<PAGE>
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
[X] Definitive Proxy Statement Rule 14a-6(e)(2))
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
V.I. TECHNOLOGIES, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No Fee Required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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<PAGE>
V.I. TECHNOLOGIES, INC.
155 Duryea Road
Melville, New York 11747
April 20, 1999
Dear Stockholder:
You are cordially invited to attend the 1999 Annual Meeting of Stockholders
(the "Meeting") of V.I. Technologies, Inc. which will be held at the Huntington
Hilton, 598 Broadhollow Road, Melville, NY 11747 on Friday, May 21, 1999, at
10:00 am local time. I look forward to greeting as many of our stockholders as
possible.
Details of the business to be conducted at the Meeting are given in the
attached Notice of Annual Meeting and Proxy Statement.
Whether or not you plan to attend the Meeting, it is important that your
shares be represented and voted at the Meeting. Therefore, I urge you to sign,
date and promptly return the enclosed proxy in the enclosed envelope so that
your shares will be represented at the Meeting. If you so desire, you may
withdraw your proxy and vote in person at the Meeting.
We look forward to meeting those of you who will be able to attend the
Meeting.
Sincerely,
/s/ John R. Barr
John R. Barr
President and Chief Executive Officer
<PAGE>
V.I. TECHNOLOGIES, INC.
155 Duryea Road
Melville, New York 11747
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be held Friday, May 21, 1999
To the Stockholders of V.I. TECHNOLOGIES, INC.:
NOTICE IS HEREBY GIVEN that the 1999 Annual Meeting of Stockholders (the
"Meeting") of V.I. Technologies, Inc., a Delaware corporation (the "Company"),
will be held at the Huntington Hilton, 598 Broadhollow Road, Melville, NY 11747
on Friday, May 21, 1999, at 10:00 am local time, for the following purposes:
1. To elect three Class I Directors to serve until the 2002 Annual
Meeting of Stockholders or until their successors are elected and
qualified.
2. To amend the Company's 1998 Director Stock Option Plan (the "1998
Director Plan") to increase the maximum number of shares of the
Company's Common Stock for which options may be granted under the 1998
Director Plan from 89,445 shares to 150,000 shares.
3. To amend the Company's 1998 Equity Incentive Plan (the "1998 Equity
Plan") to increase the number of shares of the Company's Common Stock
for which awards may be granted under the 1998 Equity Plan from
2,146,690 shares to 2,400,000 shares.
4. To ratify the appointment of KMPG LLP as the Company's independent
accountants for the current fiscal year.
5. To transact such other business as may properly come before the
Meeting or any adjournments or postponements thereof.
Only stockholders of record at the close of business on April 5, 1999 will
be entitled to notice of and to vote at the Meeting and any adjournments or
postponements thereof.
By Order of the Board of Directors
/s/ Jeffrey M. Regan
Jeffrey M. Regan, Secretary
<PAGE>
April 20, 1999
All stockholders are cordially invited to attend the Meeting. To ensure
your representation at the Meeting, you are urged to mark, sign, and return the
enclosed proxy card in the accompanying envelope, whether or not you expect to
attend the Meeting. No postage is required if mailed in the United States. Any
stockholder attending the Meeting may vote in person even if that stockholder
has returned a proxy.
================================================================================
YOUR VOTE IS IMPORTANT
TO VOTE YOUR SHARES, PLEASE SIGN, DATE AND COMPLETE THE
ENCLOSED PROXY CARD AND MAIL IT PROMPTLY IN THE
ENCLOSED RETURN ENVELOPE.
================================================================================
2
<PAGE>
PROXY STATEMENT
OF
V.I. TECHNOLOGIES, INC.
General
This Proxy Statement and Notice of Annual Meeting of Stockholders are being
provided and the accompanying proxy is being solicited by the Board of Directors
of V.I. Technologies, Inc. (the "Company") for use at the Company's 1999 Annual
Meeting of Stockholders (the "Meeting") to be held at the Huntington Hilton, 598
Broadhollow Road, Melville, NY 11747 on Friday, May 21, 1999, at 10:00 am local
time, or at any adjournment or postponement of the Meeting, for the purposes set
forth in this Proxy Statement and the foregoing Notice of Annual Meeting of
Stockholders. This Proxy Statement and accompanying proxy card are being mailed
on or about April 20, 1999, to all stockholders entitled to notice of and to
vote at the Meeting. The principal executive office of V.I. Technologies, Inc.
is located at 155 Duryea Road, Melville, New York 11747 and the Company's
telephone number is (516) 752-7314.
Solicitation
The cost of solicitation of proxies, including expenses in connection with
preparing and mailing this Proxy Statement, will be borne by the Company.
Copies of solicitation materials will be furnished to brokerage houses,
fiduciaries, and custodians to forward to beneficial owners of common stock,
$0.01 par value per share, of the Company (the "Common Stock") held in their
names. In addition, the Company will reimburse brokerage firms and other
persons representing beneficial owners of stock for their expenses in forwarding
solicitation materials to such beneficial owners. Original solicitation of
proxies by mail may be supplemented by telephone, telegram, and personal
solicitation by Directors, officers and other regular employees of the Company.
No additional compensation will be paid to Directors, officers or other regular
employees for such services.
Record Date, Voting Rights and Outstanding Shares
Only holders of record at the close of business on Monday, April 5, 1999, will
be entitled to notice of, and to vote at, the Meeting. As of April 5, 1999, the
Company had outstanding 12,413,357 shares of Common Stock. Each share of Common
Stock is entitled to one vote on each proposal that will come before the
Meeting. A majority of the outstanding shares of Common Stock will constitute a
quorum at the Meeting. Votes withheld, abstentions and broker non-votes (where
a broker or nominee does not exercise discretionary authority to vote on a
matter) are counted for purposes of determining the presence or absence of a
quorum for the transaction of business.
1
<PAGE>
Revocability of Proxy and Voting of Shares
Any stockholder giving a proxy has the power to revoke it at any time before
it is exercised. It may be revoked by filing with the Secretary of the Company,
at the principal executive offices of the Company, 155 Duryea Road, Melville,
New York 11747, an instrument of revocation or a duly executed proxy bearing a
later date. It may also be revoked by attendance at the Meeting and an election
given to the Secretary of the Company to vote in person. If not revoked, the
proxy will be voted at the Meeting in accordance with the stockholder's
instructions indicated on the proxy card. If no instructions are indicated, the
proxy will be voted (i) FOR the election of the Class I Directors described
herein, (ii) FOR the amendment to the Company's 1998 Director Stock Option Plan
(the "1998 Director Plan") to increase the maximum number of shares of the
Company's Common Stock for which options may be granted under the 1998 Director
Plan from 89,445 shares to 150,000 shares, (iii) FOR the amendment to the
Company's 1998 Equity Incentive Plan (the "1998 Equity Plan") to increase the
number of shares of the Company's Common Stock for which awards may be granted
under the 1998 Equity Plan from 2,146,690 shares to 2,400,000 shares; (iv) FOR
the ratification of the appointment of KMPG LLP as the Company's independent
accountants for the current fiscal year, and (v) in accordance with the judgment
of the proxies as to any other matter that may be properly brought before the
Meeting or any adjournments or postponements thereof.
Stockholder Proposals
The Company's Amended and Restated Bylaws require a stockholder who wishes to
bring business before or propose director nominations at an annual meeting to
give written notice to the Secretary of the Company not less than 50 days nor
more than 75 days before the meeting date, unless less than 65 days' notice or
public disclosure of the meeting date is given, in which case the stockholder's
notice must be received within 15 days after such notice or disclosure is given.
The notice must contain specified information about the proposed business or
nominee(s) and the stockholder making the proposal or nomination(s).
Accordingly, to be brought before the Annual Meeting of Stockholders, proposals
must be received by not later than the close of business on May 5, 1999.
Proposals of stockholders of the Company that are intended to be presented by
such stockholders at the Company's 2000 Annual Meeting of Stockholders must be
received by the Secretary of the Company no later than December 22, 1999 in
order to be included in the Proxy Statement and form of proxy relating to that
meeting.
2
<PAGE>
SECURITY OWNERSHIP BY MANAGEMENT AND PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to beneficial
ownership of the Company's shares of Common Stock as of January 31, 1999, (i) by
each person (or group of affiliated persons) who is known by the Company to own
beneficially more than five percent of the Company's outstanding shares of
Common Stock; (ii) by each of the Company's executive officers named in the
Summary Compensation Table (the "Named Executive Officers"), (iii) by each of
the Company's Directors; and (iv) by all current Directors and executive
officers as a group. Except as indicated in the footnotes to this table, the
persons named in the table have sole voting and investment power with respect to
all shares shown as beneficially owned by them.
<TABLE>
<CAPTION>
Number of Shares
Name of Beneficial Owner Beneficially Owned (1) Percent of Class
- ------------------------ ---------------------- -----------------
<S> <C> <C>
5% Stockholders
New York Blood Center, Inc.(2) 3,434,704 27.7%
310 East 67th Street
New York, NY 10021-6295
Ampersand Funds(3) 2,630,857 21.2%
55 William Street, Suite 240
Wellesley, MA 02481
CB Capital Investors, L.P.(4) 1,801,470 14.5%
c/o Chase Capital Partners
380 Madison Avenue
12th Floor
New York, NY 10017
Pall Corporation(5) 925,070 7.5%
2200 Northern Boulevard
East Hills, NY 11548
Massachusetts Financial Services 830,797 6.7%
Company (6)
500 Boylston Street
Boston, MA 02116
Other Named Executive
Officers
John R. Barr(7) 91,905 *
Bernard Horowitz, Ph.D.(8) 254,918 2.0%
Thomas T. Higgins 3,500 *
Joanne M. Leonard(9) 55,459 *
Other Directors
David Tendler(10) 3,434,704 27.7%
Richard A. Charpie(11) 2,630,857 21.2%
Jeremy Hayward-Surry(12)
Irwin Lerner(13) 14,416 *
Peter D. Parker(14) 2,630,857 21.2%
Damion Wicker, M.D.(15) 1,801,470 14.5%
All Current Directors and Executive 8,231,740 64.9%
Officers as a Group (9 persons)(16)
</TABLE>
___________________
* Indicates less than one percent
3
<PAGE>
(1) Beneficial ownership of Common Stock is determined in accordance with the
rules of the Securities and Exchange Commission, and includes shares for
which the holder has sole or shared voting or investment power. Shares of
Common Stock subject to options currently exercisable or which become
exercisable on or before April 1, 1999 are deemed to be beneficially owned
and outstanding by the person holding such options and, in accordance with
the rules of the Securities and Exchange Commission, are included for
purposes of computing the percentage ownership of the person holding such
options, but are not deemed outstanding for purposes of computing the
percentage ownership of any other person.
(2) Mr. Tendler, a Director of the Company, is a member of the Board of
Trustees and Executive Committee of the New York Blood Center, Inc.
("NYBC"). In addition to Mr. Tendler, the members of the Board of Trustees
of the NYBC are Ted Athanassiades, Andrew G. Bodnar, M.D., J.D., Jo Ivey
Boufford, M.D., William W. Crouse, Jesse R. Gottlieb, Robert L. Jones,
M.D., Edward D. Miller, Howard P. Milstein, John R. Mullen, Paddy Mullen,
Samuel Posner, Alan D. Schwartz, Norman C. Selby, David A. Silverman, M.D.,
Howard Sloan, William I. Spencer and Morton Spivack, M.D.
(3) Consists of 1,087,281 shares held by Ampersand Specialty Materials and
Chemicals III Limited Partnership ("ASMC III"), 17,679 shares held by
Ampersand Specialty Materials and Chemicals III Companion Fund Limited
Partnership ("ASMC III CF"), 1,052,343 shares held by Ampersand Specialty
Materials and Chemicals II Limited Partnership ("ASMC II"), 331,488 shares
held by Laboratory Partners I Limited Partnership ("Lab Partners") and
142,066 shares held by Laboratory Partners Companion Fund Limited
Partnership ("Lab Partners CF"). ASMC-III MCLP LLP is the general partner
of ASMC-III Management Company Limited Partnership, which itself is the
general partner of both ASMC III and ASMC III CF and has voting and
investment control over the shares held by those two entities. ASMC-II MCLP
LLP is the general partner of ASMC-II Management Company Limited
Partnership, which itself is the general partner of ASMC II and has voting
and investment control over the shares held by ASMC II. Ampersand Lab
Partners MCLP LLP is the general partner of Ampersand Lab Partners
Management Company Limited Partnership, which itself is the general partner
of both Lab Partners and Lab Partners CF and has voting and investment
control over the shares held by those two entities. The general partners of
ASMC-III MCLP LLP, who share voting and investment control over the shares
controlled by ASMC-III MCLP LLP, are Richard A. Charpie, Peter D. Parker,
Stuart A. Auerbach, K. Kachadurian, David J. Parker and Charles D. Yie.
Richard A. Charpie, Peter D. Parker, Stuart A. Auerbach, Charles D. Yie and
Robert A. Charpie are the general partners of ASMC-II MCLP LLP and
Ampersand Lab Partners MCLP LLP and share voting and investment control
over the shares controlled by those entities. Richard A. Charpie is the
Managing General Partner of each of ASMC-II MCLP LLP, ASMC-III MCLP LLP,
and Ampersand Lab Partners MCLP LLP. Richard A. Charpie and Peter D. Parker
are Directors of the Company.
4
<PAGE>
(4) Dr. Wicker, a Director of the Company, is a General Partner of Chase
Capital Partners, which is a limited partner of CB Capital Investors, L.P.
CB Capital Investors, Inc., a wholly-owned subsidiary of Chase Manhattan
Bank, is the general partner of CB Capital Investors, L.P. The Chase
Manhattan Bank is a wholly-owned subsidiary of Chase Manhattan Corporation.
The key officers and the directors of CB Capital Investors, Inc. are
Jeffrey C. Walker (Chief Executive Officer and director), Donald J. Hofmann
(President and director), George E. Kelts (Vice President), Mitchell J.
Blutt, M.D. (Secretary) and Robert C. Carroll (Assistant Secretary).
(5) Mr. Hayward-Surry, a Director of the Company, is the President and a
director of Pall Corporation. As disclosed in the Definitive Proxy
Statement filed by Pall with the Securities and Exchange Commission (the
"Commission") via EDGAR on October 19, 1998, the executive officers of Pall
are Jeremy Hayward-Surry (President), Eric Krasnoff (Chief Executive
Officer), Gerhard Weich (Group Vice President) and Samuel T. Wortham (Group
Vice President) and the directors of Pall are Abraham Appel, John H. F.
Haskell, Ulric Haynes, Jr., Jeremy Hayward-Surry, Eric Krasnoff, Edwin W.
Martin, Jr., Katharine L. Plourde, Chesterfield F. Seibert, Heywood
Shelley, Alan B. Slifka and James D. Watson.
(6) Based on the information provided in the Schedule 13G filed by
Massachusetts Financial Services Company ("MFS") with the Securities and
Exchange Commission on February 11, 1999. MFS has sole voting power over
812,097 shares and sole dispositive power over 830,797 shares.
(7) Consists entirely of shares issuable upon the exercise of outstanding
options exercisable on or before April 1, 1999.
(8) Includes 174,196 shares issuable upon the exercise of outstanding options
exercisable on or before April 1, 1999.
(9) Consists entirely of shares issuable upon the exercise of outstanding
options exercisable on or before April 1, 1999.
(10) Consists of the shares held by the NYBC. Mr. Tendler may be considered the
beneficial owner of the shares held by the NYBC. Mr. Tendler disclaims
beneficial ownership of such shares.
(11) Consists solely of shares described in note (3). Dr. Charpie may be
considered the beneficial owner of the shares described in note (3). Dr.
Charpie disclaims beneficial ownership of such shares except to the extent
of his pecuniary interest therein.
(12) Excludes the shares held by Pall Corporation.
(13) Includes 2,236 shares issuable upon the exercise of outstanding options
exercisable on or before April 1, 1999.
(14) Consists solely of shares described in note (3). Mr. Parker may be
considered the beneficial owner of the shares described in note (3). Mr.
Parker disclaims beneficial ownership of such shares except to the extent
of his pecuniary interest therein.
5
<PAGE>
(15) Consists solely of shares held by CB Capital Investors, L.P. Dr. Wicker
may be considered the beneficial owner of the shares held by CB Capital
Investors, L.P. Dr. Wicker disclaims beneficial ownership of such shares
except to the extent of his pecuniary interest therein.
(16) Includes 268,336 shares issuable upon the exercise of outstanding options
exercisable on or before April 1, 1999. Excludes Ms. Leonard, whose
employment with the Company ended in June, 1998.
PROPOSAL 1
ELECTION OF DIRECTORS
The Board is divided into three classes. One class of Directors is elected
each year for a three-year term. The term of the Company's Class I Directors
will expire at this Meeting. The nominees for Class I Director are John R.
Barr, Richard A. Charpie and Irwin Lerner. Messrs. Barr, Charpie and Lerner are
currently Class I Directors of the Company and are available for re-election as
Class I Directors. The Class I Directors elected in 1999 will serve for a term
of three years which will expire at the Company's 2002 Annual Meeting of
Stockholders or when their successors are elected and qualified. It is intended
that the persons named as Proxies will vote for John R. Barr, Richard A. Charpie
and Irwin Lerner for election to the Board as Class I Directors.
The affirmative vote of the holders of a plurality of the Common Stock
represented and voting at the Meeting will be required to elect John R. Barr,
Richard A. Charpie and Irwin Lerner to the Board. If Messrs. Barr, Charpie and
Lerner are elected as Directors at the Meeting, the Board will consist of a
total of eight Directors, six of whom have principal occupations outside the
Company, one of whom is the President and Chief Executive Officer of the
Company, and one of whom is Executive Vice President and Chief Scientific
Officer of the Company.
MANAGEMENT RECOMMENDS A VOTE IN FAVOR OF THE NAMED NOMINEES
Biographical Information
Biographical and certain other information concerning the Directors of the
Company is set forth below:
6
<PAGE>
Class I Nominees for Election for a Three-year Term Expiring at the 2002 Annual
Meeting
John R. Barr, age 42, joined the Company as President, Chief Executive
Officer and a Director in November 1997. Previously, Mr. Barr served as
President of North American Operations at Haemonetics Corporation from 1995 to
1997 where he had responsibility for Haemonetics' blood bank, commercial plasma
and blood bank services businesses. He also managed the global manufacturing
and North American research and development functions and served as a member of
the Board of Directors of Haemonetics. Prior to joining Haemonetics in 1990, he
held various positions at Baxter Healthcare Corporation. Mr. Barr has an
undergraduate degree in Biomedical Engineering from the University of
Pennsylvania and an M.M. from the Kellogg School of Management at Northwestern
University.
Richard A. Charpie, Ph.D., age 47, has served as a Director of the Company
since October 1995. Dr. Charpie served as the Chief Executive Officer of the
Company from August 1997 to November 1997. He was the Vice President of the
Company from November 1997 until January 1998. Dr. Charpie has been the
Managing General Partner of Ampersand Ventures and all of its affiliated
partnerships ("Ampersand") since he founded Ampersand in 1988 as a spin-off of
the venture capital group of PaineWebber Incorporated. Currently, Dr. Charpie
serves as a director of AutoCyte, Inc. and of several privately-held companies.
Dr. Charpie holds an M.S. in Physics and a Ph.D. in Applied Economics and
Finance, both from The Massachusetts Institute of Technology.
Irwin Lerner, age 68, has served as a Director of the Company since
September 1996. He is the former Chairman of the Board of Directors, Chairman
of the Executive Committee, President and Chief Executive Officer of Hoffmann-
LaRoche Inc., having retired in September 1993 after being an employee of the
company for over 31 years. Mr. Lerner is the Chairman of the Board of Medarex,
Inc. and serves on the boards of Humana Inc., Public Service Enterprise Group,
Covance Inc. and Axys Pharmaceuticals. He has been a member of the Board of
Project Hope and has chaired the New Jersey Governor's Council for a Drug-Free
Workplace. He served for twelve years on the Board of Pharmaceutical
Manufacturers Association (now PhRMA), including chairing the Association's FDA
Issues Committee and the PMA Foundation. Mr. Lerner has served on the Boards of
the National Committee for Quality Health Care, the Partnership for New Jersey
and the Center for Advanced Biotechnology and Medicine of Rutgers University.
He received his B.S. and M.B.A. degrees from Rutgers University, where he is
currently the Distinguished Executive-in-Residence at the Graduate School of
Management.
7
<PAGE>
Class II Directors Continuing in Office Until the 2000 Annual Meeting
Jeremy Hayward-Surry, age 56, has served as a Director of the Company since
December 1997. He has been the President of Pall Corporation since July 1994
and a member of its Board of Directors since April 1993. Mr. Hayward-Surry was
also the Treasurer and Chief Financial Officer of Pall from August 1992 until
December 1997 and Executive Vice President of Pall from 1992 to July 1994. Mr.
Hayward-Surry is a Fellow of the Institute of Chartered Accountants in England
and Wales.
Peter D. Parker, age 48, has served as a Director of the Company since
October 1995. After fourteen years at AMAX, a metals company, Mr. Parker joined
Ampersand in 1989 to lead its first specialty materials venture capital
partnership, Ampersand Specialty Materials Ventures Limited Partnership and is a
General Partner of Ampersand. He currently serves as a director of MicroPack
Corporation and Pentose Pharmaceuticals, and as the Chairman of Advanced
Chemistry and Technology, Inc., Novel Experimental Technology, Alexis
Corporation and Nanodyne, Inc. He holds an M.S. in Chemical Metallurgy from
Columbia University.
Damion E. Wicker, M.D., age 38, has served as a Director of the Company
since May 1997. Dr. Wicker is a General Partner of Chase Capital Partners.
Previously, Dr. Wicker was President of Adams Scientific since July 1991, and,
prior to that, held positions with MBW Venture Partners and Alexon, Inc. Dr.
Wicker was also a Commonwealth Fund Medical Fellow for the National Institute of
Health. He currently is a director of Landec Corporation and several privately-
held health care companies. Dr. Wicker received a B.S. with Honors from The
Massachusetts Institute of Technology, an M.D. from Johns Hopkins University and
holds an M.B.A. from The Wharton School of the University of Pennsylvania.
8
<PAGE>
Class III Directors Continuing in Office Until the 2001 Annual Meeting
Bernard Horowitz, Ph.D., age 54, joined the Company as Executive Vice
President, Chief Scientific Officer and a Director in February 1995. Prior to
joining the Company, Dr. Horowitz was the NYBC's Vice President for Commercial
Development and a Laboratory Head in the NYBC's Lindsley F. Kimball Research
Institute. He is internationally recognized for his research on blood viral
safety and the preparation and characterization of new therapeutics from blood
protein solutions and he holds several U.S. and non-U.S. patents for these
processes. He has extensive experience from his positions at the NYBC and the
Company with the regulatory process including product license and establishment
license applications and administration. Dr. Horowitz has authored over 60
scientific publications and reviews on a wide range of subjects including: virus
inactivation of blood proteins and blood cells, HBV detection, hemoglobin as a
blood substitute and leukocyte interferon as an antiviral and anticancer agent.
Additionally, he has served as a scientific consultant to the National
Institutes of Health, the Food and Drug Administration, the National Hemophilia
Foundation and the International Association of Biological Standardization. Dr.
Horowitz received his B.S. in Biology from the University of Chicago and his
Ph.D. from Cornell University Medical College.
David Tendler, age 61, has served as a Director and Chairman of the Company
since December 1994. In 1985, Mr. Tendler founded his own international
consulting firm, Tendler Beretz LLC, and has since remained as President and
Chief Executive Officer. In 1981, he was named Chairman and CEO of Phibro
Corporation, which subsequently acquired Salomon Brothers--at which point Mr.
Tendler became Co-Chairman and CEO of Phibro-Salomon. He joined Philipp
Brothers (the predecessor to Englehard Minerals & Chemicals Corp./Phibro Corp.)
in 1960, managed Far Eastern operations for more than seven years, and was
promoted to President of Phibro in 1975. He remains active in the private
equity and consulting businesses, and in various charitable organizations,
including service as a director of BioTechnology General Corporation and a
member of the Board of Trustees and the Executive Committee of the NYBC. Mr.
Tendler has a B.B.A. from the City University of New York.
9
<PAGE>
Board Committees and Meetings
During the fiscal year ended January 2, 1999 ("Fiscal Year 1998"), the Board
of Directors held eight meetings. The Board has two committees: an Audit
Committee and a Compensation Committee. There is no Nominating Committee or any
committee performing the functions of a nominating committee.
The Audit Committee consists of Dr. Charpie and Mr. Hayward-Surry, with Mr.
Hayward-Surry serving as Chairman. Neither Dr. Charpie nor Mr. Hayward-Surry
are current employees of the Company. Dr. Charpie was employed by the Company
during Fiscal Year 1998 until January 23, 1998 as a Vice President. The primary
function of the Audit Committee is to assist the Board of Directors in the
discharge of its duties and responsibilities by providing the Board with an
independent review of the financial health of the Company and of the reliability
of the Company's financial controls and financial reporting systems. The Audit
Committee reviews the general scope of the Company's annual audit, the fee
charged by the Company's independent accountants and other matters relating to
internal control systems. The Audit Committee met twice in Fiscal Year 1998.
The Compensation Committee of the Board of Directors is currently composed of
Mr. Lerner, Mr. Parker and Dr. Wicker, with Mr. Lerner serving as Chairman.
None of the Compensation Committee members are employees of the Company. The
Compensation Committee determines the compensation to be paid to all executive
officers of the Company, including the Chief Executive Officer. The
Compensation Committee's duties include the administration of the Company's 1998
Equity Plan. The Compensation Committee met once in Fiscal Year 1998.
Each of the Directors attended at least 75% of the Board meetings and meetings
of committees of the Board of which he was a member.
10
<PAGE>
PROPOSAL 2
AMENDMENT OF THE COMPANY'S 1998 DIRECTOR STOCK OPTION PLAN TO INCREASE THE
MAXIMUM NUMBER OF SHARES OF COMMON STOCK FOR WHICH OPTIONS MAY BE GRANTED UNDER
THE 1998 DIRECTOR STOCK OPTION PLAN FROM 89,445 SHARES TO 150,000 SHARES
A proposal will be presented at the Meeting that the Stockholders approve an
amendment to the Company's 1998 Director Stock Option Plan (the "1998 Director
Plan") to increase the maximum shares of Common Stock for which options may be
granted under the 1998 Director Plan from 89,445 shares to 150,000 shares,
subject to adjustment for stock splits, stock dividends and certain transactions
affecting the Company's capital stock. In order to ensure that sufficient
shares are available for options over the next few years, the Board of Directors
has voted to increase the number of shares for which awards may be granted under
the 1998 Director Plan by 60,555 shares.
General
- -------
In February 1998, the Company adopted the 1998 Director Plan to attract and
retain qualified persons to serve as Directors of the Company and to encourage
ownership of the Common Stock by such Directors. All of the Directors who are
not employees of the Company (the "Eligible Directors") are eligible to
participate in the 1998 Director Plan. The Company currently has six Eligible
Directors, but no options are granted under the 1998 Director Plan to any
Director who is prohibited by his or her affiliates or employers, or for any
other reason, from receiving stock options from the Company.
The 1998 Director Plan, as adopted in February 1998, provided for the grant
of an option to purchase 5,000 shares of Common Stock to each Eligible Director
upon election and upon each reelection to the Board and to each Eligible
Director who continued in office as a Director following a meeting of the
Stockholders of the Company at which any Directors were elected or reelected.
The term of these options was ten years and they became fully exercisable one
year after the date of grant if and only if the option holder remains a Director
at the opening of business on that anniversary date.
The 1998 Director Plan was subsequently amended, effective October 1998.
With these amendments, the provision for granting an option for the purchase of
5,000 shares of Common Stock was replaced with four kinds of option grants, each
of which is described below: (i) automatic initial grant of options on October
9, 1998; (ii) automatic grant of options upon initial election to the Board
subsequent to October 9, 1998; (iii) automatic annual grant of options; and (iv)
additional automatic initial grant of options on October 9, 1998. The term of
all options granted under the 1998 Director Plan as amended continues to be ten
years from the date of the grant. The exercise price for all options granted
under the 1998 Director Plan is equal to the last sale price for the Common
Stock on the business day immediately preceding the date of grant. The exercise
price may be paid in cash or shares.
11
<PAGE>
The plan provisions for the automatic initial grant provide that each
Eligible Director who was a member of the Board on October 9, 1998 automatically
received a grant of an option to purchase 15,000 shares of Common Stock. This
grant becomes exercisable in four equal installments occurring on the six month,
two-year, three-year and four-year anniversaries of the date of grant, if and
only if the option holder remains a Director of the Company at the opening of
business on the respective anniversary date.
The plan provisions for the automatic grant of options upon initial election
to the Board subsequent to October 9, 1998 provide that each Eligible Director
who is initially elected to the Board after October 9, 1998 is automatically
granted an option to purchase 15,000 shares of Common Stock. This grant becomes
exercisable in four equal installments occurring on the six month, two-year,
three-year and four-year anniversaries of the date of grant, if and only if the
option holder remains a Director of the Company at the opening of business on
the respective anniversary date.
The plan provisions for the automatic annual grant of options provide that
each Eligible Director who is reelected or continues in office as a Director of
the Company following a meeting of the Stockholders of the Company at which any
Directors are elected or reelected will automatically receive an option to
purchase 2,000 shares of Common Stock. This grant becomes fully exercisable on
the first anniversary of the date of grant, provided that the option holder
remains a Director of the Company at the opening of business on such date.
The plan provisions for the additional automatic initial grant of options on
October 9, 1998 provide that each Eligible Director who was a member of the
Board on October 9, 1998 automatically received a grant of an option to purchase
2,000 shares of Common Stock. This grant becomes fully exercisable on the first
anniversary of the date of grant, provided that the option holder remains a
Director of the Company at the opening of business on such date.
Options Granted To Date under the 1998 Director Plan and Shares Available for
- -----------------------------------------------------------------------------
Future Grants
- -------------
As of April 4, 1999, options to purchase an aggregate of 85,000 shares of
Common Stock had been granted and were outstanding under the 1998 Director Plan.
Currently, 4,445 shares of Common Stock remain available for awards under the
1998 Director Plan. Under the 1998 Director Plan as proposed to be amended,
65,000 shares would be available for awards.
Federal Income Tax Consequences Relating to 1998 Director Plan Options
- ----------------------------------------------------------------------
Options granted under the 1998 Director Plan are nonstatutory stock options.
No income is realized by the Director at the time a nonstatutory stock option is
granted. Upon exercise of an option granted under the 1998 Director Plan, (a)
ordinary income is realized by the Director in an amount equal to the difference
between the option price and the fair market value of the shares on the date of
exercise and (b) the Company receives a tax deduction for the same amount. Upon
disposition of the shares received upon exercise of an option granted under the
1998 Director Plan, appreciation or depreciation after the date of exercise is
treated as a short-term or long term capital gain or loss and will not result in
any deduction by the Company.
12
<PAGE>
Votes Required to Approve the Amendment
- ---------------------------------------
The affirmative vote of the holders of a majority of the shares of Common
Stock represented and voting at the Meeting will be required to amend the 1998
Director Plan to increase the maximum number of shares of Common Stock for which
options may be granted under the 1998 Director Plan from 89,445 shares to
150,000 shares.
The Board of Directors believes that the ability of the Company to grant
options to directors under the 1998 Director Plan is essential to attracting and
retaining qualified directors for the Company. Therefore, the Board of
Directors believes that the proposed amendment to the 1998 Director Plan is in
the best interests of the Company.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF PROPOSAL 2.
13
<PAGE>
PROPOSAL 3
AMENDMENT OF THE COMPANY'S 1998 EQUITY INCENTIVE PLAN TO INCREASE THE NUMBER OF
SHARES FOR WHICH AWARDS MAY BE GRANTED UNDER THE 1998 EQUITY INCENTIVE PLAN FROM
2,146,690 SHARES TO 2,400,000 SHARES
A proposal will be presented at the Meeting that the Stockholders approve an
amendment to the Company's 1998 Equity Incentive Plan (the "1998 Equity Plan")
to increase the maximum shares of Common Stock for which options may be granted
under the 1998 Equity Plan from 2,146,690 shares to 2,400,000 shares, subject to
adjustment for stock splits, stock dividends and certain transactions affecting
the Company's capital stock. In order to ensure that sufficient shares are
available for options over the next few years, the Board of Directors has voted
to increase the number of shares for which Awards may be granted under the 1998
Equity Plan by 253,310 shares.
General
- -------
The 1998 Equity Plan enables the Company to offer competitive compensation so
as to attract and retain top quality personnel, to provide an incentive for them
to achieve long-range performance goals, and to enable them to participate in
the long-term growth of the Company. Stock options granted under the 1998
Equity Plan are a significant element of compensation for the Company, as they
are in the biotechnology industry generally. Competition for the best personnel
in the biotechnology industry is intense. The Board of Directors believes that
it is essential for the Company's future strength to continue to offer
competitive equity compensation to employees.
The 1998 Equity Plan permits the grant of incentive and nonstatutory stock
options, stock appreciation rights, performance shares, restricted stock and
stock units (collectively, "Awards") to employees, directors and consultants of
the Company. No stock appreciation rights or other Awards other than stock
options have been granted to date. The 1998 Equity Plan is administered by the
Compensation Committee of the Board of Directors (the "Compensation Committee"),
which determines the persons to whom, and the times at which, Awards are
granted, the type of Award to be granted and all other related terms, conditions
and provisions of each Award. The Compensation Committee may delegate to one or
more officers the power to make awards to employees who are not executive
officers subject to the reporting requirements of Section 16 of the Securities
Exchange Act of 1934, as amended. The 1998 Equity Plan may be amended or
terminated at any time by the Board of Directors, subject to approval by the
Stockholders when such approval is deemed to be necessary or advisable by the
Board.
Although the Compensation Committee has discretion in granting Awards, the
exercise price of any incentive stock option ("ISO") may not be less than 100%
of the fair market value of the Company's Common Stock on the date of the grant
(and all nonstatutory stock options granted to date also have been at fair
market value). No ISO granted under the 1998 Equity Plan is transferable by the
optionee other than by will or the laws of descent and distribution. Other
Awards are transferable to the extent provided by the Compensation Committee.
The term of any ISO granted under the 1998 Equity Plan may not exceed ten years,
and no ISO may be granted under the 1998 Equity Plan more than ten years from
the Plan's adoption.
14
<PAGE>
Options are generally granted subject to forfeiture restrictions that lapse
over time during the optionee's employment. Vested options are generally
cancelled if not exercised within a specified time after termination of the
optionee's employment.
Options Granted to Date under the 1998 Equity Plan and Shares Available for
- ---------------------------------------------------------------------------
Future Grants
- -------------
As of April 4, 1999, options to purchase an aggregate of 2,013,341 shares had
been granted (not counting grants subsequently terminated) under the 1998 Equity
Plan, 1,717,968 shares were outstanding under the 1998 Equity Plan, and there
currently remain 133,349 shares available for award under the 1998 Equity Plan.
Under the 1998 Equity Plan as proposed to be amended, 386,659 shares would be
available for awards. The aggregate number of shares for which Awards may be
granted under the 1998 Equity Plan is subject to appropriate adjustment in the
event of a stock split or other recapitalization. Shares also may be issued
under the 1998 Equity Plan through the assumption or substitution of outstanding
grants from an acquired company without reducing the total number of shares
available under the 1998 Equity Plan.
Federal Income Tax Consequences Relating to 1998 Equity Plan Stock Options
- --------------------------------------------------------------------------
Incentive Stock Options. An optionee does not realize taxable income upon the
grant or exercise of an ISO under the 1998 Equity Plan. If the optionee does
not dispose of shares issued upon exercise of an ISO within two years from the
date of grant or within one year from the date of exercise, then, upon the sale
of such shares, any amount realized in excess of the exercise price is taxed to
the optionee as long-term capital gain, and any loss sustained will be a long-
term capital loss. No deduction would be allowed to the Company for Federal
income tax purposes. The exercise of ISOs gives rise to an adjustment in
computing alternative minimum taxable income that may result in alternative
minimum tax liability for the optionee. If shares of Common Stock acquired upon
the exercise of an ISO are disposed of before the expiration of the two-year and
one-year holding periods described above (a "disqualifying disposition"), the
optionee would realize ordinary income in the year of disposition in an amount
equal to the excess (if any) of the fair market value of the shares at exercise
(or, if less, the amount realized on a sale of such shares) over the exercise
price thereof, and the Company would be entitled to deduct such amount. Any
further gain realized would be taxed as a short-term or long-term capital gain
and would not result in any deduction to the Company. A disqualifying
disposition in the year of exercise will generally avoid the alternative minimum
tax consequences of the exercise of an ISO.
Nonstatutory Stock Options. No income is realized by the optionee upon the
grant of a nonstatutory option. Upon exercise of a nonstatutory stock option,
the optionee realizes ordinary income in an amount equal to the difference
between the exercise price and the fair market value of the shares on the date
of exercise, and the Company is entitled to a tax deduction for the same amount.
Upon disposition of the shares, appreciation or depreciation after the date of
exercise is treated as a short-term or long-term capital gain or loss and will
not result in any deduction for the Company.
15
<PAGE>
Votes Required to Approve the Amendment
- ---------------------------------------
The affirmative vote of the holders of a majority of the shares of Common
Stock represented and voting at the Meeting will be required to amend the 1998
Equity Plan to increase the number of shares of Common Stock for which awards
may be granted under the 1998 Equity Plan from 2,146,690 shares to 2,400,000
shares.
The Board of Directors considers the Company's ongoing program of granting
stock options broadly across the employee base to be very important to the
Company's ability to compete for top talent and a significant incentive to
promote the Company's success and, therefore, in the best interests of the
Company's Stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF PROPOSAL 3.
16
<PAGE>
PROPOSAL 4
APPOINTMENT OF AUDITORS
The Board of Directors of the Company has appointed KMPG LLP, independent
accountants, to audit the Company's consolidated financial statements for the
fiscal year ending January 1, 2000, and recommends that the Stockholders vote
for ratification of such appointment. A representative of KMPG LLP will be
present at the Meeting and will be available to respond to appropriate
Stockholders' questions and to make a statement if he or she desires to do so.
The affirmative vote of the holders of a majority of the shares of Common
Stock represented and voting at the Meeting will be required to ratify the
selection of KMPG LLP.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF PROPOSAL 4.
17
<PAGE>
ADDITIONAL INFORMATION
Management
Officers are elected annually by the Board and serve at the discretion of
the Board. Set forth below is information regarding the current executive
officers of the Company who are not Directors of the Company:
Name Age Position
---- --- --------
Thomas T. Higgins 47 Chief Financial Officer and Executive Vice President,
Operations
Thomas T. Higgins has served as Chief Financial Officer and Executive
Vice President, Operations of the Company since June 1998. Prior to joining the
Company, Mr. Higgins was with the Cabot Corporation from 1985 to 1997, most
recently as President of Distrigas of Massachusetts Corporation, a subsidiary of
the Cabot Corporation with revenues of $190 million. Also in 1997, Mr. Higgins
was Executive Vice President and Chief Operating Officer of Cabot's Liquified
Natural Gas Divison. From 1989 to 1997, Mr. Higgins served the Cabot
Corporation in Asia, as Vice President and General Manager of the Pacific Asia
Carbon Black Division in Malaysia (1996-1997), Managing Director in Indonesia
(1990-1995) and Director of New Ventures in Japan (1989-1990). Mr. Higgins
holds a B.B.A. from Boston University.
There are no family relationships between any director, executive
officer, or person nominated or chosen by the Company to become a director or
executive officer of the Company.
Compensation of Directors
Mr. Tendler receives $40,000 a year for his services as Chairman of
the Company's Board of Directors. Mr. Lerner receives $1,000 for each meeting of
the Board or of any committee of the Board which he attends. All members of the
Company's Board receive reimbursement of expenses associated with their
attendance of meetings of the Board or of any committee thereof of which they
are a member.
In addition, Eligible Directors receive grants of options as described
under Proposal 2.
Pursuant to the 1998 Director Plan, Mr. Tendler, Dr. Charpie, Mr.
Parker, Mr. Lerner and Dr. Wicker each received an automatic initial grant of
options on October 9, 1998 to purchase 15,000 shares of Common Stock and an
additional automatic initial grant of options on October 9, 1998 to purchase
2,000 shares of Common Stock.
Mr. Hayward-Surry is prohibited by his employer from receiving stock
options from the Company and has not receive any grants under the 1998 Director
Plan. In 1998, Mr. Hayward-Surry received cash compensation in the form of a
$2,335 annual retainer and a $2,000 per meeting fee for a total of $4,335.
18
<PAGE>
EXECUTIVE COMPENSATION
The following table provides certain summary information concerning
compensation (including salary, bonuses, stock options, and certain other
compensation) paid by the Company for services in all capacities for fiscal
years ended January 2, 1999 and December 31, 1997, to its Chief Executive
Officer and to each of the other persons who served as executive officers of the
Company during the Fiscal Year 1998 and whose salary plus bonus exceeded
$100,000 in Fiscal Year 1998 (all four being hereinafter referred to as the
"Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Annual Compensation
Compensation Awards
------------ ------
Name and Year Salary($) Bonus Securities All Other
Principal Position Underlying Compensation
Options (1) ($) (2)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
John R. Barr 1998 280,000 145,000
President and Chief 1997 (3) 16,154 367,621 6,635 (4)
Executive Officer
Thomas T. Higgins 1998 (5) 94,098 64,750 100,000
Executive Vice
President, Operations
and Chief Financial
Officer
Bernard Horowitz, Ph.D. 1998 190,000 53,555
Executive Vice 1997 182,262 36,960 125,223
President and Chief
Scientific Officer
Joanne M. Leonard 1998 (6) 111,258 50,000 21,469 115,000 (7)
1997 144,709 23,186 7,155
</TABLE>
________________
(1) All stock options in this column were granted under the 1998 Equity Plan,
which is administered by the Compensation Committee. Each of these options has
an exercise price equal to fair market value on the date of the grant, vests in
four equal annual installments on the first four anniversaries of the date of
grant, and expires either ten years from the date of grant or in four equal
installments ten years from the dates of vesting.
19
<PAGE>
(2) Excludes perquisites and other personal benefits, securities or property
which, in the aggregate, are less than the lesser of $50,000 or ten percent
(10%) of the total of the annual salary and bonus reported for the Named
Executive Officer for the year.
(3) Mr. Barr became President and Chief Executive Officer of the Company in
November 1997. The information shown in this table for 1997 reflects
compensation earned by Mr. Barr from November 24, 1997 through December 31,
1997.
(4) Consists of reimbursement of relocation expenses.
(5) Mr. Higgins became Executive Vice President, Operations and Chief Financial
Officer the Company in June 1998. His annual salary is $185,000.
(6) Ms. Leonard served as Vice President, Chief Financial Officer and Treasurer
of the Company until June 30, 1998.
(7) Includes a one-time payment of $93,000 upon Ms. Leonard's resignation from
the Company, made pursuant to a Letter Agreement between the Company and Ms.
Leonard dated June 24, 1998.
20
<PAGE>
STOCK OPTION GRANTS IN FISCAL YEAR 1998
The following table sets forth information concerning individual grants of
options to purchase Common Stock made to each Named Executive Officer during
Fiscal Year 1998. Mr. Barr and Dr. Horowitz were not granted any options to
purchase Common Stock in Fiscal Year 1998.
<TABLE>
<CAPTION>
Potential
Individual Grants Realizable
------------------------------------------------------ Value at
Assumed Annual
Rates of Stock
Percentage Price
of Total Appreciation
Number of Options for Option
Securities Granted to Term (3)
Underlying Employees in Exercise or
Options Fiscal Year Base Price
Name Granted(#)(1) 1998(2) ($/Share) Expiration Date 5%($) 10%($)
- ---- ------------- ------- ---------- --------------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Thomas T. Higgins 100,000(4) 15.6% $11.63 (5) 731,404 1,853,522
Joanne M. Leonard 21,469(6) 3.3% $11.18 2/15/2000 13,311 27,266
</TABLE>
_________________
(1) See Note (1) to the Summary Compensation Table.
(2) Options to purchase an aggregate of 642,344 shares were granted to all
employees in fiscal 1998.
(3) Amounts reported in these columns represent amounts that may be realized
upon exercise of the options immediately prior to the expiration of their term
assuming the specified compounded rates of appreciation (5% and 10%) on the
Company's Common Stock over the term of the options. These numbers are
calculated based on rules promulgated by the Securities and Exchange Commission
and do not reflect the Company's estimate of future stock price growth. Actual
gains, if any, on stock option exercises and Common Stock holdings are dependent
on the timing of such exercise and the future performance of the Company's
Common Stock. There can be no assurance that the rates of appreciation assumed
in this table can be achieved or that the amounts reflected will be received by
the option holder.
(4) This figure consists of two option grants. Each of the two options becomes
exercisable in four equal annual installments on each of the first four
anniversaries of the date of grant
(5) An option to purchase 35,364 shares of Common Stock expires on June 26,
2008. Each portion of an option to purchase 64,636 shares of Common Stock
expires ten years after it becomes exercisable, i.e. the first annual
installment which becomes exercisable on June 26, 1999 will expire on June 26,
2009, the second annual installment which becomes exercisable on June 26, 2000
will expire on June 26, 2010, the third annual installment which becomes
exercisable on June 26, 2001 will expire on June 26, 2011 and the fourth annual
installment which becomes exercisable on June 26, 2002 will expire on June 26,
2012.
(6) These options became fully vested pursuant to acceleration provisions
contained in a Letter Agreement between the Company and Ms. Leonard dated June
24, 1998. The expiration date for these options was extended to February 15,
2000 pursuant to an Amendment Agreement between the Company and Ms. Leonard
dated October 9, 1998.
21
<PAGE>
1998 AGGREGATED OPTION EXERCISES AND FISCAL YEAR END OPTION VALUES
Presented below is information with respect to the number of shares issued
upon option exercises by the Named Executive Officers during Fiscal Year 1998
and the value realized by the Named Executive Officers upon such exercises. The
table also provides information about the number and value of unexercised stock
options to purchase the Company's Common Stock held by each Named Executed
Officer as of January 2, 1999.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Shares Underlying Unexercised In-the-Money
Acquired on Value Options at Options at
Exercise (#) Realized ($) (1) January 2, 1999(#) January 2, 1999($)
Exercisable/ Exercisable/
Name Unexercisable Unexercisable(2)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
John R. Barr 0 0 91,905 / 275,716 182,431 / 547,296
Thomas T. Higgins 0 0 0 / 100,000 0/0
Bernard Horowitz 80,722 634,642 118,295 / 149,820 721,080 / 609,892
Joanne M. Leonard 0 0 55,459 / 0 257,483 / 0
</TABLE>
_____________________
(1) Based on the difference between the option exercise price of such options
and the closing price of the underlying Common Stock on the date of
exercise.
(2) Based on the difference between the option exercise price and the closing
price of the underlying Common Stock on December 31, 1998, which closing
price was $10.375.
22
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Compensation
Committee") is composed of three independent, disinterested Directors who are
not employees of the Company. The Compensation Committee regularly reviews and
generally approves all compensation and fringe benefit programs of the Company
and also reviews and determines the actual compensation of the Company's
executive officers, as well as all stock option grants, performance-based stock
options and both long-term and short-term cash incentive awards to all key
employees.
The Company's executive compensation program is designed to be linked
closely to corporate performance and returns to Stockholders. To this end, the
Company has developed an overall compensation strategy and specific compensation
plan that tie a very significant portion of executive compensation to the
Company's success in meeting specified performance goals. In addition, through
the use of stock options, the Company ensures that a part of each executives'
compensation is closely tied to appreciation in the Company's stock price. The
overall objectives of this strategy are to attract and retain the best possible
executive talent, to motivate these executives to achieve the goals inherent in
the Company's business strategy, to link executive and stockholder interests
through equity based plans and, finally, to provide a compensation package that
recognizes individual contributions as well as overall business results.
The key elements of the Company's executive compensation consist of base
salary, annual incentive bonuses and stock options. The Compensation Committee's
policies with respect to each of these elements, including the bases for the
compensation awarded to Mr. Barr, are discussed below. In addition, while the
elements of compensation described below are considered separately, the
Compensation Committee takes into account the full compensation package afforded
by the Company to the individual, including insurance and other employee
benefits, as well as the programs described below.
Base Salary.
Base salaries for new executive officers are initially determined by
evaluating the responsibilities of the position held and the experience of the
individual. In making determinations regarding base salaries, the Compensation
Committee considers generally available information regarding salaries
prevailing in the biotechnology industry, but does not utilize any particular
indices or peer groups. Base salaries are reviewed on an annual basis using
compensation surveys for the biotechnology industry.
Annual Incentive Bonus.
The Committee reviews the Company's annual performance plan for the ensuing
fiscal year and sets specific incentive target bonus awards which are directly
linked to the short term financial and milestone target achievement performance
objectives of the Company as a whole. The executive officers of the Company then
have an opportunity to earn a payout of their individual target bonuses in each
fiscal year provided that the Company meets or exceeds its performance plan for
the year. These bonuses are prorated to the extent that the Company achieves a
portion of its performance plan. The Committee has complete discretionary
authority to award full bonuses or special bonuses for special achievements.
23
<PAGE>
Stock Options.
Under the Company's 1998 Equity Incentive Plan, which was approved by
Stockholders, stock options are granted to the Company's executive officers.
Stock options granted to executives have an exercise price equal to the fair
market value of the Common Stock on the date of grant and vest over four years.
Stock option grants are designed to provide incentive for the creation of
stockholder value over the long term, since the full benefit of the compensation
package cannot be realized unless stock price appreciation occurs over a number
of years. In determining the amount of such grants, the Compensation Committee
evaluates the job level of the executive, responsibilities to be assumed in the
upcoming year, and responsibilities in prior years, and also takes into account
the size of the officer's awards in the past.
The Committee believes that the foregoing combination of base salaries,
incentive bonuses and stock option incentives have helped develop a Senior
Management Group dedicated to achieving significant improvement in both the
short-term and long-term financial performance of the Company.
The foregoing report has been furnished by Irwin Lerner (Chairman), Peter
Parker and Damion Wicker, M.D.
24
<PAGE>
Certain Relationships and Related Transactions
In February 1998, the Company and Pall Corporation ("Pall") entered into a
series of agreements (the "Pall Agreements") providing for, among other things,
a collaboration on the development and marketing of systems employing the
Company's light-activated compounds and Quencher viral inactivation technologies
for red blood cell concentrates. Pall is a leading manufacturer and supplier of
filtration products, including those relating to the collection, preservation,
processing, manipulation, storage and treatment of blood and blood components.
Under the Pall Agreements, Pall receives exclusive worldwide distribution rights
to any system incorporating any of the Company's viral inactivation technology
for red blood cells and platelets. The parties have also agreed to share
research, development, clinical and regulatory responsibilities and will equally
share profits and joint expenses from operations after each party is reimbursed
for its cost of goods. Upon execution of the Pall Agreements in February 1998,
Pall acquired 477,042 shares of Common Stock for $4.0 million or $8.39 per
share. Pursuant to the terms of the Pall Agreements, Pall acquired 448,028
shares of the Company's Common Stock in a private placement, which closed
contemporaneously with, and at the same price, terms, and conditions as the
initial public offering of the Company's Common Stock in June 1998. In
addition, the Pall Agreements provide that Pall will purchase up to $17.0
million worth of Common Stock at the prevailing market price per share in
installments tied to the achievement of specified development milestones in the
development of the Company's red blood cell concentrates. No such purchases
occurred in Fiscal Year 1998. In Fiscal Year 1998, the Company purchased
approximately $1,076,000 of production related materials from Pall. Mr.
Hayward-Surry, a Director of the Company, is the President and a member of the
board of directors of Pall Corporation.
In October 1998, the Company entered into an Option, Development, Manufacture
and License Agreement (the "Pentose Agreement") with Pentose Pharmaceuticals,
Inc. ("Pentose") whereby the Company has contracted to perform an initial
evaluation of combining the parties' respective technologies and to further
develop and commercialize virally inactivated blood products. The Company paid
$500,000 to Pentose to review and examine Pentose's viral inactivation
technology for a stated period. Upon expiration of the evaluation period, the
Company has the option (the "Option") to acquire the exclusive right and license
to the Pentose technology for a stated amount, subject to certain terms and
conditions. Ampersand Specialty Materials and Chemicals III Limited Partnership
("ASMC-III") owns 47% of the common stock of Pentose and Ampersand Specialty
Materials and Chemicals III Companion Fund Limited Partnership ("ASMC III-CF")
owns 8% of the common stock of Pentose. ASMC III and ASMC III CF are two of the
Ampersand Funds which, in the aggregate, own 21.3% of the Company's Common Stock
(see Note 3 to the table of Security Ownership by Management and Principal
Stockholders). Dr. Charpie and Mr. Parker, Directors of the Company, are the
Managing General Partner and a General Partner, respectively, of ASMC-III MCLP
LLP. ASMC-III MCLP LLP is the general partner of ASMC-III Management Company
Limited Partnership, which itself is the general partner of both ASMC-III and
ASMC-III CF.
25
<PAGE>
In Fiscal Year 1998, Ampersand Venture Management Corporation provided
management advisory services to the Company for which the Company paid a total
of $130,000. Dr. Charpie and Mr. Parker, Directors of the Company, are
directors of Ampersand Venture Management Corporation, and Dr. Charpie is the
President and sole stockholder of Ampersand Venture Management Corporation.
Ampersand Venture Management Corporation is a Limited Partner of ASMC-II
Management Company Limited Partnership, which is the general partner of
Ampersand Specialty Materials and Chemicals II Limited Partnership ("ASMC-II").
Ampersand Venture Management Corporation also retains certain of its rights as a
Limited Partner of ASMC-III Management Company Limited Partnership, which is the
general partner of ASMC-III and ASMC-III CF. Ampersand Venture Management
Corporation is a Limited Partner of Lab Partners Management Company Limited
Partnership, which is the general partner of Laboratory Partners I Limited
Partnership ("Lab Partners") and Laboratory Partners Companion Fund Limited
Partnership ("Lab Partners CF"). ASMC-II, ASMC-III, ASMC-III CF, Lab Partners
and Lab Partners CF collectively own 21.3% of the Company's Common Stock (see
Note 3 to the table of Security Ownership by Management and Principal
Stockholders).
The Company has entered into various license agreements with the NYBC.
Under these agreements, the Company has been granted exclusive and non-exclusive
worldwide licenses under the NYBC patents relating to viral inactivation and
other technologies. The Company also has rights of first negotiation for the
license to any NYBC improvements not otherwise exclusively licensed in the field
of viral inactivation for use with certain products, as defined. Under the
license agreements, the Company is required to pay royalties to the NYBC on the
Company's revenues derived from the use of these licenses, as defined. The
Company is required to pay aggregate minimum royalties to maintain its exclusive
licenses of $1,500,000 in fiscal 1999, $2,200,000 in fiscal 2000, $2,400,000 in
fiscal 2001 and $2,800,000 in each year thereafter. Royalty and milestone
payments in the amount of $1,037,000 were payable to the NYBC during Fiscal Year
1998, while $600,000 was payable to the NYBC in 1997, of which $300,000 was paid
in cash and the balance paid pursuant to a Stock Purchase Agreement, whereby the
Company issued 35,778 shares of Common Stock to the NYBC. The Company also is
required to meet certain research and development milestones, as defined, to
maintain its exclusive licenses. Further, the Company is required to spend a
minimum annual amounts towards the further development, evaluation and
registration of products, as defined. If minimum royalties are not paid or if
any milestone is not met, as defined for a given country, the NYBC may terminate
the license for that country and may terminate other such licenses if the
licenses in all covered countries have been individually terminated. The NYBC
may terminate any license by reasonable notice if the Company fails to cure a
breach, conform to government regulations, or sell products within a specified
number of years, as defined. Upon termination, all rights revert to the NYBC.
The Company is currently in compliance with all such obligations and covenants.
The NYBC sponsors certain scientific research at the Company. NYBC made
payments of $96,000 to the Company for Fiscal Year 1998. Mr. Tendler, a
Director of the Company, is a member of the Board of Trustees and the Executive
Committee of NYBC.
Dr. Bernard Horowitz, the Company's Executive Vice President and Chief
Scientific Officer, is one of the inventors named in the patents covering viral
inactivation technologies owned by the NYBC and licensed to the Company. Under
the terms of arrangements with the NYBC, Dr. Horowitz will receive a percentage
of the royalty payments made by the Company to the NYBC based on sales of the
Company's products and systems employing the licensed S/D, UVC or LAC
technologies.
26
<PAGE>
Stockholder Return Performance Presentation
The graph below compares the cumulative total stockholder return of the
Company's Common Stock from June 11, 1998 (the date that the Company's stock
began trading publicly) through December 31, 1998 against the cumulative total
return of the NASDAQ Stock Market Index and the NASDAQ Pharmaceutical Index
during the same period. Management cautions that the stock price performance
shown in the graph below should not be considered indicative of potential future
stock performance.
Comparison of Cumulative Total Return Among V.I. Technologies, Inc., the NASDAQ
Stock Market Index and the NASDAQ Pharmaceutical Index
[THE TABLE BELOW WAS ALSO REPRESENTED IN THE PRINTED MATERIAL BY A LINE GRAPH]
<TABLE>
<CAPTION>
=====================================================================================
Company/Index Name Base Date
June 11, 1998 December 31, 1998
- -------------------------------------------------------------------------------------
<S> <C> <C>
V.I. Technologies, Inc. $100.00 $ 92.22
- -------------------------------------------------------------------------------------
NASDAQ Stock Market Index $100.00 $127.03
- -------------------------------------------------------------------------------------
NASDAQ Pharmaceutical Index $100.00 $126.59
- -------------------------------------------------------------------------------------
</TABLE>
The graph shown above assumes that $100 was invested in the Company's Common
Stock and in each index on June 11, 1998. The total return for the indices used
assumes the reinvestment of all dividends.
27
<PAGE>
Employment Agreements and Severance and Change of Control Arrangements
Mr. Barr is party to a letter agreement with the Company, dated November 10,
1997, pursuant to which he serves as President and Chief Executive Officer.
Under this agreement, Mr. Barr is entitled to annual base compensation of
$280,000, subject to increase by the Board, and is also entitled to a
performance bonus based upon the achievement of financial and other performance
goals.
Dr. Horowitz is a party to an employment agreement with the Company which was
entered into on January 15, 1998. Pursuant to this agreement, the Company agreed
to employ Dr. Horowitz as Executive Vice President and Chief Scientific Officer
for a four-year term commencing February 1, 1995, with automatic one-year
renewals thereafter unless either party terminates the agreement. Under the
terms of this agreement, Dr. Horowitz: (i) is entitled to an annual salary of
$170,000 subject to increase by the Board; (ii) was entitled to a grant of stock
options for 223,613 shares of Common Stock at an exercise price of $2.80 per
share vesting in equal annual installments over a four year period commencing
February 1, 1995 (the "1995 Grant"); (iii) was entitled to a grant of stock
options for 125,224 shares of Common Stock at an exercise price of $8.39 per
share vesting in equal annual installments over a four-year period commencing
December 12, 1997 (the "1997 Grant"); and (iv) is entitled to benefits and
bonuses at the discretion of the Board, including an annual bonus based on the
performance of the Company targeted at 25% of Dr. Horowitz' annual salary. The
Company also agrees to use its best efforts to cause Dr. Horowitz to be a member
of its Board of Directors throughout the term of the agreement. If Dr. Horowitz
is terminated by the Company without cause, or if Dr. Horowitz voluntarily
terminates his employment with the Company for good reason, the agreement
provides that Dr. Horowitz will be entitled to receive his base salary for an
additional year following such termination of employment and any vested
benefits, and his stock options from the 1995 Grant will vest in full and from
the 1997 Grant will vest to include the amount of options that would have vested
at the next annual vesting anniversary following the date of termination of
employment.
Mr. Higgins is a party to a letter agreement with the Company, dated June 15,
1998, pursuant to which he serves as Executive Vice President, Operations and
Chief Financial Officer. Under this agreement, Mr. Higgins is entitled to annual
base compensation of $185,000, subject to increase by the Board, and is also
entitled to a performance bonus based upon the achievement of financial and
other performance goals. In addition, the letter agreement provided for a grant
of an option to purchase 100,000 shares of Common Stock. This grant will vest in
four equal annual installments, with the first installment vesting one year from
the date of grant.
Ms. Leonard, the Company's former Vice President, Chief Financial Officer and
Treasurer, entered into a Letter Agreement with the Company effective as of June
24, 1998 (the "Letter Agreement") terminating her employment with the Company.
Pursuant to the Letter Agreement, Ms. Leonard received a payment of $165,000,
including a $50,000 bonus and a one time payment upon resignation of $93,000. In
addition, the Letter Agreement provided for accelerated vesting of Ms. Leonard's
options to purchase 55,459 shares of the Company's Common Stock. These options
will expire on February 15, 2000.
28
<PAGE>
Compensation Committee Interlocks and Insider Participation
The current members of the Compensation Committee are Messrs. Lerner and
Parker and Dr. Wicker. No member of the Compensation Committee has at any time
been an officer or employee of the Company. No executive officer of the Company
served as a member of the compensation committee or board of directors of any
other entity which has an executive officer serving as a member of the Company's
Board of Directors or Compensation Committee.
Mr. Parker, a member of the Compensation Committee, is a General Partner of
the general partner of ASMC-III and ASMC-III CF, which two funds own an
aggregate of 55% of the common stock of Pentose Pharmaceuticals, Inc.
("Pentose"). The Company made certain payments to Pentose in 1998 for
evaluation and licensing of certain technologies of Pentose as described above
in "Certain Relationships and Related Transactions." Mr. Parker is also a
director of Ampersand Venture Management Corporation. The Company made payments
for management advisory services to Ampersand Venture Management Corporation in
1998 as described above in "Certain Relationships and Related Transactions."
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and persons who own more than ten percent of a registered
class of the Company's equity securities, to file reports of ownership and
changes in ownership with the Securities and Exchange Commission (the "SEC").
Directors, executive officers, and greater than ten percent holders are required
by SEC regulations to furnish the Company with copies of all Section 16(a) forms
they file.
Based solely on its review of the copies of such forms received or written
representations from certain reporting persons, the Company believes that,
during fiscal 1998, other than the late filings made by Thomas T. Higgins and
Bernard Horowitz described below, all filing requirements under Section 16(a)
applicable to its directors and executive officers were met.
In November 1998 Mr. Higgins filed a Statement of Changes in Beneficial
Ownership on Form 4 covering transactions which occurred during September 1998.
This Form 4 reported three purchases of 500 shares each of the Company's Common
Stock on September 22, 1998.
In December 1998 Dr. Horowitz filed a Statement of Changes in Beneficial
Ownership on Form 4 covering transactions which occurred during October 1998.
This Form 4 reported the exercise of options to purchase 36,000 shares of the
Company's Common Stock on October 29, 1998.
29
<PAGE>
ANNUAL REPORT
The Company's Annual Report on Form 10-K for Fiscal Year 1998 is available
without charge upon request from the Company. Requests for copies of the Annual
Report on Form 10-K should be sent to the Company's Director, Investor
Relations, Debra Bailey, at V.I. Technologies, Inc., 155 Duryea Road, Melville,
New York 11747.
OTHER MATTERS
The Board does not know of any other matter which may come before the Meeting.
If any other matters are properly presented to the Meeting, it is the intention
of the persons named in the accompanying proxy to vote, or otherwise to act, in
accordance with their best judgment on such matters.
The Board hopes that Stockholders will attend the Meeting. Whether or not you
plan to attend, you are urged to complete, sign and return the enclosed proxy in
the accompanying envelope. A prompt response will greatly facilitate
arrangements for the Meeting, and your cooperation will be appreciated.
Stockholders who attend the Meeting may vote their shares even though they have
sent in their proxies.
By Order of the Board of Directors
/s/ Jeffrey M. Regan
Jeffrey M. Regan, Secretary
Melville, New York
April 20, 1999
30
<PAGE>
<TABLE>
<CAPTION>
Appendix A
[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE
================================================
<S> <C>
V.I. TECHNOLOGIES, INC. 1. Election Of Directors. For All Withheld
Nominees From
All
Nominees
Nominees: John R. Barr
Richard A. Charpie, Ph.D. [_] [_]
Irwin Lerner
[_]
------------------------------------------------
For all nominees except for the nominees listed
in the space above.
For Against Abstain
RECORD DATE SHARES: 2. Amendment to the Company's 1998
Director Stock Option Plan (the [_] [_] [_]
"1998 Director Plan") to increase
the maximum number of shares of the
Company's Common Stock for which
options may be granted under
the 1998 Director Plan from
89,445 shares to 150,000 shares.
3. Amendment to the Company's 1998 [_] [_] [_]
Equity Incentive Plan (the "1998
Equity Plan") to increase the
maximum number of shares of the
Company's Common Stock for which
awards may be granted under the
1998 Equity Plan from 2,146,690
shares to 2,400,000 shares.
4. Ratification of appointment of [_] [_] [_]
KPMG LLP as independent
accountants.
---------------------
Please be sure to sign and date this Proxy. Date Mark box at right if an address change or comment has
been noted on the reverse side of this card
- ----------------------------------------------------------------------
Stockholder sign here Co-owner sign here
- ----------------------------------------------------------------------
</TABLE>
1
<PAGE>
DETACH CARD DETACH CARD
V.I. TECHNOLOGIES, INC.
Dear Stockholder,
Please take note of the important information enclosed with this Proxy
Ballot. There are a number of issues related to the management and
operation of your Company that require your immediate attention and
approval. These are discussed in detail in the enclosed proxy materials.
Your vote counts, and you are strongly encouraged to exercise your right
to vote your shares.
Please mark the boxes on this proxy card to indicate how your shares will
be voted. Then sign the card, detach it and return your proxy vote in the
enclosed postage paid envelope.
Your vote must be received prior to the Annual Meeting of Stockholders,
May 21, 1999. Thank you in advance for your prompt consideration of these
matters.
Sincerely,
V.I. Technologies, Inc.
1
<PAGE>
V.I. TECHNOLOGIES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Thomas T. Higgins and Jeffrey M. Regan and
each of them as Proxies of the undersigned, each with the power to appoint a
substitute, and hereby authorizes each of them to represent the undersigned
at the 1999 Annual Meeting of Stockholders to be held on May 21, 1999, or any
adjournment thereof, and there to vote all the shares of V.I. Technologies,
Inc. held of record by the undersigned on April 5, 1999, as directed on the
reverse side hereof. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR
THE NOMINEES FOR CLASS I DIRECTOR AND FOR PROPOSALS 2, 3 AND 4. If a nominee
for director is unable or unwilling to serve, the shares represented hereby
will be voted for another person in accordance with the judgment of the
Proxies named herein.
In addition, in their discretion, the Proxies are hereby authorized to vote
upon such other business as may properly come before the meeting or any
adjournment thereof. This Proxy when properly executed will be voted in the
manner directed herein by the undersigned stockholder.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Please sign this proxy card exactly as your name or names appear hereon. Joint owners should each sign personally. Trustees and
other fiduciaries should indicate the capacity in which they sign, and where more than one name appears, a majority must sign.
If a corporation, this signature should be that of an authorized officer who should state his or her title.
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
---------------------------------------------------- ----------------------------------------------------
---------------------------------------------------- ----------------------------------------------------
---------------------------------------------------- ----------------------------------------------------
(To be signed on the reverse side)
</TABLE>
<PAGE>
Appendix B
As amended and restated on 10/9/98
V.I. TECHNOLOGIES, INC.
1998 Director Stock Option Plan
-------------------------------
1. Purpose.
-------
This 1998 Director Stock Option Plan (the "Plan") governs options to purchase
Common Stock, $.01 par value per share (the "Common Stock"), of V.I.
Technologies, Inc. (the "Company") granted by the Company to members of the
Board of Directors of the Company who are not also officers or employees of the
Company. The purpose of the Plan is to attract and retain qualified persons to
serve as Directors of the Company and to encourage ownership of the Common Stock
of the Company by such Directors.
2. Administration.
--------------
Grants of stock options under the Plan shall be automatic as provided in
Section 8. However, all questions of interpretation of the Plan or of any
options granted hereunder shall be determined by the Board of Directors of the
Company (the "Board"). Any and all powers of the Board under the Plan may be
exercised by a committee consisting of one or more Directors appointed by the
Board.
3. Eligibility.
-----------
Members of the Board who are not also officers or employees of the Company shall
be eligible to participate in the Plan.
4. Shares Subject to the Plan.
--------------------------
Options may be granted under the Plan in respect of a maximum of 150,000
shares of Common Stock, subject to adjustment as provided in Section 5 below.
Shares to be issued upon the exercise of options granted under the Plan may be
either authorized but unissued shares or shares held by the Company in its
treasury. Whenever options under the Plan lapse or terminate or otherwise
become unexercisable, the shares of Common Stock which were available for such
options shall again be available for the grant of options under the Plan. 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 the
Plan.
5. Adjustment of Number of Option Shares.
-------------------------------------
In the event of a stock dividend, split-up, combination or reclassification of
shares, recapitalization or other similar capital change relating to the
Company's Common Stock, the maximum aggregate number and kind of shares or
securities of the Company as to which options may be granted under this Plan and
as to which options then outstanding shall be exercisable, and the option price
of such options shall be appropriately
<PAGE>
adjusted so that the proportionate number of shares or other securities as to
which options may be granted and the proportionate interest of holders of
outstanding options shall be maintained as before the occurrence of such event.
In the event of any reorganization, consolidation or merger to which the
Company is a party and in which the Company does not survive, or upon the
dissolution or liquidation of the Company, all outstanding options shall
terminate; provided, however, that (i) in the event of the liquidation or
-------- -------
dissolution of the Company, or in the event of any such reorganization,
consolidation or merger in which the Company does not survive and with respect
to which the resulting or surviving corporation does not assume such outstanding
option or issue a substitute option therefor, such option shall be exercisable
in full, without regard to any installment restrictions on exercise imposed
pursuant to this Plan or any Option Agreement (as defined below), during such
period preceding the effective date of such liquidation, dissolution,
reorganization, consolidation or merger (unless such option is terminated
earlier by its terms) as may be specified by the Board; and (ii) in the event of
any such reorganization, consolidation or merger, the Board may, in its good
faith discretion, arrange to have the resulting or surviving corporation assume
such outstanding option or issue a substitute option therefor.
No fraction of a share shall be purchasable or deliverable upon exercise of an
option, but, in the event any adjustment hereunder of the number of shares
covered by the option shall cause such number to include a fraction of a share,
such fraction shall be adjusted to the nearest smaller whole number of shares.
6. Non-Statutory Stock Options.
---------------------------
All options granted under the Plan shall be non-statutory options not entitled
to special tax treatment under Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code").
7. Form of Option Agreements.
-------------------------
Options shall be granted hereunder pursuant to the terms of written agreements
("Option Agreements") which shall be substantially in the form of the attached
Exhibit A or in such other form as the Board may from time to time determine.
- ---------
8. Grant of Options and Option Terms.
---------------------------------
a. Automatic Initial Grant of Options on October 9, 1998. Each non-employee
Director of the Company who is a Director of the Company on October 9, 1998
shall automatically be granted an option to purchase 15,000 shares of Common
Stock.
b. Automatic Grant of Options Upon Initial Election to the Board Subsequent
to October 9, 1998. Each non-employee Director of the Company who is initially
elected to the Company's Board of Directors after October 9, 1998 shall, upon
his or her initial election to the Board of Directors by the Company's
Stockholders, automatically be granted an option to purchase 15,000 shares of
Common Stock. No options shall be granted hereunder after ten years from the
date on which this Plan was initially approved and adopted by the Board.
c. Automatic Annual Grant of Options. Commencing after the closing of the
initial public offering of the Company's Common Stock, each non-employee
Director of the Company who is thereafter reelected to the
2
<PAGE>
Board of Directors or who continues in office as a Director of the Company
following a meeting of the Stockholders of the Company at which any Directors
are elected or reelected (a "Stockholder Meeting") shall, upon each reelection
or his or her continuation in office as described above, automatically be
granted an option to purchase 2,000 shares of Common Stock.
d. Additional Automatic Initial Grant of Options on October 9, 1998. Each
non-employee Director of the Company who is a Director of the Company on October
9, 1998 shall automatically be granted an option to purchase 2,000 shares of
Common Stock.
e. Limitations on Grants. No options shall be granted hereunder after ten
years from the date on which this Plan was initially approved and adopted by the
Board. No options will be granted hereunder to any Director who is prohibited
by his or her affiliates or employers, or for any other reason, from receiving
stock options from the Company.
f. Date of Grant. The "Date of Grant" for options granted under Sections
8(b) or 8(c) of the Plan due to elections or reelections to the Board of
Directors shall be the date of the respective Director's election or reelection
or the date of the Stockholder Meeting for Directors continuing in office. The
"Date of Grant" for the options granted pursuant to Section 8(a) or 8(d) of the
Plan is October 9, 1998.
g. Option Price. The option price for each option granted under this Plan
shall be the current fair market value of a share of Common Stock of the Company
as determined by the Board of Directors in good faith, provided that if the
Company's Common Stock is then quoted on the National Association of Securities
Dealers Automated Quotations National Market ("Nasdaq") or traded on any other
exchange, then the current fair market value of a share of Common Stock of the
Company shall be the closing price for the Company's Common Stock as reported by
Nasdaq, or the principal exchange on which the Company's Common Stock is then
traded, on the last trading day prior to the Date of Grant.
h. Term of Option. The term of each option granted under the Plan shall be
ten years from the Date of Grant.
i. Period of Exercise. Options granted under Section 8(a) or 8(b) of the
Plan shall become exercisable as to 25% of the shares subject to the option in
four cumulative installments occuring on the six-month, two-year, three-year and
four-year anniversaries of the Date of Grant, respectively, if and only if the
option holder is a member of the Board at the opening of business on that
anniversary date. Options granted under Section 8(c) or 8(d) of the Plan shall
become exercisable in full on the first anniversary of the Date of Grant if and
only if the option holder is a member of the Board at the opening of business on
that anniversary date. Directors holding exercisable options under the Plan who
cease to serve as members of the Board of the Company for any reason other than
death may, for a period of seven months following the date of cessation of
service, exercise the rights they had under such options at the time they ceased
being a Director. Any rights that have not yet become exercisable shall
terminate upon cessation of membership on the Board. Upon the death of a
Director, those entitled to do so under the Director's will or the laws of
descent and distribution shall have the right, at any time within twelve months
after the date of death, to exercise in whole or in part any rights which were
available to the Director at the time of his death. The rights of the option
holder may be exercised by the holder's guardian or legal representative in the
case of disability and by the beneficiary designated by the holder in writing
delivered to the Company or, if none has been designated, by the holder's estate
or his or her transferee on death
3
<PAGE>
in accordance with this Plan, in the case of death. Options granted under the
Plan shall terminate, and no rights thereunder may be exercised, after the
expiration of the applicable exercise period. Notwithstanding the foregoing
provisions, no rights under any options may be exercised after the expiration of
ten years from their Date of Grant.
j. Method of Exercise and Payment. Each exercise of an option hereunder may
be effected only by giving written notice, in the manner provided in Section 12
hereof, of intent to exercise the option, specifying the number of shares as to
which the option is being exercised, and accompanied by full payment of the
option price for the number of shares then being acquired. Such payment shall be
made in cash, by certified or bank check payable to the order of the Company,
credit to the Company's account at a financial or brokerage institution on the
date of exercise or a payment commitment of such an institution acceptable to
the Company, or if the option so provides, (i) in shares of Common Stock having
an aggregate Fair Market Value, at the time of such payment, equal to the total
option price for the number of shares of Common Stock for which payment is then
being made, or (ii) partly in cash or by certified or bank check payable to the
order of the Company and the balance in shares of Common Stock having an
aggregate Fair Market Value, at the time of such payment, equal to the
difference between the total option price for the number of shares of Common
Stock for which payment is then being made and the amount of the payment in cash
or by certified or bank check. Shares of Common Stock surrendered in payment of
all or part of the option price shall have been held by the person exercising
the option free of restrictions imposed by the Company for at least six months
unless otherwise permitted by the Board. For purposes hereof, the "Fair Market
Value" of the Common Stock shall be the current fair market value of a share of
Common Stock of the Company as determined by the Board of Directors in good
faith, provided that if the Company's Common Stock is then quoted on Nasdaq or
traded on any other exchange, then the Fair Market Value shall be the closing
price for the Company's Common Stock as reported by Nasdaq, or the principal
exchange on which the Company's Common Stock is then traded, for the business
day immediately preceding the option exercise date.
Receipt by the Company of such notice and payment shall, for purposes of this
Plan, constitute exercise of the option or a part thereof. Within twenty (20)
days thereafter, the Company shall deliver or cause to be delivered to the
optionee a certificate or certificates for the number of shares of Common Stock
then being purchased by the optionee. Such shares shall be fully paid and non-
assessable. If any law or applicable regulation of the Securities and Exchange
Commission or other public regulatory authority (including, but not limited to,
a stock exchange) shall require the Company or the optionee (i) to register or
qualify, under the Securities Act, any similar federal statute then in force or
any state law regulating the sale of securities, any shares of Common Stock
covered by an option with respect to which notice of intent to exercise shall
have been delivered to the Company or (ii) to take any other action in
connection with such shares before issuance thereof may be effected, then the
delivery of the certificate or certificates for such shares shall be postponed
until completion of the necessary action, which the Company shall take in good
faith and without delay. All such action shall be taken by the Company at its
own expense.
To the extent determined necessary by counsel to the Company to comply with
any applicable law, the Company may require an individual exercising an option
to represent that his purchase of shares of Common Stock pursuant to such
exercise is for his own account, for investment and without a view to resale or
distribution, and that he will not sell or otherwise dispose of any such shares
except pursuant to (i) an effective registration statement covering such
transaction filed with the Securities and Exchange Commission and in
4
<PAGE>
compliance with all of the applicable provisions of the Securities Act, and the
rules and regulations thereunder, or (ii) an opinion of Company counsel that
such registration is not required.
k. Non-transferability. Options granted under the Plan shall not be
transferable by the holder thereof otherwise than by will or the laws of descent
and distribution or by such other means as may be permitted by Rule 16b-3 (or
any successor provision) under the Securities Exchange Act of 1934, as amended.
9. Limitation of Rights.
--------------------
No Right to Continue as a Director. Neither the Plan, nor the granting of an
option or any other action taken pursuant to the Plan, shall constitute an
agreement or understanding, express or implied, that the Company will retain an
optionee as a Director for any period of time or at any particular rate of
compensation.
No Stockholders' Rights for Options. Directors shall have no rights as
Stockholders with respect to the shares covered by their options until the date
they exercise such options and pay the option price to the Company, and no
adjustment will be made for dividends or other rights for which the record date
is prior to the date such option is exercised and paid for.
10. Stockholder Approval.
--------------------
The Plan is subject to approval by the Stockholders of the Company by the
affirmative vote of the holders of a majority of the shares of voting capital
stock present or represented and entitled to vote at a meeting of the Company's
Stockholders. In the event such approval is not obtained, all options granted
under this Plan shall be void and without effect.
11. Amendment or Termination.
------------------------
The Board may amend or terminate this Plan at any time subject to any
stockholder approval that the Board deems necessary.
12. Notices.
-------
Any communication or notice required or permitted to be given under this Plan
shall be in writing and mailed by registered or certified mail or delivered in
hand, if to the Company, to its Chief Financial Officer at V.I. Technologies,
Inc., 155 Duryea Road, Melville, New York 11747 and, if to an optionee, to such
address as the optionee shall last have furnished to the Company.
13. Governing Law.
-------------
The Plan shall be governed by and construed in accordance with the laws of
Delaware.
5
<PAGE>
EXHIBIT A
---------
1998 DSO - _______ _________ Shares
V.I. TECHNOLOGIES, INC.
1998 Director Stock Option Plan
Non-statutory Stock Option Agreement
_______________ __, 199_
V.I. Technologies, Inc. (the "Company"), a Delaware corporation, hereby
grants to the person named below an option to purchase shares of Common Stock,
$.01 par value per share of the Company (the "Option") under and subject to the
Company's 1998 Director Stock Option Plan (the "Plan") exercisable only on the
following terms and conditions and those set forth on the reverse side of this
Agreement:
Name of Optionee:
Address:
Social Security No.
Option Price:
Date of Grant:
Exercisability Schedule:
[As to 25% of the shares subject to the option in four cumulative
installments occuring on the six-month, two-year, three-year and four-year
anniversaries of the Date of Grant, respectively, provided that this Optionee is
a member of the Board of Directors of the Company (the "Board") at the opening
of business on the respective anniversary date and provided that this Option may
not be exercised as to any shares after the expiration of ten years from the
date hereof.]
or
[At any time on or after the first anniversary of the date hereof, as to
2,000 shares,]
provided that this Optionee is a member of the Board of Directors of the Company
(the "Board") at the opening of business on the date described above and
provided that this Option may not be exercised as to any shares after the
expiration of ten years from the date hereof.]
By signing this Stock Option Agreement and returning on signed copy of to
the Company, the Optionee accepts the Option described herein on the terms and
conditions set forth herein or in the plan.
V.I. TECHNOLOGIES, INC. Accepted and agreed to:
By: ____________________ ______________________
Title: Optionee
6
<PAGE>
V.I. TECHNOLOGIES, INC.
1998 Director Stock Option Plan Terms and Conditions
1. This Option may be exercised from time to time in accordance with the
exercisability Schedule for up to the aggregate number of shares specified
herein, but in no event for the purchase of other than full shares; provided,
however, that this Option may not be exercised as to any shares after the
expiration of ten years from the date hereof. Written notice of exercise shall
be delivered to the Company specifying the number of shares with respect to
which the Option is being exercised. Not later than twenty days after the date
of the delivery of such notice the Company will deliver to the Optionee a
certificate for the number of shares with respect to which the Option is being
exercised against payment therefor in cash or by check, credit to the Company's
account at a financial or brokerage institution on the date of exercise or a
payment commitment of such an institution acceptable to the Company or, to the
extent the option agreement permits, by shares of the Company's Common Stock,
valued at their fair market value as of the date of exercise as determined as
provided in the Plan, or in any combination of cash, check and shares of Common
Stock. Shares of Common Stock surrendered in payment of the option price shall
have been held by the person exercising the option free of restrictions imposed
by the Company for at least six months unless otherwise permitted by the Board.
2. The Optionee shall not be deemed, for any purpose, to have any rights
whatever in respect of shares to which the Option shall not have been exercised
and payment made as aforesaid. The Optionee shall not be deemed to have any
rights to continued service as Director by virtue of the grant of this Option.
3. In the event of stock dividend, split-up, combination or reclassification
of shares, recapitalization or other similar capital change relating to the
Common Stock, the maximum aggregate number and kind of shares of securities of
the Company subject to this Option and the exercise price of this Option shall
be appropriately adjusted by the Board (whose determination shall be conclusive)
so that the proportionate number of shares or other securities subject to this
Option and the proportionate interest of the Optionholder shall be maintained as
before the occurrence of such event.
4. In the event of any reorganization, consolidation or merger to which the
Company is a party and in which the Company does not survive, or upon the
dissolution or liquidation of the Company, this option, to the extent
outstanding and unexercised, shall terminate; provided, however, that (i) in the
event of the liquidation of dissolution of the Company, or in the event of any
such reorganization, consolidation or merger in which the Company does not
survive and with respect to which the resulting or surviving corporation does
not assume such outstanding option or issue a substitute option herefor, this
option shall be exercisable in full, without regard to any installment
restrictions on exercise imposed pursuant to the Plan or this Option Agreement,
during such period preceding the effective date of such liquidation,
dissolution, reorganization, consolidation or merger (unless this option is
terminated earlier by its terms) as may be specified by the Board; and (ii) in
the event of any such reorganization, consolidation or merger, the Board may, in
its good faith discretion, arrange to have the resulting or surviving
corporation assume this option, to the extent outstanding and unexercised, or
issue a substitute option therefor.
5. This Option is not transferable by the Optionee otherwise than by will or
the laws of descent and distribution or by such other means as may be permitted
by Rule 16b-3 (or any successor provision) under the Securities Exchange Act of
1934, as amended. This Option is exercisable during the Optionee's lifetime
only by the Optionee, provided that this Option may be exercised by the
Optionholder's guardian or legal representative in the case of disability and by
the beneficiary designated by the Optionholder in writing delivered to the
Company, or, if none has been designated, by the Optionholder's estate or his or
her transferee on death in accordance with this Section, in the case of death.
6. If the Optionee ceases to serve as a member of the Board for any reason
other than death, the Optionee may, for a period of seven months following such
cessation of service, exercise the rights which the Optionee had hereunder at
the time the Optionee ceased being a Director. Upon the death of the Optionee,
those entitled to do so shall have the right, at any time within twelve months
after the date of death (subject to the prior expiration of the Option exercise
period), to exercise in whole or in part any rights which were available to the
Optionee at the time of the Optionee's death. This Option shall terminate after
the expiration of the applicable exercise period. Notwithstanding the foregoing
provisions of this Section 6, no rights under this Option may be exercised after
the expiration of ten years from the date hereof.
7. It shall be a condition to the Optionee's right to purchase shares of
Common Stock hereunder that the Company may, in its discretion, require (a) that
the shares of Common Stock reserved for issue upon the exercise of this Option
shall have been duly listed, upon official notice of issuance, upon any national
securities exchange on which the Company's Common Stock may then be listed, (b)
that either (i) a Registration Statement under the Securities Act of 1933, as
amended, with respect to said shares shall be in effect, or (ii) in the opinion
of counsel for the Company the proposed purchase shall be exempt from
registration under said Act and the Optionee shall have made such undertakings
and agreements with the Company as the Company may reasonably require, and (c)
that such other steps, if any, as counsel for the Company shall deem necessary
to comply with any law, rule or regulation applicable to the issue of such
shares by the Company shall have been taken by the Company or the Optionee, or
both. The certificates representing the shares purchased under this Option may
contain such legends as counsel for the Company shall deem necessary to comply
with any applicable law, rule or regulation.
8. Any exercise of this Option is conditioned upon the payment, if the
Company so requests, by the Optionee or such other person who may be entitled to
exercise this Option in accordance with the terms hereof, of all state and
federal taxes imposed upon the exercise of this Option and the issue to the
Optionee of the shares covered hereby.
9. This Option shall not be treated as an incentive stock option under
Section 422 of the Internal Revenue Code of 1986, as amended.
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10. This Option is issued pursuant to the terms of the Plan. This
Certificate does not set forth all of the terms and conditions of the Plan,
which are incorporated herein by reference. Capitalized terms used and not
otherwise defined herein have the meanings given to them in the Plan. Copies of
the Plan may be obtained upon written request without charge from the Company.
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Appendix C
V.I. TECHNOLOGIES, INC.
1998 EQUITY INCENTIVE PLAN
as proposed for shareholder approval at May 21, 1999 Annual Meeting
Section 1. Purpose
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The purpose of the V.I. Technologies, Inc. 1998 Equity Incentive Plan
(the "Plan") is to attract and retain key employees and directors and
consultants of the Company and its Affiliates, to provide an incentive for them
to achieve long-range performance goals, and to enable them to participate in
the long-term growth of the Company by granting Awards with respect to the
Company's Common Stock.
Section 2. Definitions
-----------
"Affiliate" means any business entity in which the Company owns
directly or indirectly 50% or more of the total combined voting power or has a
significant financial interest as determined by the Committee.
"Award" means any Option, Stock Appreciation Right, Performance Share,
Restricted Stock, Stock Unit or Other Stock-Based Award awarded under the Plan.
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time, and any successor to such Code.
"Committee" means a committee comprised of not less than two members
of the Board appointed by the Board to administer the Plan or a specified
portion thereof. If the Committee is authorized to grant Awards to a Reporting
Person or a Covered Employee, each member shall be a "Non-Employee Director" or
the equivalent within the meaning of Rule 16b-3 under the Securities Exchange
Act of 1934 or any successor provision, as applicable to the Company at the time
("Rule 16b-3"), or an "outside director" or the equivalent within the meaning of
Section 162(m) of the Code, respectively. In the event no such Committee is
appointed, then "Committee" means the Board.
"Common Stock" or "Stock" means the Common Stock, $0.01 par value, of
the Company.
"Company" means V.I. Technologies, Inc.
"Covered Employee" means a person whose income is subject to Section
162(m) of the Code.
"Designated Beneficiary" means the beneficiary designated by a
Participant, in a manner determined by the Committee, to receive amounts due or
exercise rights of the Participant in the event of the Participant's
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death. In the absence of an effective designation by a Participant, "Designated
Beneficiary" shall mean the Participant's estate.
"Effective Date" means January 25, 1996.
"Fair Market Value" means, with respect to Common Stock or any other
property, the fair market value of such property as determined by the Committee
in good faith or in the manner established by the Committee from time to time.
"Incentive Stock Option" means an option to purchase shares of Common
Stock awarded to a Participant under Section 6 that is intended to meet the
requirements of Section 422 of the Code or any successor provision.
"Nonstatutory Stock Option" means an option to purchase shares of
Common Stock awarded to a Participant under Section 6 that is not intended to be
an Incentive Stock Option.
"Option" means an Incentive Stock Option or a Nonstatutory Stock
Option.
"Other Stock-Based Award" means an Award, other than an Option, Stock
Appreciation Right, Performance Share, Restricted Stock or Stock Unit, having a
Common Stock element and awarded to a Participant under Section 11.
"Participant" means a person selected by the Committee to receive an
Award under the Plan.
"Performance Cycle" or "Cycle" means the period of time selected by
the Committee during which performance is measured for the purpose of
determining the extent to which an award of Performance Shares has been earned.
"Performance Shares" mean shares of Common Stock, which may be earned
by the achievement of performance goals, awarded to a Participant under Section
8.
"Reporting Person" means a person subject to Section 16 of the
Securities Exchange Act of 1934 or any successor provision.
"Restricted Period" means the period of time during which an Award may
be forfeited to the Company pursuant to the terms and conditions of such Award.
"Restricted Stock" means shares of Common Stock subject to forfeiture
awarded to a Participant under Section 9.
"Stock Appreciation Right" or "SAR" means a right to receive any
excess in value of shares of Common Stock over the exercise price awarded to a
Participant under Section 7.
"Stock Unit" means an award of Common Stock or units that are valued
in whole or in part by reference to, or otherwise based on, the value of Common
Stock, awarded to a Participant under Section 10.
Section 3. Administration
--------------
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The Plan shall be administered by the Committee, provided that the
Board may in any instance perform any of the functions delegated to the
Committee hereunder. The Committee shall select the Participants to receive
Awards and shall determine the terms and conditions of the Awards. The
Committee shall have authority to adopt, alter and repeal such administrative
rules, guidelines and practices governing the operation of the Plan as it shall
from time to time consider advisable, and to interpret the provisions of the
Plan. The Committee's decisions shall be final and binding. To the extent
permitted by applicable law, the Committee may delegate to one or more executive
officers of the Company the power to make Awards to Participants who are not
Reporting Persons and all determinations under the Plan with respect thereto,
provided that the Committee shall fix the maximum amount of such Awards for all
such Participants and a maximum for any one Participant.
Section 4. Eligibility
-----------
All employees and, in the case of Awards other than Incentive Stock
Options, Directors and consultants of the Company or any Affiliate, capable of
contributing significantly to the successful performance of the Company, other
than a person who has irrevocably elected not to be eligible, are eligible to be
Participants in the Plan. Incentive Stock Options may be awarded only to
persons eligible to receive such Options under the Code.
Section 5. Stock Available for Awards
--------------------------
(a) Subject to adjustment under subsection (b), Awards may be made
under the Plan for up to 2,400,000 shares of Common Stock. If any Award in
respect of shares of Common Stock expires or is terminated unexercised or is
forfeited, the shares subject to such Award, to the extent of such expiration,
termination or forfeiture, shall again be available for award under the Plan.
Common Stock issued through the assumption or substitution of outstanding grants
from an acquired company shall not reduce the shares available for Awards under
the Plan. Shares issued under the Plan may consist in whole or in part of
authorized but unissued shares or treasury shares.
(b) In the event that the Committee determines that any stock
dividend, extraordinary cash dividend, creation of a class of equity securities,
recapitalization, reorganization, merger, consolidation, split-up, spin-off,
combination, exchange of shares, warrants or rights offering to purchase Common
Stock at a price substantially below fair market value, or other similar
transaction affects the Common Stock such that an adjustment is required in
order to preserve the benefits or potential benefits intended to be made
available under the Plan, then the Committee (subject, in the case of Incentive
Stock Options, to any limitation required under the Code) shall equitably adjust
any or all of (i) the number and kind of shares in respect of which Awards may
be made under the Plan, (ii) the number and kind of shares subject to
outstanding Awards, and (iii) the award, exercise or conversion price with
respect to any of the foregoing, and if considered appropriate, the Committee
may make provision for a cash payment with respect to an outstanding Award,
provided that the number of shares subject to any Award shall always be a whole
number.
Section 6. Stock Options
-------------
(a) Subject to the provisions of the Plan, the Committee may award
Incentive Stock Options and Nonstatutory Stock Options and determine the number
of shares to be covered by each Option, the option price therefor and the
conditions and limitations applicable to the exercise of the Option. The
Committee may
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impose such conditions with respect to the exercise of Options, including
conditions relating to applicable federal and state securities laws, as it
considers necessary or advisable. The terms and conditions of Incentive Stock
Options shall be subject to and comply with Section 422 of the Code or any
successor provision and any regulations thereunder, and no Incentive Stock
Option may be granted hereunder more than ten years after the Effective Date.
(b) The Committee shall establish the option price at the time each
Option is awarded, which price shall not be less than 100% of the Fair Market
Value of the Common Stock on the date of award with respect to Incentive Stock
Options. Nonstatutory Stock Options may be granted at such prices as the
Committee may determine.
(c) Until the completion of an initial public offering of the Common
Stock, each optionholder shall execute a Stock Purchase and Right of Repurchase
Agreement, substantially in the form of Exhibit 1 hereto, prior to the purchase
---------
of any Stock pursuant to the exercise of Options. Each Option shall be
exercisable at such times and subject to such additional terms and conditions as
the Committee may specify in the applicable Award or thereafter. The Committee
may impose such conditions with respect to the exercise of Options, including
conditions relating to applicable federal or state securities laws, as it
considers necessary or advisable.
(d) No shares shall be delivered pursuant to any exercise of an Option
until payment in full of the option price therefor is received by the Company.
Such payment may be made in whole or in part in cash or, to the extent permitted
by the Committee at or after the award of the Option, by delivery of a note or
shares of Common Stock owned by the optionee, including Restricted Stock, or by
retaining shares otherwise issuable pursuant to the Option, in each case valued
at their Fair Market Value on the date of delivery or retention, or such other
lawful consideration as the Committee may determine.
(e) The Committee may provide that, subject to such conditions as it
considers appropriate, upon the delivery or retention of shares to the Company
in payment of an Option, the Participant automatically be awarded an Option for
up to the number of shares so delivered.
Section 7. Stock Appreciation Rights
-------------------------
(a) Subject to the provisions of the Plan, the Committee may award
SARs in tandem with an Option (at or after the award of the Option), or alone
and unrelated to an Option. SARs in tandem with an Option shall terminate to
the extent that the related Option is exercised, and the related Option shall
terminate to the extent that the tandem SARs are exercised. The Committee shall
determine at the time of grant or thereafter whether SARs are settled in cash,
Common Stock or other securities of the Company, Awards or other property, and
may define the manner of determining the excess in value of the shares of Common
Stock.
(b) The Committee shall fix the exercise price of each SAR or specify
the manner in which the price shall be determined. SARs granted in tandem with
Options shall have an exercise price not less than the exercise price of the
related Option. SARs granted alone and unrelated to an Option may not have an
exercise price less than 100% of the Fair Market Value of the Common Stock on
the date of grant, provided that such a SAR granted to a new employee or
consultant within 90 days of the date of employment may have a lower exercise
price so long as it is not less than 100% of the Fair Market Value on the date
of employment.
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(c) An SAR related to an Option, which SAR can only be exercised upon
or during limited periods following a change in control of the Company, may
entitle the Participant to receive an amount based upon the highest price paid
or offered for Common Stock in any transaction relating to the change in control
or paid during the thirty-day period immediately preceding the occurrence of the
change in control in any transaction reported in the stock market in which the
Common Stock is normally traded.
Section 8. Performance Shares
------------------
(a) Subject to the provisions of the Plan, the Committee may award
Performance Shares and determine the number of such shares for each Performance
Cycle and the duration of each Performance Cycle. There may be more than one
Performance Cycle in existence at any one time, and the duration of Performance
Cycles may differ from each other. The payment value of Performance Shares
shall be equal to the Fair Market Value of the Common Stock on the date the
Performance Shares are earned or, in the discretion of the Committee, on the
date the Committee determines that the Performance Shares have been earned.
(b) The committee shall establish performance goals for each Cycle,
for the purpose of determining the extent to which Performance Shares awarded
for such Cycle are earned, on the basis of such criteria and to accomplish such
objectives as the Committee may from time to time select. During any Cycle, the
Committee may adjust the performance goals for such Cycle as it deems equitable
in recognition of unusual or non-recurring events affecting the Company, changes
in applicable tax laws or accounting principles, or such other factors as the
Committee may determine.
(c) As soon as practicable after the end of a Performance Cycle, the
Committee shall determine the number of Performance Shares that have been earned
on the basis of performance in relation to the established performance goals.
The payment values of earned Performance Shares shall be distributed to the
Participant or, if the Participant has died, to the Participant's Designated
Beneficiary, as soon as practicable thereafter. The Committee shall determine,
at or after the time of award, whether payment values will be settled in whole
or in part in cash or other property, including Common Stock or Awards.
Section 9. Restricted Stock
----------------
(a) Subject to the provisions of the Plan, the Committee may award
shares of Restricted Stock and determine the duration of the Restricted Period
during which, and the conditions under which, the shares may be forfeited to the
Company and the other terms and conditions of such Awards. Shares of Restricted
Stock may be issued for no cash consideration or such minimum consideration as
may be required by applicable law.
(b) Shares of Restricted Stock may not be sold, assigned, transferred,
pledged or otherwise encumbered, except as permitted by the Committee, during
the Restricted Period. Notwithstanding the foregoing, in the Committee's
discretion, Awards in the form of Restricted Stock may be made transferable to a
limited liability company controlled solely by the Participant. Shares of
Restricted Stock shall be evidenced in such manner as the Committee may
determine. Any certificates issued in respect of shares of Restricted Stock
shall be registered in the name of the Participant and unless otherwise
determined by the Committee, deposited by the Participant, together with a stock
power endorsed in blank, with the Company. At the expiration of the Restricted
Period, the Company shall deliver such certificates to the Participant or if the
Participant has died, to the Participant's Designated Beneficiary.
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Section 10. Stock Units
-----------
(a) Subject to the provisions of the Plan, the Committee may award
Stock Units subject to such terms, restrictions, conditions, performance
criteria, vesting requirements and payment rules as the Committee shall
determine.
(b) Shares of Common Stock awarded in connection with a Stock Unit
Award shall be issued for no cash consideration or such minimum consideration as
may be required by applicable law.
Section 11. Other Stock-Based Awards
------------------------
(a) Subject to the provisions of the Plan, the Committee may make
other awards of Common Stock and other awards that are valued in whole or in
part by reference to, or are otherwise based on, Common Stock, including without
limitation convertible preferred stock, convertible debentures, exchangeable
securities and Common Stock awards or options. Other Stock-Based Awards may be
granted either alone or in tandem with other Awards granted under the Plan
and/or cash awards made outside of the Plan.
(b) The Committee may establish performance goals, which may be based
on performance goals related to book value, subsidiary performance or such other
criteria as the Committee may determine, Restricted Periods, Performance Cycles,
conversion prices, maturities and security, if any, for any Other Stock-Based
Award. Other Stock-Based Awards may be sold to Participants at the face value
thereof or any discount therefrom or awarded for no consideration or such
minimum consideration as may be required by applicable law.
Section 12. General Provisions Applicable to Awards
---------------------------------------
(a) Limitations on Grants of Options and SARs. Subject to adjustment
under Section 5(b), the number of shares subject to Options and SARs granted to
any one individual during any fiscal year may not exceed 223,613 shares.
(b) Reporting Person Limitations. Notwithstanding any other provision
of the Plan, to the extent required to qualify for the exemption provided by
Rule 16b-3, Awards made to a Reporting Person shall not be transferable by such
person other than by will or the laws of descent and distribution or, if then
permitted by Rule 16b-3, pursuant to a qualified domestic relations order as
defined in the Code or Title I of the Employee Retirement Income Security Act or
the rules thereunder, and are exercisable during such person's lifetime only by
such person or by such person's guardian or legal representative.
(c) Documentation. Each Award under the Plan shall be evidenced by a
writing delivered to the Participant specifying the terms and conditions thereof
and containing such other terms and conditions not inconsistent with the
provisions of the Plan as the Committee considers necessary or advisable to
achieve the purposes of the Plan or to comply with applicable tax and regulatory
laws and accounting principles.
(d) Committee Discretion. Each type of Award may be made alone, in
addition to or in relation to any other type of Award. The terms of each type
of Award need not be identical, and the Committee need not treat Participants
uniformly. Except as otherwise provided by the Plan or a particular Award, any
determination with respect to an Award may be made by the Committee at the time
of award or at any time thereafter.
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(e) Settlement. The Committee shall determine whether Awards are
settled in whole or in part in cash, Common Stock, other securities of the
Company, Awards or other property. The Committee may permit a Participant to
defer all or any portion of a payment under the Plan, including the crediting of
interest on deferred amounts denominated in cash and dividend equivalents on
amounts denominated in Common Stock.
(f) Dividends and Cash Awards. In the discretion of the Committee,
any Award under the Plan may provide the Participant with (i) dividends or
dividend equivalents payable currently or deferred with or without interest, and
(ii) cash payments in lieu of or in addition to an Award.
(g) Termination of Employment. The Committee shall determine the
effect on an Award of the disability, death, retirement or other termination of
employment of a Participant and the extent to which, and the period during
which, the Participant's legal representative, guardian or Designated
Beneficiary may receive payment of an Award or exercise rights thereunder.
(h) Change in Control. In order to preserve a Participant's rights
under an Award in the event of a change in control of the Company, the Committee
in its discretion may, at the time an Award is made or at any time thereafter,
take one or more of the following actions: (i) provide for the acceleration of
any time period relating to the exercise or realization of the Award, (ii)
provide for the purchase of the Award upon the Participant's request for an
amount of cash or other property that could have been received upon the exercise
or realization of the Award had the Award been currently exercisable or payable,
(iii) adjust the terms of the Award in a manner determined by the Committee to
reflect the change in control, (iv) cause the Award to be assumed, or new rights
substituted therefor, by another entity, or (v) make such other provision as the
Committee may consider equitable and in the best interests of the Company.
(i) Loans. The Committee may authorize the making of loans or cash
payments to Participants in connection with any Award under the Plan, which
loans may be secured by any security, including Common Stock, underlying or
related to such Award (provided that such Loan shall not exceed the Fair Market
Value of the security subject to such Award), and which may be forgiven upon
such terms and conditions as the Committee may establish at the time of such
loan or at any time thereafter.
(j) Withholding Taxes. The Participant shall pay to the Company, or
make provision satisfactory to the Committee for payment of, any taxes required
by law to be withheld in respect of Awards under the Plan no later than the date
of the event creating the tax liability. In the Committee's discretion, such
tax obligations may be paid in whole or in part in shares of Common Stock,
including shares retained from the Award creating the tax obligation, valued at
their Fair Market Value on the date of delivery. The Company and its Affiliates
may, to the extent permitted by law, deduct any such tax obligations from any
payment of any kind otherwise due to the Participant.
(k) Foreign Nationals. Awards may be made to Participants who are
foreign nationals or employed outside the United States on such terms and
conditions different from those specified in the Plan as the Committee considers
necessary or advisable to achieve the purposes of the Plan or to comply with
applicable laws.
(l) Amendment of Award. The Committee may amend, modify or terminate
any outstanding Award, including substituting therefor another Award of the same
or a different type, changing the date of exercise or realization and converting
an Incentive Stock Option to a Nonstatutory Stock Option, provided that the
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Participant's consent to such action shall be required unless the Committee
determines that the action, taking into account any related action, would not
materially and adversely affect the Participant.
Section 13. Miscellaneous
-------------
(a) No Right To Employment. No person shall have any claim or right
to be granted an Award, and the grant of an Award shall not be construed as
giving a Participant the right to continued employment. The Company expressly
reserves the right at any time to dismiss a Participant free from any liability
or claim under the Plan, except as expressly provided in the applicable Award.
(b) No Rights As Stockholder. Subject to the provisions of the
applicable Award, no Participant or Designated Beneficiary shall have any rights
as a stockholder with respect to any shares of Common Stock to be distributed
under the Plan until he or she becomes the holder thereof. A Participant to
whom Common Stock is awarded shall be considered the holder of the Stock at the
time of the Award except as otherwise provided in the applicable Award.
(c) Effective Date. The 1996 Equity Incentive Plan became effective
on January 25, 1996. Subject to the approval of the Stockholders of the
Company, this 1998 Equity Incentive Plan, which amends and restates the 1996
Equity Incentive Plan, will become effective on February 18, 1998. Prior to
such approval, Awards may be made under the Plan expressly subject to such
approval.
(d) Amendment of Plan. The Board may amend, suspend or terminate the
Plan or any portion thereof at any time, subject to any stockholder approval
that the Board determines to be necessary or advisable.
(e) Governing Law. The provisions of the Plan shall be governed by
and interpreted in accordance with the laws of Delaware.
_______________________________
# # #
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