1 FORM 10-K/A [X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 1997; or [ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from __________ to ______________. Commission file number 0-20713 ENTREMED, INC. (Exact name of Registrant as specified in its charter) DELAWARE 58-1959440 (State or other jurisdiction of (I. R. S. Employer incorporation or organization) Identification No.) 9610 Medical Center Drive; Rockville, Maryland 20850; (301) 217-9858 (Address, including zip code, and telephone number, including area code, of Registrant's principal executive offices) Securities registered pursuant to Section 12(b) of the Act: Name of each exchange Title of each class on which registered - ------------------- ------------------- Common NASDAQ Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.01 par value (Title and Class) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained to the best of the registrant's knowledge in definitive proxy or information statement incorporated by reference in Part III of this Form 10-K or any amendment to the Form 10-K. Yes [X] No [ ] The aggregate market value of voting stock held by non-affiliates of the Registrant, as of April 27, 1998, was approximately $130,561,500 (based upon the closing price for shares of the Registrant's Common Stock as reported by the NASDAQ Market for the last trading date prior to that date). The number of shares outstanding of the Registrant's Common Stock as of April 27, 1998 was 12,399,788. 2 ENTREMED, INC. PART III. Item 10. Directors and Executive Officers of the Registrant...........................................3 Item 11. Executive Compensation.......................................................................6 Item 12. Security Ownership of Certain Beneficial Owners and Management..............................10 Item 13. Certain Relationships and Related Transactions..............................................12 Signatures ............................................................................................13 2 3 Part III to Registrant's Form 10-K for the year ended December 31, 1997 is amended and restated as follows: PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The following table sets forth the names, ages and positions of the executive officers and directors of the Company: NAME AGE POSITION - ---- --- -------- John W. Holaday, Ph.D. (1) 52 Chairman of the Board, President, Chief Executive Officer and Director Edward R. Gubish, Ph.D. 49 Senior Vice President, Research and Development R. Nelson Campbell 33 Chief Financial Officer John C. Thomas, Jr. 44 Secretary/Treasurer Donald S. Brooks (2) 62 Director Samuel R. Dunlap, Jr. (1)(2) 48 Executive Advisor and Director Lee F. Meier (2)(3) 50 Director Mark C.M. Randall (3) 35 Director Wendell M. Starke (1) 55 Director - ----------- (1) Member of Executive Committee; (2) Member of Compensation Committee; (3) Member of Audit Committee John W. Holaday, Ph.D. is a co-founder of the Company and has served as its President and Chief Executive Officer and a director since August 1992 and its Chairman of the Board since November 1995. Prior thereto, from May 1989 to August 1992, he was a co-founder of Medicis Pharmaceutical Corp. where he served as Scientific Director, Senior Vice President for Research and Development and director. Dr. Holaday also serves as a director for CytImmune Sciences, Inc., a privately held research diagnostics company. From 1968 to 1989, he served at the Walter Reed Army Institute of Research, where he founded the Neuropharmacology Branch in 1980. He serves as an officer and fellow in several biomedical societies and has authored and edited numerous scientific articles in journals and books. His current academic positions include 3 4 Associate Professor of Anesthesiology and Critical Care Medicine and Senior Lecturer in Medicine at The Johns Hopkins University of Medicine, Baltimore, Maryland; Adjunct Professor of Pharmacology and Psychiatry at the Uniformed Services University School of Medicine, Bethesda, Maryland; and Clinical Assistant Professor of Surgery at the University of Connecticut Health Center, Farmington, Connecticut. Edward R. Gubish, Ph.D. has served as Senior Vice President of Research and Development since January 1997, prior to that he served as Vice President - Regulatory and Clinical Development of the Company since November 1995 and has been employed by the Company since October 1993. From 1990 to September 1993, Dr. Gubish served as senior director of Regulatory Affairs for Baker Norton Pharmaceuticals (IVAX) and Fujisawa Pharmaceuticals. From 1986 to 1990, Dr. Gubish served as Chief of Regulatory Affairs for the AIDS Division at the National Institutes of Health and as a scientific and administrative contact for sponsors of new biological products and IND submissions for the Center for Drugs and Biologics at the FDA. R. Nelson Campbell has served as Chief Financial Officer since January 1997. From November 1991 to June 1996, Mr. Campbell was employed by OsteoArthritis Sciences, Inc., a venture capital financed drug discovery company where he was a co-founder and served as Vice President of Business Development and Treasurer. From 1986 to 1991, he was with the international investment banking firms of Merrill Lynch Capital Markets, Nomura Securities International and lastly Daiwa America Securities, Inc., where he was engaged in corporate finance and merger transactions. John C. Thomas, Jr. has served as Secretary/Treasurer since January 1997 and served part-time as Chief Financial Officer of the Company from its inception in September 1991 until January 1997. Mr. Thomas has also served as the Chief Financial Officer of several other companies, including MEDigital, Inc., a private medical technology company since August 1996, Credit Depot Corporation, a public company engaged in loan financing (from August 1990 to March 1993 and from January 1995 until April 1996), Tapistron International, Inc., a public company engaged in the development of technology for the textile industry (from August 1991 until July 1995), and Sealite Sciences, a private biotechnology company (from June 1991 to March 1993). Mr. Thomas is a certified public accountant. Donald S. Brooks has been a director of the Company since April 1996. Since July 1993, Mr. Brooks has been a practicing attorney with the law firm Carella Byrne Bain Gilfillan Cecchi Stewart & Olstein, Roseland, New Jersey, which represents the Company on certain matters. Prior thereto, Mr. Brooks was employed by Merck & Co., Inc. for 27 years, most recently, from 1986 to 1993, as Senior Counsel. From 1980 to 1985, Mr. Brooks served as a U.S. employer delegate to the Chemical Industries Committee, International Labor Organization in Geneva, Switzerland. Samuel R. Dunlap, Jr. has served as an Executive Advisor and a director to the Company since August 1992. Mr. Dunlap also has (i) served as Chairman of Dunlap & Partners, Ltd., a financial consulting firm in Atlanta, Georgia, since October 1988, (ii) served as a director of Credit Depot Corporation, of which he was a founder, since December 1986, (iii) served as Vice 4 5 President of MEDigital, Inc. since August 1996, (iv) from 1992 through 1996 served as a director to First Pacific Networks, Inc., a publicly-held telecommunications company, (v) served as a director and a consultant of Golf Training Systems, Inc., a public company, from August 1994 until December 1995 and (vi) served as a director from July 1991 until February 1994 and an Executive Advisor from July 1991 until November 1994 of Tapistron International, Inc. From April 1986 until December 1988, Mr. Dunlap served as Executive Vice President and director of CytRx Corporation, a publicly-held pharmaceutical company of which he was a founder. Mr. Dunlap also served as Executive Vice President of Elan Pharmaceutical Research Corp., a publicly-held company, from August 1982 to December 1983 and President and a director of such entity from January 1984 to January 1985. Lee F. Meier has been a director of the Company since July 1997. Mr. Meier has over twenty years of experience in the equipment financing industry. He has been affiliated with US Leasing Corporation, The Chemical Bank of New York and Steiner Financial Corporation, a privately held, tax motivated lessor. Since 1984 Mr. Meier has served as founder and managing director of Meier Mitchell & Company, an investment banking firm specializing in providing innovative debt and lease financing products. Meier Mitchell & Company targets clients in the biotechnology and electronics industries and has arranged or provided well over $1 billion in financing to both private and public companies in these sectors. Mark C.M. Randall has been a director of the Company since April 1996. Since 1985, Mr. Randall has been associated with Sarasin International Securities Limited, London, England, a wholly-owned subsidiary of Bank Sarasin & Cie, a private bank based in Switzerland, where he has been Director since 1994. Wendell M. Starke has been a director of the Company since April 1994. Mr. Starke is a Chartered Financial Analyst and a Chartered Investment Counselor. Mr. Starke was President of INVESCO Capital Management, Inc. from 1979 to 1991. In 1992, he became Chairman of INVESCO, Inc., the parent company of INVESCO Capital Management and other INVESCO money management subsidiaries in the United States. Mr. Starke also serves as a member of the Board and as Global Chief Investment Officer of AMVESCAP, PLC. the London-based parent company of the worldwide INVESCO organization. The Company's Board of Directors is divided into three classes, as nearly equal in number as reasonably possible. Messrs. Brooks and Meier serve in a class whose terms expire at the Company's 1998 Annual Meeting; Messrs. Dunlap and Randall serve in a class whose terms expire at the Company's 1999 Annual Meeting; and Messrs. Holaday and Starke serve in a class whose terms expire at the Company's 2000 Annual Meeting. 5 6 ITEM 11. EXECUTIVE COMPENSATION The following summary compensation table sets forth the aggregate compensation paid or accrued by the Company to the Chief Executive Officer and to executive officers whose annual compensation exceeded $100,000 for fiscal 1997 (collectively, the "named executive officers") for services during the fiscal years ended December 31, 1997, 1996 and 1995. LONG TERM ANNUAL COMPENSATION COMPENSATION AWARDS SECURITIES UNDERLYING ALL OTHER SALARY BONUS OPTIONS/SARs COMPENSATION NAME AND PRINCIPAL POSITION YEAR ($) ($) (NO.) ($) John W. Holaday, Ph.D. 1997 275,000 - 260,000 18,883(1) Chairman, President and 1996 250,000 80,000 105,000 18,221(1) Chief Executive Officer 1995 200,000 100,000 270,001 18,369(1) Edward R. Gubish, Ph.D. 1997 165,000 50,000 100,000 6,332(2) Vice President, Regulatory 1996 140,000 42,000 75,000 5,670(2) and Clinical Development 1995 126,600 10,750 70,000 5,818(2) R. Nelson Campbell 1997 133,718 25,000 50,000 1,301(2) Chief Financial Officer 1996 - - - - 1995 - - - - Leo Einck, Ph.D. 1997 105,105 - - 6,332(2) Vice President, 1996 100,100 21,500 20,000 5,670(2) Extramural Programs 1995 91,000 10,750 10,000 5,818(2) John C. Thomas, Jr. 1997 120,000 25,000 50,000 - Secretary/Treasurer 1996 96,880 21,500 38,000 - 1995 48,220 3,170 6,667 5,818(2) (1) $12,551 of such amount represents the premiums paid by the Company with respect to a split-dollar life insurance policy on the life of Dr. Holaday. Premiums paid by the Company on such policy are treated as non-interest bearing advances to the insured for the policy. The initial proceeds of any death benefit are required to be used to repay the indebtedness, and the balance of the insurance proceeds are payable as designated by the insured. See "Employment Contracts and Termination of Employment and Change-in-Control Arrangements". The remaining amount represents group health insurance premiums paid on behalf of such officer. (2) Includes group health insurance premiums paid on behalf of such officer. 6 7 The following table sets forth certain information with respect to individual grants of stock options and warrants made during the fiscal year ended December 31, 1997 to each of the named executive officers. OPTION/SARS GRANTS IN LAST FISCAL YEAR POTENTIAL REALIZABLE NUMBER OF VALUE AT ASSUMED ANNUAL SECURITIES % OF TOTAL RATES OF STOCK PRICE UNDERLYING OPTIONS/SARs APPRECIATION FOR OPTION OPTIONS/ GRANTED TO EXERCISE OF TERM(1) SARs EMPLOYEES IN BASE PRICE EXPIRATION NAME GRANTED FISCAL YEAR ($/sh) DATE 5% ($) 10% ($) John W. Holaday, Ph.D. 10,000 1.16% 12.00 07/01/07 195,467 311,249 250,000 29.02% 10.00 11/20/07 4,072,238 6,484,355 Edward R. Gubish, Ph.D. 100,000 11.61% 10.00 11/20/07 1,628,895 2,593,742 R. Nelson Campbell 50,000 5.80% 10.00 11/20/07 814,448 1,296,871 Leo Einck, Ph.D. - - - - - - John C. Thomas, Jr. 50,000 5.80% 10.00 11/20/07 814,448 1,296,871 (1) Calculated by multiplying the exercise price by the annual appreciation rate shown (as prescribed by S.E.C. rules and compounded for the term of the options), subtracting the exercise price per share and multiplying the gain per share by the number of shares covered by the options. These amounts are not intended to forecast possible future appreciation, if any, of the price of the Company's Shares. The actual value realized upon exercise of the options to purchase Company Shares will depend on the fair market value of the Company's Shares on the date of exercise. 7 8 The following table sets forth information concerning all option holdings for the fiscal year ended December 31, 1997 for each of the named executive officers. None of the named executive officers exercised options during 1997. AGGREGATED OPTION/SARs EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/VALUE NUMBER OF UNEXERCISED VALUE OF UNEXERCISED SECURITIES UNDERLYING IN-THE-MONEY OPTIONS OPTIONS AT FY-END AT FY-END($) NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE John W. Holaday, Ph.D. 437,502/116,667 2,200,320/350,002 Edward R. Gubish, Ph.D. 149,166/135,834 510,622/244,379 R. Nelson Campbell 50,000/75,000 20,313/60,938 Leo Einck, Ph.D. 70,000/33,334 320,000/122,504 John C. Thomas, Jr. 149,835/56,500 1,031,576/60,938 (1) Calculated by multiplying the number of unexercised options outstanding at December 31, 1997 by the difference between the fair market value of the Company's Shares at December 31, 1997 ($11.625) and the option exercise price. EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL ARRANGEMENTS In April 1996, effective as of January 1, 1996, the Company entered into a three-year employment agreement with John W. Holaday, Ph. D., Chairman and Chief Executive Officer of the Company. The agreement provides for an annual base salary of $250,000 per year. The Company may terminate the agreement without cause and, upon such termination, Dr. Holaday will be entitled to receive his base salary through the end of the initial term of the agreement (subject to an offset for salary received from subsequent employment). The agreement contains confidentiality and non-competition provisions. The Company maintains a $2,000,000 split-dollar life insurance policy on the life of Dr. Holaday at an annual cost of approximately $12,551. Premiums paid by the Company on such policy are treated as non-interest bearing advances to the insured for the policy. The initial proceeds of any death benefit are required to be used to repay the indebtedness, and the balance of the insurance proceeds are payable as designated by the insured. Each of the Company's employees has entered into a Proprietary Information and Invention Assignment Agreement providing, among other things, that such employee will not disclose any confidential information or trade secrets in any unauthorized manner and that all inventions of such officer relating to the Company's current or anticipated business during the term of employment become the Company's property. 8 9 In the event of certain transactions, including those which may result a change in control, as defined under the Company's 1996 Plan, unvested installments of options to purchase Shares of the Company may become immediately exercisable. SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Section 16(a) of the 1934 Act requires the Company's executive officers, directors and persons who beneficially own more than 10% of a registered class of the Company's equity securities to file with the S.E.C. initial reports of ownership and reports of changes in ownership of common stock and other equity securities of the Company. Such executive officers, directors, and greater than 10% beneficial owners are required by S.E.C. regulation to furnish the Company with copies of all Section 16(a) forms filed by such reporting persons. Based solely on the Company's review of such forms furnished to the Company and written representation from certain reporting persons, the Company believes that all filing requirements applicable to the Company's executive officers, directors and greater than 10% beneficial owners were complied with. 9 10 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth, as of April 27, 1998 (except as otherwise footnoted below), certain information concerning stock ownership of all persons known by the Company to own beneficially more than 5% of the Shares, each director or director nominee, each executive officer named under "Executive Compensation" and all directors and executive officers of the Company as a group. AMONG AND NATURE OF PERCENTAGE OF NAME OF STOCKHOLDER(1) BENEFICIAL OWNERSHIP(1) OUTSTANDING CLASS John W. Holaday, Ph.D. 1,144,734 (2) 9.01% Carl R. Alving, M. D. 635,235 (3) 5.12% Donald S. Brooks 51,001 (4) * R. Nelson Campbell 50,000 (5) * Bart Chernow, M. D. 689,917 (6) 5.56% Samuel R. Dunlap, Jr. 410,235 (7) 3.30% Edward R. Gubish, Ph. D. 150,166 (8) 1.20% Lee F. Meier 50,334 (9) * Mark C. M. Randall 56,667 (10) * Wendell M. Starke 292,336 (11) 2.36% John C. Thomas, Jr. 151,667 (12) 1.22% Bristol-Myers Squibb Company 874,999 7.06% P. O. Box 4000 Princeton, New Jersey 08543 D. H. Blair Investment Banking Corp. 1,000,000 (13) 8.06% 44 Wall Street New York, New York 10005 All executive officers and directors of the 2,357,141 (14) 18.11% Company as a group (10 persons) *Less than 1% (1) Beneficial ownership is defined in accordance with the rules of the Securities and Exchange Commission ("SEC") and generally means the power to vote and/or to dispose of the securities regardless of any economic interest therein. (2) Includes 437,502 shares issuable upon exercise of options and warrants which are exercisable within 60 days and 126,666 shares held by a limited partnership of which Dr. Holaday is the general partner. Does not include 304,167 shares issuable upon exercise of options not exercisable within 60 days. (3) Includes 15,002 shares issuable upon exercise of options which are exercisable within 60 days. 10 11 (4) Includes 51,001 shares issuable upon exercise of options which are exercisable within 60 days. (5) Consists of 50,000 shares issuable upon exercise of options which are exercisable within 60 days. Does not include 75,000 shares issuable upon exercise of options not exercisable within 60 days. (6) Includes 21,002 shares issuable upon exercise of options which are exercisable within 60 days. (7) Includes 409,334 shares issuable upon exercise of options and warrants which are exercisable within 60 days. Does not include 33,334 shares issuable upon exercise of options not exercisable within 60 days. (8) Includes 149,166 shares issuable upon exercise of options which are exercisable within 60 days. Does not include 135,834 shares issuable upon exercise of options not exercisable within 60 days. (9) Includes 17,000 shares issuable upon exercise of options which are exercisable within 60 days and 33,334 shares issuable upon exercise of warrants which are exercisable within 60 days held by an entity the general partner of which is an entity in which Mr. Meier serves as Managing Director. (10) Includes 56,667 shares issuable upon exercise of options which are exercisable within 60 days. Does not include 13,334 shares issuable upon exercise of options not exercisable within 60 days. (11) Includes 102,551 shares issuable upon exercise of options and warrants which are exercisable within 60 days. Does not include 40,761 shares owned by various family members of Mr. Starke, as to which Mr. Starke disclaims beneficial ownership. (12) Includes 149,835 shares issuable upon exercise of options and warrants which are exercisable within 60 days. Does not include 56,500 shares issuable upon exercise of options not exercisable within 60 days. (13) Based on a Form 13-G filed by Mr. J. Morton Davis and D. H. Blair Investment Banking Corp. ("Blair") filed on February 3, 1998. Excludes 21,600 shares held by Mrs. Rosalind Davidowitz, Mr. Davis' wife, which Mr. Davis disclaims beneficial ownership. Mr. Davis is deemed to beneficially own the 1,000,000 shares held by D. H. Blair Investment Banking Corporation. Also excludes an aggregate of 528,240 shares owned by Steve Gorlin and June Gorlin, Mr. Gorlin's former wife, which are pledged to Blair and J. Morton Davis to secure obligations owed by Mr. Gorlin to Blair. Such shares may be voted by Mr. Gorlin until such time as a default occurs under the Gorlin Pledge or the underlying obligation. 11 12 (14) Includes 1,452,824 shares issuable upon exercise of options and warrants which are exercisable within 60 days. Does not include 618,169 shares issuable upon exercise of options not exercisable within 60 days. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The Company entered into a three year consulting agreement with Samuel R. Dunlap, Jr. commencing January 1, 1996 that provides for annual payments of $90,000. In May 1996 effective August 1995, the Company entered into a termination agreement with Steve Gorlin, a co-founder and former director of the Company, superceding a previous consulting agreement with Mr. Gorlin, that provides for annual payments of $90,000 per year for a three year period. Leon E. Rosenberg, M.D., a director of the Company until March 3, 1998, was the Senior Vice President, Scientific Affairs of Bristol-Myers Squibb Company. In December 1995, the Company and Bristol-Myers Squibb entered into a collaboration to develop and commercialize certain antiangiogenesis therapeutics. Pursuant to this collaboration, Bristol-Myers Squibb paid to the Company during fiscal 1997 an aggregate of approximately $3,670,000 in research funding and reimbursements for certain clinical trials and certain research and development and know-how. Donald S. Brooks, a director of the Company, is of counsel to the law firm Carella, Byrne, Bain, Gilfillan, Cecchi, Stewart & Olstein, which provides certain legal services to the Company. During fiscal 1997, the Company paid legal fees to Carella, Byrne, Bain, Gilfillan, Cecchi, Stewart & Olstein approximately $160,000, respectively. Wendell M. Starke, a director of the Company, is the Chairman of INVESCO, Inc. and serves as a member of the Board and Global Chief Investment Officer of AMVESCAP, the London-based parent company of the worldwide INVESCO organization. During fiscal 1997, the Company paid approximately $101,000 in 1997 for investment advisory services. In April 1995, the Company entered into a sale/leaseback transaction with respect to certain of its equipment with MMC/GATX Partnership No. 1 ("MMC/GATX"). The general partner of MMC/GATX is Meier Mitchell & Company, an entity in which Lee F. Meier, a director nominee, is the founder and Managing Director. During fiscal 1997, the Company paid lease payments to MMC/GATX in the amount of approximately $148,000 and in 1997 purchased the leased equipment for a total of $263,000. 12 13 SIGNATURE Pursuant to the requirements of the Securities Act of 1934, this report has been signed below by the following persons in the capacities and on the dates indicated. SIGNATURE TITLE DATE --------- ----- ---- /s/ John W. Holaday Chairman of the Board and April 30, 1998 - ----------------------------- Chief Executive Officer John W. Holaday, Ph. D. (principal executive officer) /s/ R. Nelson Campbell Chief Financial Officer April 30, 1998 - ----------------------------- (principal financial and R. Nelson Campbell accounting officer) /s/ John C. Thomas, Jr. Secretary/Treasurer April 30, 1998 - ----------------------------- John C. Thomas, Jr. /s/ Donald S. Brooks Director April 30, 1998 - ----------------------------- Donald S. Brooks /s/ Samuel R. Dunlap, Jr. Director April 30, 1998 - ----------------------------- Samuel R. Dunlap, Jr. /s/ Lee F. Meier Director April 30, 1998 - ----------------------------- Lee F. Meier /s/ Mark C. M. Randall Director April 30, 1998 - ----------------------------- Mark C. M. Randall /s/ Wendell M. Starke Director April 30, 1998 - ----------------------------- Wendell M. Starke 13