<PAGE> 1
SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
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 ss. 240.14a-11(c) or ss. 240.14a-12
Biofield Corp.
................................................................................
(Name of Registrant as Specified In Its Charter)
Biofield Corp.
................................................................................
(Name of Person(s) Filing Proxy Statement)
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:(1)
.....................................................................
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 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:
.....................................................................
<PAGE> 2
BIOFIELD CORP.
1225 NORTHMEADOW PARKWAY
SUITE 120
ROSWELL, GA 30076
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
JUNE 5, 1997
The Annual Meeting of Stockholders of Biofield Corp. (the "Company")
will be held at The Holiday Inn Roswell, 1075 Holcomb Bridge Road, Roswell,
Georgia 30076, telephone number (770) 992-9600, on June 5, 1997 at 9:00 a.m.
(eastern standard time) for the following purposes:
(1) To elect five directors to serve until the next
Annual Meeting of Stockholders or until their
respective successors shall have been duly elected
and qualified;
(2) To ratify the selection of Deloitte & Touche LLP,
independent public accountants, as auditors of the
Company for the year ending December 31, 1997;
(3) To ratify an amendment (i) increasing the number of
shares of Common Stock authorized for issuance under
the Biofield Corp. 1996 Stock Option Plan (the "1996
Plan") from 500,000 to 1,000,000, and (ii) limiting
the aggregate number of options which may be issued
under the 1996 Plan to any individual participant
within any five year period during the term of the
1996 Plan to 500,000 shares; and
(4) To transact such other business as may properly come
before the Annual Meeting.
Only stockholders of record at the close of business on April 15, 1997
will be entitled to notice of, and to vote at, the Annual Meeting of
Stockholders. A list of stockholders eligible to vote at the Annual Meeting will
be available for inspection at the Annual Meeting and for a period of ten days
prior to the Annual Meeting for any purpose germane to the Annual Meeting during
regular business hours at the principal executive offices of the Company at the
address specified above.
Whether or not you intend to be present at the Annual Meeting, your
proxy vote is important. To assure your representation at the Annual Meeting,
please sign and date the enclosed proxy card and return it promptly in the
enclosed envelope, which requires no additional postage if mailed in the United
States or Canada.
By Order of the Board of Directors
/s/ D. Carl Long
D. Carl Long
President and Chief Executive Officer
Roswell, Georgia
April 25, 1997
- --------------------------------------------------------------------------------
IT IS IMPORTANT THAT THE ENCLOSED PROXY CARD
BE COMPLETED AND RETURNED PROMPTLY
- --------------------------------------------------------------------------------
<PAGE> 3
BIOFIELD CORP.
1225 NORTHMEADOW PARKWAY
SUITE 120
ROSWELL, GA 30076
(770) 740-8180
-------------------
PROXY STATEMENT
-------------------
This Proxy Statement is furnished to stockholders of record of Biofield
Corp. (the "Company") as of April 15, 1997 in connection with the solicitation
of proxies by the Board of Directors of the Company (the "Board of Directors" or
"Board") for use at the Annual Meeting of Stockholders to be held on June 5,
1997 (the "Annual Meeting").
VOTING SECURITIES; PROXIES
The Company has only one class of voting securities, its Common Stock,
par value $0.001 per share (the "Common Stock"). At the Annual Meeting, each
stockholder of record at the close of business on April 15, 1997 will be
entitled to one vote for each share of Common Stock owned on that date as to
each matter presented at the Annual Meeting. On April 15, 1997, 6,493,300 shares
of Common Stock were outstanding. A list of stockholders eligible to vote at the
Annual Meeting will be available for inspection at the Annual Meeting and for a
period of ten days prior to the Annual Meeting for any purpose germane to the
Annual Meeting during regular business hours at the principal executive offices
of the Company at the address specified above.
The holders of a majority of the outstanding shares of Common Stock,
present in person or represented by proxy, shall constitute a quorum at the
Annual Meeting. The approval of a plurality of the outstanding shares of Common
Stock present in person or represented by proxy at the Annual Meeting is
required for election of the nominees as directors. In all matters other than
the election of directors, the affirmative vote of the majority of the
outstanding shares of Common Stock present in person or represented by proxy at
the Annual Meeting is required for the adoption of such matters.
All properly executed and unrevoked proxies in the accompanying form
that are received in time for the meeting will be voted at the meeting or any
adjournment thereof in accordance with instructions thereon, or if no
instructions are given, will be voted "FOR" the election of the named nominees
as directors of the Company and "FOR" the ratification of Deloitte & Touche LLP,
independent public accountants, as auditors of the Company and "FOR" the
ratification of the amendment to the Biofield Corp. 1996 Stock Option Plan, as
amended (the "1996 Plan") and will be voted in accordance with the best judgment
of the persons appointed as proxies with respect to other matters which properly
come before the Annual Meeting.
Any persons giving a proxy may revoke it at any time prior to its
exercise by delivering written notice to the Company, by executing and
delivering to the Company a later dated proxy or by attending the Annual Meeting
and voting in person.
Abstentions and broker non-votes will be counted for purposes of
determining the presence or absence of a quorum for the transaction of business
at the Annual Meeting. Abstentions will be counted in tabulations of the votes
cast on each of the proposals presented at the Annual Meeting, whereas broker
non-votes will not be counted for purposes of determining whether a proposal has
been approved.
The Annual Report of the Company (which does not form a part of the
proxy solicitation materials), including the Annual Report on Form 10-K with the
financial statements of the Company for the year ended December 31, 1996, is
being distributed concurrently herewith to stockholders.
This Proxy Statement and the accompanying form of proxy are being
mailed to the stockholders on or about April 25, 1997.
1
<PAGE> 4
PROPOSAL 1
ELECTION OF DIRECTORS AND MANAGEMENT INFORMATION
The number of directors of the Company is set by a resolution adopted
by a majority of the entire Board of Directors. The number of directors is
currently fixed at five. The Board of Directors currently consists of C. Leonard
Gordon, D. Carl Long, Joseph H. Gleberman, Harvey Horowitz and James B.
Anderson, Ph.D. Dr. Anderson, a director of the Company since 1993, has decided
not to stand for re-election at the Annual Meeting. The Board nominates Richard
J. Davies, M.D., the Chairman of the Company's Scientific Advisory and Clinical
Advisory Boards (collectively, the "Advisory Boards") to replace Dr. Anderson as
a director. The Board also nominates each of the current members of the Board of
Directors other than Dr. Anderson. Each of the nominees has agreed to stand for
election at the Annual Meeting to hold office until the next annual meeting or
until his successor is duly elected and qualified. It is intended that the
accompanying proxy will be voted in favor of the following persons to serve as
directors, unless the stockholder indicates to the contrary on the proxy.
The persons named in the accompanying proxy intend to vote for the
election as director of the nominees listed herein. Each nominee has consented
to serve if elected. The Board of Directors has no reason to believe that any
nominee will not serve if elected, but if any of them should become unavailable
to serve as a director, and if the Board of Directors designates a substitute
nominee or nominees, the persons named as proxies will vote for the substitute
nominee or nominees designated by the Board of Directors.
The following table sets forth certain information with respect to the
individuals nominated and recommended to be elected to the Board of Directors of
the Company and is based on the records of the Company and information furnished
to it by such persons. Reference is made to "Security Ownership of Certain
Beneficial Owners and Management" for information pertaining to stock ownership
by each director and executive officer of the Company and the nominees.
NOMINEES FOR ELECTION AS DIRECTORS
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
C. Leonard Gordon................... 67 Chairman of the Board
D. Carl Long........................ 37 President, Chief Executive Officer and Vice
Chairman of the Board
Richard J. Davies, M.D.............. 46 Chairman of the Advisory Boards
Joseph H. Gleberman................. 39 Director
Harvey Horowitz..................... 54 Director
</TABLE>
C. Leonard Gordon, the Company's co-founder, has served as Chairman of
the Board of Directors since the Company's inception and, until August 1992,
served as Chief Executive Officer of the Company. Mr. Gordon has been engaged in
venture capital enterprises for more than 10 years, particularly in the field of
new medical technologies and devices. Mr. Gordon has practiced law in New York
City for approximately 38 years and is currently of counsel to Gordon Altman
Butowsky Weitzen Shalov & Wein. Mr. Gordon serves as the Chairman of the Board
of Nitinol Medical Technologies, Inc.
D. Carl Long was appointed the Company's President and Chief Executive
Officer in March 1997. Mr. Long has served as Vice Chairman of the Board of
Directors since September 1992 and previously served as the Company's Chief
Executive Officer from September 1992 to December 1995. Prior to joining the
Company, Mr. Long was a co-founder of and served as Executive Vice President of
Alliance Pharmaceutical Corp., a publicly-traded company engaged in
pharmaceutical research and development, from 1987 to August 1990. Mr. Long also
served as a director of Alliance Pharmaceutical Corp. from 1987 to February
1994.
Richard J. Davies, M.D. has served as the Chairman of the Company's
Advisory Boards since their formation in 1994. Dr. Davies is Director of Surgery
at Hackensack Medical Center, Hackensack, New Jersey. He is Professor
2
<PAGE> 5
of Surgery, University of Medicine and Dentistry, New Jersey. Prior to accepting
his present position, he served as Chief of Surgical Oncology, UCSD Medical
School. Dr. Davies is a graduate of the London Hospital Medical
College/University of London. In addition to his ongoing clinical
responsibilities, Dr. Davies has contributed extensive basic science laboratory
work in the area of the electrophysiology of epithelial malignancies.
Joseph H. Gleberman has been a director since March 1995. Mr. Gleberman
is a managing director in the Principal Investment Area of Goldman, Sachs & Co.
("Goldman Sachs"). He joined Goldman Sachs in 1982 and became a partner of the
firm in 1990. Mr. Gleberman joined the Principal Investment Area in 1993. He
serves as a director of Applied Analytical Industries, Inc., BCP/Essex Holdings,
Inc., Diagnostics Holding, Inc. and I-NET, Inc. Mr. Gleberman serves on the
Company's Board of Directors as a nominee of Goldman Sachs.
Harvey Horowitz was elected a director on March 12, 1997, following the
resignation earlier in March 1997 of W. Clark Wescoe, M.D., a director of the
Company since August 1992. Mr. Horowitz is Vice President, General Counsel and a
Director of Donnkenny, Inc., a publicly-traded apparel company. Prior to joining
Donnkenny, Inc. in October 1996, Mr. Horowitz had been the managing partner of
the New York based law firm Squadron, Ellenoff, Plesent & Sheinfeld, LLP, which
represents the Company. Mr. Horowitz is the brother-in-law of Michael R.
Gavenchak, an executive officer of the Company.
STOCKHOLDER VOTE REQUIRED
Election of each director requires a plurality of the votes of the
shares of Common Stock present in person or represented by proxy at the Annual
Meeting and entitled to vote on the election of directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ELECTION TO THE BOARD OF
DIRECTORS OF THE COMPANY FOR EACH OF THE NOMINEES.
COMMITTEES OF THE BOARD
The Board of Directors has an Executive Committee which has authority
to act on most matters during intervals between Board meetings, a Compensation
Committee which has authority to review and approve all compensation
arrangements, including annual incentive awards for executive officers of the
Company, a Stock Option Committee which administers the 1992 Employee Stock
Incentive Plan (the "1992 Plan") and the 1996 Plan and an Audit Committee which
has authority to recommend annually to the Board of Directors the engagement of
the independent auditors of the Company and review the scope and results of the
audits, the adequacy of the Company's systems of internal accounting controls
and the professional services furnished by the independent auditors. The members
of the Executive Committee are Messrs. Gordon, Gleberman, Horowitz and Long. The
members of the Compensation Committee are Messrs. Gordon and Gleberman. The
members of the Stock Option Committee are Messrs. Gleberman and Horowitz. The
members of the Audit Committee are Messrs. Gordon, Horowitz and Gleberman.
ATTENDANCE AT BOARD AND COMMITTEE MEETINGS
During 1996, the Board of Directors held five meetings. The Stock
Option Committee held three meetings, the Compensation Committee held one
meeting, and the Audit Committee and the Executive Committee did not meet. Each
director attended at least 75% of the total number of meetings held during 1996
while he was a member of the Board, including meetings of committees of which
the director is a member. There are no family relationships among any of the
directors or executive officers of the Company, except that Mr. Horowitz is the
brother-in-law of Michael R. Gavenchak, an executive officer of the Company. The
Company's executive officers serve in such capacity at the pleasure of the Board
of Directors.
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 directors, executive officers, and any
persons who beneficially own more than ten percent of the Company's Common Stock
to report their ownership of the Company's Common Stock and any changes in that
ownership to the Securities and Exchange Commission and the Nasdaq National
Market Surveillance Department. Specific due dates for
3
<PAGE> 6
these reports have been established and the Company is required to report in
this Proxy Statement any failure to file by these dates during 1996. Based
solely on its review of such forms received by it from such persons for their
1996 transactions, the Company believes that all filing requirements applicable
to such officers, directors and greater than ten percent beneficial owners were
complied with except for the following exceptions: Ms. Lee Cohen, a former Vice
President of the Company, and Goldman, Sachs & Co., GS Advisors, L.P. and GS
Capital Partners, L.P. (members of The Goldman Sachs Group, L.P.) each failed to
timely file their initial Form 3's.
COMPENSATION OF DIRECTORS
Cash Compensation. Directors do not receive a fee for attending Board
of Directors or committee meetings, but are reimbursed for expenses incurred in
connection with performing their respective duties as directors of the Company.
The Company, however, intends to enter into an employment agreement with D. Carl
Long, the Company's President, Chief Executive Officer and Vice Chairman of the
Board, has an oral agreement with C. Leonard Gordon, the Company's Chairman of
the Board and has a consulting agreement with Richard J. Davies, M.D., the
Chairman of the Advisory Boards and a nominee for director. See "Employment
Agreements" and "Certain Relationships and Related Transactions."
Stock Option Grant. Under the Biofield Corp. 1996 Stock Option Plan for
Non-Employee Directors (the "1996 Directors' Stock Plan"), 150,000 shares of
Common Stock have been reserved for issuance of options. If any options granted
under the 1996 Directors' Stock Plan shall for any reason expire or be canceled
or otherwise terminated without having been exercised in full, the shares
allocable to the unexercised portion of such options shall again become
available. The 1996 Directors' Stock Plan provides for the automatic grant of
options to eligible directors. Each eligible director serving on the Board on
the effective date of the 1996 Directors' Stock Plan automatically received an
option to purchase 10,000 shares of Common Stock at a price of $11.00 per share,
subject to vesting in three equal annual installments. In the future, each
nonemployee director who joins the Board will automatically receive an initial
grant of options to purchase 10,000 shares of Common Stock at an exercise price
equal to the fair market value per share at the date of grant, subject to
vesting in three equal annual installments. In each year other than the year in
which a director receives an initial grant of options, such director will
automatically receive options to purchase 2,500 shares of Common Stock on the
date of the Annual Meeting which vest immediately upon being granted. As of
December 31, 1996, no shares had been issued upon the exercise of options
granted under the 1996 Directors' Stock Plan, 30,000 shares were subject to
outstanding options and 120,000 shares remained available for future grant.
The term of each option granted under the 1996 Directors' Stock Plan is
10 years. Options granted under the 1996 Directors' Stock Plan must be exercised
prior to the earlier of (i) the scheduled expiration date or (ii) one year
following the date of termination of service.
The exercise price of each option under the 1996 Directors' Stock Plan
must be equal to the fair market value of the Common Stock subject to the option
on the date of the grant. The exercise price of an option is payable upon
exercise in cash. Unless sooner terminated by the Board, the 1996 Directors'
Stock Plan will terminate in January 2006, and no further options may be granted
pursuant to the plan following the termination date.
SCIENTIFIC AND CLINICAL ADVISORY BOARDS
The Company has a Scientific Advisory Board and a Clinical Advisory
Board. The Company anticipates that the Advisory Boards, which are chaired by
Richard J. Davies, M.D., will assist the Company in identifying scientific and
product development and clinical opportunities, reviewing with management the
progress of the Company's specific projects and recruiting and evaluating the
Company's scientific staff. With the exception of Dr. Davies (who is party to a
consulting agreement with the Company), members of the Scientific Advisory and
Clinical Advisory Boards are paid an honorarium of $2,000 per day for their
services and are reimbursed for related travel expenses.
4
<PAGE> 7
EXECUTIVE OFFICERS
The following table sets forth certain information concerning the
executive officers of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
D. Carl Long........................ 37 President, Chief Executive Officer and Vice
Chairman of the Board
Michael R. Gavenchak................ 37 Executive Vice President, General Counsel, Secretary
and Treasurer
Mark L. Faupel, Ph.D................ 41 Vice President, Research and Development
Robert E. Yocher.................... 46 Vice President, Regulatory Affairs and Quality
Assurance
Mario J. Martinez................... 43 Vice President, Manufacturing and Operations
Timothy G. Roche.................... 33 Director of Finance and Corporate Controller
</TABLE>
D. Carl Long, see "Nominees for Election as Directors."
Michael R. Gavenchak, Executive Vice President, General Counsel,
Secretary and Treasurer, joined the Company in October 1992. Prior to joining
Biofield, Mr. Gavenchak had been a practicing attorney in New York City for
approximately eight years. From June 1990 to October 1992, Mr. Gavenchak was
in private practice.
Mark L. Faupel, Ph.D., Vice President, Research and Development, is a
co-founder of the Company. Dr. Faupel served as an Adjunct Research Associate
and Assistant Professor at the University of Georgia from 1985 to 1988. Dr.
Faupel is the inventor of the Company's two patents for the ALEXA 1000 System
and co-inventor of the Company's additional issued U.S. patents. Dr. Faupel
received a B.A. from Syracuse University and a Ph.D. in Neuroanatomy and
Physiology from the University of Georgia.
Robert E. Yocher, Vice President, Regulatory Affairs and Quality
Assurance, joined the Company in June 1993. Mr. Yocher has been involved with
regulatory affairs and quality assurance for approximately 20 years. Prior to
joining Biofield, Mr. Yocher served as Director of Regulatory Affairs at Dornier
Medical Systems, Inc., a medical device company, from March 1990 to May 1993.
Between 1972 and 1990, Mr. Yocher held various positions with several medical
products companies. Mr. Yocher has certifications from and is an active member
of both the Regulatory Affairs Professional Society and the American Society of
Quality Control.
Mario J. Martinez, Vice President, Manufacturing and Operations, joined
the Company in December 1995. Prior to joining Biofield, from 1992 to December
1995 Mr. Martinez served as Vice President of Manufacturing and Operations of EP
Technologies, a publicly-traded medical device company. Mr. Martinez served as
Manager of Manufacturing, Engineering and Technology Development at Cordis
Corporation, a manufacturer of medical products, from March 1987 to June 1992.
Timothy G. Roche, Director of Finance and Corporate Controller, joined
the Company in April 1995. Prior to joining Biofield, from October 1991 to March
1995, Mr. Roche served as Corporate Controller of Dianon Systems, Inc., a
publicly-traded laboratory services company. Between May 1987 and September
1991, Mr. Roche was employed by Arthur Andersen, LLP in their audit division.
5
<PAGE> 8
SUMMARY COMPENSATION TABLE
The following table sets forth compensation earned during the year
ended December 31, 1996 for those persons who (i) served as the Company's Chief
Executive Officer during the year ended December 31, 1996 and (ii) the four
other most highly compensated executive officers of the Company during the year
ended December 31, 1996 (collectively, the "Named Executive Officers"):
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------
SECURITIES
ANNUAL COMPENSATION UNDERLYING ALL OTHER BONUS
-------------------
NAME AND PRINCIPAL POSITION SALARY BONUS OPTIONS COMPENSATION
--------------------------- ------ ----- ------- ------------
<S> <C> <C> <C> <C>
Kenneth W. Anstey ............................................ $ 250,000 $ 100,000(1) -- $ 79,916(2)
Former President, Chief Executive Officer and Director
Michael R. Gavenchak ......................................... 138,534 25,000 -- 30,970(3)
Executive Vice President, General Counsel, Secretary
and Treasurer
Mark L. Faupel, Ph.D ......................................... 137,162 25,000 -- 9,876(4)
Vice President, Research and Development
Robert E. Yocher ............................................. 158,060 15,000 -- 14,798(5)
Vice President, Regulatory Affairs and Quality Assurance
Mario J. Martinez ............................................ 132,000 30,000 20,000 25,238(6)
Vice President, Manufacturing and Operations
</TABLE>
- -----------------------------
(1) Consists of $100,000 in cash and does not include any stock bonus award
under Mr. Anstey's employment agreement in respect of 1996.
(2) Consists of $9,295 in automobile allowance and reimbursement for taxes
related thereto, $119 in term life insurance premiums, $67,127 in
moving expenses and reimbursement for taxes related thereto and $3,375
for membership dues paid by the Company.
(3) Consists of $7,436 in automobile allowance and reimbursement for taxes
related thereto, $3,915 in disability insurance premiums and
reimbursement for taxes related thereto, $119 in term life insurance
premiums, $15,000 for a loan forgiven by the Company and $4,500 for
membership dues paid by the Company.
(4) Consists of $7,436 in automobile allowance and reimbursement for taxes
related thereto, $2,321 in disability insurance premiums and
reimbursement for taxes related thereto and $119 in term life insurance
premiums.
(5) Consists of $7,436 in automobile allowance and reimbursement for taxes
related thereto, $7,243 in disability insurance premiums and
reimbursement for taxes related thereto and $119 in term life insurance
premiums.
(6) Consists of $7,436 in automobile allowance and reimbursement for taxes
related thereto, $5,832 in disability insurance premiums and
reimbursement for ta
6
<PAGE> 9
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information concerning grants of
options to purchase Common Stock to the Named Executive Officers during the
year ended December 31, 1996.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------------------------------------------------------------
POTENTIAL REALIZABLE
NUMBER OF PERCENT OF VALUE AT ASSUMED
SECURITIES TOTAL OPTIONS ANNUAL RATES OF STOCK
UNDERLYING GRANTED TO EXERCISE OR PRICE APPRECIATION
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION FOR OPTION TERM (2)
NAME GRANTED FISCAL YEAR (1) ($/SHARE) DATE 5% 10%
- ---- ------- --------------- --------- ---- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Kenneth W. Anstey.......... -- -- -- -- $ -- $ --
Michael R. Gavenchak....... -- -- -- -- -- --
Mark L. Faupel, Ph.D....... -- -- -- -- -- --
Robert E. Yocher........... -- -- -- -- -- --
Mario J. Martinez (3)...... 20,000 11% 8.25 12/02/06 103,768 262,968
</TABLE>
(1) Based on an aggregate of 175,000 options granted to employees in 1996,
including options granted to the Named Executive Officers.
(2) Amounts represent hypothetical gains that could be achieved for the
respective options at the end of the option term. The dollar amounts set
forth in these columns are the result of calculations at the five percent
and ten percent rates set by the Securities and Exchange Commission and
are not intended to forecast possible future appreciation, if any, of the
Company's Common Stock price. There can be no assurance that such
potential realizable values will not be more or less than that indicated
in the table above.
(3) On December 2, 1996, the Stock Option Committee, under the 1996 Plan,
awarded stock options covering 20,000 shares of the Company's Common Stock
with an option price of $8.25 per share, vesting at a rate of 25% per
annum.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUEs
The following table sets forth certain information concerning the
number and value of securities underlying exercisable and unexercisable stock
options as of December 31, 1996 held by the Named Executive Officers. No
options were exercised by any of the Named Executive Officers during the year
ended December 31, 1996.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED IN-THE-MONEY
UNEXERCISED OPTIONS AT FISCAL YEAR END OPTIONS AT FISCAL YEAR END (1)
-------------------------------------- ---------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Kenneth W. Anstey (2)........ 81,700 163,400 $ 381,131 $ 762,261
Michael R. Gavenchak......... 60,049 2,451 465,751 15,184
Mark L. Faupel, Ph.D......... 131,373 36,765 1 ,439,169 262,759
Robert E. Yocher............. 66,177 2,451 347,466 15,184
Mario J. Martinez............ 22,548 46,471 139,685 306,488
</TABLE>
- ---------------------------
(1) Amounts calculated by subtracting the exercise price of the options
from the market value of the underlying Common Stock using the closing
bid price on the Nasdaq National Market of $15.375 per share of Common
Stock on December 31, 1996.
(2) All options, exercisable and unexercisable, held by Mr. Anstey as of
December 31, 1996 expired upon the termination of his employment.
7
<PAGE> 10
EMPLOYMENT AGREEMENTS
The Company intends to enter into a new employment agreement with D. Carl
Long, the current President and Chief Executive Officer of the Company. The
term of the agreement is expected to be two years, commencing April 1, 1997.
Pursuant to the agreement, Mr. Long would receive a minimum annual base salary
of $250,000. Mr. Long would also be eligible to receive an annual bonus. The
Company has also granted Mr. Long certain stock options.
Michael R. Gavenchak is employed as Executive Vice President and General
Counsel of the Company pursuant to an agreement expiring on September 30, 1998
(the "Gavenchak Agreement"). Pursuant to the Gavenchak Agreement, Mr. Gavenchak
currently receives an annual base salary of $150,000, subject to a minimum
annual cost of living increase of five percent. The Company has also granted
Mr. Gavenchak certain stock options.
Mark L. Faupel, Ph.D. is employed as Vice President, Research and
Development of the Company pursuant to an employment agreement expiring on
February 28, 1998 (the "Faupel Agreement"). The term of the Faupel Agreement is
subject to automatic renewal for successive one year periods unless either
party delivers written notice to the other not later than 60 days prior to the
end of the term or any anniversary date thereafter. Pursuant to the Faupel
Agreement, Dr. Faupel currently receives an annual salary of $150,000, subject
to a minimum annual cost of living increase of five percent. The Company has
also granted Dr. Faupel certain stock options. The Company is obligated to pay
certain royalties to Dr. Faupel based on sales of the ALEXA 1000 device and on
sales of the ALEXA 1000 sensors through 2005 or until such royalties reach
$8,000,000, whichever occurs first. Dr. Faupel is also entitled to receive an
amount equal to 10% of any monies received by the Company from research grants
where Dr. Faupel is a principal investigator of the research. Dr. Faupel has
agreed for a period of one year following termination of his employment not to
compete with the Company and has agreed to assign to the Company any inventions
he may have relating directly or indirectly to the business of the Company.
Robert Yocher is employed as Vice President, Regulatory Affairs and
Quality Assurance of the Company pursuant to an employment agreement expiring
in June 1997 (the "Yocher Agreement"). Pursuant to the Yocher Agreement, Mr.
Yocher currently receives a salary of $162,068 per year, subject to a minimum
annual cost of living increase of five percent. The Company has also granted
Mr. Yocher certain stock options.
Mario J. Martinez is employed as Vice President, Manufacturing and
Operations of the Company pursuant to a letter agreement dated September 20,
1995. Mr. Martinez currently receives an annual base salary of $150,000. The
Company has also granted Mr. Martinez certain stock options.
On March 17, 1997, Kenneth W. Anstey resigned as President, Chief
Executive Officer and a Director of the Company. Mr. Anstey was employed
pursuant to an employment agreement, dated November 10, 1995 (the "Anstey
Agreement"), pursuant to which Mr. Anstey received a base salary of $250,000,
and was eligible to receive an annual bonus of up to $350,000 upon the
achievement by the Company of certain specified goals. That portion of the
annual bonus, if any, up to $100,000 was payable in cash and the Company's
obligations with respect to payment of any additional annual bonus amount may
have been satisfied, at Mr. Anstey's election, by delivery to Mr. Anstey of
shares of Common Stock or options to purchase shares of Common Stock. Pursuant
to the Anstey Agreement, Mr. Anstey received salary and benefits earned to the
date of his resignation and a payment in respect of his annual bonus for the
preceding performance year. Pursuant to the Anstey Agreement, all of Mr.
Anstey's options expired upon his resignation and he is obligated not to
compete with the Company for a period of six months following termination of
his employment with the Company.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the year ended December 31, 1996, Messrs. Gordon, Long, Anstey, and
Gleberman served on the Compensation Committee of the Company's Board of
Directors. Mr. Gordon served as the Company's Chief Executive Officer until
August 1992. Mr. Long served as the Company's Chief Executive Officer until
December 1995. During the year ended December 31, 1996, Mr. Anstey served as
the Company's President and Chief Executive Officer and participated in the
deliberations of the Compensation Committee regarding executive compensation
during such period. Mr. Gleberman serves on the Company's Board of Directors as
a nominee of Goldman Sachs. With the exception of Mr. Gordon, who is a member
of the Compensation Committee of Nitinol Medical Technologies, Inc., and Mr.
Anstey, who
8
<PAGE> 11
is a member of the Compensation Committee of Vision Sciences, Inc., no
executive officer of the Company serves or served on the Compensation Committee
of another entity during the year ended December 31, 1996 and no executive
officer of the Company serves or served as a director of another entity who has
or had an executive officer serving on the Board of Directors of the Company.
COMPENSATION COMMITTEE REPORT
The Compensation and Stock Option Committees of the Board of Directors
advise the Chief Executive Officer and the Board of Directors on matters of the
Company's compensation philosophy and the compensation of executive officers
and other individuals compensated by the Company. The Stock Option Committee is
responsible for the administration of the Company's 1992 Plan, under which
option grants and direct stock issuances may be made to employees (including
executive officers), directors and consultants, and the Company's 1996 Plan,
under which option grants may be made to employees (including executive
officers), directors, consultants and other agents of the Company or its
affiliates. The Compensation and Stock Option Committees have reviewed and are
in accord with the compensation paid to executive officers during 1996.
EXECUTIVE COMPENSATION POLICY AND COMPONENTS OF COMPENSATION. The
Committees' fundamental executive compensation philosophy is to enable the
Company to attract and retain key executive personnel and to motivate those
executives to achieve the Company's objectives. The Company is still in the
developmental stage and has not yet achieved profitability. Therefore,
traditional methods of evaluating executive performance, such as sales and
profit levels, return on equity, and stock price are inappropriate.
Accordingly, assessment of each executive's performance is based upon
attainment of his or her specific objectives in relation to the Company's
overall annual strategic goals. The Committees may in their discretion apply
different measures of performance for future years. However, it is presently
contemplated that all compensation decisions will be designed to further the
fundamental executive compensation philosophy described above.
Each executive officer's compensation package is reviewed annually and is
comprised of three components: base salary, bonus, and stock option grants. In
addition, executive officers of the Company are eligible to participate in all
benefit programs generally available to other employees.
BASE SALARY. The suggested base salary for each executive officer is
determined on the basis of the following factors: experience, personal
performance, the salary levels in effect for comparable positions within and
without the industry and internal base salary comparability considerations. The
weight given to each of these factors differs from individual to individual, as
the Compensation Committee deems appropriate.
BONUS AWARDS. The Compensation Committee subjectively determines annual
bonus amounts paid to each executive officer for each year. Generally, annual
bonuses may be earned by each executive officer based upon the achievement of
performance goals. The Committee considers the amounts of bonuses it expects to
pay to executive officers when it compares its compensation practices with
other companies similarly situated.
STOCK OPTION PROGRAM. The Committees strongly believe that by providing
executive officers an opportunity to own shares of Company stock, the best
interests of stockholders and executive officers will be closely aligned.
Therefore, all executive officers are eligible to receive stock options from
time to time, giving them the right to purchase shares of Common Stock of the
Company at a specific price in the future. The number of stock options granted
to executive officers is determined at the discretion of the Stock Option
Committee based on the accomplishments of such executive officers, their length
of service with the Company, the number of prior awards received by such
executive officers as well as the exercise price of such awards and the
competitive practices.
CEO COMPENSATION. In advising the Board of Directors with respect to the
compensation payable to the Company's Chief Executive Officer, the Compensation
Committee seeks to achieve two objectives: (i) establish a level of base salary
competitive with that paid by companies within the industry which are of
comparable size to the Company and by companies outside of the industry with
which the Company competes for executive talent and (ii) make a significant
percentage of the total compensation package contingent upon the Company's
performance and stock price appreciation.
9
<PAGE> 12
Mr. Anstey's base salary for the year ended December 31, 1996 was
determined by the terms of the Anstey Agreement which commenced in December
1995 and is described elsewhere in this Proxy Statement. This element of
compensation was not affected to any significant degree by Company performance
factors. In accordance with the Anstey Agreement, a bonus of $100,000 was
awarded to Mr. Anstey.
In December 1995, Mr. Anstey was issued options to purchase 245,100 shares
of Common Stock, all of which expired upon his resignation. These options made
a significant portion of Mr. Anstey's total compensation contingent on
increased value for the Company's stockholders, since the value of these
options depended upon the value of the Company's Common Stock.
On March 17, 1997, Mr. Anstey resigned as the Company's Chief Executive
Officer and was replaced by D. Carl Long. The Compensation Committee is taking
into account the same foregoing criteria in determining Mr. Long's compensation.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M). An additional factor
the Committees focus on in their consideration of compensation matters is the
tax implications of various payments and benefits to the Company and to the
individual executive officers. Certain types of compensation payments and their
deductibility depend upon the timing of vesting or exercise of awards granted.
In addition, interpretations of and changes in the tax laws and other factors
beyond the Committees' control also affect the deductibility of compensation.
The Committees will not in all circumstances limit executive compensation to
that deductible under Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code"). The Committees will consider the various alternatives to
preserving the deductibility of compensation payments and benefits to the
extent consistent with their other compensation objectives and to the extent
reasonably practicable.
COMPENSATION COMMITTEE
MR. GORDON
MR. GLEBERMAN
10
<PAGE> 13
PERFORMANCE GRAPH
Set forth below is a graph comparing the cumulative total return on $100
invested in the Common Stock of the Company as of March 19, 1996 (the date
public trading of the Company's stock commenced) to the last day of the
Company's last completed fiscal year with the cumulative total return so
calculated of the Nasdaq Stock Market-US Index and the H&Q Health Care Sector
excluding Biotechnology Sector of the Hambrecht & Quist Technology and Growth
Indices.
COMPARISON OF 9 MONTH CUMULATIVE TOTAL RETURN*
AMONG BIOFIELD CORP., THE NASDAQ STOCK MARKET-US INDEX
AND THE HAMBRECHT & QUIST HEALTHCARE EXCLUDING BIOTECHNOLOGY INDEX
EDGAR PRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Cumulative Total Return
-------------------------------------------
03/19/96 03/96 06/96 09/96 12/96
<S> <C> <C> <C> <C> <C> <C>
BIOFIELD CORP. BZET 100 94 124 83 140
NASDAQ STOCK MARKET-US INAS 100 99 107 111 116
HAMBRECHT & QUIST HEALTHCARE HH- 100 101 95 105 105
EXCLUDED BIOTECHNOLOGY
</TABLE>
* $100 INVESTED ON 3/19/96 IN STOCK OR INDEX
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING DECEMBER 31.
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, which might incorporate future
filings made by the Company under those statutes, the preceding Compensation
Committee Report on Executive Compensation and the Company Stock Performance
Graph will not be incorporated by reference into any of those prior filings,
nor will such report or graph be incorporated by reference into any future
filings made by the Company under those statues.
11
<PAGE> 14
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of the
Company's Common Stock as of April 15, 1997 by (i) each person or entity known
by the Company to beneficially own 5% or more of the outstanding shares of
Common Stock, (ii) each of the Named Executive Officers, (iii) each of the
Company's directors and nominees for director and (iv) all directors and
executive officers of the Company as a group. The information as to each person
or entity has been furnished by such person or entity.
<TABLE>
<CAPTION>
SHARES PERCENTAGE OF SHARES
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED (1) SHARES OF BENEFICIAL OWNED(1)(2)
------------------------------------ ---------------------- --------------------------------
<S> <C> <C>
The Goldman Sachs Group, L.P.
and related investors......................................... 2,160,793(3) 28.5%
85 Broad Street
New York, NY 10004
C. Leonard Gordon................................................. 1,006,410(4) 15.4%
c/o Immunotherapy Inc
360 Lexington Avenue
New York, NY 10017
The Travelers Indemnity Company
and The Phoenix Insurance Company............................. 681,653(5) 10.3%
One Tower Square
Hartford, CT 06183-2030
H & Q Healthcare Investors
and H & Q Life Science Investors.............................. 408,996(6) 6.2%
50 Rowes Wharf, 4th Floor
Boston, MA 02110-3328
D. Carl Long...................................................... 430,885(7) 6.2%
c/o Biofield Corp.
1225 Northmeadow Parkway, Suite 120
Roswell, GA 30076
James B. Anderson,Ph.D............................................ 18,039(8) *
c/o The Travelers Indemnity Company
Asset Management Securities Department
One Tower Square
Hartford, CT 06183-2030
Joseph H. Gleberman............................................... 3,333(9) *
c/o Goldman, Sachs & Co.
85 Broad Street
New York, NY 10004
Harvey Horowitz(10)............................................... -- --
239 East 79th Street-Apt. 15C
New York, NY 10021
Richard J. Davies, M.D............................................ 58,824(11) *
21 Cameron Road
Saddle River, NJ 07458
Michael R. Gavenchak.............................................. 110,049(12) 1.7%
c/o Biofield Corp.
1225 Northmeadow Parkway, Suite 120
Roswell, GA 30076
Mark L. Faupel,Ph.D............................................... 131,873(13) 2.0%
c/o Biofield Corp.
1225 Northmeadow Parkway, Suite 120
Roswell, GA 30076
Robert E.Yocher................................................... 66,177(14) 1.0%
c/o Biofield Corp.
1225 Northmeadow Parkway, Suite 120
Roswell, GA 30076
Mario J. Martinez................................................. 22,548(15) *
c/o Biofield Corp.
1225 Northmeadow Parkway, Suite 120
Roswell, GA 30076
Kenneth W. Anstey................................................. -- --
4606 Riverlook Parkway
Marietta, GA 30076
All directors and executive officers as a group (10 persons) ..... 1,863,661(16) 25.3%
</TABLE>
- ---------------------------------
* LESS THAN 1%.
12
<PAGE> 15
(1) Except as indicated in the footnotes to this table, based on information
provided by such persons, the persons named in the table above have sole voting
and investment power with respect to all shares of Common Stock shown as
beneficially owned by them.
(2) Percentage of ownership is based on 6,493,300 shares of Common Stock
outstanding as of April 15, 1997. Shares of Common Stock subject to stock
options that are exercisable within 60 days as of April 15, 1997 are deemed
outstanding for computing the percentage of any other person or group.
(3) Includes shares beneficially owned by certain investment limited
partnerships of which affiliates of The Goldman Sachs Group, L.P. ("GS Group")
are the general partners or the managing general partners. Also includes
warrants exercisable for 1,089,329 shares of Common Stock. GS Capital Partners,
L.P. owns 984,320 shares of Common Stock; Stone Street Fund 1995, L.P. owns
20,502 shares of Common Stock; Stone Street Fund 1994 L.P. owns 21,285 shares
of Common Stock; Bridge Street Fund 1995, L.P. owns 23,070 shares of Common
Stock; Bridge Street Fund 1994 L.P. owns 22,287 shares of Common Stock. GS
Group disclaims beneficial ownership of shares held by such investment
partnerships to the extent partnership interests in such partnerships are held
by persons other than GS Group and its affiliates.
(4) Includes (i) 980,232 shares of Common Stock held of record jointly with Mr.
Gordon's wife, (ii) 21,276 shares of Common Stock issuable upon exercise of
warrants held of record jointly with Mr. Gordon's wife, and (iii) 4,902 shares
subject to options.
(5) Includes 518,215 shares of Common Stock beneficially owned by The
Travelers Indemnity Company and 27,274 shares of Common Stock beneficially
owned by The Phoenix Insurance Company. Also includes warrants exercisable for
136,164 shares of Common Stock of which 129,357 shares are beneficially owned
by The Travelers Indemnity Company and 6,807 shares are beneficially owned by
The Phoenix Insurance Company.
(6) Includes 189,094 shares of Common Stock beneficially owned by H&Q
Healthcare Investors and 151,820 shares of Common Stock beneficially owned by
H&Q Life Science Investors. Also includes warrants exercisable for 68,082
shares of Common Stock of which 37,445 shares are beneficially owned by H&Q
Healthcare Investors and 30,637 shares are beneficially owned by H&Q Life
Science Investors.
(7) Includes 430,885 shares subject to options.
(8) Dr. Anderson, a director of the Company, is employed by The Travelers
Companies, an affiliate of The Travelers Indemnity Company and The Phoenix
Insurance Company. Share data includes 18,039 shares subject to options granted
in respect of Dr. Anderson's service on the Board and excludes shares shown as
held by The Travelers Indemnity Company and The Phoenix Insurance Company, as
to which Dr. Anderson disclaims beneficial ownership.
(9) Mr. Gleberman is a managing director of Goldman Sachs. Share data
includes 3,333 shares subject to options granted in respect of Mr. Gleberman's
service on the Board and excludes shares shown as held by the GS Group, as to
which Mr. Gleberman disclaims beneficial ownership.
(10) Excludes shares held by trusts for the benefit of Mr. Horowitz's wife, as
to which Mr. Horowitz disclaims beneficial ownership.
(11) Includes 58,824 shares subject to options.
(12) Includes 110,049 shares subject to options.
(13) Includes 500 shares of Common Stock and 131,373 shares subject to options.
(14) Includes 66,177 shares subject to options.
(15) Includes 22,548 shares subject to options.
(16) Includes 861,653 shares subject to options.
13
<PAGE> 16
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In June 1992, the Company entered into a Laboratory Services Agreement
(the "Laboratory Agreement") with Abel Laboratories, Inc. ("Abel"), whose sole
shareholders are David M. Long, Jr., M.D., Ph.D. and his wife. Dr. Long is the
father of D. Carl Long, the Company's President, Chief Executive Officer and
Vice Chairman of the Board. The Laboratory Agreement engaged Abel to provide
specified preclinical research in connection with the Company's products. The
Company spent $750,000 in total for such specified research. The Company also
retained Abel to conduct other research which totaled approximately $215,000.
The Laboratory Agreement expired on December 31, 1993; however, the Company and
Abel have agreed that any research conducted by Abel after expiration of the
Laboratory Agreement will be pursuant to substantially the same terms as the
original agreement and will be approved and invoiced on a case-by-case basis.
The Company has retained Abel to conduct additional preclinical research under
current good laboratory and clinical practice research protocols at an
approximate aggregate cost to the Company of $576,000 and $157,000 during the
years ended December 31, 1996 and 1995, respectively.
In connection with the Laboratory Agreement, the Company entered into
two additional agreements with Abel and Dr. Long pursuant to which the Company
granted Abel the option to purchase 61,275 shares of Common Stock at $8.16 per
share. Following completion of the Company's Series A Preferred Stock offering,
the exercise price of $8.16 was reduced to $2.04 per share based on the market
capitalization of the Company after completion of such offering. The Company,
Abel and Dr. Long entered into a Patent Royalty Agreement obligating Abel and
Dr. Long to assign to the Company all of their rights and interests in all
inventions and/or technology conceived and/or developed by either of them in
connection with performing services under the Laboratory Agreement. As
consideration therefor, the Company agreed to pay Abel royalties on the net
sales of products resulting from inventions, if any, that become covered by a
U.S. or foreign patent up to a maximum of $2,000,000 per invention.
In consideration for consulting services, the Company granted in 1995
to Dr. Long 24,510 stock options at $10.20 per share for the purchase of the
Company's Common Stock, which vested immediately upon grant.
C. Leonard Gordon, the Chairman of the Board of the Company, has
entered into an oral arrangement with the Company whereby Mr. Gordon will
provide certain executive services as are required by the Company and will be
compensated for such services rendered in an amount not to exceed $80,000 per
annum until the Company has commercially marketed the ALEXA 1000 System or the
proposed Biofield screening system. The services Mr. Gordon performs for the
Company include serving as Chairman of the Board, consulting upon various
aspects of the Company's business and negotiating certain contractual
arrangements. The Company believes the terms of the arrangement are no less
favorable to the Company than terms that it could have obtained from an
unaffiliated third party.
In July 1994, the Company entered into a consulting agreement with
Richard J. Davies, M.D., the Chairman of the Advisory Boards and a nominee for
election as director, providing for annual consulting fees of $100,000 and the
grant of a stock option to purchase up to 58,824 shares of the Company's Common
Stock at an exercise price of $10.20 per share. Pursuant to the consulting
agreement, Dr. Davies serves as Chairman of the Company's Advisory Boards and
provides related consulting services to the Company. The Company believes the
terms of the consulting agreement are no less favorable to the Company than
terms that it could have obtained from an unaffiliated third party.
The Company has also entered into a separate agreement with
Oncophysics Research and Development Company, a corporation controlled by Dr.
Davies, to provide services in conducting certain research projects. In
consideration for the performance of such research projects, the Company paid
approximately $300,000 and $200,000 during the years ended December 31, 1996
and 1995, respectively.
In November and December of 1993, the Company sold an aggregate of
2,342,118 shares of Series A Preferred Stock at $4.50 per share (the
outstanding shares of Series A Preferred Stock were automatically converted
into approximately 1,341,799 shares of Common Stock upon completion of the
Company's initial public offering) pursuant to the Series A Preferred Stock
offering. Mr. Gordon, Dr. David Long, certain affiliates of Travelers and
certain affiliates of Hambrecht & Quist LLC purchased 111,111, 111,111,
1,111,112 and 333,333 shares, respectively, in the Series A Preferred Stock
offering. Dr. James B. Anderson, a current director of the Company who is not
standing for re-election, is a Second Vice President of Travelers.
14
<PAGE> 17
In September 1994, the Company sold an aggregate of 481,644 shares of
Series B Preferred Stock at $4.50 per share (the outstanding shares of Series B
Preferred Stock were automatically converted into approximately 275,934 shares
of Common Stock upon completion of the Company's initial public offering)
pursuant to the Series B Preferred Stock offering. The holders of the Series B
Preferred Stock (or the shares of Common Stock issued upon the exercise
thereof) were granted certain demand and "piggy-back" registration rights. Mr.
Gordon, Dr. David Long and certain affiliates of Hambrecht & Quist LLC
purchased 32,000, 32,000 and 166,667 shares, respectively, in the Series B
Preferred Stock offering.
In March, April and June 1995, the Company sold an aggregate of
2,914,771 units in the Securities Units offering at $4.50 per Securities Unit,
consisting of (i) an aggregate of 2,914,771 shares of Series C Preferred Stock
(the outstanding shares of Series C Preferred Stock were automatically
converted into approximately 1,428,820 shares of Common Stock upon completion
of the Company's initial public offering), (ii) 1,457,385 warrants to purchase
shares of Series D Convertible Preferred Stock, $.001 par value per share (the
"Series D Preferred Stock"), at an initial exercise price of $6.00 per share,
(iii) 1,457,385 warrants to purchase shares of Series D Preferred Stock at an
exercise price of $6.00 per share, or upon the occurrence of certain events
(which events have subsequently occurred), shares of Series C Preferred Stock
at an exercise price of $4.50 per share and (iv) the right, upon the occurrence
of certain events (which events have subsequently occurred), to receive an
aggregate of 357,192 warrants to purchase an aggregate of 357,192 shares of
Common Stock at an exercise price of $9.18 per share. On June 30, 1996, the
Company issued warrants to purchase an aggregate of 357,192 shares of Common
Stock at an exercise price of $9.18 per share to purchasers of the Securities
Units. Upon completion of the Company's initial public offering, each warrant
to purchase a share of Series D Preferred Stock automatically became
exercisable to purchase .4902 shares of Common Stock and each warrant to
purchase a share of Series C Preferred Stock automatically became exercisable
to purchase .4902 shares of Common Stock. In connection with the Securities
Units offering, the Company agreed to indemnify the purchasers of the
Securities Units against any out-of-pocket costs or expenses incurred by the
Company relating to any claim or investigation against the Company in
connection with certain intellectual property matters. In the event the Company
incurs any costs or expenses in respect of which indemnification is required,
the Company shall issue shares of Common Stock to the purchasers of Securities
Units in an amount equal to their respective proportionate equity percentage to
the indemnifiable costs or expenses incurred by the Company. The Company
entered into a Registration Rights Agreement with the purchasers of the
Securities Units which provides for certain demand and "piggy-back"
registration rights. Mr. Gordon, certain affiliates of Goldman Sachs, certain
affiliates of Travelers and certain affiliates of Hambrecht & Quist LLC
purchased 34,723, 1,777,778, 222,221 and 111,110 units, respectively, in the
Securities Units offering. Certain affiliates of Goldman Sachs purchased an
aggregate of 200,000 shares of Common Stock in the Company's initial public
offering. So long as Goldman Sachs and its affiliates beneficially own ten
percent of the then outstanding Common Stock of the Company, Goldman Sachs is
entitled to nominate one person to serve as a director of the Company. The
purchasers of Securities Units have agreed to vote all shares of capital stock
of the Company owned by them for the election of the Goldman Sachs' nominee.
Joseph H. Gleberman, a director of the Company, is a managing director of
Goldman Sachs.
D. Carl Long, the Company's current President and Chief Executive
Officer, previously served as the Company's Chief Executive Officer from
September 1992 to December 1995. In connection with the cessation of his
service as the Company's Chief Executive Officer, the Company and Mr. Long
entered into an agreement effective as of December 1, 1995 which provided for
Mr. Long's continued employment by the Company (the "Long Agreement"). The term
of Mr. Long's employment under the Long Agreement continued through July 30,
1996. Pursuant to the Long Agreement, Mr. Long received (i) a salary of $40,000
per year, (ii) payments at the rate of $60,000 per year to enable Mr. Long to
procure office space and administrative support, and (iii) benefits
substantially equivalent to those he was receiving while employed as the
Company's Chief Executive Officer. The Company also agreed to make the
following payments, in full satisfaction of the Company's obligations to Mr.
Long arising out of cessation of his employment as Chief Executive Officer
under a prior employment agreement: (i) a payment of $752,144, together with
interest thereon, payable in twelve monthly installments commencing January 1,
1996 and (ii) a payment of $25,000 payable on January 1, 1996 in full
satisfaction of certain of Mr. Long's relocation costs. Mr. Long agreed for a
period of six months following termination of his employment not to compete
with the Company.
15
<PAGE> 18
RATIFICATION OF PROPOSAL 2
INDEPENDENT PUBLIC ACCOUNTANTS
Upon the recommendation of the Audit Committee, the Board of Directors
appointed Deloitte & Touche LLP, independent public accountants and auditors of
the Company since 1992, as auditors of the Company for the year ending December
31, 1997, subject to the ratification of such appointment by the stockholders
at the Annual Meeting. A representative of Deloitte & Touche LLP will attend
the Annual Meeting of Stockholders with the opportunity to make a statement if
he or she so desires and will also be available to answer inquiries.
STOCKHOLDER VOTE REQUIRED
The affirmative vote of a majority of the shares of the Company's
voting Common Stock present in person or represented by proxy at the Annual
Meeting and entitled to vote with respect thereto is required to ratify the
appointment of public accountants.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF
DELOITTE & TOUCHE LLP AS INDEPENDENT AUDITORS OF THE COMPANY, WHICH IS
DESIGNATED AS PROPOSAL 2 ON THE ENCLOSED PROXY CARD.
RATIFICATION OF PROPOSAL 3
AMENDMENT TO THE 1996 STOCK OPTION PLAN
The 1996 Plan was adopted by the Board of Directors in January 1996
and approved by the Company's stockholders in February 1996. The 1996 Plan
provides for the grant of options to acquire a maximum of 500,000 shares of
Common Stock. As of April 15, 1997, no shares had been issued upon the exercise
of options granted under the 1996 plan, 225,000 shares were subject to
outstanding options and 275,000 shares remained available for future grant. On
April 23, 1997, the Board of Directors approved an amendment to the 1996 Plan,
subject to stockholder approval, to (i) increase the number of shares of
Common Stock authorized for issuance under the 1996 Plan from 500,000 to
1,000,000, and (ii) limit the aggregate number of options which may be issued
under the 1996 Plan to any individual participant within any five year period
during the term of the 1996 Plan to 500,000 shares (subject to proportionate
adjustments for changes in capitalization).
Description of 1996 Plan
The purpose of the 1996 Plan is to attract and retain the service or
advice of directors, employees, officers, agents, consultants and independent
contractors and to provide additional incentive for such persons to exert
maximum efforts for the success of the Company by encouraging stock ownership
in the Company. The 1996 Plan permits the granting of incentive stock options
("ISOs") or non-qualified stock options ("NSOs") at the discretion of the
administrator of the 1996 Plan (the "Plan Administrator"). The Board of
Directors has appointed a Stock Option Committee of the Board as the Plan
Administrator. Subject to the terms of the 1996 Plan, the Plan Administrator
determines the terms and conditions of options granted under the 1996 Plan.
Options granted under the 1996 Plan are evidenced by written agreements which
contain such terms, conditions, limitations and restrictions as the Plan
Administrator deems advisable and which are not inconsistent with the 1996
Plan. ISOs may be granted to individuals who, at the time of grant, are
employees of the Company or its affiliates. NSOs may be granted to directors,
employees, consultants and other agents of the Company or its affiliates. As of
April 15, 1997, seven individuals held options granted under the 1996 Plan.
The 1996 Plan provides that the Plan Administrator must establish an
exercise price for ISOs that is not less than the fair market value per share
of the Common Stock at the date of grant and an exercise price for NSOs of not
less than 85% of such fair market value. The closing price on April 15, 1997 of
the Company's Common Stock, as reported by the Nasdaq National Market, was
$5.50 per share. Each ISO must expire within ten years of the date of grant.
However, if ISOs are granted to persons owning more than 10% of the voting
stock of the Company, the 1996 Plan provides that the exercise price may not be
less than 110% of the fair market value per share at the date of grant and that
the term of such ISOs may not exceed five years. Unless otherwise provided by
the Plan Administrator, options granted under the 1996 Plan vest at a rate of
25% per year over a four-year period.
16
<PAGE> 19
An optionee whose relationship with the Company or any related
corporation ceases for any reason (other than termination for cause, death or
total disability, as such terms are defined in the 1996 Plan) may exercise
options in the three-month period following such cessation (unless such options
terminate or expire sooner by their terms), or in such longer period determined
by the Plan Administrator in the case of NSOs. Unexercised options granted
under the 1996 Plan terminate upon a merger (other than a stock merger),
reorganization or liquidation of the Company; however, immediately prior to
such a transaction, optionees may exercise such options without regard to
whether the vesting requirements have been satisfied.
Options granted under the 1996 Plan convert into options to purchase
shares of another corporation involved in a stock merger with the Company,
unless the Company and such other corporation, in their sole discretion,
determine that such options terminate. Such converted options become fully
vested without regard to whether the vesting requirements in the option
agreements for such options have been satisfied, unless the Board of Directors
determines otherwise.
The option exercise price may be paid in full at the time the notice
of exercise of the option is delivered to the Company and must be paid in cash,
by bank certified or cashier's check or by personal check. The 1996 Plan also
permits an optionee to pay the exercise price of an option by delivery of an
irrevocable direction to pledge the optionee's shares to a securities broker or
lender approved by the Company as security for a loan and to deliver all or
part of the loan proceeds to the Company in payment of all of the exercise
price and any withholding taxes. Options are nontransferable with certain
exceptions. The Board has certain rights to suspend, amend or terminate the
1996 Plan provided stockholder approval is obtained.
Stock Option Plan Benefits
Since the adoption of the 1996 Plan, options have been granted with
respect to the following shares of Common Stock:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
NAME AND POSITION UNDERLYING OPTIONS GRANTED YEAR GRANTED EXERCISE PRICE
----------------- -------------------------- ------------ --------------
<S> <C> <C> <C>
D. Carl Long..................................... 100,000(1) 1997 $ 4.75
President, Chief Executive Officer and
Vice Chairman of the Board
Michael R. Gavenchak............................. 50,000(1) 1997 6.62
Executive Vice President, General Counsel,
Secretary and Treasurer
Mark L. Faupel, Ph.D............................. -- -- --
Vice President, Research and Development
Robert E. Yocher................................. -- -- --
Vice President, Regulatory Affairs and
Quality Assurance
Mario J. Martinez................................ 20,000 1996 8.25
Vice President, Manufacturing and Operations
Kenneth W. Anstey................................ -- -- --
Former President, Chief Executive Officer
and Director
All current executive officers as a group........ 170,000
All other employees as a group................... 55,000
</TABLE>
- ------------------------
(1) Amount represents fully vested options as of the date of grant.
Federal Income Tax Consequences of Stock Option Plan
The following summary generally describes the principal federal (but
not state or local) income tax consequences of options granted under the 1996
Plan. It is general in nature and is not intended to cover all tax consequences
that may apply to a particular optionee of the Company. The provisions of the
Code and the regulations thereunder relating to these matters are complicated
and their impact in any one case may depend upon the particular circumstances.
This discussion is based on the Code as currently in effect.
17
<PAGE> 20
The 1996 Plan is not intended to be qualified under Section 401(a) of
the Code. Generally no income will be recognized at the time the option is
granted. However, on exercise of a NSO, the amount by which the fair market
value of the shares of the Common Stock on the date of exercise exceeds the
purchase price of such shares will be taxable to the participant as ordinary
income, and will be deductible for tax purposes by the Company or its
affiliates in the year in which the participant recognizes income. Special
rules may apply in the case of option holders who are reporting persons under
Section 16(b) of the Exchange Act.
The disposition of shares acquired upon exercise of a NSO generally
will result in long-term or short-term capital gain or loss (depending on the
applicable holding period) in an amount equal to the difference between the
amount realized on such disposition and the sum of the purchase price and the
amount of ordinary income recognized in connection with the exercise of the
NSO. If an option is exercised through the use of Common Stock previously owned
by a participant, such exercise generally will not be considered a taxable
disposition on the previously owned shares and, thus, no gain or loss will be
recognized with respect to such previously owned shares upon exercise. The
amount of any built-in gain on the previously owned shares generally will not
be recognized until the new shares acquired on the option exercise are disposed
of in a sale or other taxable transaction.
If, in any year after 1993, an affected participant's total
compensation from the Company (including compensation related to options
granted under the 1996 Plan) exceeds $1 million, such compensation in excess of
$1 million may not be tax deductible by the Company under Code Section 162(m).
Affected participants are generally the Company's chief executive officer and
the four most highly compensated employees of the Company (other than the chief
executive officer) during the Company's taxable year. Excluded from the
calculation of total compensation for this purpose is compensation that is
"performance-based" within the meaning of Code Section 162(m). Compensation
realized upon the exercise of an option may be regarded as "performance-based"
and, therefore, such compensation may be deductible without regard to the
limits of Code Section 162(m).
STOCKHOLDER VOTE REQUIRED
The affirmative vote of a majority of the shares of the Company's
voting Common Stock present in person or represented by proxy at the Annual
Meeting and entitled to vote with respect thereto is required to ratify the
amendment to the Biofield Corp. 1996 Stock Option Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
AMENDMENT TO THE BIOFIELD CORP. 1996 STOCK OPTION PLAN, WHICH IS DESIGNATED AS
PROPOSAL 3 ON THE ENCLOSED PROXY CARD.
STOCKHOLDER PROPOSALS
In accordance with regulations issued by the Securities and Exchange
Commission, stockholder proposals intended for presentation at the 1998 Annual
Meeting of Stockholders must be received by the Secretary of the Company no
later than December 24, 1997 if such proposals are to be considered for
inclusion in the Company's Proxy Statement.
OTHER MATTERS
Management knows of no matters that are to be presented for action at
the meeting other than those set forth above. If any other matters properly
come before the meeting, the persons named in the enclosed form of proxy will
vote the shares represented by proxies in accordance with their best judgment
in the interest of the Company on such matters.
Proxies will be solicited by mail and may also be solicited in person
or by telephone by some regular employees of the Company. The Company may also
consider the engagement of a proxy solicitation firm. Costs of the solicitation
will be borne by the Company.
By Order of the Board of Directors
/s/ D. Carl Long
D. Carl Long
President and Chief Executive Officer
Roswell, Georgia
April 25, 1997
18
<PAGE> 21
APPENDIX A
BIOFIELD CORP.
ANNUAL MEETING OF STOCKHOLDERS - JUNE 5, 1997
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned stockholder in Biofield Corp. ("Company") hereby constitutes and
appoints Michael R. Gavenchak and Timothy G. Roche and each of them, his true
and lawful attorneys and proxies, with full power of substitution in and for
each of them, to vote all shares of the Company which the undersigned is
entitled to vote at the Annual Meeting of Stockholders to be held at The Holiday
Inn Roswell, 1075 Holcomb Bridge Road, Roswell, Georgia, on June 5, 1997, 9:00
a.m. (eastern standard time), or at any postponement or adjournment thereof, on
any and all of the proposals contained in the Notice of the Annual Meeting of
Stockholders, with all the powers the undersigned would possess if present
personally at said meeting, or at any postponement or adjournment thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR THE NOMINEES LISTED ON THE REVERSE SIDE AND FOR THE APPROVAL OF PROPOSALS 2
AND 3, AND WILL BE VOTED IN THE DISCRETION OF THE PROXIES WITH RESPECT TO ANY
OTHER MATTER THAT IS PROPERLY PRESENTED AT THE MEETING.
(Continued and to be signed and dated on the other side)
[SEE REVERSE SIDE]
<PAGE> 22
[X] PLEASE MARK YOUR
VOTES AS THIS
EXAMPLE
<TABLE>
<S> <C> <C> <C>
FOR WITHHOLD
all nominees listed (except AUTHORITY
as marked in the contrary, to vote for all
see instruction below) nominees listed NOMINEES: C. Leonard Gordon,
1. Election of [ ] [ ] D. Carl Long,
Directors Joseph H. Gleberman,
Harvey Horowitz and
INSTRUCTION: To withhold authority to vote for any individual Richard J. Davies, M.D.
nominee, line through the name of the nominee.
THE DIRECTORS RECOMMEND A VOTE FOR THE NOMINEES, AND FOR PROPOSALS 2 AND 3
FOR AGAINST ABSTAIN
2. Proposal to ratify Deloitle & Touche, LLP [ ] [ ] [ ]
as independent auditors
3. Proposal to ratify the amendment to the [ ] [ ] [ ]
Biofield Corp. 1996 Stock Stock Plan
4. In their discretion, the proxies are authorized to vote upon such other business
as may properly come before the meeting.
</TABLE>
Signature(s) Dated , 1997
------------------------------------ -------------
Please sign exactly as your name appears and return this proxy immediately in
the enclosed stamped self-addressed envelope.
<PAGE> 23
APPENDIX B
FORM OF
BIOFIELD CORP.
1996 STOCK OPTION PLAN
Adopted January 29, 1996
Amended April 23, 1997
SECTION 1. PURPOSE. The purpose of the Biofield Corp. 1996 Stock
Option Plan (the "Plan") is to provide a means whereby selected employees,
officers, directors, agents, consultants, and independent contractors of
Biofield Corp., a Delaware corporation (the "Company"), or of any parent or
subsidiary (as defined in subsection 5.7 hereof and referred to hereinafter as
"Affiliates") thereof, may be granted incentive stock options and/or
nonqualified stock options to purchase shares of common stock, $.001 par value
("Common Stock") in order to attract and retain the services or advice of such
directors, employees, officers, agents, consultants, and independent
contractors and to provide additional incentive for such persons to exert
maximum efforts for the success of the Company and its Affiliates by
encouraging stock ownership in the Company.
SECTION 2. ADMINISTRATION. Subject to Section 2.3 hereof, the
Plan shall be administered by the Board of Directors of the Company (the
"Board") or, in the event the Board shall appoint and/or authorize a committee
of two or more members of the Board to administer the Plan, by such committee.
The administrator of the Plan shall hereinafter be referred to as the "Plan
Administrator".
The foregoing notwithstanding, in the event the Company shall register
any of its equity securities pursuant to Section 12(b) or 12(g) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and any
directors are eligible to receive options under the Plan, then with respect to
grants to be made to directors: (a) the Plan Administrator shall be
constituted so as to meet the requirements of Section 16(b) of the Exchange Act
and Rule 16b-3 thereunder, each as amended from time to time, or (b) if the
Plan Administrator cannot be so constituted, no options shall be granted under
the Plan to any directors.
2.1 PROCEDURES. The Board shall designate one of the
members of the Plan Administrator as chairman. The Plan Administrator may hold
meetings at such times and places as it shall determine. The acts of a
majority of the members of the Plan Administrator present at meetings at which
a quorum exists, or acts approved in writing by all Plan Administrator members,
shall be valid acts of the Plan Administrator.
2.2 RESPONSIBILITIES. Except for the terms and
conditions explicitly set forth herein, the Plan Administrator shall have the
authority,
<PAGE> 24
in its discretion, to determine all matters relating to the options to be
granted under the Plan, including, without limitation, selection of whether an
option will be an incentive stock option or a nonqualified stock option,
selection of the individuals to be granted options, the number of shares to be
subject to each option, the exercise price per share, the timing of grants and
all other terms and conditions of the options. Grants under the Plan need not
be identical in any respect, even when made simultaneously. The Plan
Administrator may also establish, amend, and revoke rules and regulations for
the administration of the Plan. The interpretation and construction by the
Plan Administrator of any terms or provisions of the Plan or any option issued
hereunder, or of any rule or regulation promulgated in connection herewith,
shall be conclusive and binding on all interested parties, so long as such
interpretation and construction with respect to incentive stock options
corresponds to the requirements of Internal Revenue Code of 1986, as amended
(the "Code") Section 422, the regulations thereunder, and any amendments
thereto. The Plan Administrator shall not be personally liable for any action
made in good faith with respect to the Plan or any option granted thereunder.
2.3 RULE 16B-3 AND SECTION 16(B) COMPLIANCE; BIFURCATION
OF PLAN. It is the intention of the Company that the Plan comply in all
respects with Rule 16b-3 under the Exchange Act, to the extent applicable, and
in all events the Plan shall be construed in favor of its meeting the
requirements of Rule 16b-3. If any Plan provision is later found not to be in
compliance with such Rule, such provision shall be deemed null and void. The
Board of Directors may act under the Plan only if all members thereof are
"disinterested persons" as defined in Rule 16b-3 and further described in
Section 4 hereof; and from and after the date that the Company first registers
a class of equity securities under Section 12 of the Exchange Act, no director
or officer or other Company "insider" subject to Section 16 of the Exchange Act
may sell shares received upon the exercise of an option during the six month
period immediately following the grant of the option. Notwithstanding anything
in the Plan to the contrary, the Board, in its absolute discretion, may
bifurcate the Plan so as to restrict, limit, or condition the use of any
provision of the Plan to participants who are officers and directors or other
persons subject to Section 16(b) of the Exchange Act without so restricting,
limiting, or conditioning the Plan with respect to other participants.
SECTION 3. STOCK SUBJECT TO THE PLAN. The stock subject to this
Plan shall be the Common Stock, presently authorized but unissued or
subsequently acquired by the Company. Subject to adjustment as provided in
Section 7 hereof, the aggregate amount of Common Stock to be delivered upon the
exercise of all options granted under the Plan shall not exceed in the aggregate
1,000,000 shares. If any option granted under the Plan shall expire, be
surrendered, exchanged for
- 2 -
<PAGE> 25
another option, cancelled, or terminated for any reason without having been
exercised in full, the unpurchased shares subject thereto shall thereupon again
be available for purposes of the Plan, including for replacement options which
may be granted in exchange for such surrendered, cancelled, or terminated
options.
SECTION 4. ELIGIBILITY. An incentive stock option may be
granted only to any individual who, at the time the option is granted, is an
employee of the Company or any Affiliate thereof. A nonqualified stock option
may be granted to any director, employee, officer, agent, consultant, or
independent contractor of the Company or any Affiliate thereof, whether an
individual or an entity. Any party to whom an option is granted under the Plan
shall be referred to hereinafter as an "Optionee".
A director shall in no event be eligible for the benefits of
the Plan unless at the time discretion is exercised in the selection of a
director as a person to whom options may be granted, or in the determination of
the number of shares which may be covered by options granted to the director,
the Plan complies with the requirements of Rule 16b-3 under the Exchange Act.
SECTION 5. TERMS AND CONDITIONS OF OPTIONS. Options granted
under the Plan shall be evidenced by written agreements which shall contain
such terms, conditions, limitations, and restrictions as the Plan Administrator
shall deem advisable and which are not inconsistent with the Plan.
Notwithstanding the foregoing, options shall include or incorporate by
reference the following terms and conditions:
5.1 NUMBER OF SHARES AND PRICE. The maximum number of
shares that may be purchased pursuant to the exercise of each option, and the
price per share at which such option is exercisable (the "exercise price"),
shall be as established by the Plan Administrator; provided, that the Plan
Administrator shall act in good faith to establish the exercise price which
shall be not less than 100% of the fair market value per share of the Common
Stock at the time of grant of the option with respect to incentive stock options
and not less than 85% of the fair market value per share of the Common Stock at
the time the option is granted with respect to non-qualified stock options; and
provided, further, that, with respect to incentive stock options granted to
greater than ten percent stockholders, the exercise price shall be as required
by Section 6 hereof. In addition, in any five year period no individual may be
granted options under the Plan to purchase more than 500,000 shares of Common
Stock, subject to adjustment as set forth in Section 7.
5.2 TERM AND MATURITY. Subject to the restrictions
contained in Section 6 hereof with respect to granting stock options to greater
than ten percent stockholders, the term of each stock option shall be as
established by the Plan Administrator and, if not so established, shall be ten
years from the
- 3 -
<PAGE> 26
date of its grant, but in no event shall the term of any incentive stock option
exceed a ten year period. To ensure that the Company or Affiliate will achieve
the purpose and receive the benefits contemplated in the Plan, any option
granted to any Optionee hereunder shall, unless the condition of this sentence
is waived or modified in the agreement evidencing the option or by resolution
adopted by the Plan Administrator, be exercisable according to the following
schedule:
<TABLE>
<CAPTION>
Period of Optionee's
Continuous Relationship
With the Company or
Affiliate From the Date Portion of Total Option
the Option is Granted Which is Exercisable
--------------------------- -----------------------
<S> <C>
1 year 25%
2 years 50%
3 years 75%
4 years 100%
</TABLE>
5.3 EXERCISE. Subject to the vesting schedule described
in subsection 5.2 hereof, each option may be exercised in whole or in part;
provided, that only whole shares may be issued pursuant to the exercise of any
option. Subject to any other terms and conditions herein, the Plan
Administrator may provide that an option may not be exercised in whole or in
part for a stated period or periods of time during which such option is
outstanding; provided, that the Plan Administrator may rescind, modify, or
waive any such limitation at any time and from time to time after the grant
date thereof. During an Optionee's lifetime, any incentive stock options
granted under the Plan are personal to such Optionee and are exercisable solely
by such Optionee. Options shall be exercised by delivery to the Company of
notice of the number of shares with respect to which the option is exercised,
together with payment of the exercise price in accordance with Section 5.4
hereof.
5.4 PAYMENT OF EXERCISE PRICE. Payment of the option
exercise price shall be made in full at the time the notice of exercise of the
option is delivered to the Company and shall be in cash, bank certified or
cashier's check, or personal check (unless at the time of exercise the Plan
Administrator in a particular case determines not to accept a personal check)
for shares of Common Stock being purchased.
The Plan Administrator can determine at the time the option is
granted in the case of incentive stock options, or at any time before exercise
in the case of nonqualified stock options, that additional forms of payment
will be permitted.
- 4 -
<PAGE> 27
To the extent permitted by the Plan Administrator and
applicable laws and regulations (including, without limitation, federal tax and
securities laws and regulations and state corporate law), an option may be
exercised by delivery of a properly executed Notice of Exercise, together with
irrevocable instructions to a broker, all in accordance with the regulations of
the Federal Reserve Board, to promptly deliver to the Company the amount of
sale or loan proceeds to pay the exercise price and any federal, state, or
local withholding tax obligations that may arise in connection with the
exercise; provided, that the Plan Administrator, in its sole discretion, may at
any time determine that this sentence, to the extent the instructions to the
broker call for an immediate sale of the shares, shall not be applicable to any
Optionee who is subject to Section 16(b) of the Exchange Act, or is not an
employee at the time of exercise.
5.5 WITHHOLDING TAX REQUIREMENT. The Company or any
Affiliate thereof shall have the right to retain and withhold from any payment
of cash or Common Stock under the Plan the amount of taxes required by any
government to be withheld or otherwise deducted and paid with respect to such
payment. No option may be exercised unless and until arrangements satisfactory
to the Company, in its sole discretion, to pay such withholding taxes are made.
At its discretion, the Company may require an Optionee to reimburse the Company
for any such taxes required to be withheld by the Company and withhold any
distribution in whole or in part until the Company is so reimbursed. In lieu
thereof, the Company shall have the right to withhold from any other cash
amounts due or to become due from the Company to the Optionee an amount equal
to such taxes or retain and withhold a number of shares having a market value
not less than the amount of such taxes required to be withheld by the Company
to reimburse the Company for any such taxes and cancel (in whole or in part)
any such shares of Common Stock so withheld. If required by Section 16(b) of
the Exchange Act, the election to pay withholding taxes by delivery of shares
of Common Stock held by any person who at the time of exercise is subject to
Section 16(b) of the Exchange Act shall be made either six months prior to the
date the option exercise becomes taxable or at such other times as the Company
may determine as necessary to comply with Section 16(b) of the Exchange Act.
Although the Company may, in its discretion, accept Common Stock as payment of
withholding taxes, the Company shall not be obligated to do so.
5.6 NONTRANSFERABILITY.
5.6.1 OPTION. Options granted under the Plan
and the rights and privileges conferred hereby may not be transferred, assigned,
pledged, or hypothecated in any manner (whether by operation of law or
otherwise) other than by will or by the applicable laws of descent and
distribution or pursuant to a qualified domestic relations order as defined in
Section 414(p) of the Code, or
- 5 -
<PAGE> 28
Title I of the Employee Retirement Income Security Act of 1974, as amended, or
the rules thereunder, and shall not be subject to execution, attachment, or
similar process. Any attempt to transfer, assign, pledge, hypothecate, or
otherwise dispose of any option under the Plan or of any right or privilege
conferred hereby, contrary to the Code or to the provisions of the Plan, or the
sale or levy or any attachment or similar process upon the rights and
privileges conferred hereby shall be null and void ab initio. The designation
by an Optionee of a beneficiary does not, in and of itself, constitute an
impermissible transfer under this subsection 5.6.1.
5.6.2 STOCK. The Plan Administrator may provide
in the agreement granting the option that (a) the Optionee may not transfer or
otherwise dispose of shares acquired upon exercise of an option without first
offering such shares to the Company for purchase on the same terms and
conditions as those offered to the proposed transferee or (b) upon termination
of employment of an Optionee the Company shall have a six month right of
repurchase as to the shares acquired upon exercise, which right of repurchase
shall allow for a maximum purchase price equal to the fair market value of the
shares on the termination date. The foregoing rights of the Company shall be
assignable by the Company upon reasonable written notice to the Optionee.
5.7 TERMINATION OF RELATIONSHIP. If the Optionee's
relationship with the Company or any Affiliate thereof ceases for any reason
other than termination for cause, death, or total disability, and unless by its
terms the option sooner terminates or expires, then the Optionee may exercise,
for a three month period, that portion of the Optionee's option which is
exercisable at the time of such cessation, but the Optionee's option shall
terminate at the end of the three month period following such cessation as to
all shares for which it has not theretofore been exercised, unless, in the case
of a nonqualified stock option, such provision is waived in the agreement
evidencing the option or by resolution adopted by the Plan Administrator within
90 days of such cessation. If, in the case of an incentive stock option, an
Optionee's relationship with the Company or Affiliate thereof changes from
employee to nonemployee (i.e., from employee to a position such as a
consultant), such change shall constitute a termination of an Optionee's
employment with the Company or Affiliate and the Optionee's incentive stock
option shall terminate in accordance with this subsection 5.7.
If an Optionee is terminated for cause, any option granted
hereunder shall automatically terminate as of the first discovery by the
Company of any reason for termination for cause, and such Optionee shall
thereupon have no right to purchase any shares pursuant to such option.
"Termination for cause" shall mean dismissal for dishonesty, conviction or
confession of a crime punishable by law (except minor violations), fraud,
misconduct, or disclosure
- 6 -
<PAGE> 29
of confidential information. If an Optionee's relationship with the Company or
any Affiliate thereof is suspended pending an investigation of whether or not
the Optionee shall be terminated for cause, all Optionee's rights under any
option granted hereunder likewise shall be suspended during the period of
investigation.
If an Optionee's relationship with the Company or any
Affiliate thereof ceases because of a total disability, the Optionee's option
shall not terminate or, in the case of an incentive stock option, cease to be
treated as an incentive stock option until the end of the 12 month period
following such cessation (unless by its terms it sooner terminates and
expires). As used in the Plan, the term "total disability" refers to a mental
or physical impairment of the Optionee which is expected to result in death or
which has lasted or is, in the opinion of the Company and two independent
physicians, expected to last for a continuous period of 12 months or more and
which causes or is, in such opinion, expected to cause the Optionee to be
unable to perform his or her duties for the Company and to be engaged in any
substantial gainful activity. Total disability shall be deemed to have
occurred on the first day after the Company and the two independent physicians
have furnished their opinion of total disability to the Plan Administrator.
For purposes of this subsection 5.7, a transfer of
relationship between or among the Company and/or any Affiliate thereof shall
not be deemed to constitute a cessation of relationship with the Company or any
of its Affiliates. For purposes of this subsection 5.7, with respect to
incentive stock options, employment shall be deemed to continue while the
Optionee is on military leave, sick leave, or other bona fide leave of absence
(as determined by the Plan Administrator). The foregoing notwithstanding,
employment shall not be deemed to continue beyond the first 90 days of such
leave, unless the Optionee's reemployment rights are guaranteed by statute or
by contract.
As used herein, the term "Affiliate" shall be defined as
follows: (a) when referring to a subsidiary corporation, "Affiliate" shall
mean any corporation (other than the Company) in, at the time of the granting
of the option, an unbroken chain of corporations ending with the Company, if
stock possessing 50% or more of the total combined voting power of all classes
of stock of each of the corporations other than the Company is owned by one of
the other corporations in such chain; and (b) when referring to a parent
corporation, "Affiliate" shall mean any corporation in an unbroken chain of
corporations ending with the Company if, at the time of the granting of the
option, each of the corporations other than the Company owns stock possessing
50% or more of the total combined voting power of all classes of stock in one
of the other corporations in such chain.
- 7 -
<PAGE> 30
5.8 DEATH OF OPTIONEE. If an Optionee dies while he or
she has a relationship with the Company or any Affiliate thereof or within the
three month period (or 12 month period in the case of totally disabled
Optionees) following cessation of such relationship, any option held by such
Optionee, to the extent that the Optionee would have been entitled to exercise
such option, may be exercised within one year after his or her death by the
personal representative of his or her estate or by the person or persons to
whom the Optionee's rights under the option shall pass by will or by the
applicable laws of descent and distribution.
5.9 STATUS OF STOCKHOLDER. Neither the Optionee nor any
party to which the Optionee's rights and privileges under the option may pass
shall be, or have any of the rights or privileges of, a stockholder of the
Company with respect to any of the shares issuable upon the exercise of any
option granted under the Plan unless and until such option has been exercised.
5.10 CONTINUATION OF EMPLOYMENT. Nothing in the Plan or
in any option granted pursuant to the Plan shall confer upon any Optionee any
right to continue in the employ of the Company or of an Affiliate thereof, or
to interfere in any way with the right of the Company or of any such Affiliate
to terminate his or her employment or other relationship with the Company at
any time.
5.11 MODIFICATION AND AMENDMENT OF OPTION. Subject to the
requirements of Section 422 of the Code with respect to incentive stock options
and to the terms and conditions and within the limitations of the Plan,
including, without limitation, Section 9.1 hereof, the Plan Administrator may
modify or amend outstanding options granted under the Plan. The modification
or amendment of an outstanding option shall not, without the consent of the
Optionee, impair or diminish any of his or her rights or any of the obligations
of the Company under such option. Except as otherwise provided herein, no
outstanding option shall be terminated without the consent of the Optionee.
Unless the Optionee agrees otherwise, any changes or adjustments made to
outstanding incentive stock options granted under the Plan shall be made in
such a manner so as not to constitute a "modification" as defined in Section
424(h) of the Code and so as not to cause any incentive stock option issued
hereunder to fail to continue to qualify as an incentive stock option as
defined in Section 422(b) of the Code.
5.12 LIMITATION ON VALUE FOR INCENTIVE STOCK OPTIONS. As
to all incentive stock options granted under the terms of the Plan, to the
extent that the aggregate fair market value (determined at the time of the
grant of the incentive stock option) of the shares of Common Stock with respect
to which incentive stock options are exercisable for the first time by the
Optionee
- 8 -
<PAGE> 31
during any calendar year (under the Plan and all other incentive stock option
plans of the Company, an Affiliate thereof or a predecessor corporation)
exceeds $100,000, such options shall be treated as nonqualified stock options.
The foregoing sentence shall not apply, and the limitation shall be that
provided by the Code or the Internal Revenue Service, as the case may be, if
such annual limit is changed or eliminated by (a) amendment of the Code or (b)
issuance by the Internal Revenue Service of (i) a Revenue ruling, (ii) a
Private Letter ruling to any of the Company, any Optionee, or any legatee,
personal representative, or distributee of any Optionee, or (iii) regulations.
5.13 VALUATION OF COMMON STOCK RECEIVED UPON EXERCISE.
The value of Common Stock received by the Optionee from an exercise under the
third paragraph of Section 5.4 hereof shall equal the sales price received for
such shares.
SECTION 6. GREATER THAN TEN PERCENT STOCKHOLDERS.
6.1 EXERCISE PRICE AND TERM OF INCENTIVE STOCK OPTIONS.
If incentive stock options are granted under the Plan to employees who, at the
time of such grant, own greater than ten percent of the total combined voting
power of all classes of stock of the Company or any Affiliate thereof, the term
of such incentive stock options shall not exceed five years and the exercise
price shall be not less than 110% of the fair market value of the Common Stock
at the time of grant of the incentive stock option. This provision shall
control notwithstanding any contrary terms contained in an option agreement or
any other document. The term and exercise price limitations of this provision
shall be amended to conform to any change required by a change in the Code or
by ruling or pronouncement of the Internal Revenue Service.
6.2 ATTRIBUTION RULE. For purposes of subsection 6.1, in
determining stock ownership, an employee shall be deemed to own the stock
owned, directly or indirectly, by or for his or her brothers, sisters, spouse,
ancestors, and lineal descendants. Stock owned, directly or indirectly, by or
for a corporation, partnership estate, or trust shall be deemed to be owned
proportionately by or for its stockholders, partners, or beneficiaries. If an
employee or a person related to the employee owns an unexercised option or
warrant to purchase stock of the Company, the stock subject to that portion of
the option or warrant which is unexercised shall not be counted in determining
stock ownership. For purposes of this Section 6, stock owned by an employee
shall include all stock owned by him or her which is actually issued and
outstanding immediately before the grant of the incentive stock option to the
employee.
SECTION 7. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. The aggregate
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number and class of shares for which options may be granted under the Plan, the
number and class of shares covered by each outstanding option, and the exercise
price per share thereof (but not the total price), and each such option, shall
all be proportionately adjusted for any increase or decrease in the number of
issued shares of Common Stock of the Company resulting from a split or
consolidation of shares or any like capital adjustment, or the payment of any
stock dividend.
7.1. EFFECT OF LIQUIDATION, REORGANIZATION, OR CHANGE IN CONTROL.
7.1.1 CASH, STOCK, OR OTHER PROPERTY FOR STOCK.
Except as provided in subsection 7.1.2 hereof, upon a merger (other than a
merger of the Company in which the holders of Common Stock immediately prior to
the merger have the same proportionate ownership of common stock in the
surviving corporation immediately after the merger), consolidation, acquisition
of property or stock, separation, reorganization (other than mere
reincorporation or creation of a holding company), or liquidation of the
Company (each, an "event"), as a result of which the stockholders of the
Company receive cash, stock, or other property in exchange for, or in
connection with, their shares of Common Stock, any option granted hereunder
shall terminate, but the time during which such options may be exercised shall
be accelerated as follows: the Optionee shall have the right immediately prior
to any such event to exercise such Optionee's option in whole or in part
whether or not the vesting requirements set forth in the option agreement have
been satisfied.
7.1.2 CONVERSION OF OPTIONS ON STOCK FOR EXCHANGE
STOCK. If the stockholders of the Company receive capital stock of another
corporation ("Exchange Stock") in exchange for their shares of Common Stock in
any transaction involving a merger (other than a merger of the Company in which
the holders of Common Stock immediately prior to the merger have the same
proportionate ownership of common stock in the surviving corporation
immediately after the merger), consolidation, acquisition of property or stock,
separation, or reorganization (other than mere reincorporation or creation of a
holding company), all options granted hereunder shall be converted into options
to purchase shares of Exchange Stock unless the Company and corporation issuing
the Exchange Stock, in their sole discretion, determine that any or all such
options granted hereunder shall not be converted into options to purchase
shares of Exchange Stock but instead shall terminate in accordance with the
provisions of subsection 7.1.1 hereof. The amount and price of converted
options shall be determined by adjusting the amount and price of the options
granted hereunder in the same proportion as used for determining the number of
shares of Exchange Stock the holders of the Common Stock receive in such
merger, consolidation, acquisition, separation, or reorganization. Unless the
Board determines otherwise, the converted options shall be fully vested whether
or not the
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vesting requirements set forth in the option agreement have been satisfied.
7.2 FRACTIONAL SHARES. In the event of any adjustment in
the number of shares covered by an option, any fractional shares resulting from
such adjustment shall be disregarded and each such option shall cover only the
number of full shares resulting from such adjustment.
7.3 DETERMINATION OF BOARD TO BE FINAL. Except as
otherwise required for the Plan to qualify for the exemption afforded by Rule
16b-3 under the Exchange Act, all adjustments under this Section 7 shall be
made by the Board, and its determination as to what adjustments shall be made,
and the extent thereof, shall be final, binding, and conclusive. Unless an
Optionee agrees otherwise, any change or adjustment to an incentive stock
option shall be made in such a manner so as not to constitute a "modification"
as defined in Section 425(h) of the Code and so as not to cause the incentive
stock option issued hereunder to fail to continue to qualify as an incentive
stock option as defined in Section 422(b) of the Code.
SECTION 8. SECURITIES LAW COMPLIANCE. Shares shall not be
issued with respect to an option granted under the Plan unless the exercise of
such option and the issuance and delivery of such shares pursuant thereto shall
comply with all relevant provisions of law, including, without limitation, any
applicable state securities laws, the Securities Act of 1933, as amended (the
"Act"), the Exchange Act, the rules and regulations promulgated thereunder, and
the requirements of any stock exchange upon which the shares may then be listed,
and shall be further subject to the approval of counsel for the Company with
respect to such compliance, including, without limitation, the availability of
an exemption from registration for the issuance and sale of any shares
hereunder. Inability of the Company to obtain from any regulatory body having
jurisdiction, the authority deemed by the Company's counsel to be necessary for
the lawful issuance and sale of any shares hereunder or the unavailability of
an exemption from registration for the issuance and sale of any shares
hereunder shall relieve the Company of any liability in respect of the
nonissuance or sale of such shares as to which such requisite authority shall
not have been obtained.
As a condition to the exercise of an option, if, in the opinion of
counsel for the Company, assurances are required by any relevant provision of
the aforementioned laws, the Company may require the Optionee to give written
assurances satisfactory to the Company at the time of any such exercise (a) as
to the Optionee's knowledge and experience in financial and business matters
(and/or to employ a purchaser representative reasonably satisfactory to the
Company who is knowledgeable and experienced in financial and business matters)
and that such Optionee is capable of evaluating, either alone or with the
purchaser representative, the merits and risks of exercising the option or (b)
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that the shares are being purchased only for investment and without any present
intention to sell or distribute such shares. The foregoing requirements shall
be inoperative if the issuance of the shares upon the exercise of the option
has been registered under a then currently effective registration statement
under the Act.
At the option of the Company, a stop-transfer order against any shares
may be placed on the official stock books and records of the Company, and a
legend indicating that the stock may not be pledged, sold, or otherwise
transferred unless an opinion of counsel is provided (concurred in by counsel
for the Company) stating that such transfer is not in violation of any
applicable law or regulation, may be stamped on stock certificates in order to
assure exemption from registration. The Plan Administrator may also require
such other action or agreement by the Optionees as may from time to time be
necessary to comply with the federal and state securities laws. NONE OF THE
ABOVE SHALL BE CONSTRUED TO IMPLY AN OBLIGATION ON THE PART OF THE COMPANY TO
UNDERTAKE REGISTRATION OF THE OPTIONS OR STOCK HEREUNDER.
Should any of the Company's capital stock of the same class as the
stock subject to options granted hereunder be listed on a national securities
exchange or on the NASDAQ National Market, all stock issued hereunder if not
previously listed on such exchange or market shall, if required by the rules of
such exchange or market, be authorized by that exchange or market for listing
thereon prior to the issuance thereof.
SECTION 9. USE OF PROCEEDS. The proceeds received by the
Company from the sale of shares pursuant to the exercise of options granted
hereunder shall constitute general funds of the Company.
SECTION 10. AMENDMENT AND TERMINATION.
10.1 BOARD ACTION. The Board may at any time suspend,
amend, or terminate the Plan, provided, that no amendment shall be made without
stockholder approval within 12 months before or after adoption of the Plan if
such approval is necessary to comply with any applicable tax or regulatory
requirement, including any such approval as may be necessary to satisfy the
requirements for exemptive relief under Rule 16b-3 of the Exchange Act or any
successor provision. Rights and obligations under any option granted before
amendment of the Plan shall not be altered or impaired by any amendment of the
Plan unless the Company requests the consent of the person to whom the option
was granted and such person consents in writing thereto.
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10.2 AUTOMATIC TERMINATION. Unless sooner terminated by
the Board, the Plan shall terminate ten years from the earlier of (a) the date
on which the Plan is adopted by the Board or (b) the date on which the Plan is
approved by the stockholders of the Company. No option may be granted after
such termination or during any suspension of the Plan. The amendment or
termination of the Plan shall not, without the consent of the option holder,
alter or impair any rights or obligations under any option theretofore granted
under the Plan.
SECTION 11. EFFECTIVENESS OF THE PLAN. The Plan shall become
effective upon adoption by the Board so long as it is approved by the holders
of a majority of the Company's outstanding shares of voting capital stock at
any time within 12 months before or after the adoption of the Plan by the
Board.
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