<PAGE>
SCHEDULE 14A
(Rule 14a-101)
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[x] Preliminary Proxy Statement
[ ] Confidential, for use of
[ ] Definitive Proxy Statement the Commission only
[ ] Definitive Additional Materials (as permitted by
[ ] Soliciting Material Pursuant to Rule 14a-6(e)(2))
Rule 14a-ll(c) or Rule 14a-12
UNIVEC, INC.
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
UNIVEC, INC.
------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) 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 0-11:1________________________
(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-ll(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:$______________
(2) Form, Schedule or Registration Statement No.: _________________
(3) Filing Party: _________________
(4) Date Filed: __________________
<PAGE>
Preliminary
UNIVEC, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
to be held on December 30, 1998
To the Stockholders of Univec, Inc.:
Notice is hereby given that the Annual Meeting of Stockholders of
Univec, Inc., a Delaware corporation (the "Company"), will be held on December
30, 1998, at the executive offices of the Company, 22 Dubon Court, Farmingdale,
New York 11735, at the hour of 10:00 a.m., for the following purposes:
1. To elect five Directors of the Company to serve until the next
annual meeting of stockholders and until their successors are duly
elected and qualified.
2. To approve the adoption of the Company's 1998 Stock Option Plan
3. To authorize the issuance of more than 596,055 shares of Common
Stock in Lieu of Cash Payment Upon Conversion of Series B 5%
Convertible Preferred Stock
4. To ratify the appointment of Richard A. Eisner & Company, LLP as the
Company's independent public accountants for the year ending
December 31, 1998.
5. To transact such other business as may properly come before the
Annual Meeting or adjournments thereof.
Only stockholders of record at the close of business on November 19,
1998, are entitled to notice of and to vote at the Annual Meeting or any
adjournments thereof.
Farmingdale, New York 11735 By Order of the Board of Directors
December , 1998
Flora Schoenfeld
Secretary
IMPORTANT:
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE PROMPTLY
COMPLETE, SIGN AND DATE THE ENCLOSED PROXY, WHICH IS SOLICITED BY THE BOARD OF
DIRECTORS OF THE COMPANY, AND RETURN IT TO THE COMPANY. THE PROXY MAY BE REVOKED
AT ANY TIME BEFORE IT IS VOTED, AND STOCKHOLDERS EXECUTING PROXIES MAY ATTEND
THE MEETING AND VOTE IN PERSON SHOULD THEY SO DESIRE.
<PAGE>
UNIVEC, INC.
22 Dubon Court
Farmingdale, New York 11735
(516) 777-2000
-----------------------------
PROXY STATEMENT
-----------------------------
The Board of Directors of Univec, Inc. (the "Company") presents this
Proxy Statement and the enclosed proxy card to all stockholders and solicits
their proxies for the Annual Meeting of Stockholders to be held on December 30,
1998. The record date of this proxy solicitation is November 19, 1998. All
proxies duly executed and received will be voted on all matters presented at the
Annual Meeting in accordance with the instructions given by such proxies. In the
absence of specific instructions, proxies so received will be voted for the
named nominees for election to the Company's Board of Directors and in favor of
proposals 2, 3 and 4 described below. The Board of Directors does not anticipate
that any of its nominees will be unavailable for election and does not know of
any matters that may be brought before the Annual Meeting other than those
listed on the Notice of the Annual Meeting.
In the event that any other matter should come before the Annual
Meeting or that any nominee is not available for election, the persons named in
the enclosed proxy will have discretionary authority to vote all proxies not
marked to the contrary with respect to such matter in accordance with their best
judgment. A proxy may be revoked at any time before being voted by sending a new
proxy bearing a later date or a revocation notice to the Company at the above
address, attn: Secretary, or by notifying the Secretary of the Company at the
Annual Meeting. The Company is soliciting these proxies and will pay the entire
expense of solicitation, which will be made by use of the mails. This Proxy
Statement is being mailed on or about December , 1998.
The total number of shares of common stock, $.001 par value ("Common
Stock"), of the Company outstanding as of November 19, 1998, was 2,981,769
shares. The Common Stock is the only outstanding class of securities of the
Company entitled to vote. Each share of Common Stock has one vote. Only
stockholders of record as of the close of business on November 19, 1998 will be
entitled to vote at the Annual Meeting or any adjournments thereof.
The affirmative vote by holders of a plurality of the votes cast for
the election of directors at the Annual Meeting is required for the election of
Directors. The affirmative vote by the majority of the votes present at the
Annual Meeting and entitled to vote is required to approve the adoption of the
Company's 1998 Stock Option Plan. to authorize the issuance of more than 596,055
shares of Common Stock upon conversion of the shares of outstanding Series B 5%
Convertible Preferred Stock and ratification of the appointment of Richard A.
Eisner & Company, LLP, as independent accountants for the year ending December
31, 1998. All proxies will be counted for determining the presence of a quorum.
Votes withheld in connection with the election of one or more nominees for
Director will not be counted as votes cast for such individuals. In addition,
where brokers are prohibited from exercising discretionary authority for
beneficial owners who have not provided voting instructions (commonly referred
to as "broker non-votes"), those shares will not be included in the vote totals.
A list of stockholders entitled to vote at the Annual Meeting will be
available at the Company's principal office, 22 Dubon Court, Farmingdale, New
York 11735, during business hours, for a period of ten (10) days prior to the
Annual Meeting for examination by any stockholder. Such list shall also be
available at the Annual Meeting.
ACTIONS TO BE TAKEN AT THE ANNUAL MEETING
PROPOSAL 1. ELECTION OF DIRECTORS
The Directors to be elected at the Annual Meeting will serve until the
next Annual Meeting of Stockholders and until their successors are duly elected
and qualified. Proxies not marked to the contrary will be voted "FOR" the
<PAGE>
election to the Board of Directors of the following five persons, all of whom
are incumbent Directors.
Set forth below is certain information as of the Record Date concerning
each Nominee, including his age, present principal occupation and business
experience during the past five years and the period he has served as a
director.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Director
Name Age Principal Occupation and Related Information Since
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Joel Schoenfeld 53 Chairman of the Board and Chief Executive August
Officer of the Company since August 1992; 1992
advisor to the United Nations Development
Programs ("UNDP"); President of J&B Schoenfeld
(a global trading company principally engaged in
the import, export and processing of pelts and
hides, specializing in trade with the USSR and
Europe) and Joel Schoenfeld & Associates (import
and export trade transactions, projects and
programs). Mr. Schoenfeld is the husband of Flora
Schoenfeld.
- --------------------------------------------------------------------------------------------------------------------
Alan H. Gold, M.D. 51 President of the Company since July 1996; plastic August
surgeon since 1972, and president of the Long 1992
Island Plastic Surgical Group; vice president and
board member of Day-Op Center of Long Island (a
privately-owned surgery center in New York);
medical advisor to the UNDP.
- --------------------------------------------------------------------------------------------------------------------
John Frank 58 Chief Information Officer of The Hartford Steam August
Boiler Inspection and Insurance Co. since August 1992
1996; Special Projects Manager for Electronic
Data Systems Corporation from October 1994 to
August 1996; Chief Auditor of Travelers Insurance
Companies from August 1993 to September 1994;
principal of Lipera Frank Inc. from September
1991 to July 1993; a partner of Coopers &
Lybrand from January 1982 to September 1991.
- --------------------------------------------------------------------------------------------------------------------
Richard Lerner 53 A principal of Lerner, Gordon & Hirsch, P.C., a August
law firm. 1992
- --------------------------------------------------------------------------------------------------------------------
David Jay 68 Prior to his retirement in 1993, he was a CPA. January
1998
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
All directors hold office until the annual meeting of stockholders of
the Company following their election or until their successors are duly elected
and qualified. Officers are appointed by the Board of Directors and serve at its
discretion.
INFORMATION ABOUT THE BOARD OF DIRECTORS,
COMMITTEES OF THE BOARD, AND EXECUTIVE OFFICERS
-2-
<PAGE>
Meetings of the Board of Directors and Information Regarding Committees
The Board of Directors has one standing committee, an Audit Committee.
The Audit Committee is composed of Dr. Gold, Mr. Frank and Mr. Lerner. The
duties of the Audit Committee include recommending the engagement of independent
auditors, reviewing and considering actions of management in matters relating to
audit functions, reviewing with independent auditors the scope and results of
its audit engagement, reviewing reports from various regulatory authorities,
reviewing the system of internal controls and procedures of the Company, and
reviewing the effectiveness of procedures intended to prevent violations of law
and regulations. The Audit Committee held two meetings in 1997.
The Board of Directors held seven meetings in 1997. All Directors
attended at least 75% of the total number of Board meetings and meetings of
committees on which they served during 1997.
-3-
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS
VOTE "FOR" THE NOMINEES FOR DIRECTORS IN THE
FOREGOING PROPOSAL 1
EXECUTIVE COMPENSATION
Summary Compensation
The following table sets forth the compensation awarded to, earned by or paid to
the Company's Chief Executive Officer and each other executive officer of the
Company whose salary and bonus for the year ended December 31, 1997 exceeded
$100,000 (collectively, the "Named Executive Officers").
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
------------------- ----------------------
Name and Other Annual Securities
Principal Position Year Salary Compensation Underlying Options
- ------------------ ---- ------ ------------ ------------------
<S> <C> <C> <C>
Joel Schoenfeld, 1997 $226,189 -- 2,130,000(2)(3)
Chairman of the 1996 $192,000(1) -- --
Board and Chief
Executive Officer
David Chabut, Chief 1997 $120,000(4) -- 120,000(2)
Financial Officer(4) 1996 $104,051(5) $15,949(6) 20,513(7)
</TABLE>
- ----------
(1) The Company accrues compensation expense for Joel Schoenfeld at a rate of
$192,000 per annum, plus benefits, which include a car allowance (approximately
$9,800 in 1997 and $8,500 in 1996) and life/disability/health and car insurance
(approximately $24,400 in 1997 and $7,500 in 1996).
(2) Represents Time Accelerated Restricted Stock Options having an exercise
price of $3.50 per share.
(3) In connection with an extension of Mr. Schoenfeld's employment agreement in
September, 1998, the Company canceled these options and issued to him an equal
number of immediately exercisable stock options at an exercise price of $1.75
per share. See "Executive Compensation - Stock Options."
(4) Mr.Chabut is no longer employed by the Company.
(5) Includes health insurance benefits.
(6) Represents the amount reimbursed to Mr. Chabut for taxes incurred in
connection with his exercise of certain stock options described in footnote (7)
below.
(7) Represents options granted to Mr. Chabut at $3.50 per share. These options
have been exercised.
Employment Agreements
Joel Schoenfeld serves as Chairman of the Board and Chief Executive
Officer of the Company pursuant to an employment agreement which expires on
March 28, 2003. The agreement provides Mr. Schoenfeld with a salary of $192,000
per annum and life, disability and health insurance benefits. The Company also
has agreed to reimburse Mr. Schoenfeld for automobile lease payments under his
existing vehicle lease, or alternatively, to provide him with an automobile
allowance of $10,800 per annum, and at the expiration of the vehicle lease, to
pay him the fair market value of the vehicle if he elects to exercise the option
to purchase the vehicle pursuant to the lease. The agreement contains a
non-competition covenant that prohibits him, directly or indirectly, from
engaging in a competitive business (as defined) for a period of twelve months
following the termination of his employment. The foregoing restriction does not
apply if the Company does not offer to extend or renew his employment set forth
in his employment agreement.
-4-
<PAGE>
Stock Options
The following table contains information concerning the grant of stock
options under the Company's Amended 1996 Stock Option Plan to Messrs. Schoenfeld
and Chabut during the fiscal year ended December 31, 1997.
OPTION GRANTS IN LAST FISCAL YEAR
(Individual Grants)
<TABLE>
<CAPTION>
Percent of
Number of Total
Shares Options
Underlying Granted to Exercise
Options Employees in Price Per Expiration
Name Granted Fiscal Year Share Date
---- ------- ----------- ----- ----
<S> <C> <C> <C> <C>
Joel Schoenfeld 2,130,000(1) 72.2% $3.50 April 11, 2007
David Chabut (2) 120,000 4.1% 3.50 April 11, 2007
</TABLE>
The following table summarizes for each of the Named Executive Officers the
total number of unexercised options, if any, held at December 31, 1997, and the
aggregate dollar value of in-the-money, unexercised options, held at December
31, 1997. The value of the unexercised, in-the-money options at December 31,
1997, is the difference between their exercise or base price ($3.50), and the
fair market value of the underlying Common Stock on December 31, 1997. The
closing bid price of the Common Stock on December 31, 1997 was $1.438.
Aggregated Option Exercises in Last Fiscal Year and FY End Option Values
<TABLE>
<CAPTION>
Shares Acquired Number of Securities Value of Unexercised
Upon Exercise Underlying In-The-Money
of Options Unexercised Option Options at
During Fiscal 1997 at December 31, 1997 December 31, 1997
------------------- --------------------------- ----------------------------
Value
Name Number Realized Exercisable Unexercisable Exercisable Unexercisable
- -------------- ------ -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Joel Schoenfeld None None None 2,130,000(1) None None
David Chabut(2) 4,370 None None 120,000 None None
</TABLE>
- --------------
(1) In connection with an extension of Mr. Schoenfeld's employment agreement in
September, 1998, the Company canceled these options and granted Mr.
Schoenfeld immediately exercisable options to purchase an equal number of
shares at an exercise price of $1.75 per share.
(2) Mr. Chabut is no longer employed by the Company.
PROPOSAL 2. APPROVAL OF THE COMPANY'S 1998 STOCK OPTION PLAN
The Board of Directors of the Company, subject to stockholder approval,
has adopted the Company's 1998 Stock Option Plan (the "1998 Plan"), which
authorizes the grant of options to purchase an aggregate of 300,000 shares of
Common Stock. As of November 19, 1998 options to purchase 54,000 shares of
Common Stock have been granted under the 1998 Plan.
-5-
<PAGE>
The affirmative vote of a majority of the outstanding shares of Common
Stock of the Company present in person or by proxy at the Annual Meeting and
voting on the 1998 Plan is required for approval of the 1998 Plan. The Board
recommends a vote in favor of the 1998 Plan.
The Board of Directors has deemed it in the best interest of the
Company to establish the 1998 Plan so as to provide employees and other persons
involved in the continuing development and success of the Company and its
subsidiaries an opportunity to acquire a proprietary interest in the Company by
means of grants of options to purchase Common Stock. The 1998 Plan authorizes
additional options for grant to eligible participants in addition to the options
to purchase shares remain available for grant (or which may become available
upon the expiration or cancellation of outstanding options) under the Company's
Amended 1996 Stock Option Plan (the "Plan"). It is the opinion of the Board of
Directors that by providing the Company's employees and other individuals
contributing to the Company and its subsidiaries the opportunity to acquire an
equity investment in the Company, the 1998 Plan will maintain and strengthen
their desire to remain with the Company, stimulate their efforts on the
Company's behalf, and also attract other qualified personnel to provide services
on behalf of the Company.
The following statements summarize certain provisions of the 1998 Plan.
All statements are qualified in their entirety by reference to the text of the
1998 Plan, copies of which are available for examination at the principal office
of the Company, 22 Dubon Court, Farmingdale, New York 11735.
The 1998 Plan allows the Company to grant incentive stock options
("ISOs"), as defined in Section 422(b) of the Internal Revenue Code of 1986, as
amended (the "Code"), Non-Qualified Stock Options ("NQSOs") not intended to
qualify under Section 422(b) of the Code, and Stock Appreciation Rights
("SARs"). ISO's, NQSO's and SAR's may be collectively referred to as "Options."
The vesting of one or more options granted hereunder may be based on the
attainment of specified performance goals of the participant or the performance
of the Company, one or more subsidiaries, parent and/or division of one or more
of the above. The 1998 Plan is intended to provide the employees, directors,
independent contractors and consultants of the Company with an added incentive
to commence or continue their services to the Company and to induce them to
exert their maximum efforts toward the Company's success. The 1998 Plan is not
subject to ERISA.
Shares Subject to the Plan.
The total number of shares of Common Stock of the Company that may be
subject to Options granted under the Plan shall be three hundred thousand shares
(300,000) in the aggregate, subject to adjustment as provided in Paragraph 8 of
the Plan; however, the grant of an ISO to an employee together with a tandem SAR
or any NQSO to an employee together with a tandem SAR shall only require one
share of Common Stock to be made available subject to the Plan to satisfy such
joint Option. The Company shall at all times while the Plan is in force reserve
such number of shares of Common Stock as will be sufficient to satisfy the
requirements of outstanding Options granted under the Plan. In the event any
Option granted under the Plan shall expire or terminate for
-6-
<PAGE>
any reason without having been exercised in full or shall cease for any reason
to be exercisable in whole or in part, the shares subject to such expired or
terminated Option shall again be available for granting of Options under the
Plan.
Eligibility for Participation
Under the 1998 Plan, ISOs or ISOs in tandem with SARs, which are
subject to the requirements set forth in Temp. Reg. Section 14a.422A-1, A-39
(a)-(e), may be granted, from time to time, to employees of the Company,
including officers, but excluding directors who are not otherwise employees of
the Company. NQSOs and SARs may be granted from time to time, under the 1998
Plan, to employees of the Company, officers, directors, independent contractors,
consultants and other individuals who are not employees of, but are involved in
the continuing development and success of the Company (persons entitled to
receive ISOs, NQSOs, and/or SARs are hereinafter referred to as "Participants").
ISOs and ISOs in tandem with SARs may not be granted under the 1998 Plan to any
person for whom shares first become exercisable under the 1998 Plan or any other
stock option plan of the Company in any calendar year having an aggregate fair
market value (measured at the respective time of grant of such options) in
excess of $100,000. Any grant in excess of such amount shall be deemed a grant
of a NQSO. To date, the Company has approximately 60 employees (three of whom
are also Officers) who are eligible for grants of one or more types of Options
under the 1998 Plan. The Company cannot presently compute the number of
non-employees who may be entitled to NQSOs.
Administration
The 1998 Plan is to be administered by the Board of Directors of the
Company and/or by a stock option or compensation committee (the administrator of
the 1998 Plan whether the Board of Directors itself or a committee thereof is
hereinafter referred to as the "Committee" unless the context otherwise
requires) which shall be comprised solely of at least two "outside directors"
(as such term is defined under Section 162(m) of the Code. The Committee will
have the authority, in its discretion, to determine the persons to whom options
shall be granted, the character of such options and the number of shares of
Common Stock to be subject to each option. The Board of Directors may administer
the 1998 Plan; provided, however, that in the event a Committee has been
appointed, the Committee will administer the 1998 Plan with respect to employees
included within the term "covered employee" under Section 162(m) of the Code.
Terms of Options
The Terms of Options granted under the 1998 Plan are to be determined
by the Board of Directors or the Committee. Each Option is to be evidenced by a
stock option agreement between the Company and the person to whom such option is
granted, and is subject to the following additional terms and conditions:
-7-
<PAGE>
(a) Exercise of the Option: The Committee will determine the
time periods during which Options granted under the 1998 Plan may be
exercised. An Option must be granted within ten (10) years from the
date the 1998 Plan was adopted or the date the 1998 Plan is approved by
the stockholders of the Company, whichever is earlier. Options will be
exercisable in whole or in part at any time during the period but will
not have an expiration date later than ten (10) years from the date of
grant. Unless otherwise provided in any option agreement issued under
the 1998 Plan, any Option granted under the 1998 Plan may be
exercisable in whole or in part at any time during the exercise period
and except for performance based options, must become fully exercisable
within five years from the date of its grant, and not less than 20% of
the Option shall become exercisable on an aggregate basis by the end of
any of the first five years of the Option. The Committee may, in its
sole discretion, accelerate any such vesting period after the grant
thereof. Notwithstanding the above, ISOs or SARs granted in tandem with
ISOs, granted to holders owning directly or through attribution more
than 10% of the Company's Common Stock are subject to the additional
restriction that the expiration date shall not be later than five (5)
years from the date of grant. An Option is exercised by giving written
notice of exercise to the Company specifying the number of full shares
of Common Stock to be purchased and tendering payment of the purchase
price to the Company in cash or certified check, or if permitted by the
instrument of grant, with respect to an ISO, or at the discretion of
the Committee with respect to NQSOs, by delivery of Common Stock having
a fair market value equal to the Option Price, by delivery of an
interest bearing promissory note having an original principal balance
equal to the Option Price and an interest rate not below the rate which
would result in imputed interest under the Code or by a combination of
cash, shares of Common Stock and promissory notes. Furthermore, in the
case of a NQSO, at the discretion of the Committee, the Participant may
have the Company withhold from the Common Stock to be issued upon
exercise of the Option that number of shares having a fair market value
equal to the exercise price and/or the withholding amount due.
(b) Option Price: The option price of an NQSO or an SAR
granted in tandem with an NQSO granted pursuant to the 1998 Plan is
determined in the sole discretion of the Committee. The option price of
an ISO or SAR granted in tandem with an ISO pursuant to the 1998 Plan
shall not be less than the fair market value thereof at the date of
grant. Such fair market value of an ISO shall be determined by the
Committee and, if the Common Stock is listed on a national securities
exchange or quoted on The Nasdaq Stock Market, Inc., the fair market
value shall be the closing price of the Common Stock, or if closing
prices are not available or the Common Stock is quoted on the National
Association of Securities Dealers, Inc. ('NASD") OTC Bulletin Board
("OTC Bulletin Board") or otherwise in the over-the-counter market, the
mean of the closing bid and asked prices of the Common Stock as
reported by The Nasdaq Stock Market, Inc., the NASD, the OTC Bulletin
Board or the National Quotation Bureau, Inc., as the case may be, on
such date, or if there is no closing price or bid or asked price on
that day, the closing price or mean of the closing bid and asked prices
on the most recent day preceding the day on which the Option is granted
for which such prices are available. ISOs or SARs granted in tandem
with ISOs,
-8-
<PAGE>
granted to holders owning directly or through attribution, more than
10% of the Company's Common Stock are subject to the additional
restriction that the option price must be at least 110% of the fair
market value of the Company's Common Stock on the date of grant.
(c) Termination of Employment or Consulting Agreement; Death;
Disability: Except as provided in the 1998 Plan, or otherwise extended
by the Committee in its sole discretion, subject to the last paragraph
of this subpart (c), upon the voluntary termination of employment with
the Company, or, in the case of a consultant, termination of the
consulting relationship prior to the termination of the term thereof a
holder of an Option under the 1998 Plan may exercise such Option to the
extent such Option was exercisable as of the date of termination or at
any time within thirty (30) days after the date of such termination.
Except as provided herein, or otherwise determined by the Board of
Directors or the Committee in its sole discretion, if such employment
or consulting relationship shall terminate for any reason other than
death, voluntary termination by the employee or for cause, then such
Options may be exercised at anytime within three (3) months after such
termination. Notwithstanding the above, unless otherwise determined by
the Committee in its sole discretion, any Options granted under the
1998 Plan shall immediately terminate in the event the Optionee is
terminated as a result of the Optionee having not adequately performed
the services for which he/she/it was hired.
Unless extended by the Committee, if the holder of an Option
granted under the 1998 Plan dies (i) while employed by the Company or a
subsidiary or parent corporation or (ii) within three (3) months after
the termination of such holder's employment, such option may be
exercised at anytime determined by the Committee, but in no event less
than six months of death by a legatee or legatees of such option under
such individual's last will or by such individual's estate, to the
extent such option was exercisable as of the date of death or date of
termination of employment, whichever date is earlier.
If the holder of an Option under the 1998 Plan becomes
disabled within the definition of Section 22(e)(3) of the Code while
employed by the Company or a subsidiary or parent corporation, such
Option may be exercised at any time within six months after such
holder's termination of employment due to the disability.
An Option may not be exercised except to the extent that the
holder was entitled to exercise the option at the time of termination
of employment or death unless otherwise extended by the Committee in
its sole discretion, and in any event it may not be exercised after the
original expiration date of the Option.
(d) Nontransferability of Options; No Liens: ISOs and SARs
granted in tandem with ISOs shall be nontransferable and nonassignable
except by will or the laws of intestacy, and any ISO or SAR in tandem
with an ISO is exercisable during the lifetime of the Optionee only by
the Optionee, or in the event of his or her death, by a person who
acquires the right to exercise the Option by bequest or inheritance or
by reason of the death of the
-9-
<PAGE>
Optionee. The Board or its Committee has the right to grant options
other than ISO's or SAR's in tandem with ISO's which may or may not be
transferable or assignable.
The option agreement may contain such other terms, provisions and
conditions not inconsistent with the 1998 Plan as may be determined by the
Committee.
-10-
<PAGE>
Termination; Modification and Amendment
The 1998 Plan (but not options previously granted under the 1998 Plan)
shall terminate ten years from the earlier of the date of its adoption by the
Board of Directors or the date the 1998 Plan is approved by the stockholders of
the Company. No Option will be granted after termination of the 1998 Plan.
The Board of Directors of the Company may terminate the 1998 Plan at
any time prior to its expiration date, or from time to time make such
modifications or amendments of the 1998 Plan, as it deems advisable. However,
the Board of Directors may not, without the approval of a majority of the then
shares of the capital stock of the Company present in person or by proxy at an
Annual or Special Meeting of Stockholders and voting thereon, except under
conditions described under "Adjustments Upon Changes in Capitalization,"
increase the maximum number of shares as to which options may be granted under
the 1998 Plan, materially change the standards of eligibility under the 1998
Plan, or adopt a new plan.
No termination, modification or amendment of the 1998 Plan may
adversely affect the terms of any outstanding Options without the consent of the
holders of such Options.
Adjustments Upon Changes in Capitalization.
In the event that the number of outstanding shares of Common Stock of
the Company is changed by reason of recapitalization, reclassification, stock
split, stock dividend, combination, exchange of shares, or the like, the Board
of Directors of the Company will make an appropriate adjustment in the aggregate
number of shares of Common Stock available under the 1998 Plan, in the number of
shares of Common Stock reserved for issuance upon the exercise of then
outstanding Options and in the exercise prices of such Options. Any adjustment
in the number of shares will apply proportionately only to the unexercised
portion of Options granted under the 1998 Plan. Fractions of shares resulting
from any such adjustment shall be revised to the next higher whole number of
shares.
In the event of the proposed dissolution or liquidation of
substantially all of the assets of the Company, all outstanding Options will
automatically terminate, unless otherwise provided by the Board of Directors.
Federal Income Tax Consequences.
The following discussion is only a summary of the principal federal
income tax consequences of the Options granted under the 1998 Plan and is based
on existing federal law, which is subject to change, in some cases
retroactively. This discussion is also qualified by the particular circumstances
of individual optionees, which may substantially alter or modify the federal
income tax consequences discussed below. Accordingly, optionees should consult
their own tax advisors.
-11-
<PAGE>
Generally, under present law, when an option qualifies as an ISO under
Section 422 of the Code (i) an employee will not realize taxable income either
upon the grant or the exercise of the option, (ii) the amount by which the fair
market value of the shares acquired by the exercise of the option at the time of
exercise exceeds the option price is included in alternative minimum taxable
income for purposes of determining the employee's alternative minimum tax, (iii)
any gain or loss (the difference between the net proceeds received upon the
disposition of the shares and the option price paid therefor) upon a qualifying
disposition of the shares acquired by the exercise of the option will be treated
as capital gain or loss if the stock qualifies as a capital asset in the hands
of the employee, and (iv) no deduction will be allowed to the Company for
federal income tax purposes in connection with the grant or exercise of an
incentive stock option or a qualifying disposition of the shares. A disposition
by an employee of shares acquired upon exercise of an ISO will constitute a
qualifying disposition if it occurs after the holder's death or more than two
years after the grant of the option and one year after the issuance of the
shares to the employee. If such shares are disposed of by the employee before
the expiration of those time limits, the transfer would be a "disqualifying
disposition" and the employee, in general, will recognize ordinary income (and
the Company will receive an equivalent deduction) equal to the lesser of (i) the
aggregate fair market value of the shares as of the date of exercise less the
option price or (ii) the amount realized on the disqualifying disposition less
the option price. Ordinary income from a disqualifying disposition will
constitute compensation for which withholding may be required under federal and
state law. Currently under the Code, the maximum rate of tax on ordinary income
is greater than the rate of tax on long-term capital gains.
The holding period for shares of stock received upon the exercise of an
ISO commences on the date of exercise of the grant. Under present Federal income
tax law, in the event that such shares are sold after two (2) years from the
date of the grant and within eighteen (18) months of the exercise of the grant,
the Federal capital gains tax will be at the rate of 28%. In the event such
shares are sold after two years from the date of the grant, and eighteen months
or more from the date of exercise of the grant, the Federal capital gains tax
will be at the rate of 20%. To the extent that an optionee recognizes a capital
loss, such loss may currently generally offset capital gains and $3,000 of
ordinary income. Any excess capital loss is carried forward indefinitely.
In the case of a non-qualified stock option granted under the 1998
Plan, no income generally is recognized by the optionee at the time of the grant
of the option assuming such non-qualified stock option does not have a readily
ascertainable fair market value. The optionee generally will recognize ordinary
income when the non-qualified stock option is exercised equal to the aggregate
fair market value of the shares acquired less the option price. Ordinary income
from non-qualified stock options will constitute compensation for which
withholding may be required under federal and state law, and the Company will
receive an equivalent deduction, subject to the limitations of Section 162(m) of
the Code which limits the amount a publicly held corporation may deduct with
respect to remuneration generally paid to an executive officer of the
Corporation to $1,000,000. Income recognized by such executive officer on the
exercise of a NQSO or SAR would be deemed remuneration. However, there are
certain requirements which, if met, will allow income from the exercise of a
NQSO or SAR to be excluded from remuneration for such purposes. Even though the
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Company and the 1998 Plan satisfy such requirements, no assurance can be given
that they will be met in the future.
Shares acquired upon exercise of non-qualified stock options will have
a tax basis equal to their fair market value on the exercise date or other
relevant date on which ordinary income is recognized and the holding period for
the shares generally will begin on the date of the exercise or such other
relevant date. Upon subsequent disposition of the shares, the optionee will
recognize capital gain or loss if the stock is a capital asset in his hands.
Provided the shares are held by the optionee for more than one year prior to
disposition, such gain or loss will be long-term capital gain or loss. As set
forth above, the maximum rate of tax on ordinary income is currently greater
than the rate of tax on long-term capital gains. To the extent an optionee
recognizes a capital loss, such loss may currently generally offset capital
gains and $3,000 of ordinary income. Any excess capital loss is carried forward
indefinitely.
The grant of an SAR is generally not a taxable event for the optionee.
Upon the exercise of an SAR the optionee will recognize ordinary income in an
amount equal to the amount of cash and with respect to SARs granted in tandem
with NQSOs, the fair market value of any shares of Common Stock received upon
such exercise, and the Company will be entitled to a deduction equal to the same
amount. However, if the sale of any shares received would be subject to Section
16(b) of the Securities Exchange Act of 1934, ordinary income attributable to
such shares received will be recognized on the date such sale would not give
rise to a Section 16(b) action, valued at the fair market value at such later
time, unless the optionee has made a Section 83(b) election within 30 days after
the date of exercise to recognize ordinary income as of the date of exercise
based on the fair market value at the date of exercise.
The foregoing discussion is only a brief summary of the applicable
federal income tax laws as in effect on this date and should not be relied upon
as being a complete statement. The federal tax laws are complex, and they are
subject to legislative changes and new or revised judicial or administrative
interpretations at any time. In addition to the federal income tax consequences
described herein, an optionee may also be subject to state and/or local income
tax consequences in the jurisdiction in which the grantee works and/or resides.
New Plan Benefits
As of November 19, 1998, options to purchase 54,000 shares of Common
Stock had been granted or allocated under the 1998 Plan to the following
directors or executive officers:
<TABLE>
<CAPTION>
Name Position Options Granted
---- -------- ---------------
<S> <C> <C>
Joel Schoenfeld Chairman of the Board of Directors and
Chief Executive Officer 15,000
Alan H. Gold, M.D. President, Director, Audit Committee Member 15,000
Andrew Jay Director, Consultant 8,000
</TABLE>
-13-
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
John Frank Director, Audit Committee Member, Consultant 6,000
Richard Lerner Director, Audit Committee Member 5,000
David Jay Director 5,000
</TABLE>
Each option granted is exercisable at a price of $1.50 per share and
expires November 19, 2003.
Other Stock Option Plans
The Company's Amended 1996 Stock Option Plan (the "Plan") authorizes
the grant of options to purchase 4,709,219 shares of Common Stock to directors,
employees (including officers) and consultants to the Company (collectively,
"Plan participants"). Options to purchase 4,315,513 shares of Common Stock have
been granted pursuant to the Plan, including options to purchase 2,130,000
shares and 140,513 shares granted to Joel Schoenfeld and David Chabut,
respectively. Options to purchase 20,513 shares have been exercised by Mr.
Chabut under the Plan. Time Accelerated Restricted Stock Options to purchase
4,125,000 shares of Common Stock have been granted to officers and directors of
the Company at an exercise price of $3.50 per share, including options to
purchase 2,130,000 shares and 120,000 shares granted to Joel Schoenfeld and
David Chabut, respectively. Time Accelerated Restricted Stock Options are
exercisable commencing upon the earliest of (i) April 24, 2006, (ii) April 24,
2000, if the Company has at least $30,000,000 in gross revenues and net income
of at least $2,000,000 for the fiscal year ended December 31, 1999, (iii) April
24, 2001, if the Company has at least $45,000,000 in gross revenues and net
income of at least $3,000,000 for the fiscal year ended December 31, 2000, (iv)
April 24, 2002, if the Company has at least $60,000,000 in gross revenues and
net income of at least $4,000,000 for the fiscal year ended December 31, 2001,
or (v) immediately upon the occurrence of a "change in control" (as defined) of
the Company. In no event may a Time Accelerated Restricted Stock option be
exercised after the tenth anniversary of the date of the grant. In connection
with an extension of Mr. Schoenfeld's employment agreement in September, 1998,
the Company canceled the Time Accelerated Restricted Stock Options granted to
Joel Schoenfeld and issued to him an equal number of immediately exercisable
options at an exercise prior of $1.75 per share.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE
"FOR" THE APPROVAL OF THE ADOPTION OF THE 1998 STOCK OPTION PLAN
(PROPOSAL 2)
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<PAGE>
PROPOSAL 3. PROPOSAL TO AUTHORIZE ISSUANCE OF MORE THAN 596,055 SHARES OF COMMON
STOCK IN LIEU OF CASH PAYMENT UPON CONVERSION OF SERIES B 5%
CONVERTIBLE PREFERRED STOCK
In July, 1998, the Company sold 750 shares of the Company's Series B 5%
Convertible Preferred Stock, stated value $1,000 per share, and Warrants
expiring in three years to purchase for $2.15 per share 112,500 shares of its
Common Stock, to an institutional investor for an aggregate price of $750,000.
Each share of Series B Preferred Stock is convertible by the holder
into the number of shares of Common Stock having the value of $1,000, on the
basis of the lower of (i) $1.925 per share and (ii) a price equal to 80 to 85%
of a price related to the market price for the Common Stock at the time of
conversion, as provided in the Certificate of Designation ("Certificate of
Designation") defining the Series B Preferred Stock. The conversion rate is
subject to adjustment in the event of a stock split, stock dividend,
recapitalization, merger, consolidation or certain other events. If the
Company's Common Stock is delisted from trading on the National Association of
Securities Dealers Automated Quotation System ("NASDAQ") for any reason, the
remaining Series B Preferred Stock may be converted into Common Stock at a price
related to 75% of the market price of the Common Stock at the time of
conversion.
Up to 33-1/2% of the Series B Preferred Stock may be converted up to
150 days after July 27, 1998; up to 66-2/3% of the Series B Preferred Stock may
be converted up to 180 days after July 27, 1998; and all the Series B Preferred
Stock may be converted after 180 days following July 27, 1998. All the Series B
Preferred Stock must be converted no later than July 27, 2000.
The Certificate of Designation provides that without shareholder
approval the Company may not issue upon conversion of the Series B Preferred
Stock more than 596,055 shares of Common Stock, which represents 19.99% of the
amount outstanding on the closing date for the Series B Preferred Stock, the
maximum number which the Board of Directors may authorize under applicable
NASDAQ rules. The Certificate of Designation provides that if the foregoing
provision would prohibit a conversion the Company must instead, in the absence
of shareholder approval, redeem the applicable Series B Preferred shares in cash
at a price equal to 125% of the $1,000 per share stated value, together with all
accrued and unpaid dividends thereon.
The Board of Directors deems it in the best interests of the Company to
have authority to issue shares of Common Stock upon conversion of the Series B
Preferred Stock in excess of the foregoing limitation rather than being required
to redeem shares of Series B Preferred Stock for a cash premium if the
limitation is exceeded. The Company's obligation to redeem Series B Preferred
shares at a cash premium could, in the opinion of the Board of Directors, have
an adverse effect on the Company's ability to obtain additional equity or debt
financing as compared with the Company's ability to obtain such additional
financing if the Series B Preferred Stock is convertible only into shares of
Common Stock. Shareholder approval of this proposal will eliminate the
obligation of the
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<PAGE>
Company to make cash payments when the limitation described above is exceeded
and accordingly would eliminate any adverse effects that might arise from the
existence of the cash redemption obligation.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE PROPOSAL
TO AUTHORIZE ISSUANCE UPON CONVERSION OF SERIES B PREFERRED STOCK OF MORE THAN
596,055 SHARES OF COMMON STOCK (PROPOSAL 3).
PROPOSAL 4. RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
On April 23, 1998, the Registrant engaged Richard A. Eisner & Company,
LLP as its principal accountant to audit the Registrant's financial statements
for the fiscal year ending December 31, 1998. They have no financial interest,
either direct or indirect, in the Company. Representatives of Richard A. Eisner
& Company, LLP are expected to be present at the Annual Meeting to respond to
appropriate questions from stockholders and to make a statement if they desire
to do so.
On April 17, 1998, the Company dismissed Coopers & Lybrand LLP (the
"Former Accountant") the Company's independent public accountants since 1992, to
reduce professional fees.
The Former Accountant's reports on the financial statements for the
fiscal years ended December 31, 1996 and 1997 did not contain an adverse opinion
or a disclaimer of opinion and were not qualified or modified as to uncertainty,
audit scope or accounting principles, except for an explanatory note concerning
the Company's ability to continue as a going concern as a result of recurring
losses from operations since its inception.
The decision to change accountants was approved by the Board of
Directors.
During the Company's last two fiscal years and the subsequent interim
periods through the date of the Former Accountant's dismissal, there were no
disagreements with the Former Accountant, whether or not resolved, 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 the Former Accountant, would have caused it to make reference to
the subject matter of the disagreements in connection with its report.
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<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS (PROPOSAL 4)
OTHER MATTERS
The Board of Directors is not aware of any business to be presented at
the Annual Meeting except the matters set forth in the Notice of Annual Meeting
and described in this Proxy Statement. Unless otherwise directed, all shares
represented by Board of Directors' proxies will be voted in favor of the
proposals of the Board of Directors described in this Proxy Statement. If any
other matters come before the Annual Meeting, the persons named in the
accompanying Proxy will vote on those matters according to their best judgment.
Security Ownership and Certain Beneficial Owners and Management
The following table sets forth certain information concerning the beneficial
ownership of the Company's Common Stock as of October 31, 1998 by (i) each
stockholder known by the Company to be a beneficial owner of more than five
percent of the outstanding Common Stock, (ii) each director of the Company and
each Named Executive Officer and (iii) all directors and executive officers as a
group.
Amount and
Nature of Percentage of
Beneficial Common Stock
Name Ownership(1) Beneficially Owned(1)(2)
- ---- ------------ ------------------------
Joel and Flora Schoenfeld(3) 2,943,743(4)(5) 55.82%(6)
Alan H. Gold, M.D.(3) 343,333(5)(7) 11.48%(8)
Andrew Jay (9) 200,560(10) 6.51%(11)
John Frank(12) 153,775(13) 5.12%(14)
Richard Lerner(3) 41,026 1.38%
David Jay(9) 6,435(15) *
David Chabut (16) 20,513 *
All directors and executive 3,488,312(17)(18) 65.28%(19)
officers as a group (6 persons)
- -------------
* Less than 1%
(1) Unless otherwise indicated, each person has sole investment and voting
power with respect to the shares indicated, subject to community property laws,
where applicable. For purposes of computing the percentage of outstanding shares
held by each person or group of persons named above as of October 31, 1998, any
security which such person or group of persons has the right to acquire within
60 days after such date is deemed to be outstanding for the purpose of computing
the percentage ownership of any other person. Accordingly, the information
presented in the foregoing table does not include shares of Common Stock
issuable upon (i) conversion of the Series A Preferred Stock (which may not be
converted prior to April 24, 1999) or (ii) Time Accelerated Restricted Stock
Options (which may not be exercised prior to the earliest of (x) April 24, 2006,
(y) the attainment of certain financial performance criteria or (z) the
occurrence of a "change in control," as defined).
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<PAGE>
(2) Except as otherwise stated, calculated on the basis of 2,981,769 shares of
Common Stock issued and outstanding.
(3) Address is c/o the Company, 22 Dubon Court, Farmingdale, New York 11735.
(4) Includes 2,130,000 shares and 200,000 shares that Joel Schoenfeld and Flora
Schoenfeld, respectively, may acquire upon exercise of presently exercisable
options.
(5) All of the shares owned by Dr. Gold have been pledged to secure certain
indebtedness to Joel Schoenfeld. Dr. Gold retains voting and dispositive power
with respect to the pledged shares until the occurrence of a default in the
payment of the indebtedness secured by the pledged shares. Accordingly, the
pledged shares have been included in the number of shares beneficially owned by
Dr. Gold and excluded from the number of shares beneficially owned Mr.
Schoenfeld.
(6) Calculated on the basis of 5,273,743 shares issued and outstanding.
(7) Includes 10,000 shares that Dr. Gold may acquire upon exercise of presently
exercisable options.
(8) Calculated on the basis of 2,991,769 shares of Common Stock issued and
outstanding.
(9) Address for Andrew Jay is c/o David Jay, 58 Ruby Lane, Plainview, New York
11803. Andrew Jay is the son of David Jay and David Jay is the father of Andrew
Jay.
(10) Includes 100,000 shares issuable upon exercise of presently exercisable
options. Does not include shares owned by David Jay, as to which Andrew Jay
disclaims beneficial ownership.
(11) Calculated on the basis of 3,081,769 shares of Common Stock issued and
outstanding.
(12) Address is c/o The Hartford Steam Boiler Insurance & Inspection Co., P.O.
Box 5204, One State Street, Hartford, Connecticut 06102-5024.
(13) Includes 22,236 shares issuable upon exercise of options, at an exercise
price of $3.50 per share, which expire on February 22, 1999.
(14) Calculated on the basis of 3,004,005 shares of Common Stock issued and
outstanding.
(15) Does not include shares owned by his son, Andrew Jay, as to which David Jay
disclaims beneficial ownership.
(16) Mr. Chabut is no longer employed by the Company.
(17) For purposes of this calculation, shares of Common Stock beneficially owned
by more than one person have only been included once.
(18) Includes 32,236 shares issuable upon exercise of presently exercisable
options. See footnotes (5) and (11) above. Does not includes shares owned by
Mr. Chabut. See footnote (16) above.
(19) Calculated on the basis of 5,344,005 shares of Common Stock issued and
outstanding.
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<PAGE>
Executive Officers and Significant Employees
The names, ages and business backgrounds of the executive officers and other
significant employees of the Company who are not nominees for Director are as
follows:
Name Age Office Officer Since
---- --- ------ -------------
Flora Schoenfeld * 51 Treasurer and Secretary August 1992
- -------------
* Flora Schoenfeld is the wife of Joel Schoenfeld, Chairman of the Board and
Chief Executive Officer of the Company.
Certain Transactions
From its inception in August 1992, the Company's operations have been
funded through advances from Joel Schoenfeld, Flora Schoenfeld and two companies
affiliated with Mr. Schoenfeld (collectively, the "Schoenfeld Parties"), and
certain other stockholders of the Company. As of December 30, 1996, the amount
due to these stockholders and affiliates with respect to the repayment of these
advances (including accrued interest) was as follows: the Schoenfeld Parties --
$1,160,877; Dr. Alan H. Gold -- $115,665; and John Frank -- $118,390. The
Company issued its demand promissory notes evidencing its obligation to repay
the foregoing advances, together with accrued interest on the outstanding
principal amount thereof at 8% per annum. On December 30, 1996 and January 24,
1997, the Schoenfeld Parties and Dr. Alan H. Gold exchanged for cancellation
their notes for an aggregate of 1,160 shares and 115 shares, respectively, of
the Company's Series A Preferred Stock. On May 2, 1997, the Company issued
34,397 shares of Common Stock to Mr. Frank, a director of the Company, in
exchange for the cancellation of $120,390 payable to him. In addition, as of
December 31, 1996, the Company had accrued compensation payable to the
Schoenfeld Parties in the amount of $644,391, including management fees of
$382,191 for periods prior to June 30, 1994. Since June 30, 1994, the Company
has recorded a salary expense for Mr. Schoenfeld in lieu of management fees due
to affiliates of Mr. Schoenfeld. On March 12, 1997, the Company issued 644
shares of Series A Preferred Stock to Mr. Schoenfeld in exchange for the
cancellation of the amount payable to him for unpaid compensation.
In connection with the formation of the Company, and in consideration
for the dilution resulting to Flora Schoenfeld (the then owner of all of the
Company's outstanding shares) from the issuance by the Company of 333,333 shares
and 205,128 shares to Dr. Alan H. Gold and David Shonfeld (a former Director of
the Company), respectively, each of Dr. Gold and David Shonfeld delivered to
Flora Schoenfeld his non-interest bearing, demand promissory note in the amount
of $750,000, the payment of which each of them agreed to secure by a pledge of
his shares.
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<PAGE>
On November 21, 1997, following a default in payment of his promissory
note, Flora Schoenfeld purchased the 256,410 shares owned by David Shonfeld as a
secured party under a pledge agreement with David Shonfeld and pursuant to
Section 9-504(3) of the Uniform Commercial Code as in effect in New York for a
total purchase price of $515,384 or $2.01 per share, representing the average of
the high and low bid prices per share of Common Stock during the preceding 30
day period. The purchase price for the shares was credited against the $750,000
due Flora Schoenfeld under David Shonfeld's promissory notes.
In connection with the Sherwood Supply Agreement, Joel Schoenfeld, Dr.
Alan H. Gold, David Shonfeld and John Frank agreed, jointly and severally, to
pay Sherwood up to $1,000,000 (less $0.14925 for each dollar paid to Sherwood
under the Sherwood Supply Agreement) in the event the Company failed to pay a
cumulative invoiced amount of $6,700,000 over the first three years of the
Sherwood Supply Agreement, provided Sherwood was able to deliver 100,000,000
plungers that met the Company's tolerances during such period. In the third
quarter of 1997, Sherwood acknowledged that it was unable to produce plungers
that met the Company's tolerances. Consequently, the individual guarantees are
no longer effective.
On October 10, 1996, UNIVEC-NY, the then owner of all of the
outstanding capital stock of the Company, was merged with and into the Company,
solely for the purpose of effecting a change in its state of incorporation from
New York to Delaware. In the merger, shareholders of UNIVEC-NY received
10,256.3954 shares of Common Stock for each share of UNIVEC-NY common stock
owned, with the total number of shares issuable to each shareholder rounded up
to the nearest whole share.
The Company occupied its former executive offices, consisting of
approximately 1,200 square feet of space, pursuant to a lease which expires in
December 1998. Rental expense for the space is $28,704 per annum for the year
ended December 31, 1997, subject to an increase of 4% annum in each subsequent
year. Dr. Alan H. Gold, the President, a Director and principal stockholder of
the Company, is the President and a stockholder of the owner of the premises,
the Long Island Plastic Surgical Group.
In December 1996, David Chabut, the former Chief Financial Officer of
the Company, exercised options to purchase 16,143 shares of Common Stock, having
an exercise price of $3.50 per share, the exercise price of which was paid for
by the cancellation of amounts payable to him for accrued, but unpaid
compensation ($44,000) and certain advances ($12,500). On May 2, 1997, Mr.
Chabut exercised options to purchase an additional 4,370 shares of Common Stock
(at $3.50 per share) and paid the exercise price of these options by
cancellation of amounts payable to him for accrued but unpaid compensation
($15,295). The Company paid the remaining amount due to Mr. Chabut ($15,949) for
federal and state withholding and payroll taxes incurred by him in connection
with the exercise of such options.
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<PAGE>
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's Officers, Directors and persons who own more than ten percent of a
registered class of the Company's equity securities within specified time
periods to file certain reports of ownership and changes in ownership with the
Securities and Exchange Commission (the "Commission"). Officers, Directors and
ten percent stockholders are required by regulation to furnish the Company with
copies of all Section 16(a) forms they file. Based solely on a review of copies
of such reports received by the Company and written representations from such
persons concerning the necessity to file such reports, the Company is not aware
of any failures to file reports or report transactions in a timely manner during
the fiscal year ended December 31, 1997, except that Dr. Gold did not timely
file a Form 5 reporting the grant of a stock option in December 1998.
Expenses
The entire cost of preparing, assembling, printing and mailing this
Proxy Statement, the enclosed Proxy and other materials, and the cost of
soliciting Proxies with respect to the Annual Meeting, will be borne by the
Company. The Company will request banks and brokers to solicit their customers
who beneficially own shares listed of record in names of nominees, and will
reimburse those banks and brokers for the reasonable out-of-pocket expenses of
such solicitations. The original solicitation of proxies by mail may be
supplemented by telephone and telegram by officers and other regular employees
of the Company, but no additional compensation will be paid to such individuals.
Stockholder Proposals
No person who intends to present a proposal for action at a forthcoming
stockholders' meeting of the Company may seek to have the proposal included in
the proxy statement or form of proxy for such meeting unless that person (a) is
a record beneficial owner of at least 1% or $1,000 in market value of shares of
Common Stock, has held such shares for at least one year at the time the
proposal is submitted, and such person shall continue to own such shares through
the date on which the meeting is held, (b) provides the Company in writing with
his name, address, the number of shares held by him and the dates upon which he
acquired such shares with documentary support for a claim of beneficial
ownership, (c) notifies the Company of his intention to appear personally at the
meeting or by a qualified representative under Delaware law to present his
proposal for action, and (d) submits his proposal timely. A proposal to be
included in the proxy statement or proxy for the Company's next annual meeting
of stockholders, will be submitted timely only if the proposal has been received
at the Company's principal executive office no later than August , 1999. If the
date of such meeting is changed by more than 30 calendar days from the date such
meeting is scheduled to be held under the Company's By-Laws, or if the proposal
is to be presented at any meeting other than the next annual meeting of
stockholders, the proposal must be received at the Company's principal executive
office at a reasonable time before the solicitation of proxies for such meeting
is made.
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<PAGE>
Even if the foregoing requirements are satisfied, a person may submit
only one proposal with a supporting statement of not more than 500 words, if the
latter is requested by the proponent for inclusion in the proxy materials, and
under certain circumstances enumerated in the Securities and Exchange
Commission's rules relating to the solicitation of proxies, the Company may be
entitled to omit the proposal and any statement in support thereof from its
proxy statement and form of proxy.
AVAILABLE INFORMATION
Copies of the Company's Annual Report on Form 10-KSB for the fiscal
year ended December 31, 1997 as filed with the Securities and Exchange
Commission, including the financial statements, can be obtained without charge
by stockholders (including beneficial owners of the Company's Common Stock) upon
written request to Flora Schoenfeld, Company's Secretary, Univec, Inc., 22 Dubon
Court, Farmingdale, New York 11735 or on the Commission's Web Site at
www.sec.gov.
By Order of the Board of Directors
Flora Schoenfeld, Secretary
Farmingdale, New York 11735
December , 1998
-22-
<PAGE>
UNIVEC, INC.
22 Dubon Court
Farmingdale, New York 11735
PROXY
The undersigned, a holder of Common Stock of Univec, Inc., a Delaware
corporation (the "Company"), hereby appoints JOEL SCHOENFELD AND FLORA
SCHOENFELD, and each of them, the proxy of the undersigned, with full power of
substitution, to attend represent and vote for the undersigned, all of the
shares of the Company which the undersigned would be entitled to vote, at the
Annual Meeting of Stockholders of the Company to be held on December 30, 1998
and any adjournments thereof, as follows:
1. The election of five Directors of the Company to serve until the next annual
meeting of stockholders and until their successors are duly elected and
qualified.
[ ] FOR all nominees listed below
[ ] WITHHOLD AUTHORITY to vote for all nominees listed below.
(Instructions: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
STRIKE A LINE THROUGH OR OTHERWISE STRIKE OUT HIS OR HER NAME BELOW)
Joel Schoenfeld, Alan H. Gold, John Frank, Richard Lerner and David Jay.
2. The adoption of the 1998 Stock Option Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Authorization to issue more than 596,055 shares of Common Stock Upon
Conversion of Series B 5% Convertible Preferred Stock.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. The ratification of the appointment of Richard A. Eisner & Company, as the
Company's independent public accountants for the year ending December 31, 1998.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. Upon such other matters as may properly come before the meeting or any
adjournments thereof.
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<PAGE>
The undersigned hereby revokes any other proxy to vote at such Annual
Meeting, and hereby ratifies and confirms all that said attorneys and proxies,
and each of them, may lawfully do by virtue hereof. With respect to matters not
known at the time of the solicitations hereby, said proxies are authorized to
vote in accordance with their best judgment.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN ACCORDANCE WITH THE
INSTRUCTIONS ON THE OTHER SIDE HEREOF. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR THE ELECTION OF THE SIX DIRECTORS NAMED IN PROPOSAL 1 AND FOR THE
ADOPTION OF PROPOSALS 2, 3 AND 4, AND AS SAID PROXIES SHALL DEEM ADVISABLE ON
SUCH OTHER BUSINESS AS MAY COME BEFORE THE MEETING.
The undersigned acknowledges receipt of a copy of the Notice of Annual
Meeting dated April [2], 1998 relating to the Annual Meeting.
-----------------------------------------------------
Signature(s) of Stockholder(s)
The signature(s) hereon should correspond exactly with the name(s) of
the Stockholder(s) appearing on the Stock Certificate. If stock is jointly held,
all joint owners should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If signer is a corporation,
please sign the full corporate name, and give title of signing officer.
Date:____________, 1998
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF
UNIVEC, INC.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY
PROMPTLY USING THE ENCLOSED ENVELOPE.
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<PAGE>
UNIVEC, INC.
1998 STOCK OPTION PLAN
1. PURPOSE.
The UNIVEC, INC. 1998 STOCK OPTION PLAN (the "Plan") is intended to
provide the employees, directors, independent contractors and consultants of
Univec, Inc. (the "Company") and/or any subsidiary or parent thereof with an
added incentive to commence and/or continue their services to the Company and to
induce them to exert their maximum efforts toward the Company's success. By thus
encouraging employees, directors, independent contractors and consultants and
promoting their continued association with the Company, the Plan may be expected
to benefit the Company and its stockholders. The Plan allows the Company to
grant Incentive Stock Options ("ISOs") (as defined in Section 422(b) of the
Internal Revenue Code of 1986, as amended (the "Code"), Non-Qualified Stock
Options ("NQSOs") not intended to qualify under Section 422(b) of the Code and
Stock Appreciation Rights ("SARs") (collectively the "Options"). The vesting of
one or more Options granted hereunder may be based on the attainment of
specified performance goals of the participant or the performance of the
Company, one or more subsidiaries, parent and/or division of one or more of the
above.
2. SHARES SUBJECT TO THE PLAN.
The total number of shares of Common Stock of the Company, $0.001 par
value per share, that may be subject to Options granted under the Plan shall be
300,000 in the aggregate, subject to adjustment as provided in Paragraph 8 of
the Plan; however, the grant of an ISO to an employee together with a tandem SAR
or any NQSO to an employee together with a tandem SAR shall only require one
share of Common Stock available subject to the Plan to satisfy such joint
Option. The Company shall at all times while the Plan is in force reserve such
number of shares of Common Stock as will be sufficient to satisfy the
requirement of outstanding Options granted under the Plan. In the event any
Option granted under the Plan shall expire or terminate for any reason without
having been exercised in full or shall cease for any reason to be exercisable in
whole or in part, the unpurchased shares subject thereto shall again be
available for granting of Options under the Plan.
3. ELIGIBILITY.
ISO's or ISO's in tandem with SAR's (provided the SAR meets the
requirements set forth in Temp. Reg. Section 14a.422A-1, A-39 (a) through (e)
inclusive) may be granted from time to time under the Plan to one or more
employees of the Company or of a "subsidiary" or "parent" of the Company, as the
quoted terms are defined within Section 424 of the Code. An Officer is an
employee for the above purposes. However, a director of the Company who is not
otherwise an employee is not deemed an employee for such purposes. NQSOs and
NQSO's in tandem with SARs may be granted from time to time under the Plan to
one or more employees of the Company, Officers, members of the Board of
Directors, independent contractors, consultants and other individuals who are
not employees of, but are involved in the continuing development and success
<PAGE>
of the Company and/or of a subsidiary of the Company, including persons who have
previously been granted Options under the Plan.
4. ADMINISTRATION OF THE PLAN.
(a) The Plan shall be administered by the Board of Directors of the
Company as such Board of Directors may be composed from time to time and/or by a
Stock Option Committee or Compensation Committee (the "Committee") which shall
be comprised of solely of at least two Outside Directors (as such term is
defined in regulations promulgated from time to time with respect to Section
162(m)(4)(C)(i) of the Code) appointed by such Board of Directors of the
Company. As and to the extent authorized by the Board of Directors of the
Company, the Committee may exercise the power and authority vested in the Board
of Directors under the Plan. Within the limits of the express provisions of the
Plan, the Board of Directors or Committee shall have the authority, in its
discretion, to determine the individuals to whom, and the time or times at
which, Options shall be granted, the character of such Options (whether ISOs,
NQSOs, and/or SARs in tandem with NQSOs, and/or SARs in tandem with ISOs) and
the number of shares of Common Stock to be subject to each Option, the manner
and form in which the optionee can tender payment upon the exercise of his
Option, and to interpret the Plan, to prescribe, amend and rescind rules and
regulations relating to the Plan, to determine the terms and provisions of
Option agreements that may be entered into in connection with Options (which
need not be identical), subject to the limitation that agreements granting ISOs
must be consistent with the requirements for the ISOs being qualified as
"incentive stock options" as provided in Section 422 of the Code, and to make
all other determinations and take all other actions necessary or advisable for
the administration of the Plan. In making such determinations, the Board of
Directors and/or the Committee may take into account the nature of the services
rendered by such individuals, their present and potential contributions to the
Company's success, and such other factors as the Board of Directors and/or the
Committee, in its discretion, shall deem relevant. The Board of Directors'
and/or the Committee's determinations on the matters referred to in this
Paragraph shall be conclusive.
(b) Notwithstanding anything contained herein to the contrary, at any
time during the period the Company's Common Stock is registered pursuant to
Section 12 of the Securities Exchange Act of 1934 (the "1934 Act"), the
Committee, if one has been appointed to administer all or part of the Plan,
shall have the exclusive right to grant Options to Covered Employees, as defined
under Section 162(m)(3) of the Code (generally persons subject to Section 16 of
the 1934 Act) and set forth the terms and conditions thereof. With respect to
persons subject to Section 16 of the 1934 Act, transactions under the Plan are
intended, to the extent possible, to comply with all applicable conditions of
Rule 16b-3, as amended from time to time, (and its successor provisions) if any,
under the 1934 Act and Section 162(m)(4)(C) of the Code of 1986, as amended. To
the extent any provision of the Plan or action by the Board of Directors or
Committee fails to so comply, it shall be deemed null and void, to the extent
permitted by law and deemed advisable by the Board of Directors and/or such
Committee.
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<PAGE>
5. TERMS OF OPTIONS.
Within the limits of the express provisions of the Plan, the Board of
Directors or the Committee may grant either ISOs or NQSOs or SARs in tandem with
NQSOs or SARs in tandem with ISOs. An ISO or an NQSO enables the optionee to
purchase from the Company, at any time during a specified exercise period, a
specified number of shares of Common Stock at a specified price (the "Option
Price"). The optionee, if granted a SAR in tandem with a NQSO or ISO, may
receive from the Company, in lieu of exercising his option to purchase shares
pursuant to his NQSO or ISO, at one of the certain specified times during the
exercise period of the NQSO or ISO as set by the Board of Directors or the
Committee, the excess of the fair market value upon such exercise (as determined
in accordance with subparagraph (b) of this Paragraph 5) of one share of Common
Stock over the Option Price per share specified upon grant of the NQSO or
ISO/SAR multiplied by the number of shares of Common Stock covered by the SAR so
exercised. The character and terms of each Option granted under the Plan shall
be determined by the Board of Directors and/or the Committee consistent with the
provisions of the Plan, including the following:
(a) An Option granted under the Plan must be granted within 10 years
from the date the Plan is adopted, or the date the Plan is approved by the
stockholders of the Company, whichever is earlier.
(b) The Option Price of the shares of Common Stock subject to each ISO
and each SAR issued in tandem with an ISO shall not be less than the fair market
value of the Common Stock at the time such ISO is granted. Such fair market
value shall be determined by the Board of Directors and, if the Common Stock is
listed on a national securities exchange or quoted on The Nasdaq Stock Market,
Inc. ("Nasdaq"), the fair market value shall be the closing price of the Common
Stock on such exchange or Nasdaq, or if closing prices are not available or the
Common Stock is quoted on the National Association of Securities Dealers, Inc.
("NASD") OTC Bulletin Board (the "OTC Bulletin Board") or otherwise traded in
the over-the-counter market, the fair market value shall be the mean of the
closing bid and asked prices of the Common Stock, as reported by Nasdaq, the
NASD, the OTC Bulletin Board or the National Quotation Bureau, Inc., as the case
may be, on the day on which the Option is granted or, if there is no closing
price or bid or asked price on that day, the closing price or mean of the
closing bid and asked prices on the most recent day preceding the day on which
the Option is granted for which such prices are available. If an ISO or SAR in
tandem with an ISO is granted to any individual who, immediately before the ISO
is to be granted, owns (directly or through attribution) more than 10% of the
total combined voting power of all classes of capital stock of the Company or a
subsidiary or parent of the Company, the Option Price of the shares of Common
Stock subject to such ISO shall not be less than 110% of the fair market value
per share of the shares of Common Stock at the time such ISO is granted.
(c) The Option Price of the shares of Common Stock subject to an NQSO
or an SAR in tandem with a NQSO granted pursuant to the Plan shall be determined
by the Board of Directors or the Committee, in its sole discretion, but in no
event less than 85% of the fair market value per share of the shares of Common
Stock at the time of grant.
-3-
<PAGE>
(d) In no event shall any Option granted under the Plan have an
expiration date later than 10 years from the date of its grant, and all Options
granted under the Plan shall be subject to earlier termination as expressly
provided in Paragraph 6 hereof. If an ISO or an SAR in tandem with an ISO is
granted to any individual who, immediately before the ISO is granted, owns
(directly or through attribution) more that 10% of the total combined voting
power of all classes of capital stock of the Company or of a subsidiary or
parent of the Company, such ISO shall by its terms expire and shall not be
exercisable after the expiration of five (5) years from the date of its grant.
(e) An SAR may be exercised at any time during the exercise period of
the ISO or NQSO with which it is granted in tandem and prior to the exercise of
such ISO or NQSO. Notwithstanding the foregoing, the Board of Directors and/or
the Committee shall in their discretion determine from time to time the terms
and conditions of SAR's to be granted, which terms may vary from the
afore-described conditions, and which terms shall be set forth in a written
stock option agreement evidencing the SAR granted in tandem with the ISO or
NQSO. The exercise of an SAR granted in tandem with an ISO or NQSO shall be
deemed to cancel such number of shares subject to the unexercised Option as were
subject to the exercised SAR. The Board of Directors or the Committee has the
discretion to alter the terms of the SARS if necessary to comply with Federal or
state securities law. Amounts to be paid by the Company in connection with an
SAR may, in the Board of Director's or the Committee's discretion, be made in
cash, Common Stock or a combination thereof.
(f) An Option granted under the Plan shall become exercisable, in whole
at any time or in part from time to time, but in no event may an Option (i) be
exercised as to less than one hundred (100) shares of Common Stock at any one
time, or the remaining shares of Common Stock covered by the Option if less than
one hundred (100), and (ii) except with respect to performance based Options,
become fully exercisable more than five years from the date of its grant nor
shall less than 20% of the Option become exercisable by the end of any of the
first five years of the Option, determined on an aggregate basis, if not
terminated as provided in Paragraph 6 hereof. The Board of Directors or the
Committee, if applicable, shall, in the event it so elects in its sole
discretion, set one or more performance standards with respect to one or more
Options upon which vesting is conditioned (which performance standards may vary
among the Options).
(g) An Option granted under the Plan shall be exercised by the delivery
by the holder thereof to the Company at its principal office (to the attention
of the Secretary) of written notice of the number of full shares of Common Stock
with respect to which the Option is being exercised, accompanied by payment in
full, which payment at the option of the optionee shall be in the form of (i)
cash or certified or bank check payable to the order of the Company, of the
Option Price of such shares of Common Stock, or, (ii) if permitted by the
Committee or the Board of Directors, as determined by the Committee or the Board
of Directors in its sole discretion at the time of the grant of the Option with
respect to an ISO and at or prior to the time of exercise with respect to a
NQSO, by the delivery of shares of Common Stock having a fair market value equal
to the Option Price or the delivery of an interest-bearing promissory note
having an original principal balance equal to the Option Price and an interest
rate not below the rate which would result in imputed interest under
-4-
<PAGE>
the Code (provided, in order to qualify as an ISO, more than one year shall have
passed since the date of grant and one year from the date of exercise), or (iii)
at the option of the Committee or the Board of Directors, determined by the
Committee or the Board of Directors in its sole discretion at the time of the
grant of the Option with respect to an ISO and at or prior to the time of
exercise with respect to a NQSO, by a combination of cash, promissory note
and/or such shares of Common Stock (subject to the restriction above) held by
the employee that have a fair market value together with such cash and principal
amount of any promissory note that shall equal the Option Price, and, in the
case of any Option at the discretion of the Committee or Board of Directors by
having the Company withhold from the shares of Common Stock to be issued upon
exercise of the Option that number of shares having a fair market value equal to
the exercise price and/or the tax withholding amount due, or otherwise provide
for withholding as set forth in Paragraph 9(c) hereof, or in the event an
employee is granted an ISO or NQSO in tandem with an SAR and desires to exercise
such SAR, such written notice shall so state such intention. To the extent
allowed by applicable Federal and state securities laws, the Option Price may
also be paid in full by a broker-dealer to whom the optionee has submitted an
exercise notice consisting of a fully endorsed Option, or through any other
medium of payment as the Board of Directors and/or the Committee, in its
discretion, shall authorize.
(h) The holder of an Option shall have none of the rights of a
stockholder with respect to the shares of Common Stock covered by such holder's
Option until such shares of Common Stock shall be issued to such holder upon the
exercise of the Option.
(i) All Options granted under the Plan shall not be transferable,
except by will or the laws of descent and distribution and may be exercised
during the lifetime of the holder thereof only by the holder. No Option granted
under the Plan shall be subject to execution, attachment or other process.
(j) The aggregate fair market value, determined as of the time any ISO
or SAR in tandem with an ISO is granted and in the manner provided for by
Subparagraph (b) of this Paragraph 5, of the shares of Common Stock with respect
to which ISOs granted under the Plan are exercisable for the first time during
any calendar year and under incentive stock options qualifying as such in
accordance with Section 422 of the Code granted under any other incentive stock
option plan maintained by the Company or its parent or subsidiary corporations,
shall not exceed $100,000. Any grant of Options in excess of such amount shall
be deemed a grant of a NQSO.
(k) Notwithstanding anything contained herein to the contrary, an SAR
which was granted in tandem with an ISO shall (i) expire no later than the
expiration of the underlying ISO; (ii) be for no more than 100% of the spread at
the time the SAR is exercised; (iii) only be exercised when the underlying ISO
is eligible to be exercised; and (iv) only be exercisable when there is a
positive spread.
-5-
<PAGE>
(l) In no event shall an employee be granted Options for more than
_______ shares of Common Stock during any calendar year period; provided,
however, that the limitation set forth in this Section 5(1) shall be subject to
adjustment as provided in Section 8 herein.
6. DEATH OR TERMINATION OF EMPLOYMENT/CONSULTING RELATIONSHIP.
(a) Except as provided herein, or otherwise determined by the Board of
Directors or the Committee in its sole discretion, upon termination of
employment with the Company voluntarily by the employee or termination of a
consulting relationship with the Company prior to the termination of the term
thereof, a holder of an Option under the Plan may exercise such Options to the
extent such Options were exercisable as of the date of termination at any time
within thirty (30) days after termination, subject to the provisions of
Subparagraph (d) of this Paragraph 6. Except as provided herein, or otherwise
determined by the Board of Directors or the Committee in its sole discretion, if
such employment or consulting relationship shall terminate for any reason other
than death, voluntary termination by the employee or for cause, then such
Options may be exercised at anytime within three (3) months after such
termination. Notwithstanding anything contained herein to the contrary, unless
otherwise determined by the Board of Directors or the Committee in its sole
discretion, any options granted hereunder to an Optionee and then outstanding
shall immediately terminate in the event the Optionee is terminated for cause,
and the other provisions of this Paragraph 6 shall not be applicable thereto.
For purposes of this Paragraph 6, termination for cause shall be deemed the
decision of the Company, in its sole discretion, that Optionee has not
adequately performed the services for which he/she/it was hired.
(b) If the holder of an Option granted under the Plan dies (i) while
employed by the Company or a subsidiary or parent corporation or while providing
consulting services to the Company or a subsidiary or parent corporation or (ii)
within three (3) months after the termination of such holder's
employment/consulting, such Options may, subject to the provisions of
subparagraph (d) of this Paragraph 6, be exercised by a legatee or legatees of
such Option under such individual's last will or by such individual's personal
representatives or distributees at any time within such time as determined by
the Board of Directors or the Committee in its sole discretion, but in no event
less than six months after the individual's death, to the extent such Options
were exercisable as of the date of death or date of termination of employment,
whichever date is earlier.
(c) If the holder of an Option under the Plan becomes disabled within
the definition of Section 22(e)(3) of the Code while employed by the Company or
a subsidiary or parent corporation, such Option may, subject to the provisions
of subparagraph (d) of this Paragraph 6, be exercised at any time within six
months after such holder's termination of employment due to the disability.
(d) Except as otherwise determined by the Board of Directors or the
Committee in its sole discretion, an Option may not be exercised pursuant to
this Paragraph 6 except to the extent that the holder was entitled to exercise
the Option at the time of termination of employment, consulting relationship or
death, and in any event may not be exercised after the original expiration date
of the Option. Notwithstanding anything contained herein which may be to the
contrary, such termination
-6-
<PAGE>
or death prior to vesting shall, unless otherwise determined by the Board of
Directors or Committee, in its sole discretion, be deemed to occur at a time the
holder was not entitled to exercise the Option.
(e) The Board of Directors or the Committee, in its sole discretion,
may at such time or times as it deems appropriate, if ever, accelerate all or
part of the vesting provisions with respect to one or more outstanding options.
The acceleration of one Option shall not infer that any other Option is or to be
accelerated.
7. LEAVE OF ABSENCE.
For the purposes of the Plan, an individual who is on military or sick
leave or other bona fide leave of absence (such as temporary employment by the
Government) shall be considered as remaining in the employ of the Company or of
a subsidiary or parent corporation for ninety (90) days or such longer period as
such individual's right to reemployment is guaranteed either by statute or by
contract.
8. ADJUSTMENT UPON CHANGES IN CAPITALIZATION.
(a) In the event that the outstanding shares of Common Stock are
hereafter changed by reason of recapitalization, reclassification, stock
split-up, combination or exchange of shares of Common Stock or the like, or by
the issuance of dividends payable in shares of Common Stock, an appropriate
adjustment shall be made by the Board of Directors, as determined by the Board
of Directors and/or the Committee, in the aggregate number of shares of Common
Stock available under the Plan, in the number of shares of Common Stock issuable
upon exercise of outstanding Options, and the Option Price per share. Subject to
subparagraph (b) of this Paragraph 8, in the event of any consolidation or
merger of the Company with or into another company, or the conveyance of all or
substantially all of the assets of the Company to another company for solely
stock and/or securities, each then outstanding Option shall upon exercise
thereafter entitle the holder thereof to such number of shares of Common Stock
or other securities or property to which a holder of shares of Common Stock of
the Company would have been entitled to upon such consolidation, merger or
conveyance; and in any such case appropriate adjustment, as determined by the
Board of Directors of the Company (or successor entity) shall be made as set
forth above with respect to any future changes in the capitalization of the
Company or its successor entity. In the event of the proposed dissolution or
liquidation of the Company, subject to subparagraph (b) of this Paragraph 8, the
sale of substantially all the assets of the Company for other than stock and/or
securities, all outstanding Options under the Plan will automatically terminate,
unless otherwise provided by the Board of Directors of the Company or any
authorized committee thereof.
(b) Any Option granted under the Plan, may, at the discretion of the
Board of Directors of the Company and said other corporation, be exchanged for
options to purchase shares of capital stock of another corporation which the
Company, and/or a subsidiary thereof is merged into, consolidated with, or all
or a substantial portion of the property or stock of which is acquired by said
other corporation or separated or reorganized into. The terms, provisions and
benefits to the
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<PAGE>
optionee of such substitute option(s) shall in all respects be identical to the
terms, provisions and benefits of optionee under his Option(s) prior to said
substitution. To the extent the above may be inconsistent with Sections
424(a)(1) and (2) of the Code, the above shall be deemed interpreted so as to
comply therewith.
(c) Any adjustment in the number of shares of Common Stock shall apply
proportionately to only the unexercised portion of the Options granted
hereunder. If fractions of shares of Common Stock would result from any such
adjustment, the adjustment shall be revised to the next higher whole number of
shares of Common Stock.
9. FURTHER CONDITIONS OF EXERCISE.
(a) Unless the shares of Common Stock issuable upon the exercise of an
Option have been registered with the Securities and Exchange Commission pursuant
to the Securities Act of 1933, as amended, prior to the exercise of the Option,
an optionee must represent in writing to the Company that such shares of Common
Stock are being acquired for investment purposes only and not with a view
towards the further resale or distribution thereof, and must supply to the
Company such other documentation as may be required by the Company, unless in
the opinion of counsel to the Company such representation, agreement or
documentation is not necessary to comply with said Act.
(b) The Company shall not be obligated to deliver any shares of Common
Stock until they have been listed on each securities exchange (including for
this purpose, the Nasdaq Stock Market, Inc.) on which the shares of Common Stock
may then be listed or until there has been qualification under or compliance
with such state or federal laws, rules or regulations as the Company may deem
applicable.
(c) The Board of Directors or Committee may make such provisions and
take such steps as it may deem necessary or appropriate for the withholding of
any taxes that the Company is required by any law or regulation of any
governmental authority, whether federal, state or local, domestic or foreign, to
withhold in connection with the exercise of any Option, including, but not
limited to, (i) the withholding of payment of all or any portion of such Option
and/or SAR until the holder reimburses the Company for the amount the Company is
required to withhold with respect to such taxes, or (ii) the canceling of any
number of shares of Common Stock issuable upon exercise of such Option and/or
SAR in an amount sufficient to reimburse the Company for the amount it is
required to so withhold, (iii) the selling of any property contingently credited
by the Company for the purpose of exercising such Option, in order to withhold
or reimburse the Company for the amount it is required to so withhold, or (iv)
withholding the amount due from such employee's wages if the employee is
employed by the Company or any subsidiary thereof.
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<PAGE>
10. TERMINATION, MODIFICATION AND AMENDMENT.
(a) The Plan (but not Options previously granted under the Plan) shall
terminate ten (10) years from the earliest of the date of its adoption by the
Board of Directors, or the date the Plan is approved by the stockholders of the
Company, or such date of termination, as hereinafter provided, and no Option
shall be granted after termination of the Plan.
(b) The Plan may from time to time be terminated, modified or amended
by the affirmative vote of the holders of a majority of the outstanding shares
of capital stock of the Company entitled to vote thereon.
(c) The Board of Directors of the Company may at any time, prior to ten
(10) years from the earlier of the date of the adoption of the Plan by such
Board of Directors or the date the Plan is approved by the stockholders,
terminate the Plan or from time to time make such modifications or amendments of
the Plan as it may deem advisable; provided, however, that the Board of
Directors shall not, without approval by the affirmative vote of the holders of
a majority of the outstanding shares of capital stock of the Company present in
person or by proxy at an Annual or Special Meeting of the Stockholders and
voting thereon, increase (except as provided by Paragraph 8) the maximum number
of shares of Common Stock as to which Options or shares may be granted under the
Plan, or materially change the standards of eligibility under the Plan.
(d) No termination, modification or amendment of the Plan may adversely
affect the rights under any outstanding Option without the consent of the
individual to whom such Option shall have been previously granted.
11. EFFECTIVE DATE OF THE PLAN.
The Plan shall become effective upon adoption by the Board of Directors
of the Company. The Plan shall be subject to approval by the affirmative vote of
the holders of a majority of the outstanding shares of capital stock of the
Company present in person or by proxy at an Annual or Special Meeting of the
Stockholders and voting thereon within one year after adoption of the Plan by
the Board of Directors.
12. NOT A CONTRACT OF EMPLOYMENT OR FOR SERVICES.
Nothing contained in the Plan or in any option agreement executed
pursuant hereto shall be deemed to confer upon any individual to whom an Option
is or may be granted hereunder any right to remain in the employ of or be
engaged by the Company or of a subsidiary or parent of the Company or in any way
limit the right of the Company, or of any parent or subsidiary thereof, to
terminate the employment of any employee or engagement of any consultant.
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<PAGE>
13. OTHER COMPENSATION PLANS.
The adoption of the Plan shall not affect any other stock option plan,
incentive plan or any other compensation plan in effect for the Company, nor
shall the Plan preclude the Company from establishing any other form of stock
option plan, incentive plan or any other compensation plan.
14. DISTRIBUTION OF FINANCIAL STATEMENTS.
The Company shall provide copies of the Company's annual financial
statements for its most recently completed fiscal year to each person granted or
exercising an option pursuant to the Plan as long as that person continues to
hold such options or shares. The Company shall not be required to provide such
financial statements to key employees whose duties in connection with the
Company assure their access to equivalent information.
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