<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
FILED BY THE REGISTRANT [X] FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
--------------------------------------------------------------------------------
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
IMPLANT SCIENCES CORPORATION
(Name of Registrant as Specified In Its Charter)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
--------------------------------------------------------------------------------
<PAGE> 2
IMPLANT SCIENCES CORPORATION
107 AUDUBON ROAD, #5
WAKEFIELD, MA 01880
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON THURSDAY, DECEMBER 7, 2000
------------------------
You are cordially invited to attend the 2000 Annual Meeting of Stockholders
(the "Annual Meeting") of Implant Sciences Corporation (the "Company") to be
held on Thursday, December 7, 2000 at 10:00 a.m. at the office of Foley, Hoag &
Eliot, LLC, One Post Office Square, Boston, Massachusetts 02109 for the
following purposes:
1. To elect five directors of the Company to serve until the 2001
Annual Meeting of Stockholders and until their respective successors
are duly elected and qualified; and
2. To approve adoption of the Company's 2000 Incentive and Non
Qualified Stock Option Plan and the reservation of 300,000 shares of
Common Stock for issuance thereunder; and
3. To consider and act upon any other matters which may properly be
brought before the Annual Meeting and at any adjournment(s) or
postponement(s)thereof.
The Board of Directors has fixed the close of business on October 10, 2000
as the record date for determining the stockholders entitled to notice of and to
vote at the 2000 Annual Meeting and at any adjournments or postponements
thereof. Only stockholders of record of the Company's Common Stock at the close
of business on that date will be entitled to notice of and to vote at the Annual
Meeting and at any adjournments or postponements thereof.
YOU ARE URGED TO READ THE ATTACHED PROXY STATEMENT, WHICH CONTAINS
INFORMATION RELEVANT TO THE ACTIONS TO BE TAKEN AT THE MEETING. IN ORDER TO
ASSURE THE PRESENCE OF A QUORUM, WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING
IN PERSON, PLEASE SIGN AND DATE THE ACCOMPANYING PROXY CARD AND MAIL IT PROMPTLY
IN THE ENCLOSED ENVELOPE. YOU MAY REVOKE YOUR PROXY IF YOU SO DESIRE AT ANY TIME
BEFORE IT IS VOTED.
By Order of the Board of Directors
/s/ Stephen N. Bunker
----------------------------------
STEPHEN N. BUNKER, Clerk
Wakefield, Massachusetts
October 12, 2000
<PAGE> 3
IMPLANT SCIENCES CORPORATION
107 AUDUBON ROAD #5
WAKEFIELD, MASSACHUSETTS 01880
------------------------
PROXY STATEMENT
------------------------
2000 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON THURSDAY, DECEMBER 7, 2000
October 12, 2000
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Implant Sciences Corporation (the
"Company") for use at the 2000 Annual Meeting of Stockholders of the Company to
be held on Thursday, December 7, 2000, at 10:00 am, and at any adjournments or
postponements thereof (the "Annual Meeting"). At the Annual Meeting,
stockholders will be asked to vote upon (i) the election of five directors of
the Company (ii) the adoption of the 2000 Incentive and Non Qualified Stock
Option Plan and (iii) any other matters properly brought before the Annual
Meeting.
The Company's executive offices are located at 107 Audubon Road, #5,
Wakefield, Massachusetts 01880. The Company's telephone number is 781-246-0700.
This Proxy Statement and the accompanying Notice of Annual Meeting and Proxy
Card are first being sent to stockholders on or about October 13, 2000.
The Board of Directors has fixed the close of business on October 10, 2000
as the record date for the determination of stockholders entitled to notice of
and to vote at the Annual Meeting (the "Record Date"). Only stockholders of
record of the Company's common stock, par value $.10 per share (the "Common
Stock"), at the close of business on the Record Date will be entitled to notice
of and to vote at the Annual Meeting. As of the Record Date, there were
5,805,370 shares of Common Stock outstanding and entitled to vote at the Annual
Meeting. Holders of Common Stock outstanding as of the close of business on the
Record Date will be entitled to one vote for each share held by them.
The presence, in person or by proxy, of holders of at least a majority of
the total number of outstanding shares of Common Stock entitled to vote is
necessary to constitute a quorum for the transaction of business at the Annual
Meeting. The affirmative vote of the holders of a plurality of the shares of
Common Stock present or represented at the Annual Meeting is required for the
election of directors. Abstentions and broker non-votes are each included in the
number of shares present at the Annual Meeting for purposes of establishing a
quorum. Abstentions and broker non-votes will have no effect on the outcome of
the election of directors.
STOCKHOLDERS OF THE COMPANY ARE REQUESTED TO COMPLETE, DATE, SIGN AND
PROMPTLY RETURN THE ACCOMPANYING PROXY CARD IN THE ENCLOSED POSTAGE-PREPAID
ENVELOPE. SHARES REPRESENTED BY A PROPERLY EXECUTED PROXY RECEIVED PRIOR TO THE
VOTE AT THE ANNUAL MEETING AND NOT REVOKED WILL BE VOTED AT THE ANNUAL MEETING
AS DIRECTED ON THE PROXY. IF A PROPERLY EXECUTED PROXY IS SUBMITTED AND NO
INSTRUCTIONS ARE GIVEN, THE PROXY WILL BE VOTED FOR THE ELECTION OF THE FIVE
NOMINEES FOR DIRECTOR OF THE COMPANY NAMED IN THIS PROXY STATEMENT AND FOR THE
ADOPTION OF THE 2000 INCENTIVE AND NON QUALIFIED STOCK OPTION PLAN AND THE
RESERVATION OF 300,000 SHARES THEREUNDER. IT IS NOT ANTICIPATED THAT ANY MATTER
OTHER THAN THOSE SET FORTH IN THIS PROXY STATEMENT WILL BE PRESENTED AT THE
ANNUAL MEETING. IF OTHER MATTERS ARE PRESENTED, PROXIES WILL BE VOTED IN
ACCORDANCE WITH THE DISCRETION OF THE PROXY HOLDERS. YOU MAY REVOKE YOUR PROXY
AT ANY TIME BEFORE IT IS VOTED.
A stockholder of record may revoke a proxy at any time before it has been
exercised by filing a written revocation with the Secretary of the Company at
the address of the Company set forth above; by filing a duly executed proxy
bearing a later date; or by appearing in person and voting by ballot at the
Annual Meeting. Any stockholder of record as of the Record Date attending the
Annual Meeting may vote in person whether or not a proxy has been previously
given, but the presence (without further action) of a stockholder at the Annual
Meeting will not constitute revocation of a previously given proxy.
<PAGE> 4
THE COMPANY'S 2000 ANNUAL REPORT, INCLUDING THE COMPANY'S AUDITED FINANCIAL
STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2000, IS BEING MAILED TO
STOCKHOLDERS CONCURRENTLY WITH THIS PROXY STATEMENT.
PROPOSAL 1
ELECTION OF DIRECTORS
The Board of Directors of the Company is currently comprised of five
members with each director serving for a term of one year and until their
successors are duly elected and qualified.
At the Annual Meeting, five directors will be elected to serve until the
2001 Annual Meeting and until their successors are duly elected and qualified.
The Board of Directors has nominated Anthony J. Armini, Stephen N. Bunker,
Robert E. Hoisington, Shunkichi Shimizu and Michael Szycher (the "Nominees").
Each Nominee has indicated his willingness to serve as a director of the
Company, and therefore the Board of Directors anticipates that each such Nominee
will serve as a director if elected. However, if any person nominated by the
Board of Directors is unable to accept election, the proxies will be voted for
the election of such other person or persons as the Board of Directors may
recommend.
INFORMATION REGARDING NOMINEES, DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information with respect to each
director, officer and director nominee, based on information furnished to the
Company by each person. The following information is as of October 10, 2000
unless otherwise specified.
DIRECTORS AND EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
NAME AGE POSITION DIRECTOR SINCE
---- --- -------- --------------
<S> <C> <C> <C>
Anthony J. Armini* 62 President, Chief Executive Officer and 1984
Chairman of the Board of Directors
Stephen N. Bunker* 57 Vice President and Chief Scientist, Director 1988
Darlene M. Deptula-Hicks* 43 Vice President and Chief Financial Officer, --
Treasurer
Alan D. Lucas 44 Vice President of Marketing Sales and Business --
Development
Robert E. Hoisington 64 Director 1992
Shunkichi Shimizu 55 Director 1998
Michael Szycher 62 Director 1999
</TABLE>
---------------
(*) Executive Officer
Dr. Anthony J. Armini has been the President, Chief Executive Officer, and
Chairman of the Board of Directors since the Company's incorporation. From 1972
to 1984, prior to founding the Company, Dr. Armini was Executive Vice President
at Spire Corporation. From 1967 to 1972, Dr. Armini was a Senior Scientist at
McDonnell Douglas Corporation. Dr. Armini received his Ph.D. in nuclear physics
from the University of California, Los Angeles in 1967. Dr. Armini is the author
of eighteen patents and five patents pending in the field of implant technology
and fourteen publications in this field. Dr. Armini has over thirty years of
experience working with cyclotrons and linear accelerators, the production and
characterization of radioisotopes, and fifteen years' experience with ion
implantation in the medical and semiconductor fields. Dr. Armini has been
nominated to serve on the Board of Directors of CardioTech International, Inc. a
publicly traded company of which Dr. Szycher is President and Chief Executive
Officer.
Dr. Stephen N. Bunker has served as the Vice President and Chief Scientist
of the Company since 1987 and Director of the Company since 1988. Prior to
joining the Company, from 1972 to 1987, Dr. Bunker was a Chief Scientist at
Spire Corporation. From 1971 to 1972, Dr. Bunker was an Engineer at McDonnell
Douglas
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<PAGE> 5
Corporation. Dr. Bunker received his Ph.D. in nuclear physics from the
University of California, Los Angeles in 1969. Dr. Bunker is the author of ten
patents in the field of implant technology.
Darlene M. Deptula-Hicks joined the Company in July 1998 as Vice President
and Chief Financial Officer. Prior to joining the Company, from 1997 to 1998 Ms.
Deptula-Hicks was the Corporate Controller for ABIOMED, Inc., a medical device
manufacturer. From 1994 to 1997 Ms. Deptula-Hicks was an independent financial
consultant. From 1992 to 1994 Ms. Deptula-Hicks was the Vice President and Chief
Financial Officer of GCA, a division of General Signal Corporation, a
semiconductor equipment manufacturer. Ms. Deptula-Hicks holds a BS in Accounting
and an MBA.
Alan D. Lucas joined the Company in March 1998 as Vice President of
Marketing, Sales and Business Development. Prior to joining the Company, Mr.
Lucas accumulated over 20 years' experience in various marketing and business
development positions for medical device companies. Most recently, from 1996 to
1998, Mr. Lucas was the Director of Corporate Development at ABIOMED, Inc. From
1994 to 1996, Mr. Lucas was a strategic marketing and sales consultant focused
on medical technology. From 1991 to 1994 Mr. Lucas was the Director of Marketing
at Vision Sciences, Inc. a developmental stage medical device company.
Robert E. Hoisington has served on the Board of Directors of the Company
since August 1992. He is the President and founder of Management Strategies, a
general line consulting firm providing strategic planning for businesses with
annual revenues ranging from $10 million to $1 billion since 1985. Prior to
founding Management Strategies, Mr. Hoisington was a professional management
consultant at Arthur Young & Company.
Shunkichi Shimizu joined the Company's Board of Directors in March, 1998.
He has been the Executive Vice President of TK Holdings, Inc. of Delaware, a
subsidiary of Takata Corporation since 1997. Takata Corporation is a
manufacturer of seat belts and airbags. Prior to joining Takata Corporation, he
served as Head of International Financial Institutions Division at the Bank of
Tokyo-Mitsubishi, Ltd., Headquarters.
Dr. Michael Szycher, joined the Company's Board of Directors in December
1999. He has been President and Chief Executive Officer and Director of
CardioTech International, Inc., a publicly traded manufacturer of medical
devices and biocompatible polymers since 1996. From 1988 to 1996, Dr. Szycher
was Chairman and Chief Technology Officer of Polymedica Industries. Dr. Szycher
is a recognized authority on polyurethanes and blood compatible polymers. He is
the editor of six books on various subjects in blood compatible materials and
devices and the author of eighty original research articles. Dr. Szycher is also
Editor-in-Chief of the quarterly publication Journal of Biomaterial
Applications.
THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors of the Company held eight meetings during the fiscal
year ended June 30, 2000 which were fully attended. The Company has standing
Audit and Compensation Committees.
AUDIT COMMITTEE
The members of the Audit Committee are Messrs. Hoisington (as Chairman),
and Shimizu. Messrs. Hoisington and Shimizu are independent directors of the
Company meeting the American Stock Exchange requirements. The Board of Directors
has adopted a written charter for the Audit Committee. The Audit Committee has
reviewed and discussed the results of the annual audit of the Company's accounts
conducted by the Company's independent auditors and the recommendations of the
auditors with respect to accounting systems and controls with management. During
the fiscal year ended June 30, 2000 the Audit Committee held two meetings.
COMPENSATION COMMITTEE
The members of the Compensation Committee are Messrs. Hoisington (as
Chairman), Shimizu and Szycher. The Compensation Committee reviews and approves
the Company's executive compensation and
3
<PAGE> 6
benefit policies and administers the Company's 1998 Incentive and Non Qualified
Stock Option Plan. During the fiscal year ended June 30, 2000, the Compensation
Committee held three meetings.
The Board of Directors selects nominees for election as directors of the
Company. The Board of Directors will consider a nominee for election to the
Board recommended by a stockholder of record if such recommendation is timely in
accordance with, and is accompanied by the information required by, the
Company's By-laws. The Company does not maintain a standing nominating
committee.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's officers, directors and persons who beneficially own more than 10%
of a registered class of the Company's equity securities ("ten percent
stockholders") to file reports of ownership and changes in ownership with the
Securities and Exchange Commission ("SEC"). Officers, directors and ten percent
stockholders are charged by the SEC regulations to furnish the Company with
copies of all Section 16(a) forms they file.
Based solely upon a review of Forms 3, 4, and 5 and amendments thereto
furnished to the Company during the past fiscal year, and, if applicable,
written representations that Form 5 was not required, the Company believes that
all Section 16(a) filing requirements applicable to its officers, directors and
ten percent stockholders were fulfilled in a timely manner.
EXECUTIVE COMPENSATION
Summary Compensation Table. The following table sets forth the aggregate
cash compensation paid by the Company with respect to the three fiscal years
ended June 30, 1998, 1999 and 2000 to the Company's Chief Executive Officer and
each of the three other most highly compensated executive officers in fiscal
2000 (the "Named Executive Officers"). The Company has no other executive
officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
-----------------
ANNUAL COMPENSATION SHARES
----------------------------------------- UNDERLYING
NAME AND OTHER ANNUAL OPTIONS
PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($)(1) GRANTED(#)
------------------ ---- --------- -------- ------------------ -----------------
<S> <C> <C> <C> <C> <C>
Anthony J. Armini*................ 2000 $129,837 $25,000 $19,386 --
President, Chief Executive
Officer 1999 $124,334 $35,000 $ 9,188 --
and Chairman of the Board 1998 $104,000 -- $ 4,044
Stephen N. Bunker*................ 2000 $118,213 -- $ 6,514 --
Vice President, Chief 1999 $ 96,135 -- $ 2,963 --
Scientist, Director 1998 $ 79,000 -- $ 2,605
Darlene M. Deptula-Hicks*......... 2000 $121,477 $40,000 $ 6,401 20,000
Vice President and Chief
Financial 1999 $ 94,344 $40,000 $ 569 25,200
Officer, Treasurer 1998 -- -- -- --
Alan D. Lucas..................... 2000 $123,478 $45,000 $ 6,465 50,000
Vice President of Sales,
Marketing 1999 $105,694 $35,000 $ 456 --
and Business Development 1998 $ 22,500 $10,000 -- 25,200
</TABLE>
---------------
* Executive Officer
(1) Other annual compensation consists of life and disability insurance premiums
and 401(k) plan benefits paid by the Company on behalf of the Named
Executive Officer.
4
<PAGE> 7
The following table sets forth certain information regarding stock options
held as of June 30, 2000 by the Named Executive Officers.
OPTION GRANTS IN FISCAL 2000
<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL GRANTED
SECURITIES UNDERLYING TO EMPLOYEES IN EXERCISE PRICE
NAME AND PRINCIPAL POSITION OPTIONS GRANTED(#) FISCAL YEAR ($/SH) EXPIRATION DATE
--------------------------- --------------------- ------------------ -------------- ---------------
<S> <C> <C> <C> <C>
Darlene M. Deptula-Hicks........... 20,000 17.3% $5.00 2009
Vice President and Chief
Financial Officer, Treasurer
Alan D. Lucas...................... 20,000 17.3% $5.00 2009
Vice President of Sales,
Marketing 30,000 26.0% $6.50 2010
and Business Development
</TABLE>
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT JUNE 30, 2000 AT JUNE 30, 2000(1)
--------------------------- ---------------------------
NAME AND PRINCIPAL POSITION EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
--------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Darlene M. Deptula-Hicks......................... 8,400 36,800 $ 51,450 $205,400
Vice President and Chief Financial Officer,
Treasurer
Alan D. Lucas.................................... 46,800 28,400 $211,650 $153,950
Vice President of Sales, Marketing and Business
Development
</TABLE>
---------------
(1) As of June 30, 2000, the market value of a share of Common Stock was
$10.125.
COMPENSATION COMMITTEE AND EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT
AND CHANGE OF CONTROL ARRANGEMENTS
None
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In January 2000, the Company received notice of the award of a joint
research grant. Funding is provided through a $100,000 Phase I grant by the
National, Heart, Lung & Blood Institute to CardioTech International and
sub-grants to the Company and Stanford University. In March 2000, the Company
also entered into a $250,000 joint research agreement with CardioTech
International to develop a proprietary radioactive brachytherapy technology. Dr.
Michael Szycher, President and CEO of CardioTech International, is a director of
the Company.
DIRECTOR COMPENSATION
The Company's directors who are employees of the Company do not receive any
compensation for service on the Board of Directors. Directors who are not
employees of the Company, other than Mr. Shimizu, are paid a yearly stipend of
$2,500 and are reimbursed for reasonable expenses incurred in connection with
attendance at Board and committee meetings.
Under the 1998 Incentive and Nonqualified Stock Option Plan (the "Option
Plan"), each Director who is not an employee of the Company, other than Mr.
Shimizu, automatically receives an annual grant of options to purchase 2,000
shares of Common Stock at an exercise price equal to the closing price of the
Common Stock on that date for each year of service. Each such option will have a
term of five years and will vest in full on the date of the grant.
5
<PAGE> 8
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of October 10, 2000,
with respect to the beneficial ownership of the Company's Common Stock of each
director and nominee for director, each named executive officer in the Executive
Compensation table below, all directors and current officers of the Company as a
group, and each person known by the Company to be a beneficial owner of five
percent or more of the Company's Common Stock. This information is based upon
information received from or on behalf of the individuals named therein.
<TABLE>
<CAPTION>
PERCENT
NUMBER OF SHARES OF
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED(1) CLASS(5)
------------------------ --------------------- --------
<S> <C> <C>
Anthony J. Armini............................... 1,223,122 21.1%
Patricia A. Armini.............................. 781,122(6) 13.5%
Casparin Corporation............................ 776,418(4) 13.4%
Stephen N. Bunker............................... 636,348 11.0%
MedTec Iowa, Inc................................ 500,000 8.6%
Robert E. and Joan Hoisington................... 30,000 *
Shunkichi Shimizu............................... --(3) --
Darlene M. Deptula-Hicks........................ 23,467(2) *
Alan D. Lucas................................... 61,867(2) 1.1%
All Directors and Officers as a group (5
persons)...................................... 1,974,804 34.0%
</TABLE>
---------------
* Less than 1%.
(1) Unless otherwise noted, each person identified possesses sole voting and
investment power over the shares listed.
(2) Includes those options exercisable within 60 days of the date hereof.
(3) Mr. Shimizu is the designated director for Casparin Corporation and is not
permitted by Casparin Corporation to personally hold any stock or receive
any stipend.
(4) Casparin Corporation is a wholly-owned subsidiary of TREC (Holland)
Amsterdam B.V., a sister company of NAR Holding Corporation.
(5) The calculation of percent of class is based on the number of shares of
Common Stock outstanding as of October 10, 2000, excluding shares held by or
for the Company.
(6) On March 14, 2000 Ms. Armini sold 150,000 shares of restricted common stock
to various individuals, some of which are the principals of MedTec Iowa,
Inc.
PROPOSAL 2
APPROVAL OF THE IMPLANT SCIENCES 2000 INCENTIVE AND NON
QUALIFIED STOCK OPTION PLAN
The Board of Directors of the Company adopted the 2000 Incentive and Non
Qualified Stock Option Plan on August 28, 2000, and has reserved 300,000 shares
for issuance, subject to approval by the stockholders. The purpose of the Plan
is to encourage and enable officers, directors, key employees and other
individuals providing services to the Company to acquire a proprietary interest
in the Company. It is anticipated that providing such persons with a direct
stake in the Company's welfare will assure a closer identification of their
interests with those of the Company and its shareholders, thereby stimulating
their efforts on the Company's behalf and strengthening their desire to remain
with the Company.
Under the Internal Revenue Code (the "Code"), stockholder approval is
necessary for stock options relating to the shares issuable under the 2000
Incentive and Non Qualified Stock Option Plan to qualify as incentive stock
options under Section 422 of the Code. In addition, American Stock Exchange
rules (the "AMEX Rules") require stockholder approval of the 2000 Incentive and
Non Qualified Stock Option Plan.
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<PAGE> 9
Approval for purposes of the Code and the AMEX Rules will require the
affirmative vote of a majority of the shares of Common Stock present or
represented at the meeting and voting on the 2000 Incentive and Non Qualified
Stock Option Plan. The full text of the 2000 Incentive and Non Qualified Stock
Option Plan as adopted by the Board of Directors is attached as Appendix A. The
following is a summary of some of its provisions.
The 2000 Incentive and Non Qualified Stock Option Plan will be administered
by the compensation committee (the "committee") consisting of at lease two
"outside directors". For purposes of the plan, an "outside director" is a person
who (a) is not an employee of the Company or any affiliate, (b) is not a former
employee of the Company or any affiliate who is receiving compensation for prior
services during the taxable year of the company or any affiliate, (c) has not
been an officer of the Company or any affiliate, and (d) does not receive
remuneration from the Company or any affiliate in any capacity other than as a
director. The Board of Directors may establish an additional single-member
committee (consisting of an executive officer) that may grant options under the
2000 Incentive and Non Qualified Stock Option Plan to non-executive officers.
The committee that will administer the 2000 Incentive and Non Qualified
Stock Option Plan will select the individuals who will receive options and will
determine the option exercise price and other terms of each option, subject to
the provisions of the Plan. This committee also has the power to make changes to
outstanding options under the Plan, including the power to reduce the exercise
price, accelerate the vesting schedule and extend the expiration date of any
option.
The 2000 Incentive and Non Qualified Stock Option Plan authorizes the grant
of options to purchase Common Stock intended to qualify as incentive stock
options, as defined in Section 422 of the Internal Revenue Code, and options
that do not so qualify. Incentive options may be granted under the Plan to
employees of the Company or any subsidiary, including directors and officers who
are employees of the Company or any subsidiary. Nonqualified options may be
granted under the Plan to employees of the Company or any subsidiary and to
directors, consultants and other persons who render services to the Company or
any subsidiary, regardless of whether they are employees of the Company or any
subsidiary.
The exercise price of incentive options granted under the 2000 Incentive
and Non Qualified Stock Option Plan must equal or exceed the fair market value
of the Common Stock on the date of grant. The exercise price of incentive
options granted under the Plan to a person who owns more than 10% of the
combined voting power of all classes of outstanding capital stock of the Company
or any subsidiary (a "greater-than-ten-percent stockholder") must equal or
exceed 110% of the fair market value of the Common Stock on the date of grant.
The exercise price of nonqualified options granted under the Plan may be above
or below the fair market value of the Common Stock.
Each incentive option will expire no later than ten years after the date of
grant or, in the case of an option granted to a greater-than-ten-percent
stockholder, five years after the date of grant. The aggregate fair market (at
the time of grant) of shares issuable pursuant to incentive options that are
exercisable for the first time in any calendar year may not exceed $100,000,
unless a greater amount is permitted by law. No person may be granted options
under the 2000 Stock Incentive Plan to purchase more than 200,000 shares of
Common Stock in any calendar year, including options that are subsequently
forfeited, canceled or otherwise terminated. For this purpose, the repricing of
any option is deemed the grant of a new option.
Except as otherwise provided by the committee that administers the 2000
Incentive and Non Qualified Stock Option Plan, options are not transferable
except by will or by the laws of descent and distribution, and during the
holder's lifetime are exercisable only by the holder. The committee that
administers the Plan will determine, in its discretion, how and when
nonqualified options will terminate. Incentive stock options will terminate as
follows:
- If the option holder is an employee of the Company at the time of his or
her death, his or her incentive option may be exercised, to the extent
exercisable at the date of death, until 180 days from the participant's
date of death or the expiration of the term of the option stated in his
or her option
7
<PAGE> 10
agreement, whichever is earlier. In such instances, the option may be
exercised by the option holder's legal representative or legatee.
- If the option holder's employment with the Company terminates because of
disability (as defined in the 2000 Incentive and Non Qualified Stock
Option Plan), his or her incentive option may be exercised, to the extent
exercisable at the time of termination, for a period of 180 days from the
date of termination of employment, or the expiration of option stated on
the option agreement whichever is earlier.
- If the option holder's employment with the Company terminates because of
retirement in accordance with the Company's normal retirement policies,
his or her incentive option is exercisable for a period of 60 days from
the date of the termination of the option holder's employment.
- If the option holder's employment is terminated by the Company for cause
(as defined in the 2000 Incentive and Non Qualified Stock Option Plan),
his or her incentive option will immediately terminate, unless the
committee that administers the Plan allows the option holder to exercise
such option for a period of 30 days from the termination date or the
stated expiration date of the option whichever is earlier. The committee
may do so in its sole discretion.
- If the option holder's employment with the Company terminates for any
reason other than those listed above, his or her incentive option may be
exercised, to the extent it was exercisable at the time of termination,
for a period of 90 days (or a different period if the committee that
administers the 2000 Incentive and Non Qualified Stock Option Plan so
specifies) from the date of termination of employment or until the stated
expiration date of the option, whichever is earlier.
The holder of any option may pay the purchase price of the shares subject
to the option (a) in cash or by certified or bank check in an amount equal to
the exercise price for such shares, (b) with the consent of the committee that
administers the 2000 Incentive and Non Qualified Stock Option Plan, in shares of
Company Common Stock having a fair market value equal to the exercise price for
such shares, (c) by delivery of irrevocable instructions to a broker to deliver
to the Company cash or a check payable to the Company for the purchase price,
provided that the holder and the broker enter into an indemnity agreement or any
other agreement that the committee that administers the 2000 Incentive and Non
Qualified Stock Option Plan requires as a prerequisite to this method of
payment, or (d) by any other means that the committee that administers the 2000
Incentive and Non Qualified Stock Option Plan determines are consistent with the
purposes of the 2000 Incentive and Non Qualified Stock Option Plan and with
applicable laws and regulations.
AMENDMENT OF THE 2000 INCENTIVE AND NON QUALIFIED STOCK OPTION PLAN
The 2000 Incentive and Non Qualified Stock Option Plan does not have a
fixed duration; however incentive options may not be granted more that ten years
after the date the Plan was approved by the Board of Directors. According to the
terms of the 2000 Incentive and Non Qualified Stock Option Plan, the Company's
Board of Directors may amend or discontinue the Plan at any time. However, no
amendment which will disqualify the 2000 Stock Incentive Plan from the Internal
Revenue Code's incentive stock option requirements will be effective without the
approval of the Company's stockholders. In addition, regulations of the Nasdaq
National Market require stockholder approval of certain amendments to the Plan.
FEDERAL INCOME TAX INFORMATION WITH RESPECT TO THE 2000 INCENTIVE AND NON
QUALIFIED STOCK OPTION PLAN
The holder of a nonqualified option recognized no income for federal income
tax purposes on the grant of the option. On the exercise of a nonqualified
option, the difference between the fair market value of the underlying shares of
Common Stock on the exercise date and the option exercise price is treated as
compensation to the holder of the option taxable as ordinary income in the year
of exercise. Such fair market value becomes the basis for the underlying shares
which will be used in computing any capital gain or loss upon disposition of
such shares.
The holder of an incentive option recognizes no income for federal income
tax purposes on the grant of the option. Except as provided below with respect
to the alternative minimum tax, there is no tax upon
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exercise of an incentive option. If the holder does not dispose of the shares
acquired upon exercise of the incentive option within two years from the date of
the grant of the incentive option or within one year after exercise of the
incentive option, any gain realized by the option holder on the subsequent sale
of those shares will be treated for federal income tax purposes as long-term
capital gain if the shares were held for more than 12 months. If the holder
sells the shares before the expiration of such two-year and one-year periods (a
"disqualifying disposition"), the difference between the lesser of the value of
the shares at the date of exercise or at the date of sale and the exercise price
of the incentive option will be treated as compensation to the option holder
taxable as ordinary income and the excess gain, if any, will be treated as
capital gain. That capital gain will be long-term capital gain if the shares
were held for more than 12 months.
The excess of the fair market value of the underlying shares of Common
Stock over the exercise price at the time of exercise of an incentive option
will constitute an item of tax preference for purposes of the alternative
minimum tax. Taxpayers who incur the alternative minimum tax will be allowed a
credit which may be carried forward indefinitely to be used as a credit against
the taxpayer's regular tax liability in a later year; however, the alternative
minimum tax credit can not reduce the regular tax below the alternative minimum
tax for that carryover year.
Generally, subject to certain limitations, the company may deduct on its
corporate income tax returns, in the year in which an option holder recognizes
ordinary income upon (a) the exercise of a nonqualified option or (b) a
disqualifying disposition of an incentive option, an amount equal to the amount
recognized by the option holder as ordinary income upon the occurrence of such
exercise or disqualifying disposition.
The 2000 Incentive and Non Qualified Stock Option Plan is not subject to
the provisions of the Employee Retirement Income Security Act of 1974, nor is
the plan qualified under Section 401(a) of the Internal Revenue Code.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE
FOR APPROVAL OF PROPOSAL NO. 2.
OTHER MATTERS
INDEPENDENT AUDITORS
The Board of Directors has reappointed Ernst and Young, LLP, as the
independent auditors to audit the financial statements of the Company for the
fiscal year ending June 30, 2001. This firm has served as the Company's auditors
since 1997.
Representatives of Ernst and Young, LLP have been invited to the Annual
Meeting and are expected to be present at the Annual Meeting. They will be given
an opportunity to make a statement, if so desired. Representatives will be
available to respond to appropriate questions from stockholders.
SOLICITATION OF PROXIES
The cost of solicitation of proxies in the form enclosed herewith will be
borne by the Company. In addition to the solicitation of proxies by mail, the
directors, officers and employees of the Company may also solicit proxies
personally or by telephone without special compensation for such activities. The
Company will also request persons, firms and corporations holding shares in
their names or in the names of their nominees, which are beneficially owned by
others, to send proxy materials to and obtain proxies from such beneficial
owners. The Company will reimburse such holders for their reasonable expenses.
OTHER PROPOSED ACTION
The Board of Directors knows of no other business to come before the
Meeting. However, if any other business should properly be presented to the
Meeting, the proxies will be voted in accordance with the judgement of the
persons holding the proxies.
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STOCKHOLDER PROPOSALS
In order to be eligible for inclusion in the Company's proxy statement and
form of proxy for the annual meeting scheduled to be held in December 2001,
stockholder proposals must comply with SEC Rule 14a-8 and any other applicable
rules and must be delivered to the Company's principal executive offices at
least 120 days prior to the anniversary date of mailing of this Proxy Statement,
being June 15, 2001.
In addition, SEC Rule 14a-4 provides that with respect to any proposal or
nomination made by a stockholder at the annual meeting scheduled for December
2001, the persons named as proxies by the Company in its solicitation materials
will have discretionary authority to vote on such proposal or nomination if the
Company did not have notice of the matter at least 45 days prior to the
anniversary date of mailing of this Proxy Statement, being September 3, 2001.
ANNUAL REPORT AND FORM 10-KSB
Additional copies of the Annual Report to Stockholders for the fiscal year
ended June 30, 2000 and copies of the Company's Annual Report on Form 10-KSB for
the fiscal year ended June 30, 2000 as filed with the Securities and Exchange
Commission are available to stockholders without charge upon written request
addressed to: Investor Relations, Implant Sciences Corporation, 107 Audubon
Road, #5, Wakefield, Massachusetts 01880.
By Order of the Board of Directors
/s/ Stephen N. Bunker
----------------------------------
STEPHEN N. BUNKER, Clerk
Wakefield, Massachusetts
October 12, 2000
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APPENDIX A
IMPLANT SCIENCES CORPORATION
2000 INCENTIVE AND NONQUALIFIED STOCK OPTION PLAN
SECTION 1. PURPOSES OF PLAN; DEFINITIONS
1.1 General Purposes. Implant Sciences Corporation, a Massachusetts
corporation (the "Company"), desires to afford certain executives, key employees
and directors of, and certain other individuals providing services to, the
Company or its subsidiary companies an opportunity to initiate or increase their
proprietary interests in the Company, and thus to create in such persons an
increased interest in and greater concern for the long-term welfare of the
Company. The Company, by granting under this 2000 Incentive and Nonqualified
Stock Option Plan (this "Plan") stock options to acquire shares of common stock
of the Company (an "Option"), seeks to retain the services of persons now
holding key positions with the Company and to secure the services of other
persons capable of filling key positions with the Company or its subsidiary
companies.
1.2 Definitions. For purposes of this Plan, the following terms shall
have the indicated meanings:
"Board" means the Board of Directors of the Company.
"Cause" shall mean, with respect to any Option holder, a determination by
the Company (including the Board) that the Holder's employment or other
relationship with the Company should be terminated as a result of (i) a material
breach by the Option holder of any agreement to which the Option holder and the
Company are parties, (ii) any act (other than retirement) or omission to act by
the Option holder that may have a material and adverse effect on the business of
the Company or on the Option holder's ability to perform services for the
Company, including, without limitation, the proven or admitted commission of any
crime (other than an ordinary traffic violation), or (iii) any material
misconduct or material neglect of duties by the Option holder in connection with
the business or affairs of the Company.
"Code" means the Internal Revenue Code of 1986, as amended, and any
successor code thereto, together with related rules, regulations and
interpretations; and any reference herein to a particular Section of the Code
shall include any successor provision of the Code.
"Committee" has the meaning set forth in Section 2.1 hereof.
"Common Stock" means the Common Stock, par value $.10 per share, of the
Company, subject to adjustment pursuant to Section 8 hereof.
"Greater-Than-Ten-Percent Stockholder" means any individual who, at the
time he or she is granted an Option, owns or, as a result of the attribution
rules of Section 424(d) of the Code, is deemed to own more than ten percent of
the total combined voting power of all classes of stock of the Company.
"Incentive Option" means any Option designated and qualified as an
"incentive stock option" within the meaning of Section 422 of the Code. The
Company intends that Incentive Options will qualify as "incentive stock options"
within the meaning of Section 422 of the Code, and the terms of this Plan shall
be interpreted in accordance with this intention; the Company makes no warranty,
however, as the qualification of any Option as an Incentive Option.
"Nonqualified Option" means any Option that is not an Incentive Option.
"Non-Employee Director" means any director who is not also an employee of
the Company, its parent or any subsidiary.
"Outside Director" means any director who (i) is not an employee of the
Company or of any "affiliated group," as such term is defined in Section 1504(a)
of the Code, which includes the Company (an "Affiliate"), (ii) is not a former
employee of the Company or any Affiliate who is receiving compensation for prior
services (other than benefits under a tax-qualified retirement plan) during the
Company's or any Affiliate's taxable year, (iii) has not been an officer of the
Company or any Affiliate and (iv) does not receive remuneration from
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the Company or any Affiliate, either directly or indirectly, in any capacity
other than as a director. "Outside Director" shall be determined in accordance
with Section 162(m) of the Code and the Treasury regulations issued thereunder.
"Securities Act" means the Securities Act of 1933, as amended, and any
successor act thereto, together with related rules, regulations and
interpretations.
SECTION 2. ADMINISTRATION
2.1 Committee. This Plan shall be administered by a committee (the
"Committee") consisting of at least two Outside Directors. It is the intention
of the Company that the Plan shall be administered to comply with the provisions
of Rule 16b-3 under the Securities Exchange Act of 1934 (the "Exchange Act"),
but the authority and validity of any act taken or not taken by the Committee
shall not be affected if any person administering the Plan is not a Non-Employee
Director as defined in the Rule. Except as specifically reserved to the Board
under the terms of the Plan, and subject to Section 4.2 hereof, the Committee
shall have full and final authority to operate, manage and administer the Plan
on behalf of the Company. Any or all powers and functions of the Committee may
at any time and from time to time be exercised by the Board, and any reference
in this Plan to the Committee shall be deemed to refer to the Board to the
extent the Board is exercising any of the powers and functions of the Committee.
2.2 Powers of the Committee. Subject to the terms and conditions of this
Plan and except with respect to Options granted pursuant to Section 4.2, the
Committee shall have the power:
(a) to determine from time to time the individuals to whom Options
shall be granted and the terms, conditions, restrictions and provisions
(which need not be identical) of each of those Options, including, with
respect to each Option, the time at which the Option shall be granted, the
number of shares of Common Stock that shall be subject to the Option, the
exercise price for each share of Common Stock subject to the Option (which
price shall be subject to the requirements of Section 6.3), the period
during which the Option shall be exercisable (whether in whole or in part)
and the time or times when each Option shall become exercisable;
(b) to modify or amend, in its sole discretion, conditionally or
unconditionally, any outstanding Option granted under this Plan, including
a reduction of the exercise price, an acceleration of the vesting schedule,
or an extension of the expiration date;
(c) to accelerate, in its sole discretion, an Option holder's right to
exercise his or her Option in whole or in part, conditionally or
unconditionally, at any time, including upon consummation of the initial
public offering of Common Stock;
(d) generally, to exercise such powers and to perform such acts as are
deemed necessary or expedient to promote the best interests of the Company
with respect to this Plan;
(e) the power to delegate to other persons the responsibility for
performing ministerial acts in furtherance of the Plan's purpose;
(f) the power to engage the services of persons or organizations in
furtherance of the Plan's purpose, including but not limited to banks,
insurance companies, brokerage firms and consultants; and
(g) to construe and interpret this Plan and Options granted hereunder
and to establish, amend, and revoke rules and regulations for the
interpretation, management and administration of this Plan. In this
connection, the Committee may supply any omission, reconcile any
inconsistency, or correct any other defect in this Plan or in any Option
agreement in the manner and to the extent it shall deem necessary or
expedient to make this Plan fully effective.
All decisions and determinations by the Committee in the exercise of the
foregoing powers shall be final and binding upon the Company and Option holders.
No member or former member of the Committee or the Board shall be liable for any
action or determination made in good faith with respect to this Plan or any
Option.
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2.3 Appointment and Proceedings of Committee. The Board may from time to
time appoint members of the Committee in substitution for or in addition to
members previously appointed, and subject to Section hereof, may fill vacancies,
however caused, in the Committee. The Committee shall select one of its members
as its chairman and shall hold its meetings at such times and places as it shall
deem advisable. A majority of its members shall constitute a quorum, and all
actions of the Committee shall require the affirmative vote of a majority of its
members. Any action may be taken by a written instrument signed by all of the
members, and any action so taken shall be as fully effective as if it had been
taken by a vote of a majority of the members at a meeting duly called and held.
SECTION 3. STOCK
3.1 Stock to be Issued. The stock subject to Options granted under this
Plan may be shares of authorized and issued Common Stock, shares of Common Stock
held in treasury or both, at the discretion of the Company. The total number of
shares of Common Stock that may be issued pursuant to Options granted under the
Plan shall not exceed 300,000 in the aggregate; provided, however, that the
class and aggregate number of shares subject to Options shall be subject to
adjustment as provided in Section hereof.
3.2 Termination of Option. If any Option granted under this Plan expires
or otherwise terminates without having been exercised in whole or in part, the
shares of Common Stock previously subject to the unexercised portion of that
Option may be the subject of new Options under this Plan.
3.3 No Fractional Shares. In no event shall any Option be exercisable for
a fraction of a share of Common Stock.
SECTION 4. ELIGIBILITY
4.1 Individuals Eligible. Incentive Options may be granted only to
officers and other employees of the Company, including members of the Board who
are also employees of the Company. Nonqualified Options may be granted to
officers or other employees of the Company, including members of the Board, and
to consultants and other individuals who render services to the Company
regardless of whether they are employees. Nonqualified Options may be granted to
Non-Employee Directors only as provided in Section 4.2 hereof.
4.2 Non-Discretionary Option Grants to Non-Employee Directors. Any other
provision of this Plan to the contrary notwithstanding, Non-Employee Directors
shall not be eligible to receive Options under the Plan except pursuant to this
Section 4.2. Each Non-Employee Director who is elected by the stockholders of
the Company to the Board initially on or subsequent to the date on which this
Plan is approved by stockholders pursuant to Section 13 shall automatically be
granted, upon such election, a Nonqualified Option to purchase 2,000 shares of
Common Stock. Each Non-Employee Director who is reelected by the stockholder of
the Company to the Board on or subsequent to said date of stockholder approval
of this Plan still automatically be granted, upon each such reelection, a
Nonqualified Option to purchase 2,000 shares of Common Stock. Options shall be
granted pursuant to this Section 4.2 only to persons who are serving as
Non-Employee Directors on the Grant Date. Any share grant referred to in this
Section shall be subject to adjustment in accordance with Section 8 hereof. The
purchase price per share of the Common Stock under each Option granted pursuant
to this Section 4.2 shall be equal to the fair market value of the Common Stock,
determined in accordance with Section 6.3 hereof, on the date the Option is
granted. Each such Option shall expire on the fifth anniversary of the date of
grant.
4.3 Greater-Than-Ten-Percent Stockholders. Except as may otherwise be
permitted by the Code or other applicable law or regulation, no Incentive Option
shall be granted to a Greater-Than-Ten-Percent Stockholder unless (a) the
exercise price per share under the Incentive Option is not less than 110% of the
fair market value of the Common Stock at the time at which the Incentive Option
is granted and (ii) the Incentive Option is not exercisable to any extent after
the fifth anniversary of the date on which the Incentive Option is granted.
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4.4 Maximum Aggregate Fair Market Value. The aggregate fair market value
(determined at the time the Incentive Option is granted) of the Common Stock
with respect to which Incentive Options are exercisable for the first time by
any Option holder during any calendar year under this Plan and any other plans
of the Company for the issuance of incentive stock options (within the meaning
of Section 422 of the Code) shall not exceed $100,000 or such greater amount as
may from time to time be permitted with respect to incentive stock options by
the Code or any other applicable law or regulation. To the extent any Option
exceeds the foregoing limitation, it shall be deemed a Nonqualified Option.
4.5 Limitation on Grants. In no event may any individual be granted
Options with respect to more than 50,000 shares of Common Stock in any calendar
year. The number of shares of Common Stock relating to an Option grant in a
calendar year that is subsequently forfeited, cancelled or otherwise terminated
shall continue to count toward the foregoing limitation in such calendar year.
In addition, if the exercise price of an Option is subsequently reduced, the
transaction shall be deemed a cancellation of the original Option and the grant
of a new one so that both transactions shall count toward the maximum shares
issuable in the calendar year of each respective transaction.
SECTION 5. TERMINATION OF EMPLOYMENT OR DEATH OF OPTION HOLDER
5.1 Termination of Employment. Except as otherwise expressly provided
herein, an Option shall terminate on the earliest of:
(a) the date of expiration thereof;
(b) the date of cancellation thereof pursuant to Section 8.3(c);
(c) sixty days after the date on which the Option holder's employment
with, or directorship or other services to, the Company are terminated
other than for Cause; provided, however, that if, before the date of
expiration of the Option, the Option holder shall be retired in good
standing from the employ of the Company for reasons of age under the then
established rules of the Company, the Option shall terminate on the earlier
of such date of expiration or 90 days after the date of such retirement. In
the event of such retirement, the Option holder shall have the right prior
to the termination of such Option to exercise the Option to the extent to
which the Option holder was entitled to exercise such Option immediately
prior to such retirement; and
(d) the date on which the Option holder's employment with, or
directorship or other services to, the Company is terminated voluntarily by
the Option holder or by the Company for Cause;
provided, however, that Nonqualified Options need not, unless the Committee
determines otherwise, be subject to the provisions set forth in clauses (c) and
(d) above nor to Section 5.2 below. Whether authorized leave of absence, or
absence on military or government service, shall constitute termination of an
employment relationship between the Company and the Option holder shall be
determined by the Committee at the commencement thereof, and the Committee shall
promptly notify the Option holder of such determination. Options shall not be
affected by any Option holder's change of employment within the Company or
change in the identity of the Company to whom directorship or other services are
provided, so long as the Option holder continues to be an employee of, or to
provide such services to, the Company.
5.2 Death or Permanent Disability of Option Holder. In the event of the
death or permanent and total disability of an Option holder prior to termination
of the Option holder's services to the Company and prior to the date of
expiration of such Option, such Option shall terminate on the earliest of its
date of expiration, its date of cancellation pursuant to Section 8.3(c), and the
date that is 180 days after the date of such death or disability. After the
death of the Option holder, his or her executors, administrators or any
individual or individuals to whom the Option may be transferred by will or by
the laws of descent and distribution, shall have the right, at any time prior to
the date of such termination, to exercise the Option to the extent the Option
holder was entitled to exercise the Option immediately prior to his or her
death. "Permanent and total disability" for these purposes shall be determined
in accordance with Section 22(e)(3) of the Code and the rules, regulations and
interpretations issued thereunder.
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SECTION 6. TERMS OF OPTION AGREEMENTS
Each Option shall be evidenced by an agreement (an "Option Agreement") in
writing that shall contain such terms, conditions, restrictions and other
provisions as the Committee shall from time to time deem appropriate. Any
additional provisions shall not, however, be inconsistent with any other term or
condition of this Plan and shall not cause any Incentive Option to fail to
qualify as an incentive stock option within the meaning of Section 422 of the
Code. Option agreements need not be identical, but each Option agreement shall,
by appropriate language, include the substance of the following provisions:
6.1 Expiration of Option. Subject to Section 4.2 hereof, notwithstanding
any other provision of this Plan or of the Option agreement, such Option shall
expire on the date specified in the Option agreement, which date shall not, in
the case of an Incentive Option, be later than the tenth anniversary (the fifth
anniversary in the case of a Greater-Than-Ten-Percent Stockholder) of the date
on which the Option was granted, or as specified in Section 5 hereof.
6.2 Exercise. Subject to Section 4.2 hereof, each Option may be exercised
so long as it is valid and outstanding, from time to time in part or as a whole,
subject to any limitations with respect to the number of shares for which the
Option may be exercised at a particular time and to such other conditions as the
Committee in its discretion may specify upon granting the Option.
6.3 Exercise Price. Subject to Section 4.2 hereof, the exercise price per
share under each Option shall be determined by the Committee at the time the
Option is granted and shall not be less than the par value of the Common Stock
obtainable upon the exercise thereof; provided, however, that the exercise price
of any Incentive Option shall not, unless otherwise permitted by the Code, be
less than the fair market value of the Common Stock on the date the Option is
granted (110% of the fair market value in the case of a Greater-
Than-Ten-Percent Stockholder). For these purposes, the "fair market value" of
the Common Stock shall equal (a) the closing price per share on the date of
grant of the Option as reported by a nationally recognized stock exchange, (b)
if the Common Stock is not listed on such an exchange, as reported by the
National Market System or another automated quotation system of the National
Association of Securities Dealers, Inc., or (c) if the Common Stock is not
quoted on any such system, the fair market value as determined by the Committee.
6.4 Transferability of Options and Option Shares. No Option shall be
transferable by its holder or by operation of law, otherwise than by will or
under the laws of descent and distribution and shall not be subject to
execution, attachment or similar process. Each Option shall, during the Option
holder's lifetime, be exercisable only by the Option holder. The Committee may
in its discretion provide upon the grant of any Option that the shares of Common
Stock purchasable upon exercise of such Option shall be subject to such
restrictions on transferability as the Committee may determine. Upon any attempt
to transfer any Option under the Plan or any right or privilege conferred
hereby, contrary to the provisions of the Plan, or (if the Committee shall so
determine) upon any levy or any attachment or similar process upon the rights
and privileges conferred hereby, such Option shall thereupon terminate and
become null and void.
6.5 Rights of Option Holders. No Option holder or other person shall, by
virtue of the granting of an Option, be deemed for any purpose to be the owner
of any shares of Common Stock subject to such Option or to be entitled to the
rights or privileges of a holder of such shares unless and until the Option
shall have been exercised pursuant to the terms thereof with respect to such
shares and the Company shall have issued and delivered the shares to the Option
holder.
6.6 Repurchase Right. The Committee may in its discretion provide upon
the grant of any Option that the Company shall have an option to repurchase,
upon terms and conditions determined by the Committee, all or any number of
shares purchased upon exercise of such Option. The repurchase price per share
payable by the Company shall be such amount or be determined by such formula as
is fixed by the Committee at the time of grant of the Option for the shares
subject to repurchase. In the event the Committee grants an Option subject to
such a repurchase option, then so long as the shares purchased upon exercise of
that Option remain subject to the repurchase option, each certificate
representing those shares shall bear a legend satisfactory to counsel for the
Company referring to the Company's repurchase option.
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6.7 "Lockup" Agreement. The Committee may in its discretion specify upon
granting an Option that the Option holder shall agree for a period of time (not
to exceed 180 days) from the effective date of any registration of securities of
the Company (upon request of the Company or the underwriters managing any
underwritten offering of the Company's securities), not to sell, make any short
sale of, loan, grant any option for the purchase of, or otherwise dispose of any
shares issued pursuant to the exercise of such Option, without the prior written
consent of the Company or such underwriters, as the case may be.
SECTION 7. METHOD OF EXERCISE; PAYMENT OF EXERCISE PRICE
7.1 Method of Exercise. Any Option may be exercised by the Option holder
by delivering to the Company, on any business day prior to the termination of
the Option, a written notice specifying the number of shares of Common Stock the
Option holder then desires to purchase and the address to which the certificates
for such shares are to be mailed, accompanied by payment of the exercise price
for such shares.
7.2 Payment of Exercise Price. Payment for the shares of Common Stock
purchased upon exercise of an Option shall be made by:
(a) cash in an amount, or a check, bank draft or postal or express
money order payable in an amount, equal to the aggregate exercise price of
the shares being purchased;
(b) with the consent of the Committee, shares of Common Stock owned by
the option holder for a period of at least 6 months and having a fair
market value (as defined for purposes of Section 6.3 hereof) equal to such
aggregate exercise price;
(c) with the consent of the Committee, by reducing the number of
Option shares otherwise issuable to the Option holder upon exercise of the
Option by a number of shares having a fair market value (as defined for
purposes of Section 6.3 hereof) equal to such aggregate exercise price;
(d) with the consent of the Committee, a personal recourse note issued
by the Option holder to the Company in a principal amount equal to such
aggregate exercise price and with such other terms, including interest rate
and maturity, as the Committee may determine in its discretion; provided,
however, that the interest rate borne by such note shall not be less than
the lowest applicable federal rate, as defined in Section 1274(d) of the
Code;
(e) with the consent of the Committee, such other consideration that
is acceptable to the Committee and that has a fair market value, as
determined by the Committee, equal to such aggregate exercise price,
including any broker-directed cashless exercise/resale procedure adopted by
the Committee; or
(f) with the consent of the Committee, any combination of the
foregoing.
As promptly as practicable after receipt of notice and payment pursuant to
Section 7.1 hereof and any documents required pursuant to Sections 9.2 and 9.3
hereof, the Company shall deliver to the Option holder a certificate registered
in the name of the Option holder and representing the number of shares with
respect to which such Option has been so exercised; provided, however, that if
any law or regulation or order of the Securities and Exchange Commission or any
other body having jurisdiction in the premises shall require the Company or the
Option holder to take any action in connection with the shares then being
purchased, the date for the delivery of the certificates for such shares shall
be extended for the period necessary to take and complete such action. Delivery
by the Company of the certificate for such shares shall be deemed effected for
all purposes when the Company or a stock transfer agent of the Company shall
have deposited such certificate in the United States mail, addressed to the
Option holder, at the address specified in the notice delivered pursuant to
Section 7.1 hereof.
SECTION 8. CHANGES IN COMPANY'S CAPITAL STRUCTURE
8.1 Rights of Company. The existence of outstanding Options shall not
affect in any way the right or power of the Company or its stockholders to enter
into, make or authorize, without limitation, (a) any adjustment,
recapitalization, reorganization or other change in the Company's capital
structure or its business,
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(b) any merger or consolidation of the Company, (c) any issue of Common Stock or
of bonds, debentures, preferred or prior preference stock or other capital stock
ahead of or affecting the Common Stock or the rights thereof, (d) a dissolution
or liquidation of the Company, (e) any sale or transfer of all or any part of
the assets or business of the Company, or (f) any other corporate act or
proceeding, whether of a similar character or otherwise.
8.2 Recapitalization, Stock Splits and Dividends. If the Company shall
effect any subdivision or consolidation of shares of its stock or other capital
readjustment, the payment of a stock dividend, or any other increase or
reduction of the number of shares of its stock outstanding, in any such case
without receiving compensation therefor in money, services or property, then
(a) the number, class and price per share of stock subject to each
outstanding Option shall be appropriately adjusted in such a manner as to
entitle an Option holder to receive upon exercise of an Option, for the
same aggregate cash consideration, the same total number and class of
shares as he or she would have received as a result of the event requiring
the adjustment had the Option holder exercised the Option in full
immediately prior to such event, and
(b) the number and class of shares with respect to which Options may
be granted under this Plan shall be adjusted by substituting for the total
number of shares of Common Stock then reserved for issuance under this Plan
that number and class of shares of stock that the owner of an equal number
of outstanding shares of Common Stock would own as the result of the event
requiring the adjustment.
8.3 Mergers, Sales, etc. If the Company shall be a party to a
reorganization or merger with one or more other corporations (whether or not the
Company is the surviving or resulting corporation), shall consolidate with or
into one or more other corporations, shall be liquidated, or shall sell or
otherwise dispose of substantially all of its assets to another corporation
(each a "Transaction"), then:
(a) subject to the provisions of clauses (b) and (c) below, after the
effective date of the Transaction, each holder of an outstanding Option
shall be entitled, upon exercise of such Option and at no additional cost,
to receive shares of Common Stock or, if applicable, shares of such other
stock or other securities, cash or property as the holders of shares of
Common Stock received pursuant to the terms of the Transaction;
(b) the Committee may accelerate the time for exercise of all
outstanding Options to a date prior to the effective date of the
Transaction, as specified by the Committee; or
(c) all outstanding Options may be canceled by the Committee as of the
effective date of the Transaction, provided that (i) notice of such
cancellation shall have been given to each Option holder and (ii) each
Option holder shall have the right to exercise such Option to the extent
that the same is then exercisable or, if the Committee shall have
accelerated the time for exercise of all outstanding Options, in full
during the thirty-day period preceding the effective date of the
Transaction.
8.4 Adjustments to Common Stock Subject to Options. Except as
hereinbefore expressly provided, the issue by the Company of shares of stock of
any class, or securities convertible into shares of stock of any class, for cash
or property, or for labor or services, either upon direct sale or upon the
exercise of rights or warrants to subscribe therefor, or upon conversion of
shares or obligations of the Company convertible into such shares or other
securities, shall not affect, and no adjustment by reason thereof shall be made
with respect to, the number or price of shares of Common Stock then subject to
outstanding Options.
8.5 Miscellaneous. Adjustments under this Section 8 shall be determined
by the Committee, and such determinations shall be conclusive. The Committee
shall have the discretion and power in any such event to determine and to make
effective provision for acceleration of the time or times at which any Option or
portion thereof shall become exercisable. No fractional shares of Common Stock
shall be issued under this Plan on account of any adjustment specified above.
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SECTION 9. GENERAL RESTRICTIONS
9.1 Granting of Options. No Option may be granted under this Plan after
the tenth anniversary of the effective date hereof.
9.2 Investment Representations. The Company may require any individual to
whom an Option is granted, as a condition of exercising such Option, to give
written assurances in substance and form satisfactory to the Company to the
effect that such individual is acquiring the Common Stock subject to the Option
for his or her own account for investment and not with a view to the resale or
distribution thereof, and to such other effects as the Company deems necessary
or advisable in order to comply with the Securities Act and applicable state
securities laws.
9.3 Compliance with Securities Laws. The Company shall not be required to
sell or issue any shares under any Option if the sale or issuance of such shares
would constitute a violation by the Option holder or the Company of any
provision of any law or regulation of any governmental authority, including the
Securities Act. In addition, the Company shall not be required to sell or issue
shares upon the exercise of any Option unless the Committee has received
evidence satisfactory to it that the holder of such Option will not transfer
such shares except pursuant to a registration statement in effect under the
Securities Act or unless an opinion of counsel satisfactory to the Company has
been received by the Company to the effect that such registration is not
required. Any determination in this connection by the Committee shall be final,
binding and conclusive. In the event the shares issuable on exercise of an
Option are not registered under the Securities Act, the Company may imprint upon
any certificate representing shares so issued the following legend or any other
legend that counsel for the Company considers necessary or advisable to comply
with the Securities Act and applicable state securities laws:
"The shares of stock represented by this certificate have not been
registered under the Securities Act of 1933 or under the securities laws of
any state and may not be sold or transferred except upon such registration
or upon receipt by the issuer of an opinion of counsel satisfactory to the
issuer, in form and substance satisfactory to the issuer, that registration
is not required for such sale or transfer."
The Company may, but shall not be obligated to, register the shares of
stock covered by any Options pursuant to the Securities Act. In the event such
shares are so registered, the Company may remove any legend on certificates
representing such shares. The Company shall not be obligated to take any
affirmative action in order to cause the exercise of an Option or the issuance
of shares pursuant thereto to comply with any law or regulation of any
governmental authority.
9.4 Other Certificate Legends. The Company may endorse such other legends
upon the certificates for shares of Common Stock issued upon exercise of an
Option and may issue such "stop transfer" instructions to the transfer agent for
the Common Stock as the Committee may, in its discretion, determine to be
necessary or appropriate (a) to implement the provisions of this Plan and such
Option with respect to such shares and (b) to permit the Company to determine
the occurrence of a disqualifying disposition (as defined in Section 421(b) of
the Code) of shares issued upon exercise of Incentive Options.
9.5 Employment Obligation. The granting of any Option shall not impose
upon the Company any obligation to employ or continue to employ any Option
holder. The right of the Company to terminate the employment of any officer or
other employee thereof shall not be diminished or affected by reason of the fact
that an Option has been granted to such officer or other employee.
SECTION 10. WITHHOLDING TAXES
10.1 Rights of Company. The Company may require an employee exercising a
Nonqualified Option, or disposing of shares of Common Stock acquired pursuant to
the exercise of an Incentive Option in a disqualifying disposition (as defined
in Section 421(b) of the Code), to reimburse the Company for any taxes required
by any government to be withheld or otherwise deducted and paid by such employer
corporation in respect of the issuance or disposition of such shares. In lieu
thereof, the employer corporation shall have the right to withhold the amount of
such taxes from any other sums due or to become due from such corporation to the
employee upon such terms and conditions as the Committee may prescribe. The
employer corporation
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may, in its discretion, hold the stock certificate to which such employee is
otherwise entitled upon the exercise of an Option as security for the payment of
any such withholding tax liability, until cash sufficient to pay that liability
has been received or accumulated.
10.2 Payment in Shares. An employee may elect to have such tax
withholding obligation satisfied, in whole or in part, by (i) authorizing the
Company to withhold from shares of Common Stock to be issued pursuant to the
exercise of a Nonqualified Option a number of shares with an aggregate fair
market value (as defined in Section 6.3 hereof determined as of the date the
withholding is effected) that would satisfy the minimum withholding amount due
with respect to such exercise, or (ii) transferring to the Company shares of
Common Stock owned by the employee for a period of at least six months and with
an aggregate fair market value (as defined in Section 6.3 hereof determined as
of the date the withholding is effected) that would satisfy the withholding
amount due.
10.3 Notice of Disqualifying Disposition. Each holder of an Incentive
Option shall agree to notify the Company in writing immediately after making a
disqualifying disposition (as defined in Section 421(b) of the Code) of any
Common Stock purchased upon exercise of the Incentive Option.
SECTION 11. AMENDMENT OR TERMINATION OF PLAN
11.1 Amendment. The Board may terminate the Plan and may amend the Plan
at any time, and from time to time, subject to the limitation that, except as
provided in Section 8 hereof, no amendment shall be effective unless approved by
the stockholders of the Company in accordance with applicable law and
regulations, at an annual or special meeting held within 12 months before or
after the date of adoption of such amendment, in any instance in which such
amendment would: (i) increase the number of shares of Common Stock that may be
issued under, or as to which Options may be granted pursuant to, the Plan; or
(ii) change in substance the provisions of Section 4 hereof relating to
eligibility to participate in the Plan. Without limiting the generality of the
foregoing, the Board is expressly authorized to amend the Plan, at any time and
from time to time, to confirm it to the provisions of Rule 16b-3 (or successor
rule) under the Exchange Act, as that Rule may be amended from time to time.
Except as provided in Section 8 hereof, the rights and obligations under
any Option granted before amendment of this Plan or any unexercised portion of
such Option shall not be adversely affected by amendment of this Plan or such
Option without the consent of the holder of such Option.
11.2 Termination. This Plan shall terminate as of the tenth anniversary
of its effective date. The Board may terminate this Plan at any earlier time for
any or no reason. No Option may be granted after the Plan has been terminated.
No Option granted while this Plan is in effect shall be altered or impaired by
termination of this Plan, except upon the consent of the holder of such Option.
The power of the Committee to construe and interpret this Plan and the Options
granted prior to the termination of this Plan shall continue after such
termination.
SECTION 12. NONEXCLUSIVITY OF PLAN
Neither the adoption of this Plan by the Board nor the submission of this
Plan to the stockholders of the Company for approval shall be construed as
creating any limitations on the power of the Board to adopt such other incentive
arrangements as it may deem desirable, including the granting of stock options
otherwise than under this Plan, and such arrangements may be either applicable
generally or only in specific cases.
The Committee's determinations under the Plan need not be uniform and may
be made by it selectively among persons who receive, or are eligible to receive,
awards under the Plan (whether or not such persons are similarly situated).
Without limiting the generality of the foregoing, the Committee shall be
entitled, among other things, to make non-uniform and selective determinations,
and to enter into non-uniform and selective Plan agreements, as to (i) the
persons to receive awards under the Plan, (ii) the terms and provisions of
awards under the Plan, (iii) the exercise by the Committee of its discretion in
respect of the exercise of options pursuant to the terms of the Plan, and (iv)
the treatment of leaves of absence pursuant to Section 5.1 hereof.
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SECTION 13. EFFECTIVE DATE
This Plan shall become effective upon its adoption by the Board, provided
that the stockholders of the Company shall have approved this Plan within twelve
months prior to or following the adoption of this Plan by the Board. Subject to
the foregoing, Options may be granted under the Plan at any time subsequent to
its effective date; provided, however, that (a) no such Option shall be
exercised or exercisable unless the stockholders of the Company shall have
approved the Plan within twelve months prior to or following the adoption of
this Plan by the Board, and (b) all Options issued prior to the date of such
stockholders' approval shall contain a reference to such condition.
SECTION 14. PROVISIONS OF GENERAL APPLICATION
14.1 Severability. The invalidity or unenforceability of any provision of
this Plan shall not affect the validity or enforceability of any other provision
of this Plan, each of which shall remain in full force and effect.
14.2 Construction. The headings in this Plan are included for convenience
only and shall not in any way effect the meaning or interpretation of this Plan.
Any term defined in the singular shall include the plural, and vice versa. The
words "herein," "hereof" and "hereunder" refer to this Plan as a whole and not
to any particular part of this Plan. The word "including" as used herein shall
not be construed so as to exclude any other thing not referred to or described.
14.3 Further Assurances. The Company and any holder of an Option shall
from time to time execute and deliver any and all further instruments, documents
and agreements and do such other and further acts and things as may be required
or useful to carry out the intent and purpose of this Plan and such Option and
to assure to the Company and such Option holder the benefits contemplated by
this Plan; provided, however, that neither the Company nor any Option holder
shall in any event be required to take any action inconsistent with the
provisions of this Plan.
14.4 Governing Law. This Plan and each Option shall be governed by the
laws of The Commonwealth of Massachusetts.
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PROXY IMPLANT SCIENCES CORPORATION PROXY
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS DECEMBER 7, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints Anthony J. Armini, and
Darlene M. Deptula-Hicks and each of them, as Proxies of the undersigned, with
full power to appoint their substitutes, and authorizes each of them to
represent and to vote all shares of Common Stock of Implant Sciences Corporation
(the "Company") held by the undersigned as of the close of business on October
10, 2000, at the Annual Meeting of Stockholders to be held at the offices of
Foley, Hoag & Eliot, LLP, One Post Office Square, Boston, Massachusetts 02109 on
Thursday, December 7, 2000 at 10:00 a.m., local time, and at any adjournments
and postponements thereof.
WHEN PROPERLY EXECUTED THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED STOCKHOLDER(S). IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE
VOTED FOR THE PROPOSALS SET FORTH ON THE REVERSE SIDE HEREOF, AND AT THE PROXIES
DISCRETION UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING. THE
BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL ONE. A STOCKHOLDER WISHING
TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATION NEED ONLY SIGN
AND DATE THIS PROXY AND RETURN IT IN THE ENVELOPE PROVIDED.
PLEASE VOTE AND SIGN ON OTHER SIDE AND RETURN PROMPTLY IN ENCLOSED ENVELOPE.
Please sign this proxy exactly as your name appears on the books of the Company.
Joint owners should each sign personally. Trustees, custodians, and other
fiduciaries should indicate the capacity in which they sign, and where more than
one name appears, a majority must sign. If the shareholder is a corporation, the
signature should be that of an authorized officer who should state his or her
title.
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ANNUAL MEETING OF STOCKHOLDERS
IMPLANT SCIENCES CORPORATION
DECEMBER 7, 2000
Please detach and mail in the envelope provided
[X] PLEASE MARK VOTE AS IN THIS EXAMPLE
1. Proposal to elect the following persons as Directors to serve until the 2000
Annual Meeting and until their successors are duly elected and qualified.
IMPLANT SCIENCES CORPORATION
Anthony J. Armini, Stephen N. Bunker, Robert E. Hoisington, Shunkuchi Shimizu
and Michael Szycher
[ ] FOR [ ] WITHHOLD [ ] FOR ALL EXCEPT
2. Proposal to adopt the addition of the 2000 Incentive and Non Qualified Stock
Option Plan and the reservation of 300,000 shares thereunder.
[ ] FOR [ ] WITHHOLD
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE, MARK THE "FOR ALL
EXCEPT" BOX AND STRIKE A LINE THROUGH THE NOMINEE'S NAME IN THE
LIST ABOVE.
RECORD DATE SHARES: The undersigned hereby acknowledge(s) receipt of a copy of
the accompanying Notice of Annual Meeting of Stockholders, the Proxy Statement
with respect thereto and the Company's 2000 Annual Report and hereby revoke(s)
any proxy or proxies heretofore given. This proxy may be revoked at any time
before it is exercised.
Please be sure to sign and date this Proxy. Date
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Mark box at right if an address change or comments have been noted on the
reverse side of this card. [ ]
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Stockholder sign here Joint-owner sign here
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