-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Gi3FgBcReT8e/cI41T8JQkWBXOPdjvmDl2zyEKUOzCWFVwdqkCOUiOmRR2dlOfDi fsD0rRd5vexIbUFIQRJ56A== 0000891092-97-000313.txt : 19970814 0000891092-97-000313.hdr.sgml : 19970814 ACCESSION NUMBER: 0000891092-97-000313 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970813 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: IMCLONE SYSTEMS INC/DE CENTRAL INDEX KEY: 0000765258 STANDARD INDUSTRIAL CLASSIFICATION: BIOLOGICAL PRODUCTS (NO DIAGNOSTIC SUBSTANCES) [2836] IRS NUMBER: 042834797 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-19612 FILM NUMBER: 97659582 BUSINESS ADDRESS: STREET 1: 180 VARICK ST CITY: NEW YORK STATE: NY ZIP: 10014 BUSINESS PHONE: 2126451405 MAIL ADDRESS: STREET 1: 180 VARICK ST CITY: NEW YORK STATE: NY ZIP: 10014 10-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1997 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____ to _____ Commission file number 0-19612 IMCLONE SYSTEMS INCORPORATED (Exact name of registrant as specified in its charter) DELAWARE 04-2834797 (State or other jurisdiction (IRS Employer Identification No.) of incorporation or organization) 180 VARICK STREET, NEW YORK, NY 10014 (Address of principal executive offices) (Zip Code) (212) 645-1405 Registrant's telephone number, including area code Not Applicable Former name, former address and former fiscal year, if changed since last report Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes__X__ No_____ Applicable only to corporate issuers: Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date. Class Outstanding as of August 12, 1997 ----- --------------------------------- Common Stock, par value $.001 24,105,055 Shares IMCLONE SYSTEMS INCORPORATED INDEX Page No. -------- PART I - FINANCIAL INFORMATION Item 1. Financial Statements Balance Sheets - June 30, 1997 (unaudited) and December 31, 1996 1 Unaudited Statements of Operations - Three and six months ended June 30, 1997 and 1996 2 Unaudited Statements of Cash Flows - Six months ended June 30, 1997 and 1996 3 Notes to Financial Statements 4 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 5 PART II - OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders 11 Item 6. Exhibits and Reports on Form 8-K 12 Part 1 - FINANCIAL INFORMATION Item 1 - Financial Statements IMCLONE SYSTEMS INCORPORATED Balance Sheets (in thousands, except share data) June 30, December 31, Assets 1997 1996 ---------- ------------ (unaudited) Current assets: Cash and cash equivalents ........................ $ 2,559 $ 2,734 Securities available for sale .................... 28,532 10,780 Prepaid expenses ................................. 450 122 Other current assets ............................. 1,294 479 --------- --------- Total current assets ...................... 32,835 14,115 --------- --------- Property and equipment: Land ............................................ 340 340 Building and building improvements .............. 8,969 8,969 Leasehold improvements .......................... 4,832 4,832 Machinery and equipment ......................... 5,576 5,159 Furniture and fixtures .......................... 536 536 Construction in progress ........................ 627 320 --------- --------- Total cost ................................ 20,880 20,156 Less accumulated depreciation and amortization . (10,418) (9,606) --------- --------- Property and equipment, net ............... 10,462 10,550 --------- --------- Patent costs, net .................................. 1,048 977 Deferred financing costs, net ...................... 60 65 Amount due from officer and stockholder ............ 90 101 Other assets ....................................... 85 77 --------- --------- $ 44,580 $ 25,885 ========= ========= Liabilities and Stockholders' Equity Current liabilities: Accounts payable ................................. $ 1,384 $ 1,059 Accrued expenses and other ....................... 731 1,366 Interest payable ................................. 191 238 Deferred revenue ................................. 208 -- Current portion of long-term liabilities ......... 3,380 3,858 --------- --------- Total current liabilities ................. 5,894 6,521 --------- --------- Long-term debt ..................................... 2,200 2,200 Other long-term liabilities, less current portion .. 435 575 --------- --------- Total liabilities ......................... 8,529 9,296 --------- --------- Commitments and contingencies Stockholders' equity: Preferred stock, $1.00 par value; authorized 4,000,000 shares; none issued and outstanding .................... -- -- Common stock, $.001 par value; authorized 45,000,000 shares; issued 24,138,872 and 20,248,122 at June 30, 1997 and December 31, 1996, respectively; outstanding 24,088,055 and 20,233,699 at June 30, 1997 and December 31, 1996, respectively ................ 24 20 Additional paid-in capital ......................... 145,912 118,760 Accumulated deficit ................................ (109,364) (101,973) Treasury stock, at cost; 50,817 and 14,423 shares at June 30, 1997 and December 31, 1996, respectively ................................... (492) (169) Unrealized loss on securities available for sale ... (29) (49) --------- --------- Total stockholders' equity ................ 36,051 16,589 --------- --------- $ 44,580 $ 25,885 ========= ========= See accompanying notes to financial statements. Page 1 IMCLONE SYSTEMS INCORPORATED Statements of Operations (in thousands, except per share data) (unaudited)
Three Months Ended Six Months Ended June 30, June 30, -------------------- -------------------- 1997 1996 1997 1996 -------- -------- -------- -------- Revenues: Product development milestone revenues ............ $ 2,500 $ -- $ 2,500 $ -- Research and development funding from third parties and other ............................ 696 75 771 150 -------- -------- -------- -------- Total revenues ...................... 3,196 75 3,271 150 -------- -------- -------- -------- Operating expenses: Research and development .......................... 3,257 2,593 8,652 4,918 General and administrative ........................ 1,272 845 2,355 1,587 -------- -------- -------- -------- Total operating expenses ............. 4,529 3,438 11,007 6,505 -------- -------- -------- -------- Operating loss ....................................... (1,333) (3,363) (7,736) (6,355) -------- -------- -------- -------- Other (income) expense: Interest and other income ......................... (440) (261) (685) (454) Interest and other expense ........................ 145 200 340 547 -------- -------- -------- -------- Net interest and other (income) expense (295) (61) (345) 93 -------- -------- -------- -------- Net loss before extraordinary item ................... (1,038) (3,302) (7,391) (6,448) Extraordinary loss on extinguishment of debt ......... -- 1,267 -- 1,267 -------- -------- -------- -------- Net loss ............................................. $ (1,038) $ (4,569) $ (7,391) $ (7,715) ======== ======== ======== ======== Net loss per common share: Loss before extraordinary loss on extinguishment of debt ........................ $ (0.04) $ (0.17) $ (0.33) $ (0.34) Extraordinary loss on extinguishment of debt .... -- (0.06) -- (0.07) -------- -------- -------- -------- Net loss per common share ............. $ (0.04) $ (0.23) $ (0.33) $ (0.41) ======== ======== ======== ======== Weighted average shares outstanding .................. 24,033 19,595 22,702 18,730 ======== ======== ======== ========
See accompanying notes to financial statements. Page 2 IMCLONE SYSTEMS INCORPORATED Statements of Cash Flows (in thousands) (unaudited)
Six Months Ended June 30, -------------------- 1997 1996 -------- -------- Cash flows from operating activities: Net loss .................................................................. $ (7,391) $ (7,715) Adjustments to reconcile net loss to net cash used in operating activities: Extraordinary loss on extinguishment of debt ............................ -- 1,267 Depreciation and amortization ........................................... 866 910 Discounted interest amortization ........................................ -- 156 Expense associated with issuance of options and warrants ............................................. 2,634 -- Loss on sale of investments ............................................. 3 -- Changes in: Prepaid expenses ..................................................... (328) (145) Other current assets ................................................. (815) (285) Due from officer ..................................................... 11 13 Other assets ......................................................... (8) -- Interest payable ..................................................... (47) (111) Accounts payable ..................................................... 325 (75) Accrued expenses and other ........................................... (635) (251) Deferred revenue ..................................................... 208 -- -------- -------- Net cash used in operating activities ......................... (5,177) (6,236) -------- -------- Cash flows from investing activities: Acquisitions of property and equipment .................................. (436) (294) Purchases of securities available for sale .............................. (54,777) (25,635) Sales of securities available for sale .................................. 37,042 7,047 Additions to patents .................................................... (120) (44) -------- -------- Net cash used in investing activities ......................... (18,291) (18,926) ======== ======== Cash flows from financing activities: Net proceeds from issuance of common stock .............................. 23,162 13,560 Proceeds from exercise of stock options and warrants .................... 1,360 1,831 Purchase of treasury stock .............................................. (323) (19) Payments of other liabilities ........................................... (906) (29) -------- -------- Net cash provided by financing activities ..................... 23,293 15,343 -------- -------- Net decrease in cash and cash equivalents .................................. (175) (9,819) Cash and cash equivalents at beginning of period ........................... 2,734 10,207 -------- -------- Cash and cash equivalents at end of period ................................. $ 2,559 $ 388 ======== ========
See accompanying notes to financial statements. Page 3 IMCLONE SYSTEMS INCORPORATED NOTES TO FINANCIAL STATEMENTS (unaudited) (1) Basis of Presentation The financial statements of ImClone Systems Incorporated (the "Company") as of June 30, 1997 and for the three and six months ended June 30, 1997 and 1996 are unaudited. In the opinion of management, these unaudited financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation. These financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 1996, as filed with the Securities and Exchange Commission (the "Commission"). Results for the interim periods are not necessarily indicative of results for the full years. (2) Related Party Transactions As of June 30, 1997, a promissory note (the "new promissory note") in the original principal amount of $110,000 given to the Company by its President and CEO totaled $90,000. The new promissory note replaces an original promissory note (the "original promissory note") which was due upon the earlier of on demand by the Company or April 30, 1997, bore interest at the rate of 8% compounded quarterly and covered miscellaneous cash advances made to the President and CEO through the date of its issuance in March 1995. The new promissory note was payable as to $15,000 no later than May 15, 1997 and as to the remainder upon the earlier of on demand by the Company or December 31, 1997 and bears interest at the rate of 5% compounded quarterly. The new promissory note covers the remaining balance of the original promissory note, interest thereon and additional miscellaneous cash advances made since the date of the original note totaling $15,000. As of August 12, 1997 the aggregate amount of the new promissory note, including interest totaled approximately $88,000. (3) Net Loss Per Share Net loss per share is computed based on the weighted average number of shares outstanding. Common stock equivalents are not included in the computation of average shares outstanding because they are anti-dilutive. (4) Reclassification Certain amounts previously reported have been reclassified to conform to current year presentation. Page 4 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis by management is provided to identify certain significant factors which affected the Company's financial position and operating results during the period included in the accompanying financial statements. Results of Operations Six Months Ended June 30, 1997 and 1996 Revenues Revenues for the six-month periods ended June 30, 1997 and June 30, 1996 were $3,271,000 and $150,000, respectively. Revenues in both periods included research and development support fees of $150,000 from the Company's corporate partnership with the Wyeth/Lederle Vaccine division of American Home Products Corporation ("American Home") in infectious disease vaccines. Revenues for the six-month period ended June 30, 1997 also included milestone revenue of $1,500,000 and contract research support of $417,000 from the Company's research and license agreement with Merck KGaA ("Merck") in cancer vaccines. Additionally, the six-month period ended June 30, 1997 included milestone revenue of $1,000,000 and royalty fees of $204,000 from the Company's strategic alliance with Abbott Laboratories ("Abbott") in diagnostics. Operating: Research and Development Total operating expenses for the six-month periods ended June 30, 1997 and June 30, 1996 were $11,007,000 and $6,505,000, respectively. Research and development expenses for the six-month periods ended June 30, 1997 and June 30, 1996 were $8,652,000 and $4,918,000, respectively. Such amounts for the six-month periods ended June 30, 1997 and June 30, 1996 represented 79% and 76%, respectively, of total operating expenses. The $3,734,000 increase in research and development expenses for the six-month period ended June 30, 1997 was primarily attributable to a one-time $2,233,000 non-cash compensation expense recorded in connection with the extension of the term of an officer's warrant to purchase 397,000 shares of the Company's common stock, $.001 par value (the "Common Stock"). The increase is also attributable to costs associated with additional staffing, contract manufacturing and testing, and expenditures in the functional areas of product development, manufacturing and clinical and regulatory affairs to support the manufacture of C225 for human clinical trials as well as travel-related expenses to pursue strategic partnerships for C225 (and other product candidates). The remaining increase reflects growth in the area of discovery research for future product candidates. General and Administrative General and administrative expenses include administrative personnel costs, costs incurred in connection with pursuing arrangements with corporate partners and technology licensors, and expenses associated with applying for patent protection for the Company's technology and products. Such expenses for the six-month periods ended June 30, 1997 and June 30, 1996 were $2,355,000 and $1,587,000, respectively, an increase of $768,000 or 48%. The increase in general and administrative expenses primarily reflects (i) $279,000 in non-cash compensation expense recorded in connection with an option grant to an officer and (ii) additional staffing to support the expanding research, clinical, development and manufacturing efforts of the Company, particularly with its lead therapeutic product candidate, C225. The Company expects general and administrative expenses to increase in future periods to support planned increases in research and development. Page 5 Interest and Other Income/Expense Interest and other income was $685,000 for the six-month period ended June 30, 1997 compared to $454,000 for the six-month period ended June 30, 1996, an increase of $231,000 or 51%. The increase was primarily attributable to the increased interest income earned from higher cash balances in the Company's investment portfolio resulting from the proceeds received from a public stock offering completed in March 1997. Interest and other expense was $340,000 and $547,000 for the six-month periods ended June 30, 1997 and June 30, 1996, respectively, a decrease of $207,000 or 38%. Interest and other expense for both periods primarily included interest on two outstanding Industrial Development Revenue Bonds with an aggregate principal amount of $4,313,000 and interest recorded on the liability to Pharmacia and UpJohn Inc. ("Pharmacia"), for the reacquisition of the worldwide rights to Interleukin - 6 mutein ("IL-6m") as well as clinical material manufactured and supplied by Pharmacia to the Company. The decrease was primarily attributable to the May 1996 exchange of debt for Company Common Stock with the Oracle Group and a Company Director. Net Losses The Company had net losses of $7,391,000 or $0.33 per share for the six-month period ended June 30, 1997, compared with $7,715,000 or $0.41 per share for the six-month period ended June 30, 1996. The decrease in the net loss for the six-month period ended June 30, 1997 was primarily due to the fact that the net loss for the six-month period ended June 30, 1996 included a $1,267,000 or $0.07 per share extraordinary loss on early extinguishment of debt. This extraordinary loss resulted from the issuance of Company Common Stock in lieu of cash repayment of a $2,500,000 loan due the Oracle Group and a $180,000 long-term note owed to a Company Director. Three Months Ended June 30, 1997 and 1996 Revenues Revenues for the three-month periods ended June 30, 1997 and June 30, 1996 were $3,196,000 and $75,000, respectively. Revenues in both periods included research and development support fees of $75,000 from the Company's corporate partnership with American Home in infectious disease vaccines. Revenues for the three-month period ended June 30, 1997 also included milestone revenue of $1,500,000 and contract research support of $417,000 from the Company's research and license agreement with Merck in cancer vaccines. Additionally, the three-month period ended June 30, 1997 included milestone revenue of $1,000,000 and royalty fees of $204,000 from the Company's strategic alliance with Abbott in diagnostics. Operating: Research and Development Total operating expenses for the three-month periods ended June 30, 1997 and June 30, 1996 were $4,529,000 and $3,438,000, respectively. Research and development expenses for the three-month periods ended June 30, 1997 and June 30, 1996 were $3,257,000 and $2,593,000, respectively. Such amounts for the three-month periods ended June 30, 1997 and June 30, 1996 represented 72% and 75%, respectively, of total operating expenses. The $664,000 increase in research and development expenses for the six-month period ended June 30, 1997 was primarily attributable to costs associated with additional staffing, contract manufacturing and testing, and expenditures in the functional areas of product development, manufacturing and clinical and regulatory affairs to support the manufacture of C225 for human clinical trials as well as travel-related expenses to pursue strategic partnerships for C225 (and other product candidates). The remaining increase reflects growth in the area of discovery research for future product candidates. Page 6 General and Administrative General and administrative expenses include administrative personnel costs, costs incurred in connection with pursuing arrangements with corporate partners and technology licensors, and expenses associated with applying for patent protection for the Company's technology and products. Such expenses for the three-month periods ended June 30, 1997 and June 30, 1996 were $1,272,000 and $845,000, respectively, an increase of $427,000 or 51%. The increase in general and administrative expenses primarily reflects (i) $150,000 in non-cash compensation expense recorded in connection with an option grant to an officer and (ii) additional staffing to support the expanding research, clinical, development and manufacturing efforts of the Company, particularly with its lead therapeutic product candidate, C225. The Company expects general and administrative expenses to increase in future periods to support planned increases in research and development. Interest and Other Income/Expense Interest and other income was $440,000 for the three-month period ended June 30, 1997 compared to $261,000 for the three-month period ended June 30, 1996, an increase of $179,000 or 69%. The increase was primarily attributable to the increased interest income earned from higher cash balances in the Company's investment portfolio resulting from the proceeds received from a public stock offering completed in March 1997. Interest and other expense was $145,000 and $200,000 for the three-month periods ended June 30, 1997 and June 30, 1996, respectively, a decrease of $55,000 or 28%. Interest and other expense for both periods primarily included interest on two outstanding Industrial Development Revenue Bonds with an aggregate principal amount of $4,313,000 and interest recorded on the liability to Pharmacia, for the reacquisition of the worldwide rights to IL-6m as well as clinical material manufactured and supplied by Pharmacia to the Company. The decrease was primarily attributable to the May 1996 exchange of debt for Company Common Stock with the Oracle Group and a Company Director. Net Losses The Company had net losses of $1,038,000 or $0.04 per share for the three-month period ended June 30, 1997, compared with $4,569,000 or $0.23 per share for the three-month period ended June 30, 1996. The decrease in the net loss for the three-month period ended June 30, 1997 was primarily due to the fact that the net loss for the three-month period ended June 30, 1996 included a $1,267,000 or $0.06 per share extraordinary loss on early extinguishment of debt. This extraordinary loss resulted from the issuance of Company Common Stock in lieu of cash repayment of a $2,500,000 loan due the Oracle Group and a $180,000 long-term note owed to a Company Director. Page 7 Liquidity and Capital Resources The Company's cash and cash equivalents and securities available for sale totaled $28,950,000 at August 12, 1997; on June 30, 1997 such balances totaled $31,091,000. The current balances in the Company's cash and cash equivalents and securities available for sale primarily reflects the proceeds received from the March 1997 public offering of 3,000,000 shares of Common Stock . In May 1996, the Company extended its collaboration with Merck for the development of a therapeutic cancer vaccine, BEC-2, for use in small-cell carcinoma and in malignant melanoma. The collaboration continues a research and license agreement between the two companies signed in December 1990. Under the terms of the modified agreement, the Company could receive up to $11,700,000 in license fees, research and development support and milestone payments in addition to moneys previously received under the original agreement. Of such $11,700,000, as of June 30, 1997, the Company earned $1,500,000 in milestone payments, and research and support payments of $417,000 which is the first of eight quarterly research and support payments totalling $4,700,000. In return, Merck will receive marketing rights to BEC-2 for all therapeutic indications outside North America. Formerly the rights of Merck were confined to Europe, Australia and New Zealand. Merck will also share in the development costs for the United States and Europe and will pay all development costs in other territories. The Company will be entitled to royalties based upon product sales outside of North America, if any. In December 1996, the Company signed an agreement with Finova Technology Finance, Inc. to finance the lease of laboratory and computer-related equipment and make certain building and leasehold improvements to facilities involving payments aggregating approximately $2,500,000. At July 31, 1997, the Company had $1,799,000 available under this agreement. In December 1996, the Company and Abbott modified their 1992 diagnostic strategic alliance to provide for an exclusive sublicensing agreement with Chiron Diagnostics ("Chiron") for the Company's patented DNA signal amplification technology, AMPLIPROBE. Under the terms of the agreement, all sales of Chiron branched DNA diagnostic probe technology in countries covered by Company patents will be subject to a royalty to Abbott to be passed through to the Company. Royalties on all Chiron sales of AMPLIPROBE are paid on a quarterly basis by Abbott and recognized upon receipt by the Company. In May 1997, a European patent was issued for the Company's proprietary Repair Chain Reaction ("RCR") DNA probe technology which was licensed to Abbott under the 1992 strategic alliance discussed in the preceding paragraph. The issuance of the patent entitled the Company to receive two milestone payments totaling $1,000,000 and royalty payments on sales in covered European countries for products using the Company's RCR technology. Abbott will be entitled to deduct from royalties otherwise due, 25% of such royalties due for a two-year period and 50% thereafter until a total of $500,000 has been deducted. The $1,000,000 in milestone payments and $75,000 in royalty payments covering 1995 and 1996 were received in June 1997. The Company has expended and will continue to expend in the future substantial funds to continue the research and development of its products, conduct pre-clinical and clinical trials, establish clinical-scale and commercial-scale manufacturing in its own facilities or in the facilities of others, and market its products. In addition, $2,113,000 and $2,200,000, respectively, in Industrial Development Revenue Bonds issued by the New York Industrial Development Agency ("NYIDA") on behalf of the Company in 1986 and 1990 become due in December 1997 and May 2004, respectively. The Company has granted a security interest in substantially all facility equipment located in its New York City facility to secure the obligations of the Company to the NYIDA relating to the 1986 and 1990 Industrial Development Revenue Bonds. Page 8 In July 1993, the Company entered into a termination agreement with Erbamont, Inc., now a subsidiary of Pharmacia, to acquire the worldwide rights to IL-6m, a blood cell growth factor, which had been licensed to Pharmacia pursuant to a development and licensing agreement. In consideration of the return of rights and the transfer of certain material and information, the Company has paid $1,928,000 and has further obligations to Pharmacia. Such obligations, including those to pay for IL-6m material manufactured and supplied by Pharmacia, totaled $2,400,000 at March 31, 1996. In addition, the Company is required to pay Pharmacia $2,700,000 in royalties on eventual sales of IL-6m, if any. In March, 1996, the Company entered into a Repayment Agreement with Pharmacia (the "Repayment Agreement") pursuant to which it agreed to pay the $2,400,000 over 24 months commencing in March 1996, with interest only payable during the first six months. At August 1, 1997 the remaining obligation to Pharmacia totaled $835,000. In connection with the Repayment Agreement, the Company signed a Confession of Judgment, which can be filed by Pharmacia with an appropriate court in the case of default by the Company. Pursuant to a Security Agreement entered into with Pharmacia, the Company pledged its interests in patents related to IL-6m and to heparanase to secure its obligations under the Repayment Agreement. The Company's future working capital and capital requirements will depend upon numerous factors, including the progress of the Company's research and development programs, pre-clinical testing and clinical trials, the Company's corporate partners fulfilling their obligations to the Company, the timing and cost of seeking regulatory approvals, the level of resources that the Company devotes to the development of manufacturing, marketing and sales capabilities, technological advances, the status of competitors and the ability of the Company to maintain existing and establish new collaborative arrangements with other companies to provide funding to the Company to support these activities. The Company expects to incur substantial funding requirements for the expansion of operations, including (i) the expansion of the clinical trials of C225 and the related manufacturing program to support these trials and (ii) in an effort to develop new product candidates the expansion of research and development activities including among other things, increased staffing, the acquisition of equipment, and the consummation of new outside research agreements. In addition, the entire $835,000 of outstanding debt to Pharmacia is payable ratably throughout the period ending February 1998 and $2,113,000 of the Industrial Development Revenue Bonds issued by the NYIDA becomes due in December 1997. The Company expects that its capital resources, including the ongoing research support of its corporate partners will be sufficient to fund its operations for approximately the next two years. However, the receipt of certain of such ongoing research support is subject to attaining research and development milestones, certain of which have not yet been achieved. These milestones include, but are not limited to, receiving regulatory permission for the filing of an Investigational New Drug ("IND") application for the initiation of a small cell lung carcinoma clinical trial and reaching certain enrollment levels for such trial relating to the BEC-2 cancer vaccine. No assurance can be given that there will be no change in projected research support (including research and development milestones) or expenses that would lead to the Company's capital being consumed at a faster rate than currently expected. In order to fund its capital needs beyond approximately the next two years, the Company will require significant levels of additional capital and intends to raise the necessary capital through additional arrangements with corporate partners, equity or debt financings or from other sources. There is no assurance that the Company will be successful in consummating any such arrangements with corporate partners, financings or securing other sources. The Company has entered into preliminary discussions with several major pharmaceutical companies concerning the funding of research and development for certain of its products in research. No assurance can be given that the Company will be successful in pursuing any such alternatives. In addition, the Company may seek to enter into a significant strategic partnership with a pharmaceutical company for the development of its lead product candidate, C225. Such a strategic alliance could include an up-front equity investment and technology access fees plus milestone fees and revenue sharing. There can be no assurance that the Company will be successful in achieving such an alliance, nor can the Company predict the amount of funds which might be available to it if it entered into such an alliance or the time at which such funds would be made available. Page 9 The Company has outfitted and purchased equipment for a certain property to create a clinical-scale production facility that complies with current Good Manufacturing Practices regulations. To be successful, the Company's products must be manufactured in commercial quantities in compliance with regulatory requirements and at acceptable costs. Although the Company has developed products in the laboratory and in some cases has produced sufficient quantities of materials for pre-clinical animal trials and early stage clinical trials, production in late stage clinical or commercial quantities may create technical challenges for the Company. If it commercializes its products, the Company may adapt this facility for use as its commercial-scale manufacturing facility. However, the Company has limited experience in clinical-scale manufacturing and no experience in commercial-scale manufacturing, and no assurance can be given that the Company will be able to make the transition to late stage clinical or commercial production. The timing and any additional costs of adapting the facility for commercial manufacturing will depend on several factors, including the progress of products through clinical trials, and are not yet determinable. Total capital expenditures made during the six months ended June 30, 1997 were $724,000 of which $567,000 related to the refurbishment and equipping of the Company's manufacturing facility in New Jersey and $157,000 reflected equipment and computer-related purchases for the corporate office and research laboratories in New York. Certain Factors Affecting Forward-Looking Statements--Safe Harbor Statement Except for the historical information contained herein, this Management's Discussion and Analysis of Financial Condition and Results of Operations and other portions of this report contain forward-looking statements that involve certain risks and uncertainties. The Company's actual operations, performance and results could differ materially from those reflected in, or anticipated by, these forward-looking statements. In evaluating the Company and its operations, performance and results, investors should consider, among other things, the scientific and business risks and uncertainties of new product development in the biotechnology field, the risk of rapid and significant technological change, the risk of development by one or more competitors of products which compete with the Company's proposed products and the risks and uncertainties discussed in the Company's public filings with the Commission, including the Company's most recent Annual Report on Form 10-K under the captions "Business" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." Recently Issued Accounting Standards In February 1997, the Financial Accounting Standards Board issued Statement of Financial Standards No. 128 (SFAS 128), "Earnings Per Share". SFAS 128 establishes standards for computing and presenting earnings per share. In accordance with the effective date of SFAS 128, the Company will adopt SFAS 128 as of December 31, 1997. This statement is not expected to have a material impact on the Company's financial statements. Page 10 PART II - OTHER INFORMATION Item 4 - Submission of Matters to a Vote of Security Holders (a) An annual meeting of stockholders was held on June 3, 1997 (the "Annual Meeting"). (b) The directors elected at the Annual Meeting were Richard Barth, Jean Carvais, Vincent T. DeVita, Jr., Robert F. Goldhammer, David M. Kies, Paul B. Kopperl, William R. Miller, Harlan W. Waksal and Samuel D. Waksal. Such persons are all of the directors of the Company whose term of office as a director continued after the Annual Meeting. (c) The matters voted upon at the Annual Meeting and the results of the voting, including broker non-votes where applicable, are set forth below. (i) Election of directors Name In Favor Withheld Broker Non-Votes - ---- -------- -------- ---------------- Richard Barth 20,671,171 778,505 N/A Jean Carvais 20,671,671 778,005 N/A Vincent T. DeVita, Jr 20,671,671 778,005 N/A Robert F. Goldhammer 20,671,671 778,005 N/A David M. Kies 20,761,371 778,305 N/A Paul B. Kopperl 20,671,571 778,105 N/A William R. Miller 20,671,671 778,005 N/A Harlan W. Waksal 20,671,571 778,105 N/A Samuel D. Waksal 20,671,271 778,405 N/A (ii) The stockholders approved a proposal to amend the Company's 1996 Incentive Stock Option Plan (the "1996 ISO Plan"), generally to (i) increase the total number of shares of Common Stock which may be issued pursuant to options which may be granted under the 1996 ISO Plan from 1,500,000 to 3,000,000, which number shall be reduced by the number of shares of Common Stock which have been or may be issued pursuant to options granted under the Company's 1996 Non-Qualified Stock Option Plan (the "1996 Non-Qualified Plan"); and (ii) change certain administration provisions of the 1996 ISO Plan. The stockholders voted 8,737,903 shares in favor, 4,057,048 shares against, 45,245 shares abstained from voting and there were 8,609,480 broker non-votes. (iii) The stockholders approved a proposal to amend the Company's 1996 Non-Qualified Stock Option Plan, generally to (i) increase the total number of shares of Common Stock which may be issued pursuant to options which may be granted under the 1996 Non-Qualified Plan from 1,500,000 to 3,000,000, which number shall be reduced by the number of shares of Common Stock which have been or may be issued pursuant to options granted under the 1996 ISO Plan; (ii) change certain administration provisions of the 1996 Non-Qualified Plan and (iii) clarify those persons eligible to participate in the 1996 Non-Qualified Plan. The stockholders voted 8,975,273 shares in favor, 3,819,798 shares against, 45,125 shares abstained from voting and there were 8,609,480 broker non-votes. (iv) The stockholders approved a proposal to amend the Company's Certificate of Incorporation to increase the total number of shares of Common Stock the Company is authorized to issue from 30,000,000 shares to 45,000,000 shares. The stockholders voted 19,145,871 shares in favor, 915,585 shares against, 33,875 shares abstained from voting and there were 1,354,345 broker non-votes. (v) The stockholders ratified the appointment by the Board of Directors of KPMG Peat Marwick LLP as the Company's independent certified public accountants for the fiscal year ending December 31, 1997. The stockholders voted 21,310,356 shares in favor, 112,160 shares against, and 27,160 shares abstained from voting. Broker non-votes were not applicable. Page 11 Item 6 - Exhibits and Reports on Form 8-K (a) Exhibits (numbered in accordance with Item 601 of Regulation S-K) Exhibit No. Description ----------- ----------- 3.1 Certificate of Incorporation and all amendments thereto 27.1 Financial Data Schedule 99.1 1996 Incentive Stock Option Plan, as amended 99.3 1996 Non-Qualified Stock Option Plan, as amended (b) Reports on Form 8-K: Date of Report Items Reported -------------- -------------- April 14, 1997 Item 5 June 3, 1997 Item 5 Page 12 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. IMCLONE SYSTEMS INCORPORATED (Registrant) Date: August 13, 1997 By /s/ Samuel D. Waksal --------------------------- Samuel D. Waksal President and Chief Executive Officer Date: August 13, 1997 By /s/ Carl S. Goldfischer --------------------------- Carl S. Goldfischer Vice President , Finance and Chief Financial Officer Page 13 EX-3.1 2 CERTIFICATE OF INCORPORATION Exhibit 3.1 CERTIFICATE OF INCORPORATION OF IMCLONE SYSTEMS INCORPORATED I, H. Kenneth Fish, the incorporator hereinafter named, for the purpose of forming a corporation pursuant to the General Corporation Law of the State of Delaware, do make this certificate, hereby declaring and certifying that this is my act and deed and that the facts herein stated are true; FIRST: The name of the corporation (the "Corporation") is IMCLONE SYSTEMS INCORPORATED. SECOND: The address of the registered office of the Corporation in the State of Delaware is 100 West 10th Street, Wilmington, County of New Castle; and the name of its registered agent at such address is The Corporation Trust Company. THIRD: The purposes of the Corporation are to engage in research and development, production, manufacturing and distribution of products based on genetic engineering, including but not limited to such products based on recombinant DNA techniques and monoclonal antibody techniques of production and to provide consulting and other services as related to the foregoing business. To acquire, hold, dispose of, buy, sell, underwrite, handle on commission and otherwise deal in stocks, shares, bonds, notes and obligations of the interests in corporations, joint-stock companies, trusts, associations, firms or persons and all forms of public and municipal securities of this or any other country, or any right or interest therein, and while owner thereof, to exercise all rights, powers and privileges of ownership in the same manner and to the same extent that an individual might; To acquire, hold, use, dispose of buildings, plants, factories, mills, machinery, works and all other real and personal property, tangible or intangible, of whatever kind and wherever situated, or any right or interest therein for the purposes of the foregoing businesses; patent rights and privileges, inventions, formulae, trademarks and names, secret processes or any right or interest therein; as a going business or otherwise, all or any part of the assets of any corporation, joint-stock company, trust, association, firm or person, and in such cases to assume all or any part of its or his liabilities. To conduct any other lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware. FOURTH: The total number of shares of capital stock which the Corporation shall have authority to issue is one million (1,000,000) shares of common stock with a par value of five cents ($0.05) per share. FIFTH: The name and the mailing address of the incorporator is as follows: NAME MAILING ADDRESS ---- --------------- H. Kenneth Fish Foley, Hoag & Eliot One Post Office Square Boston, Massachusetts 02109 SIXTH: The names and the mailing addresses of the initial directors are as follows: Harlan Waxsel 101 West 81st Street Unit 712 New York, New York Jack Waxsel 260 Hornwood Drive Dayton, Ohio 45405 Salvatore Vernace Pomona Professional Plaza Route 45 Pomona, New York 10970 SEVENTH: The original by-laws of the Corporation shall be adopted by the incorporator Thereafter, the power to make, alter, or repeal the by-laws, and to adopt any new by-law, shall be vested in the board of directors of the Corporation. EIGHTH: Elections of directors need not be by written ballot unless the by-laws of the corporation shall so provide. NINTH: Each person who at any time is, or shall have been, a director or officer of the Corporation, and is threatened to be or is made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he is, or was, a director or officer of the Corporation, or served at the request of the Corporation as a director, officer, employee, trustee, or agent of another corporation, partnership, joint venture, trust or other enterprise, shall be indemnified against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with any such action, suit or proceeding to the full extent provided by the General Corporation Law of the State of Delaware. The foregoing Jack Waxsel right of indemnification shall in no way be exclusive of any other rights of indemnification to which any such director, officer, employee, or agent may be entitled, under any by-law, agreement, vote of stockholders or disinterested directors or otherwise. TENTH: Whenever a compromise or arrangement is proposed between this Corporation and its creditors or any class of them and/or between this Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of this Corporation or of any creditor or stockholder thereof, or on the application of any receiver or receivers appointed for this Corporation under the provisions of Section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for this Corporation under the provisions of Section 279 of Title 8 of the Delaware Code, order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, to be summoned in such manner as said court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors and/or of the stockholders or class of stockholders of this Corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of this Corporation as consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders of this Corporation, as the case may be, and also on this Corporation. IN WITNESS WHEREOF, I have hereunto set my hand and seal this 24th day of April, 1984. [Seal] /s/ H. Kenneth Fish ----------------------------- H. Kenneth Fish, Incorporator CERTIFICATE OF CORRECTION FILED TO CORRECT A CERTAIN ERROR IN THE CERTIFICATE OF INCORPORATION OF IMCLONE SYSTEMS INCORPORATED FILED IN THE OFFICE OF THE SECRETARY OF STATE OF DELAWARE ON APRIL 26, 1984, AND RECORDED IN THE OFFICE OF THE RECORDER OF DEEDS FOR NEW CASTLE COUNTY, DELAWARE, ON APRIL 26, 1984 IMCLONE SYSTEMS INCORPORATED, a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY: 1. The name of the corporation is IMCLONE SYSTEMS INCORPORATED. 2. That a Certificate of Incorporation was filed by the Secretary of State of Delaware on April 26, 1984 and recorded in the office of the Recorder of Deeds of New Castle County on April 26, 1984 and that said certificate requires correction as permitted by subsection (F) of section 103 of The General Corporation Law of the State of Delaware. 3. The inaccuracy or defect of said certificate to be corrected is as follows: The surname of two of the initial directors referred to in paragraph SIXTH is Waksal rather than Waxsel. 4. Paragraph SIXTH of the certificate is corrected to read as follows: SIXTH: The names and the mailing addresses of the initial directors are as follows: Harlan Waksal 101 West 81st Street Unit 712 New York, New York Jack Waksal 260 Hornwood Drive Dayton, Ohio 45405 Salvatore Vernace Pomona Professional Plaza Route 45 Pomona, New York 10970 IN WITNESS WHEREOF, said IMCLONE SYSTEMS INCORPORATED has caused this certificate to be signed by Jack Waksal and Salvatore Vernace, a majority of its Directors, 26th day of April, 1984. IMCLONE SYSTEMS INCORPORATED /s/ Salvatore Vernace ------------------------------------- Michael A. Stetl Notary Public in and for the State of Ohio /s/ Jack Waksal ------------------------------------- My Commission expires Dec. 4, 1985 /s/ Michael A. Stetl - ------------------------------------ 5/30/84 CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION ImClone Systems Incorporated, a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY: FIRST: That the Board of Directors of said Corporation, by the unanimous written consent of its members dated September 13, 1984 filed with the minutes of the Board, adopted a resolution proposing and declaring advisable the following amendment to the Certificate of Incorporation of said Corporation: RESOLVED, that the Certificate of Incorporation of ImClone Systems Incorporated be amended by changing the FOURTH Article so that as amended said Article shall be and read as follows: "The total number of shares of capital stock which the Corporation shall have authority to issue is two million (2,000,000) shares of common stock with a par value of five cents ($0.05) per share. SECOND: That in lieu of a meeting and vote of stockholders, the stockholders have given written consent to said amendment in accordance with the provisions of section 228 of the General Corporation Law of the State of Delaware and written notice of the adoption of the amendment has been given as provided in section 228 of the General Corporation Law of the State of Delaware to every stockholder entitled to such notice. THIRD: That the aforesaid amendment was duly adopted in accordance with the applicable provisions of sections 242 and 228 of the General Corporation Law of the State of Delaware. IN WITNESS WHEREOF, said ImClone Systems Incorporated has caused this certificate to be signed by Harlan Waksal, its President, and attested by H. Kenneth Fish, its Secretary, this 29th day of September, 1984 IMCLONE SYSTEMS INCORPORATED By /s/ Harlan W. Waksal M.D. -------------------------------------- Harlan Waksal, its President ATTEST: By /s/ H. Kenneth Fish -------------------------------- H. Kenneth Fish, Secretary CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION ImClone Systems Incorporated, a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY: FIRST: That the Board of Directors of said Corporation, by the unanimous written consent of its members dated May 20, 1986 filed with the minutes of the Board, adopted a resolution proposing and declaring advisable the following amendment to the Certificate of Incorporation of said Corporation. RESOLVED, that the Certificate of Incorporation of ImClone Systems Incorporated be amended by changing the FOURTH Article so that as amended said Article shall be and read as follows: "The total number of shares of capital stock which the Corporation shall have authority to issue is seven million (7,000,000) shares of common stock with a par value of five cents ($0.05) per share." SECOND: That in lieu of a meeting and vote of stockholders, the stockholders have given written consent to said amendment in accordance with the provisions of section 228 of the General Corporation Law of the State of Delaware and written notice of the adoption of the amendment has been given as provided in section 228 of the General Corporation Law of the State of Delaware to every stockholder entitled to such notice. THIRD: That the aforesaid amendment was duly adopted in accordance with the applicable provisions of sections 242 and 228 of the General Corporation Law of the State of Delaware. IN WITNESS WHEREOF, said ImClone Systems Incorporated has caused this certificate to be signed by Harlan Waksal, its President, and attested by John Landes, its Secretary, this 16th day of June 1986. IMCLONE SYSTEMS INCORPORATED By /s/ Harlan W. Waksal M.D. -------------------------------------- Harlan Waksal, its President ATTEST. By /s/ John Landes - --------------------------------- John Landes, Secretary CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF IMCLONE SYSTEMS INCORPORATED The undersigned hereby certifies that the following amendment to the Certificate of Incorporation of ImClone Systems Incorporated (the "Corporation") has been duly adopted in accordance with the provisions of Sections 242 and 228 of the General Corporation Law of Delaware and that, pursuant to said Section 228, written notice of said adoption has been provided to those stockholders of the Corporation who did not consent in writing to such adoption: That the Certificate of Incorporation of the Corporation be, and it hereby is, amended by addition thereto of a new Article ELEVENTH as follows: ELEVENTH: To the maximum extent permitted by the General Corporation Law of the State of Delaware, as the same exists or may hereafter be amended, no director of this Corporation shall be personally liable to the Corporation or to any of its stockholders for monetary damages arising out of such director's breach of fiduciary duty as a director of the Corporation. IN WITNESS WHEREOF, said ImClone Systems Incorporated has caused this certificate to be signed by Harlan Waksal, its President, and attested by John Landes, its Secretary, this 27 day of May, 1987. ATTEST: IMCLONE SYSTEMS INCORPORATED /s/ John B. Landes By /s/ Harlan W. Waksal M.D. - ------------------------- -------------------------------------- John B. Landes, Secretary Harlan Waksal, its President CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF IMCLONE SYSTEMS INCORPORATED Pursuant to Section 242 of The Delaware General Corporation Law We, Harlan W. Waksal, Executive Vice President, and John B. Landes, Secretary, respectively, of ImClone Systems Incorporated, a corporation organized and existing under and by virtue of the Delaware General Corporation Law (the "Corporation"), do hereby certify as follows: FIRST: That the Board of Directors of the Corporation duly adopted the following amendment to the Certificate of Incorporation of the Corporation, proposing and declaring such amendment to be advisable and directing that such amendment be submitted to the stockholders of the Corporation for their approval. The Amendment is that Article NINTH of the Certificate of Incorporation of the Corporation be amended to read in its entirety as follows: "NINTH (a) Each person who was or is made a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "proceeding"), by reason of the fact that he or she, or a person of whom he or she is the legal representative, is or was a director or officer of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent or in any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the Delaware General Corporation Law, as the same exists or may hereafter be amended, against all expense, liability and loss (including attorneys' fees, judgments, fines, excise taxes or penalties under the Employee Retirement Income Security Act and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection therewith, and such indemnification shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of his or her heirs, executors and administrators, provided, however, that, except as provided in paragraph (b) hereof, the Corporation shall indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof) was authorized by the board of directors of the Corporation. The right to indemnification conferred in this Article NINTH shall be a contract right and shall include the right to be paid by the Corporation the expenses incurred in defending any such proceeding in advance of its final disposition; provided, however, that, if the Delaware General Corporation Law requires, the payment of such expenses incurred by a director or officer in his or her capacity as a director or officer (and not in any other capacity as a director or officer, including, without limitation, service to an employee benefit plan) in advance of the final disposition of a proceeding, shall be made only upon delivery to the Corporation of an undertaking, by or on behalf of such director or officer, to repay all amounts so advanced if it shall ultimately be determined that such director or officer is not entitled to be indemnified under this Article NINTH or otherwise. The provisions of this paragraph (a) shall apply to any member of any Committee appointed by the Board of Directors as fully as though such person shall have been an officer or director of the Corporation. The Corporation may, by action of its Board of Directors, provide indemnification to employees and agents of the Corporation with the same scope and effect as the foregoing indemnification of directors and officers. (b) If a claim under paragraph (a) of this Article is not paid in full by the Corporation within thirty days after a written claim has been received by the Corporation, the claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking, if any is required, has been tendered to the Corporation) that the claimant has not met the standards of conduct which make it permissible under the Delaware General Corporation Law for the Corporation to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be on the Corporation. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the Delaware General Corporation Law, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct. (c) The Corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any such expense, liability, or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the Delaware General Corporation Law. (d) The provisions of this Article NINTH shall be in addition to and not in limitation of any other rights, indemnities, or limitations of liability to which any director or officer may be entitled, as a matter of law or under any By-Law, agreement, vote of stockholders or otherwise." SECOND: That a special meeting of the stockholders of said Corporation was duly called and held, upon notice in accordance with Section 222 of the Delaware General Corporation Law, at which meeting the necessary number of shares as required by statute were voted in favor of the Amendment. THIRD: That the Amendment set forth in Article FIRST hereof was duly adopted in accordance with the applicable provisions of Section 242 of the Delaware General Corporation law. IN WITNESS WHEREOF, we have signed this certificate this 28 day of March 1988. /s/ Harlan W. Waksal ------------------------------ Harlan W. Waksal Executive Vice President Attest /s/ John B. Landes - ------------------------ John B Landes Secretary CERTIFICATE 0F AMENDMENT TO CERTIFICATE OF INCORPORATION OF IMCLONE SYSTEMS INCORPORATED under section 242 or the General Corporation law of the State of Delaware The undersigned, being the Executive Vice President of IMCLONE SYSTEMS INCORPORATED, a Delaware corporation (the "Corporation") DOES HEREBY CERTIFY as follows: FIRST: The Certificate of Incorporation of the Corporation is hereby amended by deleting Article FOURTH in its entirety and inserting the following in lieu thereof: "FOURTH: (a) the total number of shares of capital stock which the Corporation shall have the authority to issue shall be 16,000,000 shares, of which 15,000,000 shares shall be Common Stock with a par value of one cent ($.0l) per share, and 1,000,000 shares shall be Preferred Stock with a par value of one dollar ($1.00) per share. A statement of the designations of the authorized classes of stock or of any series thereof, and the voting powers, full or limited, or no voting powers, preferences and relative, participating, optional or other special rights, and qualifications, limitations or restrictions thereof, or of the authority of the Board of Directors to fix by resolution or resolutions such designations and other terms not fixed by the Certificate of Incorporation, is as follows: 1. The Board of Directors is authorized, subject to the limitations prescribed by law and in accordance with the provisions hereof, to provide for the issuance or Preferred Stock in one or more series, from time to time and, by filing a certificate of designations pursuant to the General Corporation Law, to establish the number of shares to be included in each such series, and to fix the designation, voting powers, full or limited, or no voting powers, preferences, and relative, participating, optional or other special rights, and qualifications, limitations or restrictions of the shares of each such series. The authority of the Board or Directors with respect to each such series shall include, but not be limited to, the determination or fixing of the following: (i) The distinctive designation and number of shares comprising such series; (ii) The dividend rate of such series, the conditions and time upon which such dividends shall be payable, the relation which such dividends shall bear to the dividends payable on any other class or classes of stock or series thereof, or any other series of the same class, and whether such dividends shall be cumulative or non-cumulative; (iii) The conditions upon which the shares of such series shall be subject to redemption by the Corporation and the times, prices and other terms and provisions upon which the shares of the series may be redeemed; (iv) Whether or not the shares of the series shall be subject to the operation of a retirement or sinking fund to be applied to the purchase or redemption of such shares and, if such retirement or sinking fund be established, the annual amount thereof and the terms and provisions relative to the operation thereof; (v) Whether or not the shares of the series shall be convertible into or exchangeable for shares or any other class or classes, with or without par value, or of any other series of the same class, and, it provision is made for conversion or exchange, the times, prices, rates, adjustments, and other terms and conditions of such conversion or exchange; (vi) Whether or not the shares of the series shall have voting rights, in addition to the voting rights provided by law, and, if so, subject to the limitation hereinafter set forth, the terms of such voting rights; (vii) The rights of the shares of the series in the event of voluntary or involuntary liquidation, dissolution, or upon the distribution of assets of the Corporation; (viii) Any other powers, preferences and relative participating, optional or other special rights, and qualifications, limitations or restrictions thereof, of the shares of such series, as the Board of Directors may deem advisable and as shall not be inconsistent with the provisions of this Certificate of Incorporation. 2. The holders of shares of the Preferred Stock of each series shall be entitled to receive, when and as declared by the Board of Directors, out of funds legally available for the payment of dividends, dividends at the rates fixed by the Board of Directors for such series, and no more, before any dividends, other than dividends payable in Common Stock, shall be declared and paid, or set apart for payment, on the Common Stock with respect to the same dividend period. 3. The holders of shares of the Preferred Stock of each series shall be entitled upon liquidation or dissolution or upon the distribution of the assets of the corporation to such preferences as provided in the resolution or resolutions creating such series of Preferred Stock, and no more, before any distribution or the assets of the Corporation shall be made to the holders of shares of the Common Stock. Whenever the holders of shares of the Preferred Stock shall have been paid the full amounts to which they shall be entitled, the holders of shares of the Common Stock shall be entitled to share ratably in all assets of the corporation remaining. 4. At all meetings of the stockholders of the corporation, the holders of shares of the Common Stock shall be entitled to one vote for each share of Common Stock held by them. Except as otherwise provided by a resolution or resolutions of the Board of Directors creating any series of Preferred Stock or by the Delaware General Corporation Law, the holders of shares of the Common Stock issued and outstanding shall have and possess the exclusive right to notice of stockholders' meetings and the exclusive power to vote. (b) A director shall be fully protected in relying in good faith upon the books of account of the Corporation or statements prepared by any of its officials as to the value and amount of the assets, liabilities and/or net profits of the Corporation, or any other facts pertinent to the existence and amount of surplus or other funds from which dividends might properly be declared and paid. (c) The Corporation shall be entitled to treat the person in whose name any share, right or option is registered as the owner thereof, for all purposes, and shall not be bound to recognize any equitable or other claim to or interest in such share, right or option on the part of any other person, whether or not the Corporation shall have notice thereof, save as may be expressly provided by the laws of the state of Delaware. SECOND: That such amendment was duly adopted by the Board of Directors of the Corporation and by the Stockholders of the Corporation in accordance with Section 242 of the General Corporation Law of the State of Delaware. IN WITNESS WHEREOF, this Certificate of Amendment to this Certificate of Incorporation of the Corporation has been signed, and the statements made herein affirmed as true under the penalties of perjury, this l2th day of June, 1991. /s/ Harlan W. Waksal ----------------------------- Harlan W. Waksal Executive Vice President ATTEST: /s/ John B. Landes -------------------------- John B. Landes CERTIFICATE OF AMENDMENT To CERTIFICATE OF INCORPORATION 0F IMCLONE SYSTEMS INCORPORATED Under Section 242 of the General Corporation Law of the State of Delaware The undersigned, being the Executive Vice President of IMCLONE SYSTEMS INCORPORATED, a Delaware corporation (the "Corporation") DOES HEREBY CERTIFY as follows: FIRST: The Certificate of Incorporation of the Corporation is hereby amended by deleting the first paragraph of Article FOURTH in its entirety and inserting the following in lieu thereof: "FORTH: (a) The total number of shares of capital stock which the corporation shall have the authority to issue in thirty million (30,000,000) shares or Common Stock with a par Value of one tenth of one cent ($.001) per share and four million (4,000,000} shares of Preferred Stock with par value of one dollar ($1.00) per share." SECOND: The Certificate of Incorporation of the Corporation is further amended to add a new Article TWELFTH to read as follows; "TWELFTH: Each outstanding share of Common Stock, par value $.01 per share, is hereby re-classified and changed into one and one-half shares of Common Stock, par value $.00l per share, and upon the filing of this amendment to the Certificate of Incorporation, each outstanding share of Common Stock, par value $.01 per share, shall be split up and converted into one and one-half shares of Common Stock, par value $.00l per share." THIRD: That such amendment was duly adopted by the Board of Directors of the Corporation and by the Stockholders of the corporation in accordance with Section 242 of the General Corporation Law of the State of Delaware. IN WITNESS HEREOF, this Certificate of Amendment to the Certificate of Incorporation of the Corporation has been signed, and the statements made herein affirmed as true under the penalties of perjury, this 16th day of' September, 1991. /s/ Harlan W. Waksal -------------------------- Harlan W. Waksal, Executive Vice President ATTEST: /s/ John B. Landes ---------------------------- John B. Landes, Secretary CERTIFICATE OF AMENDMENT TO CERTIFICATE OF INCORPORATION OF IMCLONE SYSTEMS INCORPORATED Under Section 242 of the General Corporation Law of the State of Delaware The undersigned, being the Executive Vice President of IMCLONE SYSTEMS INCORPORATED, a Delaware corporation (the "Corporation") DOES HEREBY CERTIFY as follows: FIRST: The Certificate of Incorporation of the Corporation is hereby amended so that Article FOURTH (a) shall read in its entirety as follows: "FOURTH: (a) The total number of shares of capital stock which the Corporation shall have the authority to issue is forty-five million (45,000,000) shares of Common Stock with a par value of one tenth of one cent ($.001) per share and four million (4,000,000) shares of Preferred Stock with a par value of one dollar ($1.00) per share." SECOND: That such amendment was duly adopted by the Board of Directors of the Corporation and by the Stockholders of the Corporation in accordance with Section 242 of the General Corporation Law of the State of Delaware. IN WITNESS WHEREOF, this Certificate of Amendment to the Certificate of Incorporation of the Corporation has been signed, and the statements hereto affirmed as true under the penalties of perjury, this 18 day of July, 1997. /s/ Harlan W. Waksal ------------------------------- Harlan W. Waksal Executive Vice President Attest: /s/ John B. Landes -------------------------- John B. Landes EX-99.1 3 1996 INCENTIVE STOCK OPTION PLAN Exhibit 99.1 IMCLONE SYSTEMS INCORPORATED 1996 INCENTIVE STOCK OPTION PLAN, AS AMENDED(1) ARTICLE 1 Purpose of Plan 1.1 General Purpose. The purpose of this Incentive Stock Option Plan (the "Plan") is to promote the interests of ImClone Systems Incorporated, and any subsidiaries of such company, as from time to time may be formed or acquired (collectively, the "Company"), by affording key executives and employees an opportunity to acquire a proprietary interest in the Company pursuant to stock options issued by the Company, and thus to create in such employees increased personal interest in its continued success. 1.2 Statutory Stock Option. Options granted under the Plan are intended to be "incentive stock options" to which Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), applies. - ---------- (1) This plan was adopted by the Board on February 25, 1996 and approved by the stockholders on June 3, 1996; it was amended by the Board on April 3, 1997 and such amendments were ratified by the stockholders on June 3, 1997. 1 ARTICLE II Shares Subject to Plan 2.1 Description of Shares. Subject to Article VII hereof, the stock to which the Plan applies is shares of the Company's common stock, $.001 par value ("Common Stock"), either authorized but unissued or Treasury shares. The number of shares of Common Stock to be issued or sold pursuant to options granted hereunder shall not exceed 3,000,000 shares; provided, that such number shall be reduced by the number of shares which have been sold under, or may be sold pursuant to options granted from time to time under, the Company's 1996 Non-Qualified Stock Option Plan (the "Non-Qualified Plan"), to the same extent as if such sales had been made or options had been granted pursuant to this Plan. 2.2 Restoration of Unpurchased Shares. Any shares subject to an option granted hereunder or under the Non-Qualified Plan that, for any reason, expires or is terminated unexercised as to such shares may again be subject to an option to be granted hereunder. ARTICLE III Administration; Committees; Amendments 3.1 Administration.. The Plan shall be administered by any of the Compensation Committee, the Stock Option Committee (which is a subcommittee of the Compensation Committee) (collectively, the "Committees") or the Company's Board of Directors (the "Board"). The Committees shall be comprised of not less than two persons who shall be appointed by the Board from among the members of the Board. Members of the Committees shall not be eligible 2 to become participants under the Plan while they are members of the Committees or for a period of three months thereafter. 3.2 Duration; Removal; Etc. The members of the Committees shall serve at the pleasure of the Board, which shall have the power at all times to remove members from the Committees or to add members thereto. Vacancies in the Committees, however caused, shall be filled by action of the Board. 3.3 Meetings; Actions of Committees. Each of the Committees and the Board may select one of its members as its Chairman and shall hold its meetings at such times and places as it may determine. All decisions or determinations of each of the Committees and the Board shall be made by the majority vote or decision of all of its members, whether present at a meeting or not; provided, however, that any decision or determination reduced to writing and signed by all of the members shall be as fully effective as if it had been made at a meeting duly called and held. Each of the Committees and the Board may make such rules and regulations for the conduct of its business not inconsistent herewith as it may deem advisable. 3.4 Interpretation. The interpretation and construction by any of the Committees or the Board of the provisions of the Plan or of the options granted hereunder shall be final, unless in the case of the Committees otherwise determined by the Board. No member of the Board or of the Committees shall be liable for any action taken or determination made in good faith. 3.5 Amendments or Discontinuation. The Board may make such amendments, changes, and additions to the Plan, or may discontinue and terminate the Plan, as it may deem advisable from time to time; provided, however, that no action shall affect or impair any options theretofore granted under the Plan, and provided, further, however, that the affirmative vote of 3 the owners of a majority of the outstanding shares of Common Stock present at a meeting in person or by proxy and entitled to vote at the meeting shall be necessary to effect any amendment to the Plan which would (a) increase the number of shares of Common Stock subject to options granted under the Plan, or (b) authorize the granting of options at a price below the minimum price established by Section 5.3 hereof. ARTICLE IV Participants; Maximum Grant; Duration of Plan 4.1 Eligibility and Participation. Options shall be granted only to persons ("Participants") who at the time of granting are key executives or key employees of the Company. Subject to the provisions of Section 4.3 hereof, the Committees or the Board shall determine the key executives and key employees to be granted options hereunder, the number of shares of Common Stock subject to such options, the exercise prices of options, the terms thereof and any other provisions not inconsistent with the Plan. 4.2 Guidelines for Participation. In selecting Participants and determining the numbers of shares of Common Stock for which options are to be granted the Committees or the Board shall consult with officers and directors of the Company, and shall take into account the duties of the respective employees, their present and potential contributions to the success of the Company, and such other factors as any of the Committees or the Board shall deem relevant. 4.3 Maximum Grant. Notwithstanding anything to the contrary in the Plan, the aggregate fair market value (determined as of the time the option is granted) of the Common Stock for which any Participant may be granted options in any calendar year (under all plans, including the 4 Plan, providing for the grant of incentive stock options of the Company and its parent and subsidiaries) shall not exceed $100,000. 4.4 Duration of Plan. All options under the Plan shall be granted within ten years from the date the Plan is adopted, or the date the Plan is approved by the shareholders of the Company, whichever is earlier. ARTICLE V Terms and Conditions of Options 5.1 Individual Stock Option Agreements. All stock options granted pursuant to the Plan shall be evidenced by stock option agreements ("Stock Option Agreements"), which need not be identical, between the Company and the Participant in such form as any of the Committees or the Board shall from time to time approve, subject to the terms of the Plan. 5.2 Number of Shares. Each Stock Option Agreement shall state the total number of shares of Common Stock with respect to which the option is granted, the terms and conditions of the option, and the exercise price or prices thereof, it being understood that any of the Committees or the Board shall have authority to prescribe in any Stock Option Agreement that the option evidenced thereby may be exercisable in full or in part, as to any number of shares subject thereto, at any time or from time to time during the term of the option, or in such installments at such times during said term as any of the Committees or the Board may determine; provided that no option granted pursuant to the Plan shall be exercisable after the expiration of ten years from the date such option is granted. A previously granted incentive stock option shall be treated as outstanding until it is exercised in full or expires by reason of the lapse 5 of time. Except as otherwise provided in any Stock Option Agreement, an option may be exercised at any time or from time to time during the term of the option as to any or all full (but no fractional) shares which have become purchasable under such option. Any of the Committees or the Board shall have the right to accelerate, in whole or in part, from time to time, conditionally or unconditionally, the right to exercise any option granted hereunder. 5.3 Option Price. The price at which the shares of Common Stock subject to each option granted under this Plan may be purchased (the "option price" or "exercise price") shall be determined by any of the Committees or the Board, which shall have authority at the time the option is granted to prescribe in any Stock Option Agreement that the price per share, with the passage of pre-determined periods of time, shall increase from the original price to higher prices, but in no case shall the original exercise price of any option be less than 100% of the fair market value of such shares on the date the option is granted, as determined by any of the Committees or the Board in accordance with applicable Treasury Regulations. Notwithstanding anything contained to the contrary herein, no option shall be granted to any employee who, at the time the option is granted, owns more than 10% of the total combined voting power of all classes of stock of the Company or of its parent or subsidiary unless, at the time option is granted, the exercise price of the option is at least 110% of the fair market value of the shares of Common Stock subject to the option and such option by its terms is not exercisable after the expiration of five years from the date such option is granted. For purposes of determining the ownership of stock of the Company, the rules of Section 424(d) of the Code shall be applied. 5.4 Method of Exercising Option; Full Payment. Subject to Section 6.1 and 6.2 hereof, options granted pursuant to the Plan may be exercised only if the Participant was, at all 6 times during the period beginning on the date the option was granted and ending on the date of such exercise, an employee of the Company, a parent or subsidiary of the Company, or a corporation or a parent or subsidiary of such corporation issuing or assuming a stock option in respect of such option in a transaction to which Section 424(a) of the Code applies. Options shall be exercised by written notice to the Company, addressed to the Company at its principal place of business. Such notice shall state the Participant's election to exercise the option and the number of shares of Common Stock in respect of which it is being exercised, and shall be signed by the Participant so exercising the option. Such notice shall be accompanied by (a) the Stock Option Agreement (which, if not exercised for all the shares thereto, shall be appropriately endorsed and returned to the Participant; (b) payment of the full purchase price of such shares, which payment shall be in cash, by check or in stock of the Company that has been owned by the participant for at least six months, or notes of the Company or, as agreed to by the Board, other consideration; and (c) such written representations and other documents as may be desirable, in the opinion of the Company's legal counsel, for purposes of compliance with state or Federal securities or other laws. In the case of payment made in stock of the Company, the stock shall be valued at its Fair Market Value (as hereinafter defined) on the last business day prior to the date of exercise. The term "Fair Market Value" for the Common Stock on any particular date shall mean the last reported sale price of the Common Stock on the principal market on which the Common Stock trades on such date or, if no trades of Common Stock are made or reported on such date, then on the next preceding date on which the Common Stock traded. The Company shall deliver a certificate or certificates representing shares of Common Stock purchased pursuant to such notice to the purchaser as soon as practicable after receipt of such notice, subject 7 to Article VIII hereof. Any of the Committees or the Board may amend an already outstanding Stock Option Agreement to add a provision permitted by clause (b) of this Section 5.4, and no such amendment, by itself, shall be deemed to constitute the grant of a new option for purposes of this Plan; provided that this sentence shall not be determinative of whether any such amendment constitutes a new grant for purposes of qualification as an Incentive Stock Option. 5.5 Rights as a Shareholder. No Participant shall have any rights as a shareholder with respect to shares of Common Stock subject to an option granted under the Plan until the date of the issuance to such Participant of stock certificates in respect of such shares. No adjustment shall be made for dividends or other rights for which the record date is prior to the date such stock certificate is issued. 5.6 Other Provisions. Stock Option Agreements entered into pursuant to the Plan may contain such other provisions (not inconsistent with the Plan) as any of the Committees or the Board may deem necessary or desirable, including, but not limited to, covenants on the part of the Participant not to compete, not to sell Common Stock obtained from the exercise of options for specified periods of time, and remedies available to the Company in the event of the breach of any such covenant. ARTICLE VI Termination of Employment; Transferability 6.1 Termination of Employment. Except as otherwise provided in connection with the grant of any option or the termination of any Participant, the right to exercise any unexercised 8 portion of any option granted under the Plan shall terminate immediately upon termination of the employment relationship between the Participant and the Company (or its parent or subsidiary, as the case may be), for any reason, without regard to cause, other than by reason that the Participant dies or becomes disabled (as defined in the Code). The option may not be exercised thereafter, and the shares of Common Stock subject to the unexercised portion of such option may again be subject to new options under the Plan. 6.2 Death or Disability of Participant. Except as otherwise permitted in connection with the grant of any option or the death or disability of a Participant, in the event a Participant dies or is disabled while in the employ of the Company or of a parent or subsidiary of the Company, any options theretofore granted to him shall be exercisable only within the next 12 months immediately succeeding such death or disability and then only in the case of death (a) by the person or persons to whom the Participant's rights under the option shall pass by will or the laws of descent and distribution, and, in the case of disability, by such Participant or his legal representative, and (b) if and to the extent that he was entitled to exercise the option at the date of his death. 6.3 Transferability. Options granted to a Participant under the Plan shall not be transferable otherwise than by will, by the laws of descent and distribution, or (if authorized in the applicable Stock Option Agreement) pursuant to a qualified domestic relations order ("QDRO") as defined by the Internal Revenue Code of 1986, as amended, or Title I of the Employee Retirement Income Security Act of 1974, as amended, or the rules thereunder. During the Participant's lifetime, options shall be exercised only by such Participant, such Participant's 9 guardian or legal representative, or (if authorized in the applicable Stock Option Agreement) such Participant's transferee pursuant to a QDRO. ARTICLE VII Capital Adjustments 7.1 Capital Adjustments. If any change is made in the shares of Common Stock subject to the Plan or subject to any option granted under the Plan (through merger, consolidation, reorganization, recapitalization, stock dividend, split-up, combination of shares, exchange of shares, issuance of rights to subscribe, or change in capital structure), appropriate adjustments shall be made by any of the Committees or the Board as to the maximum number of shares subject to the Plan and the number of shares and price per share subject to outstanding options as shall be equitable to prevent dilution or enlargement of option rights; provided, however, that any such adjustment shall comply with the rules of Section 424(a) of the Code and provided further that in no event shall any adjustment be made that would cause any option granted hereunder to be considered other than an incentive stock option. Any determination made by any of the Committees or the Board under this Article VII shall be final, binding and conclusive upon each Participant. ARTICLE VIII Legal Requirements, Etc. 8.1 Revenue Stamps. The Company shall be responsible and shall pay for any transfer, revenue, or documentary stamps with respect to shares issued upon the exercise of options granted under the Plan. 10 8.2 Legal Requirements. The Company shall not be required to issue certificates for shares upon the exercise of any option unless and until, in the opinion of the Company's legal counsel, such issuance would not result in a violation of any state or Federal securities or other law. Certificates for shares, when issued, shall have, if required in the opinion of the Company's legal counsel, the following legend, or statements of other restrictions, endorsed thereon, and may not be immediately transferable: The shares of Common Stock evidenced by this certificate have been issued to the registered owner in reliance upon written representations that these shares have been purchased for investment. These shares may not be sold, transferred, or assigned unless, in the opinion of the Company and its legal counsel, such sales, transfer, or assignment will not be in violation of the Securities Act of 1933, as amended, applicable rules and regulations of the Securities and Exchange Commission and any applicable state Securities laws. 8.3 Private Offering. The options to be granted under the Plan are available only to a limited number of present and future key executives and employees of the Company and its subsidiaries who have knowledge of the Company's financial condition, management, and affairs. Such options are not intended to provide additional capital for the Company but are to encourage stock ownership by the Company's key personnel. By the act of accepting an option, in the absence of an effective registration statement under the Securities Act of 1933, as amended, Participants shall agree that upon exercise of such option, they will acquire the shares of Common Stock that are the subject thereof for investment and not with any intention at such time to resell or redistribute the same, and they shall confirm such agreement at the time of exercise, 11 but the neglect or failure to confirm the same in writing shall not be a limitation of such agreement. ARTICLE IX General 9.1 Application of Funds. The proceeds received by the Company from the sale of shares of Common Stock pursuant to the exercise of options therefor shall be used for general corporate purposes. 9.2 Right of the Company to Terminate Employment. Nothing contained in the Plan or in a Stock Option Agreement shall confer upon any Participant any right to be continued in the employ of the Company or of any subsidiary of the Company, or interfere in any way with the right of the Company, or such subsidiary, to terminate his employment for any reason whatsoever, with or without cause, at any time. 9.3 No Obligation to Exercise. The granting of an option hereunder shall impose no obligation upon the Participant to exercise such option. 9.4 Effectiveness of Plan. The Plan shall become effective upon its adoption by the shareholders of the Company. Options may be granted under the Plan prior to the approval of the Plan by the Shareholders, but no such option may be exercised prior to such approval. 9.5 Other Benefits. Participation in the Plan shall not preclude a Participant from eligibility in any other stock benefit plan of the Company or any old age benefit, insurance, pension, profit sharing, retirement, bonus or other plan which the Company has adopted, or may, at any time, adopt for the benefit of its parents' or its subsidiaries' executives and/or employees. 12 9.6 Company Records. Records of the Company as to a Participant's period of employment, termination of employment and the reason therefor, leaves of absence, re-employment, and other matters will be conclusive for all purposes hereunder. 9.7 Tax Requirement. The exercise or surrender of any option under this Plan shall constitute a Participant's full and complete consent to whatever action the Committee elects to satisfy the Federal and state withholding requirements, if any, which the Committee in its discretion deems applicable to such exercise. 9.8 Interpretations and Adjustments. To the extent permitted by law, an interpretation of the Plan and a decision on any matter within any of the Committees' or Board's discretion made in good faith is binding on all persons. A misstatement or other mistake of fact shall be corrected when it becomes known, and the person responsible shall make such adjustment on account thereof as he considers equitable and practicable. 9.9 Information. The Company shall, upon request or as may be specifically required hereunder, furnish or cause to be furnished, all of the information or documentation which is necessary or required by any of the Committees or the Board to perform its duties and functions under the Plan. 9.10 Notice of Disqualifying Disposition. If a Participant sells or otherwise disposes of any share of Common Stock transferred to him pursuant to the exercise of an option granted hereunder within two years from the date of the granting of the option or within one year of the transfer of such shares to him (i.e., a "disqualifying disposition"), the Participant, within ten days thereafter, shall furnish to any of the Committees or the Board at the principal offices of the Company, written notice of such sale or other disposition. 13 9.11 Governing Law. The Plan and any and all options granted thereunder shall be governed by, and construed and enforced in accordance with, the laws of the State of New York from time to time in effect. 9.12 Certain Definitions. 9.12.1 "Parent". The term "parent" shall mean a "parent corporation" as defined in Section 424(e) of the Code. 9.12.2 "Subsidiary". The term "subsidiary" shall mean a "subsidiary corporation" as defined in Section 424(f) of the Code. 9.12.3 "Incentive Stock Option". The term "incentive stock option" shall mean an option described in Section 422(b) of the code. 9.12.4 "Disabled." The term "disabled" shall have the definition set forth in Section 22(a)(3) of the Code. 14 EX-99.3 4 1996 NON-QUALIFIED STOCK OPTION PLAN Exhibit 99.3 IMCLONE SYSTEMS INCORPORATED 1996 NON-QUALIFIED STOCK OPTION PLAN, AS AMENDED(1) ARTICLE I Purpose of Plan 1.1 General Purpose. The purpose of this Non-Qualified Stock Option Plan (the "Plan") is to promote the interests of ImClone Systems Incorporated (the "Company") by affording key consultants, advisors, directors and employees an opportunity to acquire a proprietary interest in the Company pursuant to stock options issued by the Company, and thus to create in such persons increased personal interest in its continued success. 1.2 Statutory Stock Option. Options granted under the Plan are intended to be "non-qualified" stock options under the Internal Revenue Code of 1986, as amended (the "Code"). - ---------- (1) This plan was adopted by the Board on February 25, 1996 and approved by the stockholders on June 3, 1996; it was amended by the Board on April 3, 1997 and such amendments were ratified by the stockholders on June 3, 1997. 1 ARTICLE II Shares Subject to Plan 2.1 Description of Shares. Subject to Article VIII hereof, the stock to which the Plan applies is shares of the Company's common stock, $.001 par value ("Common Stock"), either authorized but unissued or Treasury shares. The number of shares of Common Stock to be issued or sold pursuant to options granted hereunder shall not exceed 3,000,000 shares; provided, that such number shall be reduced by the number of shares which have been sold under, or may be sold pursuant to options granted from time to time under, the Company's 1996 Incentive Stock Option Plan (the "Incentive Stock Option Plan") to the same extent as if such sales had been made or options had been granted pursuant to this Plan. 2.2 Restoration of Unpurchased Shares. Any shares subject to an option granted hereunder that, for any reason, expires or is terminated unexercised as to such shares may again be subject to an option to be granted hereunder. ARTICLE III Administration; Committees; Amendments 3.1 Administration. The Plan shall be administered by any of the Compensation Committee, the Stock Option Committee (which is a subcommittee of the Compensation Committee) (collectively, the "Committees") or the Board of Directors of the Company (the "Board"). The Committees shall be comprised of not less than two persons who shall be appointed by the Board from among the members of the Board. Members of the Committees and 2 the Board shall be eligible to become participants under the Plans and may receive discretionary and non-discretionary grants of options. 3.2 Duration; Removal; Etc. The members of the Committees shall serve at the pleasure of the Board, which shall have the power at all times to remove members from the Committees or to add members thereto. Vacancies in the Committees, however caused, shall be filled by action of the Board. 3.3 Meetings; Actions of Committee. Each of the Committees may select one of its members as its Chairman and shall hold its meetings at such times and places as it may determine. All decisions or determinations of the Committees and the Board shall be made by the majority vote or decision of all of its members, whether present at a meeting or not; provided, however, that any decision or determination reduced to writing and signed by all of the members shall be as fully effective as if this had been made at a meeting duly called and held. Each of the Committees and the Board may make such rules and regulations for the conduct of its business not inconsistent herewith as it may deem advisable. 3.4 Interpretation. The interpretation and construction by any of the Committees or the Board of the provisions of the Plan or of the options granted hereunder shall be final, unless in the case of the Committees otherwise determined by the Board. No member of the Board or of the Committees shall be liable for an action taken or determination made in good faith. 3.5 Amendments or Discontinuation. The Board may make such amendments, changes, and additions to the Plan, or may discontinue and terminate the Plan, as it may deem advisable from time to time; provided, however, that no action shall affect or impair any options theretofore granted under the Plan, and provided, further, however, that the affirmative vote of 3 the owners of a majority of the outstanding shares of Common Stock present at a meeting in person or by proxy and entitled to vote shall be necessary to effect any amendment to the Plan which would increase the number of shares of Common Stock subject to options granted under the Plan. ARTICLE IV Participants; Maximum Grant; Duration of Plan 4.1 Eligibility and Participation. Options shall be granted only to persons ("Participants") who at the time of granting are key consultants, advisors, directors or employees of the Company. Any of the Committees or the Board shall determine the key consultants, advisors, directors and employees to be granted options hereunder, the number of shares of Common Stock subject to such options, the exercise prices of options, the terms thereof and any other provisions not inconsistent with the Plan. 4.2 Guidelines for Participation. In selecting Participants and determining the numbers of shares of Common Stock for which options are to be granted, any of the Committees or the Board shall consult with officers and directors of the Company, and shall take into account the duties of the respective persons, their present and potential contributions to the success of the Company, and such other factors as any of the Committees or the Board shall deem relevant. 4.3 Duration of Plan. All options under the Plan shall be granted within ten years from the date the Plan is approved by the shareholders of the Company. 4 ARTICLE V Terms and Conditions of Options 5.1 Individual Stock Option Agreements. All stock options granted pursuant to the Plan shall be evidenced by stock option agreements ("Stock Option Agreements"), which need not be identical, between the Company and the Participant in such form as any of the Committees or the Board shall from time to time approve, subject to the terms of the Plan. 5.2 Number of Shares. Each Stock Option Agreement shall state the total number of shares of Common Stock with respect to which the option is granted, the terms and conditions of the option, and the exercise price or prices thereof, it being understood that any of the Committees or the Board shall, subject to the terms of Article VII hereof, have authority to prescribe in any Stock Option Agreement that the option evidenced thereby may be exercisable in full or in part, as to any number of shares subject thereto, at any time or from time to time during said term as any of the Committees or the Board may determine; provided that no option granted pursuant to the Plan shall be exercisable after the expiration of ten years from the date such option is granted. Except as otherwise provided in any Stock Option Agreement, an option may be exercised at any time or from time to time during the term of the option as to any or all full (but no fractional) shares which have become purchasable under such option. Subject to the terms of Article VII hereof, any of the Committees or the Board shall have the right to accelerate, in whole or in part, from time to time, conditionally or unconditionally, the right to exercise any option granted hereunder. 5 5.3 Option Price. Subject to the terms of Article VII hereof, the price at which the shares of Common Stock subject to each option granted under this Plan may be purchased (the "option price" or "exercise price") shall be determined by any of the Committees or the Board, which shall have the authority at the time the option is granted to prescribe in any Stock Option Agreement that the price per share, with the passage of pre-determined periods of time, shall increase from the original price to higher prices. 5.4 Method of Exercising Option; Full Payment. Subject to the terms of Article VII hereof and Section 6.1 and Section 6.2 hereof, options granted pursuant to the Plan may be exercised only if the Participant was, at all times during the period beginning on the date the option was granted and ending on the date of such exercise, a key consultant, advisor, director or employee of the Company. Options shall be exercised by written notice to the Company, addressed to the Company at its principal place of business. Such notice shall state the Participant's election to exercise the option and the number of shares of Common Stock in respect of which it is being exercised, and shall be signed by the Participant so exercising the option. Such notice shall be accompanied by (a) the Stock Option Agreement (which, if not exercised for all the shares subject thereto, shall be appropriately endorsed and returned to the Participant); (b) payment of the full purchase price of such shares, which payment shall be in cash, by check or in stock of the Company that has been owned by the Participant for at least six months, or notes of the Company or, as agreed to by the Board, other consideration; and such written representations and other documents as may be desirable, in the opinion of the Company's legal counsel, for purposes of compliance with state or Federal securities or other laws. In the case of payment made in stock of the Company, the stock shall be valued at its Fair 6 Market Value (as hereinafter defined) on the last business day prior to the date of exercise. The term "Fair Market Value" for the Common Stock on any particular date shall mean the last reported sale price of the Common Stock on the principal market on which the Common Stock trades on such date or, if no trades of Common Stock are made or reported on such date, then on the next preceding date on which the Common Stock traded. The Company shall deliver a certificate or certificates representing shares of Common Stock purchased pursuant to such notice to the purchaser as soon as practicable after receipt of such notice, subject to Article IX hereof. Any of the Committees or the Board may amend an already outstanding Stock Option Agreement to add a provision permitted by clause (b) of this Section 5.4, and no such amendment, by itself, shall be deemed to constitute the grant of a new option for purposes of this Plan. 5.5 Rights as a Shareholder. No Participant shall have any rights as a shareholder with respect to shares of Common Stock subject to an option granted under the Plan until the date of the issuance to such Participant of a stock certificate in respect of such shares. No adjustment shall be made for dividends or other rights for which the record date is prior to the date such stock certificate is issued. 5.6 Other Provisions. Stock Option Agreements entered into pursuant to the Plan may contain such other provisions (not inconsistent with the Plan) as any of the Committees or the Board may deem necessary or desirable, including, but not limited to, covenants on the part of the Participant not to compete, not to sell Common Stock obtained from the exercise of options for specified periods of time, and remedies available to the Company in the event of the breach of any such covenant. 7 ARTICLE VI Termination; Transferability 6.1 Termination. Except as otherwise provided in connection with the grant of any option or the termination of any Participant, the right to exercise any unexercised portion of any option granted under the Plan shall terminate on the date of termination of the relationship between the Participant and the Company, for any reason, without regard to cause, other than by reason of death or disability. The option may not be exercised thereafter, and the shares of Common Stock subject to the unexercised portion of such option may again be subject to new options under the Plan. Such restrictions shall not apply to the options granted pursuant to Article VII which shall be exercisable in accordance with the terms thereof. 6.2 Death or Disability of Participant. Except as otherwise permitted in connection with the grant of any option or the death or disability of a Participant, in the event a Participant dies or is disabled while he is a consultant, advisor, director or employee of the Company, any options theretofore granted to him shall be exercisable only within the next 12 months immediately succeeding such death or disability and then only (a) in the case of death, by the person or persons to whom the Participants rights under the option shall pass by will or the laws of descent and distribution, and in the case of disability, by such Participant or his legal representative, and (b) if and to the extent that he was entitled to exercise the option at the date of his death or disability. Such restrictions shall not apply to the options of Participating Directors which shall be exercisable in accordance with the terms set forth in Article VII hereof. 8 6.3 Transferability. Options granted to a Participant under the Plan shall not be transferable otherwise than by will, by the laws of descent and distribution, or (if authorized in the applicable Stock Option Agreement) pursuant to a qualified domestic relations order ("QDRO") as defined by the Internal Revenue Code of 1986, as amended, or Title I of the Employee Retirement Income Security Act of 1974, as amended, or the rules thereunder. During the Participant's lifetime, options shall be exercised only by such Participant, such Participant's guardian or legal representative, or (if authorized in the applicable Stock Option Agreement) such Participant's transferee pursuant to a QDRO. ARTICLE VII Directors' Grants 7.1 Eligibility. Annually, on February 15 of each of the Company's Fiscal Years, any Director of the Company who at the time is not a full-time employee of the Company (a "Participating Director"), shall be granted an option for 2,500 shares of Common Stock. Each person who becomes a Participating Director after the first day of the Company's fiscal year and within nine months of that date shall be granted, on the date that person becomes a Participating Director, an option for a number of shares of Common Stock determined by pro rating the normal 2,500 share annual amount based on the period of time remaining in the fiscal year in which such person becomes a Participating Director. No person who owns 10% or more of the outstanding Common Stock of the Company (including shares of Common Stock issuable upon exercise of outstanding options and warrants), shall be granted options under this Article. Options under this Article are non-discretionary. 9 7.2 Options Terms. Options granted under this Article VII shall not be exercisable until the date upon which the option holder has provided one year of continuous service as a Participating Director following the date of grant of such option. Options granted pursuant to this Article shall have an exercise price equal to the Fair Market Value (as hereinafter defined) of the Common Stock on the date of the grant. The term "Fair Market Value" for the Common Stock on any particular date shall mean the last reported sale price of the Common Stock on the principal market on which the Common Stock trades on such date or, if no trades of Common Stock are made or reported on such date, then on the next preceding date on which the Common Stock traded. Notwithstanding any other provisions of this Plan, options granted under this Article shall remain exercisable for ten years after the date of grant and the option holder (or his legal representative or that of his estate) may continue to exercise an option notwithstanding that the holder ceases to be a Participating Director. 7.3 Other Provisions. In all other respects, Options granted under this Article VII shall be subject to the other provisions of the Plan, including but not limited to those governing method of exercise, exercise payment, tax withholding, and transferability. Notwithstanding any other provisions of this Plan, the provisions of this Article VII may not be amended more than once every six months, other than to comport with changes in the Code. ARTICLE VIII Capital Adjustments 8.1 Capital Adjustments. If any change is made in the shares of Common Stock subject to the Plan or subject to any option granted under the Plan (through merger, consolidation, 10 reorganization, recapitalization, stock dividend, split-up, combination of shares, exchange of shares, issuance of rights to subscribe, or change in capital structure), appropriate adjustments shall be made by any of the Committees or the Board as to the maximum number of shares subject to the Plan and the number of shares and price per share subject to outstanding options as shall be equitable to prevent dilution or enlargement of option rights. Any determination made by any of the Committees or the Board under this Article VIII shall be final, binding and conclusive upon each Participant. ARTICLE IX Legal Requirements, Etc. 9.1 Revenue Stamps. The Company shall be responsible and shall pay for any transfer, revenue, or documentary stamps with respect to shares issued upon the exercise of options granted under the Plan. 9.2 Legal Requirements. The Company shall not be required to issue certificates for shares upon the exercise of any option unless and until, in the opinion of the Company's legal counsel, such issuance would not result in a violation of any state or Federal securities or other law. Certificates for shares, when issued, shall have, if required in the opinion of the Company's legal counsel, the following legend, or statements of other restrictions, endorsed thereon, and may not immediately be transferable: The shares of Common Stock evidenced by this certificate have been issued to the registered owner in reliance upon written representations that these shares have been purchased for investment. These shares may not be sold, transferred, or assigned unless, in the opinion of the Company and its legal counsel, such sale, transfer, or assignment will not be in violation of the Securities Act of 1933, as 11 amended, applicable rules and regulations of the Securities and Exchange Commission and any applicable state securities laws. 9.3 Private Offering. The options to be granted under the Plan are available only to a limited number of present and future key consultants, advisors, directors and employees of the Company who have knowledge of the Company's financial condition, management, and affairs. Such options are not intended to provide additional capital for the Company, but are to encourage stock ownership by the Company's key personnel. By the act of accepting an option, in the absence of an effective registration statement under the Securities Act of 1933, as amended, Participants shall agree that upon exercise of such option, they will acquire the shares of Common Stock that are the subject thereof for investment and not with any intention at such time to resell or redistribute the same, and they shall confirm such agreement at the time of exercise, but the neglect or failure to confirm the same in writing shall not be a limitation of such agreement. ARTICLE X General 10.1 Application of Funds. The proceeds received by the Company from the sale of shares of Common Stock pursuant to the exercise of options therefor shall be used for general corporate purposes. 12 10.2 Right of the Company to Terminate Relationship. Nothing contained in the Plan or in a Stock Option Agreement shall confer upon any Participant any right to be continued as a consultant, advisor, director or employee of the Company, or interfere in any way with the right of the Company to terminate such relationship for any reason whatsoever, with or without cause, at any time. 10.3 No Obligation to Exercise. The granting of an option hereunder shall impose no obligation upon the Participant to exercise such option. 10.4 Effectiveness of Plan. The Plan shall become effective upon its adoption by the Board. Options may be granted under the Plan prior to the approval of the Plan by the Shareholders, but no such option may be exercised prior to such approval. 10.5 Other Benefits. Participation in the Plan shall not preclude a Participant from eligibility in any other stock benefit plan of the Company or any old age benefit, insurance, pension, profit sharing, retirement, bonus or other plan which the Company has adopted, or may, at any time, adopt. 10.6 Tax Requirements. The exercise or surrender of any option under this Plan shall constitute a Participant's full and complete consent to whatever action any of the Committees or the Board elect to satisfy the Federal and state withholding requirements, if any, which the Committee in its discretion deems applicable to such exercise. 10.7 Interpretations and Adjustments. To the extent permitted by Law, an interpretation of the Plan and a decision on any matter within any of the Committees' or the Board's discretion made in good faith is binding on all persons. A misstatement or other mistake 13 of fact shall be corrected when it becomes known, and the person responsible shall make such adjustment on account thereof as he considers equitable and practicable. 10.8 Information. The Company shall, upon request or as may be specifically required hereunder, furnish or cause to be furnished, all of the information or documentation which is necessary or required by any of the Committees or the Board to perform its duties and functions under the Plan. 10.9 Governing Law. The Plan and any and all options granted thereunder shall be governed by, and construed and enforced in accordance with, the laws of the State of New York from time to time in effect. 10.10 Certain Definitions. 10.10.1 "Parent". The term "parent" shall mean a "parent corporation" as defined in Section 424(e) of the Code. 10.10.2 "Subsidiary". The term "subsidiary" shall mean a "subsidiary corporation" as defined in Section 424(f) of the Code. 10.10.3 "Disabled". The term "disabled" shall have the definition set forth in Section 22(a) (3) of the Code. 14 EX-27 5 FDS --
5 Information taken from the June 30, 1997 Form 10-Q. 1000 3-MOS DEC-31-1997 APR-01-1997 JUN-30-1997 2,559 28,532 0 0 0 32,835 20,880 (10,418) 44,580 3,781 4,313 0 0 24 36,027 44,580 0 3,196 0 4,529 0 0 145 (1,038) 0 (1,038) 0 0 0 (1,038) (0.04) 0
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