<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
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
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:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement no.:
3) Filing Party:
4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
SIPEX CORPORATION
22 LINNELL CIRCLE
BILLERICA, MASSACHUSETTS 01821
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 28, 1999
------------------------
TO THE SHAREHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of SIPEX
Corporation, a Massachusetts corporation (the "Company"), will be held at
BankBoston, Conference and Training Center, 35th Floor, 100 Federal Street,
Boston, Massachusetts 02110, on May 28, 1999, at 10:00 a.m., local time, for the
purposes of considering and acting upon the following matters:
1. To elect one member to the Board of Directors, to serve for a
three-year term as a Class III Director.
2. To approve the adoption of the 1999 Stock 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
9, 1999 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,
Frank R. DiPietro
Clerk
Billerica, Massachusetts
Date: April 16, 1999
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 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 28, 1999
------------------------
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 Annual Meeting of Shareholders to be held at BankBoston, Conference and
Training Center, 35th Floor, 100 Federal Street, Boston, Massachusetts, 02110 on
Friday, May 28, 1999, at 10:00 a.m. local time, and at any adjournments thereof.
Only shareholders of record as of the close of business on April 9, 1999,
the record date fixed by the Board of Directors, will be entitled to notice of,
and to vote at, the Annual Meeting and at any adjournments thereof. At the close
of business on April 9, 1999, there were an aggregate of 18,055,868 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 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 Annual Meeting and voting in person.
The Company's Annual Report on Form 10-K containing financial statements
for the fiscal year ended December 31, 1998 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 16, 1999.
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 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 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.
The election of the Class III Director is by a plurality of the votes cast
by stockholders entitled to vote at the Annual Meeting. For the proposal to
approve the 1999 Stock Plan and all other matters, if any, that may be submitted
to shareholders at the 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.
<PAGE> 4
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 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
Annual Meeting. If any other matter upon which a vote may properly be taken
should be presented at the 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 9, 1999 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 Summary" below, and (iv) all directors
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>
Pilgrim Baxter & Associates, Ltd (2)...................... 1,763,100 9.8%
825 Duportail
Road Wayne, PA 19087
Putnam Family of Funds (3)................................ 1,591,374 8.8%
One Post Office Square
Boston, Massachusetts 02109
Brown Investment Advisory & Trust Co. (4)................. 1,558,005 8.6%
19 South Street
Baltimore, MD 21202
AMVESCAP PLC (5).......................................... 1,555,480 8.6%
11 Devonshire Square
London EC2M 4YR
England
J.P. Morgan & Co., Inc. (6)............................... 971,500 5.4%
60 Wall Street
New York, NY 10260
Janus Capital Corporation (7)............................. 927,500 5.1%
100 Fillmore Street, Suite 300
Denver, CO 80206-4923
James E. Donegan (8)...................................... 76,490 *
Frank R. DiPietro (9)..................................... 40,203 *
Raymond W.B. Chow (10).................................... 43,455 *
</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>
Yener Gurler (11)......................................... 10,917 *
Timothy A. Dhuyvetter (12)................................ 15,000 *
Manfred Loeb (13)......................................... 4,000 *
Lionel H. Olmer (14)...................................... 14,000 *
Daniel Deroux (15)........................................ 4,000 *
Steward S. Flaschen (16).................................. 6,000 *
John L. Sprague (17)...................................... 10,000 *
Willy M.C. Sansen (18).................................... 2,000 *
All directors and executive officers as a group (12
persons)(19)............................................ 226,065 1.3%
</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, 1998, Pilgrim Baxter
& Associates, Ltd had sole dispositive power of 1,763,100 shares, sole
voting power of 1,397,300 shares and shared voting power of 370,800 shares.
(3) Based solely on information provided in a Schedule 13G filed with the
Securities and Exchange Commission, as of December 31, 1998. Putnam
Investment Management, Inc., has shared dispositive power over 1,348,754
shares. The Putnam Advisory Company, Inc. has shared dispositive power over
242,620 shares and shared voting power over 145,400 shares. Putnam
Investments, Inc., which is a wholly-owned subsidiary of Marsh & McLennan
Company, Inc., has shared dispositive power over 1,591,374 shares, shared
voting power over 145,500 shares and wholly owns the following two
registered investment advisers: Putnam Investment Management, Inc., which
is the investment advisor to the Putnam family of mutual funds, and The
Putnam Advisory Company, Inc., which is the investment adviser to Putnam's
institutional clients.
(4) Based solely on information provided in a Schedule 13G filed with the
Securities and Exchange Commission, as of December 31, 1998, Brown
Investment Advisory & Trust Company and its wholly owned subsidiary Brown
Advisory Incorporated had sole dispositive power of 377,957 and 1,180,048
shares, respectively and sole voting power of 335,557 and 1,180,048 shares,
respectively.
(5) Based solely on information provided in a Schedule 13G filed with the
Securities and Exchange Commission, as of December 31, 1998, AMVESCAP Plc,
together with its wholly-owned subsidiaries, AMVESCAP Group Services, Inc.,
AVZ, Inc., AIM Management Group, Inc., INVESCO, Inc., INVESCO North
American Holdings, Inc., and INVESCO Funds Group, Inc., has shared
dispositive and voting power over 1,555,480 shares.
(6) Based solely on information provided in a Schedule 13G filed with the
Securities and Exchange Commission, as of December 31, 1998, J.P. Morgan &
Co. Incorporated has sole dispositive power of 971,500 shares and sole
voting power of 765,900 shares.
(7) Based solely on information provided in a Schedule 13G filed with the
Securities and Exchange Commission, as of December 31, 1998, Janus Capital
Corporation, a registered investment advisor, together with Mr. Bailey its
President and CEO, may be deemed to beneficially own 927,500 shares and
have shared dispositive and voting power over 927,500 shares held by their
Managed Portfolios. Both Janus Capital Corporation and Mr. Bailey disclaim
beneficial ownership of the shares.
3
<PAGE> 6
(8) Includes 76,490 shares issuable pursuant to stock options which are
exercisable prior to June 8, 1999. Excludes 168,000 shares issuable
pursuant to stock options which are exercisable after June 8, 1999.
(9) Includes 40,000 shares issuable pursuant to stock options which are
exercisable after June 8, 1999. Excludes 108,000 shares issuable pursuant
to stock options which are exercisable after June 8, 1999.
(10) Includes 25,000 shares issuable pursuant to stock options which are
exercisable prior to June 8, 1999. Excludes 118,000 shares issuable
pursuant to stock options which are exercisable after June 8, 1999.
(11) Includes 8,000 shares issuable pursuant to stock options which are
exercisable prior to June 8, 1999. Excludes 76,000 shares issuable pursuant
to stock options which are exercisable after June 8, 1999.
(12) Includes 15,000 shares issuable pursuant to stock options which are
exercisable prior to June 8, 1999. Excludes 66,000 shares issuable pursuant
to stock options exercisable after June 8, 1999.
(13) Excludes 21,000 shares issuable pursuant to stock options exercisable after
June 8, 1999.
(14) Includes 14,000 shares issuable pursuant to stock options which are
exercisable prior to June 8, 1999. Excludes 21,000 shares issuable pursuant
to stock options exercisable after June 8, 1999.
(15) Excludes 21,000 shares issuable pursuant to stock options exercisable after
June 8, 1999.
(16) Includes 6,000 shares issuable pursuant to stock options which are
exercisable prior to June 8, 1999. Excludes 19,000 shares issuable pursuant
to stock options exercisable after June 8, 1999.
(17) Includes 10,000 shares issuable pursuant to stock options which are
exercisable after June 8, 1999. Excludes 21,000 shares issuable pursuant to
stock options exercisable after June 8, 1999.
(18) Includes 2,000 shares issuable pursuant to stock options which are
exercisable after June 8, 1999. Excludes 13,000 shares issuable pursuant to
stock options exercisable after June 8, 1999.
(19) Includes 196,490 shares issuable pursuant to stock options which are
exercisable prior to June 8, 1999. Excludes 652,000 shares issuable
pursuant to stock option which are exercisable prior to June 8, 1999.
PROPOSAL I
ELECTION OF DIRECTORS
The Board of Directors is divided into three classes. Each class serves a
three-year term. Each Class II director is serving a term ending at the Annual
Meeting of Shareholders to be held in 2001 and each Class I director is serving
a term ending at the Annual Meeting of Shareholders to be held in 2000. The
Class III Directors' term will expire at the Annual Meeting being held May 28,
1999. All directors will hold office until their successors have been duly
elected and qualified. Prior to the Annual Meeting, Steward S. Flaschen and
Manfred Loeb were the Class I Directors; John L. Sprague, Lionel H. Olmer and
Willy M.C. Sansen were the Class II Directors; and James E. Donegan and Daniel
Deroux were the Class III Directors.
Mr. Deroux, who would have been subject to re-election as a director at the
Annual Meeting, has decided not to stand for re-election for personal reasons.
The Company expresses its thanks to Mr. Deroux for his years of service on the
Board of Directors.
The Board of Directors has nominated and recommended that James E. Donegan,
who is currently serving as a Director of the Company, be elected the Class III
director, to hold office until the Annual Meeting of Shareholders to be held in
2002 or until his successor has been duly elected and qualified or until his
earlier resignation or removal. Mr. Donegan has indicated his willingness to
serve, if elected; however if he 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
4
<PAGE> 7
represented by all proxies received by the Board of Directors and not so marked
as to withhold authority to vote for Mr. Donegan will be voted FOR the election
of Mr. Donegan.
The following table sets forth for Mr. Donegan and for each director whose
term of office will extend beyond the Annual Meeting, the year Mr. Donegan or
such director was first elected a director, his age, the positions currently
held by Mr. Donegan or each director with the Company, the year Mr. Donegan's or
each director's term will expire and the class of director of Mr. Donegan or
each 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:
James E. Donegan (1985)........... 53 Chairman of the Board, President 1999 III
and Chief Executive Officer
CONTINUING DIRECTORS:
Steward S. Flaschen (1996)........ 73 Director 2000 I
Manfred Loeb (1982-1987; 1992).... 72 Director 2000 I
Lionel H. Olmer (1988)............ 64 Director 2001 II
John L. Sprague (1993)............ 69 Director 2001 II
Willy M. C. Sansen (1997)......... 56 Director 2001 II
</TABLE>
NOMINEES FOR ELECTION AT THE ANNUAL 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. Donegan currently serves as a Director of Genesis Microchip, Inc., a
manufacturer of video semiconductors.
DIRECTORS WHOSE TERMS EXTEND BEYOND THE 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
Partners II.
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 Tractebel, Inc. (USA). 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.
Mr. Olmer has been a director of the Company since 1988. From 1981 to 1985,
he served as Undersecretary of Commerce for International Trade in the Reagan
Administration. 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.
5
<PAGE> 8
Dr. Sansen has been a director of the Company since July, 1997. He has been
a full professor at the Katholieke University Leuven in Belgium since 1981. He
currently heads the Medical and Integrated Circuits and Sensors Division of the
Electrical Engineering Department. Dr. Sansen is the author of six electronics
books and more than three hundred papers and is currently a Fellow at the
Katholieke University Leuven Institute of Electrical and Electronics
Engineering, and past chairman of the Electrical Engineering Department of
Katholieke University Leuven.
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. Dr. Sprague has also
been a partner of the CEO Perspective Group since December 1998.
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors of the Company held ten (10) meetings during the
fiscal year ended December 31, 1998. During their tenure, each of the directors
attended at least 75% of the aggregate of all meetings of the Board of Directors
during fiscal 1998.
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 Plan ("1988 Stock Plan"), 1991
Non-Statutory Stock Option Plan ("1991 Stock Plan"), 1993 Stock Option and
Incentive Plan ("1993 Stock Plan"), 1994 Stock Option and Incentive Plan ("1994
Stock Plan"), 1996 Incentive Stock Option Plan ("1996 Stock Plan"), 1996
Non-Employee Director Stock Option Plan ("1996 Director Stock Plan"), 1996
Employee Stock Purchase Plan ("1996 Stock Purchase Plan") and 1997 Stock Option
Plan ("1997 Stock Plan"). The Compensation Committee held two meetings during
fiscal 1998 and Mr. Loeb and Drs. Flaschen and Sprague attended these meetings.
The Audit Committee, of which Messrs. Olmer and Sprague are members,
reviews with 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 1998.
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, 1996, 1997 and 1998, 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
ANNUAL COMPENSATION COMPENSATION (1)
----------------------- ---------------------- ALL OTHER
FISCAL SECURITIES UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($)(2) OPTIONS(#) (3)($)
--------------------------- ------ --------- ----------- --------------------- ------------
<S> <C> <C> <C> <C> <C>
James E. Donegan.................... 1998 $244,615 $180,000 100,000 $16,576
Chairman, Chief Executive 1997 240,000 130,690 100,000 12,677
Officer and President 1996 227,652 25,000 30,000 10,879
Frank R. DiPietro................... 1998 176,442 100,000 50,000 6,152
Executive Vice President of
Finance, 1997 165,000 79,300 -- 6,065
Treasurer,Chief Financial Officer 1996 150,866 20,000 80,000 2,891
and Clerk
Raymond W.B. Chow................... 1998 175,480 80,000 50,000 4,428
Chief Technology Officer 1997 160,000 74,200 -- 4,739
1996 154,808 20,000 80,000 4,482
Timothy A. Dhuyvetter............... 1998 147,788 18,125 25,000 5,146
Senior Vice President of 1997 145,000 49,413 30,000 4,541
Low Power Analog
Yener Gurler........................ 1998 136,115 65,000 50,000 4,325
Senior Vice President of
Operations
</TABLE>
- ---------------
(1) The Company did not make any restricted stock awards, grant any stock
appreciation rights or make any long-term incentive payments during fiscal
years 1996, 1997 or 1998.
(2) Bonuses are reported in year earned even if actually paid in subsequent
year.
(3) Consists of contributions made by the Company on behalf of the Named
Executive Officers to the Company's Tax Deferred Savings Plan, and insurance
premiums paid by the Company.
7
<PAGE> 10
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth grants of stock options pursuant to the 1997
Incentive Stock Option Plan granted during the year ended December 31, 1998 to
the Named Executive Officers. No stock appreciation rights ("SARs") were granted
during the year ended December 31, 1998.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
---------------------------------------------------------------- VALUE AT ASSUMED
PERCENT OF ANNUAL RATES OF
NUMBER OF TOTAL OPTIONS STOCK PRICE
SECURITIES GRANTED TO APPRECIATION FOR
UNDERLYING EMPLOYEES EXERCISE OR OPTION TERMS($)(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......... 50,000(4) 5.4% $35.188 2/17/08 $1,106,477.21 $2,804,030.48
50,000(5) 5.4% $ 19.50 5/6/08 $ 613,172.26 $1,553,898.90
Frank R. DiPietro........ 25,000(4) 2.7% $35.188 2/17/08 $ 553,238.60 $1,402,015.24
25,000(5) 2.7% $ 19.50 5/6/08 $ 306,586.13 $ 776,949.45
Raymond W.B. Chow........ 20,000(6) 2.2% $ 25.00 1/12/08 $ 322,591.79 $ 809,839.94
30,000(7) 3.3% $34.563 3/11/08 $ 652,094.55 $1,652,535.62
Timothy A. Dhuyvetter.... 25,000(6) 2.7% $ 25.00 1/12/08 $ 403,239.73 $1,012,299.93
Yener Gurler............. 20,000(6) 2.2% $ 25.00 1/12/08 $ 322,591.79 $ 809,839.94
30,000(8) 3.3% $19.125 8/27/08 $ 360,828.29 $ 914,409.74
</TABLE>
- ---------------
(1) A total of 917,915 options were granted to employees (including the Named
Executive Officers) in fiscal year 1998 under the Company's 1997 Incentive
Stock Option Plan.
(2) All options were granted at fair market value on the date of the grant as
determined in accordance with the 1997 Stock Option Plan.
(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.
(4) These options will vest in equal annual increments over five years beginning
February 17, 1999.
(5) These options will vest in equal annual increments over five years beginning
May 6, 1999.
(6) These options will vest in equal annual increments over five years beginning
January 12, 1999.
(7) These options will vest in equal annual increments over five years beginning
March 11, 1999.
(8) These options will vest in equal annual increments over five years beginning
August 27, 1999.
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, 1998; (ii) the net value realized upon such exercise; (iii) the
number of unexercised options outstanding at December 31, 1998; and (iv) the
value of such unexercised options at December 31, 1998.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION VALUE TABLE
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF SECURITIES IN-THE-MONEY
SHARES UNDERLYING UNEXERCISED OPTIONS AT
ACQUIRED OPTIONS AT YEAR-END YEAR-END(2)($)
ON VALUE ---------------------------- ----------------------------
NAME EXERCISE REALIZED(1)($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- -------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
James E. Donegan........ 10,000 $197,997 36,490 208,000 $987,673 $3,448,130
Frank R. DiPietro....... 6,000 78,353 30,000 118,000 913,450 2,236,805
Raymond W.B. Chow....... 25,500 524,400 28,000 133,000 843,600 2,589,415
Timothy A. Dhuyvetter... 19,000 316,860 4,000 77,000 139,700 1,603,265
Yener Gurler............ 15,000 368,865 2,000 84,000 69,850 1,583,510
</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. 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, 1998,
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 salary is established annually by the Board of
Directors, but may not be less than $210,000 per year. 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
9
<PAGE> 12
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 Chief
Technology Officer 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.
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 Stock Plan, 1991 Stock Plan, 1993 Stock Plan, 1994 Stock Plan,
1996 Stock Plan, 1996 Director Stock Plan, 1996 Stock Purchase Plan, 1997 Stock
Plan and 1999 Stock 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,
10
<PAGE> 13
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 1998 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 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 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 1998 included
a significant increase in total revenues and net income. In assessing Mr.
Donegan's performance for fiscal 1998, the Compensation Committee concluded that
the financial and non-financial goals on which his compensation was based had
been achieved.
In general, under Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code"), the Company cannot deduct, for federal income tax
purposes, compensation in excess of $1,000,000 paid to certain executive
officers. This deduction limitation does not apply, however, to compensation
that constitutes "qualified performance-based compensation" within the meaning
of Section 162(m) of the Code and the regulations promulgated thereunder. The
Company has considered the limitations on deductions imposed by Section 162(m)
of the Code, and it is the Company's present intention that, for so long as it
is consistent with its overall compensation objective, substantially all tax
deductions attributable to executive compensation will not be subject to the
deduction limitations of Section 162(m) of the Code.
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, 1998, 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
serves as a member of the board of directors or compensation committee of any
entity which has one or more executive officers serving as a member of the
Company's Board of Directors or Compensation Committee.
COMPENSATION OF DIRECTORS
During 1998, Directors who were not employees of the Company received
$2,000 per quarter as a retainer (in 1999, the Directors will receive a $2,500
retainer per quarter), $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
11
<PAGE> 14
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, which was approved by the Company's shareholders at the
Special Meeting in Lieu of Annual Meeting held on May 30, 1997. 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. In 1999, the
Company will increase this option grant from 5,000 to 7,500 shares. 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.
The 1997 Stock Plan presently has 111,652 shares available for grant. Subject to
shareholder approval of the 1999 Stock Plan at the Annual Meeting of
Shareholders, the directors will be eligible to receive option grants under the
1999 Stock Plan and the Company intends to grant options to the Directors
consistent with past practices under the 1997 Stock Plan.
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 1998 was $216,800.
12
<PAGE> 15
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, 1998, 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 $100
was invested on April 2, 1996 in the Company's Common Stock, the Peer Group and
the Nasdaq Composite Index and assumes reinvestment of dividends, if any. The
Peer Group consists of all corporations that are members of the semiconductor
industry with 3674 as their Primary Standard Industrial Classification Number.
COMPARATIVE CHART
<TABLE>
<CAPTION>
SIPEX CORPORATION PEER GROUP INDEX NASDAQ COMPOSITE
----------------- ---------------- ----------------
<S> <C> <C> <C>
4/2/96 100.00 100.00 100.00
6/30/96 180.00 107.80 107.66
12/31/96 271.58 164.79 116.19
6/30/97 305.26 185.81 129.76
12/31/97 509.47 170.42 141.76
6/30/98 362.11 173.41 170.43
12/31/98 591.58 251.20 199.68
</TABLE>
<TABLE>
<CAPTION>
APRIL 2, 1996 DECEMBER 31, 1998
($) ($)
------------- -----------------
<S> <C> <C>
SIPEX Corporation Common Stock.............................. 100.0 591.58
Peer Group.................................................. 100.0 251.20
Nasdaq Composite Index (Total Return)....................... 100.0 199.68
</TABLE>
- ---------------
* $100 invested on April 2, 1996 in Common Stock or the appropriate index,
including reinvestment of dividends, through fiscal year ended December 31,
1998.
(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
13
<PAGE> 16
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 1999 STOCK PLAN
On February 17, 1999, the Board of Directors adopted the 1999 Stock Plan.
The 1999 Stock Plan provides for 1,200,000 shares of the Company's Common Stock
to be reserved for the grant, subject to shareholder approval, of incentive
stock options to employees of the Company and the grant of non-qualified stock
options, stock awards and opportunities to make direct purchases of stock in the
Company to employees, directors, officers and consultants of the Company. The
Company may not make any such grants or opportunities for direct purchases to
directors or officers (as interpreted for purposes of Rule 4460(I) of the
National Association of Securities Dealers, Inc.) or grant incentive stock
options to employees unless the shareholders approve the adoption of the 1999
Stock Plan.
The Company's 1999 Stock Plan was adopted by the Board of Directors
because, as of April 9, 1999, only 111,652 shares remain available for grant
under the Company's 1997 Stock Plan. The Board of Directors approved the 1999
Stock Plan in order to ensure that, in an increasingly competitive market, the
Company would be able to continue to attract and retain the quality of
employees, directors and officers needed to compete effectively. The size of the
market in which the Company competes and the shortage of qualified personnel
make equity compensation key to the Company's continued growth. Through the
Company's stock option plans, virtually all salaried employees receive stock
options as part of their compensation package. In addition, due in large part to
the grant of stock options, the Company has been able to successfully recruit
technically experienced individuals, including the engineers needed to achieve
the Company's long-term revenue plan and its successful introduction of new
products, as well as maintain its low rate of turnover for technical employees.
The Board of Directors believes that the 1999 Stock Plan gives the Company a
sufficient number of shares for the foreseeable future to provide equity
incentives to attract and retain employees.
In addition to the 111,652 shares available for grant under the 1997 Stock
Plan (the "Shares Available For Grant"), as of April 9, 1999, there were
outstanding options to acquire 1,903,742 shares of Common Stock under the
Company's current stock plans (excluding the 1999 Stock Plan) (the "Outstanding
Options"). As of April 9, 1999, on a fully-diluted basis (i.e., assuming
exercise of all of the Outstanding Options as well as the issuance of the
remaining Shares Available For Grant), the Outstanding Options and Shares
Available For Grant collectively account for approximately 10% of the Company's
issued and outstanding Common Stock. As of April 9, 1999, on a fully-diluted
basis (i.e., assuming exercise of all of the Outstanding Options, the issuance
of the remaining Shares Available for Grant and the issuance of the 1,200,000
additional shares available for grant under the 1999 Stock Plan (collectively,
the "Option Pool")), the Option Pool collectively accounts for approximately 15%
of the Company's issued and outstanding Common Stock. In addition to the Option
Pool, the Company has 215,641 shares available for purchase under the Company's
1996 Employee Stock Purchase Plan.
While the Board of Directors is aware and has considered the potential
dilutive effect of option grants, it also recognizes the performance and
motivational benefits of equity compensation and believes that the proposed
increase in available options is consistent with the compensatory practices of
high technology
14
<PAGE> 17
companies in its peer group. All of the Company's option grants under the 1997
Stock Plan have been made at fair market value at the time of grant and the 1999
Stock Plan requires that all option grants be made at fair market value. As a
result, no dilution to the Company's shareholders occurs unless and until the
stock price goes up, benefiting both shareholders and optionholders of the
Company. Furthermore, since the Company typically grants options that become
exercisable over a five year period, employees must remain with the Company for
long periods in order to reap the potential benefits of their option grants.
The Company is seeking shareholder approval of the 1999 Stock Plan pursuant
to this Proposal II in order to be able to grant "incentive stock options"
("ISOs") within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code"). As described below under the heading "United States
Federal Income Tax Consequences," there are several potential benefits to the
Company's employees if options granted under the 1999 Stock Plan are treated as
ISOs. In addition, shareholder approval of the 1999 Stock Plan is required in
order to allow for directors and officers to be eligible to participate in the
1999 Stock Plan. If the shareholders fail to approve the adoption of the 1999
Stock Plan, the Company will continue to make grants to employees under the 1999
Stock Plan, but any option grants made to employees under the 1999 Stock Plan
will be treated as non-qualified stock options ("NQSOs") for United States
federal income tax purposes. Furthermore, the Company will not be permitted to
make any stock option grants or opportunities for direct purchases of stock to
any directors and officers. As of April 9, 1999, the Company has granted options
to acquire 310,690 shares of the Company's Common Stock under the 1999 Stock
Plan.
The affirmative vote of a majority of the shares of Common Stock of the
Company represented in person or by proxy at the Annual Meeting of Shareholders
and entitled to vote will be required to approve the adoption of the 1999 Stock
Plan. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL OF
THE ADOPTION OF THE 1999 STOCK PLAN.
The following is a summary description of the 1999 Stock Plan, which is
qualified in its entirety by reference to the complete text of the 1999 Stock
Plan which is attached as Appendix A to this Proxy Statement.
SUMMARY OF THE 1999 STOCK PLAN
Purpose. The purpose of the 1999 Stock Plan is to encourage employees,
directors and officers 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 the 1999 Stock Plan.
Shares Subject to the 1999 Stock Plan. The Board of Directors has reserved
a maximum of 1,200,000 shares of Common Stock for issuance under the 1999 Stock
Plan.
Eligibility. The 1999 Stock Plan provides for the grant of ISOs to
employees of the Company and the grant of NQSOs, stock awards ("Awards") and
opportunities to make direct purchases of stock in the Company ("Purchases") to
employees, officers and directors of the Company, subject to shareholder
approval as discussed below. ISOs, NQSOs, Awards and Purchases are sometimes
collectively referred to as "Stock Rights" and ISOs and NQSOs are sometimes
collectively referred to as "Options." For information concerning the United
States federal income tax consequences of ISOs, NQSOs, Awards and Purchases,
please see below. The 1999 Stock Plan will not allow for grants to employees of
the Company who are officers (as interpreted for purposes of Rule 4460(i) of the
National Association of Securities Dealers, Inc.) or directors of the Company if
shareholders of the Company do not approve the 1999 Stock Plan at the Annual
Meeting of Shareholders.
Administration. The 1999 Stock Plan is administered by the Compensation
Committee of the Board of Directors. Subject to the provisions of the 1999 Stock
Plan, except with respect to Compensation Committee
15
<PAGE> 18
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 a 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 1999 Stock 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 1999 Stock 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.
Repricing. Without the prior approval of the Company's shareholders
obtained in the manner stated in Section 17 of the 1999 Stock Plan, Options
issued under the 1999 Stock Plan will not be repriced, replaced or regranted
through cancellation or by lowering the Option exercise price of a previously
granted Option.
Exercisability of Shares. The vesting schedule of all Options, Awards and
Purchases shall be determined by the Compensation 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.
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 1999 Stock 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 ISO 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 1999 Stock Plan. No Options may be granted under the 1999 Stock
Plan after February 15, 2009.
United States Federal Income Tax Consequences. The following discussion
summarizes certain United States federal income tax considerations for persons
receiving Stock Rights under the 1999 Stock Plan and certain tax effects on the
Company, 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. However, this summary is not intended to be a complete
discussion of all the United States federal income tax consequences of these
plans.
16
<PAGE> 19
Incentive Stock Options:
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 the Company is not entitled to a federal income tax
deduction upon either grant or exercise of an ISO.
2. If shares acquired upon exercise of an ISO are not disposed of within
(i) two years from the date the ISO was granted or (ii) one year from
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.
3. If shares acquired upon exercise of an ISO are disposed of and the
optionee does not satisfy the 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 as the result
of a Disqualifying Disposition of stock acquired by exercising an ISO,
the Company generally should be entitled to a corresponding federal
income tax deduction.
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 generally 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 an "alternative minimum tax" under the Code. The
Code provides that an "alternative minimum tax" will be applied against
a taxable base which is equal to "alternative minimum taxable income,"
generally reduced by a statutory exemption. In general, the amount by
which the value of the shares 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 or her
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 shares acquired upon the exercise of an ISO
are subject to vesting, or are subject to certain restrictions on
resale under federal securities laws applicable to directors, officers
or 10% shareholders.
Non-Qualified Options:
1. The optionee generally does not recognize any taxable income upon the
grant of a NQSO, and the Company is not entitled to a federal income
tax deduction by reason of such grant.
2. The optionee generally will recognize ordinary income at the time of
exercise of a 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 Company may be required to withhold income tax on
this amount.
17
<PAGE> 20
3. When the optionee sells the shares acquired upon exercise of a NQSO, he
or she generally will recognize 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 shares (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.
4. The Company 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 Company's Common Stock to the Company 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 shares acquired upon the exercise of an NQSO
are subject to vesting, or are subject to certain restrictions on
resale under federal securities laws applicable to directors, officers
or 10% shareholders.
Awards and Purchases:
The following general rules are applicable under current federal income tax
law to the grant of Awards and Purchases under the 1999 Stock Plan:
1. Under current federal income tax law, persons receiving Common Stock
pursuant to an Award or Purchase generally will recognize ordinary
income equal to the fair market value of the shares received, in the
case of an Award, or the excess of the fair market value of the
shares (determined on the date of purchase) over the purchase
price, in the case of an authorization to Purchase. The Company
generally will be entitled to a corresponding federal income tax
deduction. When such stock is sold, the seller generally will recognize
capital gains or loss.
2. 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% stockholders.
Votes Required for Approval:
The affirmative vote of a majority of the shares of Common Stock of the
Company represented in person or by proxy at the Annual Meeting of Shareholders
and entitled to vote will be required to approve the adoption of the 1999 Stock
Plan.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL OF
THE ADOPTION OF THE 1999 STOCK PLAN.
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<PAGE> 21
OPTION INFORMATION
As of April 9, 1999, the Company had approximately 280 employees with
outstanding option grants under the 1988 Stock Plan, the 1991 Stock Plan, the
1993 Stock Plan, the 1994 Stock Plan, the 1996 Stock Plan, the 1996 Director
Stock Plan, the 1996 Stock Purchase Plan and the 1997 Stock Plan.
The following table sets forth as of April 9, 1999, options granted during
fiscal year 1998 under the 1997 Stock Plan to (i) the Named Officers, (ii) each
other person who received five percent of such options, (iii) all executive
officers of the Company as a group, (iv) all current directors of the Company
who are not executive officers as a group and (v) all employees, including all
current officers who are not executive officers, as a group:
<TABLE>
<CAPTION>
NAME TITLE NO. OF OPTIONS GRANTED
---- ----- ----------------------
<S> <C> <C>
James E. Donegan.................. Chairman, Chief Executive Officer 100,000
and President
Frank R. DiPietro................. Executive Vice President, 50,000
Treasurer and Chief Financial
Officer
Raymond W.B. Chow................. Chief Technology Officer 50,000
Timothy A. Dhuyvetter............. Senior Vice President of Low Power 25,000
Analog
Yener Gurler...................... Senior Vice President of 50,000
Operations
All executive officers as a group......................................... 275,000
All current directors who are not executive officers as a group........... 30,000
All employees who are not executive officers as a group................... 612,915
</TABLE>
CERTAIN TRANSACTIONS
Pursuant to an Agreement of Lease, dated January 31, 1996, as amended
September 15, 1997, the Company leases its Billerica facility of approximately
66,000 square feet from ATC Billerica Corporation, an affiliate of Tractebel
S.A. Under the Agreement of Lease, the Company will pay monthly rent of $28,534
for the first year of the lease, which payments are subject to an annual
escalation. The Agreement of Lease expires on January 31, 2003, subject to an
option of the Company to extend such lease for an additional five-year period.
Messrs Loeb and Deroux are affiliated with Tractebel S.A.
On July 31, 1998, the Company made a loan to Timothy A. Dhuyvetter, Senior
Vice President of Low Power Analog, in the sum of $55,000 cash which canceled
and superseded in its entirety a Pledge and Security Agreement dated July 31,
1997. The loan was secured by a Pledge and Security Agreement dated July 31,
1998 and was evidenced by the issuance and delivery to the Company of a
Promissory Note bearing interest at a rate of 9% per annum, with interest
payable on a monthly basis and the principal and any remaining interest payable
to the order of the Company on July 31, 1999. This loan was subsequently
canceled and superseded in its entirety by a second loan on December 4, 1998 in
the sum of $95,000. This loan was secured by a Pledge and Security Agreement
dated December 4, 1998 and was evidenced by the issuance and delivery to the
Company of a Promissory Note bearing interest at a rate of 8% per annum with
interest payable on a monthly basis and any remaining interest payable to the
order of the Company on December 4, 1999.
On December 14, 1998, the Company made a loan to Frank R. DiPietro,
Executive Vice President, Treasurer and Chief Financial Officer of the Company,
in the sum of $250,000 cash. The loan was secured by a Pledge and Security
Agreement dated December 14, 1998 and was evidenced by the issuance and delivery
to the Company of a Promissory Note bearing interest at a rate of 8% per annum,
with interest payable on a monthly basis and the principal and any remaining
interest payable to the order of the Company on December 14, 1999.
19
<PAGE> 22
INDEPENDENT ACCOUNTANTS
The Board of Directors has selected the firm of KPMG Peat Marwick LLP as
the Company's independent accountants for the 1999 fiscal year. KPMG Peat
Marwick LLP has served as the Company's independent accounts commencing with the
year ended December 31, 1995. Representatives of KPMG Peat Marwick LLP are
expected to be present at the Annual Meeting. They will have the opportunity to
make a statement if they desire to do so and will also be available to respond
to appropriate questions from stockholders.
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 1998, with the following exceptions:
Tractebel, S.A., a former beneficial owner of greater than 10% of the Company's
common stock, failed to file a monthly report covering the sale of shares during
the month of November in a timely manner. Tractebel, S.A. 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 stockholders intended for inclusion in the Company's proxy
materials to be furnished to all stockholders entitled to vote at the 2000
Annual Meeting of Stockholders pursuant to SEC Rule 14a-8 must be received at
the Company's principal executive offices not later than December 16, 1999.
------------------------
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.
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<PAGE> 23
APPENDIX A
SIPEX CORPORATION
1999 STOCK PLAN
1. PURPOSE. The purpose of the SIPEX Corporation 1999 Stock Plan (the
"Plan") is to encourage key employees 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. Except as
provided in Section 3 below, no Stock Rights may be granted pursuant to this
Plan to any officer or director of the Company or any Related Corporation. For
purposes of this Plan, the term "officer" shall have the meaning as interpreted
for purposes of the requirements of Rule 4460(i), or its successor, of the rules
of the National Association of Securities Dealers.
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 6; (iv) determine
whether each Option granted shall be an ISO or a Non-Qualified Option; (v)
determine (subject to paragraph 7) 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
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<PAGE> 24
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.
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. 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 or consultant of
the Company or any Related Corporation. The Committee may also 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.
Notwithstanding anything to the contrary contained in this Section 3, Stock
Rights may not be granted to directors or officers of the Company or any Related
Corporation unless the Plan has been approved by the Company's stockholders
within twelve months of the adoption of the Plan by the Board.
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 1,200,000, subject to adjustment as provided in paragraph 13. 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 840,000 shares of Common Stock
under the Plan during any fiscal year of the Company.
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<PAGE> 25
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 February 17, 1999 and prior to February 16, 2009. 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. MINIMUM OPTION PRICE; ISO LIMITATIONS.
A. PRICE FOR NON-QUALIFIED OPTIONS, AWARDS AND PURCHASES. Subject to
paragraph 2(D) (relating to compliance with Section 162(m) of the Code),
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 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.
A-3
<PAGE> 26
7. OPTION DURATION. Subject to earlier termination as provided in
paragraphs 9 and 10 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 (10%) of the total combined voting power
of all classes of stock of the Company or any Related Corporation, as determined
under paragraph 6(B). Subject to earlier termination as provided in paragraphs 9
and 10, 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 16.
8. EXERCISE OF OPTION. Subject to the provisions of paragraphs 9 through
12, each Option granted under the Plan shall be exercisable as follows:
A. VESTING. The Option 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 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 16) if such acceleration would
violate the annual vesting limitation contained in Section 422(d) of the
Code, as described in paragraph 6(C).
9. 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 10, 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 16. For purposes of this paragraph 9, 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 9, 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.
10. 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
A-4
<PAGE> 27
has 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.
11. 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.
12. 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 11 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.
13. 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
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
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<PAGE> 28
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 or C 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 13 and, subject to
paragraph 2, its determination shall be conclusive.
14. 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 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
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<PAGE> 29
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 13 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.
15. TERM AND AMENDMENT OF PLAN. This Plan was adopted by the Board on
February 17, 1999, subject, with respect to the validation of ISOs granted under
the Plan, to approval of the Plan by the stockholders of the Company at the next
Meeting of Stockholders (the "Stockholder Approval"). If Stockholder Approval is
not obtained prior to February 17, 2000, ISOs granted under the Plan prior to
such date shall be treated as Non-Qualified Options. The Plan shall expire at
the end of the day on February 16, 2009 (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 Stockholder Approval. The Board may
terminate or amend the Plan in any respect at any time, except that, if
Stockholder Approval has been obtained, then the Board must obtain the approval
of the stockholders 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 13); (b) the provisions of paragraph 3
regarding eligibility for grants of ISOs may not be modified; (c) the provisions
of paragraph 6(B) regarding the exercise price at which shares may be offered
pursuant to ISOs may not be modified (except by adjustment pursuant to paragraph
13); and (d) the expiration date of the Plan may not be extended. Except as
otherwise provided in this paragraph 15, in no event may action of the Board or
stockholders alter or impair the rights of a grantee, without such grantee's
consent, under any Stock Right previously granted to such grantee.
16. MODIFICATIONS OF ISOS; CONVERSION OF ISOS INTO NON-QUALIFIED
OPTIONS. Subject to paragraph 13(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 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 Non-Qualified 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.
A-7
<PAGE> 30
17. REPRICING. Without the prior approval of the Company's stockholders
obtained in the manner stated in Section 15, Options issued under the Plan will
not be repriced, replaced or regranted through cancellation or by lowering the
Option exercise price of a previously granted Option.
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 18), 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 the
Commonwealth of Massachusetts, or the laws of any jurisdiction in which the
Company or its successors in interest may be organized.
A-8
<PAGE> 31
SKU # 1504-PS-99
<PAGE> 32
[FRONT SIDE OF PROXY CARD]
SIPEX CORPORATION
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
MAY 28, 1999
SOLICITED BY THE BOARD OF DIRECTORS
The undersigned shareholder of SIPEX Corporation, a Massachusetts
corporation (the "Corporation"), hereby acknowledges receipt of the Notice of
Annual Meeting of Shareholders and Proxy Statement, each dated April 16, 1999
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
Annual Meeting of Shareholders of the Corporation to be held at BankBoston,
Conference & Training Center, 35th Floor, 100 Federal Street, Boston,
Massachusetts 02110 on Friday, May 28, 1999 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 Mr. James E. Donegan as a member of the Board of Directors to
serve for a three-year term as a Class III Director.
[ ] FOR [ ] WITHHOLD
2. To approve the adoption of the Corporation's 1999 Stock 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> 33
[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 THE DIRECTOR, FOR THE CORPORATION'S
1999 STOCK 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: ________________ , 1999
----------------------------------
Signature
----------------------------------
Signature
(THIS PROXY SHOULD BE DATED AND MUST BE 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.)
