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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
VYSIS, INC.
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(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:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
VYSIS, INC.
3100 WOODCREEK DRIVE
DOWNERS GROVE, ILLINOIS 60515-5400
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JULY 22, 1998
The Annual Meeting of Stockholders ("Annual Meeting") of Vysis, Inc. (the
"Company") will be held at the Amoco Management Learning Center, Forum B,
located at 2001 Butterfield Road, Downers Grove, Illinois 60515, on July 22,
1998, at 10:00 a.m. for the following purposes:
1. To elect seven directors of the Board of Directors to serve until
the next Annual Meeting and until their successors have been elected and
qualified;
2. To adopt the 1998 Long Term Incentive Plan; and
3. To act upon such other matters as may properly come before the
meeting or any adjournment or postponements thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice. The record date for determining those
stockholders who will be entitled to notice of, and to vote at, the meeting and
at any adjournment thereof is June 26, 1998. The stock transfer books will not
be closed between the record date and the date of the meeting. A list of
stockholders entitled to vote at the Annual Meeting will be available for
examination by any stockholder, for any purpose germane to the meeting, during
ordinary business hours, at the offices of the Company for a period of at least
ten days prior to the meeting.
Whether or not you plan to attend the Annual Meeting, please complete, date,
sign and return the enclosed proxy promptly in the accompanying reply envelope.
You may revoke your proxy at any time prior to the Annual Meeting. If you decide
to attend the Annual Meeting and wish to change your proxy vote, you may do so
automatically by voting in person at the Annual Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
[SIGNATURE]
William E. Murray
SECRETARY
Downers Grove, Illinois
July 1, 1998
<PAGE>
VYSIS, INC.
PROXY STATEMENT
FOR
1998 ANNUAL MEETING OF STOCKHOLDERS
These proxy materials are furnished in connection with the solicitation of
proxies by the Board of Directors of Vysis, Inc., a Delaware corporation (the
"Company"), for the Annual Meeting of the Stockholders (the "Annual Meeting") to
be held at 10:00 a.m. on July 22, 1998, at the Amoco Management Learning Center,
Forum B, located at 2001 Butterfield Road, Downers Grove, Illinois 60515, and at
any adjournments or postponements of the Annual Meeting. These proxy materials
were first mailed to stockholders on or about July 1, 1998.
VOTING RIGHTS AND SOLICITATION
VOTING
Only common stockholders of record on the books of the Company at the close
of business on June 26, 1998 (the "Record Date") will be entitled to notice of
and to vote at the Annual Meeting. Each of these stockholders will be entitled
to one vote per share. There were outstanding at the close of business on the
Record Date 9,705,629 shares of common stock of the Company ("Common Stock").
The presence in person or by proxy of the holders of shares of Common Stock
representing a majority of all outstanding shares of Common Stock entitled to
vote will constitute a quorum. Votes cast in person or by proxy will be
tabulated by inspectors of election appointed for the Annual Meeting who will
determine whether a quorum is present.
Proxies will be voted on the proposals referred to thereon, and presented at
the Annual Meeting, in accordance with the stockholder's specifications marked
thereon. Stockholders are encouraged to specify their choices on matters to be
voted upon. If no specification is made with respect to any such proposal, a
proxy will be voted as to such proposal in accordance with the recommendation of
the Board of Directors set forth in this Proxy Statement. A proxy may be revoked
at any time before it is voted at the meeting by voting in person or by
delivering a later dated proxy or a written notice of revocation to the
Secretary of the Company so as to be received by the Secretary prior to the
vote.
If a quorum is present, abstentions and broker non-votes will have no effect
on the outcome of the election of directors since directors are elected by a
plurality of the votes cast. However, approval of the 1998 Long Term Incentive
Plan will require the affirmative vote of the holders of shares of Common Stock
representing more than 50% of the voting power of shares represented at the
meeting in person or by proxy and entitled to vote on the matter. As a result,
shares which abstain from voting will count as votes against the adoption of
such plan and broker non-votes will have no effect on the outcome.
SOLICITATION OF PROXIES
The Company will bear the entire cost of solicitation, including the
preparation, assembly, printing, and mailing of this Proxy Statement, the proxy,
and any additional solicitation material furnished to stockholders. Copies of
solicitation material will be furnished to brokerage houses, fiduciaries, and
custodians holding shares in their names that are beneficially owned by others
so that they may forward this solicitation material to such beneficial owners.
The original solicitation of proxies by mail may be supplemented by a
solicitation by telephone, telegram, or other means by directors, officers, or
employees of the Company. No additional compensation will be paid to these
individuals for any such services. Except as described above, the Company does
not presently intend to solicit proxies other than by mail.
<PAGE>
PROPOSAL NO. 1
ELECTION OF DIRECTORS
GENERAL
The names of persons who are nominees for director and their positions and
offices with the Company are set forth in the table below. The proxy holders
intend to vote all proxies received by them in the accompanying form for the
nominees listed below unless otherwise instructed. In the event any nominee is
unable or declines to serve as a director at the time of the Annual Meeting, the
proxies will be voted for any nominee who may be designated by the present Board
of Directors to fill the vacancy. As of the date of this Proxy Statement, the
Board of Directors is not aware of any nominee who is unable or will decline to
serve as a director. The seven nominees receiving the highest number of
affirmative votes of the shares entitled to vote at the Annual Meeting will be
elected directors of the Company to serve until the next Annual Meeting and
until their successors have been elected and qualified. Stockholders may not
cumulate votes in the election of directors.
<TABLE>
<CAPTION>
POSITIONS AND OFFICES HELD
NOMINEES WITH THE COMPANY
- --------------------------------------- -----------------------------------------------------
<S> <C>
Robert C. Carr Chairman of the Board of Directors
William M. Bartlett Director
John L. Bishop President, Chief Executive Officer and Director
Kenneth L. Melmon Director
Walter R. Quanstrom Director
Frank J. Sroka Director
Richard C. Williams Director
</TABLE>
BUSINESS EXPERIENCE OF DIRECTORS
Mr. Robert C. Carr, 57, was appointed to the Board of Directors of the
Company in October 1993 and was elected Chairman of the Company's Board of
Directors in February 1997. He has served as Vice President Corporate Planning
of Amoco Corporation ("Amoco") since May 1997. Mr. Carr has served as President
of Amoco Technology Company ("ATC"), a wholly owned subsidiary of Amoco, since
October 1993. Mr. Carr joined Amoco in 1990 and has held various positions with
Amoco, including Vice President of Chemicals Development and Diversification,
Vice President and Treasurer, Vice President of Planning and Administration, and
Vice President and Controller.
Mr. William M. Bartlett, 65, has been a Director since September 1997. For
more than the last five years, Mr. Bartlett has served as a consultant to
various companies in the health care industry. Mr. Bartlett is a director of
Medco Research, Inc., an adenosine technology and cardiovascular development
company. Mr. Bartlett has a significant amount of experience in the health care
industry, having been Chief Executive Officer-Medical Products Group and
Corporate Vice President for G.D. Searle & Co., a manufacturer and distributor
of hospital equipment and diagnostic equipment, from 1978 to 1982. He was also
President, Atlantic International Division of American Hospital Supply Company
from 1975 to 1978 and of the V. Mueller Surgical Instrument Division from 1971
to 1975.
Mr. John L. Bishop, 53, has served as President and as a Director since
November 1993 and became Chief Executive Officer in February 1996. Mr. Bishop
has over 25 years experience in developing and operating diagnostics businesses.
From 1991 until November 1993, Mr. Bishop was Chairman and Chief Executive
Officer of MicroProbe Corporation, a manufacturer of DNA probe diagnostics and
therapeutics, and, from 1987 until 1991, of Source Scientific Systems, an
original equipment manufacturer of automated diagnostic systems. From 1984 until
1986, Mr. Bishop was President and Chief Operating Officer of Gen-Probe, Inc., a
developer and manufacturer of DNA probe diagnostics for infectious diseases.
From 1968 until 1984, Mr. Bishop held various management positions with American
Hospital Supply Company and its affiliates, including a three year assignment in
Japan as an Executive Vice President and Chief
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Executive Officer of International Reagents Corp., a joint venture between
American Hospital Supply Company and Green Cross Corporation.
Kenneth L. Melmon, M.D., 63, has been a Director since September 1997. Dr.
Melmon has been a Scientific Advisory Board member of the Company since August
1994. He is also a director of Epoch, Inc., a biotechnology corporation. Since
July 1994 he has been Associate Dean, Postgraduate Medical Education at Stanford
University School of Medicine. Dr. Melmon was Associate Chairman, Department of
Medicine at the Stanford University School of Medicine from July 1989 to July
1993 and was Chairman, Stanford University Hospital Technology Transfer Program
from July 1988 to July 1993. He was Chairman, Department of Medicine at the
Stanford University School of Medicine from 1978 to 1984 and has been Professor
of Medicine and Molecular Pharmacology since 1978.
Walter R. Quanstrom, Ph.D., 55, has been a Director since September 1997.
Dr. Quanstrom is presently Amoco Corporation's Vice President of Environment,
Health and Safety, responsible for Amoco's medical department, product safety,
toxicology, industrial hygiene, environmental conservation and safety, and has
held such position since 1987.
Mr. Frank J. Sroka, J.D., 49, was appointed to the Board of Directors of the
Company in September 1993. Mr. Sroka has served as General Attorney for Amoco
with responsibility for the legal matters of ATC and its subsidiaries since
September 1993. Prior to such position, Mr. Sroka held positions in the
Research, Patents & Licensing and Law departments of Amoco since 1970.
Mr. Richard C. Williams, 54, has been a Director since September 1997. Mr.
Williams has served as President of Connor-Thoele Limited, a consulting and
financial advisory firm which serves the health care and pharmaceuticals
industry, since March 1989. Mr. Williams has served as Chairman of the Board of
Directors since October 1992 and as a director of Medco Research, Inc. since
January 1991, as a director of Centaur, Inc., a private equine diagnostic
company, since January 1991 and as a director of Immunomedics, Inc., a
biopharmaceutical research company, since March 1993. Prior to these positions
Mr. Williams has gained extensive experience in the health care industry, most
notably as Vice President and Chief Financial Officer of Erbamont, N.V., a
pharmaceutical company, and at Abbott Laboratories and American Hospital Supply
Company where he held a variety of financial management positions.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Company's Board of Directors was expanded from three members, all of
whom were officers of ATC and two of whom were employees of Amoco, to seven
members in September 1997, in anticipation of the Company's initial public
offering. During the fiscal year ended December 31, 1997, the Board of Directors
held four meetings. Each of Dr. Melman and Dr. Quanstrom missed two of the four
meetings of the Board of Directors during 1997.
The Company has two standing Board Committees: The Audit Committee and the
Compensation Committee, both of which were established in October 1997, in
anticipation of the Company's initial public offering. The Company does not have
a nominating committee.
The Audit Committee is responsible for reviewing the Company's financial
procedures and controls and for selecting and meeting with the independent
auditors. This Committee did not meet during the last fiscal year. This
Committee currently consists of Messrs. Bartlett, Sroka and Williams (Chairman).
The Compensation Committee is responsible for reviewing the compensation
arrangements in effect for the Company's executive officers and for
administering the Company's employee benefit plans. If adopted by the
stockholders, the 1998 Long Term Incentive Plan will be administered by a
subcommittee of the Compensation Committee consisting solely of non-employee
directors. The Compensation Committee did not meet during the last fiscal year.
This Committee currently consists of Messrs. Bartlett (Chairman), Carr, Melmon
and Williams.
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DIRECTOR COMPENSATION
Each director who is not an employee of the Company or Amoco (Messrs.
Bartlett, Melmon and Williams) receives a fee of $2,000 per month and $2,000 per
board meeting attended. None of the remaining directors receive any compensation
for serving on the Board of Directors.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors recommends a vote FOR the nominees listed herein.
PROPOSAL NO. 2.
APPROVAL OF THE 1998 LONG TERM INCENTIVE PLAN
The Company has previously used the grant of options under the Vysis, Inc.
1996 Stock Incentive Plan (the "1996 Plan") as an integral part of its executive
incentive program. As of June 1, 1998, grants for 975,348 shares of Common Stock
had been made under that plan and 10,054 shares remained available for future
grants and awards.
The Board of Directors of the Company has determined that a new long-term
incentive plan is needed in order to maintain a competitive executive incentive
program as a publicly held company and thereby more effectively attract and
retain and furnish incentives to outstanding individuals who are key executives
or managerial employees of the Company and its subsidiaries and consultants who
provide services to the Company or its subsidiaries. Accordingly, the Board of
Directors has adopted, and is submitting to the stockholders for their approval,
the Vysis, Inc. 1998 Long Term Incentive Plan (the "Plan").
The Plan will become effective immediately upon approval by the stockholders
and, if approved, will continue in effect until terminated by the Board of
Directors.
The summary of the Plan which follows is qualified in its entirety by
reference to the complete text of the Plan as set forth as Exhibit A hereto.
GENERAL DESCRIPTION
Participants in the Plan shall consist of such key executives and managerial
employees of the Company and consultants who provide services to the Company or
its subsidiaries as the Compensation Committee of the Board of Directors or a
subcommittee thereof (the "Committee") may select from time to time. In the
discretion of the Committee, participants in the Plan may receive stock options,
stock appreciation rights ("SARs"), stock awards or performance unit awards,
either singly or in combination. The form and amount of any grant or award, as
well as the time and conditions of exercise or vesting and any extension or
acceleration of the time of exercise or vesting, are subject to the discretion
of the Committee. Except to the extent otherwise determined by the Committee,
any shares subject to a grant or award which terminates by forfeiture,
expiration, cancellation or by any other form of termination shall again be
available for future grants under the Plan.
No awards under the Plan shall be exercisable more than ten years after the
date of grant. The Plan also sets forth special expiration provisions for
earlier termination of awards in the event of termination of employment (or
provision of services), retirement or death.
The Committee has general authority to administer the Plan, including the
authority to select participants, determine the form and amount of awards and to
amend such awards. The Committee also has the authority to extend or accelerate
the time of exercise or vesting of the awards. The Board of Directors may amend
the Plan in any respect, or terminate the Plan at any time, provided that no
amendment may materially adversely affect the rights of any participant or
beneficiary under any award made under the Plan prior to the date such amendment
is adopted by the Board of Directors.
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<PAGE>
The Plan provides that the maximum number of shares of Common Stock which
may be issued pursuant to all grants thereunder may not exceed 1,500,000. Such
shares may be authorized and unissued shares of Common Stock or treasury shares.
The closing price of the Common Stock reported on NASDAQ for June 26, 1998 was
$10. The maximum number of shares issuable under the Plan and the number and/or
price of shares or other compensation subject to any outstanding award may be
appropriately adjusted by the Committee to reflect changes in the capitalization
of the Company by reason of stock dividends, stock rights, recapitalizations,
reorganizations, mergers, consolidations, combinations, exchanges or other
relevant changes in corporate structure or capitalization.
In addition, the Internal Revenue Code of 1986, as amended (the "Code"),
places limitations on the deductibility, for Federal income tax purposes, of
annual compensation paid to certain executive officers generally designated as
the five most highly compensated officers of the Company on the last day of the
year (the "Named Executive Officers"). In order to permit certain grants and
awards under the Plan to be deductible for Federal income tax purposes, the Plan
limits the maximum number of shares that may be granted under the Plan in any
calendar year to any participant to 250,000 shares and the maximum aggregate
cash payout that may be made under the Plan in any calendar year to a Named
Executive Officer to $25,000,000.
The Plan provides that in the event of a Change in Control (as described
below), with certain exceptions, (i) all outstanding stock options and SARs
shall become fully exercisable, (ii) all stock awards shall become fully vested,
and (iii) performance units may be paid out in such manner and amounts as
determined by the Committee. For purposes of the Plan, a Change in Control will
generally be deemed to have occurred if (i) with certain limited exceptions, any
person becomes the beneficial owner of 40% or more of the combined voting power
of the Company's then outstanding securities; (ii) the Company's stockholders
approve a merger or consolidation of the Company other than (A) a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent more than 50% of
the combined voting power of the voting securities of the surviving entity, or
(B) a merger or consolidation effected to implement a recapitalization in which
no person acquires more than 15% of the Company's then outstanding securities
having the right to vote for the election of directors; (iii) the Company
stockholders approve a plan of complete liquidation of the Company or an
agreement for the sale or disposition by the Company of all or substantially all
of its assets; or (iv) during any 24 month period, the majority of the
membership of the Board changes without the approval of two-thirds of the
directors who were either directors at the beginning of the period or whose
election was previously so approved.
A participant may elect to have the Company withhold shares of Common Stock
(or to accept already-owned shares) to satisfy tax withholding obligations with
respect to exercises or payments under the Plan. No award shall be transferable
except by will or the laws of descent and distribution.
As of July 1, 1998, no grants or awards had been made under the Plan and
none are expected to be made prior to stockholder approval of the Plan. Because
grants and awards under the Plan will be determined on a case-by-case basis by
the Committee, the benefits to be received by any particular current executive
officer, by all current executive officers as a group, or by non-executive
officer employees as a group cannot be determined by the Company at this time.
STOCK OPTIONS
Options to purchase shares of Common Stock, including incentive stock
options within the meaning of Section 422 of the Code ("ISOs"), may be granted
under the Plan; provided, however, that ISOs may only be granted to employees of
the Company and its subsidiaries and certain other limitations apply to ISOs
granted under the Plan. The Committee will determine the number of shares
subject to each stock option and the manner and time of exercise. The per share
option price shall not be less than the greater of par value or 100% of the fair
market value of a share of Common Stock at the date of grant. Upon exercise,
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<PAGE>
the option price may be paid in cash, in shares of Common Stock having a fair
market value equal to the option price, or in a combination thereof, as
determined by the Committee. The Committee may also allow the "cashless"
exercise of options, subject to applicable rules and regulations. The agreement
or instrument evidencing the grant of an option may contain such other terms,
provisions and conditions not inconsistent with the Plan as the Committee may
determine and the Committee may impose restrictions on shares of Common Stock
acquired in connection with exercise.
SARS
SARs may be granted in tandem with a related stock option or may be granted
independently of a related stock option. Rights granted in tandem with a related
stock option shall be exercisable to the extent that the related stock option is
exercisable. The Committee will determine the manner and time of exercise of
rights granted independently of a stock option. In the case of rights granted in
tandem with a related stock option, the grantee may elect to exercise either the
stock option or the rights (but not both) as to any of the same shares subject
to the stock option and the rights.
Upon exercise of a SAR, the grantee shall be paid the excess of (i) the fair
market value of a share of Common Stock on the date of exercise of the SAR, over
(ii) a specified price not less than the fair market value of a share of Common
Stock on the date of grant of the SAR, multiplied by the number of shares
exercised. Such amount shall be paid in cash or in shares of Common Stock having
a fair market value equal to such excess, or in a combination thereof, in the
discretion of the Committee.
The agreement or instrument evidencing the grant of SARs may contain such
other terms, provisions and conditions not inconsistent with the Plan as the
Committee may determine and the Committee may impose restrictions on shares of
Common Stock acquired in connection with exercise.
STOCK AWARDS
Stock awards consisting of shares of Common Stock may be made under the
Plan. Such awards may be contingent upon certain criteria (such as performance
or continued employment) that must occur before or after the date the stock
award is granted, or the date the stock is earned by, vested in, or delivered to
the participant. The Committee may provide for the early vesting of any such
award in the event of termination of employment by retirement, death, incapacity
or otherwise prior to the end of the restriction period. The holder of a stock
award shall have the right to vote the shares and if the award is fully earned
and vested, to receive dividends thereon. Prior to the date that a participant
has a fully earned and vested right to the shares comprising a stock award, the
Committee, in its sole discretion, may award dividend rights with respect to
such shares. If all conditions to which a stock award is subject have been
satisfied, the holder shall be entitled to such shares free of all restrictions.
PERFORMANCE UNIT AWARDS
Performance unit awards, which may be stated in terms of cash or in units
representing shares of Common Stock, may also be made under the Plan. Such
awards shall be contingent on the achievement of objectives as shall be
established by the Committee. If a participant terminates employment during the
applicable performance period, the Committee may determine that the participant
is entitled to settlement of all or any portion of the performance unit award as
to which he would otherwise be eligible. Upon settlement of a performance award
denominated in Common Stock when granted, one share of Common Stock will be
distributed for each unit earned or cash will be distributed for each unit
earned equal to either (i) the fair market value of a share of Common Stock at
the end of the performance period, or (ii) the average Common Stock value over a
period determined by the Committee. Upon settlement of a performance award
denominated in cash when granted, the value of each unit earned will be
distributed in its initial cash value, or shares of Common Stock will be
distributed based on the cash value of the units
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earned divided by (1) the fair market value of a share of Common Stock at the
end of the performance period or (2) the average Common Stock value over a
period determined by the Committee.
FEDERAL INCOME TAX CONSEQUENCES
Generally, an employee who has been granted an ISO will not realize taxable
income and the Company will not be entitled to a deduction at the time of the
grant or exercise of such option. If the employee makes no disposition of shares
acquired pursuant to an ISO within two years from the date of grant of such
option, or within one year of the transfer of the shares to such employee, any
gain or loss realized on a subsequent disposition of such shares will be treated
as a long-term capital gain or loss. Under such circumstances, the Company will
not be entitled to any deduction for Federal income tax purposes. If the
foregoing holding period requirements are not satisfied, the employee will
generally realize ordinary income at the time of disposition in an amount equal
to the lesser of (i) the excess of the fair market value of the shares on the
date of exercise over the option price, or (ii) the excess of the amount
realized upon disposition of the shares, if any, over the option price, and the
Company will be entitled to a corresponding deduction.
Generally, an individual will not realize taxable income at the time of the
grant of an option which does not qualify as an ISO. Upon exercise of such
non-qualified stock option, however, the individual will realize ordinary income
in an amount measured by the excess, if any of the fair market value of the
shares on the date of exercise over the option price, and the Company will be
entitled to a corresponding deduction. Upon a subsequent disposition of such
shares, the individual will realize short-term or long-term capital gain or loss
with the basis for computing such gain or loss equal to the option price plus
the amount of ordinary income realized upon exercise.
Generally, an individual will not realize taxable income at the time of the
grant of an SAR. Upon exercise, however, such individual will realize ordinary
income measured by the difference between the fair market value of the Common
Stock on the applicable date of grant and the fair market value of such stock on
the date of exercise. The Company will be entitled to a corresponding deduction
in the year of exercise.
Generally, an individual who has been granted a stock award will not realize
taxable income at the time of grant, and the Company will not be entitled to a
deduction at that time, assuming that the restrictions constitute a substantial
risk of forfeiture for Federal income tax purposes. Upon the vesting of shares
subject to an award, the individual will realize ordinary income in an amount
equal to the fair market value of the shares at such time, and the Company will
be entitled to a corresponding deduction. Dividends paid to the individual
during the restriction period will also be compensation income to the individual
and deductible as such by the Company. The holder of a stock award may elect to
be taxed at the time of grant of the award on the then fair market value of the
shares, in which case (i) the Company will be entitled to a deduction at the
same time and in the same amount, (ii) dividends paid to such holder during the
restriction period will be taxable as dividends to such holder and not
deductible by the Company, and (iii) there will be no further tax consequences
when the restrictions lapse. If an individual who has made such an election
subsequently forfeits the shares, he will not be entitled to any deduction or
loss. The Company, however, will be required to include as ordinary income the
lesser of the fair market value of the forfeited shares or the amount of the
deduction originally claimed with respect to the shares.
The Company has also been advised that an employee who has been granted
performance units will not realize taxable income at the time of grant, and the
Company will not be entitled to a deduction at that time. The individual will
have income at the time of payment, and the Company will have a corresponding
deduction unless the holder is one of the executive officers and applicable
provisions of the Code are not satisfied.
Any acceleration of the payment of grants and awards under the Plan in the
event of a Change in Control of the Company may cause part or all of the
consideration involved to be treated as an "excess parachute payment" under the
Code, which may subject the participant to a 20% excise tax and which may
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not be deductible by the Company. A deduction otherwise available to the Company
for any year with respect to compensation payable to an executive officer may be
denied to the extent that it exceeds $1,000,000. For these purposes, stock
awards and performance units awarded under the Plan may under certain
circumstances qualify for, and it is anticipated that grants of options and SARs
will generally qualify for, an exception to that limitation for eligible
performance-based compensation.
STOCKHOLDER APPROVAL
Approval of the Plan will require the affirmative vote of the holders of
shares of the Company representing more than 50% of the voting power of shares
represented in person or by proxy and entitled to vote at the Annual Meeting,
with the result that shares which abstain from voting would count as votes
against the Plan and broker non-votes would have no effect on the outcome.
Proxies not limited to the contrary will be voted for approval of the Plan.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors believes that approval of the 1998 Long Term
Incentive Plan is necessary in order to provide management with a competitive
level of compensation, as determined through consultation with outside experts,
and the continuing opportunity to acquire an equity interest in the Company as
an incentive for them to remain in the Company's service. For this reason, the
Board of Directors recommends that the stockholders vote FOR the approval of the
1998 Long Term Incentive Plan.
8
<PAGE>
OWNERSHIP OF SECURITIES
The following table sets forth certain information known to the Company with
respect to beneficial ownership of the Company's Common Stock as of June 1, 1998
for (i) all persons who are beneficial owners of five percent or more of the
Company's Common Stock, (ii) the Company's directors, (iii) the Company's Chief
Executive Officer and the other executive officers named in the Summary
Compensation Table below (the "Named Executive Officers"), and (iv) all
directors and executive officers of the Company as a group. Unless otherwise
indicated, the persons named below have sole voting and investment power with
respect to the shares beneficially owned by them.
OWNERSHIP OF COMPANY STOCK
<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIALLY PERCENT
NAME OWNED(1) OWNED
- ----------------------------------------------------------------------------------- -------------------- -----------
<S> <C> <C>
Amoco Corporation.................................................................. 6,662,682(2) 68.6%
200 East Randolph Drive
Chicago, Illinois 60601
John L. Bishop..................................................................... 90,347 *
Russel K. Enns..................................................................... 14,602 *
George R. Kennedy.................................................................. 21,294 *
James P. Marcella.................................................................. 22,587 *
Steven A. Seelig................................................................... 45,174 *
William M. Bartlett................................................................ 12,853 *
Robert C. Carr..................................................................... -- *
Kenneth L. Melmon.................................................................. 13,857 *
Walter R. Quanstrom................................................................ -- *
Frank J. Sroka..................................................................... -- *
Richard C. Williams................................................................ 17,853 *
Directors and Executive Officers as a Group (13 persons)........................... 298,606 3.0%
</TABLE>
- ------------------------
* Less than 1 percent
(1) The share amounts include those shares as to which the following persons had
a right to acquire beneficial ownership by exercising stock options as of
June 1, 1998, or within 60 days after that date; Mr. Bishop, 90,347 shares;
Dr. Enns, 14,602 shares; Mr. Kennedy, 21,294 shares; Mr. Marcella, 22,587
shares; Dr. Seelig, 45,174 shares; Mr. Bartlett, 12,853 shares; Dr. Melmon,
13,857 shares; Mr. Williams, 12,853 shares; and all directors and executive
officers as a group, 243,606 shares.
(2) All such shares of Common Stock are owned of record by Amoco Technology
Company, a wholly owned subsidiary of Amoco.
OWNERSHIP OF AMOCO STOCK
The following table sets forth as of May 15, 1998, the ownership of common
stock of Amoco Corporation by the Company's directors, the Named Executive
Officers, and all directors and executive officers of the Company as a group.
Unless otherwise indicated, the persons named below have sole voting
9
<PAGE>
and investment power with respect to the shares beneficially owned by them. The
directors and executive officers of Vysis own in the aggregate less than one
percent of the common stock of Amoco Corporation.
<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIALLY OWNED
NAME (1)
- -------------------------------------------------------------------------------------------- --------------------
<S> <C>
John L. Bishop.............................................................................. 110
Russel K. Enns.............................................................................. --
George R. Kennedy........................................................................... --
James P. Marcella........................................................................... --
Steven A. Seelig............................................................................ 7,392
William M. Bartlett......................................................................... --
Robert C. Carr.............................................................................. 158,743
Kenneth L. Melmon........................................................................... --
Walter R. Quanstrom(2)...................................................................... 152,115
Frank J. Sroka(3)........................................................................... 66,453
Richard C. Williams......................................................................... --
Directors and Executive Officers as a Group (13 persons) (2)(3)............................. 384,813
</TABLE>
- ------------------------
(1) The share amounts include those shares as to which the following persons had
a right to acquire beneficial ownership by exercising stock options as of
May 1, 1998, or within 60 days after that date; Dr. Seelig, 1,600 shares;
Mr. Carr, 153,000 shares; Dr. Quanstrom, 129,000 shares; Mr. Sroka, 46,200
shares; and all directors and executive officers as a group, 329,800 shares.
Also included are shares owned in the Amoco Performance Share Plan and those
allocable to the Amoco Stock Fund accounts of participants in the Amoco
Employee Savings Plan as of May 15, 1998.
(2) Includes 1,000 shares as to which Dr. Quanstrom shares voting and
dispositive authority.
(3) Includes 4,136 shares as to which Mr. Sroka shares voting and dispositive
authority.
COMPLIANCE WITH SEC REPORTING REQUIREMENTS
Under the securities laws of the United States, the Company's directors,
executive officers, and any persons holding more than ten percent of the
Company's Common Stock are required to report initial ownership of the Company's
Common Stock and any subsequent changes in ownership to the Securities and
Exchange Commission ("SEC"). Specific due dates have been established by the
SEC, and the Company is required to disclose in this Proxy Statement any failure
to file by these dates. None of the Company's directors, executive officers or
holders of more than ten percent of the Company's Common Stock were required to
make any such filings during the Company's most recent fiscal year.
10
<PAGE>
EXECUTIVE COMPENSATION AND RELATED INFORMATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table sets forth the compensation earned, by the Company's
Chief Executive Officer and the four other highest-paid executive officers for
the 1997 fiscal year, for services rendered in all capacities to the Company and
its subsidiaries for each of the last two fiscal years. The individuals included
in the table are collectively referred to as the "Named Executive Officers."
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS ALL OTHER
--------------------- -------------------- COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS STOCK OPTIONS(#) (1)
- --------------------------------------------- --------- ---------- --------- -------------------- -------------
<S> <C> <C> <C> <C> <C>
John L. Bishop .............................. 1997 $ 224,035 $ 25,000 -- $ 4,750
President and Chief 1996 210,000 36,500 131,387 18,946
Executive Officer
George R. Kennedy ........................... 1997 153,877 -- 7,300 3,468
Senior Vice President 1996 123,258 -- 36,497 36,480
Sales and Marketing
Steven A. Seelig ............................ 1997 138,910 -- -- 2,240
Vice President Research 1996 130,200 -- 65,694 4,007
and Development and Chief
Medical Officer
James P. Marcella ........................... 1997 129,385 -- -- 3,882
Vice President Operations 1996 125,000 15,000 32,847 3,822
Russel K. Enns .............................. 1997 1996 116,654 -- 10,949 74,219
Vice President 110,000 -- 21,898 635
Regulatory Affairs
</TABLE>
- ------------------------
(1) Amounts represent the Company's 401(k) contributions made on behalf of each
of the named individuals and the reimbursement of 1996 relocation expenses
in the amounts of $14,446 for Mr. Bishop and $34,305 for Mr. Kennedy and
1997 relocation expenses in the amount of $74,219 for Dr. Enns.
STOCK OPTIONS
The following table summarizes options to purchase shares of Common Stock
granted during the fiscal year ended December 31, 1997 to the Named Executive
Officers. The amounts shown as potential realizable values on the options
identified in the table are based on assumed annualized rates of appreciation in
the price of the Common Stock of five percent and ten percent over the term of
the options, as set forth in the rules of the SEC. Actual gains, if any, on
stock option exercises depend on the future performance of the Common Stock.
There can be no assurance that the potential realizable values reflected in this
table will be achieved.
11
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED TO FOR OPTION TERM
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION ---------------------
NAME GRANTED FISCAL YEAR PRICE DATE 5% 10%
- ------------------------------------------- ----------- ------------- ----------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
George R. Kennedy.......................... 7,300 4.5% $ 6.85 8/29/07 $ 31,448 $ 79,695
Russel K. Enns............................. 10,949 6.8 6.85 8/29/07 47,168 119,532
</TABLE>
The following table sets forth information with respect to the Named
Executive Officers concerning their exercise of options during the 1997 fiscal
year and the unexercised options held by them as of the end of such year.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
NUMBER OF OPTIONS AT IN-THE-MONEY OPTIONS
SHARES VALUE DECEMBER 31, 1997 AT DECEMBER 31, 1997(1)
ACQUIRED REALIZED -------------------------- --------------------------
NAME ON EXERCISE ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------------- --------------- ------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John L. Bishop..................... -- -- 71,181 60,206 $ 887,627 $ 750,769
Steven A. Seelig................... -- -- 35,591 30,103 443,820 375,384
James P. Marcella.................. -- -- 17,796 15,051 221,916 187,686
George R. Kennedy.................. -- -- 15,970 27,827 199,146 300,867
Russel K. Enns..................... -- -- 11,864 20,983 147,944 192,460
</TABLE>
- ------------------------
(1) Based on a December 31, 1997 estimate of fair market value of $13.00 per
share.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Executive officer compensation levels for the fiscal year ended December 31,
1997 were established by the Company's Board of Directors while the Company was
an indirect wholly owned subsidiary of Amoco and prior to the formation of the
Compensation Committee in October 1997. John L. Bishop, the Company's Chief
Executive Officer, participated in the deliberations of the Board of Directors
concerning such executive officer compensation levels. During the last completed
fiscal year, no executive officer of the Company served as a director or member
of the compensation committee (or other board committee performing an equivalent
function) of any other entity, one of whose executive officers served as a
director of or member of the Compensation Committee of the Company.
EMPLOYMENT CONTRACTS AND CHANGE IN CONTROL AGREEMENTS
None of the Company's executive officers have employment, change in control,
or severance agreements with the Company, and their employment may be terminated
at any time by the Board of Directors.
CONSULTING AGREEMENTS
Prior to their appointment to the Board of Directors in September 1997, each
of Messrs. Bartlett, Melmon and Williams was a party to an advisory board
consulting agreement with the Company pursuant to which each of them provided
consulting services to the Company through service on the Company's advisory
board. The advisory board had been maintained since August 1994 for the purpose
of rendering informal advice to the Company regarding medical and technology
issues as well as business, operational and financial matters. Under such
consulting agreements, these individuals were paid in cash the following
12
<PAGE>
amounts in 1997: Mr. Bartlett, $53,253; Dr. Melmon, $45,625; and Mr. Williams,
$59,575. (In the case of Mr. Williams, the amounts shown include amounts paid to
Conner-Thoele Limited, an advisory firm of which Mr. Williams is president.)
Such consulting agreements have been terminated.
In addition, as consideration for rendering services relating to attendance
at meetings of the Board of Directors, the Company granted during 1997 to each
of Messrs. Bartlett, Melmon and Williams, options to purchase shares of Common
Stock at an exercise price of $2.74 per share as follows: Mr. Bartlett, 7,300
shares; Dr. Melmon, 10,949 shares; and Mr. Williams, 7,300 shares. Dr. Melmon
also was granted an option to purchase 1,095 shares of Common Stock in 1997,
with an exercise price of $2.74 per share, as consideration for rendering
consulting services as a member of the Company's Scientific Advisory Board.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS WITH AMOCO
Prior to the consummation of the Company's initial public offering in
February 1998 (the "IPO"), the Company engaged in a variety of transactions with
Amoco and may continue to do so on a more limited basis in the future.
Prior to the IPO, the Company received certain legal services (internal and
external), research and development support, and administrative support from
Amoco and paid for such services and support on an actual usage or pro rata
basis. The costs allocated to the Company aggregated $182,000, $304,000 and
$3,058,000 in 1997, 1996 and 1995, respectively. In addition, during 1997 Amoco
paid on behalf of the Company certain expenses aggregating $138,000. The Company
also received funding requirements and assets from Amoco. The costs of these
services, funding requirements and asset transfers were accounted for by Amoco
as intercompany receivables from Vysis. These receivables were periodically
converted into equity of Vysis. This investment by Amoco in the Company
aggregated $2,315,000 and $15,384,000 in 1996 and 1995. Additionally in 1996,
such amounts were also represented by a note payable to Amoco. At December 31,
1996, the balance of the note payable was $5,106,000. This note was subsequently
converted into 553,126 shares of Series B Preferred Stock of the Company. The
sharing of costs and funding continued during 1997 and until February 10, 1998,
with the aggregate amount of such costs and funding represented by a promissory
note that accrued interest at 7.5 percent per annum. As of February 10, 1998,
the balance of the note payable to Amoco was $10.1 million. Upon consummation of
the IPO, $8.1 million of the principal of this note was converted into Common
Stock of the Company and the remaining note balance of $2.0 million of the
principal and accrued interest was repaid with a portion of the proceeds of the
IPO.
The Company and Amoco have entered into a Cooperation Agreement, which sets
out the terms on which Amoco and the Company will cooperate in handling various
matters. These matters include (i) documentation of the assignment to the
Company of certain intellectual property rights, (ii) the allocation of costs
and liability for certain litigation brought by Gen-Probe, Inc. in which the
Company and Amoco are defendants, (iii) retention by Amoco of certain
liabilities relating to ATC's discontinued operations, and (iv) access to
Amoco's and the Company's business records.
Prior to the completion of the IPO, the Company has been included in the
consolidated or combined federal and state income tax returns of Amoco. For
periods after the completion of the IPO, the Company will no longer be included
in Amoco's federal consolidated returns, although it may continue to be included
in one or more state or local combined returns. Pursuant to an Amended and
Restated Tax Allocation Agreement, for periods during which the Company is
included in Amoco's federal consolidated return, the Company generally receives
no credit for tax benefits accruing during such periods to other members of the
Amoco consolidated group as a result of any deductions or losses incurred by the
Company; except that beginning in 1996, debt obligations of the Company owed to
Amoco were reduced by approximately 35 percent of the Company's estimated income
or loss for income tax purposes, resulting in an aggregate reduction of the
Company's debt to Amoco with an offsetting increase to contributed capital of
approximately $5.0 million for 1996 and $7.5 million for 1997.
13
<PAGE>
Under state tax laws in a number of states, including Illinois (the state in
which much of the Company's business is taxed), the Company is required by law
to be included in Amoco's unitary state tax returns as long as Amoco owns or
controls 50 percent or more of the voting equity of the Company. Under the
Amended and Restated Tax Allocation Agreement, for tax periods subsequent to the
IPO, the Company pays Amoco, or Amoco pays the Company, as the case may be, an
amount determined on the basis of a comparison between the actual combined tax
liability of Amoco and the liability that would have arisen had the Company been
excluded from Amoco's unitary return. For tax periods prior to the IPO, the
Company's state tax liability is determined by Amoco based upon their internal
allocation methodology. The application of this methodology resulted in a charge
to the Company of $53,000 for unitary state taxes in 1996. Such charge, if any,
for state income taxes from the period January 1, 1997 through the February 10,
1998 (the date of the completion of the IPO) will also be immaterial. In
addition, in such unitary states the Company will not have the future benefit of
tax loss carry-forwards that would have arisen but for the legal requirement
that the Company be included in Amoco's unitary tax return.
Immediately prior to the completion of the IPO, Vysis and Amoco entered into
a registration rights agreement (the "Registration Agreement") pursuant to which
Vysis granted Amoco registration rights under the Securities Act with respect to
the shares of Common Stock owned by Amoco. Under the Registration Agreement,
Amoco will have the right commencing on August 3, 1998 to demand that the
Company register its shares under the Securities Act of 1933, as amended (the
"Securities Act"). Under the Registration Agreement, Amoco may only sell
securities under one effective demand registration per calendar year and the
right may only be exercised with respect to specified minimum amounts of shares
of Common Stock. The Company may postpone such a demand under certain
circumstances. Amoco will have the right to include shares of Common Stock owned
by it in any registration proposed by the Company under the Securities Act,
subject to certain limitations.
INDEPENDENT PUBLIC ACCOUNTANTS
Price Waterhouse LLP served as the Company's independent public accountants
for the fiscal year ended December 31, 1997. The appointment of independent
public accountants is made annually by the Board of Directors. The decision of
the Board of Directors is based on the recommendation of the Audit Committee,
which reviews both the audit scope and estimated audit fees. The independent
public accountants for the fiscal year ended December 31, 1998 have not yet been
selected. The decision will be made following receipt from Price Waterhouse LLP
of the audit work plan and estimated audit fees for 1998. Representatives of
Price Waterhouse LLP are expected to be present at the Annual Meeting and will
have the opportunity to make a statement if they desire to do so and to respond
to appropriate questions of stockholders.
STOCKHOLDER PROPOSALS FOR 1999 PROXY STATEMENT
Stockholder proposals that are intended to be presented at the Company's
annual meeting of stockholders to be held in 1999 must be received by the
Company no later than March 3, 1999 in order to be included in the proxy
statement and related proxy materials.
14
<PAGE>
FORM 10-K
THE COMPANY WILL MAIL WITHOUT CHARGE, UPON WRITTEN REQUEST, A COPY OF THE
ANNUAL REPORT ON FORM 10-K, INCLUDING THE FINANCIAL STATEMENTS, SCHEDULES, AND
LIST OF EXHIBITS. REQUESTS SHOULD BE SENT TO VYSIS, INC., 3100 WOODCREEK DRIVE,
DOWNERS GROVE, ILLINOIS 60515-5400, ATTENTION: JAMES J. HABSCHMIDT.
OTHER MATTERS
The Board of Directors knows of no other matters to be presented for
stockholder action at the Annual Meeting. However, if other matters do properly
come before the Annual Meeting or any adjournments or postponements thereof, the
Board of Directors intends that the persons named in the proxies will vote upon
such matters in accordance with their best judgment.
BY ORDER OF THE BOARD OF DIRECTORS
[LOGO]
William E. Murray
SECRETARY
July 1, 1998
15
<PAGE>
Exhibit A
VYSIS, INC.
1998 LONG TERM INCENTIVE PLAN
1. PURPOSE. The purpose of this Vysis, Inc. 1998 Long Term Incentive Plan
(the "Plan") is to increase stockholder value and to advance the interests of
Vysis, Inc. ("Vysis") and its subsidiaries (collectively, the "Company") by
awarding equity and performance based incentives designed to attract, retain and
motivate employees. As used in the Plan, the term "subsidiary" means any
business, whether or not incorporated, in which Vysis has an ownership interest.
2. ADMINISTRATION.
2.1. ADMINISTRATION BY COMMITTEE. The Plan shall be administered by the
Compensation Committee of the Board of Directors of Vysis or a subcommittee
thereof (the "Committee"), which Committee shall consist of two or more persons
who constitute "non-employee directors" within the meaning of Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
Act") and "outside directors" within the meaning of Treas. Reg. Section
1.162-27(e)(3).
2.2. AUTHORITY. Subject to the provisions of the Plan, the Committee shall
have the authority to (a) manage and control the operation of the Plan, (b)
interpret and construe the provisions of the Plan, and prescribe, amend and
rescind rules and regulations relating to the Plan, (c) make Awards under the
Plan, in such forms and amounts and subject to such restrictions, limitations
and conditions as it deems appropriate, including, without limitation, Awards
which are made in combination with or in tandem with other Awards (whether or
not contemporaneously granted) or compensation or in lieu of current or deferred
compensation, (d) modify the terms of, cancel and reissue, or repurchase
outstanding Awards (including, but not limited to, repurchasing or settling any
Option (as defined in subsection 6.1) in cash upon a Change in Control (as
defined in subsection 12.2)), (e) prescribe the form of agreement, certificate
or other instrument evidencing any Award under the Plan, (f) correct any defect
or omission and reconcile any inconsistency in the Plan or in any Award
hereunder, (g) extend the exercise or vesting date of any Award under the Plan,
(h) accelerate the vesting or exercise date of any Award under the plan, and (i)
make all other determinations and take all other actions as it deems necessary
or desirable for the implementation and administration of the Plan; provided,
however, that in no event shall the Committee cancel or modify any outstanding
Option for the purpose of reissuing an additional option to the option holder at
a lower exercise price. The determination of the Committee on matters within its
authority shall be conclusive and binding on the Company and all other persons.
3. PARTICIPATION. Subject to the terms and conditions of the Plan, the
Committee shall determine and designate, from time to time, from among the
employees of the Company who are key executives or managerial employees and
consultants who provide services to the Company those persons who will be
granted one or more Awards under the Plan, and thereby become "Participants" in
the Plan. In the discretion of the Committee, and subject to the terms of the
Plan, a Participant may be granted any Award permitted under the provisions of
the Plan, and more than one Award may be granted to a Participant; provided,
however, that only employees of the Company may be awarded Incentive Stock
Options (as defined in subsection 6.1) under the Plan. Except as otherwise
agreed by the Committee and the Participant, or except as otherwise provided in
the Plan, an Award under the Plan shall not affect any previous Award under the
Plan or an award under any other plan maintained by the Company. For purposes of
the Plan, the term "Award" shall mean any award or benefit granted to any
Participant under the Plan.
4. DEFINITION OF FAIR MARKET VALUE. For purposes of the Plan, the "Fair
Market Value" of a share of common stock of Vysis ("Stock") as of any date shall
be the closing market composite price for such Stock as reported on NASDAQ on
that date or, if Stock is not traded on that date, on the immediately preceding
date on which Stock was traded.
<PAGE>
5. SHARES SUBJECT TO THE PLAN.
5.1. NUMBER OF SHARES RESERVED. The shares of Stock with respect to which
Awards may be made under the Plan shall be shares currently authorized but
unissued or currently held or subsequently acquired by Vysis as treasury shares,
including shares purchased in the open market or in private transactions.
Subject to the provisions of subsection 5.4, the number of shares of Stock which
may be issued with respect to Awards under the Plan shall not exceed 1.5 million
shares.
5.2. INDIVIDUAL LIMITS ON AWARDS. Notwithstanding any other provision of
the Plan to the contrary, the maximum aggregate number of shares of Stock that
may be granted or awarded to any Participant under the Plan for any calendar
year shall be 250,000 and the maximum aggregate cash payout with respect to
grants or awards under the Plan in any calendar year to any Covered Employee
(within the meaning of section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code")) shall be $25,000,000. The determination made under the
foregoing provisions of this subsection 5.2 shall be based on the shares subject
to the Awards at the time of grant, regardless of when the Awards become
exercisable.
5.3. REUSAGE OF SHARES.
(a) In the event of the exercise or termination (by reason of forfeiture,
expiration, cancellation, surrender or otherwise) of any Award under the Plan,
that number of shares of Stock that was subject to the Award but not delivered
shall again be available for Awards under the Plan.
(b) In the event that shares of Stock are delivered under the Plan as a
Stock Award (as defined in Section 8) and are thereafter forfeited or reacquired
by the Company pursuant to rights reserved upon the award thereof, such
forfeited or reacquired shares shall again be available for Awards under the
Plan.
(c) Notwithstanding the provisions of paragraphs (a) or (b), the following
shares shall not be available for reissuance under the Plan: (i) shares with
respect to which the Participant has received the benefits of ownership (other
than voting rights), either in the form of dividends or otherwise; (ii) shares
which are withheld from any award or payment under the Plan to satisfy tax
withholding obligations (as described in subsection 11.4); (iii) shares which
are surrendered to fulfill tax obligations (as described in subsection 11.4);
and (iv) shares which are surrendered in payment of the Option Price (as defined
in subsection 6.3) upon the exercise of an Option.
5.4. ADJUSTMENTS TO SHARES RESERVED. In the event of any merger,
consolidation, reorganization, recapitalization, spinoff, stock dividend, stock
split, reverse stock split, exchange or other distribution with respect to
shares of Stock or other change in the corporate structure or capitalization
affecting the Stock, the type and number of shares of Stock which are or may be
subject to awards under the Plan and the terms of any outstanding awards
(including the price at which shares of Stock may be issued pursuant to an
outstanding award) shall be equitably adjusted by the Committee, in its sole
discretion, to preserve the value of benefits awarded or to be awarded to
Participants under the Plan.
6. OPTIONS.
6.1. DEFINITIONS. The grant of an "Option" under this Section 6 entitles
the Participant to purchase shares of Stock at the Option Price (determined
under subsection 6.3), subject to the terms of this Section 6. Options granted
under this Section 6 may be either Incentive Stock Options or Non-Qualified
Stock Options, as determined in the discretion of the Committee. An "Incentive
Stock Option" is an Option that is intended to satisfy the requirements
applicable to an "incentive stock option" described in section 422(b) of the
Code. A "Non-Qualified Stock Option" is an Option that is not intended to be an
"incentive stock option" as that term is described in section 422(b) of the
Code.
6.2. RESTRICTIONS RELATING TO INCENTIVE STOCK OPTIONS. To the extent that
the aggregate fair market value of Stock with respect to which Incentive Stock
Options are exercisable for the first time by any individual during any calendar
year (under all plans of the Company) exceeds $100,000, such options shall be
treated as Non-Qualified Stock Options, to the extent required by section 422 of
the Code.
2
<PAGE>
6.3. OPTION PRICE. The price at which shares of Stock may be purchased
upon the exercise of an Option (the "Option Price") shall be established by the
Committee or shall be determined by a method established by the Committee at the
time the Option is granted; provided, however, that in no event shall such price
be less than the greater of: (i) 100% of the Fair Market Value (as defined in
Section 4) of a share of Stock as of the date on which the Option is granted; or
(ii) the par value of a share of Stock on such date.
6.4. EXERCISE. Except as otherwise expressly provided in the Plan, an
Option may be exercised, in whole or in part, in accordance with terms and
conditions established by the Committee at the time of grant; provided, however,
that no Option shall be exercisable after the Expiration Date (as defined in
Section 10) applicable to that Option. The full Option Price of each share of
Stock purchased upon the exercise of any Option shall be paid at the time of
such exercise (except that, in the case of a cashless exercise arrangement
approved by the Committee, payment may be made as soon as practicable after the
exercise) and, as soon as practicable thereafter, a certificate representing the
shares so purchased shall be delivered to the person entitled thereto. The
Option Price shall be payable in cash or in shares of Stock (valued at Fair
Market Value as of the day of exercise), or in any combination thereof, as
determined by the Committee and, to the extent provided by the Committee, a
Participant may elect to pay the Option Price upon the exercise of an Option
through a cashless exercise arrangement. The exercise of an Option will result
in the surrender of the corresponding rights under a tandem Stock Appreciation
Right, if any.
6.5. POST-EXERCISE LIMITATIONS. The Committee, in its discretion, may
impose such restrictions on shares of Stock acquired pursuant to the exercise of
an Option (including stock acquired pursuant to the exercise of a tandem Stock
Appreciation Right) as it determines to be desirable, including, without
limitation, restrictions relating to disposition of the shares and forfeiture
restrictions based on service, performance, Stock ownership by the Participant,
and such other factors as the Committee determines to be appropriate.
7. STOCK APPRECIATION RIGHTS
7.1. DEFINITION. Subject to the terms of this Section 7, a "Stock
Appreciation Right" granted under the Plan entitles the Participant to receive,
in cash or Stock, value equal to all or a portion of the excess of: (a) the Fair
Market Value of a specified number of shares of Stock at the time of exercise;
over (b) a specified price which shall not be less than 100% of the Fair Market
Value of the Stock at the time the Stock Appreciation Right is granted, or, if
granted in tandem with an Option, the exercise price with respect to shares
under the tandem Option.
7.2. EXERCISE. If a Stock Appreciation Right is not in tandem with an
Option, then the Stock Appreciation Right shall be exercisable in accordance
with the terms established by the Committee in connection with such rights after
the Expiration Date applicable to that Stock Appreciation Right. If a Stock
Appreciation Right is in tandem with an Option, then the Stock Appreciation
Right shall be exercisable at the time the tandem Option is exercisable. The
exercise of a Stock Appreciation Right will result in the surrender of the
corresponding rights under the tandem Option.
7.3. SETTLEMENT OF AWARD. Upon the exercise of a Stock Appreciation Right,
the value to be distributed to the Participant, in accordance with subsection
7.1, shall be distributed in shares of Stock (valued at their Fair Market Value
at the time of exercise), in cash, or in a combination thereof, in the
discretion of the Committee.
7.4. POST-EXERCISE LIMITATIONS. The Committee, in its discretion, may
impose such restrictions on shares of Stock acquired pursuant to the exercise of
a Stock Appreciation Right as it determines to be desirable, including, without
limitation, restrictions relating to disposition of the shares and forfeiture
restrictions based on service, performance, ownership of Stock by the
Participant, and such other factors as the Committee determines to be
appropriate.
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8. STOCK AWARDS.
8.1. DEFINITION. Subject to the terms of this Section 8, a "Stock Award"
under the Plan is a grant of shares of Stock to a Participant, the earning,
vesting or distribution of which is subject to one or more conditions
established by the Committee. Such conditions may relate to events (such as
performance or continued employment) occurring before or after the date the
Stock Award is granted, or the date the Stock is earned by, vested in or
delivered to the Participant. If the vesting of Stock Awards is subject to
conditions occurring after the date of grant, the period beginning on the date
of grant of a Stock Award and ending on the vesting or forfeiture of such Stock
(as applicable) is referred to as the "Restricted Period". Stock Awards may
provide for delivery of the shares of Stock at the time of grant, or may provide
for a deferred delivery date.
8.2. TERMS AND CONDITIONS OF AWARDS. Beginning on the date of grant (or,
if later, the date of distribution) of shares of Stock comprising a Stock Award,
and including any applicable Restricted Period, the Participant, as owner of
such shares, shall have the right to vote such shares; provided, however, that
payment of dividends with respect to Stock Awards shall be subject to the
following:
(a) On and after date that a Participant has a fully earned and vested
right to the shares comprising a Stock Award, and the shares have been
distributed to the Participant, the Participant shall have all dividend rights
(and other rights) of a stockholder with respect to such shares.
(b) Prior to the date that a Participant has a fully earned and vested
right to the shares comprising a Stock Award, the Committee, in its sole
discretion, may award Dividend Rights (as defined below) with respect to such
shares.
(c) On and after the date that a Participant has a fully earned and vested
right to the shares comprising a Stock Award, but before the shares have been
distributed to the Participant, the Participant shall be entitled to Dividend
Rights with respect to such shares, at the time and in the form determined by
the Committee.
A "Dividend Right" with respect to shares comprising a Stock Award shall
entitle the Participant, as of each dividend payment date, to an amount equal to
the dividends payable with respect to a share of Stock multiplied by the number
of such shares. Dividend Rights shall be settled in cash or in shares of Stock,
as determined by the Committee, shall be payable at the time and in the form
determined by the Committee, and shall be subject to such other terms and
conditions as the Committee may determine.
9. PERFORMANCE UNITS.
9.1. DEFINITION. Subject to the terms of this Section 9, the Award of
"Performance Units" under the Plan entitles the Participant to receive value for
the units at the end of a Performance Period to the extent provided under the
Award. The number of units earned, and the value received for them, will be
contingent on the degree to which the performance measures established at the
time of grant of the Award are met. For purposes of the Plan, the "Performance
Period" with respect to the award of any Performance Units shall be the period
over which the applicable performance is to be measured.
9.2. TERMS AND CONDITIONS OF AWARDS. For each Participant, the Committee
will determine the value of units, which may be stated either in cash or in
units representing shares of Stock; the performance measures used for
determining whether the Performance Units are earned; the Performance Period
during which the performance measures will apply; the relationship between the
level of achievement of the performance measures and the degree to which
Performance Units are earned; whether, during or after the Performance Period,
any revision to the performance measures or Performance Period should be made to
reflect significant events or changes that occur during the Performance Period;
and the number of earned Performance Units that will be paid in cash and the
number of earned Performance Units to be paid in shares of Stock.
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9.3. SETTLEMENT. Settlement of Performance Units shall be subject to the
following:
(a) the Committee will compare the actual performance to the performance
measures established for the Performance Period and determine the number of
units as to which settlement is to be made, and the value of such units.
(b) Settlement of units earned shall be wholly in cash, wholly in Stock or
in a combination of the two, to be distributed in a lump sum or installments, as
determined by the Committee.
(i) For Performance Units stated in units representing shares of Stock
when granted, one share of Stock will be distributed for each unit
earned, or cash will be distributed for each unit earned equal to either (A) the
Fair Market Value of a share of Stock at the end of the Performance Period or
(B) the average Stock value over a period determined by the Committee.
(ii) For Performance Units stated in cash when granted, the value of
each unit earned will be distributed in its initial cash value, or shares
of Stock will be distributed based on the cash value of the units earned divided
by (A) the Fair Market Value of a share of Stock at the end of the Performance
Period or (B) the average Stock value over a period determined by the Committee.
(c) Shares of Stock distributed in settlement of the units shall be subject
to such vesting requirements and other conditions, if any, as the Committee
shall determine.
9.4. TERMINATION DURING PERFORMANCE PERIOD. If a Participant's termination
of employment with the Company occurs during a Performance Period with respect
to any Performance Units granted to him, the Committee may determine that the
Participant will be entitled to settlement of all or any portion of the
Performance Units as to which he would otherwise be eligible, and may accelerate
the determination of the value and settlement of such Performance Units or make
such other adjustments as the Committee, in its sole discretion, deems
desirable.
10. EXPIRATION OF AWARDS. The "Expiration Date" with respect to an Award
under the Plan means the date established as the Expiration Date by the
Committee at the time of the grant; provided, however, that the Expiration Date
with respect to any Award shall not be later than the earliest to occur of:
(a) the ten-year anniversary of the date on which the Award is granted;
(b) if the Participant's termination of employment with the Company occurs
on account of disability, the one-year anniversary of such termination of
employment;
(c) if the Participant's termination of employment with the Company occurs
by reason of retirement, the three-year anniversary of such termination of
employment;
(d) the three-month anniversary of the Participant's death, either while
employed or thereafter; or
(e) if the Participant's termination of employment with the Company occurs
for reasons other than retirement or disability, the three-month anniversary of
such termination of employment.
If a Stock Appreciation Right is in tandem with an Option, then the
"Expiration Date" for the Stock Appreciation Right shall be the Expiration Date
for the related Option.
11. MISCELLANEOUS.
11.1. EFFECTIVE DATE. The Plan shall be effective upon its adoption by the
Board of Directors of Vysis (the "Board"). The Plan shall be unlimited in
duration and, in the event of Plan termination, shall remain in effect as long
as any Awards under it are outstanding; provided, however, that no Incentive
Stock Options may be granted under the Plan on a date that is more than ten
years from the date the Plan is adopted.
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11.2. LIMIT ON DISTRIBUTION. Distribution of shares of Stock or other
amounts under the Plan shall be subject to the following:
(a) Notwithstanding any other provision of the Plan, Vysis shall have no
liability to deliver any shares of Stock under the Plan or make any other
distribution of benefits under the Plan unless such delivery or distribution
would comply with all applicable laws and the applicable requirements of any
securities exchange or similar entity.
(b) In the case of a Participant who is subject to Section 16(a) and 16(b)
of the Exchange Act, the Committee may, at any time, add such conditions and
limitations to any Award to such Participant, or any feature of any such Award,
as the Committee, in its sole discretion, deems necessary or desirable to comply
with Section 16(a) or 16(b) and the rules and regulations thereunder or to
obtain any exemption therefrom.
(c) To the extent that the Plan provides for issuance of certificates to
reflect the transfer of shares of Stock, the transfer of such shares may be
effected on a non-certificated basis, to the extent not prohibited by applicable
law or the rules of any stock exchange.
11.3. PERFORMANCE-BASED COMPENSATION. To the extent that the Committee
determines that it is necessary or desirable to conform any Awards under the
Plan with the requirements applicable to "Performance-Based Compensation", as
that term is used in section 162(m)(4)(C) of the Code, it may, at or prior to
the time an Award is granted, take such steps and impose such restrictions with
respect to such Award as it determines to be necessary or desirable.
11.4. WITHHOLDING. All Awards and other payments under the Plan are
subject to withholding of all applicable taxes, which withholding obligations
may be satisfied, with the consent of the Committee, through the surrender of
shares of Stock which the Participant already owns, or to which a Participant is
otherwise entitled under the Plan.
11.5. TRANSFERABILITY. Awards under the Plan are not transferable except
as designated by a Participant by will or by the laws of descent and
distribution. To the extent that the Participant who receives an Award under the
Plan has the right to exercise such Award, the Award may be exercised during the
lifetime of the Participant only by the Participant.
11.6. NOTICES. Any notice or document required to be filed with the
Committee under the Plan will be properly filed if delivered or mailed by
registered mail, postage prepaid, to the Committee, in care of Vysis, at its
principal executive offices. The Committee may, by advance written notice to
affected persons, revise such notice procedure from time to time. Any notice
required under the Plan (other than a notice of election) may be waived by the
person entitled to notice.
11.7. FORM AND TIME OF ELECTIONS. Unless otherwise specified herein, each
election required or permitted to be made by any Participant or other person
entitled to benefits under the Plan, and any permitted modification or
revocation thereof, shall be in writing filed with the Committee at such times,
in such form, and subject to such restrictions and limitations, not inconsistent
with the terms of the Plan, as the Committee shall require.
11.8. AGREEMENT WITH VYSIS. At the time of an Award to a Participant under
the Plan, the Committee may require a Participant to enter into an agreement
with Vysis (the "Agreement") in a form specified by the Committee, agreeing to
the terms and conditions of the Plan and to such additional terms and
conditions, not inconsistent with the Plan, as the Committee may, in its sole
discretion, prescribe.
11.9. LIMITATION OF IMPLIED RIGHTS.
(a) Neither a Participant nor any other person shall, by reason of the
Plan, acquire any right in or title to any assets, funds or property of the
Company whatsoever, including, without limitation, any specific funds, assets,
or other property which the Company, in its sole discretion, may set aside in
anticipation of a
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liability under the Plan. A Participant shall have only a contractual right to
benefits or amounts, if any, payable under the Plan, unsecured by any assets of
the Company. Nothing contained in the Plan shall constitute a guarantee by the
Company that the assets of the Company shall be sufficient to pay any amounts or
benefits to any person.
(b) The Plan does not constitute a contract of employment, and selection as
a Participant will not give any employee the right to be retained in the employ
of the Company, nor any right or claim to any benefit or payment under the Plan,
unless such right or claim has specifically accrued under the terms of the Plan.
Except as otherwise provided in the Plan, no Award under the Plan shall confer
upon the holder thereof any right as a shareholder of Vysis prior to the date on
which he fulfills all service requirements and other conditions for receipt of
such rights.
11.10. EVIDENCE. Evidence required of anyone under the Plan may be by
certificate, affidavit, document or other information which the person acting on
it considers pertinent and reliable, and signed, made or presented by the proper
party or parties.
11.11. GENDER AND NUMBER. Where the context admits, words in one gender
shall include the other gender, words in the singular shall include the plural
and the plural shall include the singular.
12. CHANGE IN CONTROL.
12.1. ACCELERATION. Except as otherwise provided in the Plan or the
Agreement reflecting the applicable Award, upon the occurrence of a Change in
Control:
(a) All outstanding Options (regardless of whether in tandem with Stock
Appreciation Rights) and Stock Appreciation Rights (regardless of whether in
tandem with Options) shall become fully exercisable.
(b) All Stock Awards shall become fully vested.
(c) Performance Units may be paid out in such manner and amounts as
determined by the Committee.
12.2. DEFINITION OF CHANGE IN CONTROL. For purposes of the Plan, the term
"Change in Control" means a change in the beneficial ownership of the Company's
voting stock or a change in the composition of the Board which occurs as
follows:
(a) any "Person" (as such term is used in Section 13(d) and 14(d)(2) of the
Exchange Act), other than Vysis, any entity owned, directly or indirectly, by
the stockholders of Vysis in substantially the same proportions as their
ownership of stock of Vysis, and any trustee or other fiduciary holding
securities under an employee benefit plan of Vysis or its subsidiaries or such
proportionately owned corporation) becomes through acquisitions of securities of
Vysis after the Effective Date of the Plan, the "beneficial owner" (as defined
in Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of
securities of Vysis representing 40% or more of the combined voting power of
Vysis' then outstanding securities having the right to vote for the election of
directors;
(b) the stockholders of Vysis approve a merger or consolidation of Vysis
with any other corporation, other than (A) a merger or consolidation which would
result in the voting securities of Vysis outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) more than 50% of the combined
voting power of the voting securities of Vysis or such surviving entity
outstanding immediately after such merger or consolidation, or (B) a merger or
consolidation effected to implement a recapitalization of Vysis (or similar
transaction) in which no Person acquires more than 15% of Vysis' then
outstanding securities having the right to vote for the election of directors;
(c) the stockholders of Vysis approve a plan of complete liquidation of
Vysis or an agreement for the sale or disposition by Vysis of all or
substantially all of Vysis' assets (or any transaction having a similar effect);
or
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(d) during any 24 month period, individuals who at the beginning of such
period constitute the board of directors of Vysis, and any new director (other
than a director designated by a Person who has entered into an agreement with
Vysis to effect a transaction described in paragraph (a), (b) or (c) of this
subsection 12.2) whose election by the board or nomination for election by
Vysis' stockholders was approved by a vote of at least two-thirds of the
directors then still in office who either were directors at the beginning of the
period or whose election or nomination for election was previously so approved,
cease for any reason to constitute at least a majority thereof.
13. AMENDMENT AND TERMINATION. The Board may, at any time, amend or
terminate the Plan, provided that, subject to subsection 5.4 (relating to
certain adjustments to shares), no amendment or termination may materially
adversely affect the rights of any Participant or beneficiary under any Award
made under the Plan prior to the date such amendment is adopted by the Board.
Notwithstanding the foregoing or any other provision of the Plan or any Award
agreement, the Board or the Committee may amend the Plan or the terms of any
Award to the extent it deems necessary to preserve pooling-of-interest
accounting treatment for any transaction which is intended to be accounted for
through such accounting method.
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PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
OF VYSIS, INC.
TO BE HELD ON JULY 22, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, revoking any proxy heretofore given, hereby appoints
William M. Bartlett, John L. Bishop and Richard C. Williams who each hold
the power to appoint a substitute, proxies of the undersigned, with respect
to all of the shares of Common Stock of Vysis, Inc. as to which the
undersigned is entitled to vote at the Annual Meeting of Stockholders of
Vysis, Inc. to be held at 10:00 a.m. on Wednesday, July 22, 1998, at the
Amoco Management Learning Center, Forum B, 2001 Butterfield Road, Downers
Grove, Illinois 60515, and any adjournments thereof.
In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournments
thereof.
PLEASE MARK IN THE BOX IN THE FOLLOWING MANNER, USING DARK INK ONLY /X/.
PLEASE MARK, SIGN, DATE AND RETURN THIS CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
IF YOU RECEIVE MORE THAN ONE PROXY CARD, PLEASE SIGN AND RETURN ALL CARDS
IN THE ENCLOSED ENVELOPE.
FOLD AND DETACH HERE
<PAGE>
PLEASE MARK YOUR
/X/ VOTES AS IN THIS
EXAMPLE.
THIS PROXY WILL BE VOTED AS SPECIFIED BELOW. IF NO SPECIFICATION IS
MADE, THIS PROXY WILL BE VOTED "FOR" THE MATTER SPECIFICALLY REFERRED TO
BELOW.
(1) ELECTION OF DIRECTORS
/ / FOR / / WITHHELD
Nominees:
William M. Bartlett, John L. Bishop, Robert C. Carr, Kenneth L. Melmon,
Walter R. Quanstrom, Frank J. Sroka and Richard C. Williams.
For, except vote withheld from the following nominee(s)
- ------------------------------------------------------------------------------
(2) TO APPROVE THE ADOPTION OF THE 1998 LONG TERM INCENTIVE PLAN
/ / FOR / / AGAINST / / ABSTAIN
Please sign as name appears hereon. If stock is registered in the name of two
or more persons, each should sign. Executors, attorneys, corporate
officers, administrators and trustees should add their titles.
Signature
- --------------------------------------------
Signature
- --------------------------------------------
Date
- --------------------------------------------
FOLD AND DETACH HERE
