SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c)or Section 240.14a-12
EDITEK, 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):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii),14a-6(i)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11;1
4) Proposed maximum aggregate value of transaction:
1 Set forth the amount on which the filing fee is calculated and
state how it was determined.
[X] 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>
EDITEK, INC.
1238 Anthony Road
Burlington, North Carolina 27215
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on December 20, 1996
NOTICE IS HEREBY GIVEN that the Annual Meeting of the stockholders
("Annual Meeting") of EDITEK, INC., a Delaware corporation (the "Company"), will
be held at the Sheraton Minneapolis Metrodome, located at 1330 Industrial Blvd.,
Minneapolis, Minnesota on Friday, December 20, 1996 at 1:00 p.m. (CST)for the
following purposes:
1. To elect seven directors to serve on the Board of Directors of the
Company (the "Board of Directors") for the ensuing year; and
2. To consider and act upon a proposal to ratify and approve an amendment
to Article Fourth of the Company's Certificate of Incorporation to increase its
authorized Common Stock from 30,000,000 to 60,000,000 shares, and
3. To consider and act upon an amendment to the Company's Employee
Stock Purchase Plan to increase from 150,000 to 500,000 the number of shares
authorized to be issued pursuant to that Plan; and
4. To consider and act upon any other matters which may properly come
before the meeting or any adjournment thereof.
In accordance with the provisions of the Bylaws of the Company, the
Board of Directors has fixed the close of business on November 8, 1996 as the
record date for the determination of the holders of the shares of Common Stock
entitled to notice of, and to vote at, the Annual Meeting.
Your attention is directed to the accompanying Proxy Statement.
Stockholders are requested to date, sign and mail the enclosed Proxy as
promptly as possible, whether or not they expect to attend the meeting in
person.
By Order of the Board of Directors,
Harry G. McCoy
Chairman of the Board and President
Burlington, North Carolina
November 25, 1996
<PAGE>
EDITEK, INC.
1238 Anthony Road
Burlington, North Carolina 27215
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
December 20, 1996
PROXIES
The enclosed proxy (the "Proxy") is solicited by and on behalf of the
Board of Directors of EDITEK, INC., a Delaware corporation (the "Company"), for
use at the Company's 1996 annual meeting of stockholders (the "Annual Meeting")
and at any and all adjournments thereof. Any stockholder has the power to revoke
his or her Proxy at any time before it is voted. A Proxy may be revoked (1) by
delivery of written notice of revocation to the Secretary of the Company at its
principal office, 1238 Anthony Road, Burlington, North Carolina 27215, (2) by
the execution of a subsequent Proxy and presentment of such subsequent Proxy at
the Annual Meeting or (3) by attendance at the Annual Meeting and voting in
person. This solicitation is being made by use of the mails and the cost thereof
will be borne by the Company. Shares represented by valid Proxies will be voted
in accordance with the instructions indicated thereon. Unless otherwise
directed, votes will be cast FOR the election of the directors named, FOR
Proposal 2 concerning the amendment to the Company's Certificate of
Incorporation increasing the number of authorized common shares, and FOR
Proposal 3 to amend the Company's Employee Stock Purchase Plan to increase to
500,000 the number of shares issuable under the Plan.
The costs of solicitation of proxies will be borne by the Company. In
addition to use of mails, proxies may be solicited personally, or by telephone
by one or more of the regular personnel of the Company without additional
compensation. The Company expects to pay an independent proxy solicitor
approximately $15,000 as compensation for the solicitation of proxies. In
addition, the Company may reimburse brokers and other custodians, nominees and
fiduciaries for their expenses for sending proxy material to beneficial owners,
in accordance with Securities and Exchange Commission regulations.
The Company anticipates mailing proxy materials and the annual report
for its fiscal year ended December 31, 1995 (the "Annual Report") to
stockholders of record as of November 8, 1996 (the "Stockholders") on or about
November 25, 1996.
<PAGE>
OUTSTANDING VOTING STOCK
Only holders of record of the Company's Common Stock, par value $.15
per share (the "Common Stock"), at the close of business on November 8, 1996,
are entitled to vote on matters to be presented at the Annual Meeting. Each
share of Common Stock is entitled to one vote with respect to all such matters.
The number of shares of Common Stock outstanding and entitled to vote at the
close of business on November 8, 1996 was 25,513,284.
VOTE AND QUORUM REQUIREMENTS
The presence in person or by Proxy of Stockholders of a majority of the
outstanding shares of Common Stock is required for there to exist the quorum
needed to transact business at the Annual Meeting. If, initially, a quorum
should not be present, the Annual Meeting may be adjourned from time to time
until a quorum is obtained.
A plurality of the votes cast is required to elect the Directors. The
affirmative vote of a majority of the outstanding shares of Common Stock is
required for approval of the proposed amendment to the certificate of
incorporation of the Company. The votes of a majority of the shares present at
the meeting in person or by proxy is required for approval of the amendment to
the employee stock purchase plan.
In the election of Directors, any action that other than a vote for a
nominee will have the practical effect of voting against the nominee. Abstention
from voting will have the practical effect of voting against any of the other
proposals since it is one less vote for approval. Abstentions and "broker
non-votes" (as defined below) are counted for purposes of determining whether a
quorum is present, but do not represent votes cast with respect to any proposal.
"Broker non-votes" are shares held by a broker or nominee for which an executed
proxy is received by the Company, but are not voted as to one or more proposals
because instructions have not been received from the beneficial owners or
persons entitled to vote and the broker or nominee does not have discretionary
voting power.
An independent party will receive and tabulate all proxies and ballots,
and such independent party and certain other team members of the Company will
act as voting inspectors at the Annual Meeting.
COMMON STOCK OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information available to the Company as
of November 1, 1996 regarding the beneficial ownership of the Common Stock by
(i) each person known by the Company to beneficially own more than Five Percent
(5%) of the outstanding Common Stock, (ii) each of the Directors and nominees
for Director of the Company, (iii) the Chief Executive Officer and all executive
<PAGE>
officers whose compensation was $100,000 or greater during 1995, and (iv) all
executive officers, Directors and nominees for Directors of the Company as a
group:
<TABLE>
<CAPTION>
Number of Shares Percent of Common
Name Beneficially Owned Stock Outstanding
---- ------------------ -----------------
<S> <C> <C>
Morgan Capital, L.L.C. 3,896,827 15.27%
Magal Company 2,503,020 (1) 8.93%
Mifal Klita 2,429,102 (1) 8.69%
Newsun Limited 1,871,345 (1) 6.83%
Samonor Services 1,767,709 (1) 6.48%
Little Wing L.P. 1,403,508 (1) 5.22%
Everest Capital 1,939,393 (1) 7.06%
Capital Ventures, Int'l. 1,545,893 (1) 5.71%
Executive Officers and Directors:
Harry G. McCoy, Pharm. D.
Chairman and President 1,100,956 (2) 4.32%
Richard J. Braun
Chief Executive Officer and Director -0- *
Samuel C. Powell, Ph.D., Director 489,979 (3) 1.92%
David Bistricer, Director (4) -0- *
Alex Bistricer, Director (5) -0- *
Louis Perlman, Director 910,000 3.57%
James W. Hansen, Director -0- *
Carole A. Golden, Ph.D.
Vice President-Research and Development 96,082 (6) *
Peter J. Heath
Vice President-Finance, CFO and
Secretary 162,056 (7) *
Michael A. Terretti
Executive Vice President 254,892 (8) *
James D. Skinner (9) 33,333 (10) *
All Directors and Executive Officers
As A Group (10 in number) 3,047,298 (11) 11.74%
</TABLE>
* Less than one percent (1%)
(1) Represents shares of Common Stock issuable upon conversion of shares of
Series A Preferred for which the Company has received conversion
notices, but which the Company has not issued due to the Company not
having a sufficient number of authorized, unissued and unreserved shares
of Common Stock. Calculated on the basis of the day the respective
conversion notices were received by the Company. See "Amendment of
Certificate of Incorporation to Increase Number of Authorized Shares of
Common Stock."
<PAGE>
(2) Includes 451,712 shares issued in connection with the acquisition of
MEDTOX with contractually provided price protection. See
"Amendment of Incorporation to Increase Number of Authorized Shares
of Common Stock."
(3) Includes 18,334 shares of Common Stock issuable under stock options and
32,679 shares of Common Stock issuable under Common Stock Purchase
Warrants which are or will become exercisable within the next 60 days.
(4) Mr. Bistricer is an officer and principal member of Morgan Capital
L.L.C. which owns 3,896,827 shares of Common Stock. See "Certain
Relationships and Related Transactions."
(5) Mr. Bistricer is an officer and principal member of Morgan Capital
L.L.C. which owns 3,896,827 shares of Common Stock. See "Certain
Relationships and Related Transactions."
(6) Includes 96,082 shares of Common Stock issuable under options which are
or will become exercisable within the next 60 days.
(7) Includes 145,865 shares of Common Stock issuable under options which
are or which will become exercisable within the next 60 days.
(8) Includes 124,966 shares of Common Stock issuable under options which
are or will become exercisable within the next 60 days.
(9) Mr. Skinner resigned as Director, President and C.E.O. from the
Company on July 3, 1996.
(10) Includes 33,333 shares of Common Stock issuable under non-qualified
stock options which are or will become exercisable within the next 60
days.
(11) Includes 418,580 shares issuable under stock options and 32,679 shares
of Common Stock issuable under Common Stock Purchase Warrants which are
or will become exercisable within the next 60 days.
<PAGE>
ELECTION OF DIRECTORS
The Certificate of Incorporation provides that the Board of Directors
shall consist of not less than three nor more than twelve individuals, with the
exact number to be fixed from time to time by the majority vote of the Board of
Directors. The Board of Directors has fixed the number of Directors at seven
individuals.
The Board of Directors intends to present for action at the Annual
Meeting the election of Harry G. McCoy, Pharm.D., Samuel C. Powell, Ph.D.,
Richard J. Braun, Louis Perlman, Alex Bistricer, David Bistricer and James W.
Hansen to serve for the ensuing year and until their respective successors are
duly elected and qualified. Unless otherwise instructed, the enclosed Proxy will
be voted FOR the election of the nominees listed below, except that the persons
designated as proxies reserve full discretion to cast their votes for another
person recommended by the Board of Directors in the unanticipated event that any
nominee is unable or declines to serve.
Directors will be elected by the plurality vote of the holders of
Common Stock entitled to vote at the Annual Meeting and present in person or by
Proxy.
The following table sets forth the name, age and the position with the
Company of the nominees for Directors:
<TABLE>
<CAPTION>
Director
Name of Nominee Age Since Position with the Company
<S> <C> <C> <C>
Harry G. McCoy 45 1996 Chairman of the Board of
Directors, President and
Director
Samuel C. Powell, Ph.D. 43 1986 Director
Richard J. Braun 51 1996 Chief Executive Officer and
Director
Louis Perlman 63 1996 Director
Alex Bistricer 49 1996 Director
David Bistricer 47 1996 Director
James W. Hansen 41 1996 Director
</TABLE>
Harry G. McCoy, Pharm.D., was elected Chairman of the Board of Directors
and President in July 1996 and has served as a Director since January 1996. Dr.
McCoy founded MEDTOX in 1984 and served as both Clinical Director and member of
the MEDTOX Board of Directors until its acquisition by the Company in January
1996. Dr. McCoy continued as President of MEDTOX following its acquisition by
the Company. Dr. McCoy also has academic appointments with the University of
Minnesota and the University of North Dakota. Dr. McCoy is also President and
Director of MLI Dissolution, Inc. and is Chairman and CEO of the Nova Jazz
Corporation, a Minnesota non-profit company.
<PAGE>
Samuel C. Powell, Ph.D., served as Chairman of the Board of Directors from
November 1987 to June 1994 and has served as a Director of the Company since
September 1986. Dr. Powell served as Chairman of the Board and Chief Executive
Officer of Granite Technological Enterprises, from January 1984 until its
acquisition by the Company in June 1986.Since 1987, he has been President of
Powell Enterprises, Burlington, North Carolina, which engages in the management
of a variety of businesses and in commercial real estate development.
Additionally, Dr. Powell has been involved in local politics since 1985 as an
elected official, and was appointed to serve on the North Carolina Board of
Science and Technology from 1989 to 1995.
Richard J. Braun was named as a Director and elected as Chief Executive
Officer in July, 1996. From 1994 until joining the Company, Mr. Braun provided
management consulting services to the health care and technology industries.
From 1992 until 1994, Mr. Braun served as Chief Operating Officer and as a
Director of EBP, Inc., a company providing managed care health plans. From 1989
through 1991, Mr. Braun served as Executive Vice President, Chief Operating
Officer and Director of Reich and Tang L.P., an investment advisory and broker
dealer firm. Mr. Braun currently is a Director of North Star Universal, a
company with investments in health care, food products and computer connectivity
and networking as well as Chairman and Director of RSI Systems, Inc., a company
with proprietary technology in video conferencing.
Louis Perlman was named as a Director in July, 1996. Since 1987, Mr.
Perlman has served as a director of Alliance National, Inc., an executive office
suite company. Mr. Perlman is also the President of Amsterdam Industries, a
company which markets women's apparel, a position he has held since 1973. Since
1980, Mr. Perlman has been Executive Vice President and Director of House of
Ronnie, a manufacturer of women's and children's apparel.
Alex Bistricer was named as a Director in July, 1996. Mr. Bistricer is an
Officer and Principal Member of Morgan Capital, L.L. C., an investment company.
Since 1978, Mr. Bistricer has been active in a family real estate business which
concentrates on owner management.
David Bistricer was named as a Director in July, 1996. Mr. Bistricer is an
Officer and Principal Member of Morgan Capital, L.L.C., an investment company.
Since 1978, Mr. Bistricer has been active in a family real estate business which
concentrates on owner management.
James W. Hansen was named as a Director in September, 1996. Since 1990, Mr.
Hansen has served as a Director of Kinnard Investments, a holding company for
John G. Kinnard & Company, Inc. and Primevest Financial Services, Inc., which is
based in Minneapolis, Minnesota. Mr. Hansen is currently Chairman of the
Compensation and Executive Committees of the Board of Directors of Kinnard
Investments. Mr. Hansen also serves as President and Chief Executive Officer of
the Hansen Company, an investment company, as Chairman of the Board of Directors
of Prostheticare and as President of Rehabne, Inc., both of which are providers
of medical services.
Other Executive Officers
Carole A. Golden, Ph.D. was elected as Vice President-Research and
Development effective November 1987. From 1978 until she joined the Company, Dr.
Golden was Scientific Director for Microbiological Research Corporation,
Bountiful, Utah, a company engaged in the development and manufacture of
clinical diagnostic products. Dr. Golden has published numerous scientific
articles pertaining to immunodiagnostics of infectious diseases. She is a member
of various scientific societies including the New York Academy of Science and
Environmental Mutagen Society.
<PAGE>
Peter J. Heath was appointed Vice President - Finance and Chief Financial
Officer on April 29, 1991. Mr. Heath was appointed Secretary and Chief
Accounting Officer effective October 31, 1990. Mr. Heath has held the position
of Controller of the Company since July 1986. Mr. Heath was employed as
Controller and Office Manager of Granite from January 1984 until its acquisition
by the Company in June 1986.
Michael A. Terretti was appointed Vice President in October 1995. Mr.
Terretti also served as Vice President and General Manager of the Company's
Princeton Diagnostic Laboratories, Inc. subsidiary from the time he joined the
Company in March, 1994. Until the Company's acquisition of MEDTOX in January
1996. Mr. Terretti was appointed Executive Vice President of MEDTOX in February
1996. From April 1990 until October 1993, Mr. Terretti was Vice President, Sales
and Marketing of Genetic Design, Inc., a genetic testing laboratory company.
From October 1993 until joining the Company in March 1994, Mr. Terretti served
as a consultant to the Company.
Compliance With Section 16(a) Of The Securities Act of 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires that the Company's directors and executive officers, and persons who
own more than ten percent (10%) of a registered class of the Company's equity
securities, file with the Commission initial reports of ownership and reports of
changes in ownership of Common Stock and other equity securities of the Company.
Officers, directors and greater than ten- percent beneficial owners are required
by Commission regulations to furnish the Company with copies of all reports they
file under Section 16(a).
To the Company's knowledge, based solely on its review of the copies of
such reports furnished to the Company and written representations that no other
reports were required, all Section 16(a) filing requirements applicable to its
officers, directors and greater than 10% beneficial owners were complied with
during the fiscal year ended December 31, 1995.
During the fiscal year ended December 31, 1995, the Board of Directors
held four meetings (including regularly scheduled, telephonic and special
meetings) and acted on eight occasions by unanimous written consent. During that
time, all members of the Board attended at least Seventy-Five Percent (75%) of
the meetings held subsequent to their appointment.
The Company has a stock option committee (the "Stock Option Committee")
which, by the terms of the Company's Stock Option Plans, is to consist of not
less than two members of the Board of Directors appointed by the Board of
Directors. During 1995 the Stock Option Committee was comprised of Samuel C.
Powell, Gene E. Lewis and Robert J. Beckman. Mr. Lewis and Mr. Beckman resigned
as directors of the Company on July 3, 1996. The Stock Option Committee
determines the terms of options granted, including, but not limited to, the
exercise price, the number of shares subject to the option and the terms and
conditions of the option. During the fiscal year ended December 31, 1995, the
Stock Option Committee met one time and all members of the committee attended at
least Seventy-Five Percent (75%) of the meetings held subsequent to their
appointment. The Stock Option Committee is currently comprised of Samuel C.
Powell, Louis Perlman, Alex Bistricer, David Bistricer and James W. Hansen (the
"Outside Directors").
The Company has an Audit Committee which during 1995 was comprised of
Samuel C. Powell, Gene E. Lewis and Robert J. Beckman. The Audit Committee's
purpose is to meet with the firm's independent public auditors to discuss
relevant auditing questions. During the fiscal year ended December 31, 1995, the
Audit Committee held one meeting. The Audit Committee is currently comprised of
the Outside Directors.
<PAGE>
The Company has a Compensation Committee which during 1995 was comprised of
Samuel C. Powell, Gene E. Lewis and Robert J. Beckman. The Compensation
Committee's purpose is to determine the compensation of the Executive Officers
of the Corporation. During the fiscal year ended December 31, 1995, the
Compensation Committee held one meeting. The Compensation Committee is currently
comprised of the Outside Directors.
The Company does not have a Nominating Committee.
The Board of Directors recommends that Stockholders vote FOR the
election of the nominees to the Board of Directors.
<PAGE>
EXECUTIVE COMPENSATION
The following table and the narrative text discuss the compensation
paid during 1995 and the two prior fiscal years to the Company's President and
Chief Executive Officer and to the other executive officers whose annual salary
and bonuses exceeded $100,000 during 1995.
<TABLE>
<CAPTION>
Summary Compensation Table
Long Term Compensation
Annual Compensation Awards Payouts
Name and Other Restricted Options/ All Other
Principal Position Annual Stock SAR's LTIP Compen-
Year Salary Bonus Compen- Awards (#) Payouts(2) sation
sation(1) (2)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
James D. Skinner(4) 1995 $183,136 -- -- -- 25,000 -- $4,785 (3)
1994 $176,714 $20,000 -- -- 68,326 -- $4,285
1993 $176,153 -- -- -- 0 -- $3,865
Carole A. Golden 1995 $131,940 -- -- -- 15,000 -- --
Vice President 1994 $124,034 -- -- -- 36,666 -- --
Research & Development 1993 $114,046 -- -- -- 0 -- --
Peter J. Heath 1995 $101,541 -- -- -- 17,660 -- --
Vice President of 1994 $ 91,610 -- -- -- 28,332 -- --
Finance 1993 $ 71,446 -- -- -- 0 -- --
and Chief Financial
Officer
Michael A. Terretti 1995 $132,952 -- -- -- 3,910 -- --
Vice President of 1994 $ 90,321 -- -- -- 80,000 -- --
Sales and Marketing 1993 -- -- -- -- 0 -- --
</TABLE>
(1) Other Annual Compensation for executive officers is not reported as it
is less than the required reporting threshold of the Securities and
Exchange Commission.
(2) Not applicable. No compensation of this type received.
(3) Includes $4,785 of premiums paid for by the Company for a life
insurance policy on Mr. Skinner for the benefit of his named
beneficiary. In the event of a termination of Mr. Skinner's employment
by the Company without cause or by reason of a "change in control" of
the Company, Mr. Skinner is entitled to receive severance pay equal to
his then current annual salary. No amounts were paid, payable or
accrued during 1995 pursuant to this provision. See "Employment
Contracts".
(4) Mr. Skinner resigned as Director, President and C.E.O. on July 3, 1996.
<PAGE>
Stock Options Granted During Fiscal Year
The following table sets forth information about the stock options
granted to the named executive officers of the Company during 1995.
<TABLE>
<CAPTION>
Option Grants In Last Fiscal Year
Potential Realized
Value at Assumed
Annual Rates of
Stock Price
Appreciation for
Individual Grants Option Term
% of Total
Options
Number Granted to
of Employees Exercise
Options in Fiscal Price Expiration 5%($) 10%($)
Name Granted(3) Year(1) ($/Sh) Date (2) (2)
<S> <C> <C> <C> <C> <C> <C>
James D.
Skinner 25,000 7% $2.94 12/13/05 46,224 117,140
Carole A.
Golden 15,000 4% $2.94 12/13/05 27,734 70,284
Peter J.
Heath 2,660 1% $3.38 10/02/05 5,654 14,329
15,000 4% $2.94 12/13/05 27,734 70,284
Michael A.
Terretti 3,910 1% $3.44 07/25/05 8,459 21,436
</TABLE>
(1) Options to acquire an aggregate of 340,742 shares of Common Stock of
the Company were granted to all employees during 1995. No options to
acquire Common Stock were granted to non-employee directors of the
Company during 1995. No stock appreciation rights were granted to the
named executive officers during 1995.
(2) The potential realizable value of the options reported above was
calculated by assuming 5% and 10% annual rates of appreciation of the
Common Stock of the Company from the date of grant of the options until
the expiration of the options. These assumed annual rates of
appreciation were used in compliance with the rules of the Securities
and Exchange Commission and are not intended to forecast future price
appreciation of the Common Stock of the Company. The Company chose not
to report the present value of the options, which is an alternative
under Securities and Exchange Commission rules, because the Company
does not believe any formula will determine with reasonable accuracy a
present value based on unknown or volatile factors. The actual value
realized from the options could be substantially higher or lower than
the values reported above, depending upon the future appreciation or
depreciation of the Common Stock during the option period and the
timing of exercise of the options.
(3) Options were granted on July 25, 1995, October 2, 1995, and December
13, 1995. 25,000 of the options granted to Mr. Skinner, 15,000 of the
options granted to Dr. Golden, 17,660 of the options granted to Mr.
Heath, and 3,910 of the options granted to Mr. Terretti, became vested
and exercisable quarterly over a three year period in twelve equal
installments commencing three months after the grant date.
<PAGE>
Stock Options Exercised During Fiscal Year and Year-End Values of Unexercised
Options
The following table sets forth information about the stock options held
by the named executive officers of the Company at December 31, 1995. No stock
options or stock appreciation rights were exercised by the named executive
officers of the Company during 1995.
<TABLE>
<CAPTION>
Number of Unexercised Value of Unexercised In-the-
Options at FY-End Money Options at FY-End
Name Exercisable/Unexercisable Exercisable/Unexercisable (1)
<S> <C> <C>
James D. Skinner 241,033/53,458 $159,431/$0
Carole A. Golden 78,861/30,272 $ 66,111/$0
Peter J. Heath 55,534/29,461 $ 14,700/$0
Michael A. Terretti 47,006/36,904 $0/$0
</TABLE>
(1) The closing price of the Common Stock of the Company at December 31,
1995 was $2.88 per share.
Long-Term Incentive Plans and Pension Plans
The Company does not contribute to any Long-Term Incentive Plan or
Pension Plan for its executive officers as those terms are defined in the rules
of the Securities and Exchange Commission. The Company relies on its stock
option plans to provide long-term incentives for executive officers. The Company
has three stock option plans, a 1983 Stock Option Plan for employees which
expired on June 23, 1993, the Equity Compensation Plan which was adopted by the
shareholders of the annual meeting in 1993 to replace the 1983 Incentive Stock
Option Plan, and a 1991 Non-Employee Director's Plan for members of the Board of
Directors who are not employees of the Company.
Compensation of Directors
In 1995 each director who was not an employee of the Company received
$10,000 as a payment for serving on the Board during the year. All directors are
also reimbursed for expenses incurred in attending Board of Directors meetings
and participating in other activities.
Employment Contracts
Harry G. McCoy, Chairman of the Board of Directors and President of the
Company, has an employment agreement with the Company covering the period ending
January 30, 1998, which by its term is extended thereafter in one-year
increments unless either the Company or Dr. McCoy provides written notice to the
other party at least ninety (90) days prior to the end of the original term or
each renewal period or unless the agreement is otherwise terminated due to
death, permanent disability, change in control of the Company or for "cause."
<PAGE>
The employment agreement provides for an annual salary of at least $167,000 and
certain fringe benefits. If Dr. McCoy's employment with the Company terminates
during the term of the agreement and within twelve (12) months following a
change in control for any of the following reasons (a) involuntarily, other than
an involuntary termination on account of misconduct or, (b) voluntarily,
following: (i) any reduction in base salary; (ii) any material reduction in
health care or retirement benefits; (iii) any relocation to which Dr. McCoy has
not agreed to greater than thirty (30) miles; or (iv) any material reduction in
the level of responsibility, position, authorities or duties; or (c) voluntarily
if the Company or any successor of the Company either announces it will not
honor or cause the Company not to honor the terms of the agreement, Dr. McCoy
will be entitled to a Severance Award. The Severance Award consists of the
following (a) if terminated during the initial two (2) year period of the
agreement, a lump sum equal to (i) twenty-four (24) months' base salary; and
(ii) two (2) times the most recent annual bonus paid or payable and, if
terminated during a one year renewal period, a lump sum equal the twelve (12)
months' base salary; (b) reasonable expenses up to $10,000 incurred in the
pursuit of subsequent employment; (c) a lump sum payment of an amount equal to
the cost of employee-only coverage for a period of eighteen (18) months under
the group health plan maintained by or on behalf of the Company; (d) to the
extent an equity award is not fully vested and exercisable on the termination
date on account of the relevant change in control, a lump sum payment in an
amount equal to the value lost under the equity award; and (e) a lump sum
payment equivalent on an after tax basis to the additional amount Dr. McCoy
would have had in his 401(k) plan account had he: (i) continued as an employee
of the Company for an additional twelve (12) months and (ii) retired at his
early retirement date.
The employment agreement contains a Covenant Not to Compete whereby for
a period to terminate on the later of (i) January 30, 1998 or (ii) twelve (12)
months after the termination of employment with the Company, Dr. McCoy agrees
that he will not, directly or indirectly, either (a) have any interest in (b)
enter the employment of, (c) act as agent, broker, or distributor for or advisor
or consultant to, or (d) provide information useful in conducting the business
of the Company to solicit customers or employees on behalf of the Company to any
person, firm, corporation or business entity which is engaged, or which Dr.
McCoy reasonably knows is undertaking to become engaged, in the United States in
the business of the Company or outside the United States if sales are solicited
from customers located in the United States.
Peter J. Heath, Vice President-Finance, Chief Financial Officer and
Secretary of the Company, has an employment agreement with the Company covering
the period ending January 30, 1998, which by its term is extended thereafter in
one-year increments unless either the Company or Mr. Heath provides written
notice to the other party at least ninety (90) days prior to the end of the
original term or each renewal period or unless the agreement is otherwise
terminated due to death, permanent disability, change in control of the Company
or for "cause." The employment agreement provides for an annual salary of at
least $110,000 and certain fringe benefits. If Mr. Heath's employment with the
Company terminates during the term of the agreement for any of the following
reasons (a) involuntarily, other than an involuntary termination on account of
misconduct or, (b) voluntarily, if within ninety (90) days after the effective
date of a change in control, he will be entitled to a Severance Award. The
Severance Award consists of a lump sum equal to the balance of the base salary
for the remaining term of the agreement (without any renewal) and an additional
lump sum equal to twelve (12) months' base salary.
<PAGE>
One other key employee of the Company who was a former employee of MEDTOX
has an employment agreement comparable to Dr. McCoy's agreement.
Compensation Committee and Decision Making
The compensation (other than stock options) of executive officers of the
Company for 1995 was determined by the Compensation Committee which during 1995
consisted of Gene E. Lewis, Samuel C. Powell, and Robert J. Beckman. Mr. James
D. Skinner, the Chairman, President and Chief Executive Officer of the Company
during 1995, participated in deliberations of the Compensation Committee
concerning compensation for executive officers other than himself, but Mr.
Skinner was not a member of the Compensation Committee. (Mr. Powell has also
entered into certain transactions with the Company. See "Certain Relationships
and Related Transactions.")
Stock options are awarded under the Company's 1983 Stock Option Plan,
the Equity Compensation Plan and Non-Employee Director Plan by a stock option
committee consisting of the then non-employee members of the Board of Directors:
Samuel C. Powell, Gene E. Lewis, and Robert J. Beckman. All non-employee
directors were eligible to receive stock options under the Company's 1991
Non-Employee Director Plan, which is a formula plan in accordance with the
requirements of Rule 16b-3 under the Securities Act of 1934, as amended.
The number of shares issuable pursuant to options granted under the
Non-Employee Stock Option Plan is determined by dividing the aggregate award of
$10,000 by the exercise price of the options, which was the fair market value of
the Company's Common Stock on the date of the award.
<PAGE>
Report of the Compensation Committee on Executive Compensation
In General
The Committee has three primary goals for executive compensation at the
Company.
o Retaining good performers,
o Rewarding executives appropriately for performance, and
o Aligning executives' interests with those of stockholders.
Currently, executive pay consists of two elements that are designed to
meet those objectives:
o Base salary is paid based primarily on job responsibilities and
industry job comparison. The Committee believes that base salaries at
approximately industry averages are essential to retaining good
performers.
o Stock options, which allow executives to benefit when the market price
of the Company's stock increases. The Committee believes that the Stock
Option Plan is presently a better incentive than bonuses for aligning
executives interests with those of stockholders.
Following is additional information regarding each of the above
elements.
Base Salary
The executive officers of the Company during 1995 were all with the
Company for over five years. Base salary increases for executive officers have
been modest and consistent with the financial condition of the Company as well
as consistent with job performance and increases in responsibility.
Bonus
No bonuses were paid during 1995.
Stock Options
In 1995 the executive officers received incentive stock options to
purchase a total of 61,570 shares. The number of options granted to the
executive officers represented Twenty Percent (20%) of the total options granted
in 1995.
Summary
Currently, the Company's executive compensation program rewards the
following elements of performance.
<PAGE>
o Individual performance is rewarded through continued employment with the
Company.
o Stock price performance is rewarded through increases in the value of
previously granted stock options.
The Committee believes that the current program has been effective in
rewarding executives appropriately for performance, retaining good performers,
and aligning executives' interests with those of stockholders. While the
Committee is pleased with the current compensation system, it reserves the right
to make changes to the program as are necessary to continue to meet its stated
goals in future years.
Benefits also are offered to officers that are not based on
performance. Such benefits provide a safety net of protection in the event of
illness, disability, death, retirement, etc. Such a safety net is provided to
all full time employees of the Company.
Chief Executive Officer Pay
Amounts earned during 1995 by the Chief Executive Officer, James D.
Skinner, are shown in the Summary Compensation Table. Achievements by the
Company during 1995 which were deemed material to the Chief Executive Officer's
compensation include the continued negotiations that led to the completion of
the acquisition of MEDTOX in January 1996. For the current year the Compensation
Committee used, in its deliberations on executive compensation, these criteria
and other accomplishments.
Submitted by the Compensation Committee of the
Company's Board of Directors
Samuel C. Powell
Gene E. Lewis (1)
Robert J. Beckman (1)
(1) Mr. Lewis and Mr. Beckman resigned from the Board of Directors effective
July 3, 1996.
<PAGE>
Performance Graph.
The graph shown below is a line presentation comparing the Company's
cumulative five-year shareholder returns on an indexed basis with the Russell
2,000 Index and a Pharmaceutical Company Index compiled for the Company by Value
Line for the five-year period commencing on December 31, 1990 and ending on
December 31, 1995. The total return assumes that dividends were reinvested
quarterly and is based on a $100 investment on December 31, 1990.
COMPARATIVE FIVE-YEAR TOTAL RETURNS*
EDITEK, Inc., Russell Group 2000, Peer Group
(Performance results through 12/31/95)
(Comparative chart appears here. The plot points are below.)
1990 1991 1992 1993 1994 1995
EDI $100.00 $778.75 $1,667.41 $559.11 $599.04 $459.27
Russell 2000 $100.00 $146.05 $ 172.94 $205.64 $201.90 $259.31
Peer Group $100.00 $160.72 $ 131.44 $119.70 $130.71 $205.14
Assumes $100 invested at the close of trading on the last trading day
preceding the first day of the fifth preceding fiscal year in EDITEK common
stock, RUSSELL 2000 Index, and Pharmaceutical Companies Peer Group.
*Cumulative total return assumes reinvestment of dividends.
Source: Frank Russell Company
Factual material is obtained from sources believed to be reliable, but the
publisher is not responsible for any errors or omissions contained herein.
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Lease Agreement with Dr. Samuel C. Powell
In July 1986, the Company executed a lease agreement with Dr. Powell
providing for a lease to the Company of approximately 16,743 square feet of
space at 1238 Anthony Road, Burlington, North Carolina. Since 1986, the Company
has expanded the space rented under the lease to approximately 33,000 square
feet. Upon the expiration of the original lease, the Company entered into a new
lease with Dr. Powell for the same space and at the same base rental rate for a
term of one year ending on May 31, 1990. Effective June 1, 1990, the Company has
been leasing the space on a month-to-month basis. The Company is currently
leasing space at a rate of approximately $9,000 per month. The Company intends
to negotiate a new lease with Dr. Powell in the near future. The Company holds
certain rights of first refusal to lease additional space in the building if it
becomes available (the building contains a total of 42,900 square feet). The
total rent paid by the Company to Dr. Powell during the fiscal year ended
December 31, 1995 was approximately $119,000. The Company believes the rent
amount paid to Dr. Powell is consistent with market rates.
Product Sales to Carolina Biological Supply Company
During 1995, the Company sold approximately $1,000 of Conventional
Biodiagnostic Products to Carolina Biological Supply Company ("CBSC"), a company
in which Dr. Powell owns a Six Percent (6%) interest and the remainder of which
is owned by Dr. Powell's brother, step-brother and their respective families.
All sales of Conventional Biodiagnostic Products to CBSC were on an
"arms-length" basis.
Loan to Mr. James D. Skinner
The provisions of non-qualified stock options granted to Mr. Skinner
provide that the Company will lend the funds necessary to exercise such stock
options. The loans for this purpose will not exceed a term of 36 months and will
bear interest at a rate equal to the prime lending rate of Wachovia Bank & Trust
Company, N.A. and will be secured by a pledge of the shares purchased with the
proceeds of the loan. During 1988, Mr. Skinner exercised non-qualified stock
options exercisable into 13,334 shares of Common Stock at an exercise price of
$7.50 per share. At Mr. Skinner's request, the Company loaned $100,000 to Mr.
Skinner to be used to exercise such options. The loan was secured solely by a
pledge of, and as recourse only with respect to, the shares of Common Stock
purchased with the proceeds of the loan. Effective May 3, 1990, the Company
modified the loan agreement with Mr. Skinner to defer interest payments on such
loan until the date upon which the principal comes due. During 1995 the Company
modified the loan agreement with Mr. Skinner to extend the maturity date of the
loan to September 10, 1996. The outstanding balance of such loan as of December
31, 1995, was $100,000, excluding accrued interest thereon. On July 3, 1996, the
Company accepted the resignation of Mr. Skinner from his positions with the
Company. As part of the agreement reached with Mr. Skinner, the Company forgave
the principle and interest due on the loan. In return, the Company received the
13,334 shares that were issued to Mr. Skinner.
<PAGE>
Morgan Capital, LLC
David Bistricer and Alex Bistricer, Directors of the Company, are
principal partners in Morgan Capital, LLC ("Morgan") an investment company.
Morgan currently owns 3,896,827 shares of Common Stock of the Company which
represents 15.3% of the issued and outstanding Common Stock of the Company at
October 30, 1996. Morgan received the Common Stock upon the conversion of
shares of the Company's Series A Preferred Stock which Morgan purchased in
January 1996.
AMENDMENT TO CERTIFICATE OF INCORPORATION TO INCREASE
NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
Issued and Reserved Shares
The Company's Certificate of Incorporation presently authorizes the
issuance of a total of 30,000,000 shares of Common Stock, par value $.15 per
share, and 1,000,000 shares of preferred stock, par value $1.00 per share. Of
such 30,000,000 presently authorized shares of Common Stock, 25,513,284 shares
were issued and outstanding as of October 30, 1996. In addition, an aggregate
of 4,676,117 shares has been reserved for issuance as of October 30, 1996, as
summarized in the following table:
<TABLE>
<CAPTION>
Number of
Shares of Common Stock Reserved for Shares Reserved
<S> <C>
Common Stock Warrants
Series K 50,000
Series L 320,000
Series M 10,550
Series N 32,679
Common Stock Options:
Incentive 401,726
Non-Employee Director 239,540
Nonqualified 41,093
Qualified Employee Stock Purchase Plan 36
Amended and Restated Equity Compensation Plan 2,993,826
Common Stock issuable upon exercise of Purchase Warrants issued
to Investment Bankers in connection with issuance of Series A
Convertible Preferred Stock 586,667
--------
4,676,117
</TABLE>
<PAGE>
In addition to the shares of Common Stock reserved as described above, the
following shares of Common Stock are required to be issued for the purposes
described below:
<TABLE>
<CAPTION>
Shares of Common Stock Needed for
<S> <C>
Conversion of Series A Preferred Stock 19,195,468
Former Shareholders of MEDTOX Laboratories, Inc. 1,119,057
-----------
20,314,525
-----------
Total Shares of Common Stock Required 24,990,642
-----------
</TABLE>
Insufficient Number of Shares of Common Stock to Satisfy Conversion Rights
and Contractual Obligations of the Company
Conversion of Series A Preferred Stock
To date the Company has received requests to convert 378 shares of its
Series A Preferred. At the conversion rates in effect on the conversion dates,
such conversion notices require the issuance of 31,381,983 shares of Common
Stock. The Company has issued 12,186,515 shares of Common Stock upon conversion
of the Series A Preferred, but has been unable to issue the 19,195,468
additional shares of Common Stock to satisfy the remaining conversions due to
there being an insufficient number of authorized, unissued and unreserved shares
of Common Stock. As of October 30, 1996, the Company has not received
conversion notices for 29 shares of Series A Preferred. Based on the average
closing bid prices of the Common Stock for the five trading days preceding
October 30, 1996, the 29 shares of Series A Preferred Stock would be converted
into 2,090,090 shares of Common Stock.
The Company's charter provides that each share of Series A Preferred is
convertible into a number of shares obtained by dividing (i) the purchase price
of the Series A Preferred Stock ($50,000 per share) by (ii) the lower of (x)
$2.775 or (y) 75% of the Market Price of the Common Stock on the day the shares
of Series A Preferred are converted into Common Stock. "Market Price" is defined
for this purpose as the daily average of the closing bid prices quoted on the
American Stock Exchange or other exchange on which the Common Stock is traded
for the five trading days immediately preceding the date the shares are
converted. The charter indicates that the shares of Series A Preferred are
converted on the business day the Company receives the written notice of
conversion. Consequently, when the Company has sufficient shares of Common Stock
to satisfy conversion notices, holders of Series A Preferred from whom the
Company receives conversion notices will be issued a number of shares of Common
Stock that is based on the Market Price of the Common Stock for the five trading
days prior to the date the Company received the conversion notice
notwithstanding that the Company is not able to deliver the stock certificates
therefor within the three day period after receipt of the conversion notice as
required by the charter of the Company. The Company also has agreements with
certain holders of Series A Preferred who have not received shares of Common
Stock upon conversion due to there being an insufficient number of authorized
shares. The agreements require the Company to compensate such shareholders if
between the conversion date and the date shares of Common Stock are issued the
market price of the Common Stock of the Company declines. In such case,
additional shares of Common Stock will be issued to such shareholders with the
number of additional shares of Common Stock to have a market price equal to the
<PAGE>
decline in market price of the Common Stock of the Company. The number of shares
of Common Stock issuable upon conversion will not decline if between the
conversion date and the issuance date the market price of the Common Stock of
the Company increases. The agreements provide that additional shares will not be
issued to any shareholder who prior to the issuance of the additional shares
engages in short sales of the Company's Common Stock, acquires any put options,
sells any call option or loans any shares of Common Stock to someone the
shareholder knows is engaging in any such trading activity or who encourages or
assists another person to engage in any such trading activity.
As of October 30, 1996, five separate lawsuits have been commenced against
the Company by certain holders of the Series A Preferred. All five lawsuits are
currently pending in the United States District Court for the Southern District
of New York. Plaintiffs in each of the lawsuits allege breach of contract with
respect to conversion of the Preferred Stock and certain plaintiffs have also
alleged misrepresentations and securities violations in connection with the
Company's sale of the Series A Preferred. The Company may be subject to
additional litigation from holders of Series A Preferred who do not receive
shares of Common Stock issuable to them under the Company's charter or
contractual obligations. The Company intends vigorously to contest each of the
five pending lawsuits as well as any additional litigations that may be filed
hereafter. However, the Company cannot predict the outcome of the lawsuits, and
decisions in favor of plaintiffs in any or all of the lawsuits could have a
material adverse effect on the Company and its business.
The Company is currently investigating possible claims against purchasers
of Series A Preferred who may have breached the Series A Preferred subscription
agreements or otherwise engaged in improprieties in connection with the
conversion or sale of Company stock. The Company reserves the right to take
action against any such person or persons, which action may include but not be
limited to assertion of claims and the withholding of common shares otherwise
issuable upon the conversion of Series A Preferred shares.
Shares Issuable to Former Shareholders of MEDTOX
In connection with the closing of the acquisition of MEDTOX
Laboratories, Inc. ("MEDTOX") in January 1996 the Company issued 2,517,306
shares of Common Stock to MEDTOX, which distributed the shares to holders of
MEDTOX Common Stock. The Company agreed that if after the Closing Date the
market value of the Common Stock of the Company declines below approximately
$1.98 per share, the Company will issue additional shares of Common Stock
("Additional Shares") to shareholders of MEDTOX who retain their shares of
Common Stock through specified dates (the "Repricing Dates") to compensate the
MEDTOX shareholders for decreases after the closing of the MEDTOX Transaction in
the market price of the Common Stock of the Company below approximately $1.98
per share. The first Repricing Date was the fifth trading day (May 23, 1996)
following the date the Company issued a press release announcing its financial
performance for the fiscal quarter ended on March 31, 1996. On May 23, 1996, the
market price was $1.56 per share. Accordingly, 1,119,057 shares of Common Stock
are issuable to the MEDTOX shareholders. Because the number of Additional Shares
that may become issuable is tied to decreases in the market price of the Common
Stock, the number of Additional Shares issuable in the future to the MEDTOX
shareholders cannot be determined at this time and will depend upon changes in
the Market Price of the Common Stock, as well as the extent to which MEDTOX
shareholders retain the MEDTOX shares on each of the Repricing Dates. The
Company will not be able to issue any Additional Shares to MEDTOX shareholders
until the number of authorized shares of Common Stock of the Company increases.
<PAGE>
Shares Reserved For Issuance
As described in the previous table, the Company has reserved a total of
4,676,117 shares of Common Stock that would be issuable upon the exercise of
stock options, stock purchase warrants and employee stock purchase plans.
Uses for Additional Shares of Common Stock
As indicated above, the most immediate uses for the proposed additional
shares of Common Stock are to (i) satisfy the conversion rights of the Series A
Preferred, (ii) satisfy the obligations to issue Common Stock to the former
shareholders of MEDTOX, and (iii) satisfy the potential obligation of shares of
Common Stock to be issued upon exercise of certain stock options and stock
purchase warrants. In addition, the shares of Common Stock could be used for
compensation plans for employees, officers and directors of the Company and for
other corporate purposes as described below.
The additional shares of Common Stock, if so authorized, could be
issued at the discretion of the Board of Directors without any further action by
the stockholders except as required by applicable law or regulation, for use in
connection with meeting the Company's existing commitments to issue shares of
Common Stock, acquisitions, efforts to raise additional capital for the Company
and other corporate purposes. Shares will be issued for purposes other than
meeting existing commitments only upon a determination by the Board of Directors
that a proposed issuance is in the best interests of the Company. No
determination by the Board is necessary to issue shares to meet the Company's
existing commitments.
The Company believes that other synergistic acquisitions are available
to it. The increase in authorized shares will allow the Board of Directors of
the Company to consider and, if in the best interest of the stockholders, take
advantage of any such acquisition possibilities. In addition, the flexibility
vested in the Company's Board of Directors to authorize the issuance and sale of
authorized but unissued shares of Common Stock and Preferred Stock could enhance
the Board of Director's bargaining capability on behalf of the Company's
stockholders in a takeover situation and could, under some circumstances, be
used to render more difficult or discourage a merger, tender offer or proxy
contest, the assumption of control by a holder of a large block of the Company's
securities, or the removal of incumbent management, even if such a transaction
were favored by the holders of the requisite number of the then outstanding
shares. Accordingly, stockholders of the Company might be deprived of an
opportunity to consider a takeover proposal which a third party might consider
if the Company did not have authorized but unissued shares of Common Stock.
The Company is not aware of any present efforts to gain control of the
Company or to organize a proxy contest. If such a proposal were presented,
management would make a recommendation based upon the best interests of the
Company's stockholders. Except as described above and except for certain
provisions of its agreements with employees and the Company's Amended and
Restated Equity Compensation Plan which provide for severance payments and
acceleration of vesting of options and stock upon a change of control, the
Company is not aware of any anti-takeover measures which are currently part of
the Company's charter, bylaws or agreements.
<PAGE>
Accordingly, the Board of Directors has proposed that Article FOURTH of
the Company's Certificate of Incorporation be amended to increase its authorized
capital stock. As so amended, this provision of the Certificate of Incorporation
would read as set forth on Appendix A hereto.
In the event that the stockholders fail to approve the proposed increase in
the Company's authorized common stock, management believes the Company could
suffer significant adverse consequences, including, but not limited to, the
funding of continued litigation with the holders of Preferred Stock and the
possible award of significant money damages or other remedies in connection
therewith. If significant money damages were to be awarded against the Company,
material adverse consequences to its ability to fund its day to day operations
could result.
The Board of Directors recommends a Vote FOR the proposed amendment to
the Certificate of Incorporation. An affirmative vote by holders of a majority
of the outstanding shares of Common Stock entitled to vote at the Annual Meeting
is required to approve the Amendment.
APPROVAL FOR AMENDMENT TO THE EDITEK, INC.
QUALIFIED EMPLOYEE STOCK PURCHASE PLAN
On March 13, 1986 the Company adopted, and on September 11, 1986 the
shareholders of the Company approved, a Qualified Employee Stock Purchase Plan
pursuant to which the employees of the Company are given an opportunity to
acquire Common Stock of the Company (the "Stock") up to a certain percentage of
each employee's compensation through payroll deductions. The Board of Directors
of the Company has approved changes to the Qualified Employee Stock Purchase
Plan, as set forth in the form attached hereto as Appendix B (the "Qualified
Plan"), which changes include amending the plan to increase the number of shares
of Common Stock subject to the Qualified Plan from 150,000 to 500,000 shares.
The affirmative vote of a majority of the shares of Common Stock present, or
represented, and entitled to vote at the Annual Meeting is required for approval
of the amended and restated EDITEK, Inc. Qualified Employee Stock Purchase Plan.
The ability to offer the Company's employees an opportunity to acquire
shares of the Common Stock of the Company through payroll withholding at a 15%
discount from fair market value provides another means by which the Company may
compensate its employees and provide competitive compensation levels without
increasing its cash requirements. By providing competitive compensation levels
the Company can attract and retain competent personnel. Further, the Board
believes that an employee stock ownership plan, such as the Qualified Plan,
provides an incentive to employees to promote the best interests of the Company
because they have an opportunity to acquire a proprietary interest in the
Company and ultimately to benefit from appreciation in the value of the Stock.
<PAGE>
The Board of Directors recommends a vote FOR the proposal to amend and
restate the Qualified Employee Stock Purchase Plan.
Description of Plan
The following description of the Qualified Plan is merely a summary of
the plan and is qualified in its entirety by reference to the full text of the
Qualified Plan. If any part of the description of the Qualified Plan contained
in this document states anything different from the formal legal documents
governing the Qualified Plan, the formal legal plan documents will be considered
correct.
The Qualified Plan is not generally subject to the provisions of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"). The Plan
is not a qualified plan under Section 401 of the Code.
Nature and Purpose. The Plan allows eligible employees to purchase
shares of the Common Stock of the Company through payroll deductions at a price
equal to 85% of the lesser of the fair market value of the stock on the date of
the Company's receipt of the subscription or the date of the employee's exercise
of the right to purchase such shares. As amended, the maximum number of shares
that each eligible employee may subscribe for under the Qualified Plan shall be
subject to such limitations as from time to time established by the
Administrative Committee, which limitations shall apply equally to all
participants. The receipt of an approved subscription form by the Company from
an eligible employee shall be treated as the grant of a right to purchase the
shares subscribed for, and the accrual of a sufficient amount in such employee's
account to acquire a minimum of 100 shares of stock at the subscription price
shall be treated as the exercise of such purchase right.
The Qualified Plan is designed to attract and retain competent
personnel, to allow the Company to compete with other companies with respect to
compensation, to motivate Company employees to use their best efforts for the
benefit of the Company, and to provide employees an opportunity to acquire a
proprietary interest in the Company thereby encouraging the promotion of the
Company's best interests and giving the employees an opportunity to share in
future growth of the Company.
Administration. The Qualified Plan is administered by a committee
appointed by the Board of Directors of the Company (the "Administration
Committee"). The amendments to the plan provide for the Administration Committee
to be comprised of two or more non-employee directors rather than three
directors as previously provided. The amendments also remove the provision that
the Company may not compensate such committee members. In order to retain the
services of qualified outside directors, the Company has adopted a Non-Employee
Director Stock Option Plan to compensate directors for their service on the
Board as well as on committees thereof. The members of the Stock Option
Committee are deemed to be the members of the Administration Committee until
otherwise designated by the Board. The Administration Committee has the
exclusive right to interpret, prescribe rules and regulations for, and
administer the Qualified Plan. In the event there is no market for the Stock,
the Administration Committee may determine the fair market value of the Stock
for purposes of the Qualified Plan. Also, the committee shall be entitled to
reduce employee's subscriptions in excess of prescribed amounts under certain
circumstances.
<PAGE>
Securities to be Offered. The Company is authorized to issue 500,000 shares
of Stock under the Qualified Plan, which represents an increase of 350,000
shares from the previously adopted version of the plan. Of the 150,000 shares
previously approved for issuance under the plan, only 36 shares remain available
for subscription under the plan as of November 8, 1996. The Board believes that
an increase in the number of shares authorized under the Qualified Plan is
warranted due to the increase in the number of employees of the Company since
the plan was originally adopted in 1986, the limited number of shares remaining
available for subscription and increases in potentially eligible employees as a
result of the acquisition of MEDTOX Laboratories.
Subscription Amount. The plan provides that an eligible employee may
have under subscription at any one time that number of shares whose aggregate
subscription price is not more than 25% of the employee's annual rate of
compensation at the time the subscription form is received. The Qualified Plan
provides that the Administration Committee shall establish from time to time the
maximum number of shares that may be acquired by any employee under the plan and
such maximum shall apply equally to all eligible employees. The plan allows an
employee to subscribe for less than the maximum number of shares and
subsequently subscribe for additional shares until he has subscribed for the
maximum number of shares permitted. Each new subscription shall be treated for
all purposes under the plan as a separate grant of a right to purchase the
number of shares indicated on the subscription form. However, in order to be
able to subscribe for additional shares, an employee must wait at least six
months from the date of his last subscription, or three months from the date of
the withdrawal of a prior subscription, or until all subscriptions outstanding
to acquire shares under the Qualified Plan have been paid in full.
Subscription Price/Purchase Price. The subscription price for Stock
acquired under the plan is 85% of the fair market value of the Stock on the day
the executed subscription form is received by the Company. The purchase price
for shares of Stock is the lesser of the subscription price or 85% of the fair
market value on the day the right to purchase is exercised. The Qualified Plan
reflects an amendment in the formula for determining the fair market value of
the Stock on a given date which expands upon the sources for determining the
value of the Stock based upon various possible markets for the Stock. The
amended language includes methods for determining the fair market value of the
Stock if it is traded on a national securities exchange, quoted on the National
Association of Securities Dealer Automated Quotation ("NASDAQ") System or
otherwise in the over-the-counter market, or if it is not traded or quoted at
such time. Generally, the fair market value shall be based upon the last sales
price of the Stock on a given date if a minimum of 100 shares are sold on such
date, or if no shares are sold on such date, based upon the average of the high
bid and low asked prices on such date, or if no prices are available on such
date, based upon the last sales price of the Stock on the last prior date on
which a minimum of 100 shares were sold. If the Stock is not traded on an
exchange or quoted by NASDAQ or in the over-the-counter market, then the
Administrative Committee shall be permitted to determine in good faith the fair
market value by any appropriate method. The closing price of the Common Stock of
the Company on the American Stock Exchange on October 30, 1996 was $.875 per
share.
<PAGE>
Limitations on Subscriptions. Employees who own stock possessing 5% or
more of the total combined voting power or value of all classes of stock of the
Company are not eligible to subscribe for Stock under the Qualified Plan.
Further, no employee may subscribe to purchase Stock under all stock purchase
plans of the Company at a rate which exceeds $25,000 of the fair market value of
such stock for any calendar year in which such subscription is outstanding under
the Qualified Plan.
Payroll Deductions. The subscription price under the Qualified Plan
must be paid by payroll deduction from the employee's compensation. The plan
allows the Administration Committee to establish procedures and limitations
regarding payroll deductions; provided, however, that no payment period may be
structured so that the date of exercise of the purchase rights exceeds more than
twenty-seven (27) months from the date of grant of the purchase rights. Payroll
deductions shall begin when specified by the employee in the subscription form
or as soon as practicable thereafter but in no event later than two months after
the date specified by the employee.
Issuance of Stock. The Stock will only be issued by the Company when
the employee has completed paying for at least 100 shares (or any lesser amount
of shares under subscription) at the subscription price. If the purchase price
is less than the subscription price, the employee shall not be entitled to
acquire more shares than that number for which he subscribed. The plan provides
that the employee shall not be deemed to own the stock subscribed for until
issuance of the stock certificate representing such shares.
Withdrawal of Subscription. An employee may withdraw his subscription
at any time for any shares for which the right to purchase has not yet been
exercised and receive a refund of the balance in his account. An employee who
withdraws a subscription, however, shall not be entitled to subscribe for
additional shares until at least three (3) months after the last such
withdrawal.
Termination of Employment. Upon termination of a participating
employee's services because of death, permanent disability or retirement at age
55 or thereafter, the employee (or his estate) may prepay any subscription for
Stock within three (3) months thereafter in the case of permanent disability or
retirement, or within twelve (12) months thereafter in the case of death. If the
participating employee's services are terminated for any other reason, the
employee will only be entitled to receive back the balance of his subscription
account.
Transferability. Neither the right of an employee to purchase shares
under the Qualified Plan, nor his account balance, may be transferred by the
employee by way of assignment, pledge or otherwise, except that, in the event of
death of the employee, such rights may be transferred by will or the laws of
descent and distribution.
<PAGE>
Termination of Plan. The Qualified Plan became effective on September
11, 1986 following its approval by the stockholders of the Company. The
amendment to the plan is subject to and will become effective upon approval by
the stockholders of the Company. The Board may terminate the Qualified Plan at
any time, and may amend the Qualified Plan from time to time, subject to any
approval of the stockholders of the Company that may be required in order that
the Qualified Plan shall continue to qualify under Section 423 of the Code. Upon
termination of the Qualified Plan, participating employees shall, at the
discretion of the Board, either be permitted to complete unpaid subscriptions in
a manner determined by the Administrative Committee or shall be entitled to
receive the balance in their subscription account in satisfaction of all rights
under the Qualified Plan.
Interpretation of Plan. The Qualified Plan is intended, and shall be
interpreted, to meet and comply with all the requirements of Section 423 of the
Code, and related provisions.
Federal Income Tax Consequences
The Qualified Plan is intended to provide employees with the
opportunity to receive the special tax treatment afforded by Section 423 of the
Internal Revenue Code.
Under existing law, the following description summarizes the principal
Federal Income Tax Consequences of the purchase and disposition of shares of
Stock under the Qualified Plan.
Purchase of Shares. An employee does not realize, and does not have to
report any income for the year in which he subscribes nor for the year in which
he pays for Stock under the Qualified Plan, even though his purchase price is
the lesser of 85% of the fair market value of the Stock on the date he
subscribes, or on the date the right to purchase is exercised.
Disposition of Shares. Section 423 of the Internal Revenue Code
establishes a holding period which is important in determining how any gain on
disposition of shares acquired under the Qualified Plan is to be taxed. The term
"disposition" generally includes every sale, exchange, gift or transfer of legal
title except transfers made as the result of an employee's death. The holding
period provided under Section 423 is the later of two (2) years after the date
the employee subscribed or twelve (12) months after the date the shares are
transferred to him. An employee may have a different holding period for each 100
share unit of Stock acquired under the Qualified Plan.
The issue of shares of Stock in the joint names of employee and another
person is not considered a disposition. Similarly, the issue of shares in an
employee's name and the subsequent transfer of such shares into the joint names
of the employee and another person do not constitute a disposition.
Sale After End of Holding Period. When an employee sells his shares
after the specified holding period, he is required to report the following on
his Federal Income Tax Return for the year in which the sale occurs:
<PAGE>
Ordinary Income: The employee must report ordinary income in the amount of
the lesser of:
(1) 15% of the fair market value of the Stock on the date of his
subscription, or on the date of purchase, whichever is lower, or
(2) any excess of the fair market value of the Stock on the date of sale
over the purchase price.
If the employee's purchase price exceeds the fair market value on the
date of sale, no amount is reported as ordinary income.
Capital Gain or Loss: If the fair market value of the Stock on the date
of sale exceeds the lesser of the fair market value on the date of subscription
or the date of purchase, the employee must report the amount of such excess as
long term capital gain. On the other hand, if the purchase price exceeds the
fair market value on the date of sale, such excess is a long term capital loss.
Sale Before End of Holding Period. When an employee sells his shares
prior to the end of the specified holding period, he is required to report the
following on his Federal Income Tax Return for the year in which the sale
occurs:
Ordinary Income: The employee must report the excess of the fair market
value of the Stock on the date of exercise over his purchase price as ordinary
income. The "date of exercise" is the date when an employee's account is
credited with sufficient funds to purchase 100 shares of Stock (or such lesser
number as remain under a subscription agreement). Consequently, the employee
will normally have a different date of exercise for each 100-share unit of Stock
issued under the Plan.
Capital Gain or Loss: If the fair market value of the Stock on the date
of sale exceeds the fair market value on the date the employee exercised his
right to receive such shares, he must report such excess as capital gain. On the
other hand, if the fair market value on the date of exercise exceeds the fair
market value on the date of sale, the employee may report the amount of such
excess as capital loss. Any such capital gain or loss will be long term capital
gain or loss if the Stock is sold more than six (6) months after the date of
exercise, but will be short term capital gain or loss if the Stock is sold
within six (6) months after the date of exercise.
In the case of a disposition before the end of the holding period, the
Company receives a tax deduction equal to the amount of ordinary income
recognized by the employee.
RELATIONSHIPS WITH AUDITORS
The Board of Directors has appointed the firm of Ernst & Young, LLP
independent accountants, as auditors of the Company for the year ending December
31, 1996. Ernst & Young has audited the Company since 1984. It is expected that
representatives of Ernst & Young will be present at the Annual Meeting. Such
representatives will have any opportunity to make a statement at the meeting if
they desire and are expected to be available to respond to appropriate
questions.
<PAGE>
OTHER BUSINESS OF THE MEETING
Management is not aware of any matters to come before the Annual
Meeting other than those stated in the Proxy Statement. However, inasmuch as
matters of which management is not now aware may come before the meeting or any
adjournment thereof, the Proxies confer discretionary authority with respect to
acting thereon, and the persons named in such properly executed Proxies intend
to vote, act and consent in accordance with their best judgment with respect
thereto. Upon receipt of such Proxies (in the form enclosed) in time for voting,
the shares represented thereby will be voted as indicated thereon and in the
Proxy Statement.
DATE FOR SUBMISSION OF STOCKHOLDER PROPOSALS
Any proposal, relating to a proper subject, which a Stockholder may
intend to present for action at the 1997 Annual Meeting of Stockholders, and
which such Stockholder may wish to have included in the company's proxy
materials for such meeting, in accordance with the provisions of Rule 14a-8
promulgated under the Exchange Act, must be received in proper form by the
Company addressed to Mr. Richard J. Braun, Chief Executive Officer, and sent by
registered mail, return receipt requested, and received at the Company's
principal executive office at 1238 Anthony Road, Burlington, North Carolina
27215, not later than July 15, 1997.
By order of the Board of Directors,
HARRY G. McCOY
Chairman of the Board
and President
Burlington, North Carolina
November 25, 1996
COPIES OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 1995 MAY BE OBTAINED WITHOUT CHARGE BY ANY STOCKHOLDER TO WHOM THE
PROXY STATEMENT IS SENT, UPON WRITTEN REQUEST TO THE SECRETARY, EDITEK, INC.,
1238 ANTHONY ROAD, BURLINGTON, NORTH CAROLINA 27215.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934 (the "Exchange Act") and in accordance therewith
files reports, proxy statements and other information with the Securities and
Exchange Commission (the "Commission"). Reports, proxy statements and other
information filed by the Company can be inspected and copied at the public
reference facilities maintained by the Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549 and at its Regional Offices located at 75
Park Place, New York, New York 10007, and the John C. Kluczynski Federal
Building, 230 South Dearborn Street, Chicago, Illinois 60604. Copies of such
material can be obtained from the Public Reference Section of the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 upon request and
payment of the prescribed fees.
<PAGE>
The Company's Common Stock is listed on the American Stock Exchange
(the "AMEX"), and reports, proxy statements and other information filed by the
Company can be inspected at such exchange.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents, each of which was previously filed by the
Company with the Commission pursuant to Section 13 of the Exchange Act, are
incorporated herein by reference:
a) The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995.
b) The Company's Annual Report on Form 10-K/A-2 for the fiscal year ended
December 31, 1995.
c) The Company's Report on Form 10-Q for the quarter ended March 31, 1996.
d) The Company's Report on Form 10-Q for the quarter ended June 30, 1996.
e) The Company's Report on Form 10-Q for the quarter ended September 30,
1996.
All documents filed by the Company pursuant to Sections 13(a), 13(c),
14 and 15(d) of the Exchange Act subsequent to the date of this Proxy Statement
and prior to the Annual Meeting of Shareholders to which this Proxy Statement
relates shall be deemed to be incorporated by reference herein and to be a part
hereof from the date of the filing of such reports and documents. Any statement
contained in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this Proxy
Statement to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein or in any accompanying Proxy Statement Supplement modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Proxy Statement.
The Company will provide without charge to each person to whom a Proxy
Statement is delivered upon written or oral request of each person, a copy of
any documents incorporated herein by reference (other than exhibits to such
documents unless such exhibits are specifically incorporated by reference into
the documents that this Proxy Statement) incorporates. Requests for such copies
should be directed to EDITEK, Inc., Attention: Secretary, 1238 Anthony Road,
Burlington, North Carolina 27215, (910) 226-6311.
<PAGE>
APPENDIX A
EDITEK, INC.
AMENDED AND RESTATED
SECTION OF CERTIFICATE OF INCORPORATION
FOURTH: The total number of shares of stock which the Corporation shall
have authority to issue is SIXTY-ONE MILLION (61,000,000) shares, SIXTY MILLION
of which shall be of a class designated as Common Stock with a par value of
FIFTEEN CENTS ($0.15) per share and ONE MILLION of which shall be of a class
designated as Preferred Stock with a par value of ONE DOLLAR ($1.00) per share.
All or any part of the authorized capital stock of the Corporation may be issued
and sold, from time to time by the corporation, without further action by
stockholders, for such consideration (but not less than the par value thereof)
and to such persons and on such terms and conditions as may, from time to time,
be fixed or determined by the Board of Directors. The voting powers,
designations, preferences and relative, participating, optional or other special
rights and the qualifications, limitations or restrictions thereof, of the
classes of stock of the corporation which are fixed by this Certificate of
Incorporation, and the authority vested in the Board of Directors to fix by
resolution or resolution providing for the issue of Preferred Stock the voting
powers, designations, preferences and relative, participating, optional or other
special rights, and the qualifications, limitations or restrictions thereof, of
the shares of Preferred Stock which are not fixed by the Certificate of
Incorporation, are as follows:
1. The Preferred Stock may be issued from time to time in one
or more series, each such series to have such distinctive designation
or title as may be fixed by the Board of Directors prior to the
issuance of any shares thereof. Each such series may differ from every
other series already outstanding as may be determined from time to time
by the Board of Directors prior to the issuance of any shares thereof,
in any or all of the following, but in other, respects:
(a) The rate of dividend which the Preferred Stock of
any such series shall be entitled to receive, whether the
dividends of such series shall be cumulative or non-cumulative
and, if such dividends shall be cumulative, the date from
which they shall be cumulative.
(b) The right or obligation, if any, of the
corporation to redeem shares of Preferred Stock of any series
and the amount per share which the Preferred Stock of any such
series shall be entitled to receive in case of the redemption
thereof, and the right of the corporation, if any, to reissue
any such shares after the same shall have been redeemed.
(c) The amount per share which the Preferred Stock of
any such series shall be entitled to receive in case of the
voluntary liquidation, distribution or sale of assets,
dissolution or winding up of the corporation, or in case of
the involuntary liquidation, distribution or sale of assets,
dissolution or winding up of the corporation.
<PAGE>
(d) The right, if any, of the holders of Preferred
Stock of any such series to convert the same into other
classes of stock, and the terms and conditions of such
conversion.
(e) The voting power, if any, of the holders of
Preferred Stock of any series, and the terms and conditions
under which they may exercise such voting power.
(f) The terms of the sinking fund or fund of similar
nature, if any, to be provided for the Preferred Stock of any
such series.
The description of terms of the Preferred Stock of
each series in respect of the foregoing particulars shall be
fixed and determined by the Board of Directors by appropriate
resolution at or prior to the time of the authorization of the
issue of the original shares of each such series.
2. In case the stated dividends and the amounts payable on
liquidation, distribution or sale of assets, dissolution or winding up
of the corporation are not paid in full, the stockholders of all
series of the Preferred Stock shall share ratably in the payment of
dividends, including accumulations, if any, in accordance with the
same which would be payable on such shares if all dividends were
declared and paid in full and in any distribution of assets other than
by way of dividends, in accordance with the sums which would be
payable on such distribution if all sums payable were discharged and
paid in full.
3. The holders of the Preferred Stock shall be entitled to
receive, when and as declared by the Board of Directors, out of funds
legally available therefor, preferential dividends in cash at, but not
exceeding the annual rate fixed for each particular series. The holders
of the Preferred Stock shall not be entitled to receive any dividends
thereon other than dividends referred to in this Subdivision 3.
4. So long as any of the Preferred Stock remains outstanding,
in no event shall any dividend whatever, whether in cash or other
property (other than shares of Common Stock), be paid or declared or
any distribution be made on the Common Stock, nor shall any shares of
the Common Stock be purchased, retired or otherwise acquired for a
consideration by the corporation unless (a) the full dividends of the
Preferred Stock for all past dividend periods from the respective date
or then current quarter-yearly dividend period shall have been paid or
declared and a sum set apart sufficient for the payment thereof, and
(b) if at any time the corporation is obligated to retire shares of any
series of the Preferred Stock pursuant to a sinking fund or a fund of a
similar nature, all arrears, if any, in respect of the retirement of
the Preferred Stock of all such series shall have been made good.
Subject to the foregoing provisions and not otherwise, such dividends
(payable in cash, stock or otherwise) as may be determined by the Board
of Directors may be declared and paid on the Common Stock from time to
time out of the remaining funds of the corporation legally available
therefor, and the Preferred Stock shall not be entitled to participate
in any such dividend, whether payable in cash, stock or otherwise.
5. In the event of any liquidation, distribution or sale of
assets, dissolution or winding up of the corporation, whether voluntary
or involuntary, before any distribution or payment shall be made to the
holders of Common Stock, the holders of the Preferred Stock of each
series shall be entitled to be paid in cash the applicable
<PAGE>
liquidation price per share fixed at the time of the original
authorization of issuance of shares of such respective series, together
with a sum, in the case of each share of the Preferred Stock, computed
at the annual dividend on such share became cumulative to the date
fixed for such distribution or payment date paid thereon. If such
payment shall have been made in full to the holders of the Preferred
Stock, the remaining assets and funds of the corporation shall be
distributed among the holders of the Common Stock according to their
respective shares.
6. Subject to the powers, preferences and rights and the
qualifications, limitations and restrictions thereof, with respect to
each class of capital stock of the corporation having any preference or
priority over the Common Stock, the holders of the Common Stock shall
have and possess all rights appertaining to capital stock of the
corporation. Holders of Common Stock may not act by written consent
without a meeting.
<PAGE>
APPENDIX B
EDITEK, INC.
QUALIFIED EMPLOYEE STOCK PURCHASE PLAN
WHEREAS, EDITEK, Inc., a Delaware corporation (the "Company"),
adopted the Environmental Diagnostics, Inc. Qualified Employee Stock Purchase
Plan (the "Plan") to offer its employees the right to purchase its Common Stock,
$0.15 par value per share ("Stock"), on March 13, 1986;
WHEREAS, the Plan was approved by the Company's shareholders
on September 11, 1986;
WHEREAS, pursuant to Section 14 of the Plan, the Board of
Directors of the Company may amend or modify the Plan at any time, subject to
any required shareholder approval;
WHEREAS, the Company desires to amend and restate the Plan and
to increase the number of shares authorized under the Plan, subject to and
effective upon shareholder approval;
NOW, THEREFORE, pursuant to premises and covenants herein
contained, the Company does hereby amend and restate the Plan subject to and
effective upon shareholder approval which shall read as follows:
SECTION 1. EMPLOYEES ENTITLED TO PARTICIPATE.
An individual is eligible to participate in the Plan if (a) he
is regularly scheduled to work for more than twenty hours per week and five
months per calendar year; (b) he is employed by the Company or any other
corporation in which the Company owns or acquires, directly or indirectly, at
least 50% of the total combined voting power of all classes of stock, if such
corporation has been designed as a participating corporation by the
Administration Committee; and (c) he agrees to pay the subscription price by
payroll deduction. In accordance with the requirements of Section 423 of the
Internal Revenue Code of 1986, as amended (the "Internal Revenue Code"), all
employees granted subscriptions under the Plan shall have the same rights and
privileges hereunder, subject to the provisions of federal and state securities
laws that may effect transactions made pursuant to the Plan by certain employees
who may be deemed to be insiders of the Company.
It is intended that the Plan allow for broad-based employee
participation and not discriminate in favor of highly compensated employees.
Accordingly, the Plan shall be administered in compliance with Section 410(b) of
the Internal Revenue Code with regard to the broad-based participation
requirement and Section 401(a)(4) of the Internal Revenue Code with
<PAGE>
regard to the nondiscrimination requirement. Accordingly, the Plan shall be
interpreted in accordance with such provisions as now written or as hereafter
amended.
SECTION 2. SUBSCRIPTION PRICE.
The subscription price hereunder shall be the lesser of (a)
85% of the fair market value of the Stock on the day the executed subscription
form is received by the Company, or (b) 85% of the fair market value of the
Stock on the day the right to purchase is exercised, as provided in Section 7(A)
below. For purposes of this Plan, the "fair market value" of the Stock shall be
determined as set forth below.
If the Stock is traded on a national securities exchange, then
the "fair market value" on a date shall be the closing price of the Stock on
such exchange based on the sale of a minimum of 100 shares of Stock; if less
than 100 shares are traded on such date, then the fair market value shall be the
average of the high bid and low asked prices on such date; or if no prices are
quoted on such date, then the fair market value shall be the closing price of
the Stock on such exchange based on the sale of a minimum of 100 shares of Stock
on the last prior date on which at least 100 shares were sold.
If the Stock is not traded on a national securities exchange,
but is quoted in the over-the-counter market as reported on the National
Association of Securities Dealers Automated Quotation ("NASDAQ") System on a
date, then the "fair market value" of the shares on such date shall be the last
sale price reported by the NASDAQ System or the NASDAQ National Market System,
as applicable, based on the sale of a minimum of 100 shares of Stock; if less
than 100 shares are traded on such date, then the fair market value shall be the
average of the high bid and low asked prices on such date as reported by NASDAQ
System or the NASDAQ National Market System, as applicable; or if no prices are
quoted on such date, then the fair market value shall be the last sale price of
the Stock as reported by NASDAQ based on the sale of a minimum of 100 shares of
Stock on the last prior date on which at least 100 shares were sold.
If the Stock is not traded on a national securities exchange
or reported by NASDAQ, if any broker-dealer makes a market for the Stock, then
the "fair market value" of the shares on a date shall be the average of the
highest and lowest quoted selling prices of the Stock on that date, said average
to be based on the sale of a minimum of 100 shares of Stock; if less than 100
shares are traded on such date, then the fair market value of the shares on such
date shall be the average of the high bid and low asked prices on such date in
such market; or if no prices are quoted on such date, then the fair market value
of the shares on such date shall be the average of the highest and lowest quoted
selling prices of the Stock based on the sale of a minimum of 100 shares of
Stock on the last prior date on which at least 100 shares were sold.
If the Stock is not traded in any established market and no
broker-dealer makes a market in the Stock, then the "fair market value" shall be
the fair value thereof as determined in good
<PAGE>
faith by the Administration Committee pursuant to any appropriate method
selected by the Committee.
SECTION 3. NUMBER OF SHARES AUTHORIZED.
The total number of shares of Stock authorized to be issued
hereunder is 500,000 shares, which shall be newly issued shares. Additional
shares may be authorized to be issued hereunder from time to time by the Board
of Directors of the Company, provided that the stockholders of the Company
approve such increase within twelve (12) months before or after such action by
the Board of Directors.
SECTION 4. SUBSCRIPTIONS.
A. How to Subscribe.
Any eligible employee may subscribe hereunder by executing and
mailing or delivering to the Secretary of the Company or any representative
designated by him a subscription form approved by the Administration Committee.
The receipt of such subscription form by the Company shall constitute the grant
to the employee (and the acceptance by him) of a right to purchase the number of
shares indicated on the form at the subscription price and subject to the terms
and conditions contained herein, except that no such right shall be deemed to
have been granted (i) during any period in which the offering of Stock under
this Plan does not comply with the requirements of the Securities Act of 1933,
as amended, or any applicable state securities law, or (ii) if subscriptions
have been issued for the total number of shares authorized to be issued or
transferred hereunder.
B. Number of Shares for Which Employee May Subscribe.
The maximum number of shares which an eligible employee may
subscribe for under the Plan shall be subject to such limitations from time to
time established by the Administration Committee. The maximum number shall apply
equally to all eligible participants. An employee may subscribe for less than
the maximum number of shares and may successively subscribe for additional
shares until he has subscribed for the maximum number of shares permitted;
provided, however, that the receipt of each new subscription by the Company
shall be considered to be a separate grant of a right to purchase the number of
shares indicated on the subscription form for all purposes hereunder and shall
be subject to the waiting periods provided below.
<PAGE>
C. Waiting Period.
An employee who has subscribed for less than the maximum
number of shares may not subscribe for additional shares unless (i) at least six
(6) months have elapsed since the date of receipt of his last prior subscription
form, (ii) such employee has withdrawn a prior
subscription and at least three (3) months have elapsed since the date of his
last withdrawal, or (iii) all prior subscriptions by the employee to acquire
shares under the Plan have been paid in full.
D. Limitations on Subscriptions.
Notwithstanding any provision herein, an employee shall not be
entitled to subscribe hereunder if, immediately after receipt of the
subscription form by the Company, such employee owns stock possessing 5% or more
of the total combined voting power or value of all classes of stock of his
employer corporation or its parent or any subsidiary corporation. For purposes
of the preceding sentence, the rules of Section 424(d) of the Internal Revenue
Code shall apply in determining the stock ownership of an employee, and stock
which the employee may purchase under outstanding subscriptions hereunder or
under any other stock option plan shall be treated as stock owned by the
employee. Notwithstanding any provision herein, if the rights of an employee to
purchase stock under all stock purchase plans (to which Section 423 of the
Internal Revenue Code is applicable) of his employer corporation and its parent
and subsidiary corporations accrue (within the meaning of and subject to the
rules contained in Section 423(b)(8) of the Internal Revenue Code) at a rate
which exceeds $25,000 of fair market value of such stock (determined at the time
the subscription form is received by the Company) for any calendar year in which
such subscription is outstanding at any time, such employee's subscription shall
be reduced, in the manner prescribed by the Administration Committee, so that
the employee's rights do not accrue at a rate which exceeds $25,000 of fair
market value of such stock for such calendar year as described above.
SECTION 5. PAYMENT OF SUBSCRIPTION PRICE.
A. Payroll Deductions.
Payment of the subscription price under the Plan shall be made
by payroll deductions pursuant to such procedures and limitations as established
from time to time by the Administration Committee. Beginning on the date
specified in the subscription form, or as soon as practicable for the Company
thereafter, but in no event later than two months after the date specified,
deductions for payment of the subscription prices shall be made from each
regular payroll check for a participating employee until all of his
subscriptions have been paid or withdrawn, but in no event may the payment
period be structured so that the date of exercise of the purchase rights as
provided in Section 7(A) hereof exceeds twenty-seven (27) months from the date
of grant of such purchase rights. If local law prohibits payroll deductions for
such purpose, any alternative method approved by the Administration Committee
may be substituted. All payments shall be forwarded monthly to the Treasurer of
the Company.
B. Prepayment of Subscription Price.
No prepayment of subscription prices may be made except as
provided in Sections 9 and 14 below.
<PAGE>
SECTION 6. SUBSCRIPTION ACCOUNTS.
A subscription account shall be created for each participating
employee and all amounts withheld from his compensation shall be credited to
such account. Amounts credited to such accounts shall be available for the
general use of the Company. The Company will provide a statement at least once
each year of the remaining balance in each participating employee's account.
SECTION 7. ISSUANCE OF STOCK.
A. Completion of Payment for 100 Share Unit.
When the subscription account of any employee contains
an amount equal to at least 100 shares or any lesser number of shares under
subscription (on a first in first out basis) multiplied by 85% of fair market
value of the Stock on the day the executed subscription form is received by the
Company, the employee shall be deemed to have exercised the right to purchase
100 or such lesser number of shares. Thereafter the employee's account shall be
debited for the subscription price (as defined in Section 2) of such shares, and
the Company shall issue or cause to be transferred to the employee a certificate
for such shares within a reasonable time. If the fair market value on the day of
exercise is below that on the day the executed subscription was received by the
Company, the employee's subscription account shall be charged for only an amount
equal to 85% of the fair market value on such exercise date of the shares then
acquired and the balance in the account shall be held to pay for additional
shares under subscription, if any, or returned if no additional shares are then
under subscription. The number of shares purchased shall in every case be
determined solely by reference to the fair market value on the date the executed
subscription form is received by the Company, and may not be increased by reason
of any subsequent decline in fair market value.
B. Rights as Stockholders.
Nothing in this Plan shall confer upon any participating
employee any rights as a stockholder except the right to be issued a stock
certificate for fully-paid shares of Stock as provided herein, and until such
issuance, the participating employee shall not be deemed the owner of any such
shares for any purpose.
C. Extension of Time for Delivery.
The time of issuance and delivery of shares may be postponed
for such period as may be required to comply with registration requirements
under the Securities Act of 1933, as amended, listing requirements of any stock
exchange upon which Stock may be listed, if any, and the requirements under any
other law or regulation applicable to the issuance or transfer of such shares.
<PAGE>
SECTION 8. WITHDRAWAL OF SUBSCRIPTIONS.
Any employee may withdraw any subscription upon filing a
notice thereof with the person designated by and on the form approved by the
Administration Committee. Said subscription shall thereupon be canceled as to
all shares with respect to which the right to purchase has not been exercised as
provided in Section 7(A) above. If the employee withdraws all his subscriptions
hereunder, he will be entitled to receive the balance of his account within
thirty (30) days after the receipt of such notice. If an employee withdraws a
subscription, he shall not be entitled to subscribe for additional shares for
three (3) months after the last such withdrawal.
SECTION 9. TERMINATION OF EMPLOYMENT.
A. Death, Permanent Disability and Retirement.
If a participating employee's services are terminated before
his subscription is fully paid, because of death, permanent disability or
retirement at age 55 or thereafter, the employee (or, in the case of death, his
estate) may, at his option, within three (3) months thereafter in the case of
such permanent disability or retirement or within twelve months thereafter in
the case of death, prepay his subscription in whole or in part, or receive the
balance of his subscription account in satisfaction of all rights under the
Plan.
B. Other Termination of Service.
If a participating employee's services are terminated before
his subscription is fully paid, for any reason other than death, permanent
disability or retirement at age 55 or thereafter, the employee will be entitled
to receive only the balance of his subscription account. Such payment shall
constitute satisfaction of all his rights under this Plan, and all remaining
subscriptions hereunder shall be deemed withdrawn.
C. Temporary Absence.
Any employee whose name is taken off the regular payroll by
reason of leave of absence, temporary layoff, or through temporary disability,
may at his option (i) withdraw his subscriptions hereunder and receive the
amount to which he would be entitled if his services were terminated for any
reason as provided in subparagraph (B) hereof, or (ii) make regular periodic
payments to the Treasurer of the Company in an amount equal to the sum which
would have been withheld had he continued on the regular payroll.
SECTION 10. RIGHTS NOT TRANSFERABLE.
Neither the right of an employee to purchase shares hereunder,
nor his account balance, shall be transferable by the employee (by way of
assignment, pledge, or otherwise) except by will or the laws of descent and
distribution, and neither such right nor such balance
<PAGE>
shall be liable for or subject to the debts or liabilities of such employee. If
any action is taken by the employee to so transfer such right or balance, such
action shall be deemed to constitute a withdrawal of the subscription involved.
SECTION 11. ADMINISTRATION COMMITTEE.
This Plan shall be administered by an Administration Committee consisting
of two or more non-employee directors of the Company, who shall be appointed by
its Board of Directors. Until their successors shall be appointed, the
Administration Committee shall consist of the Outside Directors. The Committee,
or a majority thereof, shall have the authority to interpret this Plan, to
prescribe rules and regulations thereunder, and to make all other determinations
necessary or advisable for the Plan's administration. The members of the
Committee shall serve until their successors have been appointed by the Board of
Directors.
SECTION 12. ADJUSTMENTS.
In the event of a dividend payable in Common Stock of the
Company or a subdivision or combination of the Common Stock of the Company, the
number of shares offered under this Plan, and the number of shares offered by
options outstanding under the Plan, shall be increased or decreased
proportionately, as the case may be, without change in the aggregate
subscription price for such shares. In case the Company is reorganized or merged
or consolidated with another corporation, appropriate provisions shall be made
for the protection and continuation of any outstanding subscriptions under the
Plan by the substitution on an equitable basis determined by the Board of
Directors of appropriate stock or other securities of the reorganized, merged or
consolidated corporation which will be issuable in respect of the Stock.
SECTION 13. TAX ON ADDITIONAL COMPENSATION.
In the event that the issuance or disposition of any Stock
subscribed hereunder results in additional compensation to an employee under
federal, state or foreign laws which require that the tax thereon be withheld,
the Company and its subsidiaries will deduct from the employee's compensation
the amount required for such withholding. Until such tax is withheld or
otherwise paid by the employee to the Company, Stock paid for but unissued or
undelivered hereunder will be held by the Company in issued form as security for
the amount required to be withheld.
SECTION 14. TERM OF PLAN.
This amended and restated Plan is subject to and shall become
effective upon approval by the stockholders of the Company. The Board of
Directors may terminate the Plan at any time, and may amend the Plan from time
to time, subject to any approval of the stockholders of the Company that may be
required in order that the Plan shall continue to qualify under
<PAGE>
Section 423 of the Internal Revenue Code. Upon termination of the Plan,
participating employees shall, in the discretion of the Board of Directors,
either be permitted to complete unpaid subscriptions in a manner determined by
the Administration Committee or shall be entitled to receive the balance in
their subscription account in satisfaction of all rights under the Plan.
SECTION 15. INTERPRETATION OF THE PLAN.
It is intended that this Plan shall meet and comply with all the
requirements of Section 423 of the Internal Revenue Code, and related Sections.
The Plan and the terms used herein shall be interpreted by the Administration
Committee in such manner as to carry out such intention, and in particular, the
grant of a right to purchase shares hereunder shall be deemed to constitute the
grant of an option under Section 423 of the Internal Revenue Code, and the
exercise of the right to purchase hereunder shall be deemed to constitute the
exercise of an option under such Section.
IN WITNESS WHEREOF, the Company has caused these instruments to be executed
by its duly authorized officers and its corporate seal to be hereunto affixed,
all as of the day and year first above written.
EDITEK, INC.
ATTEST:
___________________________ By:________________________________
Secretary President
(Corporate Seal)
<PAGE>
APPENDIX C
EDITEK, INC.
ANNUAL MEETING OF STOCKHOLDERS
DECEMBER 20, 1996
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned stockholder of EDITEK, Inc. (the "Company") hereby
appoints Harry G. McCoy and Richard J. Braun, and each or either one of them,
the true and lawful attorneys, agents, and proxies of the undersigned with full
power of substitution for and in the name of the undersigned, to vote all the
shares of Common Stock of EDITEK, Inc. which the undersigned may be entitled to
vote at the Annual Meeting of Stockholders of the Company to be held at the
Sheraton Minneapolis Metrodome, located at 1330 Industrial Blvd., Minneapolis,
Minnesota on or about Friday, December 20, 1996, at 1:00 P.M., Central Time,
and at any and all adjournments thereof, with all the powers which the
undersigned would possess if personally present, for the following purposes:
(Continued and to be signed on the other side)
<PAGE>
Please mark your
votes as in this
example FOR AGAINST ABSTAIN
For Withheld
[ ] [ ] [ ] [ ] [ ]
Nominees: Harry G. McCoy, Samuel 2. The adoption of an Amendment
C. Powell, Richard J. Braun, to the Certificate of Incorporation
Alex Bistricer, David Bistricer as set forth in the Proxy Statement.
James W. Hansen and Louis Perlman
3. The adoption of the amendment to
the Employee Stock Purchase Plan
as set forth in the Proxy Statement.
1. Election of 4. Considering and acting upon any
Directors other matters which may properly
come before the meeting or any
adjournment thereof.
For, except vote withheld from the following nominees:
[ ] Please check box if you intend to attend the
meeting in person.
This Proxy will be voted for the choices specified. If no choice is
specified with respect to the election of Directors, this Proxy will be voted
FOR the election of the Directors listed. If no choice is specified for
Proposals 2 and 3, this Proxy will be voted FOR Proposals 2 and 3.
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting and
Proxy Statement dated November 25, 1996.
PLEASE MARK, SIGN, DATE AND MAIL THIS PROXY IN THE ENVELOPE PROVIDED.
SIGNATURE(S) Dated:______, 1996
NOTE: Please sign exactly as name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee, guardian,
please give your full title as such.
