section 16(b) of the Exchange Act, the optionee
generally recognizes ordinary income on the date the restrictions lapse, unless
an early income recognition election is made.) Upon a later sale of the stock,
the optionee will realize capital gain or loss equal to the difference between
the selling price and the value of the stock at the time the option was
exercised (or, if later, the time ordinary income was recognized with respect to
the exercise).
The holder of an incentive stock option does not realize taxable income
upon exercise of the option, although the option spread is included in income
for alternative minimum tax purposes. If the stock acquired upon exercise of the
incentive stock option is sold or otherwise disposed of within two years from
the grant date or within one year from the exercise date, then, in general, gain
realized on the sale is treated as ordinary income to the extent of the option
spread at the exercise date, and the Company receives a corresponding deduction.
Any remaining gain is treated as capital gain. If the stock is held for at least
two years from the grant date and one year from the exercise date, then any gain
or loss realized upon the sale will be capital gain or loss and the Company will
not be entitled to a deduction. A special basis adjustment applies to reduce the
gain for alternative minimum tax purposes.
Vote Required
The affirmative vote of holders of a majority of the shares of Common
Stock issued and outstanding is required for the adoption of this proposal.
Broker non-votes with respect to this matter will be treated as neither a vote
"for" nor a vote "against" the matter, although they will be counted in
determining if a quorum is present. However, abstentions will be considered in
determining the numbers of votes required to attain a majority of the shares
present or represented at the meeting and entitled to vote. Accordingly, an
abstention from voting by a stockholder present in person or by proxy at the
meeting has the same legal effect as a vote "against" the matter because it
represents a share present or represented at the
24
meeting and entitled to vote, thereby increasing the number of affirmative votes
required to approve this proposal.
THE BOARD OF DIRECTORS DEEMS PROPOSAL NO. 2 TO BE IN THE BEST INTEREST OF
THE COMPANY AND ITS STOCKHOLDERS AND RECOMMENDS A VOTE "FOR" APPROVAL THEREOF.
RELATIONSHIP WITH INDEPENDENT AUDITORS
Arthur Andersen LLP has been the independent auditors for the Company
since the Company's inception and will serve in that capacity for the 1999
fiscal year. A representative of Arthur Andersen LLP will be present at the
Annual Meeting and will have an opportunity to make a statement if he or she
desires to do so, and will respond to appropriate questions from stockholders.
STOCKHOLDER PROPOSALS
All stockholder proposals which are intended to be presented at the
1999 Annual Meeting of Stockholders of the Company must be received by the
Company no later than June 24, 1999 for inclusion in the Board of Directors'
proxy statement and form of proxy relating to that meeting.
OTHER BUSINESS
The Board of Directors knows of no other business to be acted upon at
the Annual Meeting. However, if any other business properly comes before the
Annual Meeting, it is the intention of the persons named in the enclosed proxy
to vote on such matters in accordance with their best judgment.
The prompt return of your proxy will be appreciated and helpful in
obtaining the necessary vote. Therefore, whether or not you expect to attend the
Annual Meeting, please sign the proxy and return it in the enclosed envelope.
25
By Order of the Board of Directors
Leonard Bell, M.D.
Secretary
Dated: October 27, 1998
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K WILL BE SENT WITHOUT CHARGE
TO ANY STOCKHOLDER REQUESTING IT IN WRITING FROM: ALEXION PHARMACEUTICALS, INC.,
25 SCIENCE PARK, NEW HAVEN, CONNECTICUT 06511, ATTENTION: PRESIDENT.
26
Below is the text of the Company's 1992 Stock Option Plan as proposed to be
amended pursuant to Proposal No. 2. Proposed language to the 1992 Stock Option
Plan is set forth in bold print and the language to be deleted is set forth in
brackets.
APPENDIX A
ALEXION PHARMACEUTICALS, INC.
1992 STOCK OPTION PLAN
1. Purpose. The purpose of the Alexion Pharmaceuticals, Inc. 1992 Stock
Option Plan (the "Plan") is to enable Alexion Pharmaceuticals, Inc. (the
"Company") and its stockholders to secure the benefits of common stock ownership
by key personnel of the Company and its subsidiaries. The Board of Directors of
the Company (the "Board") believes that the granting of options under the Plan
will foster the Company's ability to attract, retain and motivate those
individuals who will be largely responsible for the profitability and long-term
future growth of the Company.
2. Stock Subject to the Plan. The Company may issue and sell a total of
3,100,000 [1,800,000] shares of its common stock, $.0001 par value (the "Common
Stock"), pursuant to the Plan. Such shares may be either authorized and un -
issued or held by the Company in its treasury. New options may be granted under
the Plan with respect to shares of Common Stock which are covered by the
unexercised portion of an option which has terminated or expired by its terms,
by cancellation or otherwise.
3. Administration. The Plan will be administered by a committee (the
"Committee") consisting of at least two directors appointed by and serving at
the pleasure of the Board. Unless the Board determines otherwise, the members of
the Committee are to be "disinterested directors" within the meaning and for the
purposes of Rule 16(b)-3 under the Securities Exchange Act of 1934. Subject to
the provisions of the Plan, the Committee, acting in its sole and absolute
discretion, will have full power and authority to grant options under the Plan,
to interpret the provisions of the Plan, to fix and interpret the provisions of
option agreements made under the Plan, to supervise the administration of the
Plan, and to take such other action as may be necessary or desirable in order to
carry out the provisions of the Plan. A majority of the members of the Committee
will constitute a quorum. The Committee may act by the vote of a majority of its
members present at a meeting at which there is a quorum or by unanimous written
consent. The decision of the Committee as to any disputed question, including
questions of construction, interpretation and administration, will be final and
conclusive on all persons. The Committee will keep a record of its proceedings
and acts and will keep or cause to be kept such books and records as may be
necessary in connection with the proper administration of the Plan.
4. Eligibility. Options may be granted under the Plan to present or future
key employees of the Company or a subsidiary of the Company (a "Subsidiary")
within the meaning of Section 424(f) of the Internal Revenue Code of 1986 (the
"Code"), and to consultants to the Company or a Subsidiary who are not
employees. Options may be granted to directors of the Company or a Subsidiary
whether or not also employees of or consultants to the Company and/or a
Subsidiary. Subject to the provisions of the Plan, the Committee may from time
to time select the persons to whom options will be granted, and will fix the
number of shares covered by each such option and establish the terms and
conditions thereof (including, without limitation, exercise price and
restrictions on exercisability of the option or on the shares of Common Stock
issued upon exercise thereof and
1
whether or not the option is to be treated as an incentive stock option within
the meaning of Section 422 of the Code (an "Incentive Stock Option").
5. Terms and Conditions of Options. Each option granted under the Plan will
be evidenced by a written agreement in a form approved by the Committee. Each
such option will be subject to the terms and conditions set forth in this
paragraph and such additional terms and conditions not inconsistent with the
Plan (and, in the case of an Incentive Stock Option, not inconsistent with the
provisions of the Code applicable thereto) as the Committee deems appropriate.
(a) Option Exercise Price. In the case of an option which is not
treated as an Incentive Stock Option, the exercise price per share may not be
less than the par value of a share of Common Stock on the date the option is
granted; and, in the case of an Incentive Stock Option, the exercise price per
share may not be less than 100% of the fair market value of a share of Common
Stock on the date the option is granted (110% in the case of an optionee who, at
the time the option is granted, owns stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company or a Subsidiary (a
"ten percent shareholder")). For purposes hereof, the fair market value of a
share of Common Stock on any date will be equal to the closing sale price per
share as published by a national securities exchange on which shares of the
Common Stock are traded on such date or, if there is no sale of Common Stock on
such date, the average of the bid and asked prices on such exchange at the
closing of trading on such date or, if shares of the Common Stock are not listed
on a national securities exchange on such date, the closing price or, if none,
the average of the bid and asked prices in the over the counter market at the
close of trading on such date, or if the Common Stock is not traded on a
national securities exchange or the over the counter market, the fair market
value of a share of the Common Stock on such date as determined in good faith by
the Committee.
(b) Option Period. The period during which an option may be exercised
will be fixed by the Committee and will not exceed 10 years from the date the
option is granted (5 years in the case of an Incentive Stock Option granted to a
"ten percent shareholder").
(c) Exercise of Options. Unless otherwise determined by the Committee,
no option will become exercisable unless the person to whom the option was
granted remains in the continuous employ or service of the Company or a
Subsidiary for at least one year (or for such other period as the Committee may
designate) from the date the option is granted. Subject to earlier termination
of the option as provided herein, unless the Committee determines otherwise, the
option will become exercisable in accordance with the following schedule based
upon the number of full years of the optionee's continuous employment or service
with the Company or a Subsidiary following the date of grant:
Full Incremental Cumulative
Years of Percentage of Percentage of
Continuous Option Option
Employment/Service Exercisable Exercisable
------------------ ------------- -------------
Less than 1 0% 0%
1 20% 20%
2 20% 40%
3 20% 60%
4 20% 80%
5 or more 20% 100%
2
All or part of the exercisable portion of an option may be exercised at any time
during the option period, except that, without the consent of the Committee, no
partial exercise of an option may be for less than 100 shares. An option may be
exercised by transmitting to the Company (1) a written notice specifying the
number of shares to be purchased, and (2) payment of the exercise price (or, if
applicable, delivery of a secured obligation therefor), together with the
amount, if any, deemed necessary by the Committee to enable the Company to
satisfy its income tax withholding obligations with respect to such exercise
(unless other arrangements acceptable to the Company are made with respect to
the satisfaction of such withholding obligations).
(d) Payment of Exercise Price. The purchase price of shares of Common
Stock acquired pursuant to the exercise of an option granted under the Plan may
be paid in cash and/or such other form of payment as may be permitted under the
option agreement, including, without limitation, previously-owned shares of
Common Stock. The Committee may permit the payment of all or a portion of the
purchase price in installments (together with interest) over a period of not
more than 5 years.
(e) Rights as a Stockholder. No shares of Common Stock will be issued
in respect of the exercise of an option granted under the Plan until full
payment therefor has been made (and/or provided for where all or a portion of
the purchase price is being paid in installments). The holder of an option will
have no rights as a stockholder with respect to any shares covered by an option
until the date a stock certificate for such shares is issued to him or her.
Except as otherwise provided herein, no adjustments shall be made for dividends
or distributions of other rights for which the record date is prior to the date
such stock certificate is issued.
(f) Nontransferability of Options. No option shall be assignable or
transferable except upon the optionee's death to a beneficiary designated by the
optionee in accordance with procedures established by the Committee or, if no
designated beneficiary shall survive the optionee, pursuant to the optionee's
will or by the laws of descent and distribution. During an optionee's lifetime,
options may be exercised only by the optionee or the optionee's guardian or
legal representative.
(g) Termination of Employment or Other Service. If an optionee ceases
to be employed by or to perform services for the Company and any Subsidiary for
any reason other than death or disability (defined below), then, unless the
Committee determines otherwise, each outstanding option granted to him or her
under the Plan will terminate on the date three months after the date of such
termination of employment or service. If an optionee's employment or service is
terminated by reason of the optionee's death or disability (or if the optionee's
employment or service is terminated by reason of his or her disability and the
optionee dies within one year after such termination of employment or service),
then each outstanding option granted to the optionee under the Plan will
terminate on the date one year after the date of such termination of employment
or service (or one year after the later death of a disabled optionee) or, if
earlier, the date specified in the option agreement. For purposes hereof, the
term "disability" means the inability of an optionee to perform the customary
duties of his or her employment or other service for the Company or a Subsidiary
by reason of a physical or mental incapacity which is expected to result in
death or be of indefinite duration.
(h) Maximum Option Grant. The maximum option grant which may be made
to an employee of the Company in any calendar year shall not cover more than
200,000 shares.
(i) Other Provisions. The Committee may impose such other conditions
with respect to the exercise of options, including, without limitation, any
conditions relating to the application of federal or state securities laws, as
it may deem necessary or advisable.
3
6. Capital Changes, Reorganization, Sale.
(a) Adjustments Upon Changes in Capitalization. The aggregate number
and class of shares for which options may be granted under the Plan, the number
and class of shares covered by each outstanding option and the exercise price
per share shall all be adjusted proportionately for any increase or decrease in
the number of issued shares of Common Stock resulting from a split-up or
consolidation of shares or any like capital adjustment, or the payment of any
stock dividend.
(b) Cash, Stock or Other Property for Stock. Except as otherwise
provided in this subparagraph, in the event of an Exchange Transaction (as
defined below), all optionees will be permitted to exercise their outstanding
options (whether or not otherwise exercisable) and any outstanding options not
exercised before the consummation of the Exchange Transaction will thereupon
terminate. Notwithstanding the preceding sentence, if, as part of the Exchange
Transaction, the shareholders of the Company receive capital stock of another
corporation ("Exchange Stock), and if the Board, in its sole discretion, so
directs, then all outstanding options will be converted into options to purchase
shares of Exchange Stock. The amount and price of the converted options will be
determined by adjusting the amount and price of the options granted hereunder on
the same basis as the determination of the number of shares of Exchange Stock
the holders of Common Stock will receive in the Exchange Transaction.
(c) Definition of Exchange Transaction. For purposes hereof, the term
"Exchange Transaction" means a merger (other than a merger of the Company in
which the holders of Common Stock immediately prior to the merger have the same
proportionate ownership of Common Stock in the surviving corporation immediately
after the merger), consolidation, acquisition of property or stock, separation,
reorganization (other than a mere reincorporation or the creation of a holding
company) or liquidation of the Company, as a result of which the Shareholders of
the Company receive cash, stock or other property in exchange for or in
connection with their shares of Common Stock.
(d) Fractional Shares. In the event of any adjustment in the number of
shares covered by any option pursuant to the provisions hereof, any fractional
shares resulting from such adjustment will be disregarded and each such option
will cover only the number of full shares resulting from the adjustment.
(e) Determination of Board to be Final. All adjustments under this
paragraph 6 shall be made by the Board, and its determination as to what
adjustments shall be made, and the extent thereof, shall be final, binding and
conclusive. Unless an optionee agrees otherwise, any change or adjustment to an
Incentive Stock Option shall be made in such a manner so as not to constitute a
"modification" as defined in Section 424(h) of the Code and so as not to cause
the optionee's Incentive Stock Option issued hereunder to fail to continue to
qualify as an Incentive Stock Option.
7. Amendment and Termination of the Plan. The Board may amend or terminate
the Plan. Except as otherwise provided in the Plan with respect to equity
changes, any amendment which would increase the aggregate number of shares of
Common Stock as to which options may be granted under the Plan, materially
increase the benefits under the Plan, or modify the class of persons eligible to
receive options under the Plan shall be subject to the approval of the holders
of a majority of the Common Stock issued and outstanding. No amendment or
termination may affect adversely any outstanding option without the written
consent of the optionee.
4
8. No Rights Conferred. Nothing contained herein will be deemed to give any
individual any right to receive an option under the Plan or to be retained in
the employ or service of the Company or any Subsidiary.
9. Governing Law. The Plan and each option agreement shall be governed by
the laws of the State of Delaware.
10. Decisions and Determinations of Committee to be Final. Except to the
extent rights or powers under this Plan are reserved specifically to the
discretion of the Board, all decisions and determinations of the Committee are
final and binding.
11. Term of the Plan. The Plan shall be effective as of February 27, 1992,
the date on which it was adopted by the Board, subject to the approval of the
stockholders of the Company, which approval was granted on February 27, 1992.
The Plan will terminate on February 26, 2002, the date ten years after the date
of adoption by the Board, unless sooner terminated by the Board. The rights of
optionees under the options outstanding at the time of the termination of the
Plan shall not be affected solely by reason of the termination and shall
continue in accordance with the terms of the option (as then in effect or
thereafter amended).
5
ALEXION PHARMACEUTICALS, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 4, 1998
Lenoard Bell, M.D. and David W. Keiser, and each of them, as the true and
lawful attorneys, agents and proxies of the undersigned, with full power of
substitution, are hereby authorized to represent and to vote all shares of
Common Stock of Alexion Pharmaceuticals, Inc. held of record by the undersigned
on October 22, 1998, at the Annual Meeting of Stockholders to be held at 10:00
a.m. on Friday, December 4, 1998, at the Park Avenue Room at the Hotel
Inter-Continental, 111 East 48th Street, New York, New York 10017 and any
adjournment thereof. Any and all proxies heretofore given are hereby revoked.
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED AS DESIGNATED BY THE
UNDERSIGNED. IF NO CHOICE IS SPECIFIED, THE PROXY WILL BE VOTED "FOR" EACH OF
THE NOMINEES FOR DIRECTOR LISTED BELOW AND IN FAVOR OF PROPOSAL NO. 2.
1. Proposal--Election of Directors--Nominees are:
John H. Fried, Leonard Bell, Timothy F. Howe, Max Link, Joseph A. Madri,
Leonard Marks, Jr. and Eileen M. More.
/ / For all listed / / WITHHOLD AUTHORITY to
nominees vote for the listed
(except as marked nominees.
to the
contrary
above)
(INSTRUCTIONS. To withhold authority to vote for any individual nominee,
strike a line through the nominee's name in the list above.)
2. Proposal No. 2--Amendment to the Company's 1992 Stock Option Plan to
increase the number of shares of Common Stock which may be issued
thereunder.
/ / FOR / / AGAINST / / ABSTAIN
(CONTINUED ON REVERSE SIDE)
Discretionary authority is hereby granted with respect to such other matters
as may properly come before the meeting.
IMPORTANT: PLEASE SIGN EXACTLY AS NAME APPEARS BELOW. EACH JOINT OWNER SHALL
SIGN. EXECUTORS, ADMINISTRATORS, TRUSTEES, ETC. SHOULD GIVE FULL TITLE AS SUCH.
IF SIGNOR IS A CORPORATION, PLEASE GIVE FULL CORPORATE NAME BY DULY AUTHORIZED
OFFICER. IF A PARTNERSHIP, PLEASE SIGN IN PARTNERSHIP NAME BY AUTHORIZED PERSON.
DATED _____________________ , 1998
__________________________________
SIGNATURE
__________________________________
SIGNATURE IF HELD JOINTLY
THE ABOVE-SIGNED ACKNOWLEDGES
RECEIPT OF THE NOTICE OF ANNUAL
MEETING OF STOCKHOLDERS AND THE
PROXY STATEMENT FURNISHED
THEREWITH.
PLEASE SIGN, DATE AND RETURN THIS
PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
