SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
INCSTAR Corporation
(Name of Registrant as Specified In Its Charter)
_______________________________________________
(Name of Person(s) Filing Proxy Statement, if other that the Registrant)
Payments of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14a.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
....................................................................
2) Aggregate number of securities to which transaction applies:
....................................................................
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (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:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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<PAGE>
NOTICE OF REGULAR MEETING OF SHAREHOLDERS
TO BE HELD MAY 21, 1996
TO THE SHAREHOLDERS OF INCSTAR CORPORATION:
NOTICE IS HEREBY GIVEN that the Regular Meeting of the Shareholders of
INCSTAR Corporation will be held at the Minneapolis Club, 729 Second Avenue
South, Minneapolis, Minnesota 55402, on Tuesday, May 21, 1996, at 3:30 p.m.
local time for the purpose of considering and acting upon:
1. The election of a Board of Directors.
2. A proposal to approve amendments to the INCSTAR Corporation Stock
Option Plan.
3. Such other business as may properly come before the meeting or
any adjournment thereof.
Shareholders of record on April 1, 1996, are the only persons entitled to
notice of, and to vote at, the meeting. In addition to voting on these matters
at the meeting, we will review recent operations and plans for growth.
WHETHER YOU CAN BE PRESENT AT THE MEETING OR NOT, PLEASE PROMPTLY COMPLETE
AND RETURN THE ENCLOSED PROXY CARD. FOR YOUR CONVENIENCE, A RETURN ENVELOPE IS
ENCLOSED.
By Order of the Board of Directors
J. Andrew Herring
Secretary
April 15, 1996
<PAGE>
PROXY STATEMENT
The enclosed proxy is solicited by the Board of Directors of INCSTAR
Corporation, a Minnesota corporation (the "Company"), in connection with the
Regular Meeting of the Shareholders of the Company to be held on May 21, 1996,
and any adjournments thereof (the "Meeting"). The costs of solicitation are
being paid by the Company.
A proxy may be revoked at any time prior to its exercise by giving written
notice of revocation to the Secretary of the Company or by filing a new written
appointment of a proxy with the Secretary of the Company. Unless so revoked,
all properly executed proxies will be voted in accordance with the instructions
indicated on such proxies. Shares voted as abstentions on any matter (or a
"withhold vote for" as to directors) will be counted as shares that are present
and entitled to vote for purposes of determining the presence of a quorum at
the meeting and as unvoted, although present and entitled to vote, for purposes
of determining the approval of each matter as to which the shareholder has
abstained. If a broker submits a proxy which indicates that the broker does
not have discretionary authority as to certain shares to vote on one or more
matters, those shares will be counted as shares that are present and entitled
to vote for purposes of determining the presence of a quorum at the meeting,
but will not be considered as present and entitled to vote with respect to such
matters.
Only shareholders of record at the close of business on April 1, 1996, may
vote at the Meeting or any adjournment thereof. As of that date, there were
issued and outstanding 16,497,457 shares of Common Stock of the Company, the
only class of securities of the Company entitled to vote at the Meeting. Each
shareholder of record is entitled to one vote for each share registered in his
or her name as of the record date. This Proxy Statement and accompanying form
of Proxy will be first mailed to shareholders on or about April 15, 1996.
The Company's Annual Report to Shareholders is being furnished to each
shareholder with this Proxy Statement.
<PAGE>
PROPOSAL NO. 1
ELECTION OF DIRECTORS
NOMINEES
The number of directors of the Company is currently set at ten. THE BOARD
OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE INDIVIDUALS NAMED BELOW
TO SERVE AS DIRECTORS UNTIL THE NEXT REGULAR MEETING OF THE SHAREHOLDERS OR
UNTIL THEIR SUCCESSORS ARE ELECTED AND QUALIFIED. Each nominee is presently a
director of the Company. Proxies solicited by the Board of Directors will,
unless otherwise directed, be voted for the election of the nominees named.
Assuming that a quorum is present, a director candidate must receive the
affirmative vote of a majority of the voting power of the shares of Common
Stock represented in person or by proxy and entitled to vote at the Meeting in
order to be elected. In the unlikely event that any one or more of the
nominees are not available for election at the Meeting, the persons named as
proxies will vote for such other person or persons as the Board of Directors
may designate.
NAME PRINCIPAL OCCUPATION AND OTHER INFORMATION
Pierre M. Galletti, Chairman of the Board since March 1995, age 68.
M.D., Ph.D. Dr. Galletti was Vice President and CEO of the Brown
University Division of Biology and Medicine from 1972 to
1991. He retired from this position in 1991 and is
currently a University Professor and Professor of Medical
Science at Brown University. Dr. Galletti is a Fellow
of the American College of Cardiology and a Founding
Fellow of the American Institute for Medical and
Biological Engineering. He is also a Founding Scientist
and currently chairs the Scientific Advisory Board of
CytoTherapeutics, Inc, Providence, RI. Dr. Galletti is a
director of Sorin Biomedica S.p.A. ("Sorin"), a
subsidiary of SNIA BPD, S.p.A. ("SNIA"), which is a
chemical company controlled by Fiat S.p.A ("Fiat"). Dr.
Galletti is also a director of Sorin Biomedical, Inc. in
Irvine, CA.
John J. Booth Director, President and Chief Executive Officer since
September 1994, age 41. Mr. Booth was Senior Vice
President and Chief Financial Officer from May 1992 to
September 1994 and Vice President of Finance and
Administration from 1989 to 1992. Mr. Booth was Vice
President, Controller and Secretary of Clinical Sciences,
Inc. ("CSI") prior to joining the Company in 1989.
Ennio Denti Director since December 1989, Chairman from December 1989
to September 1994, age 64. Dr. Denti is President and
CEO of SNIARICERCHE S.p.A., a research and development
company affiliated with SNIA. Dr. Denti was General
Manager of Sorin from 1990 to 1992. From 1981 to 1990,
he was Vice President of External Affairs of Sorin. Dr.
Denti is also a director of Conbiotec S.p.A., an
affiliate of Sorin involved in research and development
activities relating to medical diagnostics, and director
of R.I.C.E. Friuli S.p.A., a research company affiliated
with SNIA that is involved in research in the fine
chemistry field. Prior to December 1989 Dr. Denti was
Chairman of the Board of CSI.
George H. Dixon Director since February 1987, age 75. Prior to his
retirement in November 1985, Mr. Dixon held various
management positions with First Bank System, Inc.,
including Chairman and Chief Executive Officer from
November 1983 to November 1985. Mr. Dixon is also a
director of Toro Credit Company.
Franco Fornasari Director since May 1995, age 45. Mr. Fornasari is
President and Chief Executive Officer of Fiat U.S.A.,
Inc. He was Vice President for International Trade at
Fiat from 1990 to 1995 and has served as Secretary
General of the International Advisory Board of Fiat since
March 1994. From 1985 to 1990, Mr. Fornasari held a
variety of positions with the World Bank organization.
Ezio Garibaldi Director since September 1994, age 58. Mr. Garibaldi has
been President and Chief Executive Officer of Sorin since
1990.
D. Ross Hamilton Director since December 1989, age 58. Mr. Hamilton was a
director of CSI. He is President and a director of
Hamilton Research Inc., a financial consulting firm. He
is also a director of Luther Medical Products, Inc., a
medical device company, and Belen, Inc., a natural
resource company.
Umberto Rosa Director since December 1989, age 62. Professor Rosa has
been the Chief Executive Officer of SNIA since 1990.
Prior to that he was Chief Executive Officer and General
Manager of Sorin. Professor Rosa is also President of
Biofin Holding International B.V., a wholly-owned
subsidiary of Sorin, and Executive Vice President of
Technobiomedica S.p.A., a biotechnology research holding
company. He is also a member of the Board of Directors
of Tecnogen S.p.A., a biotechnology research company, and
President of SNIA Fibre S.p.A., a nylon fibers
manufacturer.
Michael W. Steffes, Director since September 1984, age 52. Dr. Steffes
M.D., Ph.D. served as the Director of Clinical Laboratories at
the University of Minnesota Hospital from October 1984 to
July 1992 and has been a Professor in the Department of
Laboratory Medicine and Pathology at the University of
Minnesota since 1981.
Carlo Vanoli Director since September 1994, age 46. Mr. Vanoli has
been Vice President of Corporate Development of SNIA
since 1994. From 1992 to 1994, he served as President
and CEO of Sorin Biomedical Inc., in Irvine, CA, and from
1987 to 1992 he served as Strategic Planning Manager of
merger and acquisition activities for SNIA.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors held four meetings during the year ended December
31, 1995. Except for Messrs. Rosa and Denti, each director attended at least
75% of the aggregate of the total number of meetings of the Board of Directors
plus the total number of meetings of all committees of the Board on which he
served.
The Board of Directors has an Audit Committee and a Compensation
Committee.
During the year ended December 31, 1995, the Audit Committee consisted of
Mr. Dixon, Mr. Hamilton and Mr. Fornasari. It held two meetings during the
year. The Audit Committee recommends to the full Board of Directors the
selection of independent accountants, reviews the activities and reports of the
Company's independent accountants and performs such other duties as may be
authorized by the Board of Directors.
During the year ended December 31, 1995, the Compensation Committee
consisted of Mr. Vanoli, Mr. Dixon, Mr. Hamilton, Dr. Steffes and Mr.
Fornasari. The Compensation Committee held four meetings during the year. As
set forth more fully in its report below, the Compensation Committee reviews
salaries, stock options and bonus and compensation plans and performs such
other duties as may be authorized by the Board of Directors.
The Company does not have a nominating committee. The Board of Directors
will consider nominees for the position of director who are recommended by the
Company's shareholders. Any such recommendations may be submitted in writing
to the Secretary of the Company.
COMPENSATION OF DIRECTORS
The Company pays all directors who are not affiliated with Fiat an annual
retainer of $10,000. Fiat-affiliated directors receive no annual retainer. In
addition, directors are paid $500 for each meeting of the Board of Directors or
any committee attended, plus the expense of attendance in the case of non-
employee directors who are not affiliated with Fiat. Upon election to the
Board of Directors, each director is granted a nonqualified stock option to
purchase 10,000 shares of the Company's Common Stock at the then fair market
value; these options vest over a three-year period and expire on the fifth
anniversary of the date of grant.
In addition, Dr. Galletti and Dr. Steffes are party to agreements with the
Company covering their participation in the Company's Scientific Advisory Board
("SAB"). Under the terms of these agreements, which have initial terms of two
years, in return for providing certain SAB-related consulting services, each of
Dr. Galletti and Dr. Steffes will receive a fee of $1,500 per year and a
meeting fee of $1,000 for each meeting he attends in connection with his
advisory services pursuant to the SAB Agreement, subject to a maximum of one
meeting per year. Each will also receive reimbursement for all authorized
expenses incurred in performing advisory services under the SAB Agreement,
including certain travel and living expenses. Neither Dr. Galletti nor Dr.
Steffes received an option grant in connection with the execution of such SAB
agreement.
BENEFICIAL OWNERSHIP OF SHARES
The following information is furnished as of April 1, 1996, to indicate
beneficial ownership of the Common Stock of the Company by each director,
nominee and certain executive officers, individually, and all directors and
executive officers of the Company as a group. Except as otherwise indicated,
the persons listed have sole voting and investment power over such shares.
<TABLE>
<CAPTION>
Amount and Nature
of Beneficial Percent of
Name of Beneficial Owner Ownership (1)(2) Outstanding Shares
<S> <C> <C>
D. Ross Hamilton(3) 195,128 1.2%
John J. Booth 139,405 *
George E. Wellock 47,667 *
Gerald L. Majewski, Ph.D. 31,667 *
Ennio Denti 20,702 *
Thomas P. Maun 18,835 *
Michael W. Steffes, M.D., Ph.D. 16,567 *
George A. Dixon 11,667 *
Umberto Rosa 6,667 *
Fabio Lunghi 6,000 *
Pierre Galletti 4,072 *
Franco Fornasari 3,333 *
Ezio Garibaldi 3,333 *
Carlo Vanoli 3,333 *
All directors and executive
officers as a group (14 persons) 508,376 3.1%
<FN>
_______________
* Less than 1%
(1)Includes the following shares held by wives or children: Mr. Hamilton,
34,608 shares; Mr. Booth, 2,385 shares; Mr. Maun, 1,727 shares; Dr.
Steffes, 3,600 shares.
(2)Includes the following shares that could be acquired within 60 days upon
exercise of outstanding options: Mr. Hamilton, 13,685 shares; Mr. Booth,
106,667 shares; Mr. Wellock, 41,667 shares; Dr. Majewski, 31,667 shares;
Dr. Denti, 20,702 shares; Mr. Maun, 16,608 shares; Dr. Steffes, 6,667
shares; Mr. Dixon, 6,667 shares; Prof. Rosa, 6,667 shares; Dr. Galletti,
3,333 shares; Mr. Fornasari, 3,333 shares; Mr. Garibaldi, 3,333 shares; Mr.
Vanoli, 3,333 shares; and all directors and executive officers as a group,
264,329 shares.
(3)Includes 51,000 shares held by R & C Partners, a partnership of which Mr.
Hamilton is a general partner.
</FN>
</TABLE>
PRINCIPAL SHAREHOLDERS
The following information indicates the identity of each person or group
known to the Company to own beneficially more than 5% of the outstanding Common
Stock of the Company, the only class of security entitled to vote at the
meeting. Except as otherwise indicated, the persons listed have sole voting
and investment power over such shares.
<TABLE>
<CATION>
Amount and Percent of
Nature of Outstanding
Name and Address of Beneficial Owner Beneficial Ownership Shares
<S> <C> <C>
Biofin Holding International B.V.(1)(2) 9,238,427 53.6%
Locatellikade
Amsterdam, The Netherlands
LeRoy C. Kopp(3) 1,101,966 6.7%
6600 France Avenue South
Suite 672
Edina, MN 55435
<FN>
(1) Includes 730,720 shares that could be acquired within 60 days upon
exercise of outstanding warrants.
(2) Biofin Holding International B.V. is a wholly-owned subsidiary of Sorin,
which is a 75%-owned subsidiary of SNIA, which is in turn a 48%-owned
subsidiary of Fiat.
(3) As of December 31, 1995, based solely upon a Form 13G provided to the
Company by Kopp Investment Advisors, Inc. ("KIA"), a corporation of which
Mr. Kopp is the sole owner. Includes 1,001,966 shares of Common Stock
over which KIA shares investment power with the record owners; and 100,000
shares of Common Stock over which Mr. Kopp has sole voting and investment
power.
</FN>
</TABLE>
CERTAIN TRANSACTIONS
The Company has an agreement with Fiat Finance U.S.A., Inc., an affiliate
of the Company, pursuant to which the Company may borrow up to $4,500,000 at an
interest rate of LIBOR plus 1.00%. At December 31, 1995, the Company had $0
outstanding pursuant to the agreement. The Company also has a long-term note
payable to Fiat Finance U.S.A, Inc. due December 1996. This note was
originally in the amount of $7,500,000. At December 31, 1995, the Company had
no borrowings outstanding under this note. The total amount of interest paid
to Fiat Finance U.S.A., Inc. in 1995 for all of such borrowings was $170,000.
Pursuant to two distributorship agreements between the Company and Sorin,
which provide for the distribution by the Company and Sorin of certain of each
other's diagnostic products in specified areas, the Company had product sales
to and product purchases from Sorin in the amounts of $7,625,000 and
$1,807,000, respectively, for the year ended December 31, 1995. Pursuant to
certain other product distribution agreements between the Company and Sorin,
the Company accrued royalties to Sorin of $582,000 during the year ended
December 31, 1995.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the cash and noncash compensation for each
of the last three fiscal years awarded to or earned by the Chief Executive
Officer of the Company and four other executive officers of the Company whose
total annual salary and bonus earned in 1995 exceeded $100,000:
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
Securities
Underlying All Other
Name and Principal Positions Year Salary Bonus Options Compensation(1)
<S> <C> <C> <C> <C> <C>
John J. Booth (2) 1995 $226,600 $116,900 - $ 4,500
President and Chief Executive 1994 166,800 - 50,000 4,500
Officer 1993 146,000 14,800 35,000 4,500
Fabio Lunghi (3) 1995 187,000 77,200 - -
Executive Vice President and 1994 - _ _ _
Chief Operating Officer 1993 - _ _ _
Gerald L. Majewski 1995 153,000 63,100 - 4,500
Vice President of Research 1994 147,900 - - 4,500
and Development 1993 135,000 53,500 25,000 2,500
George E. Wellock 1995 137,700 56,800 - 4,100
Vice President of Operations 1994 133,400 - - 4,400
1993 129,600 13,200 25,000 4,000
Thomas P. Maun (4) 1995 100,000 41,300 - 3,000
Vice President and Chief 1994 76,100 - 27,000 2,400
Financial Officer 1993 _ _ _ _
<FN>
___________________
(1)Includes Company contributions under a Salary Savings Plan qualified under
Section 401(k) of the Internal Revenue Code of 1986, as amended. In 1995,
Company contributions equaled 50% of the first 6% of compensation (or the
allowable IRS limit, if less) contributed by the employee.
(2)Mr. Booth began serving as the Company's Chief Executive Officer in
September 1994; prior to that, he served as its Senior Vice President and
Chief Financial Officer.
(3)Mr. Lunghi was named Executive Vice President and Chief Operating Officer
of the Company in September 1994.
(4)Mr. Maun was named Vice President and Chief Financial Officer in September
1994; prior to that, he served as the Company's Director of Finance.
</FN>
</TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
No options were granted to the executive officers named in the Summary
Compensation Table above during fiscal year 1995.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table presents, for each of the executive officers named in
the Summary Compensation Table above, the number of shares of Common Stock
purchased upon exercise of options during fiscal year 1995, the aggregate
dollar value realized upon such exercise based on the market price of the
Common Stock on the dates of exercise, and the number and value of stock
options held at December 31, 1995:
<TABLE>
<CAPTION>
Shares Number of Securities Value of Unexercised
Acquired Underlying Unexercised In-the-Money Options
on Value Options at Dec. 31, 1995 At December 31, 1995
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
John J. Booth 0 $ 0 106,667 33,333 $ 93,959 $ 54,166
Fabio Lunghi 0 0 0 0 0 0
Gerald L. Majewski 0 0 31,667 8,333 12,500 6,250
George E. Wellock 0 0 41,667 8,333 12,500 6,250
Thomas P. Maun 0 0 15,708 19,192 15,729 28,771
</TABLE>
EMPLOYMENT AGREEMENTS
The Company has a written employment agreement with Mr. Booth, the initial
term of which expired in December 1992 and which provides for automatic one
year extensions unless one of the parties gives notice at least 90 days prior
to the expiration date that the agreement will terminate at the end of the
current extension. Neither the Company nor Mr. Booth has given any termination
notice with respect to this agreement. The employment agreement includes
provisions with respect to base salary level, annual cost of living increases,
annual bonus, participation in benefit plans, fringe benefits, confidential
information, ownership of intellectual property, termination of employment and
noncompetition following termination of employment. The employment agreement
provides that, in the event the Company terminates Mr. Booth's employment
without cause or Mr. Booth terminates his employment because the Company has
assigned him duties that are not appropriate to his position, Mr. Booth shall
be entitled to receive his base salary in full and certain other benefits for a
period of one year following such termination.
RETIREMENT ARRANGEMENTS
The Company has a retirement agreement with Mr. Booth which is intended to
provide continued compensation to him or his beneficiaries upon the later of
(1) his retirement from the Company after attainment of 60 years of age,
(2) his attainment of 60 years of age following termination of employment or
(3) his death during the term of employment (each one a "triggering event").
Subject to vesting requirements (the annual benefit amounts vest at the rate of
10% per year of employment), this retirement agreement provides for the payment
to Mr. Booth or his beneficiaries of annual benefits for a period of 15 years
following the occurrence of a triggering event. Mr. Booth's annual benefit
payment, which is to be adjusted to reflect increases in the cost of living
during the accrual and subsequent payment periods, is $61,300 as of December
31, 1995.
The Company maintains an executive income continuation plan for the
benefit of Dr. Majewski, Mr. Wellock and Mr. Maun. The plan provides payments
for 15 years to such officers or their respective beneficiaries upon the later
of (1) an officer's retirement from the Company after attainment of 60 years of
age, (2) his attainment of 60 years of age following termination of employment
or (3) his death during the term of employment. The annual retirement payment
is the product of an annual benefit rate set by the Board of Directors ($3,333
for 1995) multiplied by the number of years of employment as an executive
officer, up to a maximum of 15 years. An officer's rights under the plan are
fully vested after 10 years of employment as an executive officer. As of
December 31, 1995, the estimated annual retirement payment amounts for these
three officers were: Mr. Wellock, $25,000; Dr. Majewski, $10,600; and Mr. Maun,
$4,200. The benefit amounts are to be adjusted during the payment period to
reflect increases in the cost of living.
COMPENSATION COMMITTEE REPORT ON
EXECUTIVE COMPENSATION
OVERVIEW
The Compensation Committee of the Board of Directors (the "Committee") is
responsible for developing and making recommendations to the Board with respect
to the Company's executive compensation policies. The Committee also
administers all aspects of the Company's executive compensation program,
including all of the Company's employee benefit plans. The Committee is
composed of independent directors of the Company, two of whom are officers of
Fiat or its affiliates and three of whom are not affiliated with the Company or
Fiat.
The components of the Company's executive compensation program include (a)
base salaries, (b) annual cash bonuses, (c) stock options and (d) miscellaneous
fringe benefits comparable to those of similar size companies.
OFFICER CASH COMPENSATION
The Company has a written employment and noncompetition agreement with its
Chief Executive Officer, Mr. Booth. This agreement, which was originally
executed in 1989, provides for employment at a set base salary that, at a
minimum, must be adjusted each year to reflect cost of living increases as
indicated by changes in the consumer price index and that may be increased to
reflect promotions and performance. The agreement also provides that Mr. Booth
will participate in other compensation and benefit programs made available to
executive officers, which would include the Company's Economic Value Sharing
Plan discussed below. Mr. Booth's employment agreement is discussed in more
detail elsewhere in this proxy statement.
None of the Company's other executive officers have written employment
agreements. The Company's other executive officers' base salaries have been
determined primarily on the basis of the historical salary structure of the
Company. The base salaries of the Company's other executive officers are
reviewed each year by the Committee with input from the Company's Chief
Executive Officer. In connection with the Committee's annual review of such
salaries in 1995, an outside human resources management consulting firm was
engaged by the Company to conduct a study of the executive compensation levels
at other companies, including companies in the Company's industry and certain
similar size companies outside of the Company's industry. The results of this
study were reviewed with the Committee at its December 1995 meeting. The
Committee also reviewed the recommendations of the Company's Chief Executive
Officer concerning proposed increases in each of the executive officer's base
salary based on such individual's performance and current salary level relative
to the range of compensation levels described in the study. Generally, the
Committee sought to have the base salaries of the Company's executive officers
fall near the midpoint of the range of base salaries reported in the study;
however, no specific formula was used by the Committee. The Committee approved
salary increases for the Company's executive officers of between three and
twelve percent, effective January 1, 1996, for the 1996 fiscal year.
ANNUAL CASH BONUSES
In May 1993, the Compensation Committee and the Board of Directors
approved an economic value sharing plan (the "EVA Plan") for the determination
of bonuses to be paid to the Company's senior management. The EVA Plan was
designed with the assistance of a national compensation consulting firm, which
advised the Committee concerning participation levels and other variables of
the EVA Plan, and is intended to provide an incentive compensation program that
links executive officers' annual cash bonuses directly to the creation of
shareholder value. The EVA Plan allocates bonus units to each executive
officer based upon a percentage of that officer's base salary. These
percentages are 40% for the Chief Executive Officer and 32% for all other
executive officers of the Company. Bonus units are then valued based upon the
Company's performance under the EVA system for both current year performance
(the "performance factor") and for improvement over the prior year's
performance (the "improvement factor"). Unit value can be lost if EVA results
for the current year are significantly below the prior year's EVA results,
since the improvement factor can become a negative number. The Company's 1995
financial performance resulted in a unit value of $1.29.
STOCK OPTION POLICIES
Historically, the Company granted stock options annually, with awards
dependent primarily on the recipient's compensation and grade level and
allocations based largely on subjective judgments. In 1993, however, the
Board, on the recommendation of the Committee, adopted a policy of making stock
option grants to executive officers of the Company once every three years. The
levels of these grants, which vest over the three-year period, are intended to
be comparable to those made on an annual basis prior to 1993. No stock options
were granted to the Company's named executive officers in 1995. The Committee
intends to review its policies with respect to stock option grants during 1996.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Mr. Booth's base salary during 1995 was initially established by the
Committee at the time he was promoted to the position of Chief Executive
Officer on October 1, 1994. Mr. Booth's base salary primarily was determined
based on his experience in the industry and with the Company, the level of his
prior salary as the Company's Chief Financial Officer and the Company's
historical compensation levels for the chief executive officer position. At
the Committee's meeting in December 1995, the Committee reviewed the
information included in the study prepared by the human resources management
consulting firm concerning chief executive officer base salaries. The
Committee also discussed Mr. Booth's performance and the Company's performance
during 1995. The Committee recommended a 12% increase in Mr. Booth's salary,
effective October 1, 1995. The recommended increase would move Mr. Booth's
base salary closer to the midpoint of the chief executive officer salaries
included in the study. Any future increases in Mr. Booth's base salary will be
effective at the start of the next fiscal year, consistent with the effective
date of any base salary changes of the Company's other executive officers.
POSSIBLE LIMITATIONS ON DEDUCTIBILITY OF COMPENSATION
The Compensation Committee has given only limited attention to the effect
of Section 162(m) of the Internal Revenue Code (the "Code") (added in 1993),
which limits the deductibility of executive compensation in excess of
$1,000,000 since the Committee did not expect any officer's 1995 compensation
to exceed $1,000,000. In 1993, the Board of Directors amended the Company's
Stock Option Plan to include certain restrictions designed to comply with
Section 162(m) and will also change the composition of the Committee
administering the Plan if that becomes necessary. The changes to the Company's
Stock Option Plan should cause any income recognized by an officer upon
exercise of a stock option granted under the Plan to be treated as performance-
based income, which will be deductible to the Company. The Committee expects
to review the application of Section 162(m) periodically in light of the
Company's compensation policies and new regulations or interpretations of the
Section.
D. Ross Hamilton, Chairman
George H. Dixon
Michael W. Steffes
Franco Fornasari
Carlo Vanoli
Members of the Committee
<PAGE>
COMPARATIVE STOCK PERFORMANCE GRAPH
The following table provides a five year comparison of cumulative total
return, assuming reinvestment of dividends, of a $100 investment on December
31, 1990, in the Common Stock of the Company as compared to an equivalent
investment in the S&P 500 Index and the DJ Medical Supplies Index.
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C> <C>
INCSTAR Corporation 100 136 124 65 33 79
S&P 500 Index 100 130 140 155 157 215
DJ Medical Supplies 100 151 139 130 159 177
Index
</TABLE>
<PAGE>
PROPOSAL NO. 2
APPROVAL OF AMENDMENTS TO THE
INCSTAR CORPORATION STOCK OPTION PLAN
On September 14, 1995, the Board of Directors established an SAB of not
more than ten members, with the primary goal of advising and consulting with
the Board of Directors and the Company's management and employees concerning
global scientific planning for the Company's products. The Board of Directors
also established two scientific advisory panels for its autoimmune and bone and
mineral metabolism segments. In addition, the Company intends to establish a
third scientific panel in its infectious disease segment. These panels are
overseen by the SAB led by INCSTAR's Chairman Pierre M. Galletti. Also, Dr.
Michael Steffes, a director of the Company, is a member of the SAB. These
panels are intended to strengthen the Company's ties with the scientific
community.
The INCSTAR Corporation Stock Option Plan as in effect prior to September
14, 1995 (the "Plan"), provided only for the granting of stock options to
persons who were employees of the Company or non-employee directors. In
connection with the establishment of the SAB and the SAPs, however, the Board
of Directors determined that it was in the best interest of the Company to
amend the Plan to permit the grant of stock options under the Plan to
consultants or independent contractors of the Company or any of its
subsidiaries, including in particular members of the SAB and the SAPs. The
Board concluded that such an amendment would aid the Company and its
subsidiaries in attracting and retaining key consultants, independent
contractors and SAB and SAP members, and would thus help to assure the future
success of the Company. The Board accordingly adopted certain amendments to
the Plan on September 14, 1995 (the "1995 Amendments"), and directed that the
1995 Amendments be submitted to the shareholders for their approval at the
Meeting.
The 1995 Amendments amend the Plan to permit the issuance of non-qualified
stock options to consultants or independent contractors of the Company or any
of its subsidiaries, including in particular members of the SAB and the SAPs.
The 1995 Amendments also provide that: (a) each member of the SAB shall
automatically receive, upon execution of an SAB agreement, a five-year non-
qualified stock option to purchase 4,000 shares of the Company's Common Stock
(an SAB appointee may decline the stock option, but will not receive any
alternate compensation in its place) and (b) each member of an SAP shall
automatically receive, upon execution of an SAP agreement, a five-year non-
qualified stock option to purchase 2,000 shares of the Company's Common Stock
(an SAP appointee may decline the stock option, in which case such appointee
will receive an additional $2,500 compensation per year, assuming attendance at
all SAP meetings). The exercise price of each such option shall be the fair
market value of the Common Stock (as determined in accordance with the Plan) on
the date of grant. Options granted to SAB or SAP members shall become
exercisable in equal portions on the first and second anniversaries of the date
of grant, provided in each case that the recipient of the option is a member of
the SAB or SAP on such date, and shall expire on the fifth anniversary of the
date of grant. No automatic stock option grants may be made to SAB or SAP
members who serve on the Committee that administers the Plan and no one serving
on both the SAB and an SAP can receive options to purchase more than 4,000
shares in any two-year period.
Options granted to SAB or SAP members will not qualify as incentive stock
options under the Internal Revenue Code of 1986, as amended. Upon the grant of
a non-qualified stock option, the recipient does not recognize any income for
federal income tax purposes, and the Company does not receive a deduction.
Upon the exercise of a non-qualified stock option, the recipient recognizes as
ordinary income for federal income tax purposes an amount equal to the
difference between the aggregate fair market value of the shares exercised and
the aggregate exercise price for those shares on the date of exercise, and the
Company becomes entitled to a deduction in the same amount.
No current directors, executive officers or employees of the Company have
received stock options pursuant to the 1995 Amendments. Dr. Galletti, who
serves on the SAB, declined the options that he was eligible to receive upon
joining the SAB. Dr. Steffes, who also serves on the SAB, was ineligible to
receive options upon joining the SAB as the result of his position on the
Compensation Committee, which administers the Plan.
On April 1, 1996, the closing price of the Company's Common Stock on the
American Stock Exchange was $5.81 per share.
Assuming that a quorum is present, approval of the 1995 Amendments will
require the affirmative vote of a majority of the voting power of the shares of
Common Stock represented in person or by proxy and entitled to vote at the
Meeting. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE 1995
AMENDMENTS TO THE INCSTAR CORPORATION STOCK OPTION PLAN.
SHAREHOLDER PROPOSALS FOR THE
1997 REGULAR MEETING OF SHAREHOLDERS
All shareholder proposals intended to be presented at the 1997 Regular
Meeting of the Shareholders of the Company must be received by the Company at
its offices on or before December 13, 1996.
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
In the latter part of the year, the Board of Directors, upon
recommendation of the Audit Committee, will appoint an independent public
accountant to audit the books and accounts of the Company for the year ending
December 31, 1996. KPMG Peat Marwick LLP audited the books and accounts of the
Company for the year ended December 31, 1995. A representative of KPMG Peat
Marwick LLP is expected to be present at the Meeting with the opportunity to
make a statement if he or she desires to do so and is expected to be available
to respond to appropriate questions.
OTHER MATTERS
The Company is not aware of any other matters that may come before the
Meeting. If other matters properly come before the Meeting, it is the
intention of the persons named in the enclosed proxy to vote such shares in
accordance with their judgment as to the best interests of the Company.
By Order of the Board of Directors
J. Andrew Herring
Secretary
April 15, 1996
<PAGE>
PROXY INCSTAR
Science Technology and Research
INCSTAR CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY
1996 REGULAR MEETING OF SHAREHOLDERS
The undersigned hereby appoints John J. Booth and Thomas P. Maun, and each
of them, with power to appoint a substitute, to vote all shares the undersigned
is entitled to vote at the 1996 Regular Meeting of Shareholders of INCSTAR
Corporation, a Minnesota corporation, to be held on Tuesday, May 21, 1996 at
3:30 p.m., Minneapolis time, and at any adjournment thereof, as specified below
and, in their discretion, upon any other matters which may properly come before
the meeting, and hereby revokes all former proxies:
ELECTION OF DIRECTORS
Nominees: Pierre M. Galletti, John J. Booth, Ennio Denti, George H. Dixon,
Franco Fornasari, Ezio Garibaldi, D. Ross Hamilton, Umberto Rosa,
Michael W. Steffes, Carlo Vanoli
[] VOTE FOR all nominees listed, except [] WITHHOLD AUTHORITY to vote for
as marked to the contrary above. (TO all nominees listed above.
WITHHOLD YOUR VOTE FOR ANY INDIVIDUAL
NOMINEE STRIKE A LINE THROUGH THE
NOMINEE'S NAME IN THE LIST ABOVE.)
PROPOSAL TO APPROVE AMENDMENTS TO THE INCSTAR CORPORATION STOCK OPTION PLAN
[] FOR [] AGAINST [] ABSTAIN
(Continued, and to be completed and signed on the reverse side)
(Continued from the other side)
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED. IF NO CHOICE IS
SPECIFIED, PROXIES WILL BE VOTED FOR THE ELECTION OF ALL DIRECTORS NAMED ABOVE.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
DATED: ______________________, 1996
(month) (day)
___________________________________
Signature of shareholder
___________________________________
(If there are co-owners both should
sign) The signature(s) should be
exactly as the name(s) appear printed
to the left. If a corporation, please
sign the corporation name in full by a
duly authorized officer and indicate
the office of the signer. When signing
as executor, administrator, fiduciary,
attorney, trustee or guardian, or as
custodian for a minor, please give full
title as such. If a partnership, sign
in the partnership name by authorized
person.
<PAGE>
INCSTAR CORPORATION
STOCK OPTION PLAN
(AS AMENDED SEPTEMBER 14, 1995)
1. PURPOSE OF PLAN.
This Plan shall be known as the "INCSTAR Corporation Stock Option Plan"
and is hereinafter referred to as the "Plan". The purpose of the Plan is to
aid in attracting and retaining key personnel, consultants or independent
contractors of INCSTAR or any of its subsidiaries and members of the Scientific
Advisory Board and the Scientific Advisory Panels, in order to assure the
future success of INCSTAR Corporation, a Minnesota corporation ("INCSTAR"), to
offer such personnel additional incentives to put forth maximum efforts for the
success of the business of INCSTAR, and to afford such personnel an opportunity
and incentive to acquire a proprietary interest in INCSTAR and in its future
success and progress. Options granted under this Plan may be either incentive
stock options ("Incentive Stock Options") within the meaning of Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code"), or options which do
not qualify as Incentive Stock Options.
2. STOCK SUBJECT TO PLAN.
Subject to the provisions of Section 14 hereof, the stock that is subject
to options under the Plan is shares of INCSTAR's authorized common stock, par
value $0.1 per share (the "Common Stock"). Subject to adjustment as provided
in Section 14 hereof, the maximum number of shares with respect to which
options may be exercised under this Plan shall be 1,200,000 shares. If an
option under the Plan expires or for any reason is terminated without being
exercised with respect to any shares, or for any other reason is or becomes
unexercisable with respect to any shares, such shares shall again be available
for options thereafter granted during the term of the Plan.
3. ADMINISTRATION OF PLAN.
(a) The Plan shall be administered by a committee (the "Committee")
consisting of two or more "outside directors" of INCSTAR, who satisfy the
requirements of Section 162(m) of the Code and who are "disinterested persons"
with respect to the Plan within the meaning of Rule 16b-3(c)(2)(i) under the
Securities Exchange Act of 1934 as presently in effect or as hereafter modified
or amended. The members of the Committee shall be appointed by and serve at
the pleasure of the Board of Directors.
(b) The Committee shall have plenary authority in its discretion, but
subject to the express provisions of the Plan, to: (i) determine (A) the
purchase price of the shares covered by each option, (B) the employees to whom
and the times at which such options shall be granted and the number of shares
to be subject to each option, (C) the terms of exercise of each option, (D) the
form of payment to be made upon the exercise of an SAR as provided in Section
10 hereof of each option and (E) whether an option will be an Incentive Stock
Option; (ii) accelerate the time at which all or any part of an option may be
exercised; (iii) amend or modify the terms of any option with the consent of
the optionee; (iv) interpret the Plan; (v) prescribe, amend and rescind rules
and regulations relating to the Plan; (vi) determine the terms and provisions
of each option agreement under this Plan (which agreements need not be
identical), and (vii) make all other determinations necessary or advisable for
the administration of the Plan, subject to the exclusive authority of the Board
of Directors under Section 15 hereof to amend or terminate the Plan. The
Committee's determinations with respect to such matters, unless otherwise
disapproved by the Board of Directors of INCSTAR, shall be final and
conclusive.
(c) The Committee shall select one of its members as its chairman and
shall hold its meetings at such times and places as it may determine. A
majority of its members shall constitute a quorum. All determinations of the
Committee shall be made by not less than a majority of its members. Any
decision or determination reduced to writing and signed by all of the members
of the Committee shall be fully effective as if it had been made by a majority
vote at a meeting duly called and held. The Committee may appoint a secretary
and may make such rules and regulations for the conduct of its business as it
shall deem advisable.
4. ELIGIBILITY.
Incentive Stock Options may be granted under this Plan only to full or
part-time employees of INCSTAR or any of its subsidiaries, including officers
and directors of INCSTAR and such subsidiaries who are also employees. Options
which do not qualify as Incentive Stock Options and SARs may be granted under
this Plan to any full or part-time employee of INCSTAR or any of its
subsidiaries, including officers and directors of INCSTAR and such
subsidiaries, to consultants or independent contractors of INCSTAR or any of
its subsidiaries, including members of the Scientific Advisory Board and the
Scientific Advisory Panels as provided in Section 19 hereof, and to nonemployee
directors of INCSTAR as provided in Section 9 hereof. In determining the
persons to whom options or SARs shall be granted and the number of shares
subject to each option, the Committee may take into account the nature of
services rendered by the proposed grantees, their past, present and potential
contributions to the success of INCSTAR, and such other factors as the
Committee in its discretion shall deem relevant. A person who has been granted
an option or SAR under this Plan may be granted an additional option or options
or SAR or SARs under the Plan if the Committee shall so determine; provided,
however, that to the extent that the aggregate fair market value determined at
the time an Incentive Stock Option is granted of the stock with respect to
which all Incentive Stock Options owned by an optionee are exercisable for the
first time by such optionee during any calendar year under all plans of his
employer corporation and its parent and subsidiary corporations exceeds
$100,000, such options shall be treated as options that do not qualify as
Incentive Stock Options.
5. PRICE.
The option price for all Incentive Stock Options granted under the Plan
shall be determined by the Committee but shall not be less than 100% of the
fair market value of the Common Stock at the date of granting of such options.
Except as provided in Section 9 hereof, the option price for options granted
under the Plan which do not qualify as Incentive Stock Options shall also be
determined by the Committee, but shall not be less than 50% of the fair market
value of the Common Stock at the date of granting of such options. For such
purposes and for all other valuation purposes under the Plan, the fair market
value of the Common Stock shall be as reasonably determined by the Committee,
but shall not be less than (a) the closing price of the Common Stock as
reported for composite transactions, if the Common Stock is then traded on a
national securities exchange, or (b) the last sale price of the Common Stock if
the Common Stock is then quoted on the NASDAQ National Market System, or (c)
the average of the closing representative bid and asked prices of the Common
Stock as reported on NASDAQ on the date as of which fair market value is being
determined, or (d) if the Common Stock is not publicly traded, such value as
the Committee shall in good faith determine after taking into account such
facts and circumstances and taking such action as it determines are
appropriate.
6. TERM.
Subject to the provisions of Sections 9, 11 and 19 hereof, each option and
all rights and obligations thereunder shall expire on the date determined by
the Committee and specified in the option agreement with respect thereto, which
date shall be no later than the tenth anniversary of the date of grant. The
Committee shall be under no duty to provide terms of like duration for options
granted under the Plan.
7. EXERCISE OF OPTION.
(a) Subject to the provisions of Section 11 hereof, the Committee shall
have full and complete authority to determine whether an option will be
exercisable in full at any time or from time to time during the term of the
option, or to provide for the exercise thereof in such installments, upon the
occurrence of such events and at such times during the term of the option as
the Committee may determine.
(b) The exercise of any option shall only be effective at such time as
the sale of Common Stock pursuant to such exercise will not violate any state
or federal securities or other laws.
(c) An optionee electing to exercise an option shall give written notice
to INCSTAR of such election and of the number of shares subject to such
exercise. The full purchase price of such shares shall be tendered with such
notice of exercise. Payment shall be made to INCSTAR either in cash (including
check, bank draft or money order) or, at the discretion of and as specified by
the Committee, (i) by delivering certificates representing Common Stock already
owned by the optionee having a fair market value equal to the full purchase
price of the shares, or (ii) a combination of cash and such shares. Until the
optionee has been issued a certificate or certificates representing the shares
subject to such exercise, he shall possess no rights as a shareholder with
respect to such shares.
8. ADDITIONAL RESTRICTIONS.
(a) The Committee shall have full and complete authority to determine
whether all or any part of the Common Stock acquired upon exercise of any
option shall be subject to restrictions on the transferability thereof or any
other restrictions affecting in any manner the optionee's rights with respect
thereto. Any such restriction shall be set forth in the agreement relating to
such options.
(b) No person may be granted any option or options, for more than 200,000
shares of Common Stock, in the aggregate, in any three calendar year period
beginning with the period commencing January 1, 1994 and ending December 31,
1996.
9. OPTIONS TO NONEMPLOYEE DIRECTORS.
(a) Each director of INCSTAR who is not an employee of INCSTAR or
any of its subsidiaries shall be granted an option to purchase 10,000 shares of
Common Stock on (i) the date of the director's initial election to the Board of
Directors, and (ii) on the date of the annual meeting of shareholders in each
third year thereafter if the director has served continuously during the
interim period and will continue in office after the annual meeting. The
exercise price of each option shall be equal to 100% of the fair market value
of the Common Stock on the date of grant. Such options shall not qualify as
Incentive Stock Options, shall become exercisable in equal portions on the
first, second and third anniversaries of the date of grant and shall expire on
the tenth anniversary of the date of grant. Clause (ii) of the first sentence
of this paragraph was adopted on September 7, 1993. For the initial
implementation of clause (ii), each director who would have been eligible to
receive an option on the date of the 1993 annual meeting of shareholders shall
be granted an option as of September 7, 1993 on the terms set forth in this
paragraph and shall not be eligible to receive another option pursuant to the
Plan until the annual meeting of shareholders in 1996. No portion of the
option may be exercised until the Plan, as amended, has been approved by the
shareholders of the Company.
(b) Options shall be subject to the terms and conditions of Sections 7,
11, 13 and 17, except that the provisions with respect to termination for
changes in status set forth in to Section 11 shall be modified by substituting
service as a director in lieu of employment.
(c) This Section 9 shall not be amended more than once every six months
other than to comport with changes in the Code, the Employees Retirement Income
Security Act or the rules and regulations thereunder.
10. ALTERNATIVE STOCK APPRECIATION RIGHTS.
(a) At the time of grant of an option under the Plan (or at any time
thereafter as to options which are not Incentive Stock Options), the Committee,
in its discretion, may grant to the holder of such option an alternative Stock
Appreciation Right ("SAR") for all or any part of the number of shares covered
by the holder's option. Any such SAR may be exercised as an alternative, but
not in addition to, an option granted hereunder, and any exercise of an SAR
shall reduce an option by the same number of shares as to which the SAR is
exercised. An SAR granted to an optionholder shall provide that such SAR, if
exercised, must be exercised within the time period specified therein. Such
specified time period may be less than (but may not be greater than) the time
period during which the corresponding option may be exercised. An SAR may be
exercised only when the corresponding option is eligible to be exercised. The
failure of the holder of an SAR to exercise such SAR within the time period
specified shall not reduce his option rights. If an SAR is granted for a
number of shares less than the total number of shares covered by the
corresponding option, the Committee may later (as to options which are not
Incentive Stock Options) grant to the optionholder an additional SAR covering
additional shares; provided, however, that the aggregate amount of all SARs
held by any optionholder shall at no time exceed the total number of shares
covered by his unexercised options.
(b) SARs shall be exercised by the delivery to INCSTAR of a written
notice which shall state that the optionee elects to exercise an SAR as to the
option shares specified in the notice and which shall further state what
portion, if any, of the SAR exercise amount (hereinafter defined) the holder
thereof requests be paid to him in cash and what portion, if any, he requests
be paid to him in Common Stock. The Committee promptly shall cause to be paid
to such holder the SAR exercise amount either in cash, in Common Stock or in
any combination of cash and Common Stock as the Committee may determine. Such
determination may be either in accordance with the request made by the holder
of the SAR or in the sole and absolute discretion of the Committee. The SAR
exercise amount is the excess of the fair market value of one share of Common
Stock on the date of exercise over the per share option price for the option in
respect of which the SAR is exercised multiplied by the number of shares as to
which the SAR is exercised. An SAR may be exercised only when the SAR exercise
amount is positive.
(c) An SAR may only be exercised in compliance with Rule 16b-3 of the
Securities Exchange Act of 1934 as presently in effect or as hereafter modified
or amended if the same shall be in effect on the date of exercise.
(d) All provisions of this Plan applicable to options granted hereunder
shall apply with equal effect to an SAR.
11. EFFECT OF TERMINATION OF EMPLOYMENT, DEATH OR DISABILITY.
(a) In the event that an optionee shall cease to be employed by INCSTAR
or any of its subsidiaries for any reason other than willful and material
misconduct, death or disability, such optionee shall have the right to exercise
the option at any time within 3 months after such termination of employment to
the extent of the full number of shares that such optionee was entitled to
purchase under the option on the date of termination, subject to the condition
that no option shall be exercisable after the expiration of the term of the
option.
(b) In the event that an optionee shall cease to be employed by INCSTAR
or any of its subsidiaries by reason of his willful and material misconduct,
his options shall be terminated as of the date of the misconduct.
(c) If an optionee shall die while in the employ of INCSTAR or a
subsidiary or within 3 months after termination of employment for any reason
other than willful and material misconduct, or if such optionee's employment by
INCSTAR or any of its subsidiaries shall terminate by reason of optionee's
disability, and such optionee shall not have fully exercised any option granted
under the Plan, such option may be exercised at any time within 12 months after
such death or (in the case of disability) termination of employment by the
personal representatives, administrators or guardian of the optionee or by any
person or persons to whom the option is transferred by will or the applicable
laws of descent and distribution, but only to the extent of the full number of
shares such optionee was entitled to purchase under the option on the date of
such death or termination of employment.
(d) Nothing in the Plan or in any agreement thereunder shall confer on
any employee any right to continue in the employ of INCSTAR or any of its
subsidiaries or affect, in any way, the right of INCSTAR or any of its
subsidiaries to terminate any optionee's employment at any time.
12. TEN PERCENT SHAREHOLDER RULE.
Notwithstanding any other provision of the Plan, if at the time an option
is otherwise to be granted pursuant to the Plan the optionee owns directly or
indirectly (within the meaning of Section 424(d) of the Code) Common Stock of
INCSTAR possessing more than 10% of the total combined voting power of all
classes of stock of INCSTAR or its parent or subsidiary corporations (within
the meaning of Section 422(b)(6) of the Code), then any Incentive Stock Option
to be granted to such optionee pursuant to the Plan shall satisfy the
requirements of Section 422(c)(5) of the Code, and the option price shall be
not less than 110% of the fair market value of the Common Stock of INCSTAR on
the date of grant, and such option by its terms shall not be exercisable after
the fifth anniversary of such date of grant.
13. NON-TRANSFERABILITY.
Except as provided in Section 11(c), (a) no option granted under the Plan
shall be transferable by an optionee, otherwise than by will or the laws of
descent or distribution, and (b) during the lifetime of an optionee the option
shall be exercisable only by such optionee.
14. DILUTION OR OTHER ADJUSTMENTS.
If there shall be any change in the Common Stock through merger,
consolidation, reorganization, recapitalization, stock dividend, stock split or
other change in the capitalization or corporate structure of INCSTAR, the
Committee shall make appropriate adjustments in the Plan and any options or
SARs outstanding under the Plan. Such adjustments shall include, where
appropriate, changes in the aggregate number of shares subject to the Plan and
such changes in the number of shares and the price per share subject to
outstanding options and the amount payable upon exercise of outstanding SARs as
are necessary in order to prevent dilution or enlargement of option or SAR
rights.
15. AMENDMENT OR DISCONTINUANCE OF PLAN.
The Board of Directors may amend or discontinue the Plan at any time.
Except as provided in Section 14 hereof, however, no amendment of the Plan that
is not approved by the shareholders of INCSTAR shall (a) increase the maximum
number of shares subject to the Plan, (b) decrease the minimum option price
provided in Section 5 hereof, (c) extend the maximum option term under Section
6 hereof, or (d) modify the eligibility requirements for participation in the
Plan. The Board of Directors shall not alter or impair any option granted
under the Plan without the consent of the holder of the option.
16. TIME OF GRANTING.
The granting of an option pursuant to the Plan shall be effective only if
a written agreement shall have been duly executed and delivered by and on
behalf of INCSTAR and the person to whom such right is granted. Nothing
contained in the Plan or in any resolution adopted or to be adopted by the
Board of Directors or by the shareholders of INCSTAR, and no action taken by
the Committee or the Board of Directors other than the execution and delivery
of an option agreement, shall constitute the granting of an option hereunder.
17. INCOME TAX WITHHOLDING.
In order to comply with all applicable federal or state income tax laws or
regulations, INCSTAR may take such action as it deems appropriate to ensure
that all applicable federal or state payroll, withholding, income or other
taxes which are the sole and absolute responsibility of an optionee under the
Plan are withheld or collected from such optionee. In order to assist an
optionee in paying all federal and state taxes to be withheld or collected upon
exercise of an option which does not qualify as an Incentive Stock Option
hereunder, the Committee, in its absolute discretion and subject to such
additional terms and conditions as it may adopt, may permit the optionee to
satisfy such tax obligation by (a) electing to have INCSTAR withhold a portion
of the shares otherwise to be delivered upon exercise of such option having a
fair market value equal to the amount of such taxes or (b) delivering to
INCSTAR shares of Common Stock other than the shares issuable upon exercise of
such option with a fair market value, determined in accordance with Section 5
hereof, equal to such taxes. The election must be made on or before the date
that the amount of tax to be withheld is determined.
18. EFFECTIVE DATE AND TERMINATION OF PLAN.
(a) Subject to approval of the Plan by the shareholders of INCSTAR, the
effective date of the Plan, as amended, is March 4, 1994, the date of adoption
of the most recent amendments to the Plan by the Board of Directors of INCSTAR.
(b) Unless the Plan shall have been discontinued as provided in Section
15 hereof, the Plan shall terminate on the tenth anniversary of the effective
date set forth in (a) above. No option may be granted after such termination,
but termination of the Plan shall not, without the consent of an optionee,
alter or impair any rights or obligations under any option theretofore granted.
19. OPTIONS TO MEMBERS OF SCIENTIFIC ADVISORY BOARD AND SCIENTIFIC ADVISORY
PANELS.
(a) If permitted by the academic, research, medical or other institution
or institutions with which a member of the Scientific Advisory Board of
INCSTAR, may be associated, each such member shall be granted an option to
purchase 4,000 shares of Common Stock on the date such member executes a
Scientific Advisory Board Agreement with the Company; provided, that no such
grant shall be made to a member of the Committee; and provided, further, that
the number of shares of Common Stock subject to such grant, together with the
aggregate number of shares of Common Stock subject to grants made to such
person pursuant to Section 19(b) within the preceding two years, shall not
exceed 4,000 shares. The exercise price of each such option shall be the fair
market value of the Common Stock (as determined in accordance with Section 5)
on such date. Such options shall not qualify as Incentive Stock Options, shall
become exercisable in equal portions on the first and second anniversaries of
the date of grant, provided in each case that the recipient of the option is a
member of the Scientific Advisory Board on such date, and shall expire on the
fifth anniversary of the date of grant.
(b) If permitted by the academic, research, medical or other institution
or institutions with which a member of a Scientific Advisory Panel of INCSTAR,
may be associated, each such member shall be granted an option to purchase
2,000 shares of Common Stock of the Company on the date such member executes a
Scientific Advisory Panel Agreement with the Company; provided, that no such
grant shall be made to a member of the Committee; and provided, further, that
no such grant shall be made to any person who has been granted an option
pursuant to Section 19(a) within the preceding two years. The exercise price
of each such option shall be the fair market value of the Common Stock (as
determined in accordance with Section 5) on such date. Such options shall not
qualify as Incentive Stock Options, shall become exercisable in equal portions
on the first and second anniversaries of the date of grant, provided in each
case that the recipient of the option is a member of the relevant Scientific
Advisory Panel on such date, and shall expire on the fifth anniversary of the
date of grant.
(c) Options granted pursuant to this Section 19 shall be subject to the
terms and conditions of Sections 7, 11, 13, 14, 16 and 17, except that the
provisions with respect to termination for changes in status set forth in
Section 11 shall be modified by substituting service on the Scientific Advisory
Board or the relevant Scientific Advisory Panel in lieu of employment. This
Section 19 was adopted on September 14, 1995, and no portion of any option
granted pursuant to this Section 19 may be exercised until the Plan, as amended
on such date, has been approved by the shareholders of INCSTAR.