CIRCA PHARMACEUTICALS, INC.
33 Ralph Avenue
P.O. Box 30
Copiague, New York 11726-0030
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be Held
July 15, 1994
To our Shareholders:
The Annual Meeting of Shareholders of CIRCA PHARMACEUTICALS,
INC. ("Circa") will be held at The American Stock Exchange, 86
Trinity Place, 13th Floor, New York, NY 10006, on July 15, 1994, at
9:00 a.m. for the following purposes:
1. To elect four Class I Directors to serve until the 1996 Annual
Meeting and until their successors shall have been elected and
qualified;
2. To ratify the appointment of Coopers & Lybrand as Circa's
independent public accountants for 1994;
3. To approve the adoption of the 1994 Long-Term Incentive Plan;
and
4. To transact such other business as may properly come before
the meeting or any adjournment thereof.
Shareholders of record at the close of business on June 6,
1994, are entitled to notice of, and to vote at, the Annual Meeting
or any adjournments thereof.
Whether or not you plan to attend the meeting, you are
requested to mark, sign and return the accompanying Proxy card in
the envelope which is enclosed for your convenience. No postage is
required for mailing in the United States.
By Order of the Board of Directors
ROBERT V. MARROW
Secretary and General Counsel
CIRCA PHARMACEUTICALS, INC.
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
July 15, 1994
PROXY STATEMENT
Introduction
This proxy statement is furnished to the shareholders of Circa
Pharmaceuticals, Inc. ("Circa" or "the Company"), in connection
with the Board of Directors' solicitation of proxies to be used at
the Annual Meeting of Circa shareholders to be held on July 15,
1994, at the American Stock Exchange, 86 Trinity Place, 13th Floor,
New York City, New York at 9:00 a.m. or any adjournments thereof.
This Proxy Statement and the accompanying Proxy card were first
distributed to shareholders on or about June 10, 1994.
Voting at the Meeting
Only holders of common stock on Circa's books at the close of
business on June 6, 1994 (the "Record Date") will be entitled to
notice of, and to vote at, the Meeting and any adjournment thereof.
As of the Record Date, there were issued and outstanding
22,079,020 shares of the Company's common stock, par value $.01 per
share ("common stock"). Each share of common stock outstanding on
the Record Date is entitled to one vote. Shareholders will vote as
a single class with respect to all proposals.
A proxy returned by a shareholder which is not subsequently
revoked will be voted in accordance with the instructions indicated
thereon. All shares represented at the Meeting by properly
executed proxies will be voted in accordance with the instructions
thereon, if any, and if no instructions are given, the proxy will
be voted as recommended by the Board.
The management of Circa is not aware of any business to be
acted upon at this Meeting other than as is described in this Proxy
Statement, but if any other business should properly come before
the Meeting, the proxy holders (as indicated on the proxy card)
will vote the proxies according to their best judgment in the
interests of the Company.
A proxy may be revoked at any time before it is exercised by
the subsequent execution and submission of a revised proxy, by
written notice of revocation to Circa's Secretary, or by voting in
person at the Meeting.
Directors are elected by a plurality of the votes cast in the
election. Action on any other matter is approved by a majority of
the votes cast on the matter. Broker nonvotes, abstentions and
other circumstances in which proxy authority has been withheld with
respect to any matter, will be counted for purposes of determining
a quorum, but are not counted as votes cast on any matter.
<PAGE>
Election of Directors
The Board of Directors presently consists of seven members,
four of whom are non-employee directors.
The Board is divided into two classes, four Class I and three
Class II directors. Each class of directors holds office for
alternating two year terms. Class I directors currently hold terms
expiring as of the date of the 1994 Annual Meeting of Shareholders,
and Class II directors currently hold terms expiring as of the date
of the 1995 Annual Meeting of Shareholders.
At the Annual Meeting to be held on July 15, 1994, four Class
I directors are to be elected for terms expiring as of the date of
the 1996 Annual Meeting of Shareholders. The Board has nominated
the four current Class I directors to serve for new terms
commencing as of the date of the 1994 Annual Meeting of
Shareholders, and expiring as of the date of the 1996 Annual
Meeting of Shareholders. They are Michael Fedida, Stanley Grey,
Thomas P. Rice and Kenneth Siegel.
Class I Directors: Michael Fedida was elected at the 1993
Annual Meeting of Shareholders for a term expiring as of the date
of the 1994 Annual Meeting of Shareholders. Stanley Grey was
elected at the 1992 Annual Meeting of Shareholders to serve for the
term expiring as of the date of the 1994 Annual Meeting. On August
9, 1993, Kenneth Siegel was nominated and elected by the Board of
Directors for a term expiring as of the date of the 1994 Annual
Meeting of Shareholders. On November 11, 1993, Thomas P. Rice was
nominated and elected by the Board of Directors for a term expiring
as of the date of the 1994 Annual Meeting of Shareholders.
Class II Directors: Melvin Sharoky, M.D., Bruce Hausman and
Lawrence Raisfeld, were elected at the 1993 Annual Meeting of
Shareholders, for terms expiring as of the date of the 1995 Annual
Meeting of Shareholders.
All shares represented by valid proxies will be voted in the
election of directors for the Class I directors named above for
terms expiring as of the date of the 1996 Annual Meeting of
Shareholders, unless authority to vote for a particular nominee is
withheld.
Each nominee has agreed to serve as a director if elected. In
the event any current director is not elected at the Meeting, it is
anticipated that such director will continue to serve until a
successor is elected and qualified. If any nominee shall become
unavailable for election as a director prior to the Meeting, which
is not expected, the proxies will be voted for a substitute nominee
recommended by the Board of Directors.
The affirmative vote of a plurality of the votes cast by the
holders of shares entitled to vote thereon who are present at the
Meeting in person or by proxy is required for election of a person
to the Board.
Year First For Term
Elected as Expiring Position
Name of Nominee Age Director Class in With Company
Michael Fedida* 44 1988 I 1996 None
Stanley Grey* 70 1990 I 1996 None
Thomas P. Rice 44 1993 I 1996 Executive
Vice
President,
Chief
Operating
and
Financial
Officer
Kenneth Siegel* 37 1993 I 1996 None
Directors Continuing in Office:
Year First For Term
Elected as Expiring Position
Name of Director Age Director Class in With Company
Melvin Sharoky, M.D.* 43 1992 II 1995 President
and
Chief
Executive
Officer
Lawrence Raisfeld 58 1960 II 1995 Vice
President of
Financial
Affairs
Bruce Hausman* 64 1990 II 1995 None
* The Board's Audit Committee is made up of Mr. Grey,
Chairperson, Mr. Fedida and Mr. Hausman. The Board's Compensation
Committee is made up of Mr. Hausman, Chairperson, Mr. Grey, Mr.
Fedida and Mr. Siegel. The Board's Nominating Committee is made up
of Mr. Fedida, Chairperson, Dr. Sharoky, Mr. Grey and Mr. Siegel.
Melvin Sharoky, M.D.: On December 9, 1992, Melvin Sharoky, M.D.,
the Company's Executive Vice President and Director of Research and
Development, was elected by the Board of Directors as President and
Chief Executive Officer of the Company, effective January 31, 1993.
Dr. Sharoky became a director of the Company on December 9, 1992.
From August 21, 1992 to January 31, 1993, Dr. Sharoky served as
Executive Vice President and Director of Research and Development
of the Company, and as Senior Vice President of Research and
Development of the Company from March, 1991 to August, 1992. From
June, 1988 to March, 1991 Dr. Sharoky was Medical Director
of the Company.
Michael Fedida: During the past five years, Mr. Fedida, a
registered pharmacist, has served as an officer and director of
several retail pharmacies wholly or partially owned by him. In
addition, Mr. Fedida has acted as a consultant, without
remuneration, to the Company in regard to certain marketing
concepts.
Stanley Grey: Mr. Grey is a Certified Public Accountant. Prior to
his retirement in September, 1983 he served as the Managing Partner
of the New York office of the national accounting firm of Kenneth
Leventhal & Co. Mr. Grey currently serves as a consultant to
companies in the real estate industry. Mr. Grey is a Trustee and
the Treasurer of L.I. Jewish Medical Center and Vice-Chairman of
the Community Health Plan of Queens-Nassau.
Bruce Hausman: Mr. Hausman has been of counsel to the law firm of
Eisen, Hershcopf and Schulman since August, 1991, and has served as
Principal Executive Officer (May, 1992 to July, 1993) and as Senior
Vice President (February, 1988 to May, 1992) of Belding Heminway
Company, Inc., a company engaged in textile and real estate
businesses. He has served as a director of Plastigone Technologies,
Inc., since August, 1992, and as a Trustee of Beth Israel Medical
Center in New York, and Schnurmacher Nursing Home, a division of
Beth Israel Medical Center, and as Chairman of its quality
assurance committee. On December 10, 1993, Mr. Hausman became a
director of Daltex Medical Sciences, Inc., and is a member of its
executive committee.
Lawrence Raisfeld: Mr. Raisfeld is a founder of the Company and
served as its Secretary-Treasurer and Chief Financial Officer until
February, 1990. In February, 1990, he was appointed by the Board
as President and Chief Executive Officer of the Company. On January
31, 1993, Mr. Raisfeld stepped down as President and Chief
Executive Officer of the Company and currently serves as its Vice
President of Financial Affairs. In December, 1992, Mr. Raisfeld
was indicted for violation of Section 1 of the Sherman Antitrust
Act. On October 20, 1993 Mr. Raisfeld entered a plea of nolo
contendere to the charge, which is not an admission of guilt. Mr.
Raisfeld was sentenced to pay a fine of $20,000 and is subject to
unsupervised probation for a period of one year. Presently the
Defense Logistics Agency has proposed debarment of Mr. Raisfeld
from Government contracting or subcontracting.
Thomas P. Rice: Mr. Rice, Circa's Executive Vice President and
Chief Operating and Financial Officer since July 1, 1993, was
elected by the Board of Directors to become a member of the Board
on November 11, 1993. In May, 1990 Mr. Rice founded Competitive
Advantage in Baltimore, MD, a management consulting firm which
provided financial and marketing advice to international and local
businesses. Mr. Rice managed Competitive Advantage until he joined
Circa in July, 1993. From 1985 to 1990 Mr. Rice served as Vice
President and Chief Financial Officer of PharmaKinetics
Laboratories, Inc., a pharmaceutical research and testing firm, and
prior thereto was a senior manager with Deloitte and Touche, an
international accounting firm.
Kenneth Siegel: Mr. Siegel is a Managing Director of the
investment banking firm, Wertheim Schroder & Co. Incorporated, a
position which he has held since January, 1991. From 1982 through
1990 Mr. Siegel held the positions of Associate Managing Director,
First Vice President, Vice President and Associate of Wertheim
Schroder. Mr. Siegel was elected by the Board of Directors to
become a member of the Board on August 11, 1993.
Executive Officers (Other Than Directors)
Robert J. Connolly
Vice President
Manufacturing
Mr. Connolly, 60 years old, has over 35 years experience as a
manufacturing executive in the pharmaceutical industry, and has
been in charge of the Company's manufacturing facility since April,
1991. For three years prior to 1991 Mr. Connolly was Vice
President of Manufacturing for Superpharm Corporation in Bayshore,
New York, and prior to that he was Director of Manufacturing for
Pennwalt Pharmaceutical Division in Rochester, New York, for 19
years.
Stuart Deitel
Vice President
Business Development
Mr. Deitel, 45 years old, joined Circa in December, 1993 from
Rugby-Darby Group Companies, a major manufacturer and distributor
of pharmaceuticals and health care products where he held various
key management positions for eight years. During the last three of
those years he was Senior Vice President in charge of three
divisions.
Nicholas A. LaBella, Jr.
Vice President
Director of Research and Development
Mr. LaBella, 38 years old, has been Circa's Director of Regulatory
Affairs since 1989. In February, 1993, he became Vice President
and Director of Research and Development. He also serves on the
Board of Directors of Somerset Pharmaceuticals, Inc.
Robert V. Marrow, Esq.
Vice President
General Counsel
Secretary
Mr. Marrow, 53 years old, was a founder of the New York City law
firm of Salon Marrow & Dyckman, where he was the head of the
litigation department, and specialized in matters related to the
pharmaceutical industry. He joined Circa in February, 1993, as
General Counsel. He became corporate Secretary in March, 1993, and
became Vice President and General Counsel in June, 1993.
Shareholder's Derivative Action
In November, 1993, an action was commenced in the Supreme
Court, New York County, entitled Bernard Mills, on behalf of
himself and on behalf of all other similarly situated shareholders
of Circa Pharmaceuticals, Inc., and derivatively on behalf of Circa
Pharmaceuticals, Inc., Plaintiff, against Finn Andreasen, Patricia
Shukri, Michael Fedida, David Genzler, Stanley B. Grey, Bruce
Hausman, Seymour Inkles, Jack J. Kornreich, Lawrence Raisfeld,
Melvin Sharoky, M.D., and Circa Pharmaceuticals, Inc., Defendants,
New York County Index Number 128824/93. The Complaint purports to
be asserted as a derivative action on behalf of Circa and seeks to
cancel certain employment contracts entered into with certain
current and former officers and directors of Circa (none of
whom are up for election at the Annual Meeting) and alleges that
the compensation paid under those contracts is excessive.
Plaintiff also purports to bring an action on behalf of other
similarly situated shareholders for an order directing the
individual defendants to dissolve the Company, or in the
alternative, for an order appointing a receiver to dissolve the
Company. Plaintiff also seeks attorneys' fees, costs and
disbursements in connection with bringing the action. The Company
believes that this lawsuit is without merit, and intends to defend
it vigorously.
Meetings of the Board of Directors and Committees of the Board
The Board held eight meetings in 1993. All of the directors
were in attendance at each meeting. The Board has an Audit
Committee, a Compensation Committee and a Nominating Committee.
The Audit Committee is responsible for matters relating to
accounting practices and policies, financial reporting and internal
controls. The Committee reviews, with representatives of the
Company's independent accountants, the audit of the Company's
financial statements, results of that audit, and any
recommendations with respect to internal controls and financial
matters. The Committee reports its findings to the Board of
Directors. The Audit Committee held three formal meetings in 1993,
and, in addition, met informally from time to time.
The Compensation Committee makes recommendations to the Board
of Directors as to salary rates, bonuses and incentive compensation
programs of the Company and periodically reviews the Company's
overall compensation policies and practices. The Compensation
Committee met four times in 1993. In addition, the Compensation
Committee met informally from time to time.
The Nominating Committee is responsible for evaluating the
performance of the Board and its individual members, and for making
recommendations to the Board for nominees to be directors. The
Nominating Committee met once in 1994.
The Board of Directors recommends a vote FOR the election of
Michael Fedida, Stanley Grey, Thomas P. Rice and Kenneth Siegel as
Class I directors to serve for terms expiring as of the date of the
1996 Annual Meeting of Shareholders and until their successors are
elected and qualified.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following information is furnished as of the Record Date
with respect to the beneficial ownership of the common stock of (i)
the Chief Executive Officer and the next four most highly
compensated executives of the Company, (ii) all persons known to
the Company to be the beneficial owners of more than five (5%)
percent of the common stock, (iii) each director and
director-nominee of the Company, and (iv) all directors,
director-nominees and officers as a group (based upon information
furnished by such persons). Under the rules of the Securities and
Exchange Commission (the "SEC"), a person is deemed to be a
beneficial owner of a security if such person has or shares the
power to vote or direct the voting of such security or the power to
dispose of or direct the disposition of such security.
Accordingly, more than one person may be deemed to be a beneficial
owner of the same securities. A person is also deemed to be a
beneficial owner of any securities as to which that person has the
right to acquire beneficial ownership within 60 days.
Name and Address (1) Number of Shares Percentage
of Beneficial Owner Common Stock Common Stock
Melvin Sharoky, M.D.** 662,900 3.0%
Thomas Rice** 100,000 0.5%
Lawrence Raisfeld** 1,803,866 8.0%
Michael Fedida** 30,000 (2) 0.1%
Stanley Grey** 25,500 (2) 0.1%
Bruce Hausman** 30,000 (2) 0.1%
Kenneth Siegel** 2,500 (2) -
Nicholas A. LaBella, Jr. 37,551 0.1%
Robert V. Marrow 3,000 -
Directors and Officers
as a Group (11 in all) 2,695,417 12%
** Denotes Director of the Company.
(1) The address for these persons is: c/o Circa Pharmaceuticals,
Inc., 33 Ralph Avenue, P. O. Box 30, Copiague, N.Y. 11726-0030.
(2) This figure includes options to purchase shares of Circa
stock. Options granted to outside directors are not exercisable
for one year from date of grant. Michael Fedida received options
for 2,500 shares in 1990, 7,500 shares in 1991, 10,000 shares in
1992 and 10,000 shares in 1993, for total options to purchase
30,000 shares, none of which have been exercised. Bruce Hausman
received options for 2,500 shares in 1990, 7,500 shares in
1991, 10,000 shares in 1992 and 10,000 shares in 1993, for total
options to purchase 30,000 shares, of which an option to purchase
2,500 shares was exercised on August 7, 1993. Stanley Grey
received options for 2,500 shares in 1990, 7,500 shares in 1991,
10,000 shares in 1992 and 5,000 shares in 1993, for total options
to purchase 25,000 shares, none of which have been exercised.
Kenneth Siegel became a director in 1993 and received an option to
purchase 2,500 shares.
The Company knows of no contractual arrangements which
may, at a subsequent date, result in a change in control of the
Company.
<PAGE>
Executive Compensation
The following table sets forth the remuneration paid by
Circa during each of the last three years ended December 31, 1993,
to its Chief Executive Officer and four most highly paid executive
officers serving in those roles at the end of the last calendar
year, i.e. on December 31, 1993, whose remuneration is $100,000 or
more, and two executive officers who would have been included among
the four most highly compensated executives except for the
termination of their employment before December 31, 1993.
SUMMARY COMPENSATION TABLE
Long-Term Compensation
Restricted
Name and Stock
Principal Position Year Salary(1) Bonus Awards
Melvin Sharoky, M.D.(2) 1993 $ 292,345 $50,000 $2,250,000
President and 1992 224,243
Chief Executive 1991 229,743 $2,200,000
Officer
Lawrence Raisfeld (3) 1993 $ 235,416
Vice President of 1992 350,000
Financial Affairs 1991 350,000
Thomas Rice (4) 1993 $ 101,403 $12,000 $ 612,500
Executive Vice
President, Chief
Operating and
Financial Officer
Robert V. Marrow (5) 1993 $ 139,656 $ 7,000
Vice President,
General Counsel and
Secretary
Nicholas LaBella (6) 1993 $ 152,423 $15,000
Vice President 1992 127,412
and Director of 1991 111,088 $ 193,750
Research and
Development
Jack J. Kornreich (7) 1993 $ 412,306 ($1,375,000)(9)
Former Executive 1992 244,595
Vice President 1991 239,980 $2,750,000
Seymour Inkles (8) 1993 $ 340,098 ($403,750) (9)
Former Vice Pres- 1992 229,331
ident, Scientific 1991 226,735
Affairs
<PAGE>
(1) In addition to compensation shown, Executive Officers receive
group life, hospitalization, and medical insurance. Such plans do
not discriminate in favor of officers or directors of the Company
and are available generally to all salaried employees. The value
of other benefits, securities or property, in the aggregate, does
not exceed the lesser of $50,000 or 10% of total annual salary and
bonus reported in the compensation table.
(2) On December 9, 1992, Dr. Sharoky was elected President and
Chief Executive Officer of the Company, effective January 31, 1993.
On January 19, 1993, Dr. Sharoky's employment agreement, dated
April 26, 1991, was modified to extend its term from April 25, 1996
to January 31, 1997, to increase his base compensation from
$220,000 per year as Executive Vice President and Director of
Research and Development, to $300,000 per year as President and
Chief Executive Officer, and to increase the original grant of
400,000 restricted shares (which had been granted subject to the
surrender of 150,000 restricted shares granted as of June 9, 1988)
by 300,000 restricted shares totaling 700,000 shares of common
stock of the Company. Such shares are subject to forfeiture in
decreasing annual increments if Dr. Sharoky voluntarily terminates
his employment, or if his employment is terminated for cause, prior
to January 31, 1997. The forfeiture restrictions lapsed on 100,000
shares on April 25, 1993 and 100,000 shares on April 25, 1994. The
share forfeiture clause shall be terminated under certain stated
conditions. The value of the 400,000 shares at date of grant was
$2,200,000 and the value of the additional 300,000 shares at date
of grant was $2,250,000. These shares are not restricted for
purposes of receiving dividends. If Dr. Sharoky's employment is
terminated following a "change in control" of the Company, he may
be eligible to receive severance benefits including a lump sum
amount equal to approximately three times his base annual salary.
(3) Effective January 31, 1993, Mr. Raisfeld resigned as President
and Chief Executive Officer of the Company. As of January 19, 1993,
Mr. Raisfeld's employment agreement was modified, in part, to
provide that its term will expire on January 31, 1996, and that Mr.
Raisfeld will hold the position of Vice President of Financial
Affairs.
Mr. Raisfeld's annual compensation was changed from $350,000 to
$225,000, and Mr. Raisfeld may be eligible to receive cash
compensation equal to approximately three times his base annual
compensation, if there is a "change in control" of the Company.
(4) As of July 1, 1993, the Company and Mr. Rice entered into an
agreement pursuant to which the Company agreed to employ Mr. Rice
as Executive Vice President, Chief Operating and Financial Officer
of the Company through June 30, 1998. The agreement provides, in
part, that Mr. Rice is to receive as compensation for his services
an annual salary of $185,000 a year. Mr. Rice was also granted
100,000 restricted shares of common stock, which grant became
effective as of July 1, 1993, and is conditional upon Mr. Rice not
voluntarily terminating his employment, or being terminated for
cause, for a five-year period commencing July 1, 1993. If such
termination should occur in the first two years of employment, Mr.
Rice would forfeit all 100,000 shares. The number of shares
subject to forfeiture decreases by 25,000 on June 30, 1995 and by
25,000 on each June 30th thereafter. The value of the 100,000
shares was $612,500 at date of grant. These shares are not
restricted for purposes of receiving dividends. If Mr. Rice's
employment is terminated without cause after the occurrence of
a "change in control" of the Company, Mr. Rice may be eligible to
receive one year's base salary and the forfeiture provisions will
lapse on the said shares.
(5) As of February 15, 1993, Mr. Marrow and the Company entered
into an employment agreement pursuant to which the Company agreed
to employ Mr. Marrow as General Counsel and pay him a salary of
$165,000 per year.
(6) As of April 26, 1991, the Company and Mr. LaBella entered into
an agreement pursuant to which the Company agreed to employ Mr.
LaBella as Director of Regulatory Affairs (Mr. LaBella has since
become Vice President, Director of Research and Development) of the
Company through April 25, 1996. The agreement provides, in
part, that Mr. LaBella's initial base annual salary is $125,000 a
year. Mr. LaBella was also granted 50,000 restricted shares of
common stock conditioned upon Mr. LaBella not voluntarily
terminating his employment, or being terminated for cause, for a
five-year period commencing April 26, 1991. If such termination had
occurred in the first two years of employment, Mr. LaBella would
have forfeited all 50,000 shares. The number of shares subject to
forfeiture decreased by 12,500 shares on April 25, 1993, and an
additional 12,500 shares on April 25, 1994. The forfeiture
decreases by 12,500 shares on April 25, 1995 and 1996. At Mr.
LaBella's election, the forfeiture provisions shall lapse in the
event of a "change in control". The value of the 50,000 shares
was $193,750 at date of grant. These shares are not restricted for
purposes of receiving dividends.
(7) As of April 26, 1991, the Company and Mr. Kornreich entered
into an agreement pursuant to which the Company agreed to employ
Mr. Kornreich as Executive Vice President and General Counsel of
the Company through April 25, 1996. On February 1, 1993, Mr.
Kornreich signed a separation agreement pursuant to which
he resigned as Executive Vice President and General Counsel, and as
a Director of the Company. As part of his separation agreement
with the Company, Mr. Kornreich forfeited 250,000 shares previously
awarded him. The Company purchased 100,000 shares of its common
stock from Mr. Kornreich on February 1, 1993 at $8.25 per
share. Mr. Kornreich owned 150,000 restricted shares of common
stock of the Company when he resigned pursuant to the separation
agreement. Mr. Kornreich received $389,231 during 1993 as part of
his separation agreement.
(8) As of June 30, 1993, Mr. Inkles agreed to cancel his
employment agreements dated June 3, 1987, August 24, 1990 and
August 21, 1992, and to retire as Circa's Vice President of
Scientific Affairs. His employment was to have continued until
August 23, 1995 under those agreements. In exchange for forfeiting
85,000 restricted shares which were to vest during 1994 and 1995
pursuant to his employment agreements, Mr. Inkles received
severance benefits, including one year's salary in a lump sum, the
vesting of 42,500 shares of Circa stock on August 23, 1993, and an
option to purchase 21,250 shares at $5.00 per share exercisable for
five years.
(9) Represents the reversal of unearned compensation relating to
the forfeiture of previously awarded restricted common stock of the
Company.
Deferred Compensation Plan
The Company maintains a Deferred Compensation Plan for
the benefit of eligible key employees and officers. A total of
1,300,000 shares of common stock are reserved for issuance under
the plan. The Company awarded to certain employees 400,000 shares
of common stock in 1993, 55,000 shares in 1992 and 950,000 shares
in 1991. The 1991 stock awards were conditioned upon the recipients
surrendering for cancellation 350,000 shares which had been
previously awarded to them. In 1993, 472,500 shares previously
issued under the Deferred Compensation Plan were canceled and added
back into the plan for future issuance. If the recipients of
shares issued under the Deferred Compensation Plan leave the
Company's employ prior to specified dates, they must return some or
all of the awarded shares to the Company. Other terms of these
awards are similar to the stock award plan. Unearned compensa
tion has been recorded for the fair market value of the shares
issued and such amounts are being amortized by charges to income
over the related periods of employment of each employee receiving
such shares.
Directors' Fees and Stock Options
Pursuant to the Company's 1990 Directors' Stock Option
Plan ("the plan"), as amended in June, 1992 and in March, 1994,
each director not employed by the Company receives an option to
purchase 5,000 shares of Circa common stock on the date of initial
election to the Board and an option to purchase 5,000 shares of
Circa common stock once each year thereafter, on the date of the
Annual Meeting of Shareholders, provided such director has been
elected to serve on the Board of Directors for the year following
that Annual Meeting. Directors not employed by the Company also
receive an annual retainer fee of $15,000 and an additional $1,000
for each Audit Committee, Nominating Committee and Compensation
Committee meeting they attend as members of those committees.
The plan is "non-qualified" under the Internal Revenue
Code and was adopted by the Board and approved by the shareholders
in 1990. It is maintained by the Company for the benefit of
directors who are not eligible to receive options under any other
plan adopted by the Company. The plan provides that the exercise
price of each option will be 100% of the fair market value of the
common stock on the date of grant and is exercisable in full on
the first anniversary of the date of grant. A total of 500,000
shares of common stock were reserved for issuance under the plan.
In 1993, options for 27,500 shares of the Company's common stock
were issued under the plan. As of December 31, 1993, options to
purchase a total of 87,500 shares of the Company's common stock
were issued under the plan, of which options to purchase 2,500
shares have been exercised and options to purchase 412,500
shares were available for future issuance.
Employee Pension Plan
The Company maintains an Employee Pension Plan covering
substantially all employees who have completed six months of
continuous full-time service as of the first day of the year.
Benefits are payable in the form of a ten-year certain and life
annuity, and are limited by applicable laws and regulations. The
Company makes contributions to the Employee Pension Plan on behalf
of its executive officers, and makes similar contributions on
behalf of all eligible salaried employees. Directors who have not
served as employees are not eligible to receive retirement
benefits under the Employee Pension Plan. The following table sets
forth estimated annual benefits payable upon normal retirement at
age 65 pursuant to the plan to persons in specified remuneration
and years of credited service classification:
REMUNERATION YEARS OF CREDITED SERVICE (1)
15 20 25 30 35(2)
$ 100,000 $ 22,500 $ 30,000 $ 37,500 $ 45,000
150,000 33,750 45,000 56,250 67,500
200,000 45,000 60,000 75,000 90,000
250,000 * 53,064 70,752 88,440 104,077**
300,000 * 53,064 70,752 88,440 104,077**
* Compensation for benefit purposes for 1993 is limited to
$235,840 by law.
** Annual pension benefit for 1993 is limited to $104,077 by law.
(1) As of December 31, 1993, Mr. Raisfeld had 26 years, and Dr.
Sharoky had six years, of credited service. Benefits for the
Employee Pension Plan cover only annual salary. The method for
computing the pension benefit is a "fixed benefit formula" based on
a percentage of compensation and years of service.
(2) A participant may, with the consent of the Company, continue
his employment after attaining age 65. If a participant elects to
postpone his retirement benefits until his deferred retirement
date, he will receive a pension which is the actuarial equivalent
of his normal retirement pension determined as of his deferred
retirement date.
<PAGE>
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG COMPANY, AMERICAN STOCK EXCHANGE & PEER GROUP
The following graph compares the five-year cumulative
return from investing $100 in Circa common stock at the end of 1988
(dividends are assumed to be reinvested when received) with the
American Stock Exchange (AMEX) Index and the Peer Group Index. The
graph also includes a comparison of the return on such an invest
ment with a peer group used in the Company's 1993 Proxy Statement
consisting of AL Labs, Inc., Barr Laboratories, Inc., Biocraft
Labs, Inc., Forest Laboratories, Inc., Glaxo Holdings PLC ADR,
Marsam Pharmaceuticals, Inc., Merck & Co., Pfizer, Inc., and
Warner-Lambert Co.
Although the differences between the Peer Group Index and
the group used in the 1993 Proxy Statement are not material, in the
Company's opinion the Peer Group Index provides a more
representative comparison for shareholders because of the greater
number of companies in the pharmaceutical industry which are part
of that index. For that reason, the Company intends to use the
Peer Group Index in future proxy statements.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Report of the Compensation Committee
Introduction
Notwithstanding anything to the contrary set forth in any of
Circa's previous filings under the Securities Act of 1933, as
amended, or the Securities Exchange Act of 1934, as amended, that
might incorporate future filings, including this Proxy Statement,
in whole or in part, the following report and the Performance Graph
in this Proxy Statement shall not be incorporated by reference
into any such filing.
The Board of Directors has delegated to the Compensation
Committee (the Committee) the authority to make certain decisions
with respect to the compensation of the Company's Chief Executive
Officer, as well as various aspects of other compensation and
fringe benefit matters applicable to all of the Company's employees
including executive officers. In addition, the Committee
administers all of the Company's stock option and incentive award
plans. During the last fiscal year the Committee consisted of
Bruce Hausman, Chairman, Michael Fedida
and Stanley Grey; none of whom is a Company employee.
Overview
Through its executive compensation policies, the Company seeks
to attract and to retain highly qualified executives who will
contribute to its success. The Committee believes that the
availability of comprehensive benefits is important to this goal
and to motivating executive performance consistent with shareholder
interest.
The Committee recognizes that the industry in which the
Company participates is highly competitive. The Company and the
pharmaceutical industry face significant challenges in the near and
long term future. The Company's pharmaceutical products are in
various stages of development and regulatory approval, and revenues
from operations have been relatively low during the past four years
of transition and rehabilitation. Therefore, traditional
performance standards based upon sales and profits from operations
are not believed to be an appropriate measure of performance in
setting compensation policy for the Company. Rather, compensation
of the Company's executives is more appropriately based upon
whether an individual's achievements have furthered overall
corporate objectives.
In order to attract highly qualified personnel to assist in
attaining the Company's objectives, the Committee believes that the
compensation arrangements must remain competitive with those
offered by other companies in the industry.
Components of Executive Compensation
Executive base salaries are believed by the Committee to be
reasonable and are periodically reviewed by the Committee.
Compensation for any individual may be modified to reflect changes
in performance and responsibilities allocated to a particular
position.
Changes in an executive's compensation are based upon his or
her personal contribution to corporate performance, increases in
his or her responsibilities and comparisons with salaries paid to
executives of other companies with comparable positions and
experience in the industry.
The Committee believes that it is also important to provide
executive officers, as well as key employees, with a long term
interest in the Company's performance through stock ownership
programs, including stock options, restricted share grants and
other incentives. Currently, and for the foreseeable future, the
Company believes that the stock incentive programs will have
vesting schedules linked closely to an executive's, and the
Company's, performance.
The Committee believes that, over time, management
compensation should be directly linked to changes in shareholder
value. The executive compensation program thus has been designed
to align executive compensation with both the Company's business
goals and long term shareholder interests. The Committee believes
that the program, as implemented, is balanced and consistent with
these objectives.
The 1994 Long-Term Incentive Plan
The Board unanimously recommends that the shareholders approve the
Company's 1994 Long-Term Incentive Plan (the 1994 Plan) to
establish a performance-based plan for officers and key employees
that provides incentive opportunities linked directly to specific
performance measures and is intended to preserve the tax
deductibility of the Company's compensation expenses. Adoption of
the 1994 Plan would mean that such officers and employees would be
covered by the 1994 Plan in lieu of the 1988 Incentive Compensation
Plan.
It is intended that awards under the 1994 Plan will
qualify as performance-based compensation within the meaning of
section 162(m) of the Internal Revenue Code of 1986, as amended by
the Omnibus Budget Reconciliation Act of 1993. This provision
limits to $1 million the allowable deduction for compensation paid
by a publicly held company to the Chief Executive Officer and to
each of the other four most highly compensated employees for
taxable years beginning on or after January 1, 1994. This
limitation, however, does not apply to performance-based
compensation that is tied to objective performance standards which
have been established by a compensation committee of the Board
consisting solely of outside directors or to stock options granted
under a plan provided that the material terms of the performance
goals or of the plan, as the case may be, have been disclosed to
and approved by the shareholders. The 1994 Plan has been designed
by the Compensation Committee to meet these criteria.
Compensation of Chief Executive Officer
Dr. Sharoky's compensation was fixed by the Board of
Directors, with the Committee's approval, on January 19, 1993,
shortly before he became the Company's President and Chief
Executive Officer on January 31, 1993. In establishing the 1993
compensation for Dr. Sharoky, the Committee followed the policies
and procedures described above.
Dr. Sharoky's performance during his first year in office
has exceeded the Committee's high expectations. Significant
corporate objectives achieved under Dr. Sharoky's leadership during
1993 included:
Most importantly, the establishment of a new corporate culture
and identity directed towards demonstrated integrity and aggressive
pursuit of opportunities available to well-financed and
well-organized companies in a dynamic industry; and changing the
Company's name to reinforce the change in corporate culture and
reputation.
Establishing a new team of executives, including a Chief
Operating and Financial Officer with solid experience in the
pharmaceutical industry and important ties to the financial
community.
Receiving written confirmation of rehabilitation from the Food
and Drug Administration, putting to rest the regulatory problems
created by pre-1990 management.
Forging joint ventures and strategic alliances with
pharmaceutical companies that provide expertise as well as product
formulations and pharmaceutical know-how to help the Company
achieve its objectives in manufacturing and marketing off-patent
pharmaceuticals, over-the-counter medicines and branded
products.
Resolving litigation inherited from pre-1990 management,
including the successful resolution of antitrust charges made by
the Federal Government.
Restructuring the Company's partnership agreement with a
major, international pharmaceutical company, limiting cash outlays
while preserving the right to royalties.
On January 19, 1993, Dr. Sharoky's employment agreement was
modified to increase his base compensation from $220,000 per year
as Executive Vice President and Director of Research & Development,
to $300,000 per year as President and Chief Executive Officer. Dr.
Sharoky also received an additional 300,000 restricted shares of
Circa stock under the Deferred Compensation Plan, which shares are
subject to forfeiture under certain conditions (see notes to the
Executive Compensation Table) and do not vest for two years from
the date of the contract.
Dr. Sharoky's leadership, and Circa's accomplishments during
his short time as President and Chief Executive Officer, have been
recognized by industry analysts and the financial community. The
confidence of the Board of Directors and the Committee in
establishing Dr. Sharoky's compensation as President and Chief
Executive Officer has been fully warranted.
Compensation Committee
Bruce Hausman, Esq., Chairman
Michael Fedida
Stanley Grey
Kenneth Siegel
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As of December 31, 1993 there was due to the Company the sum
of approximately $1,341,000 from a trust created on behalf of Mr.
Raisfeld for premiums paid by the Company for a split-dollar life
insurance policy. This sum will be repaid from the death benefits
provided under Mr. Raisfeld's policy and is secured by
approximately $1,500,000 of cash surrender value.
As of December, 1991, the Company had advanced legal fees of
$1,331,753 on behalf of Robert Shulman, a former President of the
Company. No further advances are being made on his behalf. The
Company has instituted a legal action against Mr. Shulman for
reimbursement of legal fees advanced on his behalf, and for damages
caused to the Company by his wrongful conduct. In March, 1991, Mr.
Shulman pledged shares of the Company's common stock owned by him
as security to assure reimbursement to the Company for the legal
fees advanced on his behalf, should the Company become entitled to
such reimbursement.
Under the terms of the agreements entered into between the
Company and Mr. Raisfeld and Dr. Sharoky, the Company must use its
best efforts to cause them to be reelected to the Board during the
period of their employment with Circa.
No director, officer, nominee for election as a director or
principal security holder of the registrant, nor any relative or
spouse of any of the foregoing persons nor the Company itself is,
or during the calendar year 1993, has been, involved in any
transaction, directly or indirectly, with Circa or any pension,
retirement, savings or similar plan provided by the Company.
RATIFICATION OF THE APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board has selected Coopers & Lybrand, Certified Public
Accountants, to continue to serve as principal accountants of the
Company for 1994. Coopers & Lybrand is knowledgeable about the
Company's operations and accounting practices and is well qualified
to act in the capacity of independent accountants. In addition to
audit services relating to the Company's consolidated financial
statements and various governmental reporting requirements, Coopers
& Lybrand performs some non-audit services for Circa. Fees
applicable to the audit of Circa's consolidated financial
statements are reviewed and approved by the Board before the
services are provided. Other services are not normally approved by
the Board before the services are provided but are subsequently
reviewed. The Board believes that the non-audit services to be
provided by Coopers & Lybrand will have no effect on the
independence of that firm. Representatives of Coopers & Lybrand
are expected to be present at the Annual Meeting of Shareholders,
and will be available to make a statement and to answer questions.
The affirmative vote of a majority of the votes cast by the
holders of shares entitled to vote thereon who are present at the
meeting in person or by proxy is required for approval of this
proposal.
In view of the difficulty and expense involved in changing
independent accountants on short notice, if the resolution is not
approved, it is contemplated that the appointment for 1994 will be
permitted to stand unless the Board finds other compelling reasons
for making a change. Disapproval of the resolution will be
considered as advice to the Board to select other independent
accountants for the following year.
The Board of Directors recommends a vote "FOR" the
ratification of the appointment of Coopers & Lybrand as Circa's
independent accountants for 1994.
ADOPTION OF THE 1994 LONG-TERM INCENTIVE PLAN
In May, 1988, shareholders approved the adoption of the 1988
Incentive Compensation Plan (the "1988 Plan"), which permits only
the granting of stock options. The 1988 Plan replaced the 1981
Incentive Compensation Plan and contains identical provisions to
that plan. The Board of Directors continues to believe that
stock-based incentives are important in attracting, retaining and
rewarding officers and other selected employees and closely
aligning their interests with those of shareholders. Therefore,
the Board recommends that shareholders approve the adoption
of the 1994 Long-Term Incentive Plan (the "1994 Plan") to replace
the 1988 Plan, which will expire on May 31, 2000. The Board plans
to terminate the 1988 plan, and no further options will be granted
thereunder.
The 1994 Plan differs from the 1988 Plan in that it provides
much greater flexibility to the Compensation Committee of the Board
(the "Committee") to make stock-based awards, as more fully
discussed below. Other changes are intended to meet the
requirements of intervening legislation and regulatory
developments, none of which will have a substantive effect on the
way awards are granted or the 1994 Plan is administered.
All officers (currently 10) and selected key employees will be
eligible to participate in the 1994 Plan. Participants are
recommended by management.
The Committee will review and act on all 1994 Plan grants and
awards to officers and, consistent with procedures previously
adopted by the Company, the Committee will delegate to the chief
executive officer the authority to make grants and awards under the
1994 Plan to other employees. In administering the 1994 Plan, the
Committee has the power to interpret its provisions and to attach
conditions to grants or awards, which need not be the same for
all participants. The Committee is authorized to amend the 1994
Plan, except that it may not increase the maximum number of shares
for which awards may be made or make certain other specified
amendments without shareholder approval.
The 1994 Plan permits the grant of any form of stock option,
stock appreciation right, stock or cash award whether granted
singly, in combination or in tandem. One or more stock options may
be granted to any participant.
No participant may receive under the 1994 Plan stock options or
stock appreciation rights ("SARs") exceeding 150,000 shares or 11%
of the shares authorized for issuance under the 1994 Plan. As in
the case of all previous Company stock plans for executives, stock
options will be granted at not less than 100% of the fair market
value of the common stock on the American Stock Exchange on the
date of grant ("Fair Market Value") and other stock awards will
also be based on at least Fair Market Value. It is expected that
options and SARs will be granted for periods of 10 years or less
and may continue in effect after termination of employment.
In addition to the foregoing types of awards, the 1994 Plan
permits the Committee to grant such other award forms as shall be
consistent with the purposes of the Plan. Such grants may be paid
at the discretion of the Committee in cash, shares of common stock
or any combination thereof. The duration of the 1994 Plan will be
five years, subject to earlier termination by the Committee. The
Plan will be administered by the Committee, which is com
posed of "outside directors" within the meaning of Section 162(m)
of the Internal Revenue Code. Members of the Committee are not
eligible to participate in the Plan.
The Board of Directors has authorized for issuance under the
1994 Plan 1,400,000 shares of common stock, which is 6.6% of the
shares of the Company's common stock outstanding on March 31, 1994.
The stock's fair market value on that day was $11.50 per share.
All stock based awards and awards denominated in stock units,
whether payable in stock or cash, are subject to this limit. The
Plan is scheduled to become effective August 1, 1994, subject to
Shareholder approval.
On May 5, 1994, the Company granted options to purchase 459,000
shares of the Company's stock to eight officers and eleven key
employees, subject to shareholder approval of the 1994 Plan. The
options are subject to shareholder approval of the 1994 plan, are
exercisable over a three year period commencing one year from the
date of grant and expire ten years from the date of grant at an
exercise price of not less than 100% of fair Market Value on the
date of grant (see table below).
1994 LONG-TERM INCENTIVE PLAN
Name and Position Exercise Price Number of Options
Thomas P. Rice $12 3/8 75,000
Executive Vice President
Chief Operating and
Financial Officer
Nicholas LaBella $12 3/8 50,000
Vice President and
Director of Research
and Development
Robert V. Marrow $12 3/8 50,000
Vice President
General Counsel and
Secretary
All other officers as $12 3/8 150,000
a group
All other employees $12 3/8 134,000
as a group
Certain kinds of options that may be granted under the 1994
Plan may require a charge to earnings, and other types of awards
under the 1994 Plan will require a charge. SARs result in such a
charge when the market value of the shares exceeds the exercise
price at which the SARs were granted. The Financial Accounting
Standards Board is considering whether the accounting treatment of
stock options should be changed. The effective date of any such
change, which could result in material increased compensation
expense to the Company, is not expected to be until 1997 at the
earliest. It is not anticipated that, in the immediate future, any
type of award other than stock options will be granted under the
1994 Plan.
As discussed in the report on executive compensation, the 1994
Plan has been designed to meet the requirements of new Section
162(m) of the Internal Revenue Code for stock options and SARs and
to provide flexibility for other awards that meet these
requirements. Final regulations interpreting this complex
provision with respect to any such other types of awards are not
expected to be issued until after the July 15, 1994 meeting of
Circa's shareholders. Circa's management and the Committee will
determine what action, if any, is appropriate, when final
regulations are issued.
The 1994 Plan is printed in its entirety as Appendix 1, and
the federal income tax consequences of the issuance and exercise of
stock options are set forth as Appendix 2.
The Board of Directors recommends a vote "FOR" the 1994
Long-Term Incentive Plan.
Submission of Shareholder Proposals for the 1995 Annual Meeting
Proposals of shareholders to be presented at the 1995 Annual
Meeting of Shareholders must be received by the Company at its
executive offices, 33 Ralph Avenue, P.O. Box 30, Copiague, New York
11726-0030, not later than 120 days prior to June 10, 1995 (the
anniversary date of the mailing of this proxy), i.e., by March 25,
1995, for inclusion in the proxy statement and form of proxy
relating to that meeting.
Expenses of Solicitation
The solicitation of proxies in the form enclosed is made on
behalf of the management of the Company and by authority of its
Board. The expenses in connection with the solicitation of
proxies, including the cost of preparing, handling, printing and
mailing the Notice of Annual Meeting of Shareholders, Annual
Report, Proxy and Proxy Statement, will be borne by the Company.
Solicitations will be made by use of the mails except, that if
necessary, management may solicit proxies by advertising,
telephone, telegraph, cable and personal interview. In connection
with this solicitation of proxies, management may use the services
of its directors, officers and regular employees, who will receive
no compensation therefor in addition to their regular salaries but
who will be reimbursed for the actual out-of-pocket expenses
incurred. The Company may request banks, brokers, nominees,
custodians and fiduciaries to forward copies of the proxy
solicitation materials to shareholders of record and to reimburse
such persons for their expenses in so doing.
Other Matters
As of the date of this Proxy Statement, the above is the only
business known to management to be acted upon at the 1994 Annual
Meeting of Shareholders. However, if other matters should properly
come before the Meeting, the persons appointed by signed proxies
intend to vote them in accordance with their best judgment.
By Order of the Board of Directors,
ROBERT V. MARROW
Secretary and General Counsel
Dated: Copiague, New York
June 9, 1994
APPENDIX 1
1994 Long-Term Incentive Plan
I. Purposes
The Circa Pharmaceuticals, Inc. 1994 Long-Term Incentive Plan
(the "Plan") is designed to attract and retain executives and other
selected employees whose skills and talents are important to the
Company's operations, and reward them for major contributions to
the success of the Company.
II. Definitions
2.1 "Award" - The grant of any form of stock option, stock
appreciation right, stock or cash award, whether granted singly, in
combination or in tandem, to a Participant pursuant to such terms,
conditions, performance requirements and limitations as the
Committee may establish.
2.2 "Award Agreement" - An agreement between the Company and
a Participant that sets forth the terms, conditions, performance
requirements and limitations applicable to an Award.
2.3 "Code" - The Internal Revenue Code of 1986, as amended
from time to time.
2.4 "Committee" - The committee designated by the Board of
Directors of the Company to administer the Plan. The Committee
shall be constituted to permit the Plan to comply with any rules
and regulations promulgated under Section 162(m) of the Code or any
successor provision. No member of the Committee may receive an
Award.
2.5 "Common Stock" or "Stock" - Authorized and issued or
unissued $0.01 Par Value Common Stock of the Company.
2.6 "Company" - Circa Pharmaceuticals, Inc. and its
subsidiaries and partnerships and other business ventures
in which Circa has a significant equity interest, as determined in
the sole discretion of the Committee.
2.7 "Fair Market Value" - The average of the high and low
prices of Common Stock on the American Stock Exchange for the date
in question, provided that, if no sales of Common Stock were made
on said exchange on that date, the average of the high and low
prices of Common Stock as reported for the most recent preceding
day on which sales of Common Stock were made on said exchange.
2.8 "Participant" - An employee of the Company to whom an
Award has been made.
III. Eligibility
Individuals eligible for an Award are employees of the Company
who hold positions of responsibility and whose performance, in the
judgment of the Committee, can have a significant effect on the
success of the Company.
IV. Common Stock Available for Awards
The number of shares that may be issued under the Plan for
Awards granted wholly or partly in Stock during the term of the
Plan is 1,400,000. Included in this share limit are Awards
denominated in units of Stock that may be redeemed or exercised for
cash as well as for Stock. Common Stock related to Awards that (i)
are forfeited or terminated, (ii) expire unexercised or are settled
in cash in lieu of Stock or in such manner that all or some of the
shares covered by an Award are not issued to a Participant or (iii)
are exchanged for Awards that do not involve Common Stock shall
immediately become available for Awards.
<PAGE>
V. Administration
The Plan shall be administered by the Committee, which shall
have full and exclusive power to interpret the Plan, to grant
waivers of Award restrictions and to adopt such rules, regulations
and guidelines for carrying out the Plan as it may deem necessary
or proper. These powers include, but are not limited to, the
adoption of modifications, amendments, procedures and the like as
are necessary to comply with provisions of all applicable laws and
regulations and to enable Participants to receive the intended
advantages and benefits under the Plan.
VI. Awards
6.1 The Committee shall determine the type of Award(s) to be
made to each Participant and shall set forth in the related Award
Agreement the terms, conditions, performance requirements and
limitations applicable to each Award. Awards may include but are
not limited to those listed in this Article VI. Awards may be
granted singly, in combination or in tandem. No Participant may
receive, under the Plan, stock options or stock appreciation rights
the aggregate of which shall exceed 150,000 shares.
(a) Stock Option - A grant of a right to purchase a specified
number of shares of Common Stock the purchase price of which shall
be not less than 100% of Fair Market Value on the date of grant, as
determined by the Committee. A Stock Option may be in the form of
an incentive stock option ("ISO") which, in addition to being
subject to applicable terms, conditions and limitations established
by the Committee, complies with Section 422 of the Code.
(b) Stock Appreciation Right - A right to receive a payment,
in cash and/or Common Stock, equal to the excess of the Fair Market
Value of a specified number of shares of Common Stock on the date
the stock appreciation right ("SAR") is exercised over the Fair
Market Value on the date of grant of the SAR, as set forth in the
applicable Award Agreement.
(c) Stock Award - An Award made in Stock or denominated in
units of Stock. All or part of any Stock Award may be subject to
conditions established by the Committee and set forth in the Award
Agreement, including, but not limited to, continuous service with
the Company, achievement of specific business objectives, increases
in specified indices, attainment of targeted growth rates and other
comparable measurements of Company performance. Such Awards may be
based on Fair Market Value or other specified measures of value.
(d) Cash Award - An Award denominated in cash with the
eventual payment amount subject to future service and other
restrictions and conditions established by the Committee and set
forth in the Award Agreement, including, but not limited to,
continuous service with the Company, achievement of specific
business objectives, increases in specified indices, attainment of
targeted growth rates and other comparable measurements of Company
performance.
6.2 Awards payable wholly or partly in Stock must be held for
at least six months, (i) in the case of a Stock Option or SAR, from
the date of grant to the date of exercise and (ii) in the case of
other Awards, from the date of acquisition to the date of
disposition.
VII. Payment of Awards
Payment of Awards may be made in cash or Stock or a
combination thereof and may include such restrictions as the
Committee shall impose, including in the case of Stock,
restrictions on transfer and provision for forfeiture.
When transfer of Stock is so restricted or Stock is subject to
forfeiture, it is referred to as "Restricted Stock." The
Committee may permit a Participant to defer payments in accordance
with its procedures and in a manner that permits such deferrals to
comply with applicable requirements of the Code including the
ability to defer payment until after retirement. Dividends or
dividend equivalent rights may be extended to and made part of any
Award denominated in Stock or units of Stock, subject to such
conditions and restrictions as the Committee may impose.
The Committee may also establish rules and procedures for the
crediting of interest on deferred cash payments and dividend
equivalents for deferred payments denominated in Stock or units of
Stock.
VIII. Stock Option Exercise
The price at which shares of Common Stock may be purchased
under a Stock Option shall be paid in full at the time of the
exercise in cash or, if permitted by the Committee, by means of
tendering Common Stock or surrendering another Award, including
Restricted Stock, valued at Fair Market Value on the date of
exercise, or any combination thereof. The Committee shall
determine acceptable methods for tendering Common Stock or other
Awards and may impose such conditions on the use of Common Stock or
other Awards to exercise a Stock Option as it deems appropriate.
If shares of Restricted Stock are tendered in the exercise of a
Stock Option, a number of shares issued upon exercise, equal to the
number of shares of Restricted Stock used as consideration
therefor, shall be subject to the same restrictions as the
Restricted Stock so tendered.
IX. Tax Withholding
The Company shall have the right to (i) deduct applicable
taxes from any Award payment and withhold, at the time of delivery
or vesting of shares under the Plan, an appropriate number of
shares for payment of taxes required by law or (ii) take such other
action as may be necessary to satisfy all obligations for
withholding of such taxes. If Common Stock or Restricted Stock is
used to satisfy tax withholding, such Stock shall be valued at Fair
Market when the withholding is required to be made.
X. Amendment, Modification, Suspension or Discontinuance of the
Plan
The Committee may amend, modify, suspend or terminate the Plan in
order to meet any changes in legal requirements or accomplish any
other purpose permitted by law. Subject to changes in legal
requirements that would permit otherwise, the Plan may not be
amended without the consent of the holders of a majority of the
shares of Common Stock then outstanding to (i) increase the
aggregate number of shares of Common Stock that may be
issued under the Plan (except for adjustments pursuant to Article
XIV of the Plan), (ii) decrease the option price, (iii) materially
modify the requirements as to eligibility for participation, (iv)
withdraw administration of the Plan from the Committee or (v)
extend the period during which Awards may be granted.
XI. Termination of Employment
11.1 If the employment of a Participant terminates other than
as provided in Sections 11.2 and 11.3, all unexercised, deferred
and unpaid Awards shall be canceled immediately, unless the Award
Agreement provides otherwise.
11.2 Retirement. When a Participant's employment terminates
as a result of retirement, the Committee may (i) permit Awards to
continue in effect beyond the date of retirement in accordance with
the applicable Award Agreement and (ii) accelerate the
exercisability and vesting of any Award.
11.3 Death or Disability.
(a) In the event of a Participant's death the Participant's
estate or beneficiaries shall have the period specified in the
Award Agreement within which to receive or exercise any outstanding
Award held by the Participant under the terms specified therein.
Rights to any outstanding Award shall pass by will or the laws of
descent and distribution in the following order: (i) to
beneficiaries designated by the Participant, (ii) if none, to a
legal representative of the Participant, (iii) if none, to the
persons entitled thereto as determined by a court of competent
jurisdiction. Subject to subsection (c) below, any Award so
passing shall be exercised or paid out at such times and in such
manner as if the Participant were living.
(b) In the event a Participant is deemed by the Company to be
disabled, any Award may be paid to or exercised by the Participant
if legally competent, or by a duly appointed representative if the
Participant is legally incompetent.
(c) After the death or disability of a Participant, the
Committee may in its sole discretion at any time (i) termi
nate restrictions in any Award Agreement, (ii) accelerate any or
all installments and rights and (iii) instruct the Company to pay
the total of any accelerated payments in a lump sum to the
Participant, the Participant's estate, beneficiaries or
representative (notwithstanding that, in the absence of such
termination of restrictions or acceleration of payments, any or all
of the payments due under the Awards might ultimately have become
payable to other beneficiaries).
(d) In the event of uncertainty as to interpretation of or
controversies concerning this Section 11.3, the Committee's
determination shall be binding and conclusive.
XII. Cancellation and Rescission of Awards
Unless an Award Agreement specifies otherwise, the Committee
may cancel any unexpired, unpaid Awards at any time if the
Participant is not in compliance with all applicable provisions of
the Award Agreement and the Plan.
XIII. Nonassignability
Except pursuant to Section 11.3, no Award or any other benefit
under the Plan shall be assignable or transferable or payable to or
exercisable by anyone other than the Participant to whom it was
granted.
XIV. Adjustments
In the event of any change in the outstanding Common Stock of
the Company by reason of a Stock split, Stock dividend, combination
or reclassification of shares, recapitalization, merger or similar
event, the Committee may adjust proportionally (a) the number of
shares of Common Stock (i) reserved under the Plan, (ii) available
for ISOs, (iii) for which Awards may be granted to an individual
Participant and (iv) covered by outstanding Awards denominated in
Stock or units of Stock; (b) the Stock prices related to
outstanding Awards; and (c) the appropriate Fair Market Value and
other price determinations for such Awards. In the event of any
other change affecting the Common Stock or any distribution (other
than normal cash dividends) to holders of Common Stock, such adjust
ments as may be deemed equitable by the Committee, including
adjustments to avoid fractional shares, shall be made to give
proper effect to such event. In the event of a corporate merger,
consolidation, acquisition of property or Stock, separation,
reorganization or liquidation, the Committee may issue or assume
Stock Options by means of substitution of new Stock Options for
previously issued Stock Options or an assumption of previously
issued Stock Options.
XV. Notice
Any notice to the Company required by any of the provisions of
the Plan shall be addressed to the chief human resources officer or
to the chief executive officer of the Company in writing and shall
become effective when it is received by the office of either of
them.
XVI. Unfunded Plan
Insofar as it provides for Awards of cash and Common Stock,
the Plan shall be unfunded. Although accounts may be established
with respect to Participants under the Plan, any such accounts
shall be used merely as a book keeping convenience and the Company
shall not be required to segregate any assets in respect of the
Plan. Any liability of the Company to any Participant with respect
to an Award shall be based solely upon any contractual obligations
that may be created by the Plan and any Award Agreement; no such
obligation of the Company shall be deemed to be secured by any
pledge or other encumbrance on any property of the Company.
Neither the Company nor the Committee shall be required to give any
security or bond for the performance of any obligation that may be
created by the Plan.
XVII. Governing Law
The Plan and all determinations made and actions taken
pursuant hereto, to the extent not otherwise governed by the laws
of the United States, shall be governed by the laws of the State of
New York and construed accordingly.
XVIII. Effective and Termination Dates
The Plan shall become effective on August 1, 1994, provided
that it has been previously approved by the holders of a majority
of the shares of Common Stock then outstanding. The Plan shall
terminate five years later, subject to earlier termination by the
Committee pursuant to Article X after which no Awards may be made
under the Plan, but any such termination shall not affect Awards
then outstanding or the authority of the Committee to continue to
administer the Plan.
APPENDIX 2
Federal Income Tax Consequences
The 1994 plan permits the granting of Incentive Stock Options
(ISOs) and Non-Statutory Stock Options (NSOs), the federal income
tax consequences of which are discussed below.
Incentive Stock Options
Under the Code, a participant will recognize no taxable income
by reason of the grant or exercise of an Incentive Stock Option
(ISO), provided the holding period requirements discussed below are
satisfied. If a participant exercises an ISO and does not dispose
of the shares so acquired until after the later of (a) one year
from the date of transfer of the shares to the holder, or (b) two
years from the date of grant of the option, any amount realized by
the holder in excess of the exercise price will be recognized by
the holder as a capital gain, and any loss sustained by the holder
will be a capital loss, if the shares are capital assets in his or
her hands. The excess, if any, of the fair market value of the
shares at the time of exercise over the exercise price is an item
of tax preference to the holder for purposes of the alternative
minimum tax, unless there is an early disposition of the shares.
If the holder disposes of the shares before the holding period
requirements discussed above are satisfied, then the holder will
recognize ordinary income in his or her taxable year in which the
disposition occurs in an amount equal to the excess, if any, of the
fair market value of the shares on the date of exercise over the
exercise price paid. However, if the sale price is less than the
fair market value on the exercise date, the holder will recognize
ordinary loss in an amount equal to the excess, if any, of the
exercise price paid over the sale price. The Company will be
entitled to a deduction for its taxable year in which the
disposition occurs in the amount of the ordinary income so
recognized.
No deduction will be allowed to the Company for federal
income tax purposes in connection with the grant or exercise of the
option, if the holding period requirements discussed above are
satisfied.
Non-statutory Stock Options
The grantee of a Non-statutory Stock Option (NSO) under the
1994 Plan recognizes ordinary income in an amount equal to the
excess, if any, of the fair market value of the shares at the time
of exercise over the exercise price, and the Company will be
entitled to a deduction in the same amount as the option holder
recognizes ordinary income.
Upon a sale of the shares so acquired, the holder will have a
capital gain or loss, as the case may be, in an amount equal to the
difference between the amount realized on such sale and the tax
basis of the shares sold, if the shares are capital assets in the
hands of the holder. The tax basis of the shares will be equal to
their fair market value on the date of exercise, but not less than
the exercise price, and their holding period for determining long
or short term capital gain or loss will begin on the day after the
taxbasis of the share is so determined.
