<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:
[ ] 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
SIPEX CORPORATION
- --------------------------------------------------------------------------------
(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:
- --------------------------------------------------------------------------------
[ ] 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
SIPEX CORPORATION
22 LINNELL CIRCLE
BILLERICA, MASSACHUSETTS 01821
------------------------
NOTICE OF SPECIAL MEETING IN LIEU OF
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 30, 1997
------------------------
TO THE SHAREHOLDERS:
NOTICE IS HEREBY GIVEN that the Special Meeting in Lieu of Annual Meeting
of Shareholders of SIPEX Corporation, a Massachusetts corporation (the
"Company"), will be held at BankBoston, Conference and Training Center, 35th
Floor, Room 27, 100 Federal Street, Boston, Massachusetts 02110, on Friday, May
30, 1997, at 10:00 a.m., local time, for the purposes of considering and acting
upon the following matters:
1. To elect two members to the Board of Directors, each to serve for a
three-year term as a Class I Director.
2. To approve the adoption of the 1997 Stock Option Plan.
3. To transact such other business as may properly come before the meeting
or any adjournment thereof.
Information relating to the above matters is set forth in the attached
Proxy Statement. Only shareholders of record at the close of business on April
10, 1997 will be entitled to notice of and to vote at the meeting and any
adjournment thereof.
All shareholders are cordially invited to attend the meeting.
By Order of the Board of Directors,
James E. Donegan
Clerk
Billerica, Massachusetts
Date: April 25, 1997
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE READ THE ATTACHED PROXY
STATEMENT AND THEN COMPLETE, DATE AND SIGN THE ENCLOSED PROXY AND MAIL IT
PROMPTLY IN THE ENCLOSED ENVELOPE IN ORDER TO ENSURE REPRESENTATION OF YOUR
SHARES AT THE MEETING. NO POSTAGE NEED BE AFFIXED IF THE PROXY IS MAILED IN THE
UNITED STATES.
<PAGE> 3
SIPEX CORPORATION
22 LINNELL CIRCLE
BILLERICA, MASSACHUSETTS 01821
------------------------
PROXY STATEMENT
FOR THE SPECIAL MEETING IN LIEU OF
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 30, 1997
------------------------
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of SIPEX Corporation (the "Company") for use
at the Special Meeting in Lieu of Annual Meeting of Shareholders to be held at
BankBoston, Conference and Training Center, 35th Floor, Room 27, 100 Federal
Street, Boston, Massachusetts, 02110 on Friday, May 30, 1997, at 10:00 a.m.
local time, and at any adjournments thereof.
Only shareholders of record as of the close of business on April 10, 1997,
the record date fixed by the Board of Directors, will be entitled to notice of,
and to vote at, the Special Meeting in Lieu of Annual Meeting and at any
adjournments thereof. At the close of business on April 10, 1997, there were an
aggregate of 8,656,106 shares of common stock, par value $.01 per share (the
"Common Stock"), of the Company issued, outstanding and entitled to vote. The
holders of Common Stock are entitled to one vote per share on any proposal
presented at the Special Meeting in Lieu of Annual Meeting. Shareholders may
vote in person or by proxy. Execution of a proxy will not in any way affect a
shareholder's right to attend the meeting and vote in person. Any proxy may be
revoked by a shareholder at any time before it is exercised by delivering a
written revocation or a later dated proxy to the Clerk of the Company or by
attending the Special Meeting in Lieu of Annual Meeting and voting in person.
The Company's Annual Report to Shareholders containing financial statements
for the fiscal year ended December 31, 1996 is being mailed together with this
Proxy Statement to all shareholders entitled to vote. It is anticipated that
this Proxy Statement and the accompanying proxy will be first mailed to
shareholders on or about April 25, 1997.
QUORUM AND VOTES REQUIRED
The representation, in person or by proxy, of at least a majority of the
outstanding shares of Common Stock entitled to vote at the Special Meeting in
Lieu of Annual Meeting is necessary to constitute a quorum for the transaction
of business. Shares represented by proxies pursuant to which votes have been
withheld from any nominee for director, or which contain one or more abstentions
or broker "non-votes," are counted as present or represented for purposes of
determining the presence or absence of a quorum for the Special Meeting in Lieu
of Annual Meeting. A "non-vote" occurs when a broker or other nominee holding
shares for a beneficial owner votes on one proposal, but does not vote on
another proposal because, with respect to such other proposal, the broker does
not have discretionary voting power and has not received instructions from the
beneficial owner.
In the election of Class I Directors, the two nominees receiving the
highest number of affirmative votes of the shares present or represented and
entitled to vote at the Special Meeting in Lieu of Annual Meeting shall be
elected as Class I Directors. For the proposal to approve the 1997 Stock Option
Plan and all other matters
<PAGE> 4
being submitted to shareholders at the Special Meeting in Lieu of Annual
Meeting, the affirmative vote of the majority of shares present, in person or
represented by proxy, and voting on that matter is required for approval. The
vote on each matter submitted to shareholders is tabulated separately.
Abstentions are included in the number of shares present and represented and
voting on each matter. Broker "non-votes" are not considered voted for the
particular matter and have the practical effect of reducing the number of
affirmative votes required to achieve a majority for such matter by reducing the
total number of shares from which the majority is calculated.
The persons named as attorneys in the proxies are officers of the Company.
All properly executed proxies returned in time to be counted at the Special
Meeting in Lieu of Annual Meeting will be voted. Any shareholder giving a proxy
has the right to withhold authority to vote for any individual nominee to the
Board of Directors by writing that nominee's name in the space provided on the
proxy.
ALL PROXIES WILL BE VOTED IN ACCORDANCE WITH THE SHAREHOLDERS' INSTRUCTIONS, AND
IF NO CHOICE IS SPECIFIED, THE ENCLOSED PROXY CARD (OR ANY SIGNED AND DATED COPY
THEREOF) WILL BE VOTED IN FAVOR OF THE MATTERS SET FORTH IN THE ACCOMPANYING
NOTICE OF MEETING.
The Board of Directors knows of no other matter to be presented at the
Special Meeting in Lieu of Annual Meeting. If any other matter upon which a vote
may properly be taken should be presented at the Special Meeting in Lieu of
Annual Meeting, shares represented by all proxies received by the Board of
Directors will be voted with respect thereto in accordance with the judgment of
the persons named as attorneys in the proxies.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of April 10, 1997, information with
respect to the beneficial ownership of the Company's Common Stock by (i) each
person who is known to the Company to be the beneficial owner of more than five
percent of its Common Stock, (ii) each director, or nominee for director, of the
Company, (iii) each of the executive officers named in the Summary Compensation
Table under the caption "Executive Compensation" below, and (iv) all directors,
nominees for director and executive officers of the Company as a group. Except
as otherwise indicated in the footnotes to the table, the beneficial owners
listed have sole voting and investment power (subject to community property laws
where applicable) as to all of the shares beneficially owned by them.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
NAME AND ADDRESS OF BENEFICIAL OWNER(1) OF BENEFICIAL OWNERSHIP PERCENT OF CLASS
- --------------------------------------------------------- ----------------------- -----------------
<S> <C> <C>
AIM Management Group Inc.(2)............................. 750,000 8.7%
11 Greenway Plaza, Suite 1919
Houston, TX 77046
Tractebel S.A............................................ 1,928,986 22.3
Place du Trone 1
1000 Brussels, Belgium
Putnam Family of Funds(3)................................ 667,000 7.7
One Post Office Square
Boston, Massachusetts 02109
James E. Donegan(4)...................................... 72,995 *
Frank R. DiPietro(5)..................................... 513 *
</TABLE>
2
<PAGE> 5
<TABLE>
<CAPTION>
AMOUNT AND NATURE
NAME AND ADDRESS OF BENEFICIAL OWNER(1) OF BENEFICIAL OWNERSHIP PERCENT OF CLASS
- --------------------------------------------------------- ----------------------- -----------------
<S> <C> <C>
Raymond W.B. Chow(6)..................................... 12,500 *
Sanford Cohen(7)......................................... 5,100 *
A. Neal Lambert(8)....................................... 0 *
Manfred Loeb(9).......................................... 3,000 *
Lionel H. Olmer(10)...................................... 3,000 *
Daniel Deroux(11)........................................ 0 *
Steward S. Flaschen(12).................................. 0 *
John L. Sprague(13)...................................... 2,000 *
All directors and executive officers as a group.......... 98,858 1.1%
(11 persons)(14)
</TABLE>
- ---------------
* Less than 1% of the outstanding Common Stock
(1) Unless otherwise indicated, to the knowledge of the Company, each person
listed above maintains a mailing address at: c/o SIPEX Corporation, 22
Linnell Circle, Billerica, MA 01821.
(2) Based solely on information provided in a Schedule 13G filed with the
Securities and Exchange Commission, as of December 31, 1996, AIM Management
Group Inc., a registered investment advisor, together with its wholly-owned
subsidiaries, AIM Advisors, Inc. and AIM Capital Management, Inc., shared
dispositive power over 750,000 shares.
(3) Based solely on information provided in a Schedule 13G filed with the
Securities and Exchange Commission, as of December 31, 1996, Putnam
Investments, Inc. held of record 218,300 shares and Putnam Voyager Fund
held of record 448,700 shares. Putnam Investments, Inc., which is a wholly-
owned subsidiary of Marsh & McLennan Company, Inc., wholly owns two
registered investment advisers: Putnam Investment Management, Inc., which
is the investment advisor to the Putnam family of mutual funds (including
the Putnam Voyager Fund) and The Putnam Advisory Company, Inc., which is
the investment adviser to Putnam's institutional clients.
(4) Includes 72,995 shares issuable pursuant to stock options which are
exercisable prior to June 9, 1997. Excludes 80,000 shares issuable pursuant
to stock options which are exercisable after June 9, 1997.
(5) Includes 250 shares of Common Stock purchased by Mr. DiPietro's son, as to
which shares he disclaims beneficial ownership. Excludes 70,000 shares
issuable pursuant to stock options which are exercisable after June 9,
1997.
(6) Includes 2,500 shares issuable pursuant to stock options which are
exercisable prior to June 9, 1997. Excludes 92,500 shares issuable pursuant
to stock options which are exercisable after June 9, 1997.
(7) Includes 5,000 shares issuable pursuant to stock options which are
exercisable prior to June 9, 1997. Excludes 30,000 shares issuable pursuant
to stock options exercisable after June 9, 1997.
(8) Excludes 30,000 shares issuable pursuant to stock options which are
exercisable after June 9, 1997.
(9) Excludes all shares held by Tractebel S.A., with which Mr. Loeb is
affiliated and as to whose shares he disclaims beneficial ownership of,
except to the extent of any individual interest in such entity. Excludes
8,000 shares issuable pursuant to stock options exercisable after June 9,
1997.
3
<PAGE> 6
(10) Includes 2,000 shares issuable pursuant to stock options which are
exercisable prior to June 9, 1997. Excludes 8,000 shares issuable pursuant
to stock options exercisable after June 9, 1997.
(11) Excludes all shares held by Tractebel S.A., with which Mr. Deroux is
affiliated and as to whose shares he disclaims beneficial ownership of,
except to the extent of any individual interest in such entity. Excludes
8,000 shares issuable pursuant to stock options exercisable after June 9,
1997.
(12) Excludes 5,000 shares issuable pursuant to stock options exercisable after
June 9, 1997.
(13) Includes 2,000 shares issuable pursuant to stock options which are
exercisable prior to June 9, 1997. Excludes 8,000 shares issuable pursuant
to stock options exercisable after June 9, 1997.
(14) Includes 81,995 shares issuable pursuant to stock options which are
exercisable prior to June 9, 1997.
PROPOSAL I
ELECTION OF DIRECTORS
The Board of Directors is divided into three classes. Each class serves a
three-year term. However, each Class II and Class III director will serve for an
initial term ending at the Annual Meetings of Shareholders to be held in 1998
and 1999, respectively. The Class I Directors' term will expire at the Special
Meeting in Lieu of Annual Meeting being held May 30, 1997. All directors will
hold office until their successors have been duly elected and qualified. Prior
to the Special Meeting in Lieu of Annual Meeting, Steward S. Flaschen, Manfred
Loeb and Philippe van Marcke were the Class I Directors; John L. Sprague and
Lionel H. Olmer were the Class II Directors; and James E. Donegan and Daniel
Deroux were the Class III Directors.
Philippe van Marcke, who has served as a director since May 1994 and who
would have been subject to re-election as a director at the Special Meeting in
Lieu of Annual Meeting, decided not to stand for re-election and resigned from
the Board of Directors in March 1997. The Company expresses its thanks to Mr.
van Marcke for his service on the Board of Directors.
The Board of Directors has nominated and recommended that Steward S.
Flaschen and Manfred Loeb, who are each currently serving as Directors of the
Company, be elected Class I directors, to hold office until the Annual Meeting
of Shareholders to be held in 2000 or until their successors have been duly
elected and qualified or until their earlier resignation or removal. Both of the
nominees have indicated their willingness to serve, if elected; however if
either of them should be unable or unwilling to serve, the proxies will be voted
for the election of a substitute nominee designated by the Board of Directors or
for fixing the number of directors at a lesser number. Shares represented by all
proxies received by the Board of Directors and not so marked as to withhold
authority to vote for Dr. Flaschen and Mr. Loeb will be voted FOR the election
of both nominees.
4
<PAGE> 7
The following table sets forth for each nominee to be elected at the
Special Meeting in Lieu of Annual Meeting and for each director whose term of
office will extend beyond the Special Meeting in Lieu of Annual Meeting, the
year each such nominee or director was first elected a director, his age, the
positions currently held by each nominee or director with the Company, the year
each nominee's or director's term will expire and the class of director of each
nominee or director.
<TABLE>
<CAPTION>
NOMINEE OR DIRECTOR'S NAME AND
YEAR NOMINEE OR DIRECTOR YEAR TERM CLASS OF
FIRST BECAME A DIRECTOR AGE POSITION(S) HELD WILL EXPIRE DIRECTOR
- -------------------------------------- --- ------------------------- ----------- --------
<S> <C> <C> <C> <C>
NOMINEES:
Steward S. Flaschen (1996)............ 71 Director 1997 I
Manfred Loeb (1982-1987; 1992)........ 70 Director 1997 I
CONTINUING DIRECTORS:
Lionel H. Olmer (1988)................ 61 Director 1998 II
John L. Sprague (1993)................ 67 Director 1998 II
James E. Donegan (1985)............... 51 Chairman of the Board, 1999 III
President, Chief
Executive Officer and
Clerk
Daniel Deroux (1992).................. 60 Director 1999 III
</TABLE>
NOMINEES FOR ELECTION AT THE SPECIAL MEETING IN LIEU OF ANNUAL MEETING
Dr. Flaschen has been a director of the Company since August 1996. From
1986 to the present, Dr. Flaschen has served as President of Flaschen and
Davies, a management consulting firm. In addition, Dr. Flaschen is Chairman of
the Board of Directors of TranSwitch Corporation, a digital and mixed-signal
semiconductor company, Chairman of the Board of Telco Systems, a
telecommunications company and an Independent General Partner of Merrill Lynch
Venture Capital.
Mr. Loeb has been a director of the Company from 1982 to 1987 and from 1992
to the present. From 1983 to December 1992, he served as the Executive Director
of Tractebel S.A. and Chief Executive Officer of the Electricity and Gas
International Division of Tractebel S.A. Since 1993, Mr. Loeb has served as an
Advisor Director of Tractebel S.A. and Chairman of American Tractebel
Corporation. In addition to serving as a director of the Company, Mr. Loeb
currently serves as a director of Telfin S.A., an affiliate of Tractebel S.A.
DIRECTORS WHOSE TERMS EXTEND BEYOND THE MEETING
Mr. Donegan joined the Company in April 1985 as Chairman of the Board,
Chief Executive Officer and President of the Company. Before joining the
Company, Mr. Donegan held the position of Group Vice President of the Electronic
Components Group at Midland Ross Corporation. Prior to Midland Ross Corporation,
Mr. Donegan was Vice President and General Manager at Cameron & Barkley and
Company. Prior to working at Cameron & Barkley and Company, Mr. Donegan spent
ten years with the General Electric Company in various manufacturing positions.
Mr. Deroux has been a director of the Company since 1992. From 1963 to
1993, he served Tractebel S.A. in various positions, most recently as the Chief
Executive Officer of the Electricity and Gas International Division of Tractebel
S.A. Since 1993, Mr. Deroux has served as the Managing Director of American
Tractebel Corporation, an affiliate of Tractebel S.A.
5
<PAGE> 8
Mr. Olmer has been a director of the Company since 1988. From 1985 until
the present, he has been a partner in the law firm of Paul, Weiss, Rifkind,
Wharton & Garrison, concentrating on international trade law. In addition to
serving as a director of the Company, Mr. Olmer currently serves as a director
of Dresser Industries, a manufacturer of products and provider of services for
the hydrocarbon energy industry.
Dr. Sprague has been a director of the Company since 1993. He has been the
president of John L. Sprague Associates, Inc., a consulting firm, since 1988. In
addition to serving as a director of the Company, Dr. Sprague currently serves
as a director of Aerovox, Inc., a manufacturer of electronic components,
Allmerica Financial Corporation, a financial services company, and California
Micro Devices, a manufacturer of electronic components.
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors of the Company held four (4) meetings during the
fiscal year ended December 31, 1996. Each of the directors attended at least 75%
of the aggregate of all meetings of the Board of Directors during fiscal 1996.
The Company has standing Compensation and Audit Committees. The
Compensation Committee, of which Mr. Loeb and Drs. Flaschen and Sprague are
members, reviews and evaluates the compensation and benefits of all officers of
the Company, reviews general policy matters relating to compensation and
benefits of employees of the Company and makes recommendations concerning these
matters to the Board of Directors. The Compensation Committee administers the
Company's 1988 Non-Statutory Stock Option Pan, 1991 Non-Statutory Stock Option
Plan, 1993 Stock Option and Incentive Plan, 1994 Stock Option and Incentive
Plan, 1996 Incentive Stock Option Plan, 1996 Non-Employee Director Stock Option
Plan, 1996 Employee Stock Purchase Plan and 1997 Stock Option Plan. The
Compensation Committee held one meeting during fiscal 1996 and Mr. Loeb and Drs.
Flaschen and Sprague attended this meeting.
The Audit Committee, of which Messrs. Olmer and Sprague are members,
reviews the Company's independent auditors, the scope and timing of their audit
services and any other services they are asked to perform, the auditor's report
on the Company's consolidated financial statements following completion of their
audit and the Company's policies and procedures with respect to internal
accounting and financial controls. The Audit Committee held two meetings during
fiscal 1996.
The Board of Directors does not have a standing nominating committee or
committee performing similar functions.
6
<PAGE> 9
COMPENSATION AND OTHER
INFORMATION CONCERNING DIRECTORS AND OFFICERS
EXECUTIVE COMPENSATION SUMMARY
The following table sets forth certain information concerning the annual
and long-term compensation for services in all capacities to the Company for the
fiscal years ended December 31, 1995 and 1996, of those persons who were, during
this time (i) the chief executive officer and (ii) the other four most highly
compensated executive officers of the Company (such five officers collectively,
the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION (1)
ANNUAL COMPENSATION --------------------- ALL OTHER
FISCAL ------------------------ SECURITIES UNDERLYING COMPENSATION
NAME AND PRINCIPLE POSITION YEAR SALARY ($) BONUS ($) OPTIONS (#) (2)($)
- ---------------------------------- ------ ---------- --------- --------------------- ------------
<S> <C> <C> <C> <C> <C>
James E. Donegan.................. 1996 $ 227,652 $25,000 65,000 $ 10,879
Chairman, Chief Executive 1995 226,800 25,000 -- 7,298
Officer and President
Frank R. DiPietro................. 1996 150,866 20,000 40,000 2,891
Executive Vice President,
Treasurer 1995 150,000 20,000 -- 2,869
and Chief Financial Officer
Raymond W.B. Chow................. 1996 154,808 20,000 40,000 4,482
Senior Vice President of 1995 145,000 15,000 -- 3,737
Interface Products
Sanford Cohen..................... 1996 145,000 7,000 -- 6,508
Senior Vice President of
Technology 1995 145,000 0 -- 5,572
A. Neal Lambert................... 1996 143,558 0 -- 4,544
Senior Vice President of
Operations 1995 130,000 15,000 -- 2,300
</TABLE>
- ---------------
(1) The Company did not make any restricted stock awards, grant any stock
appreciation rights or make any long-term incentive payments during fiscal
years 1995 or 1996.
(2) Consists of contributions made by the Company on behalf of the Named
Executive Officers to the Company's Tax Deferred Savings Plan, and in the
case of Messrs. Donegan, DiPietro and Cohen, insurance premiums paid by the
Company.
7
<PAGE> 10
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth grants of stock options pursuant to the 1996
Incentive Stock Option Plan granted during the year ended December 31, 1996 to
the Named Executive Officers. No stock appreciation rights ("SARs") were granted
during the year ended December 31, 1996.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE
------------------------------------------------------------ AT ASSUMED ANNUAL
PERCENT OF RATES
TOTAL OF STOCK PRICE
NUMBER OF OPTIONS APPRECIATION
SECURITIES GRANTED TO FOR OPTION TERMS
UNDERLYING EMPLOYEES EXERCISE OR ($)(3)
OPTIONS IN FISCAL BASE PRICE PER ----------------------
NAME GRANTED (#) YEAR (%)(1) SHARE ($)(2) EXPIRATION DATE 5% 10%
- ------------------------- ----------- ----------- -------------- --------------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
James E. Donegan......... 15,000 17.4 $14.38 7/3/06 $135,653 $ 343,770
50,000 27.25 11/25/06 856,869 2,171,474
Frank R. DiPietro........ 15,000 10.7 14.38 7/3/06 135,653 343,770
25,000 27.25 11/25/06 428,434 1,085,737
Raymond W.B. Chow........ 15,000 10.7 14.38 7/3/06 135,653 343,770
25,000 27.25 11/25/06 428,434 1,085,737
Sanford Cohen............ -- -- -- -- -- --
A. Neal Lambert.......... -- -- -- -- -- --
</TABLE>
- ---------------
(1) A total of 373,490 options were granted to employees (including the Named
Executive Officers) in fiscal year 1996 under the Company's 1996 Incentive
Stock Option Plan.
(2) All options were granted at fair market value as determined in accordance
with the 1996 Incentive Stock Option Plan on the date of the grant.
(3) Amounts reported in these columns represent amounts that may be realized
upon exercise of the options immediately prior to the expiration of their
term assuming the specified compound rates of appreciation (5% and 10%) on
the market value of the Company's Common Stock on the date of option grant
over the term of the options. These numbers are calculated based on rules
promulgated by the Securities and Exchange Commission and do not reflect the
Company's estimate of future stock price growth. Actual gains, if any, on
stock option exercises and Common Stock holdings are dependent on the timing
of such exercise and the future performance of the Company's Common Stock.
There can be no assurance that the rates of appreciation assumed in this
table can be achieved or that the amounts reflected will be received by the
individuals.
8
<PAGE> 11
OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table sets forth information with respect to options to
purchase the Company's Common Stock granted under the Company's various stock
plans to the Named Executive Officers, including (i) the number of shares of
Common Stock purchased upon exercise of options in the fiscal year ended
December 31, 1996; (ii) the net value realized upon such exercise; (iii) the
number of unexercised options outstanding at December 31, 1996; and (iv) the
value of such unexercised options at December 31, 1996.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION VALUE TABLE
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF SECURITIES IN-THE-MONEY
UNDERLYING UNEXERCISED OPTIONS AT
SHARES OPTIONS AT YEAR-END YEAR-END(2)($)
ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED(1)($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------- ----------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
James E. Donegan......... 35,000 $631,625 117,995 80,000 $ 3,758,141 $ 995,875
Frank R. DiPietro........ 35,000 724,063 25,000 70,000 796,250 1,343,625
Raymond W.B. Chow........ 28,750 371,000 10,000 95,000 318,500 2,144,800
Sanford Cohen............ 20,000 307,625 15,000 30,000 477,750 955,500
A. Neal Lambert.......... 25,000 321,775 10,000 30,000 318,500 955,500
</TABLE>
- ---------------
(1) Amounts disclosed in this column do not reflect amounts actually received by
the Named Executive Officers but are calculated based on the difference
between the fair market value of the Company's Common Stock on the date of
exercise and the exercise price of the options. Prior to the Company's
public offering in April 1996, Messrs. Donegan, Chow, Cohen and Lambert
exercised options to acquire 5,000, 20,000, 5,000 and 12,000 shares,
respectively. As there was no public trading market for the Common Stock on
the date of the exercise of such options, the value realized for the option
exercises has been calculated on the basis of the initial public offering
price of $9.50 per share. The Named Executive Officers will receive cash
only if and when they sell the Common Stock issued upon exercise of the
options, and the amount of cash received by such individuals is dependent on
the price of the Company's Common Stock at the time of such sale.
(2) Value is based on the difference between the option exercise price and the
fair market value of the Company's Common Stock on December 31, 1996,
multiplied by the number of shares underlying the options.
EXECUTIVE EMPLOYMENT AGREEMENTS
The Company has entered into the following employment agreements with the
Named Executive Officers:
Mr. Donegan and the Company entered into an employment agreement on January
1, 1988. The employment agreement provides that Mr. Donegan will serve as
Chairman of the Board, President and Chief Executive Officer of the Company
until December 31, 1989 and for consecutive two-year terms thereafter unless the
Company provides at least six (6) months advance notice to the contrary prior to
expiration of any two year term; however, Mr. Donegan may voluntarily terminate
this employment and the Company may terminate his employment at any time for
cause. If the Company terminates Mr. Donegan's employment without cause, he will
be entitled to the salary and bonus benefits guaranteed under the employment
agreement until the end of the employment term. Pursuant to the employment
agreement, Mr. Donegan's
9
<PAGE> 12
salary is established annually by the Board of Directors, but may not be less
than $210,000 per year and his annual bonus may not exceed $60,000. The amount
of his annual bonus is calculated by a formula based upon a comparison of the
actual annual consolidated after-tax income or loss of the Company to the
budgeted income or loss approved by the Board of Directors for that year. The
Company must maintain a term life insurance policy in the amount of $500,000 for
Mr. Donegan's designees and a long term disability insurance policy for up to
$10,000 per month for the benefit of Mr. Donegan or his designees. Furthermore,
Mr. Donegan has agreed that he will not directly or indirectly compete with the
Company during the course of his employment and for an additional one-year
period thereafter if he voluntarily terminates his employment or is terminated
for cause.
Mr. DiPietro and the Company entered into an employment agreement on
January 1, 1988. The employment agreement provides that Mr. DiPietro will serve
as a Senior Vice President and Treasurer of the Company until December 31, 1989
and for consecutive two-year terms thereafter unless the Company provides at
least six (6) months advance notice to the contrary prior to expiration of any
two-year term; however, Mr. DiPietro may voluntarily terminate this employment
or the Company may terminate his employment for cause. If the Company terminates
Mr. DiPietro's employment without cause, he will be entitled to the salary
guaranteed under the employment agreement until the end of the employment term.
Pursuant to the employment agreement, Mr. DiPietro's salary is established
annually by the Board of Directors, but may not be less than $96,500 per year.
If Mr. DiPietro's employment is terminated for any reason by either party, the
employment agreement entitles the Company to retain him as a consultant pursuant
to specific terms. Furthermore, Mr. DiPietro has agreed that he will not
directly or indirectly compete with the Company during the course of his
employment and for an additional one-year period thereafter so long as the
Company is continuing to pay either his salary or consulting fees. Mr. DiPietro
became Executive Vice President in November 1996.
Mr. Chow and the Company entered into an employment agreement on January 1,
1996. The employment agreement provides that Mr. Chow will serve as Senior Vice
President of Interface Products of the Company until December 31, 1998 and for
consecutive two-year terms thereafter unless the Company provides at least six
(6) months advance notice to the contrary prior to expiration of any two-year
term; however, Mr. Chow may voluntarily terminate his employment or the Company
may terminate his employment for cause. If the Company terminates Mr. Chow's
employment without cause, he will be entitled to the salary guaranteed under the
employment agreement until the end of the employment term and he may not
directly or indirectly compete with the Company while the Company is continuing
to pay his salary. Pursuant to the employment agreement, Mr. Chow's salary is
established annually by the Board of Directors but may not be less than $145,000
per year.
Mr. Cohen and the Company entered into an employment agreement on July 18,
1988. The employment agreement provides that Mr. Cohen will serve as a Senior
Vice President of the company until August 17, 1990 and for consecutive two-year
terms thereafter unless the Company provides at least six (6) months advance
notice to the contrary prior to expiration of any two-year term; however, Mr.
Cohen may voluntarily terminate his employment or the Company may terminate his
employment for cause. If the Company terminates Mr. Cohen's employment without
cause, he will be entitled to the salary guaranteed under the employment
agreement until the earlier of one year from the date of termination or the
obtainment of substantially equivalent employment. Furthermore, Mr. Cohen has
agreed that he will not directly or indirectly compete with the Company during
such period so long as the Company is continuing to pay his salary. Pursuant to
the employment agreement, Mr. Cohen's salary is established annually by the
Board of Directors, but may not be less than $135,000 per year.
10
<PAGE> 13
Mr. Lambert and the Company entered into an employment agreement on August
1, 1993. The employment agreement provides that Mr. Lambert will serve as Senior
Vice President -- West Coast Operations of the Company until July 31, 1995 and
for consecutive two-year terms thereafter unless the Company provides at least
six (6) months advance notice to the contrary. Mr. Lambert may voluntarily
terminate his employment or the Company may terminate his employment for cause.
If the Company terminates Mr. Lambert's employment without cause, he will be
entitled to the salary guaranteed under the employment agreement until the end
of the employment term and he may not directly or indirectly compete with the
Company while the Company is continuing to pay his salary. Pursuant to the
employment agreement, Mr. Lambert's salary is established annually by the Board
of Directors, but may not be less than $120,000 per year. Mr. Lambert became
Senior Vice President of Operations in May 1994. In November 1996, the Company
provided notice that this agreement will not be renewed.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors currently consists of
Mr. Loeb and Drs. Flaschen and Sprague, each of whom is an independent,
non-employee director. The Compensation Committee is responsible for developing
the compensation programs that relate to the Company's executive officers,
senior management and other key employees and for establishing the specific
short- and long-term compensation elements thereunder. The Compensation
Committee also oversees the general compensation structure for all of the
Company's employees. In addition, the Compensation Committee administers the
Company's 1988 Non-Statutory Stock Option Plan, 1991 Non-Statutory Stock Option
Plan, 1993 Stock Option and Incentive Plan, 1994 Stock Option and Incentive
Plan, 1996 Incentive Stock Option Plan, 1996 Non-Employee Director Stock Option
Plan, 1996 Employee Stock Purchase Plan and 1997 Stock Option Plan.
The Company's executive compensation program established by the
Compensation Committee is designed to provide levels of compensation in formats
that assist the Company in attracting, motivating and retaining qualified
executives by providing a competitive compensation package geared to individual
and corporate performance. The Compensation Committee strives to establish
performance criteria, evaluate performance and establish base salary, annual
bonuses and long-term incentives for the Company's key decision makers based
upon performance and is designed to provide appropriate incentives for
maximization of the Company's short- and long-term financial results for the
benefit of the Company's shareholders.
In order to meet its objectives, the Compensation Committee has chosen
three basic components for the Company's executive compensation program to meet
the Company's compensation philosophy. Base salaries, the fixed regular
component of executive compensation, are based upon (i) base salary levels among
a competitive peer group, (ii) the Company's past financial performance and
future expectations, (iii) the general and industry-specific business
environment and (iv) individual performance. Annual bonuses, which are directly
linked to the Company's yearly performance, are designed to provide additional
cash compensation based on short-term performance of certain key employees.
Stock option grants, under the long-term component of executive compensation,
are designed to incentivize and reward executive officers and key employees for
delivering value to the Company's shareholders over a longer, measurable period
of time. Historically, the Company has used the grant of stock options that vest
over some measurable period of time, currently five years, to accomplish this
objective.
Mr. Donegan is the President, Chief Executive Officer and Chairman of the
Board of Directors. His fiscal 1996 performance was evaluated on the basis of
the factors described above applicable to executive officers generally. His base
salary was based on a number of factors, including the base salaries of
executives
11
<PAGE> 14
performing similar functions for peer companies and his employment contract. The
annual bonus and stock option grant components of his compensation, as well as
his salary, reflect the Company's strong financial performance, the Company's
successful initial public offering and secondary public offering, the continued
introduction and commercialization of new products and progress toward achieving
business goals, as well as the achievement by Mr. Donegan of other non-financial
goals. The Company's performance in 1996 included a significant increase in
total revenues and net income. In assessing Mr. Donegan's performance for fiscal
1996, the Compensation Committee concluded that the financial and non-financial
goals on which his compensation was based had been achieved.
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), generally prevents publicly-held corporations from deducting, for
federal income tax purposes, compensation (including compensation recognized by
the executive as a result of exercising a non-qualified stock option) in excess
of $1 million paid to the Named Executive Officers, with certain exceptions. The
Compensation Committee has considered these requirements and it is the
Compensation Committee's present intention that, so long as it is consistent
with its overall compensation objectives, substantially all of the Named
Executive Officers' compensation will be deductible for federal income tax
purposes.
RESPECTFULLY SUBMITTED BY THE COMPENSATION COMMITTEE:
Manfred Loeb
Steward S. Flaschen
John L. Sprague
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Board of Directors has established a Compensation Committee
consisting of Mr. Loeb and Drs. Flaschen and Sprague. No person who served as a
member of the Compensation Committee was, during the fiscal year ended December
31, 1996, an officer or employee of the Company or any of its subsidiaries, was
formerly an officer of the Company or any of its subsidiaries, or had any
relationship requiring disclosure herein. No executive officer of the Company
served as a member of the compensation committee of another entity (or other
committee of the Board of Directors performing equivalent functions or, in the
absence of any such committee, the entire Board of Directors), one of whose
executive officers served as a member of the Compensation Committee of the
Company.
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company receive $2,000 per quarter
as a retainer, $1,000 for each meeting of the Board of Directors attended in
person, $500 for each teleconference meeting of the Board of Directors and
$1,000 for each committee meeting, unless such committee meeting is held on the
same day as a meeting of the Board of Directors in which case the compensation
is reduced to $500. No employee of the Company receives separate compensation
for services rendered as a director. All directors are reimbursed for expenses
in connection with attending Board and committee meetings.
On March 14, 1997, the Board of Directors of the Company adopted the 1997
Stock Option Plan, subject to approval by the Company's shareholders at the
Special Meeting in Lieu of Annual Meeting to which this proxy statement relates.
Among other provisions of the 1997 Stock Option Plan, each director, who is not
also an employee or consultant of the Company, will receive on the third Monday
in July, 1997 (and on the same day each year thereafter) an option to purchase
5,000 shares of Common Stock (the "Director Options").
12
<PAGE> 15
Each person who is not also an employee or consultant of the Company and becomes
a director after the third Monday in July, 1997 will receive, upon the date of
his or her initial election as a director, an option to purchase 5,000 shares of
Common Stock. The Director Options granted will vest one-fifth on each
anniversary of the date of grant and have an exercise price equal to the fair
market value of the Common Stock on the date of grant. The term of each Director
Option will be for a period of ten years from the date of grant. Director
Options will be subject to accelerated vesting under certain circumstances and
may be transferred to the extent vested.
If the 1997 Stock Option Plan is approved by the shareholders at the
Special Meeting in Lieu of Annual Meeting, the 1996 Non-Employee Director Stock
Option Plan (the "Director Plan") shall be terminated as to the grant of any new
options thereunder effective immediately. The Board of Directors adopted the
Director Plan on January 26, 1996 and the stockholders approved the Director
Plan on February 12, 1996. Under the Director Plan, each director who is not
also an employee of the Company receives upon the date of his or her initial
election as a director an option to purchase 5,000 shares of Common Stock.
Options granted under the Director Plan vest one-fifth on each anniversary of
the date of grant. In addition, on each third Monday of July, beginning in 1997,
so long as he or she is still a director on that date, such director receives an
option to purchase 2,500 shares of Common Stock, vesting one-fifth on each
anniversary of the date of grant. All options granted under the Director Plan
have an exercise price equal to the fair market value of the Common Stock on the
date of grant. The term of each option is for a period of ten years from the
date of grant. Options may not be assigned or transferred except by will or by
the laws of descent and distribution and are exercisable to the extent vested
only while the optionee is serving as a director of the Company or within 90
days after the optionee ceases to serve as a director of the Company (except
that if a director dies or becomes disabled while he or she is serving as a
director of the Company, the option automatically becomes fully vested and is
exercisable until the scheduled expiration date of the Option).
The Company has purchased directors' and officers' liability insurance
covering all of the Company's directors and officers. The aggregate premium for
this insurance policy in 1996 was $187,200.
13
<PAGE> 16
STOCK PERFORMANCE GRAPH
The following performance graph compares the percentage change in the
cumulative total shareholder return on the Company's Common Stock during the
period from the Company's initial public offering on April 2, 1996 through
December 31, 1996, with the cumulative total return on (i) a group consisting of
the Company's peer corporations on a line-of-business basis (the "Peer Group")
and (ii) the Nasdaq Composite Index (Total Return). The comparison assumes $100
was invested on April 2, 1996 in the Company's Common Stock, the Peer Group and
the Nasdaq Composite Index and assumes reinvestment of dividends, if any. The
Peer Group consists of all corporations that are members of the semiconductor
industry with 3674 as their Primary Standard Industrial Classification Number.
The Comparison assumes $100 was invested on April 2, 1996 in the Company's
Common Stock at the $9.50 initial offering price per share and in each of the
foregoing indices and assumes reinvestment of dividends, if any.
COMPARISON OF FIVE YEAR* CUMULATIVE TOTAL RETURN AMONG
SIPEX CORPORATION, PEER GROUP AND NASDAQ COMPOSITE INDEX (TOTAL RETURN)(1)(2)
<TABLE>
<CAPTION>
NASDAQ COMPOSTITE
MEASUREMENT PERIOD SIPEX CORPORATION INDEX (TOTAL
(FISCAL YEAR COVERED) COMMON STOCK PEER GROUP RETURN)
<S> <C> <C> <C>
2-APR-96 100.00 100.00 100.00
31-DEC-96 271.58 164.90 116.19
</TABLE>
- ---------------
* $100 invested on April 2, 1996 in Common Stock or the appropriate index,
including reinvestment of dividends, through fiscal year ended December 31,
1996.
(1) Prior to April 2, 1996, the Company's Common Stock was not publicly traded.
Comparative data is provided only for the period since that date. This chart
is not "soliciting material," is not deemed filed with the Securities and
Exchange Commission and is not to be incorporated by reference in any
filings of the Company under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as
14
<PAGE> 17
amended, whether made before or after the date hereof and irrespective of
any general incorporation language in any such filing.
(2) The stock price performance shown on the graph is not necessarily indicative
of future price performance. Information used on this graph was obtained
from Media General Financial Services, Inc., a source believed to be
reliable, although the Company is not responsible for any errors or
omissions in such information.
PROPOSAL II
APPROVAL OF THE ADOPTION OF THE 1997 STOCK OPTION PLAN
On March 14, 1997, the Board of Directors adopted the 1997 Stock Option
Plan, subject to the approval of the Company's shareholders. The 1997 Stock
Option Plan provides for the grant of incentive stock options to employees and
the grant of non-qualified stock options, stock awards and opportunities to make
direct purchases of stock in the Company to employees, consultants, directors
and officers of the Company.
The Company's 1997 Stock Option Plan was adopted by the Board of Directors
of the Company to replace the Company's 1996 Non-Employee Director Stock Option
Plan and 1996 Incentive Stock Option Plan in the event that the shareholders
approve the adoption of the 1997 Stock Option Plan. In such event, the 1996
Non-Employee Director Stock Option Plan and 1996 Incentive Stock Option Plan
shall be terminated as to the grant of any new options thereunder effective
immediately upon the date of shareholder approval of the 1997 Stock Option Plan.
If the shareholders fail to approve the adoption of the 1997 Stock Option Plan,
then the 1996 Non-Employee Director Stock Option Plan and 1996 Incentive Stock
Option Plan shall remain in effect until such plans expire by their terms. The
affirmative vote of a majority of the shares of Common Stock of the Company
represented in person or by proxy at the Special Meeting in Lieu of Annual
Meeting and entitled to vote will be required to approve the adoption of the
1997 Stock Option Plan.
The Board of Directors approved the 1997 Stock Option Plan in order to
respond to recent changes in Federal securities regulations affecting equity
compensation plans and in order to increase the number of shares available for
grant by approximately 385,000 shares. The Board of Directors believes the 1997
Stock Option Plan gives the Company a sufficient number of shares for the
foreseeable future to provide equity incentives to attract and retain employees
and directors, and allows the Company greater flexibility under current Federal
securities laws to accomplish these goals. The Board of Directors unanimously
recommends a vote FOR the approval of the adoption of the 1997 Stock Option
Plan.
The following is a summary description of the 1997 Stock Option Plan, which
is qualified in its entirety by reference to the complete text of the 1997 Stock
Option Plan which is attached as APPENDIX A to this Proxy Statement.
SUMMARY OF THE 1997 STOCK OPTION PLAN
Purpose. The purpose of the 1997 Stock Option Plan is to encourage
directors, officers and employees of the Company as well as other individuals
who render services to the Company by providing opportunities to purchase stock
of the Company pursuant to options granted under the 1997 Stock Option Plan.
Shares Subject to the 1997 Stock Option Plan. The Board of Directors has
reserved a maximum of 600,000 shares of Common Stock for issuance under the 1997
Stock Option Plan.
15
<PAGE> 18
Eligibility. The 1997 Stock Option Plan provides for the grant of
incentive stock options ("ISOs") within the meaning of Section 422 of the Code
to employees of the Company and the grant of non-qualified stock options
("NQSOs"), stock awards ("Awards") or opportunities to make direct purchases of
stock in the Company ("Purchases") to employees, consultants, directors and
officers of the Company. For information concerning the United States Federal
income tax consequences of ISOs, NQSOs, Awards or Purchases, please see below.
Administration. The 1997 Stock Option Plan is administered by the
Compensation Committee of the Board of Directors. Subject to the provisions of
the 1997 Stock Option Plan, except with respect to Compensation Committee
Members, the Compensation Committee has the authority to (i) determine to whom
options, Awards and authorizations to make Purchases shall be granted, (ii)
determine the time at which options or Awards shall be granted or Purchases
made, (iii) determine the purchase price for NQSOs, Awards and Purchases, (iv)
determine whether each option granted shall be an ISO or an NQSO, (v) determine
when each option shall become exercisable and the duration of the exercise
period, (vi) determine whether restrictions such as repurchase options are to be
imposed on shares subject to options, Awards and Purchases and the nature of
such restrictions, if any and (vii) interpret the 1997 Stock Option Plan and
prescribe and rescind rules and regulations relating to it.
Option Price and Duration. The exercise price per share for each ISO and
NQSO granted under the 1997 Stock Option Plan may not be less than the fair
market value per share of Common Stock on the date of such grant. In the case of
an ISO to be granted to an employee owning stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company, the price per share for such ISO shall not be less than one hundred ten
percent (110%) of the fair market value per share of Common Stock on the date of
grant. The aggregate fair market value (determined at the time of grant) of the
shares of Common Stock subject to ISOs granted to an employee and which first
become exercisable during any calendar year cannot exceed $100,000; any portion
of an ISO grant that exceeds such $100,000 limit will be treated for tax
purposes as a NQSO. ISOs are not transferable by the optionholder except by will
or by the laws of descent and distribution. NQSOs are transferable to the extent
determined by the Compensation Committee and as set forth in the agreement
relating to the grant of any such NQSOs. Each option expires on the date
specified by the Compensation Committee, but not more than (i) ten years from
the date of grant in the case of options generally and (ii) five years from the
date of grant in the case of ISOs granted to an employee owning stock possessing
more than ten percent (10%) of the total combined voting power of all classes of
stock of the Company.
Exercisability of Shares. Options granted to Non-Employee Directors
pursuant to the automatic grant under the 1997 Stock Option Plan shall become
exercisable over five (5) years in five (5) equal annual installments beginning
from the date such options are granted. The vesting schedule of all other
Options, Awards and Purchases shall be determined by the Committee. An option
shall be exercisable in whole or in part by giving written notice to the
Company, stating the number of shares with respect to which the option is being
exercised, accompanied by payment in full for such shares.
Formula Plan Grants for Non-Employee Directors. Among other provisions of
the 1997 Stock Option Plan, each director, who is not also an employee or
consultant of the Company will receive on the third Monday in July, 1997 (and on
the same day each year thereafter) an option to purchase 5,000 shares of Common
Stock (the "Director Options"). Each person who is not also an employee or
consultant of the Company and becomes a director after the third Monday in July,
1997 will receive, upon the date of his or her initial election as a director,
an option to purchase 5,000 shares of Common Stock. The Director Options granted
will vest one-fifth on each anniversary of the date of grant and have an
exercise price equal to the fair
16
<PAGE> 19
market value of the Common Stock on the date of grant. The term of each Director
Option will be for a period of ten years from the date of grant. Director
Options are subject to accelerated vesting under certain circumstances and may
be transferred to the extent vested.
Amendment and Termination. The Board of Directors may from time to time
adopt amendments, certain of which are subject to shareholder approval, and may
terminate the 1997 Stock Option Plan at any time (although such action shall not
affect options previously granted). Generally, no ISO may be exercised more than
three months following termination of employment. However, in the event that
termination is due to death or disability, the option is exercisable for a
maximum of 180 days after such termination. Any shares subject to an option
which for any reason expires or terminates unexercised may again be available
for future grants under the 1997 Stock Option Plan. No options may be granted
under the 1997 Stock Option Plan after March 13, 2007.
The Board of Directors recommends a vote FOR the approval of the adoption
of the 1997 Stock Option Plan.
STOCK PLANS
1988 NON-STATUTORY STOCK OPTION PLAN
The Company's 1988 Non-Statutory Stock Option Plan (the "1988 Plan") was
adopted by the Board of Directors on October 22, 1988. The 1988 Plan provides
for the issuance of a maximum of 62,500 shares of Common Stock pursuant to the
grant of non-qualified stock options to employees, officers and other
individuals providing services or acting as directors of the Company. Options
granted under the 1988 Plan generally vest 20% on the date of grant and an
additional 20% annually on each subsequent anniversary of the date of grant.
As of April 10, 1997, options to purchase 500 shares of Common Stock at an
exercise price of $11.00 per share were outstanding under the 1988 Plan. The
1988 Plan is administered by the Compensation Committee of the Board of
Directors. NO FURTHER OPTIONS MAY BE GRANTED OR ISSUED UNDER THIS PLAN.
1991 NON-STATUTORY STOCK OPTION PLAN
The Company's 1991 Non-Statutory Stock Option Plan (the "1991 Plan") was
adopted by the Board of Directors on April 12, 1991. The 1991 Plan provides for
the issuance of a maximum of 239,245 shares of Common Stock pursuant to the
grant of non-qualified stock options in recognition of past services provided by
and/or to provide a performance incentive for certain key employees, officers
and other individuals providing services or acting as directors of the Company.
Options granted under the 1991 Plan generally vest 20% on the date of grant and
an additional 20% annually on each subsequent anniversary of the date of grant.
As of April 10, 1997, options to purchase 67,996 shares of Common Stock at
an average exercise price of $0.40 per share were outstanding under the 1991
Plan. THE 1991 PLAN EXPIRED ON JUNE 30, 1991 AND NO FURTHER OPTIONS MAY BE
GRANTED UNDER THIS PLAN.
1993 STOCK OPTION AND INCENTIVE PLAN
The Company's 1993 Stock Option and Incentive Plan (the "1993 Plan") was
adopted by the Board of Directors on April 22, 1993 and approved by the
Company's shareholders on May 27, 1993. The 1993 Plan provides for the issuance
of a maximum of 132,908 shares of Common Stock pursuant to the grant to
17
<PAGE> 20
employees and officers of "incentive stock options" within the meaning of the
Internal Revenue Code and the grant of non-qualified stock options to service
providers and directors of the Company. Options granted under the 1993 Plan
generally vest 20% on the date of grant and an additional 20% annually on each
subsequent anniversary of the date of grant.
As of April 10, 1997, options to purchase 58,750 shares of Common Stock at
an average exercise price of $0.40 per share were outstanding under the 1993
Plan. The 1993 Plan is administered by the Compensation Committee of the Board
of Directors. NO FURTHER OPTIONS MAY BE GRANTED OR ISSUED UNDER THIS PLAN.
1994 STOCK OPTION AND INCENTIVE PLAN
The Company's 1994 Stock Option and Incentive Plan (the "1994 Plan") was
adopted by the Board of Directors on October 3, 1994 and approved by the
Company's shareholders on May 26, 1995. The 1994 Plan provides for the issuance
of a maximum of 593,750 shares of Common Stock pursuant to the grant to
employees and officers of "incentive stock options" within the meaning of the
Internal Revenue Code and the grant of non-qualified stock options to service
providers and directors of the Company. Options granted under the 1994 Plan
generally vest 20% on the date of grant and an additional 20% annually on each
subsequent anniversary of the date of grant.
As of April 10, 1997, options to purchase 297,432 shares of Common Stock at
an average exercise price of $0.40 per share were outstanding under the 1994
Plan. The 1994 Plan is administered by the Compensation Committee of the Board
of Directors. NO FURTHER OPTIONS MAY BE GRANTED OR ISSUED UNDER THIS PLAN.
1996 INCENTIVE STOCK OPTION PLAN
The 1996 Incentive Stock Option Plan (the "1996 ISO Plan") was adopted by
the Board of Directors on January 26, 1996 and approved by the Company's
shareholders on February 12, 1996. The 1996 ISO Plan provides for the grant of
options to purchase shares of Common Stock of the Company pursuant to the grant
to employees and officers of "incentive stock options" within the meaning of the
Internal Revenue Code. The 1996 ISO Plan has reserved for issuance a maximum of
600,000 shares.
As of April 10, 1997, options to purchase 448,178 shares of Common Stock at
a weighted average exercise price of $21.68 per share were outstanding under the
1996 ISO Plan. The 1996 ISO Plan is administered by the Compensation Committee
of the Board of Directors. Subject to the provisions of the 1996 ISO Plan, the
Compensation Committee has the authority to select the optionees and determine
the terms of the incentive stock options granted, including (i) the number of
shares, (ii) option exercise terms, (iii) the duration of the option and (iv)
the time, manner and form of payments for exercise of an option. An incentive
stock option is not transferable by the optionholder except by will or by the
laws of descent and distribution. The exercise price of the grants made under
the 1996 ISO Plan cannot be less than the market price of the Common Stock at
the date of grant. Generally, no incentive stock option may be exercised more
than 90 days
18
<PAGE> 21
following termination of employment unless the termination is due to death or
disability, in which case the option is exercisable for a maximum of 180 days
after such termination.
<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERLYING OPTIONS
GRANTED UNDER THE
1996 ISO PLAN
NAME AND POSITION IN FISCAL YEAR 1996
- ---------------------------------------------------------------------------- -------------------
<S> <C>
James E. Donegan............................................................ 65,000
Chairman, Chief Executive Officer and President
Frank R. DiPietro........................................................... 40,000
Executive Vice President, Treasurer and
Chief Financial Officer
Raymond W.B. Chow........................................................... 40,000
Senior Vice President of Technology
Sanford Cohen............................................................... 0
Senior Vice President of Technology
A. Neal Lambert............................................................. 0
Senior Vice President of Operations
All current executive officers as a group ((5) persons)..................... 145,000
All current directors who are not executive officers as a group ((6)
persons).................................................................. 0
All employees who are not executive officers as a group..................... 228,490
</TABLE>
IF THE 1997 STOCK OPTION PLAN IS APPROVED BY THE SHAREHOLDERS AT THE
SPECIAL MEETING IN LIEU OF ANNUAL MEETING, THE 1996 ISO PLAN SHALL BE TERMINATED
AS TO THE GRANT OF ANY NEW OPTIONS THEREUNDER EFFECTIVE IMMEDIATELY. THE COMPANY
DOES NOT INTEND TO GRANT ANY OPTIONS PURSUANT TO THE 1996 ISO PLAN BETWEEN APRIL
10, 1997 AND THE DATE OF THE ANNUAL MEETING.
1996 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
The 1996 Non-Employee Stock Option Plan (the "1996 Director Option Plan")
was adopted by the Board of Directors on January 26, 1996 and approved by the
Company's shareholders on February 12, 1996. The 1996 Director Stock Option Plan
provides for the grant of options to purchase a maximum of 150,000 shares of
Common Stock of the Company to non-employee directors of the Company.
The 1996 Director Option Plan is administered by the Compensation Committee
of the Board of Directors. Upon the commencement of the 1996 Director Option
Plan, each director who was not also an employee of the Company and who was a
director on January 26, 1996, received an option to purchase 10,000 shares of
Common Stock. Any person who becomes a director of the Company after January 26,
1996 shall receive an option to purchase 5,000 shares of Common Stock. Options
granted under the 1996 Director Option Plan become exercisable in five equal
annual installments beginning on the first anniversary date of the grant
provided that the optionee remains a director over five years. Each non-employee
director will automatically receive, each year after his or her initial grant,
an option to purchase an additional 2,500 shares on each third Monday of July,
beginning in 1997, which will vest annually over five years. All options granted
under the 1996 Director Option Plan will have an exercise price equal to the
fair market value of the Common Stock on the date of grant. The term of each
option will be for a period of ten years from the date of grant. Options may not
be assigned or transferred except by will or by the laws of descent and
distribution and are exercisable to the extent vested only while the optionee is
serving as a director of the Company or within
19
<PAGE> 22
90 days after the optionee ceases to serve as a director of the Company (except
that if a director dies or becomes disabled while he or she is serving as a
director of the Company, the option is exercisable for a maximum of 180 days
after such death or disability). Pursuant to the 1996 Director Option Plan,
Messrs. Deroux, Loeb, Olmer, Sprague and van Marcke were each automatically
granted, on January 26, 1996, a non-qualified option to purchase 10,000 shares
of Common Stock at an exercise price of $9.50 per share. Upon joining the Board
of Directors, Dr. Flaschen was automatically granted, on August 28, 1996, a
non-qualified option to purchase 5,000 shares of Common Stock at an exercise
price of $17.13 per share.
<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERLYING OPTIONS
GRANTED UNDER THE
DIRECTOR OPTION PLAN
NAME AND POSITION IN FISCAL YEAR 1996
- --------------------------------------------------------------------------- --------------------
<S> <C>
All current executive officers as a group (5 persons)...................... 0
All current directors who are not executive officers as a group
(6 persons)................................................................. 55,000
All employees who are not executive officers as a group.................... 0
</TABLE>
IF THE 1997 STOCK OPTION PLAN IS APPROVED BY THE SHAREHOLDERS AT THE
SPECIAL MEETING IN LIEU OF ANNUAL MEETING, THE 1996 DIRECTOR OPTION PLAN SHALL
BE TERMINATED AS TO THE GRANT OF ANY NEW OPTIONS THEREUNDER EFFECTIVE
IMMEDIATELY. 1996 EMPLOYEE STOCK PURCHASE PLAN
The 1996 Employee Stock Purchase Plan (the "1996 Purchase Plan") was
adopted by the Board of Directors on January 26, 1996 and approved by the
Company's shareholders on February 12, 1996. The 1996 Purchase Plan provides for
the issuance of a maximum of 250,000 shares of Common Stock pursuant to the
exercise of nontransferable options granted to participating employees.
The 1996 Purchase Plan is administered by the Compensation Committee of the
Board of Directors. All employees of the Company, except employees who own five
percent or more of the Company's stock, whose employment is 20 hours or more per
week and more than five months in any calendar year and who have completed at
least one year of employment are eligible to participate in the 1996 Purchase
Plan. Employees who own five percent or more of the Company's Common Stock and
directors who are not employees of the Company may not participate in the 1996
Purchase Plan. To participate in the 1996 Purchase Plan, an employee must
authorize the Company to deduct an amount (not less than one percent nor more
than ten percent of a participant's total cash compensation) from his or her pay
during the six-month periods commencing on January 1 and July 1 of each year
(each a "Plan Period"), but in no case shall an employee be entitled to purchase
more than 1,000 shares in any Plan Period. The exercise price for the option for
each Plan Period is 85% of the lesser of the market price of the Common Stock on
the first or last business day of the Plan Period. If an employee is not a
participant on the last day of the Plan Period, such employee is not entitled to
exercise his or her option, and the amount of his or her accumulated payroll
deductions will be
20
<PAGE> 23
refunded. An employee's rights under the 1996 Purchase Plan terminate upon his
or her voluntary withdrawal from the plan at any time or upon termination of
employment.
<TABLE>
<CAPTION>
NUMBER OF SHARES
PURCHASED UNDER THE
1996 PURCHASE PLAN
NAME AND POSITION IN FISCAL YEAR 1996
- ------------------------------------------------------------------------ -------------------
<S> <C>
James E. Donegan........................................................ 0
Chairman, Chief Executive Officer and President
Frank R. DiPietro....................................................... 263
Executive Vice President, Treasurer and Chief Financial Officer
Raymond W.B. Chow....................................................... 0
Senior Vice President of Technology
Sanford Cohen........................................................... 100
Senior Vice President of Technology
A. Neal Lambert......................................................... 0
Senior Vice President of Operations
All current executive officers as a group (5) persons................... 363
All current directors who are not executive officers as a group (6)
persons............................................................... 0
All employees who are not executive officers as a group................. 6,034
</TABLE>
1997 STOCK OPTION PLAN
Please refer to Proposal II above.
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following discussion of United States federal income tax consequences
of the issuance and exercise of options granted under the 1988 Plan, 1991 Plan,
1993 Plan, 1994 Plan, 1996 ISO Plan, 1996 Director Option Plan, 1997 Stock
Option Plan and 1996 Purchase Plan is based upon the provisions of the Code as
in effect on the date of this Proxy Statement, current regulations, and existing
administrative rulings of the Internal Revenue Service. It is not intended to be
a complete discussion of all of the United States federal income tax
consequences of these plans or of the requirements that must be met in order to
qualify for the described tax treatment. In addition there may be foreign,
state, and local tax consequences that are not discussed herein.
The following general rules are applicable under current United States
federal income tax law to incentive stock options, granted under the 1993 Plan,
1994 Plan, 1996 ISO Plan and 1997 Stock Option Plan:
1. In general, no taxable income results to the optionee upon the
grant of an ISO or upon the issuance of shares to him or her upon the
exercise of the ISO, and no federal income tax deduction is allowed to the
Company upon either the grant or exercise of an ISO.
2. If shares acquired upon exercise of an ISO are not disposed of
within (i) two years following the date the ISO was granted or (ii) one
year after the date the shares are issued to the optionee pursuant to the
ISO exercise (the "Holding Periods"), the difference between the amount
realized on any subsequent disposition of the shares and the exercise price
will generally be treated as capital gain or loss to the optionee.
21
<PAGE> 24
3. If shares acquired upon exercise of an ISO are disposed of on or
before the expiration of one or both of the requisite Holding Periods (a
"Disqualifying Disposition"), then in most cases the lesser of (i) any
excess of the fair market value of the shares at the time of exercise of
the ISO over the exercise price or (ii) the actual gain on disposition,
will be treated as compensation to the optionee and will be taxed as
ordinary income in the year of such disposition.
4. In any year that an optionee recognizes ordinary income on a
Disqualifying Disposition of stock acquired by exercising an ISO, the
Corporation generally should be entitled to a corresponding deduction for
federal income tax purposes.
5. The difference between the amount realized by the optionee as the
result of a Disqualifying Disposition and the sum of (i) the exercise price
and (ii) the amount of ordinary income recognized under the above rules
will be treated as capital gain or loss.
6. Capital gain or loss recognized by an optionee on a disposition of
shares will be long-term capital gain or loss if the optionee's holding
period for the shares exceeds one year.
7. An optionee may be entitled to exercise an ISO by delivering shares
of the Company's Common Stock to the Company in payment of the exercise
price, if the optionee's ISO agreement so provides. If an optionee
exercises an ISO in such fashion, special rules will apply.
8. In addition to the tax consequences described above, the exercise
of ISOs may result in a further "minimum tax" under the Code. The Code
provides that an "alternative minimum tax" (at a maximum rate of 28%) will
be applied against a taxable base which is equal to "alternative minimum
taxable income," reduced by a statutory exemption. In general, the amount
by which the value of the Common Stock received upon exercise of the ISO
exceeds the exercise price is included in the optionee's alternative
minimum taxable income. A taxpayer is required to pay the higher of his
regular tax liability or the alternative minimum tax. A taxpayer who pays
alternative minimum tax attributable to the exercise of an ISO may be
entitled to a tax credit against his or her regular tax liability in later
years.
9. Special rules apply if the Common Stock acquired through the
exercise of an ISO is subject to vesting, or is subject to certain
restrictions on resale under federal securities laws applicable to
directors, officers or 10% shareholders.
The following general rules are applicable under current United States
federal income tax law to options granted under the 1988 Plan, 1991 Plan and the
1997 Stock Option Plan, which do not qualify as ISOs, and all options granted
under the 1996 Director Option Plan:
1. The optionee generally does not recognize any taxable income upon
the grant of a NQSO, and the Corporation is not allowed a federal income
tax deduction by reason of such grant.
2. The optionee generally will recognize ordinary income at the time
of exercise of the NQSO in an amount equal to the excess, if any, of the
fair market value of the shares on the date of exercise over the exercise
price. The Corporation may be required to withhold income tax on this
amount.
3. When the optionee sells the shares acquired through the exercise of
a NQSO, he or she generally will recognize a capital gain or loss in an
amount equal to the difference between the amount realized upon the sale of
the shares and his or her basis in the stock (generally, the exercise price
plus the amount taxed to the optionee as ordinary income). If the
optionee's holding period for the shares exceeds one year, such gain or
loss will be a long-term capital gain or loss.
22
<PAGE> 25
4. The Corporation generally should be entitled to a federal income
tax deduction when ordinary income is recognized by the optionee.
5. An optionee may be entitled to exercise a NQSO by delivering shares
of the Corporation's Common Stock to the Corporation in payment of the
exercise price. If an optionee exercises a NQSO in such fashion, special
rules will apply.
6. Special rules apply if the Common Stock acquired through the
exercise of a NQSO is subject to vesting, or is subject to certain
restrictions on resale under federal securities laws applicable to
directors, officers or 10% shareholders.
The following general rules are currently applicable under current United
States federal income tax law to options under the 1996 Purchase Plan:
1. The amounts deducted from an employee's pay under the 1996 Purchase
Plan will be included in the employee's compensation subject to federal
income tax. In general, no additional income will be realized by the
employee either at the time options are granted pursuant to the 1996
Purchase Plan or at the time the employee purchases shares pursuant to the
1996 Purchase Plan.
2. If the employee disposes of shares of Common Stock purchased
pursuant to the 1996 Purchase Plan more than two years after the first
business day of the Plan Period in which the employee acquired the shares,
then upon such disposition the employee will recognize ordinary income in
an amount equal to the lesser of:
(a) the excess, if any, of the fair market value of the shares on
the date of disposition over the amount the employee paid for the
shares, or
(b) the excess of the fair market value of the shares on the first
business day of the Plan Period over the option price.
In addition, the employee generally will recognize capital gain or
loss in an amount equal to the difference between the amount realized upon
the sale of shares and the employee's tax basis in the shares (i.e., the
amount the employee paid for the shares plus the amount, if any, taxed as
ordinary income). If the employee's holding period for the shares is more
than one year, such gain or loss will be long-term capital gain or loss.
3. If the employee disposes of shares of Common Stock purchased
pursuant to the 1996 Purchase Plan within two years after the first
business day of the Plan Period in which the employee acquired the shares,
then upon disposition, the employee will recognize ordinary income in an
amount equal to the excess, if any, of the fair market value of the shares
on the last business day of the Plan Period over the amount the employee
paid for the shares.
In addition, the employee generally will recognize capital gain or
loss in an amount equal to the difference between the amount realized upon
the sale of shares and the employee's tax basis in the shares (i.e., the
amount the employee paid for the shares plus the amount, if any, taxed as
ordinary income). If the employee's holding period for the shares is more
than one year, such gain or loss will be long-term capital gain or loss.
4. If the two-year holding period is satisfied, the Corporation will
not receive any deduction for federal income tax purposes with respect to
the options or the shares of Common Stock issued upon their exercise. If
the two-year holding period is not satisfied, the Corporation generally
will be entitled to a
23
<PAGE> 26
federal income tax deduction in an amount equal to the amount which is
considered ordinary income as a result of such disposition.
The following general rules are applicable under current federal income tax
law to the grant of Awards and Purchases under the 1997 Stock Option Plan:
Under current United States federal income tax law, persons receiving
Common Stock pursuant to an Award or a grant of an opportunity to make a
Purchase generally recognize ordinary compensation income equal to the fair
market of the shares received, reduced by any purchase price paid. The Company
generally should be entitled to a corresponding federal income tax deduction.
When such stock is sold, the seller generally will recognize capital gain or
loss. Special rules apply if the stock acquired is subject to vesting, or is
subject to certain restrictions on resale under federal securities laws
applicable to directors, officers or 10% shareholders.
CERTAIN TRANSACTIONS
Pursuant to an Agreement of Lease, dated January 31, 1996, the Company
leases its Billerica facility of approximately 46,600 square feet from ATC
Billerica Corporation, an affiliate of Tractebel S.A. Under the Agreement of
Lease, the Company will pay monthly rent of $9,917 for the first year of the
lease, which payments are subject to an annual escalation. The Agreement of
Lease expires on January 31, 2001, subject to an option of the Company to extend
such lease for an additional five-year period. Tractebel S.A. beneficially owns
approximately 22.3% of the Company's Common Stock as of April 10, 1997 and
Messrs. Deroux and Loeb are affiliated with Tractebel S.A.
The Company's Revolving Credit Agreement with Generale Bank, as amended in
February 1996, provided for a $7.5 million line of credit due February 28, 1997,
secured by the Company's inventories and accounts receivable and bearing
interest at Generale Bank's prime rate plus a commitment fee in the amount of
0.25% per annum of the unused amount. Generale Bank is approximately 25% owned
by Societe Generale de Belgique S.A., which in turn owns approximately 40% of
the outstanding capital stock of Tractebel S.A. The Company repaid this line of
credit in full in April 1996 and terminated this agreement with Generale Bank at
that time.
The Company has adopted a policy whereby all future transactions between
the Company and its officers, directors and affiliates will be on terms no less
favorable to the Company than could be obtained from unrelated third parties and
will be approved by a majority of the disinterested members of the Company's
Board of Directors.
INDEPENDENT ACCOUNTANTS
In September 1995, the Company retained KPMG Peat Marwick LLP as its
independent accountants and replaced Ernst & Young LLP. The report of Ernst &
Young LLP on the Company's financial statements for the year ended December 31,
1994 contained an explanatory paragraph about the Company's ability to continue
as a going concern. Since the initial engagement of Ernst & Young LLP for the
year ended December 31, 1988 and through the date of replacement, there were no
disagreements between the Company and Ernst & Young LLP on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure. The change in independent accountants was approved by the
Board of Directors.
24
<PAGE> 27
A representative of KPMG Peat Marwick LLP will be at the Special Meeting in
Lieu of Annual Meeting and will be given an opportunity to make a statement if
so desired and will be available to respond to appropriate questions from the
Shareholders.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's officers, directors and persons who own more than ten percent of a
registered class of the Company's equity securities (collectively, "Reporting
Persons"), to file reports of ownership on Forms 3, 4 and 5 with the Securities
and Exchange Commission and the Company. Based on the Company's review of copies
of such forms and written representations from the Reporting Persons, the
Company believes that all its officers, directors and greater than ten percent
shareholders complied with all filing requirements applicable to them with
respect to transactions during fiscal year 1996, with the following exceptions:
Messrs. Deroux, DiPietro, Loeb and Olmer failed to file a monthly report
covering the acquisition of shares during the month of April in a timely manner.
Each of Messrs. Deroux, DiPietro, Loeb and Olmer subsequently filed a Form 4.
EXPENSES AND SOLICITATION
The cost of soliciting proxies on behalf of the Company will be borne by
the Company. The Company will pay banks, brokers and other entities that
exercise fiduciary powers which hold shares of Common Stock of record in nominee
name or otherwise or as a participant in a registered clearing agency or which
hold shares of Common Stock on behalf of beneficial owners and deposit such
shares for safekeeping with another entity that exercises fiduciary powers their
reasonable expenses for completing the mailing to security holders of proxy
soliciting material and annual reports supplied by the Company. Further
solicitation may be made by the officers and employees of the Company by mail,
telephone, telegraph or personal interview without additional compensation. The
Company also may retain a professional proxy solicitation service at the
Company's expense to assist in the solicitation of proxies if necessary.
DEADLINE FOR SUBMISSION OF SHAREHOLDER PROPOSALS
Proposals of Shareholders intended to be presented at the next Annual
Meeting of Shareholders must be received by the Company at its principal office
in Billerica, Massachusetts, not later than February 28, 1998 for inclusion in
the proxy statement for that meeting.
------------------------
THE BOARD OF DIRECTORS ENCOURAGES SHAREHOLDERS TO ATTEND THE MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE. PROMPT RESPONSE WILL
GREATLY FACILITATE ARRANGEMENTS FOR THE MEETING AND YOUR COOPERATION WILL BE
APPRECIATED. SHAREHOLDERS WHO ATTEND THE MEETING MAY VOTE THEIR STOCK PERSONALLY
EVEN THOUGH THEY HAVE SENT IN THEIR PROXIES.
25
<PAGE> 28
APPENDIX A
SIPEX CORPORATION
1997 STOCK OPTION PLAN
1. PURPOSE. The purpose of the SIPEX Corporation 1997 Stock Option Plan
(the "Plan") is to encourage key employees of SIPEX Corporation (the "Company")
and of any present or future parent or subsidiary of the Company (collectively,
"Related Corporations") and other individuals who render services to the Company
or a Related Corporation, by providing opportunities to participate in the
ownership of the Company and its future growth through (a) the grant of options
which qualify as "incentive stock options" ("ISOs") under Section 422(b) of the
Internal Revenue Code of 1986, as amended (the "Code"); (b) the grant of options
which do not qualify as ISOs ("Non-Qualified Options"); (c) awards of stock in
the Company ("Awards"); and (d) opportunities to make direct purchases of stock
in the Company ("Purchases"). Both ISOs and Non-Qualified Options are referred
to hereafter individually as an "Option" and collectively as "Options." Options,
Awards and authorizations to make Purchases are referred to hereafter
collectively as "Stock Rights." As used herein, the terms "parent" and
"subsidiary" mean "parent corporation" and "subsidiary corporation,"
respectively, as those terms are defined in Section 424 of the Code.
2. ADMINISTRATION OF THE PLAN
A. BOARD OR COMMITTEE ADMINISTRATION. The Plan shall (be administered
by the Board of Directors of the Company (the "Board") or, subject to
paragraph 2(D) (relating to compliance with Section 162(m) of the Code), by
a committee appointed by the Board (the "Committee"). Hereinafter, all
references in this Plan to the "Committee" shall mean the Board if no
Committee has been appointed. Subject to ratification of the grant or
authorization of each Stock Right by the Board (if so required by
applicable state law), and subject to the terms of the Plan, the Committee
shall have the authority to (i) determine to whom (from among the class of
employees eligible under paragraph 3 to receive ISOs) ISOs shall be
granted, and to whom (from among the class of individuals and entities
eligible under paragraph 3 to receive Non-Qualified Options and Awards and
to make Purchases) Non-Qualified Options, Awards and authorizations to make
Purchases may be granted; (ii) determine the time or times at which Options
or Awards shall be granted or Purchases made; (iii) determine the purchase
price of shares subject to each Option or Purchase, which prices shall not
be less than the minimum price specified in paragraph 7; (iv) determine
whether each Option granted shall be an ISO or a Non-Qualified Option; (v)
determine (subject to paragraph 8) the time or times when each Option shall
become exercisable and the duration of the exercise period; (vi) extend the
period during which outstanding Options may be exercised; (vii) determine
whether restrictions such as repurchase options are to be imposed on shares
subject to Options, Awards and Purchases and the nature of such
restrictions, if any, and (viii) interpret the Plan and prescribe and
rescind rules and regulations relating to it. If the Committee determines
to issue a Non-Qualified Option, it shall take whatever actions it deems
necessary, under Section 422 of the Code and the regulations promulgated
thereunder, to ensure that such Option is not treated as an ISO. The
interpretation and construction by the Committee of any provisions of the
Plan or of any Stock Right granted under it shall be final unless otherwise
determined by the Board. The Committee may from time to time adopt such
rules and regulations for carrying out the Plan as it may deem advisable.
No member of the Board or the Committee shall be liable for any action or
determination made in good faith with respect to the Plan or any Stock
Right granted under it.
A-1
<PAGE> 29
B. COMMITTEE ACTIONS. The Committee may select one of its members as
its chairman, and shall hold meetings at such time and places as it may
determine. A majority of the Committee shall constitute a quorum and acts
of a majority of the members of the Committee at a meeting at which a
quorum is present, or acts reduced to or approved in writing by all the
members of the Committee (if consistent with applicable state law), shall
be the valid acts of the Committee. From time to time the Board may
increase the size of the Committee and appoint additional members thereof,
remove members (with or without cause) and appoint new members in
substitution therefor, fill vacancies however caused, or remove all members
of the Committee and thereafter directly administer the Plan.
C. GRANT OF STOCK RIGHTS TO BOARD MEMBERS. Stock Rights may be
granted to members of the Board. All grants of Stock Rights to members of
the Board shall in all respects be made in accordance with the provisions
of this Plan applicable to other eligible persons. Members of the Board who
either (i) are eligible to receive grants of Stock Rights pursuant to the
Plan or (ii) have been granted Stock Rights may vote on any matters
affecting the administration of the Plan or the grant of any Stock Rights
pursuant to the Plan, except that no such member shall act upon the
granting to himself or herself of Stock Rights, but any such member may be
counted in determining the existence of a quorum at any meeting of the
Board during which action is taken with respect to the granting to such
member of Stock Rights.
D. PERFORMANCE-BASED COMPENSATION. The Board, in its discretion, may
take such action as may be necessary to ensure that Stock Rights granted
under the Plan qualify as "qualified performance-based compensation" within
the meaning of Section 162(m) of the Code and applicable regulations
promulgated thereunder ("Performance-Based Compensation"). Such action may
include, in the Board's discretion, some or all of the following (i) if the
Board determines that Stock Rights granted under the Plan generally shall
constitute Performance-Based Compensation, the Plan shall be administered,
to the extent required for such Stock Rights to constitute
Performance-Based Compensation, by a Committee consisting solely of two or
more "outside directors" (as defined in applicable regulations promulgated
under Section 162(m) of the Code), (ii) if any Non-Qualified Options with
an exercise price less than the fair market value per share of Common Stock
are granted under the Plan and the Board determines that such Options
should constitute Performance-Based Compensation, such options shall be
made exercisable only upon the attainment of a pre-established, objective
performance goal established by the Committee, and such grant shall be
submitted for, and shall be contingent upon shareholder approval and (iii)
Stock Rights granted under the Plan may be subject to such other terms and
conditions as are necessary for compensation recognized in connection with
the exercise or disposition of such Stock Right or the disposition of
Common Stock acquired pursuant to such Stock Right, to constitute
Performance-Based Compensation.
3. ELIGIBLE EMPLOYEES AND OTHERS. ISOs may be granted only to employees of
the Company or any Related Corporation. Non-Qualified Options, Awards and
authorizations to make Purchases may be granted to any employee, officer or
director (whether or not also an employee) or consultant of the Company or any
Related Corporation. The Committee may take into consideration a recipient's
individual circumstances in determining whether to grant a Stock Right. The
granting of any Stock Right to any individual or entity shall neither entitle
that individual or entity to, nor disqualify such individual or entity from,
participation in any other grant of Stock Rights.
4. STOCK. The stock subject to Stock Rights shall be authorized but
unissued shares of Common Stock of the Company, par value $.01 per share (the
"Common Stock"), or shares of Common Stock reacquired by the Company in any
manner. The aggregate number of shares which may be issued pursuant to the Plan
is
A-2
<PAGE> 30
600,000, subject to adjustment as provided in paragraph 14. If any Option
granted under the Plan shall expire or terminate for any reason without having
been exercised in full or shall cease for any reason to be exercisable in whole
or in part or shall be repurchased by the Company, the unpurchased shares of
Common Stock subject to such Option shall again be available for grants of Stock
Rights under the Plan.
No employee of the Company or any Related Corporation may be granted
Options to acquire, in the aggregate, more than 420,000 shares of Common Stock
under the Plan during any fiscal year of the Company. If any Option granted
under the Plan shall expire or terminate for any reason without having been
exercised in full or shall cease for any reason to be exercisable in whole or in
part or shall be repurchased by the Company, the shares subject to such Option
shall be included in the determination of the aggregate number of shares of
Common Stock deemed to have been granted to such employee under the Plan.
5. GRANTING OF STOCK RIGHTS. Stock Rights may be granted under the Plan at
any time on or after March 14, 1997 and prior to March 13, 2007. The date of
grant of a Stock Right under the Plan will be the date specified by the
Committee at the time it grants the Stock Right; provided, however, that such
date shall not be prior to the date on which the Committee acts to approve the
grant.
6. AUTOMATIC GRANT OF OPTIONS TO NON-EMPLOYEE DIRECTORS.
A. Each director who is not an employee or officer or consultant of
the Company (a "Non-Employee Director") who becomes a director after the
third Monday in July, 1997 shall be automatically granted on the date such
person first becomes a member of the Board, without further action by the
Board, an Option to purchase 5,000 shares of Common Stock.
B. Subject to the availability of shares under this Plan, each person
who is a member of the Company's Board of Directors on the third Monday in
July, 1997 and on the same day of each year thereafter during the term of
this Plan, and who is a Non-Employee Director of the Company on any such
date, is automatically granted on each such date, without further action by
the Board of Directors, an Option to purchase 5,000 shares of the Company's
Common Stock.
C. OPTION PRICE. The purchase price of the stock covered by an Option
granted pursuant to this paragraph shall be 100% of the fair market value
of such shares on the day the Option is granted. "Fair market value" shall
be determined in accordance with paragraph 7D hereof.
D. PERIOD OF OPTION. An Option granted under this paragraph shall
expire on the date which is ten (10) years after the date of grant of the
Option unless sooner terminated in accordance with paragraphs 10 or 11 of
this Plan.
E. VESTING OF SHARES. Options granted under this paragraph shall
become exercisable, in accordance with the following schedule, provided
that the optionee has continuously served as a member of the Board through
such date:
<TABLE>
<CAPTION>
PERCENTAGE OF OPTION
SHARES FOR WHICH DATE OPTION SHARES
OPTION WILL BE EXERCISABLE BECOME EXERCISABLE
- -------------------------- -----------------------------------------------
<S> <C>
0% Less than 1 year from the date of grant
20% 1 year from the date of grant
40% 2 years from the date of grant
60% 3 years from the date of grant
80% 4 years from the date of grant
100% 5 years from the date of grant
</TABLE>
A-3
<PAGE> 31
The number of shares as to which Options may be exercised shall be
cumulative, so that once the Option shall become exercisable as to any
shares it shall continue to be exercisable as to said shares, until
expiration or termination of the Option as provided in this Plan.
7. MINIMUM OPTION PRICE; ISO LIMITATIONS.
A. PRICE FOR NON-QUALIFIED OPTIONS, AWARDS AND PURCHASES. The
exercise price per share specified in the agreement relating to each
Non-Qualified Option granted, and the purchase price per share of stock
granted in any Award or authorized as a Purchase, under the Plan may not be
less than the fair market value (as determined in accordance with paragraph
7(D)) of the Common Stock of the Company on the date of grant.
B. PRICE FOR ISOS. The exercise price per share specified in the
agreement relating to each ISO granted under the Plan shall not be less
than the fair market value per share of Common Stock on the date of such
grant. In the case of an ISO to be granted to an employee owning stock
possessing more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company or any Related Corporation, the
price per share specified in the agreement relating to such ISO shall not
be less than one hundred ten percent (110%) of the fair market value per
share of Common Stock on the date of grant. For purposes of determining
stock ownership under this paragraph, the rules of Section 424(d) of the
Code shall apply.
C. $100,000 ANNUAL LIMITATION ON ISO VESTING. Each eligible employee
may be granted Options treated as ISOs only to the extent that, in the
aggregate under this Plan and all incentive stock option plans of the
Company and any Related Corporation, ISOs do not become exercisable for the
first time by such employee during any calendar year with respect to stock
having a fair market value (determined at the time the ISOs were granted)
in excess of $100,000. The Company intends to designate any Options granted
in excess of such limitation as Non-Qualified Options, and the Company
shall issue separate certificates to the optionee with respect to Options
that are Non-Qualified Options and Options that are ISOs.
D. DETERMINATION OF FAIR MARKET VALUE. If, at the time an Option is
granted under the Plan, the Company's Common Stock is publicly traded,
"fair market value" shall be determined as of the date of grant or, if the
prices or quotes discussed in this sentence are unavailable for such date,
the last business day for which such prices or quotes are available prior
to the date of grant and shall mean (i) the average (on that date) of the
high and low prices of the Common Stock on the principal national
securities exchange on which the Common Stock is traded, if the Common
Stock is then traded on a national securities exchange; or (ii) the last
reported sale price (on that date) of the Common Stock on the Nasdaq
National Market, if the Common Stock is not then traded on a national
securities exchange; or (iii) the closing bid price (or average of bid
prices) last quoted (on that date) by an established quotation service for
over-the-counter securities, if the Common Stock is not reported on the
Nasdaq National Market. If the Common Stock is not publicly traded at the
time an Option is granted under the Plan, "fair market value" shall mean
the fair value of the Common Stock as determined by the Committee after
taking into consideration all factors which it deems appropriate,
including, without limitation, recent sale and offer prices of the Common
Stock in private transactions negotiated at arm's length.
8. OPTION DURATION. Subject to earlier termination as provided in
paragraphs 10 and 11 or in the agreement relating to such Option, each Option
shall expire on the date specified by the Committee, but not more than (i) ten
years from the date of grant in the case of Options generally and (ii) five
years from the date of grant in the case of ISOs granted to an employee owning
stock possessing more than ten percent
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(10%) of the total combined voting power of all classes of stock of the Company
or any Related Corporation, as determined under paragraph 7(B). Subject to
earlier termination as provided in paragraphs 10 and 11, the term of each ISO
shall be the term set forth in the original instrument granting such ISO, except
with respect to any part of such ISO that is converted into a Non-Qualified
Option pursuant to paragraph 17.
9. EXERCISE OF OPTION. Subject to the provisions of paragraphs 10 through
13, each Option granted under the Plan shall be exercisable as follows:
A. VESTING. Except for options granted under Section 6, Options shall
either be fully exercisable on the date of grant or shall become
exercisable thereafter in such installments as the Committee may specify.
B. FULL VESTING OF INSTALLMENTS. Once an installment becomes
exercisable, it shall remain exercisable until expiration or termination of
the Option, unless otherwise specified by the Committee.
C. PARTIAL EXERCISE. Each Option or installment may be exercised at
any time or from time to time, in whole or in part, for up to the total
number of shares with respect to which it is then exercisable.
D. ACCELERATION OF VESTING. The Committee, or Board with respect to
Options granted to any Non-Employee Director pursuant to Section 6, shall
have the right to accelerate the date that any installment of any Option
becomes exercisable; provided that the Committee shall not, without the
consent of an optionee, accelerate the permitted exercise date of any
installment of any Option granted to any employee as an ISO (and not
previously converted into a Non-Qualified Option pursuant to paragraph 17)
if such acceleration would violate the annual vesting limitation contained
in Section 422(d) of the Code, as described in paragraph 7(C).
10. TERMINATION OF EMPLOYMENT. Unless otherwise specified in the agreement
relating to such ISO, if an ISO optionee ceases to be employed by the Company
and all Related Corporations other than by reason of death or disability as
defined in paragraph 11, no further installments of his or her ISOs shall become
exercisable, and his or her ISOs shall terminate on the earlier of (a) three
months after the date of termination of his or her employment, or (b) their
specified expiration dates, except to the extent that such ISOs (or unexercised
installments thereof) have been converted into Non-Qualified Options pursuant to
paragraph 17. For purposes of this paragraph 10, employment shall be considered
as continuing uninterrupted during any bona fide leave of absence (such as those
attributable to illness, military obligations or governmental service) provided
that the period of such leave does not exceed 90 days or, if longer, any period
during which such optionee's right to reemployment is guaranteed by statute or
by contract. A bona fide leave of absence with the written approval of the
Committee shall not be considered an interruption of employment under this
paragraph 10, provided that such written approval contractually obligates the
Company or any Related Corporation to continue the employment of the optionee
after the approved period of absence. ISOs granted under the Plan shall not be
affected by any change of employment within or among the Company and Related
Corporations, so long as the optionee continues to be an employee of the Company
or any Related Corporation. Nothing in the Plan shall be deemed to give any
grantee of any Stock Right the right to be retained in employment or other
service by the Company or any Related Corporation for any period of time.
11. DEATH; DISABILITY.
A. DEATH. If an ISO optionee ceases to be employed by the Company and
all Related Corporations by reason of his or her death, any ISO owned by
such optionee may be exercised, to the extent otherwise exercisable on the
date of death, by the estate, personal representative or beneficiary who
has
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acquired the ISO by will or by the laws of descent and distribution, until
the earlier of (i) the specified expiration date of the ISO or (ii) 180
days from the date of the optionee's death.
B. DISABILITY. If an ISO optionee ceases to be employed by the
Company and all Related Corporations by reason of his or her disability,
such optionee shall have the right to exercise any ISO held by him or her
on the date of termination of employment, for the number of shares for
which he or she could have exercised it on that date, until the earlier of
(i) the specified expiration date of the ISO or (ii) 180 days from the date
of the termination of the optionee's employment. For the purposes of the
Plan, the term "disability" shall mean "permanent and total disability" as
defined in Section 22(e)(3) of the Code or any successor statute.
12. ASSIGNABILITY. No ISO shall be assignable or transferable by the
optionee except by will or by the laws of descent and distribution, and during
the lifetime of the optionee shall be exercisable only by such optionee. Stock
Rights other than ISOs shall be transferable to the extent set forth in the
agreement relating to such Stock Right.
13. TERMS AND CONDITIONS OF OPTIONS. Options shall be evidenced by
instruments (which need not be identical) in such forms as the Committee may
from time to time approve. Such instruments shall conform to the terms and
conditions set forth in paragraphs 6 through 12 hereof and may contain such
other provisions as the Committee deems advisable which are not inconsistent
with the Plan, including restrictions applicable to shares of Common Stock
issuable upon exercise of Options. The Committee may specify that any Non-
Qualified Option shall be subject to the restrictions set forth herein with
respect to ISOs, or to such other termination and cancellation provisions as the
Committee may determine. The Committee may from time to time confer authority
and responsibility on one or more of its own members and/or one or more officers
of the Company to execute and deliver such instruments. The proper officers of
the Company are authorized and directed to take any and all action necessary or
advisable from time to time to carry out the terms of such instruments.
14. ADJUSTMENTS. Upon the occurrence of any of the following events, an
optionee's rights with respect to Options granted to such optionee hereunder
shall be adjusted as hereinafter provided, unless otherwise specifically
provided in the written agreement between the optionee and the Company relating
to such Option:
A. STOCK DIVIDENDS AND STOCK SPLITS. If the shares of Common Stock
shall be subdivided or combined into a greater or smaller number of shares
or if the Company shall issue any shares of Common Stock as a stock
dividend on its outstanding Common Stock, the number of shares of Common
Stock deliverable upon the exercise of Options shall be appropriately
increased or decreased proportionately, and appropriate adjustments shall
be made in the purchase price per share to reflect such subdivision,
combination or stock dividend.
B. CONSOLIDATIONS OR MERGERS. If the Company is to be consolidated
with or acquired by another entity in a merger or other reorganization in
which the holders of the outstanding voting stock of the Company
immediately preceding the consummation of such event, shall, immediately
following such event, hold, as a group, less than a majority of the voting
securities of the surviving or successor entity, or in the event of a sale
of all or substantially all of the Company's assets or otherwise (each, an
"Acquisition"), the Committee or the board of directors of any entity
assuming the obligations of the Company hereunder (the "Successor Board"),
shall, as to outstanding Options, either (i) make appropriate provision for
the continuation of such Options by substituting on an equitable basis for
the shares then subject to such Options either (a) the consideration
payable with respect to the outstanding shares of Common Stock in
connection with the Acquisition, (b) shares of stock of the surviving or
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successor corporation or (c) such other securities as the Successor Board
deems appropriate, the fair market value of which shall not materially
exceed the fair market value of the shares of Common Stock subject to such
Options immediately preceding the Acquisition; or (ii) upon written notice
to the optionees, provide that all Options must be exercised, to the extent
then exercisable or to be exercisable as a result of the Acquisition,
within a specified number of days of the date of such notice, at the end of
which period the Options shall terminate; or (iii) terminate all Options in
exchange for a cash payment equal to the excess of the fair market value of
the shares subject to such Options (to the extent then exercisable or to be
exercisable as a result of the Acquisition) over the exercise price
thereof.
C. RECAPITALIZATION OR REORGANIZATION. In the event of a
recapitalization or reorganization of the Company (other than a transaction
described in subparagraph B above) pursuant to which securities of the
Company or of another corporation are issued with respect to the
outstanding shares of Common Stock, an optionee upon exercising an Option
shall be entitled to receive for the purchase price paid upon such exercise
the securities he or she would have received if he or she had exercised
such Option prior to such recapitalization or reorganization.
D. MODIFICATION OF ISOS. Notwithstanding the foregoing, any
adjustments made pursuant to subparagraphs A, B or C with respect to ISOs
shall be made only after the Committee, after consulting with counsel for
the Company, determines whether such adjustments would constitute a
"modification" of such ISOs (as that term is defined in Section 424 of the
Code) or would cause any adverse tax consequences for the holders of such
ISOs. If the Committee determines that such adjustments made with respect
to ISOs would constitute a modification of such ISOs or would cause adverse
tax consequences to the holders, it may refrain from making such
adjustments.
E. DISSOLUTION OR LIQUIDATION. In the event of the proposed
dissolution or liquidation of the Company, then the Committee shall, as to
outstanding Options, at its discretion provide, upon written notice to the
optionees, (i) that all Options must be exercised, to the extent then
exercisable within a specified number of days of the date of such notice,
at the end of which period, the Options shall terminate or (ii) that such
Options (including those which have not yet vested) shall be exercisable
within a specified number of days of such notice, at the end of which
period the Options shall terminate.
F. ISSUANCES OF SECURITIES. Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or
price of shares subject to Options. No adjustments shall be made for
dividends paid in cash or in property other than securities of the Company.
G. FRACTIONAL SHARES. No fractional shares shall be issued under the
Plan and the optionee shall receive from the Company cash in lieu of such
fractional shares.
H. ADJUSTMENTS. Upon the happening of any of the events described in
subparagraphs A, B, C or E above, the class and aggregate number of shares
set forth in paragraph 4 hereof that are subject to Stock Rights which
previously have been or subsequently may be granted under the Plan shall
also be appropriately adjusted to reflect the events described in such
subparagraphs. The Committee or the Successor Board shall determine the
specific adjustments to be made under this paragraph 14 and, subject to
paragraph 2, its determination shall be conclusive.
15. MEANS OF EXERCISING OPTIONS. An Option (or any part or installment
thereof) shall be exercised by giving written notice to the Company at its
principal office address, or to such transfer agent as the Company
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<PAGE> 35
shall designate. Such notice shall identify the Option being exercised and
specify the number of shares as to which such Option is being exercised,
accompanied by full payment of the purchase price therefor either (a) in United
States dollars in cash or by check, (b) at the discretion of the Committee,
through delivery of shares of Common Stock having a fair market value equal as
of the date of the exercise to the cash exercise price of the Option, (c) at the
discretion of the Committee, by delivery of the grantee's personal recourse note
bearing interest payable not less than annually at no less than 100% of the
lowest applicable Federal rate, as defined in Section 1274(d) of the Code, (d)
at the discretion of the Committee and consistent with applicable law, through
the delivery of an assignment to the Company of a sufficient amount of the
proceeds from the sale of the Common Stock acquired upon exercise of the Option
and an authorization to the broker or selling agent to pay that amount to the
Company, which sale shall be at the participant's direction at the time of
exercise, or (e) at the discretion of the Committee, by any combination of (a),
(b), (c) and (d) above. If the Committee exercises its discretion to permit
payment of the exercise price of an ISO by means of the methods set forth in
clauses (b), (c), (d) or (e) of the preceding sentence, such discretion shall be
exercised in writing at the time of the grant of the ISO in question. The holder
of an Option shall not have the rights of a shareholder with respect to the
shares covered by such Option until the date of issuance of a stock certificate
to such holder for such shares. Except as expressly provided above in paragraph
14 with respect to changes in capitalization and stock dividends, no adjustment
shall be made for dividends or similar rights for which the record date is
before the date such stock certificate is issued.
16. TERM AND AMENDMENT OF PLAN. This Plan was adopted by the Board on
March 14, 1997, subject, with respect to the validation of ISOs granted under
the Plan, to approval of the Plan by the shareholders of the Company at the next
Meeting of Shareholders or, in lieu thereof, by written consent. If the approval
of shareholders is not obtained prior to March 14, 1998, any grants of ISOs
under the Plan made prior to that date will be rescinded. The Plan shall expire
at the end of the day on March 13, 2007 (except as to Options outstanding on
that date). Subject to the provisions of paragraph 5 above, Options may be
granted under the Plan prior to the date of shareholder approval of the Plan.
The Board may terminate or amend the Plan in any respect at any time, except
that, without the approval of the shareholders obtained within 12 months before
or after the Board adopts a resolution authorizing any of the following actions:
(a) the total number of shares that may be issued under the Plan may not be
increased (except by adjustment pursuant to paragraph 14); (b) the provisions of
paragraph 3 regarding eligibility for grants of ISOs may not be modified; (c)
the provisions of paragraph 7(B) regarding the exercise price at which shares
may be offered pursuant to ISOs may not be modified (except by adjustment
pursuant to paragraph 14); and (d) the expiration date of the Plan may not be
extended. Except as otherwise provided in this paragraph 16, in no event may
action of the Board or shareholders alter or impair the rights of a grantee,
without such grantee's consent, under any Stock Right previously granted to such
grantee.
17. MODIFICATIONS OF ISOS; CONVERSION OF ISOS INTO NON-QUALIFIED
OPTIONS. Subject to paragraph 14(D), without the prior written consent of the
holder of an ISO, the Committee shall not alter the terms of such ISO (including
the means of exercising such ISO) if such alteration would constitute a
modification (within the meaning of Section 424(h)(3) of the Code). The
Committee, at the written request or with the written consent of any optionee,
may in its discretion take such actions as may be necessary to convert such
optionee's ISOs (or any installments or portions of installments thereof) that
have not been exercised on the date of conversion into Non-Qualified Options at
any time prior to the expiration of such ISOs, regardless of whether the
optionee is an employee of the Company or a Related Corporation at the time of
such conversion. Such actions may include, but shall not be limited to,
extending the exercise period or reducing the exercise price of the appropriate
installments of such ISOs. At the time of such conversion, the Committee (with
the consent of the optionee) may impose such conditions on the exercise of the
resulting
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<PAGE> 36
Non-Qualified Options as the Committee in its discretion may determine, provided
that such conditions shall not be inconsistent with this Plan. Nothing in the
Plan shall be deemed to give any optionee the right to have such optionee's ISOs
converted into NonQualified Options, and no such conversion shall occur until
and unless the Committee takes appropriate action. Upon the taking of such
action, the Company shall issue separate certificates to the optionee with
respect to Options that are Non-Qualified Options and Options that are ISOs.
18. APPLICATION OF FUNDS. The proceeds received by the Company from the
sale of shares pursuant to Options granted and Purchases authorized under the
Plan shall be used for general corporate purposes.
19. NOTICE TO COMPANY OF DISQUALIFYING DISPOSITION. By accepting an ISO
granted under the Plan, each optionee agrees to notify the Company in writing
immediately after such optionee makes a Disqualifying Disposition (as described
in Sections 421, 422 and 424 of the Code and regulations thereunder) of any
stock acquired pursuant to the exercise of ISOs granted under the Plan. A
Disqualifying Disposition is generally any disposition occurring on or before
the later of (a) the date two years following the date the ISO was granted or
(b) the date one year following the date the ISO was exercised.
20. WITHHOLDING OF ADDITIONAL INCOME TAXES. Upon the exercise of a
Non-Qualified Option, the transfer of a Non-Qualified Stock Option pursuant to
an arm's-length transaction, the grant of an Award, the making of a Purchase of
Common Stock for less than its fair market value, the making of a Disqualifying
Disposition (as defined in paragraph 19), the vesting or transfer of restricted
stock or securities acquired on the exercise of an Option hereunder, or the
making of a distribution or other payment with respect to such stock or
securities, the Company may withhold taxes in respect of amounts that constitute
compensation includible in gross income. The Committee in its discretion may
condition (i) the exercise of an Option, (ii) the transfer of a Non-Qualified
Stock Option, (iii) the grant of an Award, (iv) the making of a Purchase of
Common Stock for less than its fair market value, or (v) the vesting or
transferability of restricted stock or securities acquired by exercising an
Option, on the grantee's making satisfactory arrangement for such withholding.
Such arrangement may include payment by the grantee in cash or by check of the
amount of the withholding taxes or, at the discretion of the Committee, by the
grantee's delivery of previously held shares of Common Stock or the withholding
from the shares of Common Stock otherwise deliverable upon exercise of a Option
shares having an aggregate fair market value equal to the amount of such
withholding taxes.
21. GOVERNMENTAL REGULATION. The Company's obligation to sell and deliver
shares of the Common Stock under this Plan is subject to the approval of any
governmental authority required in connection with the authorization, issuance
or sale of such shares.
Government regulations may impose reporting or other obligations on the
Company with respect to the Plan. For example, the Company may be required to
send tax information statements to employees and former employees that exercise
ISOs under the Plan, and the Company may be required to file tax information
returns reporting the income received by grantees of Options in connection with
the Plan.
22. GOVERNING LAW. The validity and construction of the Plan and the
instruments evidencing Stock Rights shall be governed by the laws of
Massachusetts, or the laws of any jurisdiction in which the Company or its
successors in interest may be organized.
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[FRONT SIDE OF PROXY CARD]
SIPEX CORPORATION
PROXY FOR SPECIAL MEETING IN LIEU OF
ANNUAL MEETING OF SHAREHOLDERS
MAY 30, 1997
SOLICITED BY THE BOARD OF DIRECTORS
The undersigned shareholder of SIPEX Corporation, a Massachusetts
corporation (the "Corporation"), hereby acknowledges receipt of the Notice of
Special Meeting in Lieu of Annual Meeting of Shareholders and Proxy Statement,
each dated April 25, 1997 and hereby appoints James E. Donegan and Frank R.
DiPietro, and each of them, proxies and attorneys-in-fact, with full power to
each of substitution, on behalf and in the name of the undersigned, to represent
the undersigned at the Special Meeting in Lieu of Annual Meeting of Shareholders
of the Corporation to be held at BankBoston, Conference & Training Center, 35th
Floor, Room 27, 100 Federal Street, Boston, Massachusetts 02110 on Friday, May
30, 1997 at 10:00 a.m., local time, and at any adjournment or adjournments
thereof, and to vote all shares of Common Stock which the undersigned would be
entitled to vote if then and there personally present, on the matters set forth
below:
1. To elect two (2) members of the Board of Directors to serve for three-year
terms as Class I Directors.
/ / FOR all nominees listed below / / WITHHOLD
(except as indicated)
If you wish to withhold authority to vote for any individual nominee,
strike a line through that nominee's name in the list below.
Steward S. Flaschen
Manfred Loeb
2. To approve the adoption of the Corporation's 1997 Stock Option Plan.
/ / FOR / / AGAINST / / ABSTAIN
and, in their discretion, upon such other matter or matters which may properly
come before the meeting or any adjournment of adjournments thereof.
<PAGE> 38
[REVERSE SIDE OF PROXY CARD]
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS
INDICATED, WILL BE VOTED FOR THE ELECTION OF DIRECTORS, FOR THE CORPORATION'S
1997 STOCK OPTION PLAN AND AS SAID PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS
AS MAY PROPERLY COME BEFORE THE SPECIAL MEETING IN LIEU OF ANNUAL MEETING OF
SHAREHOLDERS.
Dated: , 1997
-------------------------------
--------------------------------------------
Signature
--------------------------------------------
Signature
(This Proxy should be marked dated and signed by the shareholder(s) exactly
as his or her name appears hereon, and returned promptly in the enclosed
envelope. Persons signing in a fiduciary capacity should so indicate. If shares
are held by joint tenants or as community property, both should sign.)
