<PAGE>
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.
- --------------------------------------------------------------------------------
(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:
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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 JUNE 30, 1999
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 June 30,
1999, 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 1999 Outside Directors Stock Option 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 May 3, 1999. 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
[LOGO]
William E. Murray
SECRETARY
Downers Grove, Illinois
May 3, 1999
<PAGE>
VYSIS, INC.
PROXY STATEMENT
FOR
1999 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 June 30, 1999, 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
will be first mailed to stockholders on or about May 28, 1999.
VOTING RIGHTS AND SOLICITATION
VOTING
Only common stockholders of record on the books of the Company at the close
of business on May 3, 1999 (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 9,807,016 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 1999 Outside Directors
Stock 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>
William M. Bartlett Director
John L. Bishop President, Chief Executive Officer and Director
Kenneth L. Melmon Director
Anthony J. Nocchiero Nominee for Director
Walter R. Quanstrom Co-Chairman of the Board of Directors
Frank J. Sroka Director
Richard C. Williams Co-Chairman of the Board of Directors
</TABLE>
BUSINESS EXPERIENCE OF DIRECTORS
Mr. William M. Bartlett, 66, 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 served as 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, 54, has served as President and as a Director since
November 1993 and became Chief Executive Officer in February 1996. 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 Executive Officer of International Reagents
Corp., a joint venture between American Hospital Supply Company and Green Cross
Corporation.
Kenneth L. Melmon, M.D., 64, 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,
2
<PAGE>
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.
Anthony J. Nocchiero, 47, is the Chief Financial Officer of the Chemicals
Stream of BP Amoco p.l.c. ("BP Amoco") and Vice President and Controller, North
America of BP Amoco and has held such positions since December 31, 1998, the
date of the merger between Amoco Corporation ("Amoco") and the former British
Petroleum Corporation. Prior to the merger, he had worked in various financial
management positions for Amoco since 1975, most recently as Vice President and
Controller.
Walter R. Quanstrom, Ph.D., 56, has been a Director since September 1997 and
has served as Co-Chairman of the Board of Directors since January 1999. Dr.
Quanstrom is presently BP Amoco's Group Vice President, HSE, responsible for BP
Amoco's medical department, product safety, toxicology, industrial hygiene,
environmental conservation and safety, and prior to December 1998 held a similar
position with Amoco since 1987.
Mr. Frank J. Sroka, J.D., 50, was appointed to the Board of Directors of the
Company in September 1993. Mr. Sroka has served as General Attorney for BP Amoco
with responsibility for the legal matters of Amoco Technology Company 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, 55, has been a Director since September 1997 and
has served as Co-Chairman of the Board of Directors since January 1999. 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., an
adenosine technology and cardiovascular development company, 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 served
as Vice President and Chief Financial Officer of Erbamont, N.V., a
pharmaceutical company, and held a variety of financial management positions at
Abbott Laboratories and American Hospital Supply Company.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During 1998, the Board of Directors held ten meetings. Each director
attended 90% or more of the aggregate meetings of the Board of Directors and the
committees on which such director served.
The Company has three standing Board Committees: The Strategic Planning
Committee, the Audit Committee and the Compensation Committee. The Company does
not have a nominating committee.
The Strategic Planning Committee is responsible for establishing and
monitoring the achievement of long term strategic goals for the Company. This
Committee met once during 1998. This Committee currently consists of Messrs.
Bartlett, Bishop, Carr, Melmon and Williams (Chairman).
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 met three times during 1998. 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. The Compensation Committee
met three times during 1998. This Committee currently consists of Messrs.
Bartlett (Chairman), Carr, Melmon and Williams. The 1998 Long Term Incentive
Plan of the Company is administered by a subcommittee of the Compensation
Committee consisting solely of non-employee directors (the "Stock Option
Subcommittee"). During 1998 the Stock Option Subcommittee consisted of Messrs.
Bartlett, Melmon and Williams and held four meetings.
3
<PAGE>
DIRECTOR COMPENSATION
Each director who is not an employee of the Company or any subsidiary or
affiliate of the Company (an "Outside Director") receives a fee of $2,000 per
month and $2,000 per board meeting attended. On October 1, 1998, each of the
Company's Outside Directors (Messrs. Bartlett, Melmon and Williams) received, in
consideration for serving on the Board of Directors, an option grant with
respect to 5,000 shares of Common Stock with an exercise price equal to $5.60
per share and an expiration date of October 1, 2008. Subject to stockholder
approval of the Company's 1999 Outside Directors Stock Option Plan (the
"Directors Plan"), each Outside Director will receive, upon election to the
Board of Directors for his or her initial term, an option grant with respect to
10,000 shares of Common Stock and, as of the date of each regular annual meeting
of the Company's stockholders (beginning with the 1999 meeting), each person who
is an Outside Director at the close of such meeting will receive an option grant
with respect to 5,000 shares of Common Stock. All options granted under the
Directors Plan have an exercise price equal to the fair market value of the
Common Stock on the date of grant and a maximum term of 10 years (See Proposal
No. 2). None of the remaining directors receive any compensation for serving on
the Board of Directors.
On March 29, 1999, the Company announced that Mr. Williams would become
directly involved, for an interim period, in the implementation of the Company's
1999 operating plan. In recognition of his expanded responsibilities during this
period, Mr. Williams will receive a retainer of $20,500 per month and an option
to purchase 160,000 shares of Common Stock at a price of $5.60 per share. This
option has the same exercise provisions as those options granted to the
Company's executive officers during 1998. See "Executive Compensation and
Related Information--Stock Options"
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors recommends a vote FOR the nominees listed herein.
PROPOSAL NO. 2.
APPROVAL OF THE 1999 OUTSIDE DIRECTORS STOCK OPTION PLAN
The Directors 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 Directors Plan which follows is qualified in its entirety
by reference to the complete text of the Directors Plan as set forth as Exhibit
A hereto.
GENERAL DESCRIPTION
The Directors Plan provides that, on the date of an Outside Director's
initial election to the Board of Directors, the Outside Director will receive an
option to purchase 10,000 shares of Common Stock. In addition, the Directors
Plan provides that each person who is an Outside Director at the close of the
regular annual meeting of the Company's stockholders (beginning with the 1999
meeting) will receive an option to purchase 5,000 shares of Common Stock. All
options awarded under the Directors Plan will have an option price equal to the
greater of (i) fair market value of a share of Common Stock on such date
(determined in accordance with the Directors Plan), or (ii) the par value of a
share of Common Stock on such date. All options granted under the Directors Plan
will be immediately exercisable at the date of grant and will remain in effect
for ten years after the date of grant (or, if earlier, the first anniversary of
the date on which the Outside Director's service as a director of the Company
terminates for any reason).
The maximum number of shares of Common Stock reserved for issuance under the
Directors Plan is 100,000 shares, subject to adjustment as provided in the
Directors Plan to reflect certain corporate transactions affecting the number
and type of outstanding shares. The closing price of the Common Stock reported
on NASDAQ for April 29, 1999 was $3 1/16.
4
<PAGE>
Under Federal income tax laws and regulations presently in effect, an
Outside Director who receives an option under the Directors Plan will not
recognize income for Federal income tax purposes upon the grant of the option
and the Company will not be entitled to a tax deduction by reason of such grant.
Upon exercise of the option, the Outside Director will recognize ordinary income
equal to the difference between the option price and the fair market value of
the Common Stock on the date of exercise and the Company will be entitled to a
corresponding deduction.
STOCKHOLDER APPROVAL
Approval of the Directors 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 Directors 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 Directors Plan.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors believes that approval of the 1999 Outside Directors
Stock Option Plan is necessary in order to attract and retain as Outside
Directors persons whose abilities, experience and judgment can contribute to the
progress of the Company and to facilitate the Director's ability to acquire a
proprietary interest in the Company. For this reason, the Board of Directors
recommends that the stockholders vote FOR the approval of the 1999 Outside
Directors Stock Option Plan.
5
<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 March 1,
1999 for (i) all persons who are beneficial owners of five percent or more of
the Company's Common Stock, (ii) each director and nominee for director, (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, the nominee for director and executive officers 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>
BP Amoco p.l.c. ................................................................... 6,662,682(2) 68.0%
200 East Randolph Drive
Chicago, Illinois 60601
Crabbe Huson Group, Inc. .......................................................... 523,000(3) 5.3%
121 SW Morrison, Suite 1400
Portland, Oregon 97204
John L. Bishop .................................................................... 117,990 1.2%
James J. Habschmidt ............................................................... 97,814 1.0%
George R. Kennedy ................................................................. 31,335 *
James P. Marcella ................................................................. 28,748 *
Steven A. Seelig .................................................................. 57,496 *
William M. Bartlett ............................................................... 27,797 *
Robert C. Carr .................................................................... 0 *
Kenneth L. Melmon ................................................................. 26,288 *
Anthony J. Nocchiero .............................................................. 0 *
Walter R. Quanstrom ............................................................... 10,000 *
Frank J. Sroka .................................................................... 0 *
Richard C. Williams ............................................................... 32,797 *
Directors, Nominee for Director and Executive Officers as a Group
(15 persons) ...................................................................... 467,342 4.6%
</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
March 1, 1999, or within 60 days after that date; Mr. Bishop, 114,990
shares; Mr. Habschmidt, 22,814 shares; Mr. Kennedy, 31,335 shares; Mr.
Marcella, 28,748 shares; Dr. Seelig, 57,496 shares; Mr. Bartlett, 8,879
shares; Dr. Melmon, 26,288 shares; Mr. Williams, 8,879 shares; and all
directors, nominee for director and executive officers as a group, 336,506
shares.
(2) All such shares of Common Stock are owned of record by Amoco Technology
Company, an indirect wholly owned subsidiary of BP Amoco.
(3) Information with regard to Crabbe Huson Group, Inc. is based solely on a
Schedule 13G, dated February 12, 1999, containing information as of December
31, 1998. According to such Schedule 13G, Crabbe Huson Group Inc. shared
voting power with respect to 498,000 shares and shared investment power with
respect to 523,000 shares.
6
<PAGE>
OWNERSHIP OF BP AMOCO SHARES
The following table sets forth as of April 20, 1999, the ownership of
American depositary shares (each representing six ordinary shares of BP Amoco)
by the Company's directors, the nominee for director, the Named Executive
Officers, and all directors, the nominee for director 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. The directors, the nominee for director and executive officers of Vysis
own in the aggregate less than one percent of the ordinary shares of BP Amoco.
<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIALLY
NAME OWNED(1)
- -------------------------------------------------------------------------------------------- --------------------
<S> <C>
John L. Bishop.............................................................................. 72
James J. Habschmidt......................................................................... 0
George R. Kennedy........................................................................... 0
James P. Marcella........................................................................... 0
Steven A. Seelig............................................................................ 2,248
William M. Bartlett......................................................................... 0
Robert C. Carr.............................................................................. 23,779
Kenneth L. Melmon........................................................................... 0
Anthony J. Nocchiero........................................................................ 46,425
Walter R. Quanstrom(2)...................................................................... 106,819
Frank J. Sroka(3)........................................................................... 49,166
Richard C. Williams......................................................................... 0
Directors, Nominee for Director and Executive Officers as a Group
(15 persons)(2)(3)........................................................................ 228,509
</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
April 20, 1999, or within 60 days after that date; Mr. Nocchiero, 43,800
shares; Dr. Quanstrom, 87,999 shares; Mr. Sroka, 35,333; and all directors,
nominee for director and executive officers as a group, 167,132 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 April 23, 1999.
(2) Includes 661 shares as to which Dr. Quanstrom shares voting and dispositive
authority.
(3) Includes 2,736 shares as to which Mr. Sroka shares voting and dispositive
authority.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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. Based solely upon a review of the forms filed by such
persons and furnished to the Company, and written representations of such
persons, the only failure by such persons to file on a timely basis was a
failure by Mr. Williams to timely report one purchase transaction that occurred
in September 1998. The purchase was inadvertently omitted from the Form 4 filed
by Mr. Williams in early October 1998. A corrected Form 4 was filed promptly
thereafter.
7
<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 1998 fiscal year, for services rendered in all capacities to the Company and
its subsidiaries for each of the last three 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............................... 1998 $ 250,385 $ 50,000 320,000(2) $ 5,000
President and Chief 1997 224,035 25,000 -- 4,750
Executive Officer 1996 210,000 36,500 131,387 18,946
James J. Habschmidt(3)....................... 1998 234,077 -- 280,000(2) 5,000
Executive Vice President and Chief 1997 25,926 -- 54,745 --
Financial Officer
George R. Kennedy(4)......................... 1998 166,984 -- 176,000(2) 3,062
Senior Vice President 1997 153,877 -- 7,300 3,468
Sales and Marketing 1996 123,258 -- 36,497 36,480
Steven A. Seelig............................. 1998 162,695 -- 200,000(2) --
Vice President Research 1997 138,910 -- -- 2,240
and Development and Chief Medical 1996 130,200 -- 65,694 4,007
Officer
James P. Marcella............................ 1998 138,154 -- 60,000(2) 4,195
Vice President Operations 1997 129,385 -- -- 3,882
1996 125,000 15,000 32,847 3,822
</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.
(2) One-half of the total number of options granted during 1998 represent
options granted in July 1998 and cancelled in October 1998 in connection
with the grant of replacement options.
(3) Mr. Habschmidt ceased employment with the Company in March 1999.
(4) Mr. Kennedy ceased employment with the Company in March 1999.
STOCK OPTIONS
The following table summarizes options to purchase shares of Common Stock
granted during the year ended December 31, 1998 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.
8
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
% OF TOTAL VALUE AT ASSUMED ANNUAL
NUMBER OF OPTIONS RATES OF STOCK PRICE
SHARES GRANTED TO APPRECIATION FOR OPTION
UNDERLYING EMPLOYEES TERM
DATE OF OPTIONS IN FISCAL EXERCISE EXPIRATION ------------------------
NAME GRANT GRANTED(1) YEAR PRICE DATE 5% 10%
- ----------------------------------- ------------ ------------ ----------- ----------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
John L. Bishop..................... 7/22/98 160,000(2) 7.6% $ 9.75 7/22/2008 $ 981,076 $ 2,486,238
10/1/98 160,000 7.6 5.60 10/1/2008 563,490 1,427,993
James J. Habschmidt................ 7/22/98 140,000(2) 6.6 9.75 7/22/2008 858,441 2,175,458
10/1/98 140,000 6.6 5.60 10/1/2008 493,053 1,249,494
George R. Kennedy.................. 7/22/98 88,000(2) 4.2 9.75 7/22/2008 539,592 1,367,431
10/1/98 88,000 4.2 5.60 10/1/2008 309,919 785,396
Steven A. Seelig................... 7/22/98 100,000(2) 4.7 9.75 7/22/2008 613,172 1,553,899
10/1/98 100,000 4.7 5.60 10/1/2008 352,181 892,496
James P. Marcella.................. 7/22/98 30,000(2) 1.4 9.75 7/22/2008 183,952 466,170
10/1/98 30,000 1.4 5.60 10/1/2008 105,654 267,749
</TABLE>
- ------------------------
(1) All of the options listed in the foregoing table become exercisable in
increments following (A) the achievement by the Company of sustained
profitability (defined as two consecutive quarters of positive net earnings)
and (B) the completion of specified product milestones, but in no event
later than the ninth anniversary of the date of grant. In addition, upon the
occurrence of a Change in Control (as defined in the 1998 Long Term
Incentive Plan) all of the options will become fully exercisable. In the
case of certain events constituting a Change in Control that involve a
person acquiring 40% or more of the combined voting power of all of the
Company's outstanding securities, a holder of an option may elect to receive
the value of such option in cash.
(2) All such grants were cancelled in October 1998 in connection with the grant
of a replacement option with an exercise price of $5.60 per share and an
expiration date of 10/1/2008 but otherwise with identical terms.
The following table below sets forth information with respect to the Named
Executive Officers concerning their exercise of options during 1998 and the
unexercised options held by them as of the end of 1998.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
NUMBER OF OPTIONS AT IN-THE-MONEY OPTIONS
SHARES VALUE DECEMBER 31, 1998 AT DECEMBER 31, 1998(1)
ACQUIRED REALIZED -------------------------- --------------------------
NAME ON EXERCISE ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------------- --------------- ------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John L. Bishop..................... -- -- 104,038 187,349 $ 504,064 $ 132,506
James J. Habschmidt................ -- -- 19,391 175,354 51,095 93,158
George R. Kennedy.................. -- -- 27,683 104,114 121,595 55,233
Steven A. Seelig................... -- -- 52,020 113,674 252,037 66,251
James P. Marcella.................. -- -- 26,010 36,837 126,018 33,125
</TABLE>
- ------------------------
(1) Based on the closing price of the Common Stock on December 31, 1998 of
$5 3/8 per share.
9
<PAGE>
The following table sets forth information concerning option repricings
during 1998 which constitute the only repricing of options held by any executive
officer of the Company during the last ten fiscal years. The rationale for such
repricings are discussed under "Compensation Committee Report--1998 Option
Repricing."
TEN YEAR OPTION REPRICING
<TABLE>
<CAPTION>
SECURITIES MARKET
UNDERLYING PRICE OF EXERCISE LENGTH OF ORIGINAL
NUMBER OF STOCK AT PRICE AT NEW OPTION TERM
OPTIONS TIME OF TIME OF EXERCISE REMAINING AT DATE OF
NAME DATE REPRICED REPRICING REPRICING PRICE(1) REPRICING
- -------------------------------- ------------ ----------- ----------- ----------- ----------- --------------------
<S> <C> <C> <C> <C> <C> <C>
John L. Bishop
President and Chief Executive
Officer........................ 10/1/98 160,000 $ 4.625 $ 9.75 $ 5.60 9 years 10 months
James J. Habschmidt
Executive Vice President and
Chief Financial Officer........ 10/1/98 140,000 4.625 9.75 5.60 9 years 10 months
Steven A. Seelig
Vice President Research and
Development and Chief Medical
Officer........................ 10/1/98 100,000 4.625 9.75 5.60 9 years 10 months
George R. Kennedy
Senior Vice President Sales and
Marketing...................... 10/1/98 88,000 4.625 9.75 5.60 9 years 10 months
James P. Marcella
Vice President Operations...... 10/1/98 30,000 4.625 9.75 5.60 9 years 10 months
Russel K. Enns
Vice President Regulatory
Matters........................ 10/1/98 100,000 4.625 9.75 5.60 9 years 10 months
William E. Murray
General Counsel and
Secretary...................... 10/1/98 20,000 4.625 9.75 5.60 9 years 10 months
Paul Steuperaert
President, European
Operations..................... 10/1/98 50,000 4.625 9.75 5.60 9 years 10 months
</TABLE>
- ------------------------
(1) The exercise price of the replacement options represents the average of the
closing prices of the Common Stock for the 35 trading day period ending on
October 1, 1998, the date on which the replacement options were granted.
EMPLOYMENT CONTRACTS AND CHANGE IN CONTROL ARRANGEMENTS
None of the Company's Named 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. Pursuant to the terms of the
option agreements entered into during 1998 in connection with options granted
under the Company's 1998 Long Term Incentive Plan, payments may be made to each
of the Named Executive Officers holding such options following a change in
control. See "--Stock Options."
10
<PAGE>
COMPENSATION COMMITTEE REPORT
The compensation for the Company's executive officers is set by the Board of
Directors, after consideration of the Compensation Committee's recommendations.
The Stock Option Subcommittee of the Compensation Committee also has exclusive
responsibility for the administration of the 1998 Long Term Incentive Plan under
which awards may be made to executive officers.
EXECUTIVE COMPENSATION PROGRAMS
The Company's executive compensation programs, which contain no special
perquisites, consist of three principal elements: base salary, cash bonus, and
stock options. The Company's objective is to emphasize incentive compensation in
the form of stock option grants, rather than base salary or cash bonuses. The
Board of Directors sets the annual base salary for executives after
consideration of the recommendations of the Compensation Committee. Before
making its recommendations, the Compensation Committee reviews historical
compensation levels of the executives, evaluates past performance, and assesses
expected future contributions of the executives. In making determinations
regarding base salaries, the Company considers generally available information
regarding salaries prevailing in the industry but does not tie salaries to any
particular indices.
The Company does not maintain any formal incentive bonus plan under which
its executive officers are paid cash bonuses. The Board of Directors determines
any cash bonus in light of the Compensation Committee's recommendations. Before
making its recommendations on any cash bonus, the Compensation Committee reviews
overall Company financial and operating performance, the performance of each
executive officer and each executive officer's individual contributions.
The Company relies upon long-term incentives through stock option grants as
an integral part of the Company's executive officer compensation program. The
Company generally makes option grants to executive officers on the date of hire
and periodically thereafter. Stock option grants are instrumental in promoting
the alignment of long-term interests between the Company's executive officers
and stockholders, because the executives realize gains only if the stock price
increases over the fair market value at the date of grant and the executives
exercise their options. As part of this program, the Company's stockholders
approved in July 1998, the Company's 1998 Long Term Incentive Plan, which
provides for option grants to executive officers and management. Option grants
were approved in 1998 by the Stock Option Subcommittee of the Compensation
Committee under the 1998 Long Term Incentive Plan to each of the executive
officers. In determining the amount of such grants, the Stock Option
Subcommittee considered each executive officer's expected contributions to the
future growth of the Company, the responsibilities of each executive officer,
and grants to other executives in the industry holding comparable positions as
well as the executive's position within the Company.
Under the Company's 1996 Stock Incentive Plan, the predecessor to the 1998
Long Term Incentive Plan, all option grants to executive officers vest in
monthly increments over a four year period. In contrast, all stock option grants
made under the 1998 Long Term Incentive Plan during 1998 contained vesting
provisions explicitly tied to the future financial and operating performance of
the Company in order to provide close alignment between executive performance
and stockholder benefit. In particular, these vesting provisions first
conditioned the vesting of the option grants upon the Company achieving
sustained profitability, defined as two consecutive quarters in which the
Company's revenues exceeded expenses of the business. Second, as an additional
condition, the vesting of the option grants was proportionally tied to the
Company's commercial introduction of specified clinical products and major
research products. The Compensation Committee believes that these vesting
provisions provide appropriate alignment between executive performance and
stockholder value.
11
<PAGE>
1998 OPTION REPRICING
The stock option grants under the 1998 Long Term Incentive Plan were
initially made at the fair market value of the Company's Common Stock on July
22, 1998 of $9.75 per share. However, shortly following the award of these
grants, the Company's Common Stock price began a decline to a low of about $4.00
per share in late September 1998 due to what the Compensation Committee believed
were market conditions for small capitalization biotechnology stocks generally
rather than any adverse development related to the Company. The Board of
Directors initiated a review of the incentive aspects of the 1998 option grants
and concluded that it was appropriate for the Stock Option Subcommittee to
consider a repricing of the option grants. After considering the intended long
term incentive and retention aspects of the 1998 option grants, as well as the
performance based vesting provisions of such option grants, and after receiving
the advice of an outside compensation consultant, the Stock Option Subcommittee
approved on October 1, 1998 the repricing of all 1998 option grants to an option
price of $5.60 per share of Common Stock. The new option price was arrived at by
averaging the closing prices of the Common Stock for the 35 trading day period
ending on the date of the repricing and represented a 21% premium over the
closing price of the Common Stock on that date. This repricing was implemented
by cancellation of the grants made in July 1998 and the issuance of replacement
options in October 1998. Because of the performance based vesting provisions of
the options, none of the replacement options are currently exercisable.
COMPENSATION DEDUCTIBILITY
Section 162(m) of the U.S. Internal Revenue Code of 1986, as amended (the
"Code"), imposes a limit on tax deductions for annual compensation in excess of
one million dollars paid by a corporation to its chief executive officer and the
other four most highly compensated executive officers of the corporation. This
provision permits exclusions of certain forms of "performance based
compensation" from the compensation taken into account for the purposes of that
limit.
In general, compensation attributable to stock options granted under the
1998 Long Term Incentive Plan would qualify as "performance based compensation"
and therefore be excluded from this deduction limitation. One requirement that
option grants must meet to qualify is that the number of shares covered by such
option, when added to the number of shares covered by any other options granted
under the plan during that year, not exceed the maximum individual limit of
250,000 shares established by the 1998 Long Term Incentive Plan. Under
applicable U.S. Treasury regulations, both the original July 1998 option grants
and the replacement options granted in October 1998 in connection with the
option repricing discussed above are counted against this maximum individual
limit. As a result, the compensation attributable to a portion of the
replacement option grants (70,000 shares in the case of Mr. Bishop and 30,000 in
the case of Mr. Habschmidt) would not qualify as "performance based
compensation" and would be included in determining whether their compensation
exceeded the one million dollar limit in the year the options are exercised,
assuming such individuals are subject to the provisions of Section 162(m) at
that time.
The Compensation Committee believes that, although it is desirable for
executive compensation to be tax deductible for the Company, whenever in the
Committee's judgment tax deductibility would not be consistent with objectives
for the particular compensation, the Company should compensate its executive
officers fairly in accordance with the guidelines discussed in this report and
not be unduly limited by the anticipated tax treatment. Accordingly, the total
compensation paid to an executive officer in any year may exceed the amount that
is deductible. The Compensation Committee will continue to assess the impact of
Section 162(m) of the Code on its compensation practices and determine what
further action, if any, is appropriate.
In its determination of the stock option repricing described above, the
Stock Option Subcommittee approved the repricing of all of the 1998 option
grants to Mr. Bishop and to Mr. Habschmidt without regard to the one million
dollar limit of Section 162(m). The Stock Option Subcommittee concluded that
12
<PAGE>
the incentive aspects of the grants to Mr. Bishop and Mr. Habschmidt outweighed
the potential limit on the Company's deduction of compensation paid to Mr.
Bishop and Mr. Habschmidt.
CHIEF EXECUTIVE OFFICER COMPENSATION
Mr. Bishop's performance was evaluated, and his compensation determined, in
accordance with the factors described above applicable to executive officers
generally. For the fiscal year ended December 31, 1998, Mr. Bishop's base salary
was increased 11.7% from his salary for 1997, and he was granted a cash bonus of
$50,000, an increase of 100% compared to his 1997 cash bonus of $25,000.
During July 1998, the Stock Option Subcommittee granted Mr. Bishop an option
to purchase 160,000 shares of the Company's Common Stock with an option price of
$9.75. (This grant was cancelled and replaced with a new grant for the same
number of shares but with a lower exercise price in October 1998 in connection
with the option repricing discussed above.) In addition to the factors
applicable to executive officers generally described above, the amount of the
original grant reflected Mr. Bishop's overall contributions to the Company
during fiscal 1998 in completing an initial public offering of the Company's
Common Stock, in positioning the Company for future growth, and the significant
contributions that the Company anticipates he will make in the future.
COMPENSATION COMMITTEE
WILLIAM M. BARTLETT, CHAIRMAN
ROBERT C. CARR
KENNETH L. MELMON
RICHARD C. WILLIAMS
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1998 the Compensation Committee consisted of Messrs. Bartlett, Carr,
Melmon and Williams. 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.
13
<PAGE>
PERFORMANCE GRAPH
The following performance graph compares changes, for the periods indicated,
in the Cumulative Total Return on an investment in Common Stock with (i) the
Standard & Poor's 500 Stock Index (the "S&P 500") and (ii) the NASDAQ
Biotechnology Index (the "Peer Group").
The comparison reflects the investment of $100 on February 5, 1998, and the
reinvestment of dividends, in each of Common Stock, the S&P 500 and the Peer
Group. "Cumulative Total Return" on a share of Common Stock, the S&P 500 and the
Peer Group is measured by dividing (a) the sum of (i) the cumulative amount of
dividends for the period of February 5, 1998 through December 31, 1998 (assuming
the reinvestment of dividends over such period), and (ii) the difference between
the price of a share of Common Stock, the S&P 500 and the Peer Group,
respectively, at February 5, 1998, and December 31, 1998, by (b) the price of a
share of Common Stock, the S&P 500 and the Peer Group, respectively, at February
5, 1998.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
VYSIS,
INC. S&P 500 NASDAQ BIOTECHNOLOGY
<S> <C> <C> <C>
2/5/98 $100.00 $100.00 $100.00
12/31/98 $44.60 $124.19 $141.78
</TABLE>
<TABLE>
<CAPTION>
FEBRUARY 5, 1998 DECEMBER 31, 1998
----------------- -----------------
<S> <C> <C>
Vysis, Inc............................................... $ 100 $ 44.60
S&P 500.................................................. $ 100 $ 124.19
Nasdaq Biotechnology..................................... $ 100 $ 141.78
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has historically received certain legal services (internal and
external), research and development support, and administrative support from BP
Amoco and paid for such services and support on an actual usage or pro rata
basis. During 1998 the Company received research and development support costing
$131,000. In addition, during 1998, BP Amoco paid on behalf of the Company
certain expenses aggregating $32,000. Prior to the Company's initial public
offering in February 1998 (the "IPO"), the Company also received cash advances
to meet its working capital requirements and assets from BP Amoco. Prior to the
IPO, such advances during 1998 aggregated $1.7 million and were accounted for by
BP Amoco as an intercompany receivable from Vysis and added to an existing note
payable to BP Amoco. As of February 10, 1998, the balance of the note payable to
BP 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.
14
<PAGE>
The Company and BP Amoco have entered into a Cooperation Agreement, which
sets out the terms on which BP Amoco and the Company will cooperate in handling
various matters following the IPO, including the allocation of costs and
liability for certain patent infringement litigation brought by Gen-Probe, Inc.
in which the Company and BP Amoco are defendants.
Prior to the completion of the IPO, the Company has been included in the
consolidated or combined federal and state income tax returns of BP Amoco. For
periods after the completion of the IPO, the Company will no longer be included
in BP Amoco's federal consolidated return, although it may continue to be
included in one or more state or local combined returns. The Company entered
into a tax sharing agreement with BP Amoco, effective January 1, 1996, which
provided for a capital contribution to the Company in an amount approximating
the tax effect of including the Company's results of operations prior to the IPO
in BP Amoco's consolidated federal tax return. Under this agreement, $1.1
million was recorded as contributed capital and a related reduction of the note
payable to BP Amoco during 1998 for the losses incurred by the Company in 1998
prior to the IPO.
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 BP Amoco's unitary state tax returns as long as BP Amoco owns
or controls 50 percent or more of the voting equity of the Company. Under the
tax sharing agreement, for tax periods subsequent to the IPO, the Company pays
BP Amoco, or BP 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 BP
Amoco and the liability that would have arisen had the Company been excluded
from BP Amoco's unitary returns. The Company and BP Amoco are currently unable
to estimate the amount of state income tax benefit to be received by the Company
as a result of its loss position for the period February 11, 1998 through
December 31, 1998.
Immediately prior to the completion of the IPO, Vysis and BP Amoco entered
into a registration rights agreement (the "Registration Agreement") pursuant to
which Vysis granted BP Amoco registration rights under the Securities Act of
1933 as amended (the "Securities Act") with respect to the shares of Common
Stock owned by BP Amoco. Under the Registration Agreement, BP Amoco has the
right to demand that the Company register its shares under the Securities Act.
Under the Registration Agreement, BP 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. BP 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 AUDITORS
Deloitte & Touche LLP served as the Company's independent auditors for the
fiscal year ended December 31, 1998, and has been selected to serve as the
Company's independent auditors for the fiscal year ending December 31, 1999.
Representatives of Deloitte & Touche 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.
On December 31, 1998, the Company dismissed PricewaterhouseCoopers LLP
("PWC") as the Company's independent accountant. On November 20, 1998, PWC
notified the Company that upon final approval of the merger between British
Petroleum and Amoco Corporation, PWC would no longer be independent with respect
to the Company. The Company was informed that a lack of independence will result
due to the business relationship between PWC and the anticipated merged British
Petroleum-Amoco Corporation organization, the Company's majority shareholder.
PWC's report on the financial statements of the Company for the years ending
December 31, 1997, 1996 and 1995 did not contain an adverse opinion or
disclaimer of opinion and was not qualified or modified as to uncertainty, audit
scope or accounting principles. In connection with the audit of the
15
<PAGE>
Company's financial statements for the years ending December 31, 1997, 1996 and
1995 and in subsequent interim periods through December 31, 1998, there were no
disagreements with PWC on any matter of accounting principles or practices,
financial statement disclosure or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of PWC, would have caused it
to make reference to the subject matter of the disagreements in its report. In
addition, there has been no reportable events for the years ending December 31,
1997, 1996 and 1995 and subsequent periods through December 31, 1998 as
described in paragraph (a)(1)(v) of Item 304 of Regulation S-K, promulgated
under the Securities Exchange Act of 1934 (a "Reportable Event").
Effective December 31, 1998, the Company retained Deloitte & Touche LLP
("D&T") as its independent auditors. The decision to change auditors was
approved by the Audit Committee of the Board of Directors of the Company. Prior
to engaging D&T, the Company had never consulted D&T concerning either the
application of accounting principles to a specified completed or uncompleted
transaction, the type of audit opinion that might be rendered on the Company's
financial statements or any matter that was either the subject of a disagreement
with the Company's former accountant or a Reportable Event. Further, there was
no written report or oral advice provided that D&T concluded was an important
factor considered by the Company in reaching a decision as to an accounting,
auditing or financial reporting issue.
STOCKHOLDER PROPOSALS
Stockholder proposals that are intended to be presented at the Company's
annual meeting of stockholders to be held in 2000 must be received by the
Company no later than January 4, 2000 in order to be included in the proxy
statement and related proxy materials.
The bylaws of the Company provide for certain procedures which stockholders
must follow to nominate persons for election as directors or to introduce an
item of business at an annual meeting. These procedures are applicable whether
or not the proposal is intended to be included in the proxy materials for that
meeting. Generally, the stockholder must notify the Secretary of the Company of
the proposal not less than 60 days nor more than 90 days before the first
anniversary of the prior year's annual meeting. The notice must include the name
and address of the stockholder. If the notice relates to a nomination for
director, it must also set forth the name, age, principal occupation and
business and residence address of any nominee(s), the number of shares of Common
Stock beneficially owned by the nominee(s), and such other information regarding
each nominee as would have been required to be included in a proxy statement
filed pursuant to the SEC's proxy rules (including the written consent of each
nominee). Notice of an item of business must include a brief description of the
proposed business, the reasons for conducting the proposed business at the
annual meeting and any material interest of such stockholder in the proposed
business.
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: WILLIAM E. MURRAY
16
<PAGE>
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
May 3, 1999
17
<PAGE>
Exhibit A
VYSIS, INC.
1999 OUTSIDE DIRECTORS STOCK OPTION PLAN
1. PURPOSE. The purpose of this Vysis, Inc. 1999 Outside Directors Stock
Option Plan (the "Plan") is to attract and retain as non-employee directors of
Vysis, Inc. ("Vysis") persons whose abilities, experience and judgment can
contribute to the continued progress of Vysis and its subsidiaries and to
facilitate the directors' ability to acquire a proprietary interest in Vysis.
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"). Notwithstanding the foregoing, no member of the
Committee shall act with respect to the administration of the Plan except to the
extent consistent with the exempt status of the Plan under Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
Act").
2.2. AUTHORITY. Subject to the provisions of the Plan, the Committee shall
have the authority to (a) interpret the Plan and to adopt, amend and rescind
administrative guidelines and other rules and regulations relating to the Plan,
(b) correct any defect or omission and to reconcile any inconsistency in the
Plan or in any award made hereunder, and (c) make all other determinations and
to take all other actions necessary or advisable for the implementation and
administration of the Plan. The determination of the Committee on matters within
its authority shall be conclusive and binding on Vysis and all other persons.
3. PARTICIPATION. Only Outside Directors shall be eligible to participate
in the Plan. As of any applicable date, an "Outside Director" is a person who is
serving as a director of Vysis and who is not an officer or employee of Vysis or
any subsidiary or affiliate of Vysis as of that date.
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.
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 5.3, the number of shares of Stock which
may be issued with respect to awards under the Plan shall not exceed 100,000
shares.
5.2. 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) Notwithstanding the provisions of paragraph (a), shares of Stock which
are surrendered in payment of the Option Price (as defined in subsection 6.3)
upon the exercise of an Option (as defined in subsection 6.1) shall not be
available for reissuance under the Plan.
5.3. 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 Option Price) shall be equitably adjusted by the Committee, in
its sole discretion, to preserve the value of benefits awarded or to be awarded
to Outside Directors under the Plan.
<PAGE>
6. OPTIONS.
6.1. DEFINITIONS. The grant of an "Option" under this Section 6 entitles
the Outside Director to purchase shares of Stock at the Option Price, subject to
the terms of this Section 6. Options granted under this Section 6 shall be
non-qualified stock options which are not intended to be "incentive stock
options" as that term is described in section 422(b) of the Internal Revenue
Code of 1986, as amended.
6.2. AWARDS OF OPTIONS. Each Outside Director shall be awarded Options
under this Section 6 in accordance with the following:
(a) Upon his election to the Board for his first term, each Outside
Director shall be awarded an Option to purchase 10,000 shares of Stock.
(b) As of the date of each regular annual meeting of Vysis' stockholders
(beginning with the 1999 annual meeting of stockholders), each person who is an
Outside Director at the close of such meeting shall be awarded an Option to
purchase 5,000 shares of Stock.
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 the greater of (i)
the Fair Market Value 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. Each Option granted to an Outside Director under this
Section 6 shall be immediately exercisable as of the date of grant and no Option
shall be exercisable after the Expiration Date (as defined in subsection 6.5).
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 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.
6.5. EXPIRATION DATE. The "Expiration Date" with respect to an award under
the Plan means the earlier of the following dates:
(a) the ten-year anniversary of the date on which the award is granted; or
(b) the one-year anniversary of the date on which the Outside Director's
service as a director of Vysis terminates for any reason.
7. MISCELLANEOUS.
7.1. EFFECTIVE DATE. The Plan shall be effective upon its adoption by the
Board of Directors (the "Board") and the stockholders of Vysis. The Plan shall
be unlimited in duration and, in the event of Plan termination, shall remain in
effect as long as any Options under it are outstanding.
7.2. LIMIT ON DISTRIBUTION. Distribution of shares of Stock 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 unless such delivery
would comply with all applicable laws and the applicable requirements of any
securities exchange or similar entity.
(b) The Committee may, at any time, add such conditions and limitations to
any Option awarded hereunder or any feature of any such Option, as the
Committee, in its sole discretion, deems necessary or desirable to comply with
Section 16(a) or 16(b) of the Exchange Act 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.
2
<PAGE>
7.3. TRANSFERABILITY. Options awarded under the Plan are not transferable
except as designated by an Outside Director by will or by the laws of descent
and distribution. To the extent that the Outside Director who receives an Option
under the Plan has the right to exercise such Option, the Option may be
exercised during the lifetime of the Outside Director only by the Outside
Director.
7.4. 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.
7.5. AGREEMENT WITH VYSIS. At the time of the grant of an Option to an
Outside Director under the Plan, the Committee may require an Outside Director
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.
7.6. LIMITATION OF IMPLIED RIGHTS. The Plan does not constitute a contract
of continued service, and participation in the Plan shall not give any Outside
Director the right to be retained as a director of Vysis, nor any right or claim
to any benefit 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
stockholder of Vysis prior to the date on which he fulfills all service
requirements and other conditions for receipt of such rights.
7.7. 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.
7.8. 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.
8. AMENDMENT AND TERMINATION.
The Board may, at any time, amend or terminate the Plan, provided that,
subject to subsection 5.3 (relating to certain adjustments to shares), no
amendment or termination may materially adversely affect the rights of any
Outside Director under any Option 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 Agreement, the Board or the Committee may amend the
Plan or the terms of any Option 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.
3
<PAGE>
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
OF VYSIS, INC.
TO BE HELD ON JUNE 30, 1999
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, June 30, 1999, 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, Kenneth L. Melmon, Anthony J.
Nocchiero, 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 1999 OUTSIDE DIRECTORS STOCK OPTION 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
