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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
LIDAK PHARMACEUTICALS
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(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:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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LIDAK PHARMACEUTICALS
11077 NORTH TORREY PINES ROAD
LA JOLLA, CALIFORNIA 92037
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 18, 1998
------------------------
The Annual Meeting of Shareholders of LIDAK Pharmaceuticals (the "Company")
will be held at the San Diego Hilton Beach & Tennis Resort at 1775 East Mission
Bay Drive, San Diego, California 92109 on Saturday, April 18, 1998, at 9:00 a.m.
for the following purposes:
1. To elect three (3) directors of the Company to hold office until the
2000 Annual Meeting of Shareholders.
2. To ratify the selection of Deloitte & Touche LLP as independent auditors
for the fiscal year ending September 30, 1998.
3. To transact such other business as may properly come before the meeting
or any adjournment or postponement of the meeting.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only shareholders of record at the close of business on February 20, 1998
will be entitled to notice of and to vote at the meeting or any adjournment
thereof. Each of these shareholders is cordially invited to be present and vote
at the meeting in person.
By Order of the Board of Directors,
/S/ JEFFERY B. WEINRESS
JEFFERY B. WEINRESS
Secretary
San Diego, California
March 13, 1998
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE SIGN AND DATE THE
ENCLOSED PROXY CARD AND RETURN IT PROMPTLY. THIS IS IMPORTANT BECAUSE A MAJORITY
OF THE SHARES MUST BE REPRESENTED, EITHER IN PERSON OR BY PROXY, TO CONSTITUTE A
QUORUM. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON EVEN THOUGH YOU SEND
IN YOUR PROXY NOW.
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LIDAK PHARMACEUTICALS
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 18, 1998
TABLE OF CONTENTS
PAGE
----
General Information......................................... 1
Shares Outstanding and Voting Rights........................ 1
Proposal One
Election of Directors..................................... 2
Proposal Two
Ratification of Independent Auditors...................... 6
Other Business.............................................. 16
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LIDAK PHARMACEUTICALS
11077 NORTH TORREY PINES ROAD
LA JOLLA, CALIFORNIA 92037
------------------------
PROXY STATEMENT FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 18, 1998
------------------------
GENERAL INFORMATION
Your proxy in the enclosed form is solicited by the Board of Directors (the
"Board") of LIDAK Pharmaceuticals, a California corporation (the "Company"), for
use at the Annual Meeting of Shareholders to be held at the San Diego Hilton
Beach & Tennis Resort at 1775 East Mission Bay Drive, San Diego, California
92109 on April 18, 1998 (the "Meeting") for the purposes set forth in the
accompanying notice and at any adjournment or postponement of the Meeting. The
mailing of this Proxy Statement and the accompanying form of proxy to
shareholders of the Company is expected to commence on or about March 18, 1998.
The shares represented by any proxy in the enclosed form will be voted in
accordance with the instructions given on the proxy if the proxy is properly
executed and is received by the Company prior to the close of voting at the
Meeting or any adjournment or postponement thereof. Proxies received by the
Company on which no contrary instruction has been given will be voted FOR the
election of Class I Directors nominated by management, and FOR ratification of
the selection of independent auditors for the fiscal year ending September 30,
1998, and as recommended by the Board of Directors, in its discretion, with
regard to all other matters which may properly come before the Meeting. A
shareholder giving a proxy has the power to revoke it at any time before it is
exercised. A proxy may be revoked by filing with the Secretary of the Company an
instrument revoking it or a duly executed proxy bearing a later date. The powers
of the proxy holders will be suspended if the person executing the proxy is
present at the Meeting and votes in person.
Copies of solicitation material will be furnished to brokerage houses,
fiduciaries, and custodians holding shares in their names which are beneficially
owned by others ("record holders") to forward to such beneficial owners. In
addition, the Company may reimburse such persons for their cost of forwarding
the solicitation material to such beneficial owners. Original solicitation of
proxies by mail may be supplemented, if deemed desirable or necessary, by one or
more of telephone, telegram, facsimile, or personal solicitation by directors,
officers, or employees of the Company. No additional compensation will be paid
for any such services. The Company reserves the right, if deemed desirable or
necessary, to retain a proxy solicitation firm or other third parties to deliver
solicitation material to record holders for distribution by them to their
principals and to assist the Company in collecting or soliciting proxies from
such holders. The costs of these services, exclusive of out-of-pocket costs, is
not expected to exceed $10,000. Except as described above, the Company does not
intend to solicit proxies other than by mail.
SHARES OUTSTANDING AND VOTING RIGHTS
Only holders of shares of Class A Common Stock ("Class A Shares") and Class
B Common Stock ("Class B Shares") of record as at the close of business on
February 20, 1998 are entitled to notice of and to vote at the Meeting. On the
record date, there were issued and outstanding 39,805,850 Class A Shares and
49,000 Class B Shares (collectively, the "Shares"). Each Class A Share is
entitled to one vote and each Class B Share is entitled to five votes on all
matters to be voted upon at the Meeting. The presence, in person or by proxy
duly authorized, of the holders of a majority of the Shares will constitute a
quorum for the transaction of business at the Meeting and any continuation or
adjournment thereof. Broker non-votes (i.e. shares held by a broker or nominee
which are represented at the Meeting, but with respect to which such broker or
nominee is not empowered to vote on a particular purpose) will be counted in
determining whether a quorum is present at the Meeting. Directors are elected by
a plurality of votes of the Shares present in person
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or represented by proxy at the Meeting. Any Shares not voted (whether by
abstention, broker non-votes or otherwise) will have no impact on the election
of directors, except to the extent that the failure to vote for an individual
results in another individual receiving a larger portion of votes. The other
proposals submitted to the shareholders in the enclosed proxy must be approved
by the vote of the holders of a majority of the Shares represented in person or
by proxy and entitled to vote at the Meeting. In determining whether such
proposals have been approved, abstentions and broker non-votes are not counted
as votes for or against the proposal.
Your execution of the enclosed proxy will not affect your right as a
shareholder to attend the Meeting and to vote in person. Any shareholder giving
a proxy has a right to revoke it at any time by either (i) a later-dated proxy,
(ii) a written revocation sent to and received by the Secretary of the Company
prior to the Meeting, or (iii) attendance at the Meeting and voting in person.
PROPOSAL ONE
ELECTION OF DIRECTORS
(ITEM 1 ON THE PROXY CARD)
The By-laws of the Company provide that the Board shall be divided into two
classes as nearly equal in number as reasonably possible with any overage
allocated in the discretion of the Board. The current number of directors (which
may vary between four and seven) has been fixed at seven by action of the Board
in accordance with the By-Laws. Each class of directors has a two-year term.
Three of the Company's seven directors (the "Class I Directors") are to be
elected at the Meeting. The remaining four directors (the "Class II Directors")
are to be elected at the 1999 Annual Meeting. Currently, the three Class I
Directors of the Company are Messrs. Agersborg, Jenkins and Samuels (each of
whom has been unanimously nominated for election at the Meeting). The four
current Class II Directors of the Company are Dr. Katz, Mr. Olson, Mr. Towle and
Dr. Yakatan.
Each Class I Director nominee elected at the Meeting will hold office until
the 2000 Annual Meeting, and until his successor is elected and qualified,
unless he resigns or his seat on the Board becomes vacant due to his death,
removal or other cause in accordance with the By-Laws of the Company. Management
knows of no reason why any of these nominees would be unable or unwilling to
serve; but if any nominee should be unable or unwilling to serve, the proxies
will be voted for the election of such other person(s) for the office of
director as management may recommend in the place of such nominee. THE BOARD
UNANIMOUSLY RECOMMENDS VOTING "FOR" THE THREE NOMINEES LISTED BELOW.
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INFORMATION REGARDING CLASS I DIRECTOR NOMINEES FOR A TWO-YEAR TERM EXPIRING AT
THE 2000 ANNUAL MEETING
The following table sets forth the names, ages, principal occupations for
the periods indicated and other directorships of each of the current Class I
Director nominees at the Meeting. Messrs. Agersborg, Jenkins and Samuels are
currently directors of the Company.
CURRENT
PRINCIPAL OCCUPATION FOR THE DIRECTOR TERM
NAME AGE PAST FIVE YEARS AND OTHER DIRECTORSHIPS SINCE ENDS
---- --- ---------------------------------------- -------- -------
Helmer P.K. Agersborg, Jr......... 69 Pharmaceutical industry consultant since October 1998
1990. Affiliated with Wyeth Laboratories 1992
and Wyeth-Ayerst Research, subsidiaries
of American Home Products from
1958-1990. From 1987-1990, served as
President of Wyeth-Ayerst Research. Also
director of Afferon Corporation, Maret
Corporation and Collagenex
Pharmaceuticals, Inc.
William N. Jenkins................ 69 Retired, having served as an attorney August 1998
specializing in corporate and securities 1988
law for more than 30 years. Of counsel
to the law firm of Musick, Peeler &
Garrett (1990 to January 1992) and
partner in the law firm of Jenkins &
Perry (1961 to 1989).
Stuart A. Samuels................. 56 Pharmaceutical industry consultant since April 1998
1990. Affiliated with the Rorer Group 1992
from 1986 to 1990 where he held
positions of Senior Vice President,
Rorer Pharmaceuticals Corporation, and
General Manager of Rorer Pharmaceuticals
and President of Dermik Laboratories,
both divisions of Rorer Pharmaceuticals
Corporation.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" EACH NOMINEE.
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INFORMATION REGARDING CLASS II DIRECTORS CONTINUING IN OFFICE UNTIL THE 1999
ANNUAL MEETING
CURRENT
PRINCIPAL OCCUPATION FOR THE DIRECTOR TERM
NAME AGE PAST FIVE YEARS AND OTHER DIRECTORSHIPS SINCE ENDS
---- --- --------------------------------------- -------- ---------
David H. Katz..................... 54 Former Chief Executive Officer of the August 1999
Company from August 1988 to March 1998 1988
and President from August 1988 through
October 1989 and from March 1992 to
March 1998. Founder of Medical Biology
Institute ("MBI"), serving as its
President and Chief Executive Officer
since its inception in 1981 and as a
director since August 1990. Founder of
Quidel Corporation, a San Diego-based
biotechnology company ("Quidel"),
serving as its Chairman of the Board
and Chief Executive Officer from
inception in 1981 through March 1985,
and as its Chairman of the Board and
Chief Scientific Officer through March
1988. Chairman of the Department of
Cellular and Developmental Immunology
at Scripps Clinic and Research
Foundation from 1976 until 1981.
Kenneth E. Olson.................. 61 Chairman of the Board (July 1984- August 1999
present) and Chief Executive Officer 1988
(December 1990-February 1996 and March
1997-present) of Proxima Corporation, a
supplier of display projection systems
for professional desktop computers.
Sidney N. Towle................... 53 Registered representative since June August 1999
1990 and, since January 1994, a Senior 1988
Vice President of H.C. Wainwright &
Co., Inc. Registered representative for
Homans, McGraw, Trull, Valeo and
Company, Inc. from December 1988 until
June 1990. Prior thereto, Vice Chairman
of J.T. Moran Financial Corp.
("Moran"). Founded Buttonwood
Securities Corporation of Massachusetts
in 1974, remaining Chief Executive
Officer until it was acquired by Moran
in 1988. Vice President of John Magee,
Inc., a wholly-owned subsidiary of
Moran from February 1988 until October
1988.
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CURRENT
PRINCIPAL OCCUPATION FOR THE DIRECTOR TERM
NAME AGE PAST FIVE YEARS AND OTHER DIRECTORSHIPS SINCE ENDS
---- --- --------------------------------------- -------- ---------
Gerald J. Yakatan, Ph.D........... 55 President and CEO since March 1998. February 1999
Vice President of Drug Development of 1998
the Company on a half-time basis from
July 1995 to March 1998. Independent
consultant to other biotechnology
companies and President and CEO of
IriSys Research & Development, LLC, a
company specializing in contract drug
formulation services, founded by Dr.
Yakatan in 1996. President and CEO of
Tanabe Research Laboratories, USA,
Inc., an inflammation drug discovery
research and development company, from
1990 to 1995. Executive Vice President
for Research and Development and Vice
President of Pharmaceutical Development
at Immunetech Pharmaceuticals
(predecessor to Tanabe Research) from
1987 to 1990.
There are no family relationships among any of the directors and officers.
BOARD MEETINGS AND COMMITTEES
During the fiscal year ended September 30, 1997 ("Fiscal 97"), the Board
held six regular meetings and three special meetings. Each director attended at
least 75% of the meetings held during Fiscal 97 which occurred on or after the
initiation of their term as a director. Each director who served on the
Compensation and Stock Option Committee also attended at least 75% of such
committee's meetings held during Fiscal 97 which occurred on or after the
initiation of his term as a director.
During Fiscal 97, the Board of the Company had an Executive Committee, an
Audit Committee, a Technology Review Committee and an Executive Compensation and
Stock Option Committee. The Company does not have a Nominating Committee nor a
committee that performs equivalent functions of a Nominating Committee.
The Executive Committee has all of the authority of the Board to act on any
matter except with respect to: (i) the approval of any action for which
shareholder approval is required under the California General Corporation Law;
(ii) the filling of vacancies on the Board or on any committee thereof; (iii)
the fixing of compensation for directors; (iv) the adoption, amendment or repeal
of any bylaw; (v) the amendment or appeal of any resolution of the Board which
by its terms is not so amendable or repealable; (vi) any distribution to
shareholders except at a rate or within a price range determined by the Board;
(vii) the appointment of other committees of the Board or the members thereof;
and (viii) the termination of any officer. The Executive Committee, which
consisted of Messrs. Jenkins and Olson and Dr. Katz during Fiscal 97, held no
meetings during Fiscal 97. The Executive Committee currently consists of Messrs.
Agersborg, Jenkins, Olson, Samuels, Towle and Yakatan.
The Audit Committee oversees the Company's accounting and financial
reporting policies and internal controls, reviews annual audit reports and
management letters and makes recommendations to the Board regarding appointment
of independent auditors. The Audit Committee currently consists of Mr. Jenkins.
The Audit Committee held one meeting during Fiscal 97.
The Executive Compensation and Stock Option Committee consists of Messrs.
Olson and Towle. The principal functions of this committee are to recommend to
the Board the compensation of directors and
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officers of the Company, to oversee the administration of the Company's stock
option plans and to perform such other duties regarding compensation for
employees and consultants as the Board may delegate from time to time. See also
"Compensation Committee Report." The Executive Compensation and Stock Option
Committee held one meeting during Fiscal 97.
The Technology Review Committee consists of Messrs. Agersborg and Samuels.
The Technology Review Committee monitors the status of the Company's research
and product development efforts and reviews the commercial potential of existing
and new product opportunities. The Technology Review Committee held one meeting
during Fiscal 97.
PROPOSAL TWO
RATIFICATION OF INDEPENDENT AUDITORS
(ITEM 2 ON THE PROXY CARD)
The Board has selected Deloitte & Touche LLP as the Company's independent
auditors for the fiscal year ending September 30, 1998, and has further directed
that management submit the selection of independent auditors for ratification by
the shareholders at the Meeting. Deloitte & Touche LLP has audited the Company's
financial statements annually since the Company's inception. Its representatives
are expected to be present at the Meeting, will have the opportunity to make a
statement if they desire to do so and will be available to respond to
appropriate questions.
Shareholder ratification of the selection of Deloitte & Touche LLP as the
Company's independent auditors is not required by the Company's By-Laws or
otherwise. The Board is submitting the selection of Deloitte & Touche LLP to the
shareholders for ratification as a matter of good corporate practice. In the
event the shareholders fail to ratify the selection, the Board will reconsider
whether or not to retain that firm. Even if the selection is ratified, the Board
in its discretion may direct the appointment of a different independent
accounting firm at any time during the year if the Board determines that such a
change could be in the best interests of the Company and its shareholders.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE
SELECTION OF DELOITTE & TOUCHE LLP TO SERVE AS THE COMPANY'S INDEPENDENT
AUDITORS FOR THE FISCAL YEAR ENDING SEPTEMBER 30, 1998.
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SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership (as defined by Rule 13d-3 under the Securities Exchange Act of 1934,
as amended) of the Company's voting shares (Class A Shares and Class B Shares)
as of February 20, 1998 by: (i) each director, nominee and named executive
officer of the Company; (ii) all current executive officers and directors of the
Company as a group; and (iii) all persons known by the Company to own
beneficially 5% or more of the outstanding shares or voting power of the
Company's voting securities. The table is based upon information supplied by
directors, officers and principal shareholders. Unless otherwise indicated, each
of the listed persons has sole voting and sole investment power with respect to
the Shares beneficially owned, subject to community property laws where
applicable.
AMOUNT AND PERCENT OF
NATURE OF TOTAL
NAME AND ADDRESS OF BENEFICIAL BENEFICIAL PERCENT OF VOTING
TITLE OF CLASS OWNER OR IDENTITY OF GROUP(1) OWNERSHIP(2) CLASS(2) POWER(3)
- --------------------- ------------------------------ ------------ ---------- -----------
Class A Common Stock David H. Katz(4)(5) 3,193,050 7.58% 11.56%**
Class B Common Stock 385,000 88.71%
Class A Common Stock HealthMed, Incorporated(6) 4,114,193 9.78% 9.32%**
Class B Common Stock -0- -0-
Class A Common Stock William N. Jenkins(7)(8) 277,000 * *
Class B Common Stock 16,000 24.62%
Class A Common Stock Kenneth E. Olson(9)(10) 223,400 * *
Class B Common Stock 16,000 24.62%
Class A Common Stock Stuart A. Samuels(11) 45,000 * *
Class B Common Stock -0- -0-
Class A Common Stock Sidney N. Towle, Jr.(12) 177,000 * *
Class B Common Stock -0- -0-
Class A Common Stock Helmer P.K. Agersborg, Jr.(13) 70,000 * *
Class B Common Stock -0- -0-
Class A Common Stock Timothy R. Russell(14) 197,994 * *
Class B Common Stock -0- -0-
Class A Common Stock Gerald J. Yakatan(15) 115,048 * *
Class B Common Stock -0- -0-
Class A Common Stock James E. Berg(16) 98,292 * *
Class B Common Stock -0- -0-
Class A Common Stock Jeffery B. Weinress(17) 20,000 * *
Class B Common Stock -0- -0-
Class A Common Stock All officers and directors as 4,833,784 10.20% 14.25%
Class B Common Stock a group (ten persons)(18)(19) 417,000 93.00%
- ---------------
* Percentage of shares beneficially owned does not exceed 1%.
** Because of the definition of "beneficial ownership" under the Securities
Exchange Act of 1934, certain shares of Common Stock are shown in the Table
to be beneficially owned by both David H. Katz and HealthMed, Incorporated
(these shares are, in effect, counted twice). See Notes (3)-(6) below.
(1) C/O LIDAK Pharmaceuticals, 11077 North Torrey Pines Road, La Jolla,
California 92037.
(2) Based upon 39,805,850 shares of Class A Common Stock and 49,000 shares of
Class B Common Stock outstanding as of February 20, 1998, plus any shares
of Common Stock under options and warrants or subject to conversion rights
of the particular individual or, in the case of all directors and executive
officers, as a group. Includes all shares of Common Stock under options,
warrants, or other conversion rights exercisable or convertible within 60
days of February 20, 1998.
(3) Percentage of total voting power is based upon total cumulative voting
power of Class A Common Stock and Class B Common Stock combined as of
February 20, 1998 Each share of Class A Common Stock entitles the holder to
one vote per share on matters to be voted on by shareholders; each share of
Class B
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Common Stock entitles the holder to five votes per share. The percentage
ownership and voting power for each shareholder is calculated by assuming
the exercise or conversion of all warrants, options exercisable within 60
days of February 20, 1998 and convertible securities held by such holder
and the nonexercise and nonconversion of all other outstanding warrants,
options and convertible securities.
(4) Includes options to purchase 1,877,000 shares of Class A Common Stock and
386,190 shares of Class A Common Stock issuable upon exercise of Class D
Warrants. Also includes options to purchase 47,157 shares of Class A Common
Stock held by a member of his family. Does not include options to purchase
30,000 shares of Class A Common Stock and options to purchase 6,843 shares
of Class A Common Stock held by a member of his family which are not
exercisable within 60 days of February 20, 1998.
Pursuant to his Schedule 13D dated January 12, 1998 filed by Dr. Katz with
the SEC, Dr. Katz has stated that he is a party to a Voting Trust Agreement
dated January 12, 1998 between Dr. Katz and HealthMed, Inc. Dr. Katz
further stated that he has transferred 882,703 shares of Class A Common
Stock to this voting trust, of which HealthMed, Inc., as trustee, exercises
sole voting power; that he has retained the right to dispose of these
shares through public sales with prior notice to the trustee, but may not
dispose of more than 20% of such shares in any 30 day period; that all
shares of Class A and Class B Common Stock which Dr. Katz purchases or
receives during the term of the Agreement must be placed in the voting
trust; and that the term of the Voting Trust Agreement is ten years.
Because HealthMed exercises sole voting power over such shares, HealthMed
is shown as a beneficial owner of these same shares in this Table.
(5) Includes options to purchase 375,000 shares of Class B Common Stock granted
under Dr. Katz' employment agreement and options to purchase 10,000 shares
of Class B Common Stock held by a member of his family. See Note 4.
(6) Pursuant to the Schedule 13D dated January 12, 1998 filed by HealthMed,
Inc. with the SEC, HealthMed has stated that it acquired an aggregate of
443,400 shares of Class A Common Stock on January 12, 1998 from Dr. Katz
and MBI. HealthMed stated in its Schedule 13D that it exercises sole voting
and dispositive power over such shares.
Also in its Schedule 13D, HealthMed has stated that it has sole voting
power, as trustee, over 882,703 shares of the Company's Class A Common
Stock, which were transferred to a voting trust by Dr. David Katz under a
Voting Trust Agreement between HealthMed and Dr. David Katz dated January
12, 1998. HealthMed further stated that Dr. Katz has retained the power to
dispose of the shares through public sales with prior notice to the
trustee, but may not dispose of more than 20% of such shares during any 30
day period, and that the term of this Voting Trust Agreement is ten years.
Because Dr. Katz retains the power to dispose of these shares, he also is
listed as a beneficial owner of these same shares in this Table.
Also in its Schedule 13D, HealthMed stated that pursuant to a Purchase
Rights Agreement dated January 12, 1998 between HealthMed and Dr. Katz,
HealthMed has the right to receive either (i) 31.5% of the shares received
by Dr. Katz upon the exercise of his outstanding stock options to purchase
1,918,400 shares of Class A Common Stock and 375,000 shares of Class B
Common Stock (which convert to Class A upon transfer) or (ii) 31.5% of the
net proceeds from the sale of such shares. HealthMed further stated that
because these options are exercisable within 60 days, HealthMed may be the
beneficial owner of 722,421 shares of Class A Common Stock. Based solely on
its review of the HealthMed Schedule 13D, the Company believes that all
shares of Company Common Stock which may be acquired by Dr. Katz during the
term of the Voting Trust Agreement, including upon the exercise of options
and warrants, must be placed in the voting trust, and as a result, that
HealthMed (as the voting trustee) is the beneficial owner of all 2,263,190
shares of Class A Common Stock and 375,000 shares of Class B Common Stock
(which convert to Class A upon transfer) issuable to Dr. Katz upon the
exercise of stock options and warrants which are currently exercisable. Dr.
Katz also is listed as a beneficial owner of these same shares in this
Table.
Also in its Schedule 13D, HealthMed stated that, pursuant to a Voting Trust
Agreement dated January 12, 1998 between HealthMed and Medical Biology
Institute ("MBI"), HealthMed has sole
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voting power, as trustee, over 151,900 shares of Class A Common Stock which
MBI transferred to a voting trust. HealthMed further stated that MBI has
retained the power to dispose of all of such shares held in the trust
through public sales with prior notice to the trustee, but may not dispose
of more than 20% of such shares during any 30 day period, and that the term
of this Voting Trust Agreement is ten years.
(7) Includes options to purchase 277,000 shares of Class A Common Stock. Does
not include options to purchase 10,000 shares of Class A Common Stock which
are not exercisable within 60 days of February 20, 1998.
(8) Includes options to purchase 16,000 shares of Class B Common Stock.
(9) Includes options to purchase 187,000 shares of Class A Common Stock. Does
not include options to purchase 10,000 shares of Class A Common Stock which
are not exercisable within 60 days of February 20, 1998.
(10) Includes options to purchase 16,000 shares of Class B Common Stock.
(11) Includes options to purchase 45,000 shares of Class A Common Stock. Does
not include options to purchase 10,000 shares of Class A Common Stock which
are not exercisable within 60 days of February 20, 1998.
(12) Includes options to purchase 177,000 shares of Class A Common Stock. Does
not include options to purchase 10,000 shares of Class A Common Stock which
are not exercisable within 60 days of February 20, 1998.
(13) Includes options to purchase 70,000 shares of Class A Common Stock. Does
not include options to purchase 10,000 shares of Class A Common Stock which
are not exercisable within 60 days of February 20, 1998.
(14) Includes options to purchase 192,994 shares of Class A Common Stock. Does
not include options to purchase 15,708 shares of Class A Common Stock which
are not exercisable within 60 days of February 20, 1998.
(15) Includes options to purchase 115,048 shares of Class A Common Stock. Does
not include options to purchase 24,952 shares of Class A Common Stock which
are not exercisable within 60 days of February 20, 1998.
(16) Includes options to purchase 98,292 shares of Class A Common Stock. Does
not include options to purchase 15,708 shares of Class A Common Stock which
are not exercisable within 60 days of February 20, 1998.
(17) Includes options to purchase 20,000 shares of Class A Common Stock. Does
not include options to purchase 80,000 shares of Class A Common Stock which
are not exercisable within 60 days of February 20, 1998.
(18) Includes 1,302,403 shares of Class A Common Stock and options and warrants
to purchase an aggregate of 3,492,681 shares of Class A Common Stock. Does
not include options to purchase 224,509 shares of Class A Common Stock
which are not exercisable within 60 days of February 20, 1998.
(19) Includes 49,000 shares of Class B Common Stock and options to purchase
417,000 shares of Class B Common Stock.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") requires the Company's executive officers and directors, and
persons who own more than ten percent of a registered class of the Company's
equity securities, to file reports of beneficial ownership and changes in
beneficial ownership with the Securities and Exchange Commission ("SEC").
Executive officers, directors and greater than ten percent shareholders are
required by SEC regulations to furnish the Company with copies of all Section
16(a) forms they file.
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To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and written representation that no other
reports were required, all Section 16(a) filing requirements applicable to its
executive officers, directors and greater than ten percent shareholders were
complied with in Fiscal 97.
EXECUTIVE COMPENSATION
Directors who are not otherwise employed by the Company ("Outside
Directors"), other than Mr. Jenkins, are paid a retainer of $500 per month. Mr.
Jenkins, Chairman of the Board, received a monthly retainer of $2,500 through
January 11, 1998, which was increased by the Board to $5,000 per month while the
discussions about the potential HealthMed financing proposal were under
consideration by the Company and until such increase may be discontinued by the
Board. All Outside Directors receive $1,500 for attendance at each regular
meeting of the Board, $1,000 for attendance at each meeting of the Technology
Review Committee and $250 for attendance at each special meeting of directors
and meetings of committees of the directors other than the Technology Review
Committee. In January 1998, the Board constituted a Special Committee of
Independent Directors (the "Special Committee") to evaluate the HealthMed
financing proposal. Members of the Special Committee receive $750 for attendance
at each Special Committee meeting, and $1,500 per day if the director spends
more than four hours on a given day at the direction of the Special Committee on
the work of the Committee (inclusive of any fees payable in respect of a special
meeting or committee meeting attended on the same day). Directors who are also
employees (currently only Dr. Yakatan) receive no compensation for services as a
member of the Board.
In March 1994, the shareholders of the Company approved the Company's 1994
Stock Option Plan (the "1994 Option Plan"). The 1994 Option Plan provides that
non-employee directors are automatically granted options to purchase 10,000
Class A Shares of the Company's Common Stock on the date of the Company's annual
meeting each year. The options granted at such time have an exercise price equal
to the fair market value of the Class A Shares on the date of grant, vest
ratably over three years and have a term of ten years. Unless sooner terminated
by the Board, the 1994 Option Plan expires on January 14, 2004. The Board may
amend, suspend, modify or terminate the 1994 Option Plan, but may not without
the prior written approval of shareholders make any amendment which: (i)
materially increases the number of shares available for issuance under the 1994
Option Plan (except as expressly permitted); (ii) materially changes the class
of persons who are eligible for the grant of ISOs; or (iii) if required by Rule
16b-3 (or any successor) under the Exchange Act, would materially increase the
benefits accruing to participants under the 1994 Option Plan or would materially
modify the requirements as to eligibility for participation in the 1994 Option
Plan.
In March 1997, Messrs. Agersborg, Jenkins, Olson, Samuels and Towle each
received stock options to purchase 10,000 Class A Shares at an exercise price of
$2.25 per share pursuant to the 1994 Option Plan.
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COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY OF COMPENSATION
The following executive compensation disclosures reflect all compensation
awarded to, earned by or paid to the named executive officers of the Company for
the fiscal years ended September 30, 1997, 1996, and 1995. The named executive
officers (the "Named Executive Officers") are the Company's Chief Executive
Officer ("CEO"), regardless of compensation level, and the other executive
officers of the Company who received in excess of $100,000 in total annual
salary and bonus for Fiscal 97. Gerald J. Yakatan was appointed President and
CEO of the Company on March 4, 1998, following the termination of David H. Katz
as the Company's President and CEO.
SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION
---------------------------------------------
AWARDS
-----------------------------
ANNUAL COMPENSATION SECURITIES PAYOUTS
----------------------------------------- RESTRICTED UNDERLYING -------------
NAME AND PRINCIPAL OTHER ANNUAL STOCK OPTIONS/ LTP
POSITION YEAR SALARY($)(2) BONUS($) COMPENSATION($) AWARDS($)(3) SARS(#)(4) PAYOUTS($)(5)
------------------ ---- ------------ -------- --------------- ---------------- ---------- -------------
Gerald J.
Yakatan(1).......... 1997 111,693 -- -- -- 15,000 --
President and Chief 1996 104,723 -- -- -- 25,000 --
Executive Officer 1995 21,154 -- -- -- 100,000 --
(Formerly Vice
President of Drug
Development)
Timothy R. Russell.... 1997 177,031 -- -- -- 15,000 --
Vice President of 1996 168,046 -- -- -- 25,000 --
Business Development 1995 161,949 -- -- -- 15,000 --
and Licensing
James E. Berg......... 1997 110,792 -- -- -- 25,000 --
Vice President of 1996 99,705 -- -- -- 3,000 --
Clinical Affairs and 1995 92,000 -- -- -- 6,000 --
Product Development
David H. Katz(6)...... 1997 232,200 -- -- -- 30,000 --
Former President and 1996 228,000 -- -- -- -- --
Chief Executive 1995 228,000 -- -- -- 30,000 --
Officer
NAME AND PRINCIPAL ALL OTHER
POSITION COMPENSATION($)
------------------ ---------------
Gerald J.
Yakatan(1).......... --
President and Chief --
Executive Officer --
(Formerly Vice
President of Drug
Development)
Timothy R. Russell.... --
Vice President of --
Business Development --
and Licensing
James E. Berg......... --
Vice President of --
Clinical Affairs and --
Product Development
David H. Katz(6)...... --
Former President and --
Chief Executive --
Officer
- ---------------
(1) Dr. Yakatan's salary for the periods shown was based on his allocating 50%
of his time to the Company and 50% of his time to other endeavors.
(2) Amounts shown include compensation earned and received by Named Executive
Officers. No amounts were earned but deferred at the election of those
officers.
(3) The Company has not made any Restricted Stock Awards.
(4) The Company has not made any grants of SARs.
(5) The Company has not made any Long Term Incentive Plan ("LTIP") Payouts.
(6) Dr. Katz' salary was based on his allocating 75% of his time to the Company
and 25% to MBI. See "Employment Contracts and Termination of Employment
Agreements."
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STOCK OPTION GRANTS
The following table shows all individual grants of stock options to the
Named Executive Officers during Fiscal 97.
OPTION/SAR GRANTS IN FISCAL 97
PERCENT OF POTENTIAL REALIZABLE
TOTAL VALUE AT
OPTIONS/ ASSUMED ANNUAL RATES
SARS EXERCISE OF APPRECIATION
GRANTED TO OR BASE FOR OPTION TERMS(3)
OPTIONS/SARS EMPLOYEES IN PRICE EXPIRATION ---------------------
NAME GRANTED(#)(1) FISCAL YEAR ($/SH)(2) DATE 5% 10%
---- ------------- ------------ --------- ---------- --------- ---------
Gerald J. Yakatan......... 15,000 3% 2.25 03/15/07 $21,225 $53,789
Timothy R. Russell........ 15,000 3% 2.25 03/15/07 $21,225 $53,789
James E. Berg............. 10,000 2% 1.4688 11/09/06 $ 9,237 $23,409
15,000 3% 2.25 03/15/07 $21,225 $53,789
David H. Katz............. 30,000 6% 1.875 06/21/07 $35,375 $89,648
- ---------------
(1) These options vest over three years, with the first one-third vesting in its
entirety on the first anniversary of the date of grant, and the remaining
two-thirds vesting during the next two years on a daily basis. Vesting may
be accelerated and the options may be repriced at the discretion of the
Board. In the event of a specified corporate transaction such as a
dissolution, merger or other reorganization of the Company in which more
than 50% of the Company's stock is exchanged, vesting on such options shall
be accelerated unless the surviving corporation assumes the options
outstanding, substitutes similar rights for outstanding options, or the
options shall continue.
(2) Market price on date of grant.
(3) The potential realizable value is calculated by assuming that the stock
price on the date of grant appreciates at the indicated rate, compounded
annually, for the entire term of the option and that the option is exercised
and sold on the last day of its term at this appreciated stock price.
OPTION EXERCISES IN FISCAL 97
Set forth below is information with respect to exercises of stock options
by the Named Executive Officers during Fiscal 97 and the fiscal year-end value
of all unexercised stock options held by such persons.
AGGREGATED OPTION EXERCISES IN FISCAL 97 AND FISCAL YEAR-END OPTION VALUES
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED,
OPTIONS HELD AT FISCAL IN-THE-MONEY OPTIONS
SHARES YEAR-END(#) AT FISCAL YEAR-END($)(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
Gerald J. Yakatan........... -- -- 115,048 24,952 $ 1,032 $ 1,780
Timothy R. Russell.......... -- -- 192,994 17,006 $124,783 $ 1,780
James E. Berg............... -- -- 98,292 15,708 $ 38,703 $ 6,796
David H. Katz............... -- -- 2,252,000 30,000 $909,375 $16,875
- ---------------
(1) Based upon the closing bid price of the Company's Common Stock of $2.4375
quoted on the NASDAQ National Market System on September 30, 1997.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT ARRANGEMENTS
The Company is currently in the process of negotiating executive employment
agreements with Dr. Gerald J. Yakatan, the Company's President and Chief
Executive Officer, and Mr. Jeffery Weinress, the
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Company's Vice President and Chief Financial Officer. The Company has a
regularly scheduled meeting of the Board of Directors on March 14, 1998, at
which action concerning these contracts may be taken by the Board. When and as
the parties reach agreement regarding the terms of these contracts, the Company
will publicly announce these arrangements.
In April 1993, the Company entered into an employment agreement with David
H. Katz, M.D. (the "1993 Employment Agreement"), which replaced the prior
employment agreement between Dr. Katz and the Company dated September 9, 1988,
as amended on September 19, 1989 and October 8, 1989, respectively (the "1988
Employment Agreement"). On March 4, 1998, David H. Katz, M.D. was terminated for
cause as President and CEO of the Company. The 1993 Employment Agreement
provided that Dr. Katz's employment with the Company was on an "at will" basis,
subject to the discretion of the Board, for an annual base salary of $207,692.
Dr. Katz' salary was based on his allocating 75% of his time to the Company and
25% to MBI. Dr. Katz's salary was reviewed by the Compensation Committee of the
Board of the Company from time to time to determine, within the Board's
discretion, whether an increase was appropriate. In March 1994 and June 1997,
the board increased Dr. Katz's annual base salary to $228,000 and $240,000,
respectively. Dr. Katz was also entitled to all benefits generally available to
the Company's employees. Under the 1993 Employment Agreement, in the event that
Dr. Katz had been terminated for any reason other than cause, Dr. Katz would
have been entitled to receive a severance payment in the amount of his annual
base salary, payable over twelve months.
The 1993 Employment Agreement further provided that, except for Dr. Katz's
involvement with MBI, Dr. Katz's services were to be exclusive to the Company.
The terms of the 1993 Employment Agreement prohibited Dr. Katz from engaging in
any other businesses or providing services of a business or commercial nature to
any other person or organization unless such activity was fully disclosed to the
Company and approved by the Company's Board of Directors.
CERTAIN RELATIONSHIPS AND TRANSACTIONS
David H. Katz, former President and CEO and a director of the Company, is
also President and CEO of MBI. In October 1988, the Company and MBI entered into
a twenty-year licensing agreement (the "MBI Agreement"), which granted the
Company an exclusive, worldwide license to all existing technology of MBI and a
right of first preference to license future technology developed at MBI. The MBI
Agreement was amended in 1993 and 1994. Under the MBI Agreement, as amended, the
Company has been granted an exclusive worldwide license to all technology and
know-how of MBI which had been developed or which was under development as of
the original date of the MBI Agreement and a right of first preference to
license future technology of MBI through the year 2013, subject to restrictions,
if any, in the funding agreements by which MBI develops the technology. The
Company expects that, if rights to additional technologies developed at MBI are
acquired pursuant to the right of first preference under the MBI Agreement, the
Company will assume responsibility, including funding, for the commercial
development efforts including remaining research and development, clinical
testing and regulatory approvals.
The Company and MBI have also entered into agreements for the leasing of
facilities and equipment and the use of certain research and administrative
services. During Fiscal 97, the Company incurred charges to MBI totaling
$448,251 and $223,262, respectively, under these agreements.
The Company has received correspondence from MBI asserting certain concerns
related to its license agreement with LIDAK and certain unspecified rights to
LIDAKOL which possibly give rise to an "equitable lien and constructive trust"
on any proceeds of the development of LIDAKOL. The Company believes these
assertions are without merit and currently expects to file an arbitration
proceeding to affirm its position.
In addition, during Fiscal 97, Dr. Katz' wife was employed by the Company
as a scientist at an annual salary of approximately $80,000 plus employee
benefits, and Dr. Katz' daughter was employed in the Company's Investor
Relations Department at an annual salary of approximately $50,000 plus employee
benefits, which was raised to $67,000 in November 1997.
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BOARD COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
The Executive Compensation and Stock Option Committee (the "Committee")
recommends to the Board compensation for the Company's directors and officers
and oversees the administration of the Company's employee stock option plans.
All decisions of the Committee relating to compensation of the Company's
executive officers are reviewed and approved by the entire Board of Directors.
COMPENSATION POLICY
The Company's executive compensation policy is designed to establish an
appropriate relationship between executive pay and the Company's annual
performance, its long-term growth objectives and its ability to attract and
retain qualified executive officers. The Committee attempts to achieve these
goals by integrating on an individualized basis competitive annual base salaries
with stock options through the Company's stock option plans and otherwise. The
Committee believes that cash compensation in the form of salary and bonus
provides the Company's executives with short term rewards for success in
operations, and that long term compensation through the award of stock options
better coordinates the objectives of management with those of the shareholders
with respect to the long term performance and success of the Company. The
Committee generally takes into consideration a variety of subjective and
objective factors in determining the compensation package for executive
officers, including how compensation compares to that paid by competing
companies and the responsibilities and performance by each executive and the
Company as a whole. In making its determinations, the Committee attempts to
address the unique challenges which are present in the biotechnology industry in
which the Company competes against a number of public and private companies with
respect to attracting and retaining executives and other key employees.
The Committee has relied heavily on the equity/option position of
executives as an important mechanism to retain and motivate executives and key
employees while at the same time aligning the interests of the executives with
the interests of the shareholders generally. The Committee believes that option
grants are instrumental in motivating employees to meet the Company's future
goals. By working to increase the Company's value, one of the Company's primary
performance goals is met and the executives are likewise compensated through
option value.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
As discussed above under "Employment Contracts and Termination of
Employment Agreements," the Company currently is negotiating an executive
employment agreement with Dr. Yakatan. The Committee expects that Dr. Yakatan's
compensation will be consistent with the executive compensation policy described
above.
Also as discussed above under "Employment Contracts and Termination of
Employment Agreements," the Company entered into an employment agreement with
Dr. Katz in April 1993, providing, among other things, for an annual base salary
of $207,692, based on Dr. Katz' allocating 75% of his time to the Company. In
March 1994, the Board increased this base salary to $228,000 and in June 1997,
the Board increased this base salary to $240,000. Dr. Katz was terminated as the
President and CEO of the Company on March 4, 1998.
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COMPENSATION ARRANGEMENTS GENERALLY
Overall, the Committee believes that the compensation arrangements for the
Company's executives serve the long term interests of the Company and its
shareholders and that, in particular, the equity/option positions of executives
are an important factor in retaining and attracting key executives. Nonetheless,
the Committee intends to continue to review and analyze its policies in light of
the performance and development of the Company and the environment in which it
competes for executives and to retain outside compensation consultants from time
to time to assist the Committee in such review and analysis.
Executive Compensation and
Stock Option Committee
Kenneth E. Olson
Sidney N. Towle
March 11, 1998
The foregoing reports of the Committee shall not be deemed incorporated by
reference by any general statement incorporating by reference the Proxy
Statement into any filing under the Securities Act of 1933, as amended, or the
Exchange Act, except to the extent that the Company specifically incorporates
this information by reference, and shall not otherwise be deemed filed under
such acts.
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PERFORMANCE GRAPH
The graph below compares the cumulative total shareholder return on the
Company's Class A Common Stock from September 30, 1992 to present with the
cumulative total return of the NASDAQ U.S. Index and the NASDAQ Pharmaceutical
Index over the same period.
LIDAK PHARMACEUTICALS
COMPARISON OF FIVE YEAR CUMULATIVE SHAREHOLDER TOTAL RETURN*
AMONG LIDAK PHARMACEUTICALS, THE NASDAQ STOCK MARKET-US INDEX
AND THE NASDAQ PHARMACEUTICAL INDEX
Cumulative Total Return**
9/92 9/93 9/94 9/95 9/96 9/97
---- ---- ---- ---- ---- ----
Lidak Pharmaceuticals 100 789 234 446 166 266
NASDAQ STOCK MARKET-US 100 131 132 182 216 297
NASDAQ PHARMACEUTICAL 100 100 87 128 154 172
- ---------------
* The graph assumes that $100.00 was invested in the Company's Class A Common
Stock and in each index on September 30, 1992.
** The total return for the Company's Class A Common Stock and the indices used
assumes the reinvestment of dividends. No dividends have been declared on the
Company's Class A Common Stock.
Pursuant to SEC regulations, this chart is not "soliciting material", is
not deemed filed with the SEC, and is not to be incorporated by reference in any
filing of the Company under the Securities Act of 1933, as amended, or the
Exchange.
OTHER BUSINESS
The Company knows of no other matters to be submitted at the Meeting. If
any other matters are properly brought before the Meeting or any adjournment
thereof, it is the intention of the persons named in the enclosed proxy to vote
the shares they represent in accordance with their judgment.
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SHAREHOLDER PROPOSALS TO BE PRESENTED
AT NEXT ANNUAL MEETING
Proposals of shareholders intended to be presented by such shareholders at
next year's Annual Meeting must be received by the Company at its principal
office no later than November 18, 1998, and must satisfy the conditions
established by the SEC for shareholder proposals to be included in the Company's
proxy statement for that meeting.
FORM 10-K
A copy of the Company's annual report for Fiscal 97 is being mailed with
this proxy statement to shareholders entitled to notice of the Meeting. At any
shareholder's written request, the Company will provide without charge, a copy
of the Company's Annual Report on Form 10-K for Fiscal 97, as filed with the
SEC, including the financial statements and a list of exhibits. If copies of
exhibits are requested, a copying charge of $.20 per page will be made. Requests
should be sent to Investor Relations, LIDAK Pharmaceuticals, 11077 North Torrey
Pines Road, La Jolla, California 92037.
Each shareholder is urged to complete, date, sign and promptly return the
enclosed proxy card.
By Order of the Board of Directors
/S/ JEFFERY B. WEINRESS
JEFFERY B. WEINRESS
Secretary
La Jolla, California
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PROXY
LIDAK PHARMACEUTICALS
FOR ANNUAL MEETING OF SHAREHOLDERS
APRIL 18, 1998
PROXY SOLICITED ON BEHALF OF THE DIRECTORS
The undersigned hereby appoints Gerald J. Yakatan and Jeffery B. Weinress, or
either of them, as his or her agents and proxies with full power of substitution
to vote any and all shares of LIDAK Pharmaceuticals which the undersigned is
entitled to vote at the annual meeting of shareholders of said company to be
held April 18, 1998, or any adjournment or postponement thereof, as specified
below.
(PLEASE SIGN AND DATE THE PROXY ON THE REVERSE SIDE)
****************
SEE REVERSE SIDE
****************
22
/X/ PLEASE MARK YOUR VOTES AS THIS EXAMPLE
1. Election of the following nominees as directors:
FOR (except as indicated to the contrary below) / /
WITHHOLD AUTHORITY TO VOTE FOR / /
NOMINEES: Helmer P.K. Agersborg, Jr.
William N. Jenkins
Stuart A. Samuels
TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE THAT NOMINEE'S
NAME ON THE LINE PROVIDED BELOW.
- ------------------------------------------------------------------------------
2. Proposal to ratify the selection of Deloitte & Touche LLP as
independent auditors for the fiscal year ending September 30, 1998.
FOR AGAINST ABSTAIN
/ / / / / /
3. As they shall in their sole judgment determine on any other matter that
may properly come before the meeting or any adjournment or postponement
thereof.
UNLESS OTHERWISE MARKED, THIS PROXY WILL BE VOTED FOR THE ELECTION OF SOME OR
ALL OF THE PERSONS NAMED IN PROPOSAL 1 ON THE REVERSE HEREOF, ALL OF WHOM WILL
BE NOMINATED BY THE BOARD OF DIRECTORS OF LIDAK PHARMACEUTICALS FOR ELECTION AS
DIRECTORS, AND FOR PROPOSALS 2 AND 3. If any such nominee is unable or unwilling
to serve or is otherwise unavailable, said proxy holders shall have discretion
and authority to vote in accordance with their judgment for other nominees or to
distribute such vote in such proportions among other nominees as they in their
sole judgment shall determine.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
SIGNATURE: ___________________________ DATE: _____________, 1998
NOTE: Sign exactly as name appears hereon. Give your full title if signing in
other than individual capacity. All joint owners should sign.