SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[X] Preliminary proxy statement
[ ] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
SPECTRASCIENCE, 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
[ ] 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 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>
PRELIMINARY COPY
SPECTRASCIENCE, INC.
14405 21st Avenue North, Suite 111
Minneapolis, MN 55447
Tel: (763) 745-4120 Fax: (763) 745-4126
email: [email protected]
website: www.spectrascience.com
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 17, 2000
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders
(the "Annual Meeting") of SPECTRASCIENCE, Inc. ("SPECTRASCIENCE") to be held on
Wednesday, May 17, 2000, at 3:30 p.m. Central Standard Time, at The Marquette
Hotel, 710 Marquette Avenue, Minneapolis, Minnesota 55402, Tel: (612) 376-7436,
Fax: (612) 376-7418.
At the Annual Meeting you will be asked:
1. To elect four (4) persons to serve as directors until
the next Annual Meeting of Shareholders or until
their respective successors shall be elected and
qualified.
2. To approve an amendment to SPECTRASCIENCE's Articles
of Incorporation increasing the number of authorized
shares of SPECTRASCIENCE common stock, $.25 par value
(the "Common Stock") from 10,000,000 to 17,000,000.
3. To approve an increase in the number of shares of
Common Stock authorized for issuance under
SPECTRASCIENCE's 1991 Stock Plan.
4. To ratify the selection of Ernst & Young LLP as
SPECTRASCIENCE's independent public accounts for the
current fiscal year ending December 31, 2000.
5. To consider and act upon any other matters that may
properly come before the Annual Meeting or any
adjournment thereof.
The Board of Directors has fixed March 30, 2000 as the record date.
Only shareholders of record at the close of business on the record date will be
entitled to receive notice of and to vote at the Annual Meeting and any
adjournment or postponement thereof. A copy of SPECTRASCIENCE's Annual Report
for the fiscal year ended December 31, 1999, a Proxy Statement and a Proxy Card
accompany this formal Notice of Meeting. These materials are first being mailed
to shareholders on or about April 10, 2000.
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL
MEETING, YOU ARE URGED TO MARK, SIGN, DATE AND RETURN THE ENCLOSED PROXY AS
PROMPTLY AS POSSIBLE IN THE ENVELOPE PROVIDED. THIS WILL ENSURE YOUR SHARES ARE
REPRESENTED AND SAVE US ADDITIONAL EXPENSES ASSOCIATED WITH SOLICITING PROXIES.
IF YOU DO ATTEND THE MEETING, YOU MAY REVOKE YOUR PROXY AND VOTE YOUR SHARES IN
PERSON.
By Order of the Board of Directors
Chester E. Sievert, Jr.
PRESIDENT, CHIEF EXECUTIVE OFFICER AND
Dated: April , 2000 CORPORATE SECRETARY
<PAGE>
PRELIMINARY COPY
SPECTRASCIENCE, INC.
14405 21ST AVENUE NORTH, SUITE 111
MINNEAPOLIS, MINNESOTA 55447
------------------------------
PROXY STATEMENT
------------------------------
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 17, 2000
This proxy statement and the enclosed proxy are being furnished to the
shareholders of SPECTRASCIENCE, Inc., a Minnesota corporation ("SPECTRASCIENCE"
or "the Company"), in connection with the solicitation of proxies on behalf of
our Board of Directors for use at the Annual Meeting of Shareholders ("Annual
Meeting") and at any adjournment(s) thereof, for the purposes set forth in the
accompanying Notice of Annual Meeting of Shareholders. The Annual Meeting will
be held on Wednesday, May 17, 2000, at 3:30 p.m. Central Standard Time, at The
Marquette Hotel, 710 Marquette Avenue, Minneapolis, Minnesota 55402, Tel: (612)
376-7436, Fax: (612) 376-7418.
This proxy statement, the accompanying proxy and our Annual Report for
the fiscal year ended December 31, 1999, are first being mailed to
SPECTRASCIENCE shareholders on or about April 10, 2000. The Annual Report is not
to be considered a part of our proxy solicitation materials.
SOLICITATION AND REVOCATION OF PROXIES
The costs and expenses of soliciting proxies will be borne by
SPECTRASCIENCE. Our officers, directors and employees may solicit proxies by use
of the mail, telephone, facsimile or in person. They will not be compensated for
any solicitations. SPECTRASCIENCE may reimburse brokerage firms and others for
expenses they incur in forwarding proxy materials to beneficial owners of our
Common Stock.
PROXIES IN THE FORM ENCLOSED ARE SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS. You may revoke your proxy at any time by giving written notice to our
Corporate Secretary, delivering another proxy with a later date, or voting in
person at the Annual Meeting.
If you own shares through a bank or brokerage firm account, you may
instead receive a voting instruction form with this proxy statement, which you
may use to instruct how your shares should be voted. Just as with a proxy, you
may vote those shares by completing, signing and returning the voting
instruction form in the enclosed envelope. Many banks and brokerage firms have
arranged for internet or telephonic voting of shares and provide instructions
for using those services on the voting instruction form. If your bank or
brokerage firm uses ADP Investor Communication Services, you may vote your
shares via the internet at www.proxyvote.com or by calling the toll-free number
on your voting instruction form. Any shareholder holding shares through a bank
or brokerage firm may revoke a previously granted proxy or change previously
given voting instructions by contacting the bank or brokerage firm, or by
obtaining a legal proxy from the bank or brokerage firm and voting at the Annual
Meeting.
QUORUM AND VOTING RIGHTS
Only shareholders of record at the close of business on March 30, 2000
are entitled to execute proxies or to vote at the Annual Meeting. As of that
date there were 6,576,725 outstanding shares of SPECTRASCIENCE common stock,
$.25 par value (the "Common Stock"). These outstanding shares of Common Stock
are the only outstanding voting securities of SPECTRASCIENCE. Each holder of
Common Stock is entitled to one vote for each share held with respect to any
matter that may properly come before the
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Annual Meeting. A majority of the outstanding shares entitled to vote are
required to constitute a quorum at the Annual Meeting. The affirmative vote of a
majority of the Common Stock entitled to vote and present, by proxy or in
person, at the Annual Meeting is required to approve matters properly brought
before the Annual Meeting.
If a shareholder abstains from voting as to any proposal, then the
shares they hold will be considered present at the Annual Meeting for purposes
of determining a quorum and for calculating the vote with respect to such
proposal. However, the shares will not be considered to have been voted in favor
of such proposal. If a broker returns a "non-vote" proxy, indicating a lack of
authority to vote on a proposal, the shares covered by such non-vote will be
considered present at the Annual Meeting for purposes of determining a quorum,
but not present for purposes of calculating the vote with respect to such
proposal.
All properly executed proxies delivered pursuant to this solicitation
and not revoked will be voted at the Annual Meeting in accordance with the
directions given. IF NO SPECIFIC INSTRUCTIONS ARE GIVEN WITH REGARD TO THE
MATTERS TO BE VOTED UPON, THE SHARES REPRESENTED BY A SIGNED PROXY WILL BE VOTED
"FOR" PROPOSALS 1, 2, 3 AND 4 SET FORTH IN THE NOTICE OF MEETING.
PROPOSAL 1
ELECTION OF DIRECTORS
The Board of Directors has nominated the four persons named below to
serve as directors of SpectraScience until the next annual meeting of
shareholders or until their earlier death, resignation or removal from office.
All of the nominees are presently members of the Board of Directors and have
consented to serve another term as a director if re-elected. If any of the
nominees should be unavailable to serve for any reason, the Board of Directors
may designate a substitute nominee or nominees (in which case the persons named
on the enclosed proxy card will vote all valid proxies for the election of the
substitute nominee or nominees), allow the vacancy or vacancies to remain open
until a suitable candidate or candidates are located, or by resolution provide
for a lesser number of directors. The Board of Directors has no reason to
believe that any nominee will be unable or unwilling to serve as a director if
elected.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH NOMINEE. The affirmative
vote of a majority of the Common Stock entitled to vote and present, by proxy or
in person, at the Annual Meeting is required for election of each of the
nominees.
INFORMATION ABOUT NOMINEES
The names of the nominees, their ages, the year in which each first
became a director and their principal occupations are set forth below.
<TABLE>
<CAPTION>
Name Age Title Director/Officer Since
- ---- --- ----- ----------------------
<S> <C> <C> <C>
Chester E. Sievert, Jr. 48 Chairman of the Board, President, Chief 1998
Executive Officer, and Corporate Secretary
Henry M. Holterman 44 Director 1992
Nathaniel S. Thayer 75 Director 1992
Johan A.P.M. De Hond 46 Director 1999
</TABLE>
CHESTER E. SIEVERT, JR. has served as Chairman of the Board since June
18, 1999. He has held the title of President and Chief Executive Officer since
January 5, 1999. He joined SPECTRASCIENCE as a consultant in June 1996, and has
held various executive positions since November 1996. Prior to joining
SPECTRASCIENCE, Mr.
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Sievert was a founder of and worked at two medical product companies; ReTech,
Inc. from 1980 to 1986; and FlexMedics Corporation from 1986 to 1995. As a
former academic scientist on staff at the University of Minnesota College of
Medicine and the Veterans Administration Medical Center, Mr. Sievert published
extensively in the fields of gastroenterology, urology and fiber optics. Mr.
Sievert has a Bachelor of Science Degree in Comparative Physiology from the
University of Minnesota.
HENRY M. HOLTERMAN has served as a director of SPECTRASCIENCE since
March 1992. Since 1991, he has been the Managing Director of Reggeborgh Beheer
BV, a company located in the Netherlands that invests in companies and owns
property projects generally located in the Netherlands. Mr. Holterman is a
chartered accountant and, from 1987 to 1991, was group controller for Transport
Development Group PLC and the Dutch Holding Company ETOM NV.
NATHANIEL S. THAYER has served as a director of SPECTRASCIENCE since
May 1993. He has been a partner in the law firm of Blais Cunningham & Crowe
Chester, located in Pawtucket, Rhode Island, since 1969.
JOHAN A.P.M. DE HOND, M.D. has served as a director of SPECTRASCIENCE
since June 18, 1999. He has been with Hospital Sophia in Zwolle, and Hospital
Diaconesse in Meppel, the Netherlands, since 1992 as a Senior Urologist. Dr. de
Hond completed his medical education in 1979 at the University of Utrecht, also
in The Netherlands. Dr. de Hond's background includes specialty training in
surgery as well as urology. Dr. de Hond has a clinical interest in photodynamic
therapy.
REMUNERATION OF MEMBERS OF THE BOARD OF DIRECTORS
DIRECTORS' FEES. The Company pays each non-employee director $500 for
each Board of Directors' meeting and committee meeting attended and reimburses
each such director for reasonable travel and out-of-pocket expenses for
attendance at these meetings.
AUTOMATIC OPTION GRANT. Pursuant to SPECTRASCIENCE's 1991 Stock Plan,
as amended, each non-employee director is entitled to receive an option to
purchase 10,000 shares of Common Stock when first elected to the Board of
Directors. Additionally, each non-employee director is entitled to receive an
automatic grant of options to purchase 5,000 shares of Common Stock upon
re-election to the Board each year the 1991 Stock Plan is in effect. The
exercise price of the option is based on the greater of (a) the prevailing
market price (defined as the closing price) of the Common Stock on the date of
grant or (b) the average of the closing prices of the Common Stock for the ten
trading days immediately prior to the date of grant.
The options granted to non-employee directors under the 1991 Stock Plan
expire ten years from the date of grant (subject to earlier termination in the
event of death), are not transferable (except by will or the laws of descent and
distribution), and become fully exercisable one year after the date of grant.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During the fiscal year ended December 31, 1999, the Board of Directors
held five meetings and adopted resolutions by unanimous written action on two
occasions (as permitted under Minnesota Statutes Section 302A.239). Each of the
directors attended all of the meetings of the Board of Directors and applicable
committees held while each was a director during such fiscal year. The Board of
Directors has an Audit Committee and a Compensation Committee.
The members of the Audit Committee during the fiscal year ended
December 31, 1999 were Messrs. Holterman and Thayer. The functions of the Audit
Committee are (i) to review the internal and external financial reporting of the
Company, (ii) to review the scope of the independent audit, and (iii) to
consider comments by the auditors regarding internal controls and accounting
procedures and management's response
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to those comments. The Audit Committee met one time during the fiscal year ended
December 31, 1999, primarily to review SPECTRASCIENCE's internal and external
financial reporting practices.
The members of the Compensation Committee during the fiscal year ended
December 31, 1999 were Messrs. Holterman and Thayer. The functions of the
Compensation Committee are to review and approve (i) the salaries of all
directors and officers of SPECTRASCIENCE, (ii) all bonus awards, annual or
otherwise, for all officers and employees of SPECTRASCIENCE, and (iii) all stock
option grants for directors, officers, and employees of SPECTRASCIENCE, as well
as stock option grants for others outside of SPECTRASCIENCE. The Compensation
Committee met two times during the fiscal year ended December 31, 1999.
SPECTRASCIENCE does not have a nominating committee of the Board of
Directors.
EXECUTIVE OFFICERS
The names, ages and positions of the executive officers and key
management personnel of SPECTRASCIENCE are listed below.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Chester E. Sievert, Jr.....48 Chairman of the Board, President, Chief Executive Officer and
Corporate Secretary
Scott G. Anderson..........45 Vice President Marketing & Sales
</TABLE>
Please see "Information About Nominees" for background information on
Mr. Sievert.
SCOTT G. ANDERSON joined SPECTRASCIENCE on February 7, 2000 as Vice
President Marketing & Sales. Mr. Anderson has over 22 years of sales and
marketing experience within the medical devices industry. From 1995 until
joining SPECTRASCIENCE he was Manager of Business Development for Olympus
America, Inc., the worldwide leader in endoscopic and imaging devices in
gastroenterology. During his 20-year career at Olympus, Mr. Anderson held senior
management positions in business development, operations and sales. Mr. Anderson
has a Bachelor of Science Degree in Biology from Bard College, New York.
EXECUTIVE COMPENSATION AND OTHER BENEFITS
The following table shows for the fiscal year ending December 31, 1999,
compensation awarded, paid to, or earned by SPECTRASCIENCE's Chief Executive
Officer and to all executive officers whose salary and bonuses exceeded $100,000
for that year (the "Named Executive Officers"):
<TABLE>
<CAPTION>
Annual Compensation Awards Payouts
------------------------------------- ------------------------- --------
Other Securities
Annual Restricted Underlying All Other
Compen- Stock Option/s LTIP Compen-
Name and Principal Position Year Salary Bonus sation (1) Award(s) SARs Payouts sation (5)
- --------------------------- ------ -------- -------- ---------- ---------- ----------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Chester E. Sievert, Jr.
President, Chief 1999 135,000 $44,000 $6,000 -- 100,000 (2) -- $5,300
Executive Officer and 1998 110,000 -- 6,000 -- 145,000 (3) -- 3,300
Corporate Secretary 1997 $ 92,500 15,000 6,000 -- 85,000 (4) -- 1,712
</TABLE>
- --------------
(1) Other Annual Compensation consists of a car allowance of $500 per month.
(2) Details of these option grants are provided in the following table entitled
"Option Grants in Last Fiscal Year."
(3) Represents a ten-year stock option with an exercise price of $4.0833 per
share for 45,000 shares of Common Stock, granted pursuant to the 1991 Stock
Plan. Six thousand of these shares vest immediately, with the remainder
vesting one-third per year over three years. Mr. Sievert was also granted
two ten-year stock options, each for 50,000 shares of Common Stock, one of
which vested immediately, and one of which vested on November 19,
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1999, when SPECTRASCIENCE received a recommendation for approval of its
pre-market approval application by an FDA medical device panel. Both
options have an exercise price of $4.4141 per share.
(4) Includes a ten-year stock option for 50,000 shares of Common Stock which
will vest in its entirety upon the successful completion of the clinical
studies on the Virtual Biopsy(TM) System and the filing with the FDA of a
pre-market notification package and final FDA product approval; and a
ten-year stock option for 35,000 shares, vesting one-third per year over
three years. Both options have an exercise price of $3.9125.
(5) All Other Compensation includes amounts contributed to the SPECTRASCIENCE
Savings and Retirement Plan, which qualifies as a 401(k) Plan under the
Internal Revenue Code of 1986, as amended.
OPTION AND STOCK APPRECIATION RIGHTS
The following table sets forth information concerning individual grants
of stock options made to the Named Executive Officers named in the Summary
Compensation Table set forth in "Executive Compensation and Other Benefits"
above, during the year ended December 31, 1999. No stock appreciation rights
("SARs") were granted or exercised during the year ended December 31, 1999.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants
---------------------------------------------------------------
Number of % of Total
Securities Options Potential Realizable Value
Underlying Granted to Exercise or at Assumed Annual Rates of
Options Employees in Base Price Stock Price Appreciation
Granted Fiscal Year ($/Sh) (3) Expiration Date for Option Term (4)
-----------------------------
5% 10%
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Chester E. Sievert, Jr. 50,000 (1) 41.5% $4.2000 April 19, 2009 $132,068 $334,686
50,000 (2) $4.0063 August 25, 2009 $125,977 $319,251
</TABLE>
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(1) Ten-year stock option for 50,000 shares of Common Stock with an exercise
price of $4.20 per share, vesting one-third per year over three years,
granted pursuant to the 1991 Stock Plan. All shares will be vested by April
19, 2002.
(2) Ten-year stock option for 50,000 shares of Common Stock with an exercise
price of $4.0063 per share, vesting immediately, granted pursuant to the
1991 Stock Plan.
(3) The exercise price was determined based on the greater of (a) the
prevailing market price (defined as the closing price) of the Common Stock
on the date of grant or (b) the average of the closing prices of the Common
Stock for the ten trading days immediately prior to the date of grant.
(4) Potential realizable value is net of the exercise price, but before taxes
associated with exercise. Potential realizable value is based on an
assumption that the market price of the stock appreciates at the stated
rate, compounded annually, from the date of grant until the end of the
ten-year option term, multiplied by the number of options granted. These
values are calculated based on regulations promulgated by the Securities
and Exchange Commission and do not reflect the Company's estimate of future
stock price appreciation. There can be no assurance that the actual stock
price appreciation over the ten-year option term will be at the assumed 5%
or 10% levels, or at any other defined level.
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AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTION VALUES
The following table sets forth certain information concerning
individual exercises of stock options during the year ended December 31, 1999
and the value of unexercised stock options as of December 31, 1999 for each of
the Named Executive Officers.
<TABLE>
<CAPTION>
Value of Unexercised
Shares Number of Securities In-the-Money
Acquired on Value Underlying Unexercised Options/SARs
Exercise Realized Options/SARs at FY-end at FY-End (1)(2)
-------------------------------------------------------------------------------------
Exercisable Unexercisable Exercisable Unexercisable
-------------- -----------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Chester E. Sievert, Jr.(3) -- -- 159,412 187,667 $2,042 $4,375
</TABLE>
(1) Upon the exercise of an option, the optionee must pay the exercise price in
cash or stock. Stock options are "in-the-money" if the closing bid price
for the Common Stock is greater than the exercise price of the stock
options. The closing bid price for the Common Stock on December 31, 1999
was $4.00 per share. The value of the options is calculated by taking the
difference between the exercise price and the closing bid price on December
31, 1999, and multiplying this difference by the number of option shares.
When the exercise price was higher than the market value of the Common
Stock, the option was not "in-the-money."
(2) Does not include the number or value of unexercisable options granted
subsequent to December 31, 1999. No SARs were held by any of the Named
Executive Officers on December 31, 1999.
(3) "In-the-money" options include 23,333 shares which are exercisable and
50,000 shares which are unexercisable. The unexerciseable shares become
exerciseable upon final FDA approval of the Virtual Biopsy(TM) System. The
exercise price for both options is $3.9125.
CHANGE-IN-CONTROL ARRANGEMENTS
SPECTRASCIENCE entered into a Severance Agreement with Mr. Sievert on
May 21, 1997, providing for severance pay in the event of a "Change in Control"
(as defined in the Severance Agreement). The Severance Agreement provides for
severance pay if his employment is terminated, either voluntarily or
involuntarily, during the three-year period following a Change in Control event.
The severance payment shall be equal to full compensation for one year and
payment will be made in a lump sum upon termination. In addition to the
severance payment, Mr. Sievert will be entitled to the following benefits upon a
Change in Control event: (i) 18 months of life, accident and health and dental
insurance benefits; (ii) 12 months of out-placement services; (iii) complete
coverage for fiduciary liability and directors' and officers' insurance for a
period of six years after a Change in Control event; (iv) indemnification for
any losses that might result from actions taken in good faith before the "Date
of Termination" (as defined in the Severance Agreement); (v) reimbursement for
all legal fees and expenses incurred as a result of termination, except to the
extent such payment would constitute a "parachute payment" within the meaning of
Section 280G(b)(2) of the Internal Revenue Code of 1986, as amended (the
"Code"); (vi) all benefits under the Company's Savings and Retirement Plan, or
any successor to such plan and any other plan or arrangement relating to
retirement benefits; (vii) all benefits and rights under any and all Company
stock purchase, restricted stock grant and stock option plans or programs, or
any successor to any such plans or programs, which shall be in addition to, and
not reduced by, any other amounts payable under the Severance Agreement; and
(viii) immediate vesting of all outstanding but unvested options. If there had
been a Change in Control event during the fiscal year ended December 31, 1999,
and the employment of Mr. Sievert was immediately terminated, Mr. Sievert would
have been entitled to receive, pursuant to the terms of his Severance Agreement,
a lump sum payment upon termination of $216,000.
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All stock option agreements outstanding under the Company's 1991 Stock
Plan provide for the acceleration of exercisability of options immediately prior
to a Change in Control event (except in certain cases where the optionee is
terminated for "cause" or resigns without "good reason").
OWNERSHIP OF VOTING SECURITIES BY PRINCIPAL HOLDERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of the SPECTRASCIENCE Common Stock as of March 24, 2000,
by: (a) each director of SPECTRASCIENCE; (b) each Named Executive Officer; (c)
each person or entity known by us to own beneficially more than five percent of
the Common Stock; and (d) all the directors and executive officers of
SPECTRASCIENCE as a group.
<TABLE>
<CAPTION>
Amount and Nature of Percent of Class
Name and Address of Beneficial Owner Beneficial Ownership Beneficially Owned (8)
- ------------------------------------ -------------------- ----------------------
<S> <C> <C>
Reggeborgh Beheer BV
Postbox 319, 7460 AH Rijssen, The Netherlands 816,145 (1) 11.7%
Perkins Capital Management, Inc. and
The Perkins Opportunity Fund
730 East Lake Street, Wayzata, MN 55391-1769 602,372 (2) 9.0%
Nathaniel S. Thayer
150 Main Street, P.O. Box 1325, Pawtucket, RI 02862 437,778 (3) 6.6%
Chester E. Sievert, Jr.
14405 21st Avenue N, Suite 111
Minneapolis, Minnesota 55447 250,745 (4) 3.7%
Henry M. Holterman
Postbox 319, 7460 AH Rijssen, The Netherlands 26,000 (5) 0.4%
Johan A.P.M. De Hond
Van Hambroeckmarke 1, 8016 KM Zwolle, The Netherlands 0 (6) 0.0%
Officers and Directors as a Group (4 persons) 714,523 (7) 10.4%
</TABLE>
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(1) Includes (a) 434,000 shares held by Reggeborgh Beheer BV, (b) 125,000
shares issuable upon the exercise of warrants that are exercisable
within 60 days of March 24, 2000, and (c) 171,430 shares and 85,715
shares issuable upon the exercise of warrants, that can be acquired
within 60 days of March 24, 2000 under the terms of a convertible
demand note.
(2) Includes (a) 427,372 shares owned by Perkins Capital Management, Inc.
and (b) 175,000 shares owned by The Perkins Opportunity Fund
(collectively "Perkins"). The shares beneficially owned by Perkins also
include 105,836 shares issuable upon exercise of warrants held by
Perkins or their clients within 60 days of March 24, 2000.
(3) Includes (a) 389,578 shares owned by Mr. Thayer, (b) 48,000 shares
issuable upon exercise of options that are exercisable within 60 days
of March 24, 2000 and (c) 200 shares held in a joint account in which
Mr. Thayer has a 50% beneficial interest. Mr. Thayer, a non-employee
director of the Company, is a partner of the law firm of Blais
Cunningham & Crowe Chester.
(4) Includes 250,745 shares issuable upon exercise of options that are
exercisable within 60 days of March 24, 2000. Excludes 50,000 shares
issuable upon exercise of options that will vest upon final FDA
approval for the Virtual Biopsy(TM) System. Mr. Sievert is Chairman,
President and Chief Executive Officer of SPECTRASCIENCE.
(5) Includes 26,000 shares issuable upon exercise of options that are
exercisable within 60 days of March 24, 2000. Mr. Holterman is a
non-employee director of the Company, and is the Managing Director of
Reggeborgh Beheer BV (see footnote 1).
(6) Mr. De Hond is a non-employee director. Currently, none of the stock
options he beneficially owns will vest within 60 days of March 24,
2000.
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(7) Includes 389,778 shares and 324,745 shares issuable upon exercise of
options held by all directors and executive officers (4 persons) that
are exercisable within 60 days of March 24, 2000. Excludes 50,000
shares issuable upon exercise of options by Mr. Sievert upon the
successful completion of certain performance milestones.
(8) Based upon 6,576,725 shares of Common Stock outstanding on March 24,
2000.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
("Exchange Act") requires our directors, executive officers and persons who are
beneficial owners of more than 10% of the Common Stock to file initial reports
of ownership and reports of changes in ownership of Common Stock and any other
equity securities of SPECTRASCIENCE with the Securities and Exchange Commission,
and to furnish us with copies of all Section 16(a) reports they file. To the
best of the our knowledge, based upon a review of the copies of such reports
furnished to us and written representations that no other reports were required,
during the year ended December 31, 1999, all Section 16(a) filing requirements
applicable to our officers, directors, and 10% shareholders were satisfied.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There were no material transactions between the Company and its
directors or executive officers during the two year period ended December 31,
1999.
PROPOSAL 2
AMENDMENT OF ARTICLES OF INCORPORATION TO INCREASE THE NUMBER OF
AUTHORIZED SHARES OF COMMON STOCK
Article III of the Articles of Incorporation, currently provides for
10,000 authorized shares of common stock with a stated par value of $.25 per
share, and 20,000,000 shares of preferred stock with a stated par value of $1.00
per share. The proposed amendment to the Articles of Incorporation would
increase the number of authorized shares of common stock of the Company to
17,000,000.
The Board of Directors believes that the increased authorization of
shares is advisable at this time so that shares will be available in the future
on a timely basis if such need arises in connection with stock split or
dividends, financings, acquisitions or other corporate purposes. This will
enable the Company to take advantage of market conditions, the availability of
favorable financing, and opportunities for acquisitions without the delay and
expense associated with convening an additional special shareholders' meeting.
Unless required by law, the Articles of Incorporation or the rules of
any stock exchange on which the shares may be in the future listed, the Board of
Directors will be able to provide for the issuance of the additional shares
without further action by the Company's shareholders and no further
authorization of the shareholders will be sought prior to such issuance. If the
Common Stock qualifies for listing on the Nasdaq National or SmallCap Market,
under existing regulations of the NASD approval by a majority of the holders of
the shares of Common Stock would be required prior to the original issuance of
additional shares in certain circumstances, including (a) in connection with
certain stock plans, (b) in connection with certain acquisitions if the number
of shares of Common Stock to be issued (including securities convertible into or
exercisable for shares of Common Stock) is or will be equal to or in excess of
20% of the number of shares outstanding before the issuance of such Common
Shares, or (c) if the issuance would result in a change in control of the
Company.
Although not designed or intended for such purposes, the effect of the
proposed increase in the authorized shares might be to render more difficult or
to discourage a merger, tender offer, proxy contest or
Page 8
<PAGE>
change in control of the Company and the removal of management, which holders of
Common Stock might otherwise deem favorable. The authority of the Board of
Directors to issue shares might be used to create voting impediments or to
frustrate an attempt by another person or entity to effect a takeover or
otherwise gain control of the Company because the issuance of additional shares
would dilute the voting power of the shares then outstanding. Shares could also
be issued to purchasers who would support the Board of Directors in opposing a
takeover bid which the Board of Directors determines not to be in the best
interests of the Company and its shareholders. The overall effect of the ability
of the Board of Directors to issue additional shares may be to delay or prevent
attempts by other persons or entities to acquire control of the Company without
negotiations with the Board of Directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL TO AMEND THE
ARTICLES OF INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON
STOCK. The affirmative vote of a majority of Common Stock entitled to vote and
present, by proxy or in person, at the Annual Meeting is required for approval
of the amendment to the Articles of Incorporation.
PROPOSAL 3
RATIFICATION OF AMENDMENT TO THE AMENDED AND RESTATED
1991 STOCK PLAN
Currently, under the SPECTRASCIENCE 1991 Stock Plan (the "Plan"), the
number of shares of Common Stock available for issuance is 1,640,000. As of
March 24, 2000, there were 1,048,911 shares subject to outstanding grants under
the Plan, and 591,089 shares that were issued pursuant to option exercises under
the Plan.
The purpose of the Plan is to (a) improve individual performance by
providing long-term incentives and rewards to employees and consultants of
SPECTRASCIENCE, (b) assist the Company in attracting, retaining and motivating
employees and consultants with experience and ability, and (c) associate the
interests of such employees and consultants with those of SPECTRASCIENCE 's
shareholders. A summary description of the terms of the Plan is set forth below;
however, the summary is qualified in its entirety by the terms of the Plan,
which is included as an attachment to this proxy statement.
The Plan provides for the grant of options to key employees,
consultants, officers and directors, including non-employee directors of the
Company, of (i) options to purchase Common Stock that qualify as "incentive
stock options" within the meaning of Section 422 of the Code ("Incentive
Options") and (ii)
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<PAGE>
options to purchase common stock that do not qualify as such Incentive Options
("Non-Qualified Options"). Incentive Options and Non-Qualified Options are
collectively referred to as "Options."
PROPOSED AMENDMENT
The Board of Directors has adopted, subject to shareholder approval,
the Plan as described below.
The Company has outstanding options under the Plan to non-employee
directors, officers and other employees and consultants for the purchase, upon
exercise, 1,074,911 shares of Common Stock. An additional 565,089 shares already
have been issued upon the exercise of options granted under the Plan. (The
exercise price of previously granted options ranges from $2.50 to $11.25 per
share.) The proposed amendment will increase the aggregate number of shares of
Common Stock issuable under the Plan from 1,640,000 to 2,140,000. This increase
will cover the 1,640,000 shares of Common Stock represented by outstanding and
previously exercised stock options, and permit SPECTRASCIENCE to issue options
to purchase an additional 500,000 shares to attract and retain key employees,
non-employee directors and consultants.
The following table sets forth the number of vested and unvested stock
options held by the Named Executive Officer, the executive officers of the
Company as a group and the employees as a group as of March 24, 2000 under the
1991 Stock Plan:
<TABLE>
<CAPTION>
Holder of Options Vested Options Unvested Options
- ----------------- -------------- ----------------
<S> <C> <C>
Chester E. Sievert, Jr.
President, Chief Executive Officer and Corporate Secretary 184,079 186,333
Current Executive Officers (2 persons) 184,079 196,000
Current Non-Employee Directors (3 persons) 74,000 35,000
All Employees Excluding Executive Officers (10 persons) 129,165 206,335
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL TO AMEND THE 1991
STOCK PLAN. The affirmative vote of a majority of Common Stock entitled to vote
and present, by proxy or in person, at the Annual Meeting is required for
approval of the amendment to the Plan.
SUMMARY OF THE PLAN
GENERAL. The Plan is formally administered by the Compensation
Committee. The Compensation Committee makes recommendations to the Board as to
the type of Options to be granted under the Plan, selects the participants to be
granted Options under the Plan, establishes the amount of the grants to the
participants and prescribes discretionary terms and conditions of each grant not
otherwise fixed under the Plan.
The Plan will terminate on July 10, 2001, unless sooner terminated by
action of the Board of Directors. No Options will be granted after termination
of the Plan. Prior to ratification of the amendment of the Plan, the maximum
number of shares of Common Stock reserved for issuance under the Options is
2,140,000. In the event of any reorganization, merger, recapitalization, stock
dividend, stock split or similar change in the corporate structure or shares of
the Company, appropriate adjustments will be made to the number and kind of
shares reserved under the Plan and under outstanding Options and to the exercise
price of outstanding Options. The Board of Directors may amend the Plan in any
respect without shareholder approval, unless shareholder approval is then
required by federal securities or tax laws or the rules of any applicable stock
exchange. No right or interest in any Option may be assigned or transferred by a
participant, except by will or the laws of descent and distribution, or
subjected to any lien or otherwise encumbered.
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<PAGE>
OPTIONS. The exercise price for Non-Qualified Options is determined by
the Compensation Committee and may be less than the fair market value of the
Common Stock on the day the Non-Qualified Options are granted. Incentive Options
must be granted with an exercise price equal to the fair market value of the
Common Stock on the date the Incentive Options are granted, except that
Incentive Options granted to persons owning stock possessing more than 10% of
the total combined voting power of all classes of stock of the Company or any
subsidiary may not be granted at less than 110% of the fair market value on the
date of grant. In determining the fair market value of the Common Stock on the
date of grant, the Compensation Committee will use the closing price of the
Common Stock, provided, however, that this price is not less than the average
closing price of the Common Stock for the prior ten trading days. Pursuant to
the Plan, each non-employee director is automatically granted a Non-Qualified
Option to purchase 10,000 shares of the Common Stock upon becoming a director,
and a non-qualified option to purchase 5,000 shares of the Common Stock in
January each year such non-employee director serves as a director of the
Company, subject to proration for directors who commence service during a
calendar year. The aggregate number of Options to be granted to non-employee
directors as a group cannot exceed 200,000 shares. Such automatic option grants
have an exercise price equal to the fair market value of the Common Stock on the
date of grant, as defined earlier in this same paragraph.
Payment of an option exercise price may be made either in cash or by
transfer from the participant to the Company of previously acquired shares of
Common Stock having an aggregate fair market value on the date of exercise equal
to the payment required, subject to the right of the Compensation Committee to
reject a participant's election to pay the option exercise price with such
previously acquired shares. The Compensation Committee may, in its sole
discretion, determine, either at the time of grant or exercise of an Option, to
make a short-term, interest-free loan to a participant of the funds necessary to
pay the option exercise price and any withholding obligations due upon such
exercise. Options may not be transferred other than by will or the laws of
descent and distribution, and during the lifetime of an optionee may be
exercised only by the optionee. Options may be exercised in whole or in
installments, as determined by the Compensation Committee. Incentive Options
will have a maximum term fixed by the Compensation Committee, not to exceed 10
years from the date of grant or, in the case of Incentive Options granted to
persons owning stock representing more than 10% of the total combined voting
power of all classes of stock of the Company or any subsidiary, five years from
the date of grant. For Incentive Options, the aggregate fair market value
(determined as of the time the Incentive Option is granted) of shares of Common
Stock with respect to which Incentive Options become exercisable for the first
time by the participant under the Plan during any calendar year may not exceed
$100,000.
TERMINATION OF EMPLOYMENT. All Options granted under the Plan must be
exercised no later than six months following the Optionee's termination of
employment to the Company, whether as a result of death, disability, retirement
or other cause.
CHANGE IN CONTROL OF THE COMPANY. In the case of a "Change in Control"
of the Company, all outstanding Options will become immediately exercisable in
full; provided, however, that if a Change in Control occurs, in connection with
any business combination in which the Company is not the surviving corporation,
the Compensation Committee, in its sole discretion, may determine, with respect
to Options which have been outstanding for more than one year, that participants
holding such outstanding Options will receive for each share of Common Stock
subject to such Options cash in an amount equal to the excess of the fair market
value of such shares immediately prior to the effective date of such business
combination over the exercise price per share of such Options.
For purposes of the Plan, a "Change in Control" of the Company will be
deemed to have occurred, among other things, upon (i) the sale or other
disposition of substantially all of the assets of the Company, (ii) the approval
by the Company's shareholders of a plan or proposal for the liquidation or
dissolution of the Company, (iii) an event that would be required to be reported
in response to Item 1(a) of the Current Report on Form 8-K pursuant to Section
13 or 15(d) of the Exchange Act, (iv) any person becoming the beneficial
Page 11
<PAGE>
owner of 50% or more of the combined voting power of the Company's outstanding
securities, or (v) a change in the composition of the Board such that the
individuals who constitute the Board as of the effective date of the Plan cease
for any reason to constitute at least the majority thereof (with exceptions for
individuals who are nominated or otherwise approved by the current Board).
FEDERAL INCOME TAX CONSEQUENCES
The following description of federal income tax consequences is based
on current statutes, regulations and interpretations. The description does not
include state or local income tax consequences. In addition, the description is
not intended to address specific tax consequences applicable to an individual
participant who receives Options under the Plan.
INCENTIVE OPTIONS. There will not be any federal income tax
consequences to either the participant or the Company as a result of the grant
to an employee of an Incentive Option under the Plan. The exercise by a
participant of an Incentive 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 Option, determined at the time of exercise, over the
amount paid for the shares by the participant will be includable in the
participant's alternative minimum taxable income 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 (see explanation below).
Special rules will apply if previously acquired shares of Common Stock are
permitted to be tendered in payment of an Option exercise price.
If the participant disposes of the Incentive Stock Option shares
acquired upon exercise of the Incentive 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 Option was granted, nor within one year after the participant
exercised the Incentive Option and the shares were transferred to the
participant, then the participant will recognize a long-term capital gain or
loss. The amount of the long-term capital gain or loss will be equal to the
difference between (i) the amount the participant realized on disposition of the
shares, and (ii) the option price at which the participant acquired the shares.
The Company is not entitled to any compensation expense deduction under these
circumstances.
If the participant does not satisfy both of the above holding period
requirements (a "disqualifying disposition"), then the participant will be
required to report as ordinary income, in the year the participant disposes of
the shares, the amount by which the lesser of (i) the fair market value of the
shares at the time of exercise of the Incentive Option (or, for directors,
officers or greater than 10% Shareholders of the Company, generally the fair
market value of the shares six months after the date of exercise, unless such
persons file an election under Section 83(b) of the Code, within 30 days of
exercise), or (ii) the amount realized on the disposition of the shares, exceeds
the option price for the shares. The Company will be entitled to a compensation
expense deduction in an amount equal to the ordinary income includable in the
taxable income of the participant. This compensation income may be subject to
withholding. The remainder of the gain recognized on the disposition, if any, or
any loss recognized on the disposition, will be treated as long-term or
short-term capital gain or loss, depending on the holding period.
NON-QUALIFIED OPTIONS. Neither the participant nor the Company incurs
any federal income tax consequences as a result of the grant of a Non-Qualified
Option. Upon exercise of a Non-Qualified Option, a participant will recognize
ordinary income, subject to withholding, on the date of exercise in an amount
equal to the difference between (i) the fair market value of the shares
purchased, determined on the date of exercise, and (ii) the consideration paid
for the shares. The participant may be subject to an additional excise tax if
any amounts are treated as excess parachute payments (see explanation below).
Special rules will apply if previously acquired shares of Common Stock are
permitted to be tendered in payment of an Option exercise price.
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<PAGE>
At the time of a subsequent sale or disposition of any shares of Common
Stock obtained upon exercise of a Non-Qualified Option, any gain or loss will be
a capital gain or loss. Such capital gain or loss will be long-term capital gain
or loss if the sale or disposition occurs more than one year after the date of
exercise and short-term capital gain or loss if the sale or disposition occurs
one year or less after the date of exercise.
In general, the Company will be entitled to a compensation expense
deduction in connection with the exercise of a Non-Qualified Option for any
amounts includable in the taxable income of the participant as ordinary income,
provided the Company complies with any applicable withholding requirements.
EXCISE TAX ON PARACHUTE PAYMENTS. The Code also imposes a 20% excise
tax on the recipient of "excess parachute payments," as defined in the Code and
denies tax deductibility to the Company on excess parachute payments. Generally,
parachute payments are payments in the nature of compensation to employees of a
company who are officers, shareholders, or highly compensated individuals, which
payments are contingent upon a change in ownership or effective control of the
company, or in the ownership of a substantial portion of the assets of the
company. For example, acceleration of the exercisability of Options upon a
change in control of the Company may constitute parachute payments, and in
certain cases, "excess parachute payments."
PROPOSAL 4
RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS
At the Annual Meeting, a vote will be taken ratifying the appointment
by the Board of Directors, of Ernst & Young LLP as the independent public
accounts of SPECTRASCIENCE for the current fiscal year ending December 31, 2000
and to provide other appropriate accounting services. Ernst & Young LLP has
audited the financial statements of the Company for the fiscal years ended
December 31, 1991 through December 31, 1999. Representatives of Ernst & Young
LLP will be present at the Annual Meeting, will have an opportunity to make a
statement if they desire to do so and will be available to respond to
appropriate questions from shareholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF ERNST & YOUNG
LLP AS INDEPENDENT PUBLIC ACCOUNTANTS OF SPECTRASCIENCE FOR THE FISCAL YEAR
ENDING DECEMBER 31, 2000. The affirmative vote of a majority of Common Stock
entitled to vote and present, by proxy or in person, at the Annual Meeting is
required for ratification of Ernst & Young LLP as the independent public
accountants.
SHAREHOLDER PROPOSALS FOR THE NEXT ANNUAL MEETING
The rules of the Securities and Exchange Commission permit shareholders
of a company, after timely notice to the Company, to present proposals for
shareholder action in the Company's proxy statement where such proposals are
consistent with applicable law, pertain to matter appropriate for shareholder
action and are not properly omitted by company action in accordance with the
proxy rules. Any shareholder proposals that may properly be presented at the
2001 Annual Meeting of Shareholders must be prepared in accordance with all
applicable rules of the Securities and Exchange Commission and must be received
by the Secretary of SpectraScience, Inc. at our executive offices in
Minneapolis, Minnesota, no later than December 21, 2000 for inclusion in the
proxy statement for the 2001 Annual Meeting of Shareholders.
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<PAGE>
OTHER MATTERS THAT MAY COME BEFORE THE ANNUAL MEETING
SPECTRASCIENCE did not receive written notice of any shareholder
proposal prior to February 25, 2000, as required by SPECTRASCIENCE's Bylaws, and
as of the date of this proxy statement, the Board of Directors of SPECTRASCIENCE
knows of no business that will be presented for consideration at the Annual
Meeting other than the matters described in this proxy statement. If any other
matters are properly brought before the Annual Meeting, the persons named in the
enclosed form of proxy will vote the proxies in accordance with their best
judgment.
It is important that proxies be returned promptly with instructions as
to voting. Shareholders who do not expect to attend the Annual Meeting in person
are urged to mark, sign, date and send in the proxies by return mail.
By Order of the Board of Directors
Chester E. Sievert, Jr.
PRESIDENT, CHIEF EXECUTIVE OFFICER AND
Dated: April 10, 2000 CORPORATE SECRETARY
<PAGE>
<TABLE>
<S> <C>
PROXY THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS The undersigned, having
- ----- received a Notice of Annual Meeting of Shareholders and accompanying Proxy Statement,
SPECTRASCIENCE, INC. hereby appoints Chester E. Sievert, Jr. as proxy, with the power of substitution, and
14405 21st Avenue N, Suite 111 hereby authorizes him to represent and to vote as designated below, all the shares of
Minneapolis, MN 55447 Common Stock of SPECTRASCIENCE, Inc. which the undersigned is entitled to vote at the
- ------------------------------ Annual Meeting of Shareholders to be held on May 17, 2000, or any adjournment thereof.
1. ELECTION OF DIRECTORS (INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR A SPECIFIC NOMINEE, LINE THROUGH THEIR NAME BELOW)
Chester E. Sievert, Jr. Henry M. Holterman [ ] FOR (ALL NOMINEES LISTED EXCEPT AS MARKET TO THE CONTRARY)
---
Nathaniel S. Thayer Johan A.P.M. de Hond [ ] WITHHOLD AUTHORITY (TO VOTE FOR ALL NOMINEES LISTED)
---
[ ] FOR
2. TO APPROVE AMENDMENT OF ARTICLES OF INCORPORATION TO INCREASE THE AUTHORIZED NUMBER OF [ ] AGAINST
SHARES OF COMMON STOCK [ ] ABSTAIN
[ ] FOR
3. TO APPROVE AMENDMENT OF THE COMPANY'S 1991 STOCK PLAN INCREASING THE NUMBER OF SHARES OF [ ] AGAINST
COMMON STOCK AUTHORIZED. [ ] ABSTAIN
[ ] FOR
4. TO RATIFY THE SELECTION OF ERNST & YOUNG LLP AS INDEPENDENT PUBLIC ACCOUNTANTS. [ ] AGAINST
[ ] ABSTAIN
(CONTINUED, AND TO BE SIGNED ON THE OTHER SIDE)
(CONTINUED FROM OTHER SIDE)
5. In his discretion, the Proxy is authorized to vote upon such other business
as may properly come before this meeting.
This proxy when properly executed will be voted in the manner directed herein by
the undersigned shareholder. Please sign exactly as name appears below. When
shares are held by joint tenants, both should sign. When signing as attorney,
executor, administrator, trustee, or guardian, please give full title as such.
If a corporation, please sign full corporate name by President or other
authorized officer. If a partnership, please sign in partnership name by
authorized person. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR
PROPOSALS 1, 2, 3 AND 4.
________________________________________________
SIGNATURE
DATED:_________________________________, 2000
PLEASE VOTE, SIGN, DATE AND RETURN THE
PROXY CARD USING THE ENCLOSED ENVELOPE
________________________________________________
SIGNATURE IF HELD JOINTLY
</TABLE>
<PAGE>
SPECTRASCIENCE, INC.
1991 STOCK PLAN
(AS AMENDED MARCH 24, 2000)
SECTION 1. GENERAL PURPOSE OF PLAN; DEFINITIONS
The name of this plan is the SPECTRAScience, Inc. 1991 Stock Plan (the
"Plan"). The purpose of the Plan is to enable SPECTRAScience, Inc. (the
"Company") and its Subsidiaries to retain and attract executives, key employees
(whether full or part-time), consultants and non-employee directors who
contribute to the Company's success by their ability, ingenuity and industry,
and to enable such individuals to participate in the long-term success and
growth of the Company by giving them a proprietary interest in the Company.
For purposes of the Plan, the following terms shall be defined as set
forth below:
(a) "BOARD" means the Board of Directors of the Company.
(b) "CAUSE" means a felony conviction of a participant or the failure of a
participant to contest prosecution for a felony, or a participant's
willful misconduct or dishonesty, any of which is directly and
materially harmful to the business or reputation of the Company.
(c) "CODE" means the Internal Revenue Code of 1986, as amended.
(d) "COMMITTEE" means the Committee referred to in Section 2 of the Plan.
If at any time no Committee shall be in office, then the functions of
the Committee specified in the Plan shall be exercised by the Board.
(e) "COMPANY" means, SPECTRAScience, Inc., a corporation organized under
the laws of the State of Minnesota (or any successor corporation).
(f) "DISABILITY" means permanent and total disability as determined by the
Committee.
(g) "DISINTERESTED PERSON" shall have the meaning set forth in Rule 16b-3
as promulgated by the Securities and Exchange Commission under the
Securities Exchange Act of 1934, or any successor definition adopted by
the Commission.
(h) "EARLY RETIREMENT" means retirement, with consent of the Committee at
the time of retirement, from active employment with the Company and any
Subsidiary or Parent Corporation of the Company.
(i) "FAIR MARKET VALUE" means the value of the Stock on a given date as
determined by the Committee in accordance with the applicable Treasury
Department regulations under Section 422A of the Code with respect to
"incentive stock options."
(j) "INCENTIVE STOCK OPTION" means any Stock Option intended to be and
designated as an "Incentive Stock Option" within the meaning of Section
422A of the Code.
(k) "NON-QUALIFIED STOCK OPTION" means any Stock Option that is not an
Incentive Stock Option, and is intended to be and is designated as a
"Non-Qualified Stock Option."
(1) "NON-EMPLOYEE DIRECTOR" means any member of the Board who is not an
employee of the Company, any Parent Corporation or Subsidiary.
(m) "NORMAL RETIREMENT" means retirement from active employment with the
Company, any Subsidiary or Parent Corporation of the Company on or
after age 65.
(n) "PARENT CORPORATION" means any corporation (other than the Company) in
an unbroken chain of corporations ending with the Company if each of
the corporations (other than the Company) owns stock possessing 50% or
more of the total combined voting power of all classes of stock in one
of the other corporations in the chain.
(o) "RETIREMENT" means Normal Retirement or Early Retirement.
(p) "STOCK" means the Common Stock, $.25 par value per share, of the
Company.
(q) "STOCK APPRECIATION RIGHT" means the right pursuant to an award granted
under Section 6 below to surrender to the Company all or a portion of a
Stock Option in exchange for an amount equal to the difference between
(i) the Fair Market Value, as of the date such Stock Option or such
portion
A-1
<PAGE>
thereof is surrendered, of the shares of Stock covered by such Stock
Option or such portion thereof, and (ii) the aggregate exercise price
of such Stock Option or such portion thereof.
(r) "STOCK OPTION" means any option to purchase shares of Stock granted
pursuant to Section 5 below.
(s) "SUBSIDIARY" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if each of
the corporations (other than the last corporation in the unbroken
chain) owns stock possessing 50% or more of the total combined voting
power of all classes of stock in one of the other corporations in the
chain.
SECTION 2. ADMINISTRATION
The Plan shall be administered by the Board of Directors or by a
Committee of not less than two directors, all of whom are Disinterested Persons,
who shall be appointed by the Board of Directors of the Company and who shall
serve at the pleasure of the Board.
The Committee shall have the power and authority to grant to eligible
persons, pursuant to the terms of the Plan: (A) Stock Options or (B) Stock
Appreciation Rights.
In particular, the Committee shall have the authority:
(i) to select the officers and other key employees of the Company or its
Subsidiaries, and consultants and other persons having a contractual
relationship with the Company or its Subsidiaries, to whom Stock Options and/or
Stock Appreciation Rights may from time to time be granted hereunder;
(ii) to determine whether and to what extent Incentive Stock Options,
Non-Qualified Stock Options or Stock Appreciation Rights, or a combination of
the foregoing, are to be granted hereunder;
(iii) to determine the number of shares to be covered by each such award granted
hereunder;
(iv) to determine the terms and conditions, not inconsistent with the terms of
the Plan, of any award granted hereunder (including, but not limited to, any
restriction on any Stock Option or other award and/or the shares of Stock
relating thereto) and to amend such terms and conditions (including, but not
limited to, any amendment which accelerates the vesting of any award); and
(v) to determine whether, to what extent, and under what circumstances, Stock
Options may be exercised following termination of employment.
The Committee shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it shall,
from time to time, deem advisable; to interpret the terms and provisions of the
Plan and any award issued under the Plan (and any agreements relating thereto);
and to otherwise supervise the administration of the Plan. The Committee may
delegate its authority to the President and/or the Chief Executive Officer of
the Company for the purpose of selecting employees who are not officers of the
Company for purposes of (A) above.
All decisions made by the Committee pursuant to the provisions of the
Plan shall be final and binding on all persons, including the Company and Plan
participants.
SECTION 3. STOCK SUBJECT TO PLAN
The total number of shares of Stock reserved and available for
distribution under the Plan shall be 2,140,000 shares, subject to increase or
decrease in the event of any adjustment required in the paragraph below. Such
shares may consist, in whole or in part, of authorized and unissued shares.
Subject to paragraph (b)(iv) of Section 6 below, if any shares that have been
optioned cease to be subject to Options, are forfeited or such award otherwise
terminates without a payment being made to the participant, such shares shall
again be available for distribution in connection with future awards under the
Plan.
In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, stock split (reverse or other), other change
in corporate structure affecting the Stock, or spin-off or other distribution of
assets to shareholders, such substitution or adjustment shall be made in the
aggregate number of shares reserved for issuance under the Plan and in the
number and option price of shares subject to outstanding options granted under
the Plan as may be determined to be appropriate by the Committee, in its sole
discretion, provided that the number of shares subject to any award shall always
be a whole number. Such adjusted option price shall also be used to determine
the amount payable by the Company upon the exercise of any Stock Appreciation
Right associated with any Option.
SECTION 4. ELIGIBILITY
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Officers, other key employees of the Company or its subsidiaries,
Non-Employee Directors and consultants and other persons having a contractual
relationship with the Company or its Subsidiaries who are responsible for or
contribute to the management, growth and/or profitability of the business of the
Company and its Subsidiaries are eligible to be granted Stock Option or Stock
Appreciation Right awards under the Plan. Except for Non-Employee Directors,
whose participation in the Plan shall be limited as provided in paragraph (k) of
Section 5, the optionees and participants under the Plan shall be selected from
time to time by the Committee, in its sole discretion, from among those
eligible, and the Committee shall determine, in its sole discretion, the number
of shares covered by each award.
SECTION 5. STOCK OPTIONS
Any Stock Option granted under the Plan shall be in such form as the
Committee may from time to time approve.
The Stock Options granted under the Plan may be of two types: (i)
Incentive Stock Options and (ii) Non-Qualified Stock Options. No Incentive Stock
Options shall be granted under the Plan after July 10, 2001.
The Committee shall have the authority to grant any optionee Incentive
Stock Options, Non-Qualified Stock options, or both types of options (in each
case with or without Stock Appreciation Rights). To the extent that any option
does not qualify as an Incentive Stock Option, it shall constitute a separate
Non-Qualified Stock Option.
Anything in the Plan to the contrary notwithstanding, no term of this
Plan relating to Incentive Stock Options shall be interpreted, amended or
altered, nor shall any discretion or authority granted under the Plan be so
exercised, so as to disqualify either the Plan or any Incentive Stock Option
under Section 422A of the Code. The preceding sentence shall not preclude any
modification or amendment to an outstanding Incentive Stock Option, whether or
not such modification or amendment results in disqualification of such option as
an Incentive Stock Option, provided the optionee consents in writing to the
modification or amendment.
Options granted under the Plan shall be subject to the following terms
and conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Committee shall deem desirable.
(a) OPTION PRICE. The option price per share of Stock purchasable under
a Stock Option shall be determined by the Committee at the time of grant and may
not, except as provided in this paragraph or in paragraph (1) below, be less
than 85% of the Fair Market Value of the Stock on the date of the grant of the
Option unless the Option itself or such lower option price per share is approved
by the shareholders. In no event shall the option price per share of Stock
purchasable under an Incentive Stock Option be less than 100% of the Fair Market
Value of the Stock on the date of the grant of the option. If an employee owns
or is deemed to own (by reason of the attribution rules applicable under Section
425(d) of the Code) more than 10% of the combined voting power of all classes of
stock of the Company or any Parent Corporation or subsidiary and an Incentive
Stock Option is granted to such employee, the option price shall be no less than
110% of the Fair Market Value of the Stock on the date the option is granted.
(b) OPTION TERM. The term of each Stock Option shall be fixed by the
Committee, but no Incentive Stock Option shall be exercisable more than ten
years after the date the option is granted. If an employee owns or is deemed to
own (by reason of the attribution rules of Section 425(d) of the Code) more than
10% of the combined voting power of all classes of stock of the Company or any
Parent Corporation or Subsidiary and an Incentive Stock Option is granted to
such employee, the term of such option shall be no more than five years from the
date of grant.
(c) EXERCISABILITY. Stock Options shall be exercisable at such time or
times as determined by the Committee at or after grant. If the Committee
provides, in its discretion, that any option is exercisable only in
installments, the Committee may waive such installment exercise provisions at
any time. Installment exercise restrictions may be based upon the lapse of time,
the attainment of specified performance goals, or a combination of each.
Notwithstanding the foregoing, unless the Stock Option Agreement provides
otherwise, any Stock Option granted under this Plan shall be exercisable in
full, without regard to any installment exercise provisions, upon the occurrence
of any of the following events: (i) dissolution or liquidation of the Company
other than in conjunction with a bankruptcy of the company or any similar
occurrence, (ii) any merger, consolidation, acquisition, separation,
reorganization, or similar occurrence, where the Company will not be the
surviving entity or (iii) the transfer of substantially all of the assets of the
Company or 75% or more of the outstanding Stock of the Company. In the event of
a transaction within (ii), the surviving entity shall issue comparable options
(i.e. having an equivalent spread between exercise price and stock fair market
value) to the holders of the Stock Options.
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(d) METHOD OF EXERCISE. Stock Options may be exercised in whole or in
part at any time during the option period by giving written notice of exercise
to the Company specifying the number of shares to be purchased. Such notice
shall be accompanied by payment in full of the purchase price, either by
certified or bank check, or by any other form of legal consideration deemed
sufficient by the Committee and consistent with the Plan's purpose and
applicable law, including promissory notes or a properly executed exercise
notice together with irrevocable instructions to a broker acceptable to the
Company to promptly deliver to the Company the amount of sale or loan proceeds
to pay the exercise price. As determined by the Committee, in its sole
discretion, payment in full or in part may also be made in the form of
unrestricted Stock already owned by the optionee (based on the Fair Market Value
of the Stock on the date the option is exercised, as determined by the
Committee); provided, however, that, in the case of an Incentive Stock Option,
the right to make a payment in the form of already owned shares may be
authorized only at the time the option is granted. If the terms of an option so
permit, or the Committee so provides, an optionee may elect to pay all or part
of the option exercise price by having the Company withhold from the shares of
Stock that would otherwise be issued upon exercise that number of shares of
Stock having a Fair Market Value equal to the aggregate option exercise price
for the shares with respect to which such election is made. No shares of Stock
shall be issued until full payment therefor has been made. An optionee shall
generally have the rights to dividends and other rights of a shareholder with
respect to shares subject to the option when the optionee has given written
notice of exercise, has paid in full for such shares, and, if requested, has
given the representation described in paragraph (a) of Section 10.
(e) NON-TRANSFERABILITY OF OPTIONS. No Stock Option shall be
transferable by the optionee otherwise than by will or by the laws of descent
and distribution, and all Stock Options shall be exercisable, during the
optionees lifetime, only by the optionee.
(f) TERMINATION BY DEATH. If an optionees employment by the Company and
any Subsidiary or Parent Corporation terminates by reason of death, the Stock
Option may thereafter be immediately exercised, to the extent then exercisable
(or on such accelerated basis as the Committee shall determine at or after
grant), by the legal representative of the estate or by the legatee of the
optionee under the will of the optionee, for a period of six months (or such
shorter period as the committee shall specify at grant) from the date of such
death or until the expiration of the stated term of the option, whichever period
is shorter.
(g) TERMINATION BY REASON OF DISABILITY. If an optionees employment by
the Company and any Subsidiary or Parent Corporation terminates by reason of
Disability, any Stock Option held by such optionee may thereafter be exercised,
to the extent it was exercisable at the time of termination due to Disability
(or on such accelerated basis as the Committee shall determine at or after
grant), but may not be exercised after six months (or such shorter period as the
Committee shall specify at grant) from the date of such termination of
employment or the expiration of the stated term of the option, whichever period
is the shorter. In the event of termination of employment by reason of
Disability, if an Incentive Stock Option is exercised after the expiration of
the exercise periods that apply for purposes of Section 422A of the Code, the
option will thereafter be treated as a Non-Qualified Stock Option.
(h) TERMINATION BY REASON OF RETIREMENT. If an optionees employment by
the Company and any Subsidiary or Parent Corporation terminates by reason of
Retirement, any Stock Option held by such optionee may thereafter be exercised
to the extent it was exercisable at the time of such Retirement, but may not be
exercised after six months (or such shorter period as Committee shall specify at
grant) from the date of such termination of employment or the expiration of the
stated term of the option, whichever period is the shorter. In the event of
termination of employment by reason of Retirement, if an Incentive Stock Option
is exercised after the expiration of the exercise periods that apply for
purposes of Section 422A of the Code, the option will thereafter be treated as a
Non-Qualified Stock Option.
(i) OTHER TERMINATION. Unless otherwise determined by the Committee or
as set forth in paragraph (1) below, if an optionees employment by the Company,
any Subsidiary or Parent Corporation terminates for any reason other than death,
Disability or Retirement, any Stock option held by such optionee may thereafter
be exercised to the extent it was exercisable at such termination, but may not
be exercised after six months (or such shorter period as the Committee shall
specify at grant) from the date of such termination of employment or the
expiration of the stated term of the option, whichever period is the shorter;
provided, however, that if the optionees employment is terminated for Cause, all
rights under the Stock Option shall terminate and expire upon such termination.
(j) ANNUAL LIMIT ON INCENTIVE STOCK OPTIONS. The aggregate Fair Market
Value (determined as of the time the Option is granted) of the Common Stock with
respect to which an Incentive Stock Option under this Plan or any other plan of
the Company, any subsidiary or Parent Corporation is exercisable for the first
time by an optionee during any calendar year shall not exceed $100,000.
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(k) NON-EMPLOYEE DIRECTORS. Each Non-Employee Director serving as a
director on October 1, 1994 shall, on or before October 15, 1994, surrender for
cancellations all options held by such person to purchase shares of the
Company's Common Stock (pre-split) and shall be granted options to purchase the
same number of shares of the Company's Common Stock (post-split). Each
Non-Employee Director not serving as a director on October 1, 1994 elected as
director (whether by vote of shareholders or directors) shall, upon such
election, be granted an option to purchase 10,000 shares of the Company's Common
Stock (subject to adjustment pursuant to Section 3 above).
Each Non-Employee Director serving as a director on October 1, 1994
shall, on or before October 15, 1995, be granted an option to purchase an
additional 5,000 shares of the Company's Common Stock in lieu of any 1995 annual
grant to which such director would otherwise be entitled.
Each Non-Employee Director shall automatically be granted an option to
purchase 5,000 shares of the Company's Common Stock (subject to adjustment
pursuant to Section 3 above) annually during the period such director serves on
the Board and the Plan is in effect. The date of the automatic grant shall be
January 1 if the Non-Employee Director is serving on the Board on such date, and
the date on which the Non-Employee Director commences services on the Board if
the director is elected after January 1. If a Non-Employee Director commences
service on the Board after June 30 in any year in which the Plan is in effect
then, for such year, such director shall be granted an option to purchase 2,500
shares of the Company's Common Stock (subject to adjustment pursuant to Section
3 above).
All Non-Employee Director Stock Options shall be granted at a price per
share equal to 100% of the Fair Market Value of the Company's Common Stock on
the date of grant. The term of each Non-Employee Director Stock Option shall be
ten years from the date of grant.
All such Stock Options shall be designated as Non-Qualified Stock
options and shall be subject to the same terms and provisions as are then in
effect with respect to the grant of Non-Qualified Stock Options to salaried
officers and key employees of the Company, except that (i) the term of each such
Stock Option shall be equal to ten years; (ii) each Stock Option shall become
exercisable as to all or any part of the shares subject to the Stock Option
beginning one year after the date the Stock Option is granted; and (iii) no
Stock Appreciation Rights may be granted to Non-Employee Directors in
conjunction with any Stock Options granted under this paragraph (k) or in any
other manner under this Plan. Subject to the foregoing, all provisions of this
Plan not inconsistent with the foregoing shall apply to Stock Options granted to
Non-Employee Directors. There is no maximum in the number of shares as to which
Stock Options may be granted to any individuals/Non-Employee Director under this
Plan. The maximum aggregate number of shares as to which Stock Options may be
granted to Non-Employee Directors under this Plan shall be 200,000 shares. The
number of shares reflects the June 30, 1994, 1-for-5 reverse stock split of the
Company's Common Stock and shall be further subject to adjustment pursuant to
Section 3 above.
(l) YUREK AND SEILER OPTIONS. The options to be granted to Daryl F.
Yurek (1,000,000 shares) and James L. Seiler (50,000 shares) at $.50 per share
are issued pursuant to that certain financing transaction to be approved by
shareholders on or about January 30, 1992. At the time of issue, Mr. Yurek was
an employee of the Company and Mr. Seiler was a consultant to the Company.
Paragraph (i) above notwithstanding, if the Company terminates Mr. Yurek's
employment other than for cause, disability or death, then all of the Option
shares shall vest for both Yurek and Seiler and the two optionees shall continue
to have the right to exercise the Options pursuant to the terms thereof as if
Mr. Yurek's employment had continued.
SECTION 6. STOCK APPRECIATION RIGHTS
(a) GRANT AND EXERCISE. Except as set forth in paragraph (k) of Section
5, Stock Appreciation Rights may be granted in conjunction with all or part of
any Stock option granted under the Plan. In the case of a Non-Qualified Stock
Option, such rights may be granted either at or after the time of the grant of
such Option. In the case of an Incentive Stock Option, such rights may be
granted only at the time of the grant of the option.
A Stock Appreciation Right or applicable portion thereof granted with
respect to a given Stock Option shall terminate and no longer be exercisable
upon the termination or exercise of the related Stock option, except that a
Stock Appreciation Right granted with respect to less than the full number of
shares covered by a related Stock Option shall not be reduced until the exercise
or termination of the related Stock Option exceeds the number of shares not
covered by the Stock Appreciation Right.
A Stock Appreciation Right may be exercised by an optionee, in
accordance with paragraph (b) of this Section 6, by surrendering the applicable
portion of the related Stock Option. Upon such exercise and surrender, the
optionee shall be entitled to receive an amount determined in the manner
prescribed in
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paragraph (b) of this Section 6. Stock Options which have been so surrendered,
in whole or in part, shall no longer be exercisable to the extent the related
Stock Appreciation Rights have been exercised.
(b) TERMS AND CONDITIONS. Stock Appreciation Rights shall be subject to
applicable regulations relating to the exercise of Stock Appreciation Rights by
optionees subject to reporting responsibilities under Section 16 of the
Securities and Exchange Act of 1934, and to such terms and conditions, not
inconsistent with the provisions of the Plan, as shall be determined from time
to time by the Committee, including the following:
(i) Stock Appreciation Rights shall be exercisable only at such time or
times and to the extent that the Stock Options to which they relate shall be
exercisable in accordance with the provisions of Section 5 and this Section 6 of
the Plan.
(ii) Upon the exercise of a Stock Appreciation Right, an optionee shall
be entitled to receive up to, but not more than, an amount in cash or shares of
Stock equal in value to the excess of the Fair Market Value of one share of
Stock over the option price per share specified in the related option multiplied
by the number of shares in respect of which the Stock Appreciation Right shall
have been exercised, with the Committee having the right to determine the form
of payment.
(iii) Stock Appreciation Rights shall be transferable only when and to
the extent that the underlying Stock Option would be transferable under Section
5 of the Plan.
(iv) Upon the exercise of a Stock Appreciation Right, the Stock Option
or part thereof to which such Stock Appreciation Right is related shall be
deemed to have been exercised for the purpose of the limitation set forth in
Section 3 of the Plan on the number of shares of Stock to be issued under the
Plan, but only to the extent of the number of shares issued or issuable under
the Stock Appreciation Right at the time of exercise based on the value of the
Stock Appreciation Right at such time.
(v) A Stock Appreciation Right granted in connection with an Incentive
Stock Option may be exercised only if and when the market price of the Stock
subject to the Incentive Stock Option exceeds the exercise price of such Option.
SECTION 7. TRANSFER, LEAVE OF ABSENCE, ETC
For purposes of the Plan, the following events shall not be deemed a
termination of employment:
(a) a transfer of an employee from the Company to a Parent Corporation
or Subsidiary, or from a Parent Corporation or Subsidiary to the Company, or
from one Subsidiary to another;
(b) a leave of absence, approved in writing by the Committee, for
military service or sickness, or for any other purpose approved by the Company
if the period of such leave does not exceed ninety (90) days (or such longer
period as the Committee may approve, in its sole discretion); and
(c) a leave of absence in excess of ninety (90) days, approved in
writing by the Committee, but only if the employee's right to re-employment is
guaranteed either by a statute or by contract, and provided that, in the case of
any leave of absence, the employee returns to work within 30 days after the end
of such leave.
SECTION 8. AMENDMENTS AND TERMINATION
The Board may amend, alter, or discontinue the Plan, but no amendment,
alteration, or discontinuation shall be made (i) which would impair the rights
of an optionee or participant under a Stock Option or Stock Appreciation Right
or other Stock-based award theretofore granted, without the optionees or
participant's consent, or (ii) which without the approval of the shareholders of
the Company would cause the Plan to no longer comply with rules promulgated by
the Securities and Exchange Commission under authority granted in Section 16 of
the Securities Exchange Act of 1934, as amended, Section 422A of the Code or any
other regulatory requirements.
The Committee may amend the terms of any award or option theretofore
granted, prospectively or retroactively, but, subject to Section 3 above, no
such amendment shall impair the rights of any holder without his consent. The
Committee may also substitute new Stock Options for previously granted options,
including previously granted options having higher option prices.
SECTION 9. UNFUNDED STATUS OF PLAN
The Plan is intended to constitute an "unfunded" plan for incentive and
deferred compensation. With respect to any payments not yet made to a
participant or optionee by the Company, nothing contained herein shall give any
such participant or optionee any rights that are greater than those of a
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general creditor of the Company. In its sole discretion, the Committee may
authorize the creation of trusts or other arrangements to meet the obligations
created under the Plan to deliver Stock or payments in lieu of or with respect
to awards hereunder, provided, however, that the existence of such trusts or
other arrangements is consistent with the unfunded status of the Plan.
SECTION 10. GENERAL PROVISIONS
(a) The Committee may require each person purchasing shares pursuant to
a Stock Option under the Plan to represent to and agree with the Company in
writing that the optionee is acquiring the shares without a view to distribution
thereof. The certificates for such shares may include any legend which the
Committee deems appropriate to reflect any restrictions on transfer.
All certificates for shares of Stock delivered under the Plan pursuant
to any Stock-based awards shall be subject to such stock transfer orders and
other restrictions as the Committee may deem advisable under the rules,
regulations, and other requirements of the securities and Exchange commission,
any stock exchange upon which the Stock is then listed, and any applicable
Federal or state securities laws, and the Committee may cause a legend or
legends to be put on any such certificates to make appropriate reference to such
restrictions.
(b) Subject to paragraph (d) below, recipients of Stock-based awards
under the Plan (other than Stock Options) are not required to make any payment
or provide consideration other than the rendering of services.
(c) Nothing contained in this Plan shall prevent the Board of Directors
from adopting other or additional compensation arrangements, subject to
shareholder approval if such approval is required; and such arrangements may be
either generally applicable or applicable only in specific cases. The adoption
of the Plan shall not confer upon any employee of the Company or any subsidiary
any right to continued employment with the Company or a Subsidiary, as the case
may be, nor shall it interfere in any way with the right of the Company or a
Subsidiary to terminate the employment of any of its employees at any time.
(d) Each participant shall, no later than the date as of which any part
of the value of an award first becomes includible as compensation in the gross
income of the participant for Federal income tax purposes, pay to the Company,
or make arrangements satisfactory to the Committee regarding payment of, any
Federal, state, or local taxes of any kind required by law to be withheld with
respect to the award. The obligations of the Company under the Plan shall be
conditional on such payment or arrangements and the Company and Subsidiaries
shall, to the extent permitted by law, have the right to deduct any such taxes
from any payment of any kind otherwise due to the participant. With respect to
any award under the Plan, if the written terms of such award so permit, a
participant may elect by written notice to the Company to satisfy part or all of
the withholding tax requirements associated with the award by (i) authorizing
the Company to retain from the number of shares of Stock that would otherwise be
deliverable to the participant, or (ii) delivering to the Company from shares of
Stock already owned by the participant, that number of shares having an
aggregate Fair Market Value equal to part or all of the tax payable by the
participant under this Section 10(d). Any such election shall be in accordance
with, and subject to, applicable tax and securities laws, regulations and
rulings.
(e) At the time of grant, the Committee may provide in connection with
any grant made under this Plan that the shares of Stock received as a result of
such grant shall be subject to a repurchase right in favor of the Company,
pursuant to which the participant shall be required to offer to the Company upon
termination of employment for any reason any shares that the participant
acquired under the Plan, with the price being the then Fair Market Value of the
Stock or, in the case of a termination for Cause, an amount equal to the cash
consideration paid for the Stock, subject to such other terms and conditions as
the Committee may specify at the time of grant. The Committee may, at the time
of the grant of an award under the Plan, provide the Company with the right to
repurchase shares of Stock acquired pursuant to the Plan by any participant who,
at any time within two years after termination of employment with the Company,
directly or indirectly competes with, or is employed by a competitor of the
Company.
SECTION 11. EFFECTIVE DATE OF PLAN
The Plan shall be effective on July 11, 1991 (the date of approval by
the Board of Directors), subject to approval by a vote of the holders of a
majority of the Stock present and entitled to vote at the next Annual or Special
Meeting of the Company's shareholders and shall expire (unless terminated
earlier) as of July 10, 2001. Awards may be granted under the Plan prior to
shareholder approval, provided such awards are made subject to shareholder
approval.
END
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