SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the registrant |X|
Filed by a party other than the registrant |_|
Check the appropriate box: |_| Confidential, for Use of the
|_| Preliminary Proxy Statement Commission Only (as
permitted
|X| Definitive Proxy Statement by Rule 14a-6(e)(2))
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to |_| Rule 240.14a-11(c)
or |_| Rule 240.14a-12
Innovex, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required
|_| $125 per Exchange Act Rule o-11(c)(1)(ii), 14a-6(i)(1) or Item 22(a)(2) of
Schedule 14A
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transactions applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
[INNOVEX, INC. LOGO]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
JANUARY 20, 1999
Notice is hereby given that the Annual Meeting of Shareholders of
Innovex, Inc. will be held at the Lutheran Brotherhood Building, Minneapolis,
Minnesota on Wednesday, January 20, 1999 at 3:30 p.m., Central Standard Time,
for the following purposes:
1. To elect seven directors to hold office until the next Annual
Meeting of Shareholders or until their successors are elected.
2. To approve a proposal to amend the Company's 1994 Stock Plan
to increase the authorized shares from 1,200,000 to 1,800,000.
3. To approve the selection of the Company's independent auditors
for the current fiscal year.
4. To transact such other business as may properly come before
the meeting or any adjournment or adjournments thereof.
The Board of Directors has fixed the close of business on December 9,
1998 as the record date for the determination of shareholders entitled to notice
of and to vote at the meeting.
By Order of the Board of Directors,
Thomas W. Haley, CHAIRMAN OF THE BOARD
Hopkins, Minnesota
December 21, 1998
TO ASSURE YOUR REPRESENTATION AT THE MEETING, PLEASE SIGN, DATE AND RETURN YOUR
PROXY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU EXPECT TO ATTEND IN PERSON.
SHAREHOLDERS WHO ATTEND THE MEETING MAY REVOKE THEIR PROXIES AND VOTE IN PERSON
IF THEY SO DESIRE. THIS PROXY IS SOLICITED ON BEHALF OF THE COMPANY.
<PAGE>
INNOVEX, INC.
PROXY STATEMENT
This Proxy Statement is furnished to the shareholders of Innovex, Inc.
(the "Company") in connection with the solicitation of proxies by the Board of
Directors of the Company to be voted at the Annual Meeting of Shareholders to be
held on January 20, 1999. The cost of this solicitation will be borne by the
Company. In addition to the solicitation by mail, officers, directors and
employees of the Company may solicit proxies by telephone, telegraph or in
person. The Company may also request banks and brokers to solicit their
customers who have a beneficial interest in the Company's Common Stock
registered in the names of nominees and will reimburse such banks and brokers
for their reasonable out-of-pocket expenses.
Any proxy may be revoked at any time before it is voted by written
notice to the Secretary, by receipt of a proxy properly signed and dated
subsequent to an earlier proxy, or by revocation of a written proxy by request
in person at the Annual Meeting. If not so revoked, the shares represented by
such proxy will be voted.
The Company has outstanding only one class of stock, $.04 par value
Common Stock, of which 14,781,504 shares were issued and outstanding and
entitled to vote at the close of business of December 9, 1998. Each share of
Common Stock is entitled to one vote. Only shareholders of record at the close
of business on December 9, 1998 will be entitled to vote at the meeting. The
presence in person or by proxy of the holders of a majority of the shares of
stock entitled to vote at the Annual Meeting of Shareholders constitutes a
quorum for the transaction of business.
Under Minnesota law, each item of business properly presented at a
meeting of shareholders generally must be approved by the affirmative vote of
the holders of a majority of the voting power of the shares present, in person
or by proxy, and entitled to vote on that item of business. However, if the
shares present and entitled to vote on that item of business would not
constitute a quorum for the transaction of business at the meeting, then the
item must be approved by a majority of the voting power of the minimum number of
shares that would constitute a quorum. Votes cast by proxy or in person at the
Annual Meeting of Shareholders will determine whether or not a quorum is
present. Abstentions will be treated as shares that are present and entitled to
vote for purposes of determining the presence of a quorum but as unvoted for
purposes of determining the approval of the matter submitted to the shareholders
for a vote. If a broker indicates on the proxy that it does not have
discretionary authority as to certain shares to vote on a particular matter,
those shares will not be considered as present and entitled to vote with respect
to that matter.
The Company's corporate offices are located at 530 Eleventh Avenue
South, Hopkins, Minnesota 55343, and its telephone number is (612) 938-4155. The
mailing of this Proxy Statement to shareholders of the Company commenced on or
about December 21, 1998.
1
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table includes information as of December 9, 1998
concerning the beneficial ownership of Common Stock of the Company by (i) all
persons who are known to the Company to beneficially hold more than five percent
of the Common Stock of the Company; (ii) each of the directors and director
nominees of the Company; (iii) each executive officer named in the Summary
Compensation Table on page 7; and (iv) all directors and officers of the Company
as a group. Unless otherwise indicated, all shares represent sole voting and
investment power.
Name and Address Amount and Nature of Percent
of Beneficial Owner Beneficial Ownership of Class
------------------- -------------------- --------
Thomas W. Haley (1)(2) 840,520(3)(4) 5.7%
2421 Crowne Hill Road
Minnetonka, MN 55305
Neumeier Investment Counsel LLC 845,250 5.7%
26435 Carmel Rancho Blvd.
Carmel, CA 93923
Gerald M. Bestler (1) 10,454(4) *
Mary E. Curtin (1)(5) 26,750(6)(7) *
Willis K. Drake (1) 23,800(4) *
Frank L. Farrar (8) -- *
Robert E. Miller (8) -- *
Michael C. Slagle (1) 8,566(4) *
Bernt M. Tessem (1) 3,350(4) *
Allan J. Chan (2) 29,600(4) *
Bruce R. Funk (2) 6,800(4) *
Timothy S. McIntee(2) 22,300(4) *
William P. Murnane (2)(5) 60,000(4) *
All Directors and Officers 1,052,740(4) 7.1%
as a Group (12 persons)
- -----------------------------
*Less than 1%
2
<PAGE>
(1) Serves as a director of the Company and, except for Mr. Drake, has been
nominated for election.
(2) Serves as an executive officer of the Company and appears in the
Summary Compensation Table on page 7 hereof.
(3) Excludes 26,750 shares beneficially owned by Ms. Curtin, Mr. Haley's
spouse.
(4) Includes the following number of shares which may be purchased pursuant
to the exercise of stock options within sixty days from the date
hereof: Mr. Haley, 2,000 shares; Mr. Bestler, 5,512 shares; Mr. Drake,
2,000 shares; Mr. Slagle, 8,566 shares; Mr. Tessem, 2,000 shares; Mr.
Chan, 29,000 shares; Mr. Funk, 6,800 shares; Mr. McIntee 4,300 shares;
Mr. Murnane, 60,000 shares; and all directors and officers as a group,
135,178 shares.
(5) Ms. Curtin and Mr. Murnane are first cousins.
(6) Includes 6,000 shares indirectly owned through a self-directed pension
plan.
(7) Excludes 838,520 shares beneficially owned by Mr. Haley, Ms. Curtin's
spouse.
(8) Has been nominated for election as a director of the Company.
ELECTION OF DIRECTORS
(PROPOSAL 1)
The Company has a Board of Directors consisting of seven persons
elected annually to serve until the next annual meeting of stockholders or until
their successors are elected. The Board of Directors has authorized Thomas W.
Haley to nominate Directors for election at the 1999 Annual Meeting. Mr. Haley
has nominated the seven persons named below. Proxies cannot be voted for a
greater number of persons than the number of nominees named below. All of the
nominees are currently members of the Board of Directors, except Frank L. Farrar
and Robert E. Miller, and were elected by the shareholders. It is intended that
proxies solicited will be voted for such nominees. The Board of Directors
believes that each nominee named below will be able to serve, but should any
nominee be unable to serve as a director, the persons named in the proxies have
advised that they will vote for the election of such substitute nominee as the
Board of Directors may propose.
Ms. Curtin, a current director and nominee and the spouse of Mr. Haley,
also a current director and nominee, and the Company's Chief Executive Officer,
has interests adverse to the Company in matters described more fully in this
proxy under the heading "CERTAIN TRANSACTIONS AND LEGAL PROCEEDINGS."
The names, ages and principal occupations of the nominees are set forth
below, based upon information furnished to the Company by the nominees.
<TABLE>
<CAPTION>
Principal Occupation and Director
Name and Age Other Directorships Since
------------ ------------------- -----
<S> <C> <C>
Thomas W. Haley* (62) Chairman and Chief Executive Officer of the 1972
Company.
Michael C. Slagle (63) Retired; former owner of Minnesota Benefit 1972
Planners, an insurance brokerage and consulting
firm.
Bernt M. Tessem (68) Independent Sales Consultant since October 1992. 1976
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
Principal Occupation and Director
Name and Age Other Directorships Since
------------ ------------------- -----
<S> <C> <C>
Gerald M. Bestler (69) Retired; formerly Executive Vice President of 1988
BMC Industries Inc., an optical and electronic
components manufacturer, and President of the
Precision Etched Products Group of BMC
Industries Inc. Mr. Bestler is also a Director of
ANCOR Communications.
Mary E. Curtin* (51) President of Grupo Palo Maria and Garza Blanca 1995
Properties; Secretary to the Board of the Company;
Executive Vice President, Corporate for the
Company from April 1997 through April 1998;
Vice President and General Counsel for the
Company from January 1996 through April 1997.
Prior to joining the Company, Ms. Curtin practiced
law for 23 years as an attorney with the United
States Department of Justice, the Board of
Governors of the Federal Reserve System, as a
partner at Lindquist & Vennum P.L.L.P., and as a
partner at Curtin and Barnes in Minneapolis.
Frank L. Farrar (69) Chairman of Performance Bankers, Inc., Chairman ____
of Beresford Bancorporation, Inc., a South Dakota
thrift holding company, Chairman of Capital
Bancorporation, Inc., a South Dakota bank holding
company, Chairman of Uptown Bancorporation,
Inc., an Illinois bank holding company, and
Chairman of Fulda Bancorporation, a Minnesota
bank holding company. Mr. Farrar is also a
Director of Mercury Waste Solutions, Inc., a
publicly-held mercury processing company.
Robert E. Miller (56) President of Bank Compensation Consulting, a ____
division of Clark/Bardes. Prior to forming Bank
Compensation Consulting in September 1998, Mr.
Miller was a 24-year partner with McGladrey &
Pullen, LLP, a national accounting firm,
specializing in the financial institutions industry.
</TABLE>
- ------------------------
*Mr. Haley and Ms. Curtin are spouses.
4
<PAGE>
OTHER INFORMATION REGARDING THE BOARD
MEETINGS. The Board of Directors met seven times during fiscal year
1998. Each director attended more than 75% of the meetings of the Board of
Directors and any committee on which he or she served.
BOARD COMMITTEES. The Company has an Audit Committee, a Compensation
Committee, and a Stock Option Committee, all established by the Board of
Directors and each of which consists of members of the Board of Directors. The
Audit Committee, which during the last fiscal year consisted of Messrs. Bestler,
Drake and Tessem, met one time during fiscal year 1998. The Audit Committee
recommends the selection of independent accountants and reviews the activities
and reports of the independent accountants, as well as the internal controls of
the Company. The Compensation Committee, which is currently comprised of Messrs.
Haley, Slagle and Tessem, met one time during fiscal year 1998. The Compensation
Committee assists management in making recommendations to the Board with respect
to officers' and key employees' salaries and bonuses. The Stock Option
Committee, which is currently comprised of Messrs. Bestler and Slagle, met one
time during fiscal year 1998. The Stock Option Committee makes recommendations
to the Board with respect to awarding stock options to the Company's key
personnel.
On December 7, 1998, the Board of Directors authorized Thomas W. Haley
to consider nominees for election to the Board of Directors and to establish the
slate of directors for the 1999 Annual Meeting of Shareholders. On the same
date, Mr. Haley proposed the current slate of director nominees. On December 9,
1998, the special independent committee appointed with respect to the litigation
described below under CERTAIN TRANSACTIONS AND LEGAL PROCEEDINGS recommended
that Mary Curtin not be included in the slate of nominees. Mr. Haley will not
consider a nomination by a shareholder of a candidate for election as a director
of the Company at the 1999 Annual Meeting of Shareholders.
CERTAIN TRANSACTIONS AND LEGAL PROCEEDINGS
Mary Curtin, a current director of the Company and a director nominee,
has indicated her intent to commence litigation against the Company and possibly
certain individuals for marital status discrimination and sex discrimination. A
formal complaint has not been served or filed, but a draft complaint was
provided to the Company by Ms. Curtin's counsel on September 25, 1998. In the
draft complaint, Ms. Curtin articulates claims for violations of the Minnesota
Human Rights Act, violations of Title VII of the Civil Rights Act of 1964 and
for negligent retention and intentional infliction of emotional distress. Ms.
Curtin's claims are based on allegations that she was treated differently from
male senior management, and ultimately constructively discharged because she is
married to Thomas Haley, the Company's Chief Executive Officer and a current
director and director nominee of the Company, and because she is a woman. She
claims to have experienced a hostile working environment created by generally
sexist attitudes and sexist epithets directed at her. Ms. Curtin seeks damages
of approximately $10 million. Management has been advised that the individuals
involved in the allegations deny them.
Because Ms. Curtin is a member of the Board of Directors, and the
spouse of Thomas Haley, the Board of Directors of the Company on August 14, 1998
appointed a special independent committee of its
5
<PAGE>
members to investigate, review and take action with respect to such claims. The
special committee is currently comprised of Bernt M. Tessem, Gerald M. Bestler
and Willis K. Drake. William J. Miller, an initial member of the special
committee, resigned as a director of the Company and a member of the committee
on December 7, 1998. The special committee has reviewed the results of an
initial investigation by the Company's outside counsel into the claims and is
presently engaged in efforts to resolve the dispute on terms satisfactory to the
Company. As a result of the committee's investigation and efforts, the Company
believes that the matter may be settled for an amount which will not have a
material adverse effect on the Company's financial statements. In the event the
Company's efforts at settlement are unsuccessful, the Company intends to
vigorously defend itself against Ms. Curtin's threatened claims and believes
that any judgment entered against it will not have a material adverse effect on
the Company's financial statements.
6
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table shows, for the fiscal years ending September 30,
1998, 1997 and 1996, the cash compensation paid by the Company, as well as
certain other compensation paid or accrued for those years, to Thomas W. Haley,
the Company's Chief Executive Officer, and each of the four other most highly
compensated executive officers of the Company in office at the end of fiscal
1998 (together with Mr. Haley, the "Named Executives"), whose total cash
compensation exceeded $100,000 during fiscal year 1998 in all capacities in
which they served:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Compensation
Annual Compensation Awards
------------------------- --------------- ---------------
Securities
Name and Principal Underlying All Other
Position Year Salary Bonus Options Compensation(1)
- ------------------ ---- ------ ----- ------- ---------------
<S> <C> <C> <C> <C> <C>
Thomas W. Haley 1998 $248,655 $75,000 10,000 $5,146
Chairman and Chief 1997 209,520 150,000 -- 4,626
Executive Officer 1996 183,538 150,000 -- 4,345
Allan J. Chan 1998 165,961 70,000 10,000 4,955
Senior Vice President 1997 149,520 110,000 30,000 4,203
Sales and Marketing 1996 126,167 110,000 -- 4,953
Bruce R. Funk 1998 104,071 40,000 5,000 3,859
Vice President Asian 1997 95,714 55,000 16,000 4,190
Operations 1996 89,377 55,000 -- 4,331
Timothy S. McIntee 1998 155,769 45,000 1,500 946
Senior Vice President 1997 20,769 5,000 20,000 --
Corporate 1996 -- -- -- --
William P. Murnane 1998 160,675 70,000 10,000 4,424
President and Chief 1997 139,328 75,000 30,000 4,422
Operations Officer 1996 133,077 45,000 -- 1,350
</TABLE>
- -------------------
(1) These amounts represent Company matching contributions to the Company's
401(k) plan on behalf of such employees.
7
<PAGE>
STOCK OPTIONS
The following table contains information concerning the grant of stock
options under the Company's stock option plans to the Named Executives during
fiscal year 1998:
OPTION GRANTS IN LAST FISCAL YEAR
Individual Grants
<TABLE>
<CAPTION>
Number % of Total Potential Realizable Value
of Options at Assumed Annual Rates
Securities Granted to Exercise of Stock Price Appreciation
Underlying Employees Price for Option Term(1)
Options in Fiscal Per Expiration
Name Granted Year Share Date 5% 10%
- ------------------------------------------------------------------------- ---------------------------
<S> <C> <C> <C> <C> <C> <C>
Thomas W. Haley 10,000 5.3 $28.75 10-17-07 $180,807 $458,201
Allan J. Chan 10,000 5.3 28.75 10-17-07 180,807 458,201
Bruce R. Funk 5,000 2.7 28.75 10-17-07 90,404 229,100
Timothy S. McIntee 1,500 .8 28.75 10-17-07 27,121 68,730
William P. Murnane 10,000 5.3 28.75 10-17-07 180,807 458,201
</TABLE>
(1) Gains are reported net of the option exercise price, but before taxes
associated with exercise. These amounts represent certain assumed rates
of appreciation only. Actual gains, if any, on stock option exercises
are dependent on the future performance of the Common Stock, overall
stock market conditions, as well as the option holder's continued
employment through the vesting period. The amounts reflected in this
table may not necessarily be achieved.
OPTION EXERCISES AND HOLDINGS
The following table sets forth information with respect to the Named
Executives concerning the exercise of options during fiscal year 1998 and the
unexercised options held as of September 30, 1998:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options Options
at FY-End at Fiscal Year-End(1)
---------------------- ---------------------
Shares Acquired Value
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Thomas W. Haley -- -- -- 10,000 -- --
Allan J. Chan -- -- 21,000 46,000 $78,311 $86,623
Bruce R. Funk 4,200 $77,281 2,600 22,600 8,556 40,749
Timothy S. McIntee -- -- 4,000 17,500 -- --
William P. Murnane -- -- 52,000 48,000 254,142 119,616
</TABLE>
(1) Based on a per share price of $12.125, which was the closing sale price
for the Company's Common Stock on September 30, 1998, the last trading
day of the Company's fiscal year.
8
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Haley, the Chairman and Chief Executive Officer of the Company,
served on the Board of Directors' Compensation Committee during fiscal year
1998. Mr. Haley's spouse has interests adverse to the Company in matters
described more fully in this proxy under the heading "CERTAIN TRANSACTIONS AND
LEGAL PROCEEDINGS."
JOINT REPORT OF THE COMPENSATION COMMITTEE AND STOCK OPTION COMMITTEE
The Compensation Committee of the Board of Directors consists of Mr.
Haley, the Chairman and Chief Executive Officer at the Company, and Messrs.
Slagle and Tessem, who are outside Directors. The Compensation Committee meets
as required and is responsible for setting the salaries and levels of incentive
awards for the officers and key personnel of the Company. The Stock Option
Committee of the Board of Directors consists of Mr. Bestler and Slagle, who are
outside Directors. The Stock Option Committee meets as required and makes
recommendations to the Board with respect to awarding stock option based
compensation to the Company's key personnel.
COMPENSATION PHILOSOPHY. The Compensation and Stock Option Committees'
governing philosophy for determining compensation levels is designed to attract
and retain the highest quality personnel possible consistent with the Company's
resources and capabilities. Executive compensation is broken into the following
components:
1. BASE SALARIES. Base salaries for executive management and officers
of the Company are intended to be competitive with companies of similar
market capitalization and revenue levels. The base salaries are also
intended to recognize individual achievements and assist the Company in
attracting and retaining qualified executives.
2. BONUS PROGRAM. Cash bonuses are awarded annually as appropriate.
The bonus awards are based on both Company and divisional performance
with consideration given to the individual's contribution to the
Company's performance.
3. STOCK OPTIONS. Stock options encourage and reward effective
management that results in long-term corporate financial success, as
measured by stock price appreciation. Stock options only have value for
the executive officers if the price of the Company's stock appreciates
in value from the date the options are granted.
CHIEF EXECUTIVE OFFICER COMPENSATION. The salary and bonus of the Chief
Executive Officer is set by and subject to the discretion of the Compensation
Committee with Board of Director approval. The compensation for Thomas W. Haley,
the Chief Executive Officer, was determined by using a process and philosophy
similar to that used for all executives but Mr. Haley abstains from voting on
his own compensation.
9
<PAGE>
SUBMITTED BY THE COMPENSATION AND STOCK OPTION COMMITTEES OF THE COMPANY'S BOARD
OF DIRECTORS:
Compensation Committee: Stock Option Committee:
Thomas W. Haley, Chairman Gerald M. Bestler
Michael C. Slagle Michael C. Slagle
Bernt M. Tessem
The preceding report shall not be deemed incorporated by reference by
any general statement incorporating by reference this Proxy Statement into any
filing under the Securities Act of 1933 (the "1933 Act") or the Securities
Exchange Act of 1934 (the "1934 Act"), except to the extent the Company
specifically incorporates this information by reference, and shall not otherwise
be deemed filed under the 1933 Act or the 1934 Act.
STOCK PERFORMANCE
The graph below sets forth a comparison of the cumulative shareholder
return of the Company's Common Stock over the last five fiscal years with the
cumulative total return over the same periods for the Nasdaq Stock Market (U.S.
and Foreign Companies) Index and the Nasdaq Non-Financial Index. The graph
compares the cumulative total return of the Company's Common Stock as of the end
of each of the Company's last five fiscal years on $100 invested as of September
30, 1993, assuming the reinvestment of all dividends and after giving effect to
a 3 for 2 stock split on May 31, 1995 and a 2 for 1 stock split on December 23,
1996:
[PLOT POINTS CHART]
10
<PAGE>
1993 1994 1995 1996 1997 1998
- --------------------------------------------------------------------------------
Innovex, Inc. $100 $107.35 $347.78 $299.46 $1041.60 $394.56
Nasdaq Non- 100 99.45 138.63 161.82 217.29
Financial 219.97
Nasdaq Stock 100 100.60 137.69 162.32 223.29 223.26
Market
================================================================================
DIRECTOR COMPENSATION
Directors who are not employees of the Company (currently all directors
except Mr. Haley) are paid an annual cash retainer fee of $7,000, $1,000 for
each board of directors meeting attended and $500 for each board committee
meeting attended. In addition, each non-employee director receives an automatic
grant of options to purchase 1,000 shares of Common Stock at an exercise price
equal to the fair market value of such Common Stock on the date on which such
director is elected or re-elected.
EMPLOYMENT AGREEMENTS
The Company has employment agreements with Mr. Chan, Mr. Funk, Mr.
McIntee and Mr. Murnane. Those employment agreements provide, among other
things, for those individuals' employment to continue for a period of 90 days
following, and for a lump sum cash severance payment of from 3 to 12 months'
salary in the event of, involuntary termination other than for cause,
termination of the Company's operations due to bankruptcy or insolvency, total
disability of the employee, a change in control of the Company or constructive
termination of the employee. In general, a "change in control" would occur when
there has been any change in the controlling persons reported in the Company's
proxy statements, when 20% or more of the Company's outstanding voting stock is
acquired by any person, when current members of the Board of Directors or their
successors elected or nominated by such members cease to constitute a majority
of the Board of Directors, when the Company merges or consolidates with or sells
substantially all its assets to any person or entity, or when the Company's
stockholders vote to liquidate or dissolve the Company. However, a "change in
control" would not occur if any of these events are authorized, approved or
recommended by the Board of Directors. The employment agreement also prohibits
disclosure of confidential information concerning the Company and requires
disclosure of and assignment of inventions, discoveries and other works relating
to those individuals' employment. The employment agreement contains a covenant
not to compete with the Company at any time during employment with the Company
and for a period of 6 months after employment is terminated. If a change in
control had occurred as of the end of fiscal 1998, the following individuals
would have received the approximate payment indicated pursuant to the employment
agreements: Mr. Chan, $85,000; Mr. Funk, $81,900; Mr. McIntee, $85,000; Mr.
Murnane, $87,500; and all current executive officers as a, group $438,900
11
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than 10% of
a registered class of the Company's equity securities, to file with the
Securities and Exchange Commission initial reports of ownership and reports of
changes in ownership of Common Stock and other equity securities of the Company.
The insiders are required by Securities and Exchange Commission regulations to
furnish the Company with copies of all Section 16(a) forms they file, including
Forms 3, 4, and 5.
To the Company's knowledge, based solely on review of the copies of
such reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended September 30, 1998, all
Section 16(a) filing requirements applicable to its insiders were complied with.
APPROVAL OF AMENDMENT OF THE 1994 STOCK OPTION PLAN
(PROPOSAL 2)
GENERAL INFORMATION
On April 21, 1994, the Company's Board of Directors adopted the
Innovex, Inc. 1994 Stock Option Plan (the "1994 Plan") and such action was
approved by the shareholders on March 7, 1995. The purpose of the 1994 Plan is
to provide a continuing, long-term incentive to selected eligible officers, key
employees and consultants of the Company and of any subsidiary corporation of
the Company and to provide a means of rewarding outstanding performance and to
enable the Company to maintain a competitive position and to attract and retain
key personnel necessary for continued growth and profitability.
PROPOSED PLAN AMENDMENT
The 1994 Plan authorized issuance of 200,000 shares of Common Stock
(adjusted to 300,000 after the 3 for 2 stock split on May 31, 1995) pursuant to
options granted under the 1994 Plan. The Plan was amended by the Board of
Directors on November 30, 1995 and approved by the shareholders on January 23,
1996 to increase by 300,000 the shares available thereunder, adjusted in the
aggregate to 1,200,000 shares upon a 2-for-1 stock split on December 23, 1996.
On October 23, 1998 the Board of Directors amended the Plan, subject to
ratification and approval of shareholders, to increase the total number of
shares available under the 1994 Plan by 600,000 shares to a total of 1,800,000.
There were outstanding on December 9, 1998 options to purchase 792,505 shares
under the 1994 Plan and 361,300 shares have been exercised. Therefore, without
shareholder approval of this amendment to the 1994 Plan, only 46,195 shares
remain available under the 1994 Plan for awards. The Board of Directors has
deemed it prudent to increase the shares available for grant under the 1994 Plan
by 600,000 to facilitate future option grants.
SHARES AVAILABLE UNDER 1994 PLAN. The maximum number of shares of
common stock presently reserved for stock options under the 1994 Plan, as
amended by the Board of Directors, is 1,200,000(subject to possible adjustment
in the event of stock splits or other similar changes in the common stock).
Shares of common stock covered by expired or terminated stock options may be
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used for subsequent grants under the 1994 Plan.
ELIGIBILITY AND ADMINISTRATION. Officers and other key employees of the
Company and its subsidiaries who are responsible for or contribute to the
management, growth and/or profitability of the business of the Company and its
subsidiaries, as well as consultants, are eligible to be granted options under
the 1994 Plan. The number of options granted and the terms and conditions of
such options need not be uniform among participants, even as to options granted
at the same time, whether or not the participants are similarly situated. The
1994 Plan shall be administered by the Board or, in its discretion, by a
committee, as defined in the 1994 Plan, who shall be appointed by the Board of
Directors. The term "Committee" as used in this proposal refers to the Board or,
if the Board has delegated its authority, the Stock Option Committee. The
Committee will have the power to make grants, determine the number of shares
covered by each grant and other terms and conditions of such grants, interpret
the 1994 Plan, and adopt rules, regulations and procedures with respect to the
administration of the 1994 Plan. The Committee's recommendations regarding
option grants and the terms and conditions of those grants shall be conclusive.
GRANTS UNDER 1994 PLAN. The Committee may grant stock options that
either qualify as "incentive stock options" under ss.422 of the Internal Revenue
Code of 1986, as amended ("Code"), or as "non-qualified stock options" in such
form and upon such terms as the Committee may approve from time to time. Stock
options granted under the 1994 Plan may be exercised during their respective
terms as determined by the Committee. The purchase price may be paid by
tendering cash or, in the Committee's discretion, by tendering promissory notes
or common stock or any other form of legal consideration deemed sufficient by
the Committee and consistent with the 1994 Plan's purpose and applicable law. No
shares of stock shall be issued until full payment therefor has been made. Upon
notification of the amount due and prior to, or concurrently with, the delivery
to the optionee of a certificate representing any shares purchased pursuant to
the exercise of an option, the optionee shall promptly pay to the Company any
amount necessary to satisfy applicable federal, state or local withholding tax
requirements. If the terms of the option so permit, the optionee may elect to
pay all or part of the option exercise price by having the Company withhold upon
exercise of the option a number of shares with a fair market value equal to the
aggregate option exercise price for the shares with respect to which such
election is made. No stock option shall be transferable or assignable by the
optionee or exercised by anyone else during the optionee's lifetime.
Stock options may be exercised during varying periods of time after a
participant's termination of employment, dependent upon the reason for
termination. Following a participant's death, the participant's stock options
may be exercised by the legal representative of the estate or the optionee's
legatee for a period of six months or until the expiration of the stated term of
the option, whichever is less, without installment exercise restrictions. The
same time periods apply if the participant is terminated by reason of permanent
disability. If the participant's employment is terminated for any other reason,
the participant's stock options may be exercised, to the extent they were
exercisable at the time of termination, for a period of one month from the date
of termination or until the expiration of the stated term of the option,
whichever is less; provided, if the participant's employment is terminated as a
result of the participant's deliberate, willful or gross misconduct, the
participant's stock options immediately terminate.
No incentive stock options shall be granted under the 1994 Plan after
April 21, 2004. The
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term of an incentive stock option may not exceed 10 years (or 5 years if issued
to a participant who owns or is deemed to own more than 10% of the combined
voting power of all classes of stock of the Company, any subsidiary or
affiliate) and non-qualified options shall not have a term exceeding ten years.
Non-qualified options granted to consultants shall not have a term exceeding
five years. The aggregate fair market value of common stock with respect to
which an incentive stock option is exercisable for the first time by an optionee
during any calendar year shall not exceed $100,000. The exercise price under an
incentive stock option may not be less than the fair market value of the common
stock on the date the option is granted (or, in the event the participant owns
more than 10% of the combined voting power of all classes of stock of the
Company, the option price shall be not less than 110% of the fair market value
of the stock on the date the option is granted). The exercise price for
non-qualified options granted under the 1994 Plan may be less than 100% of the
fair market value of the common stock on the date of grant. No optionee may be
granted options in any fiscal year to purchase an aggregate total of more than
100,000 shares of common stock.
FEDERAL INCOME TAX CONSEQUENCES
There will not be any federal income tax consequences to either the
participant or the Company as a result of the grant to a participant of an
Incentive Stock Option under the 1994 Plan. The exercise by a participant of an
Incentive Stock Option also will not result in any federal income tax
consequences to the Company or the participant, except that (i) an amount equal
to the excess of the fair market value of the shares acquired upon exercise of
the Incentive Stock Option, determined at the time of exercise, over the
consideration paid for the shares by the participant will be a tax preference
item for purposes of the alternative minimum tax, and (ii) the participant may
be subject to an additional excise tax if any amounts are treated as "excess
parachute payments" within the meaning of the Code.
If a participant disposes of the shares acquired upon exercise of an
Incentive Stock Option, the federal income tax consequences will depend upon how
long the participant has held the shares. If the participant does not dispose of
the shares within two years after the Incentive Stock Option was granted, nor
within one year after the participant exercised the Incentive Stock Option and
the shares were transferred to the participant (the "Applicable Holding
Periods"), then the participant will recognize a long-term capital gain or loss.
If the Applicable Holding Periods are not satisfied, then any gain realized in
connection with the disposition of such stock will generally be taxable as
ordinary compensation income in the year in which the disposition occurred, to
the extent of the difference between the fair market value of such stock on the
date of exercise and the option exercise price. The Company is entitled to a tax
deduction to the extent, and at the time, the participant realizes compensation
income. The balance of any gain will be characterized as a capital gain. As part
of the Taxpayer Relief Act of 1997, and amendments thereto, Congress modified
the maximum federal income tax rate for most long-term capital gains recognized
after May 6, 1997. Under the new law, capital gains resulting from property held
for more than 12 months will be taxed at a maximum rate of 20%, and capital
gains resulting from property held for less than one year will be taxed at a
maximum rate of 28%.
An optionee will not realize taxable compensation income upon the grant
of a non-qualified stock option. As a general matter, when an optionee exercises
a non-qualified stock option, he or she will realize taxable compensation income
at that time equal to the difference between the aggregate
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option price and the fair market value of the stock on the date of exercise. The
Company is entitled to a tax deduction to the extent, and at the time, the
participant realizes compensation income.
REGISTRATION WITH THE SEC
Upon the approval of the amendment to the 1994 Plan by the
shareholders, the Company intends to file a registration statement covering the
offering of the additional 600,000 shares of common stock issuable under the
1994 Plan with the Securities and Exchange Commission pursuant to the Securities
Act of 1933, as amended.
VOTE REQUIRED
Shareholder approval of the amendment to the 1994 Plan requires the
affirmative vote of the holders of a majority of the shares of common stock
represented at the meeting and entitled to vote on this proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE
AMENDMENT TO THE 1994 STOCK OPTION PLAN.
APPROVAL OF INDEPENDENT AUDITORS
(PROPOSAL 3)
Grant Thornton LLP has been reappointed by the Board of Directors as
the Company's auditors for the current year. Although shareholder approval is
not required, it is the policy of the Board of Directors to request shareholder
ratification of the appointment or reappointment of auditors.
A representative of Grant Thornton LLP will be present at the Annual
Meeting of Shareholders, will have an opportunity to make a statement and will
be available to respond to appropriate questions. The Board of Directors
recommends that the shareholders vote "for" the proposal to approve the
reappointment of Grant Thornton LLP, and the endorsed proxy will be so voted
unless a contrary vote is indicated. In the event the reappointment of Grant
Thornton LLP should not be approved by the shareholders, the Board of Directors
will make another appointment to be effective at the earliest possible time.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" REAPPOINTMENT OF GRANT
THORNTON LLP AS THE COMPANY'S INDEPENDENT AUDITORS.
SHAREHOLDER PROPOSALS
Any shareholder desiring to submit a proposal for action at the 2000
Annual Meeting of Shareholders and presentation in the Company's proxy statement
with respect to such meeting should arrange for such proposal to be delivered to
the Company's offices, 530 Eleventh Avenue South, Hopkins, Minnesota 55343,
addressed to Thomas W. Haley, no later than August 18, 1999 in order to be
considered for inclusion in the Company's proxy statement relating to the
meeting. Matters pertaining to such proposals, including the number and length
thereof, eligibility of persons
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entitled to have such proposals included and other aspects are regulated by the
Securities Exchange Act of 1934, Rules and Regulations of the Securities and
Exchange Commission and other laws and regulations to which interested persons
should refer.
On May 21, 1998 the Securities and Exchange Commission adopted an
amendment to Rule 14a-4, as promulgated under the Securities and Exchange Act of
1934, as amended. The amendment to Rule 14a-4(c)(1) governs the Company's use of
its discretionary proxy voting authority with respect to a stockholder proposal
which is not addressed in the Company's proxy statement. The new amendment
provides that if a proponent of a proposal fails to notify the Company at least
45 days prior to the month and day of mailing of the prior year's proxy
statement, then the Company will be allowed to use its discretionary voting
authority when the proposal is raised at the meeting, without any discussion of
the matter in the proxy statement.
With respect to the Company's 2000 Annual Meeting of Shareholders, if
the Company is not provided notice of a shareholder proposal, which the
shareholder has not previously sought to include in the Company's proxy
statement, by November 30, 1999, the Company will be allowed to use its voting
authority as described above.
GENERAL
The Board of Directors of the Company knows of no matters other than
the foregoing to be brought before the meeting. However, the enclosed proxy
gives discretionary authority in the event that any additional matters should be
properly presented. The Annual Report of the Company for the past fiscal year is
enclosed herewith and contains the Company's financial statements for the fiscal
year ended September 30, 1998. A copy of Form 10-K, the annual report filed by
the Company with the Securities and Exchange Commission, will be furnished
without charge to any shareholder who requests it in writing from the Company at
the address noted on the first page of this Proxy Statement.
By Order of the Board of Directors,
Thomas W. Haley, CHAIRMAN OF THE BOARD
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INNOVEX, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON JANUARY 20, 1999
The undersigned hereby appoints Thomas W. Haley and Michael C. Slagle,
or either of them, as proxies with full power of substitution to vote all shares
of stock of Innovex, Inc. of record in the name of the undersigned at the close
of business on December 9, 1998, at the Annual Meeting of Shareholders to be
held in Minneapolis, Minnesota on January 20, 1999, or at any adjournment or
adjournments thereof, hereby revoking all former proxies.
1. ELECTION OF DIRECTORS:
[ ] FOR all nominees listed [ ] WITHHOLD AUTHORITY
below (except as marked to vote for all nominees
to the contrary). listed below.
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE
A LINE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW.)
Gerald M. Bestler, Mary E. Curtin, Frank L. Farrar, Thomas W. Haley,
Robert E. Miller, Michael C. Slagle, and Bernt M. Tessem
2. PROPOSAL TO INCREASE THE AUTHORIZED SHARES UNDER THE 1994 STOCK OPTION PLAN
FROM 1,200,000 TO 1,800,000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. PROPOSAL TO RATIFY APPOINTMENT OF GRANT THORNTON LLP AS INDEPENDENT PUBLIC
ACCOUNTANTS.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON ANY OTHER
MATTERS COMING BEFORE THE MEETING.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED ON PROPOSALS (1), (2)
AND (3) IN ACCORDANCE WITH THE SPECIFICATIONS MADE AND "FOR" SUCH PROPOSAL IF
THERE IS NO SPECIFICATION.
Dated: ____________________________________, 19______
_____________________________________________________
(Signature)
_____________________________________________________
(Signature)
PLEASE SIGN NAME(S) EXACTLY AS SHOWN AT LEFT. WHEN
SIGNING AS EXECUTOR, ADMINISTRATOR, TRUSTEE OR
GUARDIAN, GIVE FULL TITLE AS SUCH; WHEN SHARES
HAVE BEEN ISSUED IN NAMES OF TWO OR MORE PERSONS,
ALL SHOULD SIGN.
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