-----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, C0hp3agzVc11eMFcWmPtVbTC6kA/CZFgUa5EdnfMsZ9zYOoEJJYeXwNSzvg/nRtd /fcRBuK1L+s/7kyMuJ2jcg== 0000891092-98-000296.txt : 19980814 0000891092-98-000296.hdr.sgml : 19980814 ACCESSION NUMBER: 0000891092-98-000296 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980813 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: SEC FILE NUMBER: 000-19612 FILM NUMBER: 98685978 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, 1998 [X] 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 of (IRS Employer incorporation or organization) Identification No.) 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, 1998 Common Stock, par value $.001 24,420,025 Shares IMCLONE SYSTEMS INCORPORATED INDEX Page No. -------- PART I - FINANCIAL INFORMATION Item 1. Financial Statements Balance Sheets - June 30, 1998 (unaudited) and December 31, 1997 1 Unaudited Statements of Operations and Comprehensive Loss - Three and Six months ended June 30, 1998 and 1997 2 Unaudited Statements of Cash Flows - Six months ended June 30, 1998 and 1997 3 Notes to Financial Statements 4 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 5 Item 3. Quantitative and Qualitative Disclosures About Market Risk 10 PART II - OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders 11 Item 5. Other Information 12 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 1998 1997 --------- --------- (unaudited) Current assets: Cash and cash equivalents $ 3,874 $ 2,558 Securities available for sale 47,852 57,052 Prepaid expenses 576 596 Other current assets 638 589 --------- --------- Total current assets 52,940 60,795 --------- --------- Property and equipment: Land 340 340 Building and building improvements 10,471 8,969 Leasehold improvements 4,832 4,832 Machinery and equipment 7,608 6,315 Furniture and fixtures 623 550 Construction in progress -- 2,159 --------- --------- Total cost 23,874 23,165 Less accumulated depreciation and amortization (12,120) (11,294) --------- --------- Property and equipment, net 11,754 11,871 --------- --------- Patent costs, net 972 944 Deferred financing costs, net 51 55 Other assets 2,318 2,115 --------- --------- $ 68,035 $ 75,780 ========= ========= Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 1,580 $ 1,731 Accrued expenses and other 696 1,440 Interest payable 43 68 Deferred revenue 283 208 Current portion of long-term liabilities 583 677 --------- --------- Total current liabilities 3,185 4,124 --------- --------- Long-term debt 2,200 2,200 Other long-term liabilities, less current portion 1,429 1,118 Preferred stock dividends payable 1,302 112 --------- --------- Total liabilities 8,116 7,554 --------- --------- Commitments and contingencies Stockholders' equity : Preferred stock, $1.00 par value; authorized 4,000,000 shares; issued and outstanding Series A Convertible: 400,000 at June 30, 1998 and December 31, 1997 (preference in liquidation $41,302 and $40,112, respectively) 400 400 Common stock, $.001 par value; authorized 45,000,000 shares; issued 24,439,142 and 24,265,072 at June 30, 1998 and December 31, 1997, respectively; outstanding 24,388,325, and 24,214,255 at June 30, 1998 and December 31, 1997, respectively 24 24 Additional paid-in capital 185,112 185,706 Accumulated deficit (125,245) (117,464) Treasury stock, at cost; 50,817 shares at June 30, 1998 and December 31, 1997 (492) (492) Note receivable from officer and stockholder (136) -- Accumulated other comprehensive income: Unrealized gain on securities available for sale 256 52 --------- --------- Total stockholders' equity 59,919 68,226 --------- --------- $ 68,035 $ 75,780 ========= ========= See accompanying notes to financial statements. Page 1 IMCLONE SYSTEMS INCORPORATED Statements of Operations and Comprehensive Loss (in thousands, except per share data) (unaudited)
Three Months Ended Six Months Ended June 30, June 30, -------------------- -------------------- 1998 1997 1998 1997 -------- -------- -------- -------- Revenues: Product development milestone revenues $ -- $ 2,500 $ 1,000 $ 2,500 Research and development funding from third parties and other 765 696 1,615 771 -------- -------- -------- -------- Total revenues 765 3,196 2,615 3,271 -------- -------- -------- -------- Operating expenses: Research and development 4,675 3,257 8,846 8,652 General and administrative 1,546 1,272 2,959 2,355 -------- -------- -------- -------- Total operating expenses 6,221 4,529 11,805 11,007 -------- -------- -------- -------- Operating loss (5,456) (1,333) (9,190) (7,736) -------- -------- -------- -------- Other: Interest and other income (778) (440) (1,609) (685) Interest expense 110 145 200 340 -------- -------- -------- -------- Net interest and other income (668) (295) (1,409) (345) -------- -------- -------- -------- Net loss (4,788) (1,038) (7,781) (7,391) Preferred dividends (including assumed incremental yield of $317 for the three-months ended June 30, 1998 and $635 the six-months ended June 30, 1998) 967 -- 1,825 -- -------- -------- -------- -------- Net loss to common stockholders $ (5,755) $ (1,038) $ (9,606) $ (7,391) ======== ======== ======== ======== Net loss $ (4,788) $ (1,038) $ (7,781) $ (7,391) Other comprehensive income: Unrealized gain on securities available for sale: Unrealized holding gain arising during the period 135 43 204 20 Less: Reclassification adjustment for realized gain (loss) included in net income -- -- 2 (3) -------- -------- -------- -------- Total other comprehensive income 135 43 202 23 -------- -------- -------- -------- Comprehensive loss $ (4,653) $ (995) $ (7,579) $ (7,368) ======== ======== ======== ======== Basic and diluted net loss per common share $ (0.24) $ (0.04) $ (0.40) $ (0.33) ======== ======== ======== ======== Weighted average shares outstanding 24,273 24,033 24,251 22,702 ======== ======== ======== ========
See accompanying notes to financial statements. Page 2 IMCLONE SYSTEMS INCORPORATED Statements of Cash Flows (in thousands) (unaudited) Six Months Ended June 30, -------------------- 1998 1997 -------- -------- Cash flows from operating activities: Net loss $ (7,781) $ (7,391) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 883 866 Expense associated with issuance of options and warrants 310 2,634 (Gain) loss on sale of investments (2) 3 Changes in: Prepaid expenses 20 (328) Other current assets (49) (815) Due from officer -- 11 Other assets (35) (8) Interest payable (25) (47) Accounts payable (151) 325 Accrued expenses and other (744) (635) Deferred revenue 75 208 -------- -------- Net cash used in operating activities (7,499) (5,177) -------- -------- Cash flows from investing activities: Acquisitions of property and equipment (570) (436) Purchases of securities available for sale (28,760) (54,777) Sales of securities available for sale 37,997 37,042 Additions to patents (81) (120) -------- -------- Net cash provided by (used in) investing activities 8,586 (18,291) -------- -------- Cash flows from financing activities: Net proceeds from issuance of common stock -- 23,162 Proceeds from exercise of stock options and warrants 150 1,360 Purchase of treasury stock -- (323) Proceeds from equipment and building improvement financings 593 -- Payments of other liabilities (514) (906) -------- -------- Net cash provided by financing activities 229 23,293 -------- -------- Net increase (decrease) in cash and cash equivalents 1,316 (175) Cash and cash equivalents at beginning of period 2,558 2,734 -------- -------- Cash and cash equivalents at end of period $ 3,874 $ 2,559 ======== ======== 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 ("ImClone" or the "Company") as of June 30, 1998 and for the three and six months ended June 30, 1998 and 1997 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 audited financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 1997, as filed with the Securities and Exchange Commission. Results for the interim periods are not necessarily indicative of results for the full years. (2) Related Party Transactions In January 1998, the Company accepted a promissory note totaling approximately $131,000 from its President and CEO in connection with the exercise of a warrant to purchase 87,305 shares of the Company's common stock, $.001 par value (the "Common Stock"). The note is due no later than two years from issuance and is full recourse. Interest is payable on the first anniversary date of the promissory note and on the stated maturity or any accelerated maturity at the annual rate of 8.5%. At June 30, 1998, the total amount due the Company, including interest, is approximately $136,000 and is classified in the stockholders' equity section of the balance sheet as a note receivable from officer and stockholder. (3) Earnings Per Share Basic and diluted Earnings Per Share ("EPS") are computed based on the weighted average number of shares outstanding. Potentially dilutive securities, including convertible preferred stock, options and warrants, have not been included in the diluted EPS computation because they are anti-dilutive. (4) Comprehensive Income On January 1, 1998, the Company adopted Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS 130"), which establishes standards for reporting and display of comprehensive income and its components. In accordance with SFAS 130, the Company has displayed the components of "Other comprehensive income" and "Comprehensive loss" in the accompanying Financial Statements. All prior-period data has been reclassified to conform with the provisions of SFAS 130. (5) 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 periods included in the accompanying financial statements. RESULTS OF OPERATIONS Six Months Ended June 30, 1998 and 1997 Revenues Revenues for the six-months ended June 30, 1998 and 1997 were $2,615,000 and $3,271,000 respectively, a decrease of $656,000, or 20%. The decrease in revenues for the six-months ended June 30, 1998 was primarily attributable to a decrease in milestone revenue which can vary widely from period to period depending upon the timing of the achievement of various research and development milestones for products under development. Revenues for the six-months ended June 30, 1998 consisted of (i) $150,000 in research support from the Company's partnership with the Wyeth/Lederle Vaccine and Pediatrics Division of American Home Products Corporation ("American Home") in infectious diseases, (ii) $1,000,000 in milestone revenue and $1,250,000 in research and support payments from the Company's research and license agreement with Merck KGaA ("Merck") with respect to the Company's BEC2 product candidate, (iii) $117,000 in royalty revenue from the Company's strategic alliance with Abbott Laboratories ("Abbott") in diagnostics and (iv) $98,000 from a Phase I Small Business Innovation Research grant from the National Cancer Institute for a program in cancer-related angiogenesis. Revenues for the six-months ended June 30, 1997 consisted of (i) $150,000 in research support from the Company's partnership with American Home, (ii) $1,500,000 in milestone revenue and $417,000 in research and support payments from the Company's research and license agreement with Merck and (iii) $1,000,000 in milestone revenue and $204,000 in royalty revenue from the Company's strategic alliance with Abbott. Operating: Research and Development Expenses Total operating expenses for the six-months ended June 30, 1998 and 1997 were $11,805,000 and $11,007,000, respectively, an increase of $798,000, or 7%. Research and development expenses for the six-months ended June 30, 1998 and 1997 were $8,846,000 and $8,652,000, respectively, an increase of $194,000 or 2%. Such amounts for the six-months ended June 30, 1998 and 1997 represented 75% and 79%, respectively, of total operating expenses. The increase in research and development expenses for the six-months ended June 30, 1998 was attributable to increased expenditures associated with additional staffing in the area of discovery research, the initiation of new supported research programs with academic institutions, the establishment of corporate in-licensing arrangements, and expenditures in the functional areas of product development, manufacturing and clinical and regulatory affairs to support the Company's lead therapeutic product candidate, C225, for human clinical trials. This increase was partially offset by the one-time $2,233,000 non-cash compensation expense recorded for the six-months ended June 30, 1997 in connection with the extension of the term of an officer's warrant to purchase 397,000 shares of Common Stock. General and Administrative Expenses 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-months ended June 30, 1998 and 1997 were $2,959,000 and $2,355,000, respectively, an increase of $604,000, or 26%. The increase in general and administrative expenses primarily reflected (i) additional support staffing for the expanding research, clinical, development and manufacturing efforts of the Company, particularly with respect to C225 and (ii) expenses associated with the pursuit of strategic corporate alliances and other corporate development expenses. The Company expects general and administrative expenses to increase in future periods to support planned increases in research, clinical, development and manufacturing efforts of the Company. Page 5 Interest and Other Income and Interest Expense Interest and other income was $1,609,000 for the six-months ended June 30, 1998 compared to $685,000 for the six-months ended June 30, 1997, an increase of $924,000, or 135%. The increase was primarily attributable to the increased interest income earned from higher cash balances in the Company's investment portfolio resulting from a private placement of Series A Convertible Preferred Stock (the "Series A Preferred Shares" or "Series A Preferred Stock") completed in December 1997. Interest expense was $200,000 and $340,000 for the six-months ended June 30, 1998 and 1997, respectively, a decrease of $140,000 or 41%. Interest expense for both periods primarily included interest on an outstanding Industrial Development Revenue Bond issued in 1990 (the "1990 IDA Bond") with a principal amount of $2,200,000, interest recorded on capital lease obligations, and interest recorded on a liability to Pharmacia and UpJohn Inc. ("Pharmacia"), for the reacquisition of the worldwide rights to a recombinant mutein form of Interleukin-6 as well as clinical material manufactured and supplied by Pharmacia to the Company. The decrease was primarily attributable to the December 1997 repayment of an IDA Bond issued in 1986 (the "1986 IDA Bond") with a principal amount of $2,113,000 and the February 1998 repayment of the remaining liability to Pharmacia. Net Losses The Company had net losses to common stockholders of $9,606,000 or $0.40 per share for the six-months ended June 30, 1998 compared with $7,391,000 or $0.33 per share for the six-months ended June 30, 1997. The increase in the net losses and per share net loss to common stockholders was due primarily to the accrued dividends to preferred stockholders and to the factors mentioned in the preceding paragraphs. Three Months Ended June 30, 1998 and 1997 Revenues Revenues for the three-months ended June 30, 1998 and June 30, 1997 were $765,000 and $3,196,000, respectively, a decrease of $2,431,000, or 76%. The decrease in revenues for the three-months ended June 30, 1998 was primarily attributable to a decrease in milestone revenue which can vary widely from period to period depending upon the timing of the achievement of various research and development milestones for products under development. Revenues for the three-months ended June 30, 1998 consisted of (i) $75,000 in research support from the Company's partnership with American Home, (ii) $625,000 in research and support payments from the Company's research and license agreement with Merck, and (iii) $65,000 in royalty revenue from the Company's strategic alliance with Abbott. Revenues for the three-months ended June 30, 1997 consisted of (i) $75,000 in research support from the Company's partnership with American Home, (ii) $1,500,000 in milestone revenue and $417,000 in research and support payments from the Company's research and license agreement with Merck, and (iii) $1,000,000 in milestone revenue and $204,000 in royalty revenue from the Company's strategic alliance with Abbott. Operating: Research and Development Total operating expenses for the three-months ended June 30, 1998 and 1997 were $6,221,000 and $4,529,000, respectively, an increase of $1,692,000 or 37%. Research and development expenses for the three-months ended June 30, 1998 and 1997 were $4,675,000 and $3,257,000, respectively, an increase of $1,418,000 or 44%. Such amounts for the three-months ended June 30, 1998 and 1997 represented 75% and 72%, respectively, of total operating expenses. The increase in research and development expenses for the six-months ended June 30, 1998 was attributable to increased expenditures associated with additional staffing in the area of discovery research, the initiation of new supported research programs with academic institutions, the establishment of corporate in-licensing arrangements, and expenditures in the functional areas of product development, manufacturing and clinical and regulatory affairs to support the Company's lead therapeutic product candidate, C225, for human clinical trials. 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-months ended June 30, 1998 and 1997 were $1,546,000 and $1,272,000, respectively, an increase of $274,000 or 22%. The increase in general and administrative expenses primarily reflected (i) additional support staffing for the expanding research, clinical, development and manufacturing efforts of the Company, particularly with respect to C225 and (ii) expenses associated with the pursuit of strategic corporate alliances and other corporate development expenses. The Company expects general and administrative expenses to increase in future periods to support planned increases in research, clinical, development and manufacturing efforts of the Company. Interest and Other Income/Expense Interest and other income was $778,000 for the three-months ended June 30, 1998 compared to $440,000 for the three-months ended June 30, 1997, an increase of $338,000, or 77%. The increase was primarily attributable to the increased interest income earned from higher cash balances in the Company's investment portfolio resulting from a private placement of Series A Preferred Stock completed in December 1997. Interest expense was $110,000 and $145,000 for the three-months ended June 30, 1998 and June 30, 1997, respectively, a decrease of $35,000 or 24%. Interest and other expense for both periods primarily included interest on the 1990 IDA Bond with an aggregate principal amount of $2,200,000 and interest recorded on capital lease obligations. The decrease was primarily attributable to the December 1997 repayment of the 1986 IDA Bond with a principal amount of $2,113,000. Net Losses The Company had net losses to common stockholders of $5,755,000 or $0.24 per share for the three-months ended June 30, 1998 compared with $1,038,000 or $0.04 per share for the three-months ended June 30, 1997. The increase in the net losses and per share net loss to common stockholders was due primarily to the accrued dividends to preferred stockholders and to the factors mentioned in the preceding paragraphs. LIQUIDITY AND CAPITAL RESOURCES At June 30, 1998, the Company's principal sources of liquidity consisted of cash and cash equivalents and securities available for sale of approximately $51,726,000. The Company has financed its operations since inception primarily through the public and private sales of equity securities, the sale of three issues of IDA bonds (collectively, the "IDA Bonds") through the New York City Industrial Development Agency (the "NYIDA"), license fees and contract research and development fees and royalties received under agreements with collaborative partners and interest earned on these funds. Since inception, public and private sales of equity securities in financing transactions have raised approximately $163,799,000 in net proceeds. The sale of the IDA Bonds in each of 1985, 1986 and 1990 raised an aggregate of $6,313,000, the proceeds of which have been used for the acquisition, construction and installation of the Company's research and development facility in New York City, and of which $2,200,000 is currently outstanding. Since inception, the Company has earned approximately $31,277,000 from license fees, contract research and development fees and royalties from collaborative partners, including approximately $2,615,000 earned during the six-months ended June 30, 1998. Since inception the Company has earned approximately $7,054,000 in interest income, including approximately $1,607,000 earned during the six-months ended June 30, 1998. Page 7 The Company has obligations under various capital leases for certain laboratory, office and computer equipment and also certain building improvements primarily under a December 1996 financing agreement (the "1996 Financing Agreement") and an April 1998 financing agreement (the "1998 Financing Agreement") with Finova Technology Finance, Inc. ("Finova"). The 1996 Financing Agreement allowed the Company to finance the lease of equipment and make certain building and leasehold improvements to existing facilities involving amounts aggregating approximately $2,500,000. Each lease has a fair market value purchase option at the expiration of a 42-month term. Pursuant to the 1996 Financing Agreement, the Company issued to Finova a warrant expiring December 31, 1999 to purchase 23,220 shares of Common Stock at an exercise price of $9.69 per share. The Company recorded a non-cash debt discount of approximately $125,000 in connection with this financing, which discount is being amortized over the 42-month term of the first lease. The 1996 Financing Agreement with Finova expired in December 1997 and the Company did not utilize the full $2,500,000 under the agreement. In April 1998, the Company entered into the 1998 Financing Agreement with Finova aggregating approximately $2,000,000. The terms of the 1998 Financing Agreement are substantially similar to the now expired 1996 Financing Agreement except that each lease has a 48-month term. As of June 30, 1998, the Company had entered into eight individual leases under both the 1996 Financing Agreement and the 1998 Financing Agreement aggregating a total cost of $2,478,000 and had $1,267,000 available under the 1998 Financing Agreement. 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. The Company has entered into preliminary discussions with several major pharmaceutical companies regarding various alternatives concerning the funding of research and development for certain of its products. No assurance can be given that the Company will be successful in consummating any such alternatives. These discussions have included potential significant strategic alliances for the development and commercialization of the Company's lead product candidate, C225. Such strategic alliances could include up-front license fees plus milestone fees and revenue sharing. There can be no assurance that the Company will be successful in achieving such alliances, nor can the Company predict the amount of funds which might be available to it if it entered into such alliances or the time at which such funds would be made available or the other terms of any such alliances. In January 1998, the Company completed the construction and commissioning of a new 1,750 square foot process development center at its Somerville, New Jersey facility at a cost of approximately $1,650,000. The Company has also taken steps to complete a formal design concept for large scale manufacturing at this facility. If the Company adapts this facility to large-scale manufacturing or does so at another location, it will incur substantial additional costs. The lease on the Company's New York City facility expires in March 1999. The Company expects to extend the lease and retrofit the facility to fit its needs. The 1990 IDA Bond in the outstanding principal amount of $2,200,000 becomes due in 2004. If the lease on the Company's New York City facility is terminated, the 1990 IDA Bond provides that it will become due 60 days prior to such termination. The Company will incur interest on the 1990 IDA Bond aggregating approximately $250,000 during 1998. The Company has granted the NYIDA a security interest in substantially all facility equipment located in the New York facility to secure the obligations of the Company to the NYIDA under the 1990 IDA Bond. The holders of the Series A Preferred Shares are entitled to receive cumulative dividends at an annual rate of $6.00 per share. Dividends accrue as of the issuance date of the Series A Preferred Shares and are payable on the outstanding Series A Preferred Shares in cash on December 31 of each year beginning December 31, 1999 or at the time of conversion or redemption of the Series A Preferred Shares on which the dividend is to be paid, whichever is sooner. Accrued dividends were $1,302,000 at June 30, 1998. Page 8 Total capital expenditures made during the six-months ended June 30, 1998 were $709,000. Of such expenditures, $139,000 have been reimbursed in accordance with the terms of the 1998 Financing Agreement with Finova. Of the total capital expenditures made during the six-months ended June 30, 1998, $537,000 related to improving and equipping the Company's manufacturing facility in New Jersey. The balance of capital additions was for equipment and computer-related purchases for the corporate office and research laboratories in New York. The Company anticipates that its existing capital resources, including the on-going research support of its corporate partners, should enable it to maintain its current and planned operations through the end of the year 2000. However, the receipt of such ongoing research support is subject to attaining research and development milestones, certain of which have not yet been achieved. There can be no assurance that the Company will achieve these milestones. The Company's future working capital and capital requirements will depend upon numerous factors, including, but not limited to, 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 cost of manufacturing scale-up and effective commercialization activities and arrangements, the level of resources that the Company devotes to the development of marketing and sales capabilities, the costs involved in filing, prosecuting and enforcing patent claims, 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. In order to fund its capital needs after the end of the year 2000, the Company will require significant levels of additional capital and intends to raise the capital through additional arrangements with corporate partners, equity or debt financings or from other sources. There is no assurance the Company will be successful in consummating any such arrangements. If adequate funds are not available, the Company may be required to significantly curtail its planned operations. Uncertainties associated with the length and expense of pre-clinical and clinical testing of any of the Company's product candidates could greatly increase the cost of development of such products and affect the timing of any anticipated revenues from product sales, and failure by the Company to obtain regulatory approval for any product will preclude its commercialization. In addition, the failure by the Company to obtain patent protection for its products may make certain of its products commercially unattractive. At December 31, 1997, the Company had net operating loss carryforwards for federal income tax purposes of approximately $115,000,000 which expire at various dates from 2000 through 2012. At December 31, 1997 the Company had research credit carryforwards of approximately $2,303,000 which expire at various dates between years 2001 and 2012. Pursuant to Section 382 of the Internal Revenue Code of 1986, as amended, the annual utilization of a company's net operating loss and research credit carryforwards may be limited if the company experiences a change in ownership of more than 50 percentage points within a three-year period. Since 1986, the Company experienced two ownership changes. Accordingly, the Company's net operating loss carryforwards available to offset future federal taxable income arising before such ownership changes are limited to $5,159,000 annually. Similarly, the Company is restricted in using its research credit carryforwards arising before such ownership changes to offset future federal income tax expense. Other Items The Company is evaluating the risks and costs associated with the year 2000 conversion. The Company is communicating with those organizations with which it does business to ensure that year 2000 issues are being resolved in a timely manner. If necessary, modifications and conversions by those with which the Company does business are not completed timely, the year 2000 conversion issue may have a material adverse effect on the Company's consolidated financial position and results of operations. Based on the Company's ongoing evaluation, management does not currently believe that the costs to achieve year 2000 compliance will be material to the Company's financial position or results of operations. Page 9 Certain Factors Affecting Forward-Looking Statements--Safe Harbor Statement Those statements contained herein that do not relate to historical information are forward-looking statements. There can be no assurance that the future results covered by such forward-looking statements will be achieved. Actual results may differ materially due to the risks and uncertainties inherent in the Company's business, including without limitation, the risks and uncertainties associated with completing pre-clinical and clinical trials of the Company's compounds that demonstrate such compounds' safety and effectiveness; obtaining additional financing to support the Company's operations; obtaining and maintaining regulatory approval for such compounds and complying with other governmental regulations applicable to the Company's business; obtaining the raw materials necessary in the development of such compounds; consummating collaborative arrangements with corporate partners for product development; achieving milestones under collaborative arrangements with corporate partners; developing the capacity to manufacture, market and sell the Company's products, either directly or with collaborative partners; developing market demand for and acceptance of such products; competing effectively with other pharmaceutical and biotechnological products; obtaining adequate reimbursement from third party payors; attracting and retaining key personnel; protecting proprietary rights; and those other factors set forth in "Management's Discussion and Analysis of Financial Condition and Results of Operations--Overview and Risk Factors," in the Company's most recent Annual Report on Form 10-K. Item 3 - Quantitative and Qualitative Disclosures About Market Risk Not applicable. 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 May 27, 1998 (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, John Mendelsohn, 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, are set forth below. Broker non-votes were not applicable. (I) Election of directors Name In Favor Withheld ---- -------- -------- Richard Barth 20,225,747 159,159 Jean Carvais 20,225,947 158,959 Vincent T. DeVita, Jr. 20,228,708 156,198 Robert F. Goldhammer 20,105,567 279,339 David M. Kies 20,231,947 152,959 Paul B. Kopperl 20,231,947 152,959 John Mendelsohn 20,232,147 152,759 William R. Miller 20,226,147 158,759 Harlan W. Waksal 20,232,207 152,669 Samuel D. Waksal 20,108,767 276,139 (ii) The stockholders approved the Company's 1998 Employee Stock Purchase Plan. The stockholders voted 19,790,050 shares in favor, 388,426 shares against and 206,430 shares abstained from voting. (iii) 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 20,161,112 shares in favor, 211,739 shares against and 57,055 shares abstained from voting. Page 11 Item 5 - Other Information None. Item 6 - Exhibits and Reports on Form 8-K (a) Exhibits (numbered in accordance with Item 601 of Regulation S-K) Exhibit No. Description ----------- ----------- 10.67 Equipment leasing commitment from Finova Technology Finance, Inc. 10.68 1998 Employee Stock Purchase Plan 10.69 1998 Non-Qualified Stock Option Plan, as amended 27.1 Financial Data Schedule (b) Reports on Form 8-K None. 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, 1998 By /s/ Samuel D. Waksal ------------------------------------- Samuel D. Waksal President and Chief Executive Officer Date: August 13, 1998 By /s/ Carl S. Goldfischer ------------------------------------- Carl S. Goldfischer Vice President, Finance and Chief Financial Officer Page 13 EX-10.67 2 EQUIPMENT LEASING COMMITMENT Exhibit 10.67 March 23, 1998 Mr. Paul Goldstein Senior Director Finance, Controller ImClone Systems, Inc. 22 Chubb Way Somerville, NJ 08876 Dear Mr. Goldstein FINOVA Technology Finance, Inc. ("Lessor") is pleased to offer to lease the Equipment described below to ImClone Systems, Inc. ("Lessee"). The outline of this Commitment is a follows: Lessee: ImClone Systems Inc. Lessor: FINOVA Technology Finance, Inc. Equipment: Various laboratory, computer and office equipment, and leasehold improvements. All equipment shall be subject to review and approval by the Lessor for its acceptability for lease under this Commitment. The Equipment Cost of all leasehold improvements shall not exceed $420,000. However, no leasehold improvements may be acceptable for lease if, at the time of closing, their Equipment Cost plus the aggregate Equipment Cost for previously delivered leasehold improvements shall exceed 21% of the Equipment Cost of all Equipment then and previously delivered under prior commitments. Equipment Cost: $2,000,000 Equipment Location: Somerville, NJ and an office in New York, NY Anticipated Delivery: February 1, 1998 - March 31, 1999 Closing Date: The date that the Lessor makes payment for the Equipment covered under each schedule to the Equipment Lease (each a "Schedule" and collectively the "Schedules") with an aggregate cost of not less than $75,000, but no later than March 31, 1999. Term: From each Closing Date until 48 months from the thirtieth day of the month next following or coincident with that Closing Date. Monthly Rent: Monthly Rent equal to 2.420% of Equipment Cost shall be payable monthly in advance. First and last month's rent due in advance. Adjustment to Rental Payments: If on the second business day preceding the Closing Date for each Schedule, the highest yield for four-year U.S. Treasury Notes as published in The Wall Street Journal is greater or less than the yield on January 12, 1998, the Monthly Rent Payments shall be increased or decreased to reflect such change in the yield. The yield as of January 12, 1998 is 5.26%. As of the Closing Date, the Monthly Rent Payments shall be fixed for the entire term. Interim Rent: Interim Rent shall accrue from each Closing Date until the 29th day of the month (27th day of the month in the case of February) unless the Closing Date is on the 30th day of the month. If the Closing Date is the 31st day of a month, Interim Rent shall accrue until the 29th day of the next following month. Interim Rent shall be at the daily equivalent of the currently adjusted Monthly Payment. Net Lease: The lease shall be a net-net-net lease containing the usual provisions in the Lessor's lease agreement and such other or different provisions that are agreed to by the parties. The Lessee shall be responsible for maintenance, insurance, taxes, and all other costs and expenses. Taxes: Sales or use taxes shall be added to the Equipment Cost or collected on the gross rentals, as appropriate. The Lessee will be given an opportunity to supply tax exemption certificates where applicable. Insurance: Prior to any delivery of Equipment, the Lessee shall furnish confirmation of insurance reasonably acceptable to the Lessor covering the Equipment including primary, all risk, physical damage, property damage and bodily injury with appropriate loss payee endorsement in favor of the Lessor. Condition to Closing: Conditions precedent to each Closing Date shall include that no payment is then past due to the Lessor or any assign of the Lessor from the Lessee, that the Lessee is in compliance with the material provisions of this Commitment and the lease, that information requested by the Lessor and all documentation then required by the Lessor's counsel has been received by the Lessor including resolutions of the Board of Directors of the Lessee authorizing the transactions contemplated by this Commitment and an opinion of counsel for the Lessee satisfactory to counsel for the Lessor, that the Lessee is not in default under any material contract to which it is a party or by which it or its property is bound, and that there has not been any material adverse change or threatened material adverse change in the financial or other condition, business, operations, properties, assets or prospects of the Lessee since December 31, 1996 or from the written information that has been supplied to the Lessor prior to the date of this Commitment by the Lessee. The Lessor shall not be responsible for any failure of suppliers or manufactures of the Equipment or their distributors to perform their obligations to the Lessor or the Lessee. The Lessee shall provide quarterly financial statements and status reports during the Commitment period. Purchase Option: The Lessee shall have the option to purchase all (but not less than all) the Equipment, at the expiration of the term of the lease for the then current Fair Market Value of the Equipment, plus applicable sales and other taxes. Automatic Renewal: In the event the Lessee does not exercise the Purchase Option described above, the lease shall automatically renew for a term of one year with Monthly rentals equal to 1.50% of Equipment Cost payable monthly in advance. At the expiration of the renewal period, the Lessee shall have the option to purchase all (but not less than all) the Equipment for its then current Fair Market Value, plus applicable sales and other taxes. Additional Covenants: There shall be no actual or threatened material conflict with, or material violation of, any regulatory statute, standard or rule relating to the Lessee, its present or future operations, or the Equipment. All statements made by the Lessee to the Lessor shall be correct in all material respects and shall not omit any material fact necessary to make the statements not misleading in light of the circumstances in which they are made. There shall be no material breach of the representations and warranties of the Lessee in the lease during the term of the lease and any renewal periods. The representations shall include that the Equipment Cost of each item of the Equipment does not exceed the fair and usual price for like quantity purchases of such item and reflects all discounts, rebates and allowances for the Equipment given to Lessee or any affiliate of Lessee by the manufacturer, supplier or anyone else including, without limitation, discounts for advertising, prompt payment, testing or other services. Fees and Expenses: The Lessee shall be responsible for the Lessor's reasonable expenses in connection with the transaction. Survival: The Commitment Letter shall survive closing. However, if there is any conflict between the terms and conditions of the Master Equipment Lease Agreement and Schedules and those of this Commitment Letter, the Master Equipment Lease Agreement and Schedules shall control. Commitment-Expiration: This Commitment shall expire on March 31, 1998, unless prior thereto either extended in writing by the Lessor or accepted as provided below by the Lessee. A $15,000 Commitment Fee shall be due upon signing of this letter. The $15,000 previously paid Application Fee shall be applied towards the Commitment Fee. The Commitment Fee shall be first applied to the costs and expenses of the Lessor in connection with the transaction, and any remainder shall be applied to the second month's rent due under the Schedules on a pro-rata basis. Should you have any questions, please call me. If you wish to accept this Commitment, please so indicate by signing and returning the enclosed duplicate copy of this letter to me by April 1, 1998. Sincerely, FINOVA TECHNOLOGY FINANCE, INC. By: /s/ Linda A. Moschitto --------------------------------------- Linda A. Moschitto Director - Contract Administration Accepted this 1 day of April, 1998 IMCLONE SYSTEMS, INC. By: /s/ Paul A. Goldstein ---------------------------- Typed or Printed Name: Paul A. Goldstein Title: Senior Director Finance, Controller EX-10.68 3 EMPLOYEE STOCK PURCHASE PLAN Exhibit 10.68 IMCLONE SYSTEMS INCORPORATED 1998 EMPLOYEE STOCK PURCHASE PLAN The following constitutes the provisions of the 1998 Employee Stock Purchase Plan of ImClone Systems Incorporated. 1. PURPOSE. The purpose of the Plan is to provide employees of the Company and its Affiliates with an opportunity to purchase Common Stock of the Company. It is the intention of the Company that the Options granted under the Plan be considered options issued under an "Employee Stock Purchase Plan" as that term is defined under Section 423(b) of the Code. The provisions of the Plan shall, accordingly, be construed so as to extend and limit participation in a manner consistent with the requirements of that section of the Code. 2. DEFINITIONS. (a) "AFFILIATE" as used in the Plan means any parent corporation or subsidiary corporation of the Company, as those terms are defined in Sections 424(e) and (f), respectively, of the Code. (b) "BOARD" shall mean the Board of Directors of the Company, or a committee of the Board of Directors named by the Board to administer the Plan. (c) "CODE" shall mean the Internal Revenue Code of 1986, as amended. (d) "COMMON STOCK" shall mean the Common Stock, $0.001 par value, of the Company. (e) "COMPANY" shall mean ImClone Systems Incorporated, a Delaware corporation. (f) "COMPENSATION" shall mean all compensation that is taxable income for federal income tax purposes, including, payments for overtime, shift premium, incentive compensation, incentive payments, bonuses, commissions and other compensation. (g) "CONTINUOUS STATUS AS AN EMPLOYEE" shall mean the absence of any interruption or termination of service as an employee of the Company or any Affiliate. Continuous Status as an Employee shall not be considered interrupted in the case of a leave of absence agreed to in writing by the Company or any Affiliate, provided that such leave is for a period of not more than 90 days or reemployment upon the expiration of such leave is guaranteed by contract or statute. (h) "CONTRIBUTIONS" shall mean all amounts credited to the account of a participant pursuant to the Plan. (i) "EXERCISE DATE" shall mean the last day of each Offering Period of the Plan. (j) "OFFERING DATE" shall mean the first business day of an Offering Period under the Plan. (k) "OFFERING PERIOD" shall mean any of the three month periods commencing on each of July 1, October 1, January 1 and April 1 of each year (or such other periods as may be determined by the Board which shall comply with Section 423(b)(7) of the Code); provided that the initial offering period shall commence at a time to be determined by the Board. (l) "OPTION" shall mean an option granted under Section 6 of this Plan. (m) "PLAN" shall mean this ImClone Systems Incorporated 1998 Employee Stock Purchase Plan. 3. ELIGIBILITY. (a) Options may be granted only to employees of the Company or any Affiliate. An employee of the Company or any Affiliate shall not be eligible to participate in an Offering Period, unless on the Offering Date of such Offering Period, such employee has maintained Continuous Status as an Employee for a period of six (6) months preceding such Offering Date. In addition, no employee of the Company or any Affiliate shall be eligible to be granted an Option under the Plan, unless, on the Offering Date, such employee's customary employment with the Company or such Affiliate is at least twenty (20) hours per week and at least five (5) months per calendar year. (b) No employee shall be eligible for the grant of an Option under the Plan if, immediately after any such grant, such employee owns stock possessing five percent (5%) or more of the total combined voting power or value of all classes of stock of the Company or of any Affiliate. For purposes of this subparagraph 3(b), the rules of Section 424(d) of the Code shall apply in determining the stock ownership of any employee, and stock which such employee may purchase under all outstanding rights and options shall be treated as stock owned by such employee. (c) An eligible employee may be granted an Option under the Plan only if such Option, together with any other options granted under "employee stock purchase plans" of the Company and any Affiliates, as specified by Section 423(b)(8) of the Code, do not permit such employee's rights to purchase stock of the Company or any Affiliate to accrue at a rate which exceeds twenty-five thousand dollars ($25,000) of fair market value of such stock (determined at the time such Options are granted) for each calendar year in which such Options are outstanding at any time. Any Option granted under the Plan shall be deemed to be modified to the extent necessary to satisfy this paragraph 3(c). (d) Officers of the Company shall be eligible to participate in the Plan; provided, however, that the Board may provide in an Offering Period that 2 certain employees who are highly compensated employees within the meaning of Section 423(b)(4)(D) of the Code shall not be eligible to participate. 4. OFFERING PERIODS. The Plan shall be implemented by a series of Offering Periods, with a new Offering Period commencing on July 1, October 1, January l and April 1 of each year (or such other periods as may be determined by the Board which shall comply with Section 423(b)(7) of the Code); provided that the initial Offering Period shall commence at a time to be determined by the Board. The Plan shall continue until terminated in accordance with paragraph 17 or paragraph 21 hereof. In addition, employees shall not be entitled to enroll in the Plan or exercise any Options granted under the Plan during any period in which the Company has restricted the purchase or sale of its securities by its employees. 5. PARTICIPATION; CONTRIBUTIONS. (a) An eligible employee may become a participant in the Plan by completing an enrollment form ("Enrollment Form") provided by the Company and filing it with the Company prior to the applicable Offering Date, unless a later time for filing the Enrollment Form is set by the Board for all eligible employees with respect to a given Offering Period. The Enrollment Form shall set forth the percentage of the participant's Compensation (which shall be a whole percentage not less than 1% and not more than 15%) to be paid as Contributions pursuant to the Plan. (b) Payroll deductions shall commence on the first payroll following the Offering Date and shall end on the last payroll paid on or prior to the Exercise Date of the Offering Period to which the Enrollment Form is applicable, unless sooner terminated by the participant as provided in paragraph 8. All payroll deductions made by a participant shall be credited to such participant in an account under the Plan. A participant may not make payments into such account. (c) A participant may discontinue his or her participation in the Plan as provided in paragraph 8. (d) Notwithstanding the foregoing, to the extent necessary to comply with Section 423(b)(8) of the Code and paragraph 3(c) herein, a participant's payroll deductions may be decreased to 0% at such time during any Offering Period which is scheduled to end during the current calendar year that the aggregate of all payroll deductions accumulated with respect to such Offering Period and any other Offering Period ending within the same calendar year equals $21,250. Payroll deductions shall recommence at the rate provided in such participant's Enrollment Form at the beginning of the first Offering Period which is scheduled to end in the following calendar year, unless terminated by the participant as provided in paragraph 8. 3 6. GRANT OF OPTION. (a) On the Offering Date of each Offering Period, each eligible employee participating in such Offering Period shall be granted an Option to purchase on the Exercise Date of such Offering Period a number of shares of Common Stock determined by dividing such employee's Contributions accumulated prior to such Exercise Date and retained in the participant's account as of the Exercise Date by 85% of the fair market value of a share of the Common Stock on the Exercise Date; provided however, that such purchase shall be subject to the limitations set forth in Sections 3(b), 3 (c), 3(d) and 10 hereof. The fair market value of a share of the Common Stock shall be determined as provided in Section 6(b) below. (b) The fair market value of the Common Stock on a given date shall be determined by the Board in its discretion; provided that (i) if the Common Stock is listed on a stock exchange, the fair market value per share shall be the closing price on such exchange on such date as reported in the Wall Street Journal (or, (A) if not so reported, as otherwise reported by the exchange, and (B) if not reported on such date, then on the last prior date on which a sale of the Common Stock was reported); or (ii) if not listed on an exchange but traded on the National Association of Securities Dealers Automated Quotation ("Nasdaq") National Market, the fair market value per share shall be the last reported sale price on such date as reported in the Wall Street Journal (or (A) if not so reported, as otherwise reported by the Nasdaq National Market and (B) if not reported on such date, then on the last prior date on which a sale of the Common Stock was reported) or (iii) if traded on Nasdaq SmallCap and not the National Market the fair market value per share shall be the mean of the closing bid and asked price per share of the Common Stock on such date, as reported in the Wall Street Journal (or, (A) if not so reported, as otherwise reported by Nasdaq, and (B) if not so reported on such date, then on the last prior date on which a sale of the Common Stock was reported); or (iv) if the Common Stock is otherwise publicly traded, but not listed on a stock exchange or traded on Nasdaq, the fair market value per share shall be determined in good faith by the Board in its discretion. 7. EXERCISE OF OPTION. (a) Unless a participant withdraws from the Plan as provided in paragraph 8, such participant's Option for the purchase of shares of Common Stock will be exercised automatically on the Exercise Date of the Offering Period and the maximum number of full shares of Common Stock subject to the Option will be purchased for such participant at the applicable purchase price with the accumulated Contributions in such participant's account. If a fractional number of shares of Common Stock results, then such number shall be rounded down to the next whole number and the excess Contributions shall be carried forward to the next Exercise Date, unless such participant withdraws the Contributions pursuant to paragraph 8(a) or is no longer eligible to participate in the Plan, in which case such amount shall be distributed to the participant without interest. The shares purchased upon exercise of an Option hereunder shall be deemed to be transferred to the participant on the Exercise Date. During a participant's lifetime, a participant's Option to purchase shares hereunder is exercisable only by such participant. 4 (b) Shares shall not be issued with respect to an Option unless the exercise of such Option and the issuance and delivery of such shares of Common Stock pursuant thereto shall comply with all applicable provisions of law, domestic or foreign, including, without limitation, the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, the rules and regulations promulgated thereunder, and the requirements of any stock exchange upon which the shares of Common Stock may then be listed, and shall be further subject to the approval of counsel for the Company with respect to such compliance. As a condition to the exercise of an Option, the Company may require the person exercising such Option to represent and warrant at the time of any such exercise that the shares of Common Stock are being purchased only for investment and without any present intention to sell or distribute such shares of Common Stock if, in the opinion of counsel for the Company, such a representation is required by any of the aforementioned applicable provisions of law. 8. WITHDRAWAL; TERMINATION OF EMPLOYMENT. (a) A participant may withdraw all but not less than all the Contributions credited to his or her account under the Plan at any time prior to the Exercise Date of the Offering Period by written notice to the Company. All of the participant's Contributions credited to such participant's account will be paid to such participant promptly after receipt of such participant's notice of withdrawal and such participant's Option for the current Offering Period will be automatically terminated, and no further Contributions for the purchase of shares of Common Stock will be made during the Offering Period. (b) Upon termination of the participant's Continuous Status as an Employee, prior to the Exercise Date of the Offering Period for any reason, including retirement or death, the Contributions credited to such participant's account will be returned to such participant or, in the case of his or her death, to the person or persons entitled thereto under paragraph 12, and his or her Option will be automatically terminated. (c) In the event an employee fails to remain in Continuous Status as an Employee of the Company for at least 20 hours per week during the Offering Period in which the employee is a participant, such participant will be deemed to have elected to withdraw from the Plan and the Contributions credited to such participant's account will be returned to such participant and the Option terminated. (d) A participant's withdrawal from an Offering Period will not have any effect upon his or her eligibility to participate in a succeeding Offering Period or in any similar plan which may hereafter be adopted by the Company. 9. INTEREST. No interest shall accrue on the Contributions of a participant in the Plan. 5 10. STOCK. The maximum number of shares of Common Stock which shall be made available for sale under the Plan shall be 500,000 shares subject to adjustment upon changes in capitalization of the Company as provided in paragraph 16. Shares sold under the Plan may be newly issued shares or shares reacquired in private transactions or open market purchases, but all shares sold under the Plan regardless of source shall be counted against the 500,000 share limitation. If the total number of shares of Common Stock which would otherwise be subject to Options granted pursuant to Section 6(a) hereof on the Offering Date of an Offering Period exceeds the number of shares of Common Stock then available under the Plan (after deduction of all shares of Common Stock for which Options have been exercised or are then outstanding), the Company shall make a pro rata allocation of the shares of Common Stock remaining available for Option grant in as uniform a manner as shall be reasonably practicable and as it shall determine to be equitable. Any amounts remaining in an employee's account not applied to the purchase of Common Stock pursuant to this Section 10 shall be refunded on or promptly after the Exercise Date. In such event, the Company shall give written notice of such reduction of the number of shares of Common Stock subject to the Option to each employee affected thereby and shall similarly reduce the rate of Contributions, if necessary. 11. ADMINISTRATION. The Board shall supervise and administer the Plan and shall have full power to adopt, amend and rescind any rules deemed desirable and appropriate for the administration of the Plan and not inconsistent with the Plan, to construe and interpret the Plan, and to make all other determinations necessary or advisable for the administration of the Plan. 12. DESIGNATION OF BENEFICIARY. (a) A participant may file a written designation of a beneficiary who is to receive any shares of Common Stock and cash, if any, from the participant's account under the Plan in the event of such participant's death subsequent to the end of the Offering Period but prior to delivery of such participant's shares of Common Stock and cash. In addition, a participant may file a written designation of a beneficiary who is to receive any cash from the participant's account under the Plan in the event of such participant's death prior to the Exercise Date of the Offering Period. If a participant is married and the designated beneficiary is not the spouse, spousal consent shall be required for such designation to be effective. (b) Such designation of beneficiary may be changed by the participant (and his or her spouse, if any) at any time by written notice. In the event of the death of a participant and in the absence of a beneficiary validly designated under the Plan who is living at the time of such participant's death, the Company shall deliver such shares of Common Stock and/or cash to the executor or administrator of the estate of the participant, or if no such executor or administrator has been appointed (to the knowledge of the Company), the Company, in its discretion, may deliver such shares and/or cash to the spouse or to any one or more dependents or relatives of 6 the participant, or if no spouse, dependent or relative is known to the Company, then to such other person as the Company may designate. 13. TRANSFERABILITY. Neither Contributions credited to a participant's account nor any rights with regard to the exercise of an Option or to receive shares under the Plan may be assigned, transferred, pledged or otherwise disposed of in any way other than by will, the laws of descent and distribution or as provided in paragraph 12 hereof by the participant. Any such attempt at assignment, transfer, pledge or other disposition shall be without effect, except that the Company may treat such act as an election to withdraw Contributions in accordance with paragraph 8. 14. USE OF FUNDS. All Contributions received or held by the Company under the Plan may be used by the Company for any corporate purpose, and the Company shall not be obligated to segregate such Contributions. 15. REPORTS. Individual accounts will be maintained for each participant in the Plan. Statements of account will be given to participants, the per share purchase price, the number of shares purchased and the remaining cash balance, if any. 16. ADJUSTMENTS UPON CHANGES IN STOCK. 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, distribution of substantially all of the assets of the Company, spin-off of a subsidiary's voting securities to the Company's shareholders, 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 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 the Board hereunder shall be final, binding and conclusive upon each participant. 17. AMENDMENT OR TERMINATION. The Board may at any time terminate or amend the Plan. Except as provided in paragraph 16, no such termination may affect Options previously granted, nor may an amendment make any change in any Option therefore granted which adversely affects the rights of any participant. In addition, to the extent necessary to comply with Section 423 of the Code (or any successor rule or provision or any applicable law or regulation), 7 the Company shall obtain stockholder approval in such a manner and to such a degree as so required. 18. NOTICES. All notices or other communications by a participant to the Company under or in connection with the Plan shall be deemed to have been duly given when received in the form specified by the Company at the location, or by the person, designated by the Company for the receipt thereof. 19. RIGHT TO TERMINATE EMPLOYMENT. Nothing in the Plan or in any agreement entered into pursuant to the Plan shall confer upon any participant the right to continue in the employment of the Company or any Affiliate, or affect any right which the Company or any Affiliate may have to terminate the employment of such participant. 20. RIGHTS AS A STOCKHOLDER. Neither the granting of an Option nor a deduction from payroll shall constitute a participant the owner of shares covered by an Option. No participant shall have any right as a stockholder unless and until an Option has been exercised, and the shares of Common Stock underlying the Option have been registered in the Company's share register. 21. TERM OF PLAN. The Plan shall become effective upon its adoption by each of the Board and the stockholders and shall continue in effect for a term of ten (10) years unless sooner terminated earlier under paragraph 17. 22. APPLICABLE LAW. This Plan shall be governed in accordance with the laws of Delaware. 8 EX-10.69 4 STOCK OPTION PLAN Exhibit 10.69 IMCLONE SYSTEMS INCORPORATED 1998 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, and non-officer 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"). 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 1,000,000 shares. - ---------- (1) Amended by the Board of Directors on July 7, 1998. 1 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 and Stock Option Committee (the "Committee") or the Board of Directors of the Company (the "Board"). The Committee shall be comprised of not less than two persons who shall be appointed by the Board from among the members of the Board. 3.2 Duration; Removal; Etc. The members of the Committee shall serve at the pleasure of the Board, which shall have the power at all times to remove members from the Committee or to add members thereto. Vacancies in the Committee, however caused, shall be filled by action of the Board. 3.3 Meetings; Actions of Committee. The Committee may select one of its members as its Chairman and shall hold meetings at such times and places as it may determine. All decisions or determinations of the Committee 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. The Committee and the Board may make such rules and regulations for the conduct of its business not inconsistent herewith as it may deem advisable. 2 3.4 Interpretation. The interpretation and construction by the Committee or the Board of the provisions of the Plan or of the options granted hereunder shall be final, unless in the case of the Committee otherwise determined by the Board. No member of the Board or of the Committee 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. ARTICLE IV Participants; Participation Guidelines; 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, or non-officer employees of the Company or a subsidiary. The Committee or the Board shall determine the key consultants, advisors, and non-officer 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. Persons who are disabled within the meaning of the Code shall not be eligible for the grant of options. 4.2 Guidelines for Participation. In selecting Participants and determining the numbers of shares of Common Stock for which options are to be granted, either the Committee 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 of the Committee or the Board shall deem relevant. 3 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 Committee and the Board. 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 Committee 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 the Committee 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 said term as the Committee 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. The Committee 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 4 determined by any of the Committee 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 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 or a non-officer employee of the Company or a subsidiary. 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 by wire transfer, certified or bank check or in stock of the Company that has been owned by the Participant for at least six months, 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 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 5 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 VIII hereof. Either the Committee 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 each of the Committee 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; 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 6 between the Participant and the Company or a subsidiary, 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. 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 or non-officer employee of the Company or a subsidiary, 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. 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. 7 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 either the Committee 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 either the Committee 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. 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 immediately be transferable: 8 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 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 consultants, advisors and non-officer 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 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 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 or non-officer employee of the Company, or interfere in any way with the 9 right of the Company to terminate such relationship 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 Committee and ratification of the Board. Options may be granted under the Plan prior to the ratification of the Plan by the Board, 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. 9.6 Tax Requirements. The exercise or surrender of any option under this Plan shall constitute a Participant's full and complete consent to whatever action the Committee 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. 9.7 Interpretations and Adjustments. To the extent permitted by Law, an interpretation of the Plan and a decision on any matter within either the Committee or the 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. 9.8 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 10 necessary or required by either the Committee or the Board to perform its duties and functions under the Plan. 9.9 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. 9.10 Certain Definitions. 9.10.1 "Parent". The term "parent" shall mean a "parent corporation" as defined in Section 424(e) of the Code. 9.10.2 "Subsidiary". The term "subsidiary" shall mean a "subsidiary corporation" as defined in Section 424(f) of the Code. 9.10.3 "Disabled". The term "disabled" shall have the definition set forth in Section 22(a) (3) of the Code. EX-27 5 FDS --
5 Information taken from June 30, 1998 Form 10-Q. 1,000 3-MOS DEC-31-1998 APR-01-1998 JUN-30-1998 3,874 47,852 0 0 0 52,940 23,874 (12,120) 68,035 3,185 2,200 0 400 24 59,495 68,035 0 765 0 6,221 (778) 0 110 (4,788) 0 (4,788) 0 0 0 (4,788) (0.24) (0.24)
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