<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] 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 Rule 14a-11(c) or Rule 14a-12
</TABLE>
BIOFIELD CORP.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
BIOFIELD CORP.
1225 NORTHMEADOW PARKWAY
SUITE 120
ROSWELL, GA 30076
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
JUNE 4, 1998
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 4, 1998 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, 1998;
(3) To ratify an amendment to increase the number of
shares of Common Stock authorized for issuance under
the Biofield Corp. 1996 Stock Option Plan (the "1996
Plan") from 1,000,000 to 1,500,000; 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, 1998
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, 1998
- --------------------------------------------------------------------------------
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, 1998 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 4,
1998 (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, 1998 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, 1998, 10,029,609
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, 1997, 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 29, 1998.
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 Richard J.
Davies, M.D. The Board nominates each of the current members of the Board of
Directors for another term. 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 nominee for director.
NOMINEES FOR ELECTION AS DIRECTORS
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
C. Leonard Gordon................... 68 Chairman of the Board
D. Carl Long........................ 38 President, Chief Executive Officer and Vice
Chairman of the Board
Joseph H. Gleberman................. 40 Director
Harvey Horowitz..................... 55 Director
Richard J. Davies, M.D.............. 47 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 39 years and is currently of counsel to Gordon Altman
Butowsky Weitzen Shalov & Wein. Mr. Gordon serves as a director 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.
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. and Diagnostics
Holding, Inc. Mr. Gleberman serves on the Company's Board of Directors as a
nominee of Goldman Sachs.
2
<PAGE> 5
Harvey Horowitz has been a director since March 12, 1997. From October
1996 to February 1998, Mr. Horowitz was Vice President and General Counsel of
Donnkenny, Inc., a publicly-traded apparel company. Mr. Horowitz is currently
General Counsel and a director of Donnkenny, Inc. 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.
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 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.
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 1997, the Board of Directors held eight meetings and acted by
written consent on one occasion. The Stock Option Committee held one meeting and
acted by written consent on four occasions, the Compensation Committee acted by
written consent on one occasion, the Audit Committee held two meetings and acted
by written consent on one occasion, and the Executive Committee did not meet.
Each director attended at least 75 % of the total number of meetings held during
1997 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.
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 . Specific due dates for these reports have been established and the
Company is required to report in this Proxy Statement any failure to file by
these dates during 1997. Based solely on its review of such forms received by it
from such persons for their 1997 transactions, the Company believes that all
filing requirements applicable to such officers, directors and greater than ten
percent beneficial owners were complied with except that Richard J. Davies, M.D.
filed his initial Form 3 after the due date.
3
<PAGE> 6
COMPENSATION OF DIRECTORS
Cash Compensation. Outside directors receive fees in the amount of
$3,750 per quarter and $500 per Board of Directors or committee meeting
attended, and are reimbursed for expenses incurred in connection with performing
their respective duties as directors of the Company. The Company has entered
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., a director and the Chairman of the
Advisory Boards. 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. 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, 1997, no
shares had been issued upon the exercise of options granted under the 1996
Directors' Stock Plan, 29,166 shares were subject to outstanding options and
120,834 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 $1,500 to $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........................ 38 President, Chief Executive Officer and Vice
Chairman of the Board
Robert M. Johnson................... 50 Chief Operating Officer
Michael R. Gavenchak................ 38 Executive Vice President, General Counsel, Secretary
and Treasurer
Todd J. Polk........................ 50 Vice President, Regulatory and Clinical Affairs and
Quality Assurance
Timothy G. Roche.................... 34 Vice President, Finance
</TABLE>
D. Carl Long, see "Nominees for Election as Directors."
Robert M. Johnson, Chief Operating Officer, joined the Company in
August 1997. Prior to joining Biofield, Mr. Johnson served as Senior Vice
President, Business Development, at Healthdyne Technologies, Inc., a medical
device company, from 1994 to 1997. From 1991 to 1994, Mr. Johnson served as Vice
President, General Manager of Nellcor, Inc., also a medical device company.
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.
Todd J. Polk, Vice President, Regulatory and Clinical Affairs, Quality
Assurance, joined the Company in August 1997. Prior to joining Biofield, from
June 1989 to August 1997, Mr. Polk served as Vice President, Regulatory
Affairs/Quality Assurance at Cabot Medical Corporation, a company engaged in the
research, design and development of medical devices, which merged with Circon
Corporation in August 1995. In addition, from January 1990 to January 1995, Mr.
Polk served as an industry representative to the Obstetrics/Gynecology Devices
Panel of the FDA.
Timothy G. Roche, Vice President, Finance, 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.
SUMMARY COMPENSATION TABLE
The following table sets forth compensation earned during the year
ended December 31, 1997 for those persons who (i) served as the Company's Chief
Executive Officer during the year ended December 31, 1997 and (ii) the other
most highly compensated executive officers of the Company during the year ended
December 31, 1997, including former executive officers whose total annual salary
and bonus during such year exceeded $100,000 (collectively, the "Named Executive
Officers"):
5
<PAGE> 8
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION AWARDS
----------------------------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION (1) OPTIONS (#) COMPENSATION
--------------------------- ---- -------- -------- ---------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
D. Carl Long 1997 $209,424 $ 70,000 -- 300,000 $ --
President, Chief Executive 1996 (2)
Officer and Vice Chairman 1995 167,252 15,000 18,190 (3) 56,372 --
Michael R. Gavenchak 1997 157,558 25,000 -- 65,000 --
Executive Vice President, 1996 138,534 25,000 -- -- 15,000 (4)
General Counsel and Treasurer 1995 127,613 30,000 -- 7,353 --
Timothy G. Roche 1997 115,500 16,250 -- 40,000 --
Vice President, Finance 1996 83,868 12,000 -- -- 4,151 (5)
1995 52,789 10,000 -- 17,157 21,786 (5)
Kenneth W. Anstey 1997 69,135 -- -- -- --
Former President, Chief 1996 250,000 100,000 -- -- 67,127 (5)
Executive Officer and Director 1995 15,384 -- -- 245,100 --
Mark L. Faupel, Ph.D. 1997 155,427 -- -- -- --
Former Vice President, 1996 137,162 25,000 -- -- --
Research and Development 1995 126,524 30,000 -- 7,353 --
</TABLE>
- --------------------------
(1) Except as otherwise set forth in the Other Annual Compensation column,
personal benefits for each executive officer named in the table did not
exceed, in the aggregate, $50,000 or 10% of such executive officer's
total annual salary and bonus in 1997, 1996 or 1995.
(2) In connection with the cessation of his employment as Chief Executive
Officer of the Company in December 1995, Mr. Long received certain
payments pursuant to an agreement entered into by the Company and Mr.
Long described in detail elsewhere in this Proxy Statement. See
"Certain Relationships and Related Transactions."
(3) Amount includes $9,295 in automobile allowance and reimbursement for
taxes related thereto.
(4) Amount represents a loan forgiven by the Company.
(5) Amount represents moving expenses and reimbursement for taxes related
thereto.
6
<PAGE> 9
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information concerning grants of
options to purchase Common Stock to the Named Executive Officers during the year
ended December 31, 1997.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------------------------------------------------
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF PERCENT OF ANNUAL RATES OF STOCK
SECURITIES TOTAL OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE OR FOR OPTION TERM (2)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION ------------------------
NAME GRANTED FISCAL YEAR (1) ($/SHARE) DATE 5% 10%
- --------------------- ----------- --------------- ----------- ----------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
D. Carl Long 100,000 (3) 12% $ 4.75 03/02/07 $298,725 $757,028
200,000 (4) 24% 2.94 07/08/07 369,538 936,483
Michael R. Gavenchak 50,000 (5) 6% 6.62 03/12/07 208,164 527,529
15,000 (6) 2% 4.63 05/12/07 43,630 110,566
Timothy G. Roche 40,000 (7) 5% 4.63 05/12/07 116,346 294,842
Kenneth W. Anstey - - - - - -
Mark L. Faupel, Ph.D. - - - - - -
</TABLE>
(1) Based on an aggregate of 835,200 options granted to employees in 1997,
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 March 2, 1997, the Stock Option Committee, under the 1996 Plan,
awarded stock options covering 100,000 shares of the Company's Common
Stock with an exercise price of $4.75 per share, fully vested as of the
date of grant.
(4) On July 8, 1997, the Stock Option Committee, under the 1996 Plan,
awarded stock options covering 200,000 shares of the Company's Common
Stock with an exercise price of $2.94 per share, vesting in equal
monthly installments over a two year period.
(5) On March 12, 1997, the Stock Option Committee, under the 1996 Plan,
awarded stock options covering 50,000 shares of the Company's Common
Stock with an exercise price of $6.62 per share, fully vested as of the
date of grant.
(6) On May 12, 1997, the Stock Option Committee, under the 1996 Plan,
awarded stock options covering 15,000 shares of the Company's Common
Stock, with an exercise price of $4.63 per share, 7,500 options vested
upon grant and the remaining portion vested six months from the date of
grant.
(7) On May 12, 1997, the Stock Option Committee, under the 1996 Plan,
awarded stock options covering 40,000 shares of the Company's Common
Stock with an exercise price of $4.63 per share, 20,000 options vested
upon grant and the remaining portion vested six months from the date of
grant.
7
<PAGE> 10
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, 1997 held by the Named Executive Officers. No options
were exercised by any of the Named Executive Officers during the year ended
December 31, 1997.
<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>
D. Carl Long 559,072 79,166 $ 184,278 $ -
Michael R. Gavenchak 127,500 - 3,204 -
Timothy G. Roche 57,157 - - -
Kenneth W. Anstey - - - -
Mark L. Faupel, Ph.D 133,824 34,314 145,129 -
</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 $2.56 per share of Common Stock
on December 31, 1997.
EMPLOYMENT AGREEMENTS
The Company has entered into a new employment agreement with D. Carl
Long (the "Long Agreement"), the current President and Chief Executive Officer
of the Company. The term of the agreement is three years, commencing July 7,
1997. Pursuant to the agreement, Mr. Long receives a minimum annual base salary
of $250,000. Mr. Long is also 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 March 31, 1999 (the
"Gavenchak Agreement"). Pursuant to the Gavenchak Agreement, Mr. Gavenchak
currently receives an annual base salary of $157,500, 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. was employed during 1997 with the Company as Vice
President, Research and Development of the Company pursuant to an employment
agreement. Pursuant to such agreement, Dr. Faupel received an annual salary of
$150,000, subject to a minimum annual cost of living increase of five percent.
The Company also granted Dr. Faupel 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. Mr. Anstey did not
receive a bonus for the 1997 year, and all of Mr. Anstey's options expired upon
his resignation.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the year ended December 31, 1997, Messrs. Gordon, 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.
Anstey served as the Company's President and Chief Executive Officer until March
1997 and
8
<PAGE> 11
participated in the deliberations of the Compensation Committee regarding
executive compensation during such period. From March 1997 through the year
ended December 31, 1997, Mr. Long 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 has been 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, 1997 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 1997.
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
outside of 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
individual or group 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 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 competitive practices.
9
<PAGE> 12
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.
Mr. Long's base salary for the year ended December 31, 1997 was
determined by the terms of the Long Agreement which commenced on July 7, 1997
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 Long Agreement, a bonus of $70,000 was awarded to Mr. Long.
On March 2, 1997, the Stock Option Committee, under the 1996 Plan,
awarded Mr. Long stock options covering 100,000 shares of the Company's Common
Stock with an exercise price of $4.75 per share, fully vested as of the date of
grant. In addition, on July 8, 1997, the Stock Option Committee, under the 1996
Plan, awarded Mr. Long stock options covering 200,000 shares of the Company's
Common Stock with an exercise price of $2.94 per share, vesting in equal monthly
installments over a two year period. These options make a significant portion of
Mr. Long's total compensation contingent on increased value for the Company's
stockholders, since the value of these options depend 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 Mr. Long. Mr. Anstey's base salary through March 17,
1997 was determined by the terms of the Anstey Agreement and is described
elsewhere in this Proxy Statement. This element of compensation was not affected
to any significant degree by Company performance factors. Mr. Anstey did not
receive a bonus for the 1997 year. Mr. Anstey's stock options 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.
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 CUMULATIVE TOTAL RETURN*
FOR THE PERIOD FROM MARCH 19, 1996 THROUGH DECEMBER 31, 1997
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
------------------------------------------------------------------------------------------------
3/19/96 3/31/96 6/30/96 9/30/96 12/31/96 3/31/97 6/30/97 9/30/97 12/31/97
------- ------- ------- ------- -------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Biofield Corp. BZET 100 94 124 83 140 51 31 43 23
NASDAQ STOCK INAS 100 99 107 111 116 110 130 152 143
MARKET (U.S.)
HAMBRECHT & HH- 100 101 95 105 105 100 120 125 125
QUIST
HEALTHCARE
EXCLUDING
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 statutes.
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, 1998 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) BENEFICIALLY OWNED (1) (2)
- ------------------------------------ ---------------------- --------------------------
<S> <C> <C>
The Goldman Sachs Group, L.P.
and related investors 2,246,131 (3) 22.4%
85 Broad Street
New York, NY 10004
C. Leonard Gordon 1,075,387 (4) 10.7%
c/o Immunotherapy Inc
360 Lexington Avenue
New York, NY 10017
H & Q Healthcare Investors and
H & Q Life Science Investors 947,266 (5) 9.4%
50 Rowes Wharf, 4th Floor
Boston, MA 02110-3328
Tudor Capital (U.K.), L.P. and
related investors 730,158 (6) 7.3%
The Upper Mill, Kingston Rd.
Ewell, Surrey KT 172AF
The Travelers Indemnity Company
and The Phoenix Insurance Company 680,414 (7) 6.8%
One Tower Square
Hartford, CT 06183-2030
D. Carl Long 584,072 (8) 5.5%
c/o Biofield Corp.
1225 Northmeadow Parkway, Suite 120
Roswell, GA 30076
Joseph H. Gleberman 9,166 (9) *
c/o Goldman, Sachs & Co.
85 Broad Street
New York, NY 10004
Harvey Horowitz (10) 3,300 (10) *
239 East 79th Street-Apt. 15C
New York, NY 10021
Richard J. Davies, M.D. 83,824 (11) *
21 Cameron Road
Saddle River, NJ 07458
Michael R. Gavenchak 127,500 (12) 1.3%
c/o Biofield Corp.
1225 Northmeadow Parkway, Suite 120
Roswell, GA 30076
Timothy G. Roche 57,157 (13) *
c/o Biofield Corp.
1225 Northmeadow Parkway, Suite 120
Roswell, GA 30076
Kenneth W. Anstey (14) - *
960 Parrott Drive
Hillsborough, CA 94010
</TABLE>
12
<PAGE> 15
<TABLE>
<CAPTION>
SHARES PERCENTAGE OF SHARES
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED (1) BENEFICIALLY OWNED (1) (2)
- ----------------------------------------------- ---------------------- --------------------------
<S> <C> <C>
Mark L. Faupel, Ph.D. 134,324 (15) 1.3%
530 Windswept Way
Alpharetta, GA 30202
All directors and executive officers as a group 1,940,406 17.8%
(9 persons)
</TABLE>
- -----------------------------------------------
* Less than 1%.
(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 10,029,609 shares of Common Stock
outstanding as of April 15, 1998. Shares of Common Stock subject to stock
options that are exercisable within 60 days as of April 15, 1998 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. GS Capital Partners,
L.P. owns 2,021,523 shares of Common Stock; Stone Street Fund 1995, L.P. owns
52,841 shares of Common Stock; Stone Street Fund 1994, L.P. owns 54,860 shares
of Common Stock; Bridge Street Fund 1995, L.P. owns 59,463 shares of Common
Stock; and Bridge Street Fund 1994, L.P. owns 57,444 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) 1,068,034 shares of Common Stock held of record jointly with
Mr. Gordon's wife, and (ii) 7,353 shares subject to options. Mr. Gordon has
served as Chairman of the Board of Directors since the Company's inception.
(5) Includes 561,517 shares of Common Stock beneficially owned by H & Q
Healthcare Investors and 385,749 of Common Stock beneficially owned by H & Q
Life Sciences Investors. H & Q Healthcare Investors and H & Q Life Sciences
Investors are affiliates of Hambrecht & Quist LLC, which acted as the
representative of the several underwriters in connection with the Company's
initial public offering in March 1996, and which acted as placement agent in the
Company's private placement in December 1997.
(6) Includes shares beneficially owned by certain investment funds managed by
Tudor Capital (U.K.), L.P. ("Tudor Capital") or affiliates of Tudor Capital
serve as executive managers, officers and/or directors. Tudor Proprietary
Trading, L.L.C. owns 240,952 shares of Common Stock; Tudor BVI Futures, Ltd.
owns 189,841 shares of Common Stock; and the Upper Mill Capital Appreciation
Fund Ltd. owns 299,365 shares of Common Stock. In addition to the direct
beneficial ownership interests of the stockholders referred to above, Tudor
Capital, Tudor Capital (U.K.), Ltd., Tudor Investment Corporation and Paul Tudor
Jones, II may be deemed to have shared voting and/or dispositive power with
respect to 489,206 shares of Common Stock; 489,206 shares of Common Stock;
189,841 shares of such Common Stock and 730,158 shares of Common Stock,
respectively.
(7) Includes 646,396 shares of Common Stock beneficially owned by The Travelers
Indemnity Company and 34,018 shares of Common Stock beneficially owned by The
Phoenix Insurance Company. James B. Anderson, Ph.D. who was an officer of each
of The Travelers Indemnity Company and The Phoenix Insurance Company, served on
the Company's Board of Directors from November 1993 to June 1997. Dr. Anderson
is no longer employed by The Travelers Indemnity Company and The Phoenix
Insurance Company.
(8) Includes 584,072 shares subject to options.
(9) Mr. Gleberman is a managing director of Goldman Sachs. Share data includes
9,166 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.
13
<PAGE> 16
(10) Includes 3,300 shares subject to options granted in respect of Mr.
Horowitz's service on the Company's Board and excludes shares held by trusts for
the benefit of Mr. Horowitz's wife, as to which Mr. Horowitz disclaims
beneficial ownership.
(11) Includes 83,824 shares subject to options.
(12) Includes 127,500 shares subject to options.
(13) Includes 57,157 shares subject to options.
(14) On March 17, 1997, Kenneth W. Anstey resigned as President, Chief Executive
Officer and a Director of the Company. Mr. Anstey's options expired upon his
resignation.
(15) Includes 500 shares of Common Stock and 133,824 shares subject to options.
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 $595,000 and $576,000 during the
years ended December 31, 1997 and 1996, 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.
C. Leonard Gordon, the Chairman of the Board of the Company, has
entered into an oral arrangement with the Company whereby Mr. Gordon provides
certain executive services as are required by the Company and is compensated for
such services rendered in an amount not to exceed $80,000 per annum until the
Company has commercially marketed the Biofield Diagnostic 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 director of
the Company, providing for consulting fees of $150,000 per year, as amended, 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. As of December 31, 1997,
such options are fully vested. Pursuant to the consulting agreement,
14
<PAGE> 17
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. In June 1997, the Chairman
of the Advisory Boards was granted options to purchase 50,000 share of Common
Stock at $4.69 per share pursuant to the 1996 Plan. Such options vest ratably
over a two year period commencing on June 4, 1997. Dr. Davies has served as a
member of the Company's Board of Directors since June 1997.
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 during the years ended December 31, 1997 and 1996 respectively.
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.
On December 17, 1997, the Company consummated a private placement (the
"1997 Private Placement") of 2,867,670 shares of Common Stock to accredited
investors, yielding aggregate gross proceeds to the Company of $9,033,160. The
1997 Private Placement was made pursuant to the exemption from the registration
requirements of the Securities Act provided by Section 4(2) thereof and
Regulation D thereunder. Certain affiliates of Hambrecht & Quist LLC, which
acted as the representative of the several underwriters in connection with the
Company's initial public offering in March 1996, and which acted as placement
agent in the 1997 Private Placement, purchased an aggregate of 498,413 shares of
Common Stock in the 1997 Private Placement. Mr. Gordon, certain affiliates of
The Goldman Sachs Group, L.P. ("GS Group") and certain affiliates of The
Travelers Companies ("Travelers") purchased 79,365; 730,157; and 79,363 shares,
respectively, in the 1997 Private Placement.
15
<PAGE> 18
Concurrent with the closing of the 1997 Private Placement, the Company
issued an aggregate of 643,639 shares of Common Stock in exchange for
outstanding warrants to purchase an aggregate of 1,574,930 shares of Common
Stock (the "Warrant Exchange"). Such warrants were issued in connection with the
Company's 1995 private placement of Securities Units. In order to participate in
the Warrant Exchange, warrant holders were required to invest in the 1997
Private Placement. Pursuant to the Warrant Exchange, Mr. Gordon exchanged 21,276
outstanding warrants for 8,437 shares; certain affiliates of GS Group exchanged
1,089,329 outstanding warrants for 444,510 shares; certain affiliates of
Hambrecht & Quist LLC exchanged 68,082 outstanding warrants for 27,780 shares;
and certain affiliates of Travelers exchanged 136,164 outstanding warrants for
55,562 shares.
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 term of Mr. Long's employment under
such Agreement continued through July 30, 1996. Pursuant to the 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 in 1995. 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.
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, 1998 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 1,000,000 shares of Common
Stock. As of April 15, 1998, no shares had been issued upon the exercise of
options granted under the 1996 Plan, 698,200 shares were subject to outstanding
options and 301,800 shares remained available for future grant. On February 24,
1998, the Board of Directors approved an amendment to the 1996 Plan, subject to
stockholder approval, to increase the number of shares of Common Stock
authorized for issuance under the 1996 Plan from 1,000,000 to 1,500,000.
16
<PAGE> 19
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,
1998, 26 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, 1998 of the
Company's Common Stock, as reported by the Nasdaq National Market, was $4.00 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. 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 is limited to 500,000 shares (subject to
proportionate adjustments for changes in capitalization).
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.
17
<PAGE> 20
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 1997 $ 4.75
President, Chief Executive Officer and 200,000 1997 $ 2.94
Vice Chairman of the Board -------
300,000
Michael R. Gavenchak 50,000 1997 $ 6.62
Executive Vice President, General Counsel, 15,000 1997 $ 4.63
Secretary and Treasurer 25,000 (1) 1998 $ 3.50
------
90,000
Timothy G. Roche 40,000 1997 $ 4.63
Vice President, Finance 5,000 (1) 1998 $ 3.50
-------
45,000
Kenneth W. Anstey -- -- --
Former President, Chief Executive Officer
and Director
Mark L. Faupel, Ph.D. -- -- --
Former Vice President, Research and
Development
All current executive officers as a group 435,000
All other employees as a group 188,200
</TABLE>
- ------------------------
(1) On January 13, 1998, the Stock Option Committee, under the 1996 Plan,
awarded stock options that vest at a rate of 25% per annum.
The closing price of the Company's Common Stock, as reported by the
Nasdaq National Market, was $2.56 and $4.00 per share as of December 31, 1997
and April 15, 1998, respectively.
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.
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.
18
<PAGE> 21
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 1999 Annual
Meeting of Stockholders must be received by the Secretary of the Company no
later than December 23, 1998 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, 1998
19
<PAGE> 22
APPENDIX A
BIOFIELD CORP.
ANNUAL MEETING OF STOCKHOLDERS - JUNE 4, 1998
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 4,
1998, 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> 23
- -----
PLEASE MARK YOUR
X 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
----- -----
1. Election of NOMINEES: C. Leonard Gordon,
Directors D. Carl Long,
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.
</TABLE>
THE DIRECTORS RECOMMEND A VOTE FOR THE NOMINEES, AND FOR PROPOSALS 2 AND 3
<TABLE>
<S> <C> <C> <C>
FOR AGAINST ABSTAIN
2. Proposal to ratify Deloitte & Touche, LLP ----- ----- -----
as independent auditors.
----- ----- -----
3. Proposal to ratify the amendment to the ----- ----- -----
Biofield Corp. 1996 Stock Option Plan.
----- ----- -----
4. In their discretion, the proxies are authorized to vote upon such other business
as may properly come before the meeting.
Signature(s) ________________________________________________________________________________________________ Dated __________, 1998
Please sign exactly as your name appears and return this proxy immediately in the enclosed stamped self-addressed envelope.
</TABLE>
<PAGE> 24
APPENDIX B
BIOFIELD CORP.
1996 STOCK OPTION PLAN, AS AMENDED
As Proposed to be Amended at the
1998 Annual Meeting of Stockholders
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, 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
<PAGE> 25
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 1,500,000
shares as such Common Stock was constituted on the effective date of the Plan.
If any option granted under the Plan shall expire, be surrendered, exchanged for
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".
-2-
<PAGE> 26
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
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>
-3-
<PAGE> 27
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.
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
-4-
<PAGE> 28
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 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.
-5-
<PAGE> 29
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 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.
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
-6-
<PAGE> 30
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
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.
-7-
<PAGE> 31
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
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,
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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
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
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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)
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
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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.
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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