SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. __)
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|X| Preliminary Proxy Statement
|_| Confidential, For Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
|_| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material pursuant to Rule 14a-11(c) or Rule 14a-12
ENZON, INC.
(Name of Registrant as Specified In Its Charter)
KENNETH J. ZUERBLIS
(Name of Person(s) filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(I)(3).
|_| Fee computed on table below per Exchange Act Rules 14a-6(I)(4) and 0-11.
(1) Title of each class of securities to which transaction
applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11: Set forth the
amount on which the filing fee is calculated and state how it
was determined.
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid.
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|_| Check box if any part of the fee is offset as provided by Exchange Act
rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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4) Date Filed:
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ENZON, INC.
685 Route 202/206
Bridgewater, New Jersey 08807
(908) 541-8600
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 3, 2002
To our Stockholders:
You are hereby notified that the annual meeting of stockholders (the
"Annual Meeting") of Enzon, Inc., a Delaware corporation ("Enzon" or the
"Company") will be held at the Embassy Suites Hotel, 121 Centennial Avenue,
Piscataway, New Jersey on Tuesday, December 3, 2002 at 10:00 a.m. local time,
for the following purposes:
1. To elect two Class I directors, each for a term of three years in
accordance with the Company's Certificate of Incorporation and
By-Laws (Proposal No. 1);
2. To vote on a proposal to amend the Company's Certificate of
Incorporation to change the name of the Company from "Enzon, Inc."
to "Enzon Pharmaceuticals, Inc." (Proposal No. 2);
3. To ratify the selection of KPMG LLP, independent certified public
accountants, to audit the consolidated financial statements of the
Company for the fiscal year ending June 30, 2003 (Proposal No. 3);
and
4. To transact such other matters as may properly come before the
Annual Meeting or any adjournment thereof.
Only holders of record of the Company's Common Stock, par value $.01 per
share, and Series A Cumulative Convertible Preferred Stock, par value $.01 per
share, at the close of business on October 25, 2002 are entitled to notice of,
and to vote at, the Annual Meeting.
We hope that as many stockholders as possible will personally attend the
Annual Meeting. Whether or not you plan to attend the Annual Meeting, your proxy
vote is important. To assure your representation at the meeting, please
complete, sign and date the enclosed proxy card and return it promptly in the
enclosed envelope. Sending in your proxy will not prevent you from voting in
person at the Annual Meeting.
By order of the Board of Directors,
Kenneth J. Zuerblis
Corporate Secretary
Bridgewater, New Jersey
October 26, 2002
ENZON, INC.
-------
PROXY STATEMENT
-------
This Proxy Statement is furnished to stockholders of record of Enzon, Inc.
("Enzon" or the "Company") as of October 25, 2002, in connection with the
solicitation of proxies for use at the annual meeting of stockholders (the
"Annual Meeting") to be held on Tuesday, December 3, 2002 and at any adjournment
thereof. The accompanying proxy is solicited by the Board of Directors of the
Company and is revocable by the stockholder any time before it is voted. For
more information concerning the procedure for revoking the proxy, see "General."
This Proxy Statement was first mailed to stockholders of the Company on or about
November 1, 2002, accompanied by the Company's Annual Report to Stockholders for
the fiscal year ended June 30, 2002. The principal executive offices of the
Company are located at 685 Route 202/206 Bridgewater, New Jersey 08807,
telephone (908) 541-8600.
OUTSTANDING SHARES AND VOTING RIGHTS
Only holders of the Company's common stock, par value $.01 per share (the
"Common Stock" or "Common Shares") and Series A Cumulative Convertible Preferred
Stock, $.01 per share (the "Series A Preferred Stock" or "Series A Preferred
Shares") outstanding at the close of business on October 25, 2002 (the "Record
Date") are entitled to receive notice of and vote at the Annual Meeting. As of
the Record Date, the number and class of shares of stock that were outstanding
and will be entitled to vote at the meeting were ___ Common Shares and 7,000
Series A Preferred Shares. Each Common Share and Series A Preferred Share is
entitled to one vote on all matters. No other class of securities will be
entitled to vote at the Annual Meeting. There are no cumulative voting rights.
To be elected, a director must receive a plurality of the votes of the
Common Shares and Series A Preferred Shares, voting together as a single class,
present in person or represented by proxy at the Annual Meeting and entitled to
vote on the election of directors. The affirmative vote of at least a majority
of the Common Shares and Series A Preferred Shares outstanding as of the record
date, and entitled to vote thereon, voting together as a single class, is
necessary for approval of Proposal No. 2. The affirmative vote of at least a
majority of the Common Shares and Series A Preferred Shares, present in person
or represented by proxy at the Annual Meeting and entitled to vote thereon,
voting together as a single class, is necessary for approval of Proposal No. 3.
A quorum is representation in person or by proxy at the Annual Meeting of at
least one-third of the combined Common Shares and Series A Preferred Shares
outstanding as of the Record Date.
Pursuant to the Delaware General Corporation Law, only votes cast "For" a
matter constitute affirmative votes. Proxy cards which are voted by marking
"Withheld" or "Abstain" on a particular matter are counted as present for quorum
purposes and for purposes of determining the outcome of such matter, but since
they are not cast "For" a particular matter, they will have the same effect as
negative votes or votes cast "Against" a particular matter. If a validly
executed proxy card is not marked to indicate a vote on a particular matter and
the proxy granted thereby is not revoked before it is voted, it will be voted
"For" such matter. Where brokers are prohibited from exercising discretionary
authority for beneficial owners who have not provided voting instructions
(commonly referred to as "broker non-votes"), such broker non-votes will be
treated as shares that are present for purposes of determining the presence of a
quorum; however, with respect to proposals which require the affirmative vote of
a percentage of shares present at the Annual Meeting for approval, such broker
non-votes will be treated as not present for purposes of determining the outcome
of any such matter. With respect to proposals which require the affirmative vote
of a percentage of the outstanding shares for approval, since such broker
non-votes are not cast "For" a particular matter, they will have the same effect
as negative votes or votes cast "Against" such proposals.
PROPOSAL NO. 1 - ELECTION OF DIRECTORS
Pursuant to the provisions of the Company's Certificate of Incorporation
and By-laws, the Board of Directors is comprised of three classes of directors,
designated Class I, Class II and Class III. One class of directors is elected
each year to hold office for a three-year term and until successors of such
directors are duly elected and qualified. Two Class I directors will be elected
at this year's Annual Meeting. The nominees for election to the office of
director, and certain information with respect to their backgrounds and the
backgrounds of non-nominee directors, are set forth below. It is the intention
of the persons named in the accompanying proxy card, unless otherwise
instructed, to vote to elect the nominees named herein as Class I directors.
Each of the nominees named herein presently serves as a director of the Company.
In the event any of the nominees named herein is unable to serve as a director,
discretionary authority is reserved to the Board of Directors to vote for a
substitute. The Board of Directors has no reason to believe that any of the
nominees named herein will be unable to serve if elected.
Nominees for Election to the Office of Director
at the 2002 Annual Meeting
Director
Nominee Age Since Position with the Company
- ----------------------------- ----- ---------- --------------------------------------
Arthur J. Higgins (4) 46 2001 President and Chief Executive Officer,
Chairman of the Board
Dr. Rosina B. Dixon (1)(2)(5) 59 1994 Director
Non-Nominee Directors Continuing to Serve
in the Office of Director after the 2002 Annual Meeting
Director
Nominee Age Since Position with the Company
- ------------------------------ ----- ---------- -------------------------------------
David S. Barlow (1)(2)(3)(7) 45 1999 Director
Rolf A. Classon (1)(3)(7) 57 1997 Director
Robert LeBuhn (3)(4)(5) (7) 70 1994 Director
Dr. David W. Golde (2)(5)(6) 62 1998 Director
Robert L. Parkinson Jr. (6)(8) 51 2002 Director
(1) Member of the Compensation Committee
(2) Member of Scientific Advisory Committee
(3) Member of the Finance and Audit Committee
(4) Member of the Executive Committee
(5) Member of Corporate Governance Committee
(6) Class II director serving until the 2003 Annual Meeting
(7) Class III director serving until the 2004 Annual Meeting
(8) Member of Compensation Committee as of September 11, 2002
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BUSINESS EXPERIENCE OF DIRECTORS
Nominee Class I Directors Serving Until the 2002 Annual Meeting
Arthur J. Higgins, has served as the Company's President, Chief Executive
Officer and a director of the Company since May 31, 2001, and Chairman of the
Board since December 3, 2001. Prior to joining the Company, Mr. Higgins had been
with Abbott Laboratories for 14 years and most recently served as Senior Vice
President of Pharmaceutical Operations since 1998. He also held various other
positions at Abbott Laboratories, including Vice President of Pacific, Asia and
Africa Operations and Vice President of International Business Development.
Previously, Mr. Higgins worked for Bristol-Myers and Sandoz in the U.K. Mr.
Higgins graduated from Strathclyde University, Scotland and holds a B.S. degree
in biochemistry.
Dr. Rosina B. Dixon, has served as a director of the Company since August
1994. Dr. Dixon has been a consultant to the pharmaceutical industry since 1987.
Prior to such time she held senior positions at Ciba-Geigy Pharmaceuticals, a
division of Ciba-Geigy Corporation, and Schering-Plough Corporation. She
received her M.D. from Columbia University, College of Physicians and Surgeons
and is certified by the National Board of Medical Examiners and the American
Board of Internal Medicine. She is a member of the American College of Clinical
Pharmacology, American Society for Clinical Pharmacology and Therapeutics, and
the National Association of Corporate Directors and currently serves as a
director of Church & Dwight Co., Inc. and Cambrex Corporation.
The Board of Directors recommends a vote FOR Mr. Higgins and Dr. Dixon as
Class I Directors (Proposal No. 1 on the Proxy Card).
Non-Nominee Class II Directors Serving until the 2003 Annual Meeting
Dr. David W. Golde, has served as a director of the Company since March
1998. Dr. Golde is currently a Professor of Medicine at Cornell University
Medical College, a Professor of Molecular Pharmacology and Therapeutics at
Cornell University Graduate School of Medical Sciences, a tenured member of
Sloan Kettering Institute and attending physician at Memorial Hospital, at the
Sloan-Kettering Cancer Center. From 1996 to 2002, Dr. Golde was
Physician-In-Chief at Memorial Sloan-Kettering Cancer Center. From 1991 to 1996,
Dr. Golde served as Head of the Division of Hematologic Oncology at Memorial
Sloan-Kettering Cancer Center. Prior to 1991, Dr. Golde was a professor of
medicine and Chief of the Division of Hematology and Oncology at UCLA, Director
of the UCLA AIDS Center and Director of the UCLA Clinical Research Center. Dr.
Golde serves on the Board of Directors of Viasys, Inc.
Robert L. Parkinson, Jr., has served as a director of the Company since
February 2002. In August 2002 Mr. Parkinson was appointed as the Dean of Loyola
University Chicago's School of Business Administration and its Graduate School
of Business. Mr. Parkinson worked at Abbott Laboratories from 1976 until 2001.
From 1999-2001, Mr. Parkinson served as President and Chief Operating Officer of
Abbott Laboratories. He was elected Executive Vice President in 1998,
responsible for overseeing Abbott's international operations for pharmaceutical,
hospital and nutritional products as well as the U.S.-based Ross laboratories
division. From 1995-1998, Mr. Parkinson served as president of international
operations and from 1993-1995, he served as president of chemical and
agricultural products. Mr. Parkinson was named vice president of European
operations in 1990 and had previously served as vice president of marketing and
sales, hospital products. Mr. Parkinson is currently Chairman of the Board of
GeneProt Inc. and serves on the Board of Directors of Northwestern Memorial
Hospital.
Non-Nominee Class III Directors for Election at the 2004 Annual Meeting
David S. Barlow, has served as a director of the Company since June 1999.
Mr. Barlow has served as President of Black Diamond Capital, a private
investment company, since October 1999. From 1995 to September 1999, Mr. Barlow
was President of Pharmaceuticals at Sepracor, Inc. From 1993 to 1995, Mr. Barlow
served as the General Manager of Pharmaceuticals at Sepracor, Inc. Prior to
1993, Mr. Barlow held several senior level positions at Rhone-Poulenc Rorer,
Inc., including Vice President, World Wide Marketing and Business Development at
Armor Pharmaceutical Company, a subsidiary of Rhone-Poulenc Rorer, Inc. Mr.
Barlow serves on the Board of
3
Directors of Pan Pacific Pharmaceuticals, Inc., Biostream, Inc., Red Bird LLC
and New River Pharmaceuticals. He also serves on the Board of Trustees of Bates
College, McLean Hospital and Newton Country Day School.
Rolf A. Classon, has served as a director of the Company since January
1997. Since 1995 Mr. Classon has served as an Executive Vice President of Bayer
Corporation and President of Bayer Diagnostics. From 1991 to 1995, Mr. Classon
was an Executive Vice President in charge of Bayer Diagnostics' Worldwide
Marketing, Sales and Service operations. From 1990 to 1991, Mr. Classon was
President and Chief Operating Officer of Pharmacia Biosystems A.B. Prior to
1991, Mr. Classon served as President of Pharmacia Development Company Inc. and
Pharmacia A.B.'s Hospital Products Division.
Robert LeBuhn, has served as a director of the Company since August 1994.
Mr. LeBuhn is a private investor and is a director of Cambrex Corporation and US
Airways Group, Inc. He is Trustee and Chairman of the Geraldine R. Dodge
Foundation, a Trustee and Treasurer of All Kinds of Minds, a Trustee of
Executive Service Corp., and a trustee of the Aspen Music Festival and School
and President of its National Council.
DIRECTORS' COMPENSATION
Directors' Cash Compensation
During the fiscal year ended June 30, 2002, the Company paid its former
Chairman of the Board Randy H. Thurman $53,000 in consideration for serving as
Chairman. Mr. Higgins succeeded Mr. Thurman as Chairman of the Board on December
3, 2001. Under the Company's 1996 Independent Directors' Stock Plan, as amended
(the "Independent Directors' Stock Plan") non-executive members of the Board of
Directors ("Independent Directors") can elect at the end of the calendar year to
receive up to 50% of the fees payable under the Independent Directors' Stock
Plan in cash, with the remainder of the fees to be paid in Common Stock. The
Independent Directors' Plan provides for compensation to Independent Directors
of $2,500 per quarter plus $500 for each meeting attended. During the fiscal
year ended June 30, 2002, Dr. David Golde and Dr. Rosina Dixon elected to
receive 50% of their compensation for the year ended December 31, 2001 under
this plan in cash which totaled $6,750 and $7,250, respectively. All other
directors elected to receive 100% of their compensation as stock.
Directors' Stock Options
Through January 2, 2002, Independent Directors received annual stock
option grants under the Company's Non-Qualified Stock Option Plan pursuant to a
formula that was approved by stockholders. Under the formula, each of the
Independent Directors automatically received an option to purchase 10,000 shares
of Common Stock annually on January 2 (the "Regular Grant"). Newly elected
directors also received an option to purchase 10,000 shares of Common Stock (the
"Initial Election Grant") on the date of each Independent Director's initial
election to the Board. In addition, each newly-elected Independent Director
automatically received an option to purchase such Independent Director's pro
rata share of the Regular Grant for the year in which such Independent Director
was initially elected to the Board, which equals the product of 833 multiplied
by the number of whole months remaining in the year until the next Regular Grant
(the "Pro Rata Grant"). In December 2001, the stockholders approved the
Company's 2001 Incentive Stock Plan and in September 2002 the Compensation
Committee of the Board of Directors voted to stop making the annual formula
grants of stock options to Independent Directors under the Non Qualified Plan
since that plan was running out of shares and to instead make such annual
formula grants of stock options to the Independent Directors under the 2001
Incentive Stock Plan commencing as of January 2, 2003. In addition, in September
of 2002 the Compensation Committee of the Board of Directors decided to change
the number of shares subject to the option granted as the Regular Grant from
10,000 to 5,000. As a result the multiplier used to determine the number of
shares subject to the option granted as a Pro Rata Grant subsequent to January
2, 2003 was changed from 833 to 417. The number of shares subject to the option
granted as an Initial Election Grant remained at 10,000.
The options granted as a Regular Grant vest and become exercisable on the
January 1st following the date of grant. The options, granted pursuant to a Pro
Rata Grant, vest and become exercisable on the January 1st following such
Independent Director's initial election to the Board. The options granted
pursuant to an Initial Election Grant vest and become exercisable as to 5,000
shares one year after the date of grant; and as to 5,000 shares two years after
4
the date of grant. The per share exercise price of options granted pursuant to
the formula is equal to the fair market value of the Common Stock on the date of
grant.
An option granted to an Independent Director pursuant to the formula will
not become exercisable as to the relevant shares unless such Independent
Director has served continuously on the Board of Directors during the period
commencing on the date the option was granted and terminating on the date the
option is scheduled to vest; provided, however, that if an Independent Director
does not fulfill such continuous service requirement due to such Independent
Director's death or disability all options granted under the Formula and held by
such Independent Director nonetheless vest and become exercisable as though such
Independent Director fulfilled the continuous service requirement. If an
Independent Director does not fulfill such continuous service requirement the
Committee, in its sole discretion, may waive such continuous service
requirement. An option granted to an Independent Director pursuant to the
Formula remains exercisable for a period of ten years from the date of grant.
Independent Directors' Stock Plan
Through December 31, 2001, the Company's Independent Directors received
compensation for serving on the Board of Directors payable in shares of the
Company's common stock or a combination of shares of common stock and cash under
the Company's Independent Directors Stock Plan. In September 2002 the
Compensation Committee of the Board of Directors decided to terminate the
Independent Directors Stock Plan as a stand-alone plan and to instead issue
shares of the Company's common stock under the Independent Directors Stock Plan
pursuant to the 2001 Incentive Stock Plan. During fiscal 2002, each Independent
Director was entitled to compensation of $2,500 per quarter and $500 for each
meeting attended by such Independent Director under the Independent Director's
Stock Plan. In 2002, in connection with the reduction of shares subject to the
option granted under the Regular Grant to Independent Directors the Compensation
Committee of the Board of Directors approved a change, effective for the quarter
ended March 31, 2002 and for each quarter thereafter, to the compensation under
the Independent Directors Stock Plan to include the payment of $500 for
committee meetings attended by the Independent Directors which are held on a day
when no Board of Directors meeting is held. Under the Independent Directors'
Stock Plan the Independent Directors are entitled to elect to receive up to 50%
of the fees payable under the Independent Directors' Stock Plan in cash, with
the remainder of the fees to be paid in shares of the Company's common stock.
Fees payable and shares issuable under the Independent Director's Stock Plan are
paid annually at the end of the calendar year. The number of shares issued will
be based on the last reported sale price of a share of common stock on the
Nasdaq National Market at the end of the quarter for which fees are payable.
During the fiscal year ended June 30, 2002, the Company paid cash fees of $6,750
to Dr. David Golde and $7,250 to Dr. Rosina Dixon. All other directors elected
to receive 100% of their compensation in shares of the Company's common stock.
During the fiscal year ended June 30, 2002, the Company recorded an aggregate of
$89,000 in Independent Directors' fees, a summary of which follows:
Value of
Consideration
-----------------
Randy H. Thurman(1) $12,600
David S. Barlow 14,100
Rolf A. Classon 14,100
Rosina B. Dixon 14,600
David W. Golde 14,100
Robert LeBuhn 14,100
Robert L. Parkinson 5,000
(1) In addition to the standard directors fees, Mr. Thurman received
$53,000 for serving as Chairman of the Board for the period from July 1, 2001 to
December 3, 2001. Mr. Thurman resigned from the Board of Directors on May 7,
2002.
5
Section 16(a) Beneficial Ownership Reporting Compliance
Ownership of and transactions in the Company's Common Stock by executive
officers and directors of the Company and owners of 10% or more of the Company's
outstanding Common Stock are required to be reported to the Securities and
Exchange Commission pursuant to Section 16(a) of the Securities Exchange Act of
1934, as amended. Based solely on the Company's review of such reports and
written representations from certain reporting persons, during the fiscal year
ended June 30, 2002 all such reports were filed in a timely manner.
Directors' Stock Ownership Program
In October 2000, the Board of Directors implemented a director's stock
ownership program which requires each of the directors to own beneficially,
outstanding Common Stock of the Company with a market value of at least $100,000
within two years after the director first joins the Company's Board of
Directors. The determination of whether the shares owned beneficially by a
director meet the $100,000 minimum market value requirement will be based on the
highest average trading price of the Common Stock over any consecutive twenty
trading days during the two year period after the director first joins the
Company's Board of Directors or the price paid for the Common Stock by the
director. Shares of Common Stock underlying outstanding options will not be
counted towards satisfaction of this requirement. The Board of Directors may
waive this requirement under certain circumstances. All of the Company's current
directors meet this requirement.
INFORMATION CONCERNING BOARD AND COMMITTEE MEETINGS
AND COMMITTEES OF THE BOARD
Eight meetings of the Company's Board of Directors were held during the
fiscal year ended June 30, 2002. Each incumbent director attended at least 75%
of the total number of meetings of the Board of Directors and committees of the
Board of Directors, of which such director was a member, held during the fiscal
year.
As of June 30, 2002, the standing committees of the Company's Board of
Directors were the Finance and Audit Committee, the Compensation Committee, the
Executive Committee, the Scientific Advisory Committee and the Corporate
Governance Committee.
As of June 30, 2002, the Finance and Audit Committee was comprised of
Robert LeBuhn, chairman, Rolf A. Classon and David S. Barlow. The primary
purpose of the Finance and Audit Committee is to assist the Board of Directors
in fulfilling its responsibility to oversee management's conduct of the
Company's financial reporting process. In furtherance of such purpose, the
Finance and Audit Committee shall be directly responsible for the appointment,
compensation and oversight of the work of the Company's independent Auditors as
well as the approval, in advance, of all services provided by the independent
auditors, whether audit services or non-audit services. In addition, the Finance
and Audit Committee shall assist with: (a) the overview of financial reports and
other financial information provided by the Company to any governmental or
regulatory body, the public or other users thereof, (b) the Company's systems of
internal accounting and financial controls, (c) the annual independent audit of
the Company's financial statements, and (d) the Company's legal compliance and
ethics programs, as established by management and the Board of Directors. The
Finance and Audit Committee adopted a written charter during fiscal 2000 and
amended such charter in September 2002. A copy of the charter of the Finance and
Audit Committee as amended, is attached to this Proxy Statement as Appendix A.
The Finance and Audit Committee held three meetings during the fiscal year ended
June 30, 2002.
As of June 30, 2002, the Compensation Committee was comprised of Rolf A.
Classon, chairman, Dr. Rosina B. Dixon, David S. Barlow. Robert L. Parkinson
joined the Compensation Committee in September 2002. The primary functions of
the Compensation Committee are to administer the Company's Non-Qualified Stock
Option Plans and 2001 Incentive Stock Plan, determine the compensation of the
Company's officers and senior management, and review compensation policy. There
were four meetings of the Compensation Committee during the fiscal year ended
June 30, 2002.
6
The Scientific Advisory Committee is comprised of Dr. David W. Golde,
chairman, Dr. Rosina B. Dixon and David S. Barlow. This committee provides
scientific input to the Board of Directors and serves as the liaison between the
Company's senior research and development management and the Board of Directors.
There was one meeting of the Scientific Advisory Committee during the fiscal
year ended June 30, 2002.
The Corporate Governance Committee is comprised of Dr. Rosina B. Dixon,
chairperson, Dr. David W. Golde and Robert LeBuhn. This committee reviews and
sets corporate governance policy and will be responsible for director and senior
management succession planning. There were no meetings of the Corporate
Governance Committee during the fiscal year ended June 30, 2002.
Given the relatively small size of the Company's current Board of
Directors, the Company determined that efficiencies were not being realized from
meetings of the Executive Committee and therefore suspended regular meetings of
the Executive Committee in September 1994. There were no meetings of the
Executive Committee during the fiscal year ended June 30, 2002.
The Company has not yet established a policy with respect to the
consideration of stockholder nominees to the Board of Directors.
COMPENSATION COMMITTEE INTERLOCKS AND
INSIDER PARTICIPATION
During the fiscal year ended June 30, 2002, the members of the Board of
Directors serving on the Compensation Committee of the Board of Directors were
Rolf A. Classon, chairman, Dr. Rosina B. Dixon, David S. Barlow and Randy H.
Thurman, none of whom are or have ever been employees of the Company. Randy H.
Thurman resigned from the Board of Directors in May 2002. During the fiscal year
ended June 30, 2002, no executive officer of the Company served on the
compensation committee or board of directors of any other entity which had an
executive officer who also served on the Compensation Committee or Board of
Directors of the Company.
FINANCE AND AUDIT COMMITTEE INDEPENDENCE
During the fiscal year ended June 30, 2002, the members of the Board of
Directors serving on the Finance and Audit Committee of the Board of Directors
were Robert LeBuhn, David S. Barlow and Rolf A. Classon, all of whom are
considered "independent directors" as defined by Rule 4200 (a) (15) of the
National Association of Securities Dealers listing standards.
BUSINESS EXPERIENCE OF EXECUTIVE OFFICERS
Set forth below is certain information regarding the executive officers of
the Company who do not serve on the Board of Directors.
Dr. Ulrich Grau, 53, has served as the Company's Chief Scientific Officer
since March 2002. From January 2000 to March 2001 Dr. Grau served as President
of Research and Development at BASF Pharma. From January 1999 to July 1999 Dr.
Grau served as Senior Vice President and R&D integration officer at Aventis
Pharmaceuticals. From November 1997 to January 1999 Dr. Grau served as Senior
Vice President Global Product Realization at Hoechst Marion Rousset.
Kenneth J. Zuerblis, 43, has served as the Company's Chief Financial
Officer since January 1996 and as Vice President, Finance since April 1994.
During May 2000, Mr. Zuerblis was appointed Secretary of the Company. From July
1991 to April 1994, Mr. Zuerblis served as the Company's Controller. From
January 1982 to July 1991, Mr. Zuerblis was employed by KPMG LLP in various
positions, the last being senior manager. He became a certified public
accountant in 1985.
7
SUMMARY COMPENSATION TABLE
The following table provides a summary of cash and non-cash compensation
for each of the last three fiscal years ended June 30, 2002, 2001 and 2000 with
respect to the Company's Chief Executive Officer and the other executive
officers serving during the fiscal year ended June 30, 2002 (the "Named
Executive Officers").
Long-Term
Compensation
Annual Compensation Awards
------------------------------------------- --------------------------
Restricted
Stock Securities
Name and Other Annual Award(s) Underlying All Other
Principal Position Year Salary($) Bonus($) Compensation($)(1) ($) Options(#) Compensation($)(2)
------------------ ---- --------- -------- ------------------ ---------- ---------- ------------------
Arthur J. Higgins 2002 $500,000 $750,000(3) $ 190,446(4) -- 800,000(5) $5,500
President, Chief 2001 23,077 -- $1,562,500(6) 400,000(7) --
Executive Officer and
Chairman
Ulrich Grau 2002 101,538 50,000 -- -- 150,000(8) --
Chief Scientific Officer
Kenneth J. Zuerblis 2002 280,615 136,000 -- -- -- 5,280
Vice President, Finance, 2001 238,500 90,000 -- -- 100,000(9) 6,578
Chief Financial Officer and 2000 194,077 65,700 -- -- -- 7,622
Corporate Secretary
Dr. Jeffrey McGuire(10) 2002 249,307 50,000 -- 5,211
Former Vice President, 2001 217,849 74,250 -- -- 100,000(9) 6,531
Research and Development 2000 170,552 52,900 -- -- -- 5,386
and Chief Scientific Officer
- ----------
(1) Excludes perquisites and other personal benefits that in the
aggregate do not exceed 10% of the Named Executive Officer's total
annual salary and bonus.
(2) Consists of annual Company contributions to a 401(k) plan.
(3) Minimum guaranteed bonus payable under Mr. Higgins' employment
agreement.
(4) Compensation related to Mr. Higgins temporary living expenses and
amounts reimbursed during the fiscal year for the payment of taxes
relating to the payment of such temporary living expenses by the
Company on behalf of Mr. Higgins.
(5) Pursuant to his employment agreement, Mr. Higgins as a result of his
election to Chairman of the Board of the Directors during December
2001 was granted an option to purchase 400,000 of the Company's
Common Stock at an exercise price of $57.67 per share. Mr. Higgins
was also granted an option to purchase 400,000 shares of the
Company's Common Stock at an exercise price of $28.17 as a long-term
incentive during May 2002. 100,000 of these options vest each year
on the anniversary date of the date on which such option was
granted. The vesting and exercisability of such shares will
accelerate if (i) the last sale price of the Company's Common Stock
exceeds $100 per share for at least twenty consecutive trading days
as reported by the Nasdaq National Market during a time in which Mr.
Higgins is employed by the Company (ii) Mr. Higgins' employment is
terminated without cause (as defined in Mr. Higgins employment
agreement) in connection with a "change in control" (as defined in
Mr. Higgins' employment agreement), or (iii) Mr. Higgins terminates
his employment for good reason (as defined in Mr. Higgins employment
agreement) in connection with a change of control.
(6) Mr. Higgins was issued 25,000 shares of restricted Common Stock on
June 29, 2001, which shall vest as to 5,000 shares per year
commencing May 31, 2002. The last reported sale price of Enzon's
Common Stock on June 29, 2001 was $62.50 per share. The aggregate
value of Mr. Higgins' restricted Common Stock as of June 30, 2001
was $1,562,500. As of June 30, 2002, Mr. Higgins held 5,000 vested
shares and 20,000 unvested shares of such restricted Common Stock.
The aggregate value of such restricted Common Stock, as
8
of June 30, 2002, was $628,000 based upon, the last reported sale
price of Enzon's Common Stock on June 28, 2002. Mr. Higgins is
entitled to any cash dividends declared on the restricted Common
Stock; however, if the Company distributes a non-cash dividend prior
to the date such shares vest, such dividend will be held by the
Secretary of the Company until such shares have vested. The shares
of restricted Common Stock will vest immediately upon (i) the
Company terminating Mr. Higgins' employment without "cause" (as
defined in Mr. Higgins' employment agreement), (ii) Mr. Higgins
terminating his employment for "good reason" (as defined in Mr.
Higgins' employment agreement), or (iii) Mr. Higgins' death or
"disability" (as defined in Mr. Higgins' employment agreement).
(7) Mr. Higgins was granted an option to purchase 400,000 shares of the
Company's Common Stock at an exercise price of $70.00 per share in
May 2001 pursuant to his employment agreement. Of these options,
200,000 vested on May 31, 2001 and became exercisable on November
30, 2001. Of the remaining 200,000 options, 25% vest and become
exercisable each year on May 31, through May 31, 2005. The vesting
and exercisability of such shares will accelerate if (i) the last
sale price of the Company's Common Stock exceeds $100 per share for
at least twenty consecutive trading days as reported by the Nasdaq
National Market during a time in which Mr. Higgins is employed by
the Company, (ii) Mr. Higgins' employment is terminated without
cause in connection with a "change in control" (as defined in Mr.
Higgins' employment agreement), or (iii) Mr. Higgins terminates his
employment for good reason (as defined in Mr. Higgins employment
agreement) in connection with a change in control.
(8) Pursuant to his employment agreement, Dr. Grau was granted an option
to purchase 150,000 shares of the Company's Common Stock at an
exercise price of $45.98 per share, during March 2002. Of these
options, 100,000 will vest over a five year period at a rate of
20,000 shares per year. The vesting and exercisability of such
shares will accelerate if the last sale price of the Company's
Common Stock exceeds $100 per share for at least twenty consecutive
trading days as reported by the Nasdaq National Market during a time
in which Dr. Grau is employed by the Company. The remaining 50,000
options shall vest on the fifth anniversary of the grant and shall
immediately vest and become exercisable on the date of which the
audited financial statements of the Company report net annual
revenues of not less than fifty million dollars from the commercial
sale of product(s) used for organ rejection or autoimmune diseases
per a contemplated royalty agreement between the Company and Vivo
Healthcare, provided Dr. Grau is employed by the Company on a
full-time basis as its Chief Scientific Officer.
(9) The Compensation Committee granted to each of Dr. McGuire and Mr.
Zuerblis an option to purchase 100,000 shares of the Company's
Common Stock at an exercise price of $44.75 per share during July
2000. 50,000 of the shares underlying each option grant will vest
and become exercisable over a five year period at a rate of 10,000
shares per year. The remaining 50,000 shares will vest and become
exercisable on the seventh anniversary of the date of grant, if Dr.
McGuire or Mr. Zuerblis, as the case may be, is employed by the
Company on such date. The vesting and exercisability of such shares
will accelerate if the last sale price of the Company's Common Stock
exceeds $100 per share for at least twenty consecutive trading days
as reported by the Nasdaq National Market during a time in which Dr.
McGuire or Mr. Zuerblis, as the case may be, is employed by the
Company. In the event of a change in control of the Company (as
defined in Dr. McGuire's and Mr. Zuerblis' option agreement), other
than a liquidation, a sale of at least 80% of the assets of the
Company, or a merger in which the Company is not the surviving
entity, each option will vest and become exercisable according to
the terms of the option agreement as if the change in control had
not occurred. However, with respect to the 50,000 shares which vest
on the seventh anniversary of the date of grant, if a change in
control in which the Company liquidates, sells at least 80% of its
assets, or merges with another company and is not the surviving
corporation occurs prior to July 31, 2007, and the Company's
stockholders receive at least $100 per share in connection with the
change in control, the option will vest upon the change in control
if Dr. McGuire or Mr. Zuerblis, as the case may be, is still
employed by the Company on such date, or, in the event that Dr.
McGuire or Mr. Zuerblis, as the case may be, is not still employed
by the Company on such date, if Dr. McGuire's or Mr. Zuerblis'
termination was not voluntary or was not for cause. With respect to
the shares which vest over a five year period, if a liquidation, a
sale of at least 80% of the Company's assets, or, a merger in which
the Company is not the surviving entity, occurs prior to July 31,
2005, the options will vest upon the change in control if Dr.
McGuire or Mr. Zuerblis, as the case may be, is still employed by
the Company on such date, or, in the event that Dr. McGuire or Mr.
Zuerblis is not still employed by the Company on such date, if Dr.
McGuire's or Mr. Zuerblis' termination was not voluntary or was not
for cause.
9
(10) Dr. Grau succeeded Dr. McGuire as Chief Scientific Officer in March
2002. Dr. McGuire's full-time employment with the Company terminated
as of July 31, 2002.
10
OPTION GRANTS IN LAST FISCAL YEAR
The following table contains information concerning the grant of stock
options under the Company's Stock Option Plans to the Named Executive Officers
during the fiscal year ended June 30, 2002.
Individual Grants
----------------------------------------------------
% of Total
Number of Options
Securities Granted to Exercise Potential Realizable Value at
Underlying Employees or Base Assumed Annual Rates of Stock
Options in Price Expiration Price Appreciation for Option Term(2)
Name Granted (1) Fiscal Year ($/Share) Date 0%($) 5%($) 10%($)
- ----------------- ----------- ----------- --------- ---------- ----- ----- ------
Arthur J. Higgins 400,000(3) 28.54% $ 57.67 12/3/2011 0 $14,507,341 $36,764,451
Arthur J. Higgins 400,000(4) 28.54% $ 28.17 5/31/2012 0 $ 7,086,385 $17,958,290
Ulrich Grau 150,000(5) 10.70% $ 45.98 3/15/2012 0 $ 4,337,486 $10,992,042
(1) All options were granted at an exercise price that equaled or
exceeded the fair market value of the Common Stock on the date of
grant, as determined by the last sale price as reported on the
Nasdaq National Market.
(2) The amounts set forth in the three columns represent hypothetical
gains that might be achieved by the optionees if the respective
options are exercised at the end of their terms. These gains are
based on assumed rates of stock price appreciation of 0%, 5% and 10%
compounded annually from the dates the respective options were
granted. The 0% appreciation column is included because the options
were granted with exercise prices which equaled or exceeded the
market price of the underlying Common Stock on the date of grant,
and thus will have no value unless the Company's stock price
increases above the exercise prices.
(3) Pursuant to his employment agreement, Mr. Higgins was granted an
option to purchase 400,000 shares of the Company's Common Stock for
an exercise price of $57.67 per share during December 2001 as a
result of his appointment as Chairman of the Board. These options
vest over a four year period at a rate of 100,000 shares per year.
The vesting and exercisability of such shares will accelerate if (i)
the last sale price of the Company's Common Stock exceeds $100 per
share for at least twenty consecutive trading days as reported by
the Nasdaq National Market during a time in which Mr. Higgins is
employed by the Company, (ii) Mr. Higgins' employment is terminated
without "cause" (as defined in Mr. Higgins' employment agreement) in
connection with a "change in control" (as defined in Mr. Higgins'
employment agreement), or (iii) Mr. Higgins terminates his
employment for "good reason" (as defined in Mr. Higgins' employment
agreement) in connection with a change in control.
(4) The Compensation Committee granted Mr. Higgins long-term incentive
options in May 2002 to purchase 400,000 shares of the Company's
Common Stock for an exercise price of $28.17 per share. The vesting
and exercisability of such shares will accelerate if (i) the last
sale price of the Company's Common Stock exceeds $100 per share for
at least twenty consecutive trading days as reported by the Nasdaq
National Market during a time in which Mr. Higgins is employed by
the Company (ii) Mr. Higgins' employment is terminated without cause
(as defined in Mr. Higgins' employment agreement) in connection with
a "change in control" (as defined in Mr. Higgins' employment
agreement), or (iii) Mr. Higgins terminates his employment for good
reason (as defined in Mr. Higgins' employment agreement) in
connection with a change of control.
(5) In connection with an employment agreement, the Compensation
Committee granted Dr. Grau an option to purchase 150,000 shares of
the Company's Common Stock for an exercise price of $45.98 per
share. Of these options, 100,000 will vest over a five year period
at a rate of 20,000 per year. The vesting and exercisability of such
shares will accelerate if the last sale price of the Company's
Common Stock exceeds $100 per share for at least twenty consecutive
trading days as reported by the NASDAQ market during a time in which
Dr. Grau is employed by the Company. The remaining 50,000 options
shall vest on the fifth anniversary of the grant and shall
immediately vest and become exercisable on the date of which the
audited financial statements of the Company report net annual
revenues of not less than fifty million
11
dollars from the commercial sale of the product(s) used for organ
rejection or autoimmune diseases per a contemplated royalty
agreement between the Company and Vivo Healthcare, provided Dr. Grau
is employed by the Company on a full-time basis as its Chief
Scientific Officer.
12
OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table sets forth the information with respect to the Named
Executive Officers concerning the exercise of options during the fiscal year
ended June 30, 2002 and unexercised options held as of June 30, 2002.
Value of Unexercised
Number of Securities In-the-Money Options
Underlying Unexercised at FY-End
Shares Options at FY-End (#) ($)(1)
Acquired Value ----------------------- --------------------
Name On Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- -------------- --------------- ------------ ----------- ------------- ----------- -------------
Arthur J. Higgins -- -- 250,000 950,000 -- --
Ulrich Grau -- -- -- 150,000 -- --
Dr. Jeffrey McGuire -- -- 51,600 96,800 $ 667,067 $19,091
Kenneth J. Zuerblis -- -- 93,600 98,500 1,422,864 23,864
(1) Based upon a market value of $25.12 as determined by the last sale
price as reported on the Nasdaq National Market on June 30, 2002. If
the exercise price is equal to or greater than such last sale price,
the option is deemed to have no value.
EMPLOYMENT AND TERMINATION AGREEMENTS
The Company has entered into an employment agreement with its President
and Chief Executive Officer, Arthur J. Higgins. Under the employment agreement
Mr. Higgins received an initial base salary of $500,000 per year and
participated in Enzon's bonus plan for management commencing with the fiscal
year ending June 30, 2002. The employment agreement may be terminated by either
party with twelve months written notice, but not before May 31, 2005. Under the
terms of Mr. Higgins' employment agreement, he is entitled to a bonus of between
0 and 200% of his base salary with a target of 100% of his base salary in future
years. Under the terms of the agreement, Mr. Higgins was guaranteed a minimum
cash bonus in the amount of $750,000 for the fiscal year ended June 30, 2002. On
May 31, 2001 pursuant to the employment agreement, Mr. Higgins was granted an
option under Enzon's Non-Qualified Plan, to purchase 400,000 shares of Enzon's
Common Stock at the per share exercise price of $70.00, the last reported sale
price of a share of the Company's Common Stock on the date of grant. The option
vested as to 200,000 shares on May 31, 2001; however, these shares did not
become exercisable until November 30, 2001. The remaining shares vest and become
exercisable as to 50,000 shares on each of the first, second, third and fourth
anniversaries of the date of grant. Pursuant to the employment agreement, Mr.
Higgins was granted an additional option to purchase 400,000 shares of Enzon's
Common Stock at the per share exercise price of $57.67, the last reported sale
price of a share of Common Stock on December 3, 2001, the date the Board of
Directors elected to have him begin serving as Chairman of the Board of
Directors. Such option will vest and become exercisable as to 100,000 shares on
the first, second, third and fourth anniversaries of such date. Notwithstanding
the foregoing, all unvested options granted to Mr. Higgins shall immediately
vest and become exercisable if (i) the last reported sale price of a share of
Enzon's Common Stock is at least $100.00 as reported on the Nasdaq National
Market for at least twenty consecutive trading days, provided that, Mr. Higgins
is then employed by Enzon on a full-time basis as its President and Chief
Executive Officer, (ii) Mr. Higgins' employment is terminated without "cause"
(as defined in Mr. Higgins' employment agreement) in connection with a "change
in control" (as defined in Mr. Higgins' employment agreement), or (iii) Mr.
Higgins terminates his employment for "good reason" (as defined in Mr. Higgins'
employment agreement) in connection with a change in control. Pursuant to the
employment agreement, Mr. Higgins also received 25,000 shares of restricted
Common Stock, which shall vest as to 5,000 shares per year commencing on the
first anniversary of the commencement of his employment (May 31, 2001). The
shares of restricted Common Stock will vest immediately upon (i) the Company
terminating Mr. Higgins' employment without cause, (ii) Mr. Higgins terminating
his employment for good reason, or (iii) Mr. Higgins' death or "disability" (as
defined in Mr. Higgins' employment agreement).
In the event Mr. Higgins' employment is terminated by Enzon without cause
or by Mr. Higgins for good reason, prior to May 31, 2004, Mr. Higgins will be
entitled to: (i) cash payments equal to the remainder of his base
13
salary until May 31, 2005; (ii) a cash payment equal to the aggregate target
bonus, which would have been payable to Mr. Higgins (based on his salary at the
time of his termination) for each fiscal year until the fiscal year ending June
30, 2005; (iii) reimbursement for any medical and dental coverage available to
Mr. Higgins and any family member for a period of up to eighteen months
commencing on the date of termination; (iv) a cash payment equal to any unpaid
base salary through the date of termination, (v) all shares of restricted Common
Stock shall vest; and (vi) all options that have not vested at the time of
termination will terminate; provided, however, a prorated portion of the tranche
of unvested options that were scheduled to vest on the anniversary of the
applicable grant date immediately following the date of such termination shall
vest. In the event Mr. Higgins' employment is terminated by Enzon without cause
or by Mr. Higgins for good reason subsequent to May 31, 2004, Mr. Higgins will
be entitled to receive a cash payment equal to his annual base salary, his
target bonus and the pro rata amount of the target bonus for the fiscal year in
which he was terminated and items (iii), (iv), (v) and (vi) above.
Mr. Higgins' employment agreement also requires him to maintain the
confidentiality of Enzon information and assign inventions developed during the
term of the agreement and for a six-month period following termination of
employment with Enzon. Mr. Higgins is precluded from competing with Enzon during
the term of his employment agreement and for two years after his employment is
terminated.
The Company entered into a three year employment agreement with Dr. Ulrich
Grau with an automatic renewal for an additional twenty-four months. This
agreement provides for a base salary of $400,000 per year and participation in
Enzon's bonus plan for management commencing with the fiscal year ending June
30, 2002. Dr. Grau was granted an option under Enzon's Non-Qualified Plan to
purchase 150,000 shares of Enzon's Common Stock at a per share exercise price of
$45.98. With regard to 100,000 shares subject to this option, this option vests
and becomes exercisable as to 25,000 shares on the first, second, third and
fourth anniversaries of the date of grant. The remaining 50,000 shares will vest
on the fifth anniversary of the grant and shall immediately vest and become
exercisable on the date of which the audited financial statements of the Company
report net annual revenues of not less than fifty million dollars from the
commercial sale of the product(s) used for organ rejection or autoimmune
diseases per a contemplated royalty agreement between the Company and Vivo
Healthcare, provided Dr. Grau is employed by the Company on a full-time basis as
Chief Scientific Officer.
In the event Dr. Grau's employment is terminated by Enzon without cause or
by Dr. Grau for good reason (as defined in Dr. Grau's employment agreement), Dr.
Grau will be entitled to (i) cash payments equal to his annual base salary (ii)
cash payment equal to the target bonus which would be payable for the fiscal
year which commences immediately following the date of termination (iii)
reimbursement for any medical and dental coverage available to Dr. Grau and any
family member a period of up to eighteen months commencing on the date of
termination (ii) a cash payment equal to any unpaid base salary through the date
of termination, (v) cash payment equal to a pro rata amount of the target bonus
for the fiscal year during which termination occurs (vi) all options that have
not vested at the time of termination will terminate, however, with respect to
the option to purchase 100,000 shares, a prorated portion of the tranche of
unvested options which were schedule to vest on the anniversary of the
commencement date immediately following the date of such termination shall vest.
The option to purchase 50,000 shares which becomes exercisable on the fifth
anniversary date of the commencement date subject to acceleration upon the
achievement of an annual net annual revenue milestone, as described above, shall
vest as to a pro-rated portion of such shares as of the date of termination.
Dr. Grau's employment agreement also requires him to maintain the
confidentiality of Enzon information during the term of his agreement. Dr. Grau
is precluded from competing with Enzon during the term of his employment
agreement and for two years after his employment is terminated.
The Company has an agreement with Mr. Zuerblis which provides for payment
of three years of Mr. Zuerblis' compensation and benefits (as defined in such
agreement) following a change in control of the Company (as defined in such
agreement) including the provision for such payment in the event Mr. Zuerblis'
employment with the Company is terminated under certain circumstances. Following
such change in control any unvested options, except for the 100,000 options
granted to Mr. Zuerblis in July 2000 which are not subject to this agreement,
held by Mr. Zuerblis would vest and become exercisable if his employment with
the Company is terminated under certain circumstances following such change in
control. The term of this agreement is for three years. Prior to a change in
14
control of the Company, the agreement automatically renews on each successive
anniversary for an additional three years, unless the Company gives Mr. Zuerblis
60 days notice prior to the anniversary date that it does not plan to renew such
agreement.
Dr. Jeffrey McGuire and Kenneth Zuerblis were each granted an option to
purchase 100,000 shares of the Company's Common Stock at an exercise price of
$44.75 per share in July 2000. Of the options granted to each of Dr. McGuire and
Mr. Zuerblis, 50,000 shares will vest and become exercisable at a rate of 10,000
shares per year for so long as each one of them remains employed by the Company.
The remaining 50,000 shares will each vest on the seventh anniversary of the
date of grant if Dr. McGuire or Mr. Zuerblis, as the case may be, is employed by
the Company at such date. Under the terms of options granted to Dr. McGuire and
Mr. Zuerblis, in the event of change in control (as defined in Dr. McGuire's and
Mr. Zuerblis' option agreement), other than a liquidation, a sale of at least
80% of the assets of the Company, or a merger in which the Company is not the
surviving entity, the 100,000 options granted to each of Dr. McGuire and Mr.
Zuerblis will vest and become exercisable according to the terms of the option
agreement as if the change in control had not occurred. However, with respect to
the 50,000 shares which vest on the seventh anniversary of the date of grant, if
a change in control in which the Company liquidates, sells at least 80% of its
assets, or merges with another company and is not the surviving corporation
occurs prior to July 31, 2007, and the Company's stockholders receive at least
$100 per share in connection with the change in control, the option will vest
upon the change in control if Dr. McGuire or Mr. Zuerblis, as the case may be,
is still employed by the Company on such date, or, in the event that Dr. McGuire
or Mr. Zuerblis, as the case may be, is not still employed by the Company on
such date, if Dr. McGuire's or Mr. Zuerblis' termination was not voluntary or
was not for cause. With respect to the shares which vest over a five year
period, if a liquidation, a sale of at least 80% of the Company's assets, or, a
merger in which the Company is not the surviving entity, occurs prior to July
31, 2005, the options will vest upon the change in control if Dr. McGuire or Mr.
Zuerblis, as the case may be, is still employed by the Company on such date, or,
in the event that Dr. McGuire or Mr. Zuerblis is not still employed by the
Company on such date, if Dr. McGuire's or Mr. Zuerblis' termination was not
voluntary or was not for cause.
The Company has entered into a transition agreement with its Senior Vice
President, Scientific Affairs and former Chief Scientific Officer, Jeffrey
McGuire. Under the transition agreement, Dr. McGuire's full-time employment with
the Company terminated as of July 31, 2002 and he agreed to work as a part-time
employee of the Company (up to five (5) hours per month) through June 30, 2003.
Pursuant to the transition agreement, Dr. McGuire will receive monthly payments
of $20,833.33 through June 30, 2003, although he has the right to request a lump
sum payment of the remaining balance of such monthly payments at any time prior
to June 30, 2003. The stock options that Dr. McGuire received pursuant to the
Company's Non-Qualified Stock Option Plan will continue to vest in accordance
with their respective terms and Dr. McGuire will maintain the right to exercise
any and all vested options for so long as he remains an employee of the Company,
provided that as of the date that Dr. McGuire's employment as a part-time
employee of the Company terminates all vesting of his stock options will cease
and he will have 190 days thereafter (or such earlier date as the options expire
by their respective terms) in which to exercise any or all vested stock options
If Dr. McGuire's employment terminates due to his death, his vested options may
be exercised by the executors or administrators, or legatees or heirs, of his
estate, in accordance with their original terms. Under the transition agreement,
through June 30, 2003, Dr. McGuire has agreed to not directly or indirectly,
become, or be interested in or associated with any other person, corporation,
firm, partnership or entity engaged to a significant degree in (i) developing,
marketing, or selling enzymes, protein-based biopharmaceuticals or other
pharmaceuticals that are modified using polyethylene glycol ("PEG") or PEG
containing polymers, (ii) developing, marketing or selling single-chain
antigen-binding proteins or polypeptides or (iii) any technology or area of
business in which the Company was involved to a significant degree through July
2002. In addition, pursuant to the transition agreement, during or after the
term of his employment, Dr. McGuire is prohibited from using or disclosing to
third parties, information relating to patent applications filed or to be filed
by the Company, trade secrets relating to the Company's products or services,
and information relating to the Company's research and development activities.
Under the terms of the transition agreement, Dr. McGuire has assigned to the
Company all tangible and intangible property, including, but not limited to,
inventions, developments or discoveries conceived, reduced to practice, made or
discovered by him or in collaboration with others during the term of his
employment with the Company.
15
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
During the fiscal year ended June 30, 2002, the Compensation Committee of
the Board of Directors consisted of three non-employee directors. The
Compensation Committee determines all compensation paid or awarded to the
Company's officers, including the Named Executive Officers in the Summary
Compensation Table.
Compensation Philosophy
The philosophy of the Company's compensation programs is to enhance the
Company's performance and stockholder value by aligning the financial interests
of the Company's senior managers with those of its stockholders, while keeping
the overall compensation package competitive. The compensation package for
officers includes a number of components. The package is designed to align
individual compensation with the short-term and long-term performance of the
Company and is based on the following principles:
o Pay for achievement of business and strategic objectives, measured
on the Company's financial and operating performance and individual
strategic, management and development goals.
o Pay competitively, with compensation set at levels that will attract
and retain key employees. The Company regularly reviews compensation
surveys of companies in the biopharmaceutical industry and sets
compensation levels based on the results of these reviews.
o Align compensation with interests of stockholders through equity.
The compensation package for each of the Named Executive Officers as well
as other officers who are members of the Company's executive staff consists of
four elements: (1) base salary, (2) performance-based incentive, (3) stock
options, and (4) various other benefits. More specific information on each of
these elements follows.
Base Salary
The Compensation Committee aims to set base salaries at levels that are
competitive with those paid to senior executives with comparable qualifications,
experience and responsibilities at other companies in the pharmaceutical and
biotechnology industries, including those companies making up the Nasdaq
Biotechnology Index line of the stock performance graph that appears in this
proxy statement. The Compensation Committee believes that this is necessary to
attract and retain the executive talent required to lead the Company, since the
Company competes with a large number of companies in the biopharmaceutical
industry, including large pharmaceutical companies, for executive talent.
Salaries are reviewed annually and in connection with promotions. Industry, peer
group and national survey results are considered in making salary determinations
to align the Company's pay practices with other companies in the pharmaceutical
and biotechnology industries. In addition to survey results, individual job
performance is also considered in setting salaries. The Chief Executive Officer
reviews members of the executive staff and makes recommendations to the
Compensation Committee on salary, including salary increases, based on his
judgment of the individual's performance. The Compensation Committee reviews
these recommendations independently and approves, with any modifications it
considers appropriate, the annual salary and salary increases.
Annual Incentive Compensation
The Company maintains an incentive program that provides an opportunity
for officers and employees to earn an incentive based upon the performance of
both the Company and the individual (the "Performance Incentive Program"). The
incentive potential is stated as a percentage of the officer's and employee's
base salary and varies by position. Financial and individual performance goals
are set at the start of the fiscal year and are based on business criteria
specified in this program. Actual incentives are calculated at the end of the
fiscal year based on goal performance. All executive staff had the same
corporate goals. Other goals and weightings for each participant varied,
depending on the participant's position and areas of responsibility and the
participant's effect on the Company's performance.
16
Stock Options
The Compensation Committee believes that stock options directly link the
amounts earned by officers with the amount of appreciation realized by the
Company's stockholders. Stock options also serve as a critical retention
incentive. Stock options have always been viewed as a major means to attract and
retain highly qualified executives and key personnel and have always been a
major component of the compensation package, consistent with practices
throughout the pharmaceutical and biotechnology industries. The Company's option
programs are structured to encourage key employees to continue in the employ of
the Company and motivate performance that will meet the long-term expectations
of stockholders. In determining the size of any option award, the Compensation
Committee considers the individual's past performance and potential, the
position held by the individual and the individual's annual base salary
compensation.
The Compensation Committee considers and makes option grants to officers
and all other employees once a year. Options may also be granted at other times
during the year in connection with promotions or for new hires. Option grants to
executive staff members are made under the Stock Option Plans with the exercise
price equal to the last reported sale price of the Company's Common Stock on the
date of grant and expire up to ten years after the date of the grant. Vesting on
most options occurs ratably over a four to five year period, which is designed
to encourage retention.
Other Benefits
Executive staff members participate in various medical, dental, life,
disability and benefit programs that are generally made available to all
salaried employees.
CEO Compensation
Arthur J. Higgins has been President and Chief Executive Officer of the
Company since May 2001. His employment agreement called for a base salary of
$500,000 for fiscal 2002. The Compensation Committee awarded the Company's
President and Chief Executive Officer a bonus of $750,000, as guaranteed
pursuant to his employment agreement. The Compensation Committee also awarded
cash bonuses under the Performance Incentive Program to the Company's other
executive officers. The bonuses were based on the success of the launch of
PEG-INTRON in combination with Ribavirin and the strengthening of the Company's
financial position.
Mr. Higgins is eligible for a bonus in future fiscal years of between 0
and 200% of his base salary with a target to of 100% of his base salary. These
compensation levels were based on Mr. Higgins extensive prior experience as a
senior executive in a major multinational pharmaceutical company and the
compensation paid to chief executive officers with similar credentials. Pursuant
to his employment agreement Mr. Higgins received an option to purchase 400,000
shares of Common Stock at a per share exercise price of $57.67 on December 3,
2001, when he assumed the position of Chairman of the Board of Directors. Such
option vests and becomes exercisable as to 100,000 shares on December 3, 2002
and the first, second and third anniversaries of such date. Mr. Higgins was
granted an option to purchase 400,000 shares of Common Stock at a per share
exercise price of $28.17 under the 2001 Incentive Stock Plan as a long-term
incentive on May 31, 2002. This option vests and becomes exercisable as to
100,000 shares on May 31, 2003 and the first, second and third anniversaries of
such date. Notwithstanding the foregoing, all unvested options granted to Mr.
Higgins shall immediately vest and become exercisable when the last reported
sale price of a share of Enzon's Common Stock is at least $100.00 as reported on
the Nasdaq National Market for at least twenty consecutive trading days, provide
that, Mr. Higgins is then employed by Enzon on a full-time basis as its
President and Chief Executive Officer. The options granted to Mr. Higgins in
fiscal 2002 were granted with an exercise price equal to the last reported sale
price of the Company's Common Stock as reported on the Nasdaq Market on the date
of the grant.
THE COMPENSATION COMMITTEE
Rolf A. Classon, Chairman
David S. Barlow
Dr. Rosina B. Dixon
17
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company is expected to enter into an assignment agreement and a
royalty agreement with Vivo Healthcare Corporation ("Vivo"). Dr. Grau is a 37.5%
stockholder of Vivo. The material business terms of the assignment agreement and
royalty agreement were negotiated prior to the time Dr. Grau joined the Company.
Pursuant to the assignment agreement Vivo will assign to the Company, Vivo's
entire right, title and interest in, to and under all of the assets of Vivo used
or useful in connection with the development of a polymenzed version of
mycophenolate ("p-MPA technology"). In consideration for the agreement the
Company has agreed to pay Vivo's a milestone payment of $750,000 when an IND for
a product containing the P-MPA Technology is approved and royalties, if any, on
sales of this product by the Company. The development of the product to the IND
stage is at the sole discretion of the Company. Vivo and each of Vivo's
stockholder's, including Dr. Grau, have agreed to not compete with the Company
in marketing the p-MPA technology or products which include the p-MPA
technology, either directly or indirectly, for a period up to five (5) years
following the execution date of the assignment agreement. The Company is not
obligated to develop, commercialize or otherwise exploit the p-MPA technology,
provided that if the Company does not expend at least one million dollars
($1,000,000) on the development or commercialization of the p-MPA technology
during the two (2) years following the execution date of the assignment
agreement, (i) the five (5) year non-compete period shall be reduced to two (2)
years following the execution date of the assignment agreement, and (ii) Vivo
shall have the right to cause the Company to reassign the p-MPA technology to
Vivo. Pursuant to the royalty agreement with Vivo, the Company is required to
pay Vivo a royalty percentage based on the aggregate net sales by the Company or
its licensees of products which embody the p-MPA technology at the rate of (i)
three percent (3%) up to the first $25 million of such net sales by the Company
(or aggregate royalties the Company receives on such net sales by its
licensees); (ii) two percent (2%) for the next $25 million of such net sales by
the Company (or aggregate royalties the Company receives on such net sales by
its licensees); (iii) one percent (1%) for the next $50 million of such net
sales by the Company (or aggregate royalties the Company receives on such net
sales by its licensees); and (iv) one-half of one percent (0.5%) of such net
sales by the Company thereafter (or aggregate royalties the Company receives on
such net sales by its licensees). If Vivo breaches any of its material
obligations under the royalty agreement then the Company has the right to
terminate such agreement upon thirty (30) days written notice to Vivo. The
royalty agreement also terminates upon the reassignment of the p-MPA technology
to Vivo pursuant to the assignment agreement. Besides these two subject to
possible early terminations as described above, the royalty agreement will
terminate the later of (i) ten (10) years after the execution of the royalty
agreement or (ii) such time when the Company does not hold any valid and
enforceable patents relating to the p-MPA technology.
REPORT OF THE FINANCE AND AUDIT COMMITTEE OF
THE BOARD OF DIRECTORS
The Company's Finance and Audit Committee consists of three independent
members of the Board of Directors as defined in Rule 4200(a)(15) of the National
Association of Securities Dealers' listing standards. The Board of Directors
adopted a written charter for the Finance and Audit Committee on June 7, 2000
and the Finance and Audit Committee reviewed and revised such charter on
September 11, 2002 (a copy of which is attached hereto as Appendix A).
The primary purpose of the Finance and Audit Committee is to assist the
Board of Directors in fulfilling its responsibility to oversee management's
conduct of the Company's financial reporting process. In furtherance of such
purpose, the Finance and Audit Committee shall be directly responsible for the
appointment, compensation and oversight of the work of the Company's independent
auditors as well as the approval, in advance, of all services provided by the
independent auditors, whether audit services or non-audit services. In addition,
the Finance and Audit Committee shall assist with: (a) the overview of financial
reports and other financial information provided by the Company to any
governmental or regulatory body, the public or other users thereof, (b) the
Company's systems of internal accounting and financial controls, (c) the annual
independent audit of the Company's financial statements, and (d) the Company's
legal compliance and ethics programs, as established by management and the Board
of Directors.
18
The Finance and Audit Committee has reviewed and discussed the audited
financial statements for the fiscal year ended June 30, 2002 with management.
Furthermore, the Finance and Audit Committee has discussed with the Company's
independent auditors, KPMG LLP, the matters required to be discussed by SAS 61.
Also, the Finance and Audit Committee has received the written disclosures and
letter from KPMG required by Independence Standards Board Standard No. 1 and has
discussed with KPMG such auditing firm's independence. Based on these reviews
and discussions the Finance and Audit Committee recommended that the audited
financial statements be included in the Company's Annual Report on Form 10-K for
the fiscal year ended June 30, 2002, the last fiscal year for filing such annual
report with the U.S. Securities and Exchange Commission.
THE FINANCE AND AUDIT COMMITTEE
Robert LeBuhn, Chairman
David S. Barlow
Rolf A. Classon
19
STOCKHOLDER RETURN PERFORMANCE GRAPH
The graph below summarizes the total cumulative return experienced by the
Company's stockholders from June 30, 1997 through June 30, 2002, compared to the
Nasdaq National Market-US Index and the Company's Peer Group index, the Nasdaq
Biotechnology Index. The changes for the periods shown in the graph and table
below are based on the assumption that $100 had been invested in the Company's
Common Stock and in each index below on June 30, 1997.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG ENZON, INC., THE NASDAQ NATIONAL MARKET INDEX AND PEER GROUPS
Cumulative Total Return
------------------------------------------------------------------
6/97 6/98 6/99 6/00 6/01 6/02
---- ---- ---- ---- ---- ----
ENZON, INC. 100.00 283.33 919.44 1,888.89 2,777.78 1,116.44
NASDAQ STOCK MARKET (U.S.) 100.00 131.62 189.31 279.93 151.75 103.32
NASDAQ BIOTECHNOLOGY 100.00 102.58 164.03 393.49 327.72 164.94
20
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of October 25, 2002
concerning stock ownership of all persons known by the Company to own
beneficially 5% or more of the outstanding shares of the Company's voting stock,
each director, each executive officer named in the Summary Compensation Table
and all executive officers and directors of the Company as a group:
Percentage of
Directors, Officers or Number of Voting Stock
5% Stockholders(1) Shares(2) Outstanding(3)
------------------------------ --------- --------------
Arthur J. Higgins [387,638](4) *
Ulrich Grau [--](5) *
Dr. Jeffrey McGuire [67,565](6)
Rolf A. Classon 56,923(7) *
David S. Barlow 48,920(8) *
Dr. Rosina B. Dixon 143,808(9) *
Dr. David W. Golde 98,920(10) *
Robert LeBuhn 98,597(11) *
Robert L. Parkinson, Jr 5,000 *
Kenneth J. Zuerblis [115,146](12) *
Orbimed Advisors, Inc. 3,441,500(13) 7.2%
767 Third Avenue
New York, NY 10017
Janus Capital Corporation 2,798,190(14) 6.4%
Thomas Bailey
100 Fillmore Street
Denver, Colorado 80206
Fidelity Management and Research 2,488,459(15) 5.7%
82 Devonshire Street
Boston, MA 02109
All Executive Officers and Directors [1,057,587](16) 2.4%
as a group (ten persons)
- ----------
* Less than one percent.
(1) The address of all current executive officers and directors listed
above is in the care of the Company.
(2) All shares listed are Common Stock. Except as discussed below, none
of these shares are subject to rights to acquire beneficial
ownership, as specified in Rule 13d-3(d)(1) under the Securities
Exchange Act of 1934, as amended, and the beneficial owner has sole
voting and investment power, subject to community property laws
where applicable.
(3) Gives effect to [43,001,323] shares of Common Stock and 7,000 shares
of Series A Preferred Stock which were issued and outstanding as of
October 25, 2002. Generally, the Series A Preferred Stock and Common
Stock will vote as one class of stock. Each share of Common Stock
and each share of Series A Preferred Stock is entitled to one vote.
The percentage of voting stock outstanding for each stockholder is
calculated by dividing (i) the number of shares of Common Stock
deemed to be beneficially held by such stockholder as of October 25,
2002 by (ii) the sum of (A) the number of shares of Common Stock
outstanding as of October 25, 2002 plus (B) the number of shares of
Series A Preferred Stock outstanding as of October 25, 2002 plus (C)
the number of shares of Common Stock issuable upon exercise of
options held by such stockholder which were exercisable as of
October 25, 2002 or which will become exercisable within 60 days
after October 25, 2002.
(4) Includes 350,000 shares subject to options which were exercisable as
of October 25, 2002 or which will become exercisable within 60 days
after October 25, 2002, 25,000 shares of restricted Common Stock
21
which vest as to 5,000 shares per year commencing May 31, 2002 and
[138] shares held through Mr. Higgins' 401K account.
(5) Includes [ ] shares held through Dr. Grau's 401K account.
(6) Includes 65,000 shares subject to options which were exercisable as
of October 25, 2002 or which will become exercisable within 60 days
after October 25, 2002, and (2,163) shares held through Dr.
McGuire's 401K account. Dr. McGuire resigned as Chief Scientific
Officer in March 2002.
(7) Includes 50,000 shares subject to options which were exercisable as
of October 25, 2002 or which will become exercisable within 60 days
after October 25, 2002.
(8) Includes 39,996 shares subject to options which were exercisable as
of October 25, 2002 or which will become exercisable within 60 days
after October 25, 2002.
(9) Includes 116,664 shares subject to options which were exercisable as
of October 25, 2002 or which will become exercisable within 60 days
after October 25, 2002, 500 shares held by Dr. Dixon's husband and
100 shares held by Dr. Dixon's son. Dr. Dixon disclaims beneficial
ownership as to shares held by her husband and son.
(10) Includes 55,320 shares subject to options which were exercisable as
of October 25, 2002 or which will become exercisable within 60 days
after October 25, 2002, 35,500 shares held by a trust for Dr.
Golde's benefit, 2,600 shares held by a separate trust for Dr.
Golde's daughter, 1,000 shares beneficially owned by Dr. Golde's
wife and 4,200 shares owned by Dr. Golde's sons. Dr. Golde disclaims
beneficial ownership as to shares held by his sons.
(11) Includes 86,664 shares subject to options which were exercisable as
of October 25, 2002 or which will become exercisable within 60 days
after October 25, 2002.
(12) Includes 107,750 shares subject to options which were exercisable as
of October 25, 2002 or which will become exercisable within 60 days
after October 25, 2001, 600 shares owned by Mr. Zuerblis' IRA and
[4,136] shares held through Mr. Zuerblis' 401k account.
(13) The information concerning the stock ownership of Orbimed Advisors,
LLC was obtained from a Schedule 13F filed with the Securities and
Exchange Commission for the period ended June 30, 2002.
(14) The information concerning the stock ownership of the Janus Capital
Corporation and Thomas Bailey was obtained from a Schedule 13G filed
with the Securities and Exchange Commission on September 9, 2002.
Janus Capital Corporation has sole voting and dispositive power over
2,798,190 shares of Common Stock. Thomas Bailey, President and
Chairman of the Board of Janus Capital Corporation, as a result of
his position may be deemed to exercise control of Janus Capital
Corporation.
(15) The information concerning the stock ownership of Fidelity
Management and Research was obtained from a Schedule 13F filed with
the Securities and Exchange Commission for the period ended June 30,
2002.
(16) Includes all shares owned beneficially by the directors and
executive officers named in the Summary Compensation Table.
22
PROPOSAL NO. 2 - APPROVAL OF
PROPOSED AMENDMENT TO THE COMPANY'S CERTIFICATE
OF INCORPORATION TO CHANGE THE COMPANY'S NAME
On September 11, 2002, the Board of Directors approved an amendment to the
Company's Certificate of Incorporation, subject to stockholder approval, to
change the Company's name from "Enzon, Inc." to "Enzon Pharmaceuticals, Inc.".
The proposed new name better reflects the Company's on-going strategy to
become a more fully integrated bio-pharmaceutical company while continuing to
build on the brand recognition already established for the "Enzon" name.
Text of the of the proposed amendment to the Certificate of Incorporation
is as follows:
"The Certificate of Incorporation of Enzon, Inc. shall be amended by
deleting Article 1 thereof and fully restating it as follows:
Article 1: The name of the corporation is Enzon Pharmaceuticals,
Inc. (the "Corporation")."
The change in corporate name will not affect the status of the Company or
the rights of any stockholder in any respect, or the validity or transferability
of stock certificates presently outstanding. The Company's stockholders will not
be required to exchange stock certificates to reflect the new name. If a
physical certificate represents a stockholder's shares of common stock
currently, that certificate will continue to represent such stockholder's
ownership of such shares. It will not be necessary for stockholders to surrender
stock certificates bearing the Company's former corporate name. When physical
certificates are presented for transfer in the ordinary course, new certificates
bearing the new corporate name will be issued.
The Board of Directors recommends a vote for approval of the proposed
amendment to the Certificate of Incorporation. (Proposal No. 2 on the Proxy
Card)
PROPOSAL NO. 3 RATIFICATION OF AUDITORS
On September 11, 2002, the Finance and Audit Committee of the Board of
Directors, pursuant to authority granted by the Board of Directors, approved the
retention of KPMG LLP ("KPMG"), independent certified public accountants, to
audit the consolidated financial statements of the Company for the fiscal year
ending June 30, 2003. KPMG served as auditor of the consolidated financial
statements of the Company for the fiscal years ended June 30, 2002, 2001, and
2000. Representatives of KPMG are expected to be present at the Annual Meeting
and will have the opportunity to make a statement should they desire to do so.
Such representatives are also expected to be available to respond to questions.
Audit Fees
The aggregate fees billed by KPMG in connection with its audit of the
Company's annual financial statements for the fiscal year 2002 and its review of
the financial statements included in the Company's Form 10-Qs during fiscal year
2002 was $79,000.
All Other Fees
KPMG billed the Company fees totaling $237,000 for all other services
performed during fiscal year 2002 which related to tax consulting and
compliance; due diligence for proposed mergers and acquisitions; the services
related to selection of a new financial reporting system and various technical
accounting consultations. The Finance and Audit Committee has considered whether
the provision of all other services by KPMG is compatible with maintaining
KPMG's independence and concluded that KPMG is "independent".
23
The Board of Directors recommends a vote FOR ratification of the selection
of KPMG, independent certified public accountants, to audit the consolidated
financial statements of the Company for the fiscal year ending June 30, 2003
(Proposal No. 3 on the Proxy Card).
ANNUAL REPORT TO STOCKHOLDERS
The Company's Annual Report to Stockholders for the fiscal year ended June
30, 2002 accompanies this Proxy Statement.
STOCKHOLDERS' PROPOSALS
In order for a stockholder to have a proposal included in the proxy
statement for the 2003 annual stockholders' meeting, the proposal must comply
with both the procedures identified by Rule 14a-8 under the Securities Exchange
Act of 1934, as amended (the Exchange Act") and be received in writing by the
Company's Secretary on or before 5:00 P.M. Eastern Standard Time on July 3,
2003. Such a proposal will be considered at the 2003 annual stockholders'
meeting.
Pursuant to the advance notice requirements in Article II Section 2.15 of
the Company's By-laws, to be considered at the 2003 annual stockholder meeting,
a stockholder's proposal must be delivered to or mailed and received by the
Secretary of the Company not later than one hundred twenty (120) days prior to
such meeting. Therefore, in the event a stockholder does not meet the July 3,
2003 deadline under Rule 14a-8 under the Exchange Act, the stockholder can still
give notice of a proposal to be presented at the 2003 annual stockholders'
meeting until August 2, 2003, however, such proposal will not be included in the
Company's proxy materials relating to such meeting. The Company's Bylaws further
require the stockholder to provide to the Secretary of the Company, among other
things, the name and address of the stockholder who intends to make the
nominations or propose the business, the name and address of the person or
persons to be nominated, a description of the business to be proposed and a
representation that the stockholder is a holder of record of stock of the
Company entitled to vote at such meeting. The chairman of the meeting may refuse
to acknowledge the nomination of any person or the proposal of any business not
made in compliance with the foregoing procedure.
Any proposal received after August 2, 2003 will be considered untimely
within Rule 14a-4(c) under the Exchange Act and the persons named in the proxy
for such meeting may exercise their discretionary voting power with respect to
such proposal.
GENERAL
The cost of soliciting proxies will be borne by the Company. In addition
to mailing, proxies may be solicited by personal interview, telephone and
telegraph, and by directors, officers and regular employees of the Company,
without special compensation therefor. The Company expects to reimburse banks,
brokers and other persons for their reasonable out-of-pocket expenses in
handling proxy materials for beneficial owners of the Company's Common Stock.
Unless contrary instructions are indicated on the proxy card, all shares
of Common Stock or Series A Preferred Stock represented by valid proxies
received pursuant to this solicitation (and not revoked before they are voted)
will be voted FOR the election of the nominees for directors named herein and
FOR Proposal No. 2 and Proposal No. 3.
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted. Proxies may be revoked by filing with
the Secretary of the Company written notice of revocation bearing a later date
than the proxy, by duly executing a subsequent proxy relating to the same shares
of Common Stock or Series A Preferred Stock or by attending the Annual Meeting
and voting in person. Attendance at the Annual Meeting will not in and of itself
constitute revocation of a proxy unless the stockholder votes his or her shares
of Common Stock or Series A Preferred Stock in person at the Annual Meeting. Any
notice revoking a proxy should be
24
sent to the Secretary of the Company, Kenneth J. Zuerblis, at Enzon, Inc., 685
Route 202/206, Bridgewater, New Jersey 08807.
The Board of Directors knows of no business other than that set forth
above to be transacted at the meeting, but if other matters requiring a vote of
the stockholders arise, the persons designated as proxies will vote the shares
of Common Stock or Series A Preferred Stock represented by the proxies in
accordance with their judgment on such matters. If a stockholder specifies a
different choice on the proxy, his or her shares of Common Stock or Series A
Preferred Stock will be voted in accordance with the specification so made.
Please complete, sign and date the enclosed proxy card, which is revocable
as described herein, and mail it promptly in the enclosed postage-paid envelope.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. WE URGE YOU TO FILL IN,
SIGN AND RETURN THE ACCOMPANYING PROXY CARD, NO MATTER HOW LARGE OR SMALL YOUR
HOLDINGS MAY BE.
By order of the Board of Directors,
Kenneth J. Zuerblis, Corporate Secretary
Bridgewater, New Jersey
October 26, 2002
25
Appendix A
CHARTER OF THE FINANCE AND AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS OF
ENZON, INC.
Authority
The Audit Committee (the "Committee") of the Board of Directors (the
"Board") of Enzon, Inc. (the "Company") is established pursuant to Article III,
Section 8 of the Company's Amended and Restated By-laws and Section 141(c) of
the Delaware General Corporation Law. The presence in person or by telephone of
a majority of the Committee's members shall constitute a quorum for any meetings
of the Committee. All actions of the Committee will require the vote of a
majority of its members present at a meeting of the Committee at which a quorum
is present.
Purpose
The primary purpose of the Committee is to assist the Board in fulfilling
its responsibility to oversee management's conduct of the Company's financial
reporting process. In furtherance of such purpose, the Committee shall be
directly responsible for the appointment, compensation and oversight of the work
of the Company's independent auditors as well as for the approval, in advance,
of all services provided by the independent auditors, whether audit services or
non-audit services; provided, that non-audit services may be approved after
engagement therefor but before completion of the audit for the applicable fiscal
year as may be permitted by Section 10A of the Securities Exchange Act of 1934
and the applicable rules of the NASD. In addition, the Committee shall assist
with: (a) the overview of the financial reports and other financial information
provided by the Company to any governmental or regulatory body, the public or
other users thereof, (b) the Company's systems of internal accounting and
financial controls, (c) the annual independent audit of the Company's financial
statements, and (d) the Company's legal compliance and ethics programs as
established by management and the Board. In so doing, it is the responsibility
of the Committee to maintain free and open means of communication among the
Committee, the other directors, the independent auditors, the internal auditors
and the financial and senior management of the Company.
In discharging its oversight role, the Committee is empowered to
investigate any matter brought to its attention with full access to all books,
records, facilities and personnel of the Company and the power to retain
independent counsel, auditors or other advisors for this purpose. The Committee
is in place to represent the Company's stockholders; accordingly, the
independent auditors are ultimately accountable to, and must report directly to,
the Committee.
The Committee shall review the adequacy of this Charter on an annual
basis.
Membership
The Committee shall be comprised of not less than three members of the
Board, and the Committee's composition will meet the requirements of Section 10A
of the Securities Exchange Act of 1934 and the applicable rules of the NASD.
Accordingly, all of the members will be directors:
1. Who have no relationship to the Company or any of its subsidiaries
(other than as a member of the Committee, the Board or any other
Board committee) that may interfere with the exercise of their
independence from management and the Company or that would otherwise
cause such director to be an affiliated person of the Company or any
of its subsidiaries;
2. Who have not accepted any consulting, advisory, or other
compensatory fee from the Company other than in his or her capacity
as a member of the Committee, the Board or any other Board
committee; and
3. Who are financially literate. In addition, at least one member of
the Committee will have accounting or related financial management
expertise.
Meetings
The Committee shall meet with such frequency and at such intervals as it
shall determine is necessary to carry out its duties and responsibilities. As
part of its purpose to foster open communications, the Committee shall meet at
least annually with management, the head of the internal auditing department and
the Company's independent auditors in separate sessions to discuss any matters
that the Committee or each of these groups or persons believe should be
discussed privately. In addition the Committee, or any member thereof designated
Chairman of the Committee, should meet or confer with the independent auditors
and management quarterly to review the Company's periodic financial statements
prior to their filing with the Securities and Exchange Commission. The Committee
may ask members of management and others to attend its meetings.
Key Responsibilities
The Committee's job with respect to the Company's financial statements is
one of oversight and it recognizes that the Company's management is responsible
for preparing the Company's financial statements and that the independent
auditors are responsible for auditing those financial statements. Additionally,
the Committee recognizes that financial management, as well as the independent
auditors, have more time, knowledge and detailed information on the Company than
do Committee members; consequently, in carrying out its oversight
responsibilities, the Committee is not providing any expert or special assurance
as to the Company's financial statements or any professional certification as to
the independent auditors' work.
The following functions shall be the common recurring activities of the
Committee in carrying out its oversight function. These functions are set forth
as a guide with the understanding that the Committee may diverge from this guide
as appropriate given the circumstances.
o The Committee shall:
- review with management and the independent auditors the
audited financial statements to be included in the Company's
Annual Report on Form 10-K (or the Annual Report to
Shareholders if distributed prior to the filing of Form 10-K)
and review and consider with the independent auditors the
matters required to be discussed by Statement of Auditing
Standard ("SAS") No. 61;
- as a whole, or through the Committee chair, review with the
independent auditors the Company's interim financial results
to be included in the Company's quarterly reports to be filed
with Securities and Exchange Commission and the matters
required to be discussed by SAS No. 61; this review will occur
prior to the Company's filing of the Form 10-Q;
- request from the independent auditors annually, a formal
written statement delineating all relationships between the
auditors and the Company consistent with Independence
Standards Board Standard Number 1 ("Standard No. 1");
- discuss with the independent auditors any such disclosed
relationships and their impact on the independent auditors'
independence;
- take appropriate action to oversee the independence of the
independent auditors;
- prepare a report to be included in each annual proxy statement
of the Company commencing after December 15, 2000 which
states, among other things, whether (i) the Committee has
reviewed and discussed with management the audited financial
statements to be included in the Company's Annual Report on
Form 10-K, (ii) the Committee has discussed with the Company's
independent auditors the matters that the auditors are
required to discuss with the Committee by SAS No. 61, (iii)
the Committee has received the written disclosures and letter
from the Company's independent auditors required by Standard
No. 1 and has discussed with the independent auditors their
independence, and (iv) the Committee has recommended to the
Board that the audited financial statements be included in the
Company's Annual Report on Form 10-K for the last fiscal year;
- review with the independent auditors, the Company's internal
auditors and financial and accounting personnel, the adequacy
and effectiveness of the accounting and financial controls of
the Company and elicit any recommendations for the improvement
of such control procedures or particular areas where new or
more detailed controls or procedures are desirable;
- review the internal audit function of the Company, including
the independence and authority of its reporting obligations,
the proposed audit plans for the coming year, and the
coordination of such plans with the independent auditors;
review accounting and financial human resources and succession
planning within the Company;
- submit the minutes of all meetings of the Committee to, or
discuss the matters discussed at each Committee meeting with,
the Board; and
- use its established procedures to investigate any matter
brought to its attention within the scope of its duties, with
the power to retain independent counsel for this purpose if,
in its judgment, that is appropriate.
o The Committee recognizes the independent auditors' ultimate
accountability to the Committee as representative of the shareholders of the
Company. In connection therewith, the Committee shall have the ultimate
authority and responsibility to select (or nominate for shareholder approval),
evaluate, determine the compensation of, and, where appropriate, replace the
independent auditors.
In addition to its oversight functions described above, the Committee
shall establish procedures for (a) the receipt, retention, and treatment of
complaints regarding accounting, internal accounting controls, or auditing
matters and (b) the confidential, anonymous submission by employees of the
Company of concerns regarding questionable accounting or auditing matters. The
Committee shall also review and approve all transactions between the Company or
any of its subsidiaries and any party related to the Company or any of its
subsidiaries.
Proxy Card
ENZON, INC.
Annual Meeting of Stockholders December 3, 2002
This Proxy Is Solicited on Behalf of the Board of Directors
Arthur J. Higgins and Kenneth J. Zuerblis and each of them, as
proxies, with full power of substitution in each of them, are hereby authorized
to represent and to vote, as designated below and on the reverse side, on all
proposals and in the discretion of the proxies on such other matters as may
properly come before the annual meeting of stockholders of Enzon, Inc. (the
"Company") to be held on December 3, 2002 or any adjournment(s),
postponement(s), or other delay(s) thereof (the "Annual Meeting"), all shares of
stock of the Company to which the undersigned is entitled to vote at the Annual
Meeting.
UNLESS OTHERWISE DIRECTED, THIS PROXY WILL BE VOTED "FOR" PROPOSALS
1, 2 and 3 AND WILL BE VOTED IN THE DISCRETION OF THE PROXIES ON SUCH OTHER
MATTERS AS MAY PROPERLY COME BEFORE THE ANNUAL MEETING. THE BOARD OF DIRECTORS
HAS PROPOSED AND RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" PROPOSALS 1, 2 and 3.
(1) Election of the following nominees as Class I Directors to serve in such
capacities until their successors are duly elected and qualified:
Arthur J. Higgins Rosina B. Dixon
(Authority to vote for any nominee(s) may be withheld by lining through the
name(s) of any such nominee(s).)
/ / FOR all nominees / / WITHHOLD authority for all
(2) Proposal to approve the amendment to the Company's Certificate of
Incorporation to change the name of the Company from "Enzon, Inc." to
"Enzon Pharmaceuticals, Inc.".
/ / FOR / / AGAINST / / ABSTAIN
(3) Ratification of the selection of KPMG LLP to audit the consolidated
financial statements of the Company for the fiscal year ending June 30,
2003.
/ / FOR / / AGAINST / / ABSTAIN
/ / Please check this box if you expect to attend the Annual Meeting in
person.
(Please sign exactly as name appears to the
left, date and return. If shares are held by
joint tenants, both should sign. When signing
as attorney, executor, administrator,
trustees or guardian, please give full title
as such. If a corporation, please sign in
full corporate name by president or other
authorized officer. If a partnership, please
sign in partnership name by authorized
person.)
Date:
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Sign Here
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Signature (if held jointly)
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Capacity (Title or Authority,
i.e. Executor, Trustee)
PLEASE SIGN, DATE AND MAIL YOUR PROXY TODAY.
