<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
<TABLE>
<S> <C>
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 Section 240.14a-12
VYSIS, INC.
-----------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
-----------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
</TABLE>
Payment of Filing Fee (Check the appropriate box):
<TABLE>
<S> <C> <C>
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
----------------------------------------------------------
(2) Aggregate number of securities to which transaction
applies:
----------------------------------------------------------
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how
it was determined):
----------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------
(5) Total fee paid:
----------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or
Schedule and the date of its filing.
(1) Amount Previously Paid:
----------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
----------------------------------------------------------
(3) Filing Party:
----------------------------------------------------------
(4) Date Filed:
----------------------------------------------------------
</TABLE>
<PAGE>
VYSIS, INC.
3100 WOODCREEK DRIVE
DOWNERS GROVE, ILLINOIS 60515-5400
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 31, 2000
The Annual Meeting of Stockholders ("Annual Meeting") of Vysis, Inc. (the
"Company") will be held at the DoubleTree Conference Center, Forum A, located at
2111 Butterfield Road, Downers Grove, Illinois 60515, on May 31, 2000, at
10:00 a.m. for the following purposes:
1. To elect six directors of the Board of Directors to serve until the
next Annual Meeting and until their successors have been elected and
qualified; and
2. To act upon such other matters as may properly come before the
meeting or any adjournments 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 April 17, 2000. 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
/s/ William E. Murray
William E. Murray
SECRETARY
Downers Grove, Illinois
April 28, 2000
<PAGE>
VYSIS, INC.
PROXY STATEMENT
FOR
2000 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 May 31, 2000, at the DoubleTree Conference Center,
Forum A, located at 2111 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 5, 2000.
VOTING RIGHTS AND SOLICITATION
VOTING
Only common stockholders of record on the books of the Company at the close
of business on April 17, 2000 (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 10,070,922 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.
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 six 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>
John L. Bishop....................... President, Chief Executive Officer and
Director
Eileen A. Kamerick................... Director
Kenneth L. Melmon.................... Director
Anthony J. Nocchiero................. Director
Walter R. Quanstrom.................. Chairman of the Board of Directors
Frank J. Sroka....................... Director
</TABLE>
BUSINESS EXPERIENCE OF DIRECTORS
Mr. John L. Bishop, 55, has served as President and as a Director since
November 1993 and became Chief Executive Officer in February 1996. Mr. Bishop is
a Director of the American College of Medical Genetics Foundation, a charitable
foundation of the American College of Medical Genetics, focused on funding
educational activities related to medical genetic services. 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.
Eileen A. Kamerick, 41, has been a Director since January 2000.
Ms. Kamerick is Vice President Finance--The Americas of BP Amoco p.l.c.
("BP Amoco") and has held that position since December 31, 1998, the date of the
merger between Amoco Corporation ("Amoco") and the former British Petroleum
Corporation. Prior to the merger, she held various management positions in the
treasury and law departments of Amoco since 1990, most recently as Vice
President and Treasurer.
Kenneth L. Melmon, M.D., 65, 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, 48, has been a Director since June 1999.
Mr. Nocchiero is the Chief Financial Officer of the Chemicals Stream of
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 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., 57, has been a Director since September 1997.
Dr. Quanstrom has served as Chairman of the Board of Directors since October
1999 having previously served as Co-Chairman beginning January 1999.
Dr. Quanstrom has been appointed Senior Vice President of Mostardi-Platt, an
environmental consulting company, effective May 1, 2000. Prior to his retirement
from BP Amoco on April 1, 2000, Dr. Quanstrom was BP Amoco's Group Vice
President, HSE, responsible for BP Amoco's medical department, product safety,
toxicology, industrial hygiene, environmental conservation and safety since
December 1998. Prior to that time he held a similar position with Amoco since
1987. Dr. Quanstrom also served as a director of BP Solarex, a subsidiary of
BP Amoco formerly known as Amoco-Enron Solar, which is engaged in the
manufacturing and sale of solar cells, from 1987 to October 1999.
Mr. Frank J. Sroka, J.D., 51, 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.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During 1999, the Board of Directors held 12 meetings. Each director attended
75% or more of the aggregate meetings of the Board of Directors and the
committees on which such director served.
The Company has two standing Board Committees: The Compensation Committee
and the Audit Committee. The Company does not have a nominating committee. Upon
the resignation of two of the Company's outside directors in October 1999, the
functions formerly performed by the Company's Compensation Committee were
assumed by the full Board of Directors. Prior to then, the Compensation
Committee met three times during 1999.
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 twice during 1999. This Committee currently
consists of Messrs. Melmon, Noccherio (Chairman) and Sroka.
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. Under the Company's 1999 Outside
Directors Stock Option Plan (the "Directors Plan"), each Outside Director
receives, 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, each person
who is an Outside Director at the close of such meeting receives 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. 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.
3
<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 April 1,
2000 for (i) all persons who are beneficial owners of five percent or more of
the Company's Common Stock, (ii) each 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 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) 66.2%
200 East Randolph Drive
Chicago, Illinois 60601
John L. Bishop......................................... 134,387 1.3%
Alfred H. Ellsworth.................................... 9,690 *
Russel K. Enns......................................... 29,656 *
Steven A. Seelig....................................... 65,694 *
Paul J. J. G. Steuperaert.............................. 0 *
Eileen A. Kamerick..................................... 0 *
Kenneth L. Melmon...................................... 40,117 *
Anthony J. Nocchiero................................... 0 *
Walter R. Quanstrom(3)................................. 20,750 *
Frank J. Sroka......................................... 0 *
Directors and Executive Officers as a Group 326,072 3.1%
(12 persons).........................................
</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 April 1, 2000, or within 60 days after that date; Mr. Bishop,
131,387 shares; Mr. Ellsworth, 9,690 shares; Dr. Enns, 29,656 shares;
Dr. Seelig, 65,694 shares; Dr. Melmon, 40,117 shares; Dr. Quanstrom,
10,000 shares; and all directors and executive officers as a group,
312,322 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) Includes 750 shares owned by Dr. Quanstrom's wife.
4
<PAGE>
OWNERSHIP OF BP AMOCO SHARES
The following table sets forth as of April 1, 2000 the ownership of American
depositary shares (each representing six ordinary shares of BP Amoco) 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 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 ordinary shares of BP Amoco.
<TABLE>
<CAPTION>
NUMBER SHARES
NAME BENEFICIALLY OWNED (1)
- ---- ----------------------
<S> <C>
John L. Bishop........................................... 144
Alfred H. Ellsworth...................................... 0
Russel K. Enns........................................... 0
Steven A. Seelig......................................... 4,054
Paul J. J. G. Steuperaert................................ 0
Eileen A. Kamerick....................................... 17,648
Kenneth L. Melmon........................................ 0
Anthony J. Nocchiero..................................... 95,874
Walter R. Quanstrom...................................... 219,000
Frank J. Sroka(2)........................................ 99,548
Directors and Executive Officers as a Group 436,268
(12 persons)(2)..........................................
</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 1, 2000, or within 60 days after that date; Ms. Kamerick,
16,802 shares; Mr. Nocchiero, 89,478 shares; Dr. Quanstrom,
172,000 shares; Mr. Sroka, 71,010; and all directors and executive officers
as a group, 336,047 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 24, 2000.
(2) Includes 5,472 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, none of such persons failed to file a report on a timely basis during
1999.
5
<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 1999 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
ANNUAL COMPENSATION COMPENSATION AWARDS
---------------------- ------------------- ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS STOCK OPTIONS(#) COMPENSATION(1)
--------------------------- -------- -------- -------- ------------------- ---------------
<S> <C> <C> <C> <C> <C>
John L. Bishop .................. 1999 $250,000 $-- -- $4,800
President and Chief 1998 250,385 50,000 320,000(2) 5,000
Executive Officer 1997 224,035 25,000 -- 4,750
Paul J.J.G. Steuperaert ......... 1999 194,622(3) -- 50,000 --
President, European 1998 70,918(3) -- 100,000(2) --
Operations (JOINED VYSIS IN
SEPTEMBER 1998)
Steven A. Seelig ................ 1999 180,000 400 -- --
Vice President Research & 1998 162,695 -- 200,000(2) --
Development and 1997 138,910 -- -- 2,240
Chief Medical Officer
Alfred H. Ellsworth ............. 1999 159,408 -- 25,000 4,395
Vice President Finance 1998 136,038 -- 100,000(2) 3,023
(JOINED VYSIS IN NOVEMBER 1997) 1997 12,597 -- 15,000 --
Russel K. Enns .................. 1999 144,000 -- 10,000 4,320
Vice President 1998 147,600 -- 200,000(2) 2,215
Regulatory Affairs 1997 116,654 -- 10,949 74,219
</TABLE>
- ------------------------
(1) Amounts represent the Company's 401(k) contributions made on behalf of each
of the named individuals and the reimbursement of 1997 relocation expenses
in the amount of $74,219 for Dr. Enns.
(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) Amounts converted from French Francs using average of monthly exchange
rates during year.
6
<PAGE>
STOCK OPTIONS
The following table summarizes options to purchase shares of Common Stock
granted during the year ended December 31, 1999 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.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
% OF TOTAL POTENTIAL REALIZABLE
OPTIONS VALUE AT ASSUMED
NUMBER OF GRANTED ANNUAL RATES OF STOCK
SECURITIES TO PRICE APPRECIATION
UNDERLYING EMPLOYEES FOR OPTION 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.......... -- -- -- -- -- $ -- $ --
Paul J. J. G.
Steuperaert........... 6/29/99 50,000 6.9% $3.75 6/29/09 117,918 298,827
Steven A. Seelig........ -- -- -- -- -- -- --
Alfred H. Ellsworth..... 5/5/99 25,000 3.4 2.94 5/5/09 46,224 117,140
Russel K. Enns.......... 5/5/99 10,000 1.4 2.94 5/5/09 18,490 46,856
</TABLE>
- ------------------------
(1) All of the options listed in the foregoing table become exercisable in
increments following (A) the achievement by the Company of sustained
profitability (defined as two consecutive quarters of positive net
earnings) and (B) the completion of specified product milestones, but in no
event later than the ninth anniversary of the date of grant. In addition,
upon the occurrence of a Change in Control (as defined in the 1998 Long
Term Incentive Plan) all of the options will become fully exercisable. In
the case of certain events constituting a Change in Control that involve a
person acquiring 40% or more of the combined voting power of all of the
Company's outstanding securities, a holder of an option may elect to
receive the value of such option in cash.
The following table below sets forth information with respect to the Named
Executive Officers concerning their exercise of options during 1999 and the
unexercised options held by them as of the end of 1999.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
NUMBER OF UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT IN-THE-MONEY OPTIONS AT
ACQUIRED VALUE DECEMBER 31, 1999 DECEMBER 31, 1999(1)
ON REALIZED --------------------------- ---------------------------
NAME EXERCISE ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John L. Bishop.............. -- -- 131,387 160,000 $406,643 $--
Paul J. J. G. Steuperaert... -- -- -- 100,000 -- --
Steven A. Seelig............ -- -- 65,694 100,000 203,323 --
Alfred H. Ellsworth......... -- -- 8,127 81,873 -- 17,125
Russel K. Enns.............. -- -- 28,515 114,332 67,774 6,850
</TABLE>
- ------------------------
(1) Based on the closing price of the Common Stock on December 31, 1999 of
$3.625 per share.
7
<PAGE>
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 and 1999 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."
COMPENSATION COMMITTEE REPORT
The compensation for the Company's executive officers is set by the Board of
Directors. Prior to October 1999, this was done after consideration of the
Compensation Committee's recommendations. Prior to October 1999, the Stock
Option Subcommittee of the Compensation Committee had exclusive responsibility
for the administration of the 1998 Long Term Incentive Plan under which awards
may be made to executive officers. Beginning in October 1999, this
responsibility was assumed by the full Board of Directors.
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. Prior to October
1999, the Board of Directors made its decisions after consideration of the
recommendations of the Compensation Committee. Before making its
recommendations, the Compensation Committee reviewed historical compensation
levels of the executives, evaluated past performance, and assessed expected
future contributions of the executives. The Board of Directors continues to take
these factors into account. 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. Prior to October 1999, this determination was made in light of
the Compensation Committee's recommendations. Before making its recommendations
on any cash bonus, the Compensation Committee reviewed overall Company financial
and operating performance, the performance of each executive officer and each
executive officer's individual contributions. The Board of Directors continues
to take these factors into account.
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,
8
<PAGE>
all stock option grants made under the 1998 Long Term Incentive Plan during
1998, as well as all stock option grants made during 1999 to the Named Executive
Officers, 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. These vesting provisions are intended to provide
appropriate alignment between executive performance and stockholder value.
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. However, one
requirement that such option grants must meet to qualify is that they be awarded
by a committee consisting solely of "outside directors" as defined by applicable
U.S. Treasury regulations. Following the October 1999 resignation of two of the
Company's outside directors, the full Board of Directors assumed the
responsibilities of the Compensation Committee, including responsibility for
awarding options under the 1998 Long Term Incentive Plan. During the remainder
of 1999 the Board of Directors awarded options to purchase an aggregate of
210,000 shares of common stock to nine employees (none of whom were executive
officers named in the foregoing compensation table). As a result, the
compensation attributable to these option grants would not qualify as
"performance based compensation" and would be included in determining whether
compensation exceeded the one million dollar limit in the year the option is
exercised, assuming that the option holder was one of the five most highly
compensated executive officers of the Company at that time. The Board of
Directors concluded that the incentive aspects of the grants to these employees
outweighed the potential limit on the Company's deduction of compensation paid
to them.
The Board of Directors believes that, although it is desirable for executive
compensation to be tax deductible for the Company, whenever in the Board'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 Board of Directors 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.
9
<PAGE>
CHIEF EXECUTIVE OFFICER COMPENSATION
Mr. Bishop's compensation was determined in accordance with the factors
described above applicable to executive officers generally. For the fiscal year
ended December 31, 1999, Mr. Bishop's base salary was not increased from his
salary for 1998, and he did not receive a cash bonus or the grant of any stock
options.
THE BOARD OF DIRECTORS
JOHN L. BISHOP
EILEEN A. KAMERICK
KENNETH L. MELMON
ANTHONY J. NOCCHIERO
WALTER R. QUANSTROM
FRANK J. SROKA
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Prior to October 1999, the Compensation Committee consisted of William M.
Bartlett, Walter R. Quanstrom and Richard C. 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.
10
<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, 1999 (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 each fiscal year-end date through
December 31, 1999 by (b) the price of a share of Common Stock, the S&P 500 and
the Peer Group, respectively, at February 5, 1998.
<TABLE>
<CAPTION>
FEBRUARY 5, 1998 DECEMBER 31, 1998 DECEMBER 31, 1999
---------------- ----------------- -----------------
<S> <C> <C> <C>
Vysis, Inc.................... $100 $ 44.60 $ 30.21
S&P 500....................... $100 $124.19 $146.41
Nasdaq Biotechnology.......... $100 $141.78 $285.88
</TABLE>
11
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
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 a tax
sharing agreement between the Company and BP Amoco, 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. As a result of the Company's 1998 losses being
included in BP Amoco's unitary state filings, the Company received a $30,000
state tax benefit payment from BP Amoco.
Immediately prior to the completion of its initial public offering in 1998,
Vysis entered into a registration rights agreement (the "Registration
Agreement") with BP Amoco 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.
On March 29, 1999, the Company announced that Mr. Richard C. Williams,
formerly Co-Chairman of the Board of Directors, 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 received a retainer of $20,500 per month and an option under the
1998 Long Term Incentive Plan to purchase 160,000 shares of Common Stock at a
price of $5.60 per share. This option expired unexercised three months following
his October 1999 resignation.
Upon his termination in March 1999, the Company entered into an agreement
with Mr. George R. Kennedy, its former Senior Vice President, Sales and
Marketing, that provided for payments to Mr. Kennedy equal to his then current
salary, and continued vesting under the Company's stock option plans, for up to
one year following his termination of employment. Pursuant to this agreement,
the Company paid to Mr. Kennedy $120,254 in 1999.
INDEPENDENT AUDITORS
Deloitte & Touche LLP served as the Company's independent auditors for the
two fiscal years ended December 31, 1999, and has been selected to serve as the
Company's independent auditors for the fiscal year ending December 31, 2000.
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
12
<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 have 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 2001 must be received by the
Company no later than December 30, 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.
13
<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: WILLIAM E. MURRAY
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
/s/ William E. Murray
William E. Murray
SECRETARY
April 28, 2000
14
<PAGE>
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
OF VYSIS, INC.
TO BE HELD ON MAY 31, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, revoking any proxy heretofore given, hereby appoints
John L. Bishop and Walter R. Quanstrom 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, May 31, 2000, at the DoubleTree Conference Center, Forum A,
2111 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:
John L. Bishop, Eileen A. Kamerick, Kenneth L. Melmon, Anthony J.
Nocchiero, Walter R. Quanstrom and Frank J. Sroka.
For, except vote withheld from the following nominee(s)
- ------------------------------------------------------------------------------
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(s)
- --------------------------------------------
Date
- --------------------------------------------
FOLD AND DETACH HERE
VYSIS, INC.
Dear Stockholder:
We encourage you to vote your shares electronically this year either by
telephone or via the Internet. This will eliminate the need to return your
proxy card. You will need your proxy card and Social Security number (where
applicable) when voting your shares electronically. The Voter Control Number
that appears in the box above, just below the perforation, must be used in
order to vote by telephone or via the Internet.
The EquiServe Vote by Telephone and Vote by Internet systems can be accessed
24-hours a day, seven days a week up until the day prior to the meeting.
TO VOTE BY TELEPHONE:
Using a touch-tone phone call Toll-free: 1-877-PRX-VOTE (1-877-779-8683)
TO VOTE BY INTERNET:
Log on to the Internet and go to the website: http://www.eproxyvote.com/vysi
NOTE: IF YOU VOTE OVER THE INTERNET, YOU MAY INCUR COSTS SUCH AS
TELECOMMUNICATION AND INTERNET ACCESS CHARGES FOR WHICH YOU WILL BE
RESPONSIBLE.
THANK YOU FOR VOTING YOUR SHARES.
YOUR VOTE IS IMPORTANT!
DO NOT RETURN THIS PROXY CARD IF YOU ARE VOTING BY TELEPHONE OR THE INTERNET.
