<PAGE> 1
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 sec. 240.14a-12
SEROLOGICALS CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials:
----------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
SEROLOGICALS CORPORATION
780 PARK NORTH BOULEVARD, SUITE 110
ATLANTA, GEORGIA 30021
---------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 16, 2000
---------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
Serologicals Corporation (the "Corporation") will be held at 8:00 A.M., local
time, on May 16, 2000, at the JW Marriott Hotel, 3300 Lenox Road, NE, Atlanta,
Georgia 30326, for the following purposes:
1. To elect two Class 2 Directors of the Corporation to hold office
until the Annual Meeting of Stockholders occurring in 2003 and until the
election and qualification of their respective successors;
2. To approve an amendment to the Corporation's Second Amended and
Restated 1994 Omnibus Incentive Plan (the "Omnibus Plan") to increase the
maximum number of shares of Common Stock that may be issued pursuant to
awards to any participant in any given fiscal year from two hundred
twenty-five thousand (225,000) shares to five hundred twenty-five thousand
(525,000) shares; and
3. To transact such other business as may properly come before the
meeting.
Only holders of record of the Corporation's $0.01 par value common stock
(the "Common Stock") at the close of business on March 20, 2000 are entitled to
notice of, and to vote at, the meeting and any adjournment thereof. Such
stockholders may vote in person or by proxy.
STOCKHOLDERS WHO FIND IT CONVENIENT ARE CORDIALLY INVITED TO ATTEND THE
MEETING IN PERSON. IF YOU ARE NOT ABLE TO DO SO AND WISH THAT YOUR STOCK BE
VOTED, YOU ARE REQUESTED TO FILL IN, SIGN, DATE AND RETURN THE ACCOMPANYING
PROXY IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED
STATES.
By Order of the Board of Directors,
Peter J. Pizzo, III
Secretary
Dated: April 26, 2000
<PAGE> 3
SEROLOGICALS CORPORATION
780 PARK NORTH BOULEVARD, SUITE 110
ATLANTA, GEORGIA 30021
---------------------
PROXY STATEMENT
---------------------
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of Serologicals Corporation (the "Corporation") of
proxies to be used at the Annual Meeting of Stockholders (the "Annual Meeting")
of the Corporation to be held at 8:00 A.M., local time, on May 16, 2000, at the
JW Marriott Hotel, 3300 Lenox Road NE, Atlanta, Georgia 30326 and at any
adjournments thereof. The purposes of the meeting are:
1. To elect two Class 2 directors of the Corporation to hold office
until the Annual Meeting of Stockholders occurring in 2003 and until the
election and qualification of their respective successors;
2. To approve an amendment (the "Omnibus Plan Amendment") to the
Corporation's Second Amended and Restated 1994 Omnibus Incentive Plan (the
"Omnibus Plan") to increase the maximum number of shares of Common Stock
that may be issued pursuant to awards to any participant in any given
fiscal year from two hundred twenty-five thousand (225,000) shares to five
hundred twenty-five thousand (525,000) shares; and
3. To transact such other business as may properly come before the
meeting.
If proxy cards in the accompanying form are properly executed and returned,
the shares of Common Stock represented thereby will be voted as instructed on
the proxy. If no instructions are given, such shares will be voted (i) FOR the
election as directors of the nominees of the Board of Directors named below,
(ii) FOR the approval of the Omnibus Plan Amendment and (iii) in the discretion
of the persons named in the proxy card on any other proposals to properly come
before the meeting or any adjournment thereof. Any proxy may be revoked by a
stockholder prior to its exercise upon written notice to the Secretary of the
Corporation, or by the vote of a stockholder cast in person at the meeting. The
approximate date of mailing of this Proxy Statement is April 26, 2000.
VOTING
Holders of record of the Corporation's Common Stock on March 20, 2000 will
be entitled to vote at the Annual Meeting or any adjournment thereof. As of that
date, there were 23,204,871 shares of Common Stock outstanding and entitled to
vote, and a majority will constitute a quorum for the transaction of business.
Abstentions and broker non-votes are counted for purposes of determining the
presence or absence of a quorum for the transaction of business. Each share of
Common Stock entitles the holder thereof to one vote on all matters to come
before the meeting, including the election of directors.
Directors are elected by a plurality of votes cast. Abstentions and broker
non-votes will have no effect on the election of Directors. The favorable vote
of a majority of the votes cast at the Annual Meeting is necessary to adopt the
Omnibus Plan Amendment. Abstentions are counted as a vote against the Omnibus
Plan Amendment and broker non-votes will have no effect on the Omnibus Plan
Amendment. The Board of Directors recommends a vote FOR each of the nominees
named below and FOR the adoption of the Omnibus Plan Amendment.
INFORMATION AS TO NOMINEES AND OTHER DIRECTORS
Two directors are to be elected at the Annual Meeting. The Board of
Directors has recommended the persons named in the table below as nominees for
election as directors. Both such persons are presently directors of the
Corporation. Unless otherwise specified in the accompanying proxy, the shares
voted pursuant to it will be voted for the persons named below as nominees for
election as directors. If, for any reason, at the
<PAGE> 4
time of the election either of the nominees should be unable or unwilling to
accept election, it is intended that such proxy will be voted for the election,
in such nominee's place, of a substitute nominee recommended by the Board of
Directors. However, the Board of Directors has no reason to believe that either
nominee will be unable or unwilling to serve as a director and the nominees have
each agreed to serve if elected.
The Board of Directors currently consists of six members and is divided
into three classes. The following information is derived from information
supplied by the nominees and directors and is presented with respect to the
nominees for election as directors of the Corporation in Class 2 to serve for a
term of three years and until the election and qualification of their respective
successors, and for the directors in Classes 1 and 3 whose terms expire at the
annual meeting of stockholders occurring in 2002 and 2001, respectively, and
until the election and qualification of their respective successors.
NOMINEES FOR DIRECTOR WHOSE TERM EXPIRES IN 2003
(CLASS 2)
<TABLE>
<CAPTION>
HAS BEEN A
DIRECTOR OF THE
NAME OF NOMINEE AGE CORPORATION SINCE
- --------------- --- -----------------
<S> <C> <C>
Wade Fetzer, III............................................ 62 1997
Samuel A. Penninger, Jr..................................... 58 1983
</TABLE>
DIRECTORS WHOSE TERM OF OFFICE
WILL CONTINUE AFTER THE ANNUAL MEETING
Directors Whose Term Expires in 2001 (CLASS 3)
<TABLE>
<CAPTION>
HAS BEEN A
DIRECTOR OF THE
NAME OF DIRECTOR AGE CORPORATION SINCE
- ---------------- --- -----------------
<S> <C> <C>
Desmond H. O'Connell, Jr.................................... 64 1998
George M. Shaw, M.D., Ph.D.................................. 46 1993
</TABLE>
Directors Whose Term Expires in 2002 (CLASS 1)
<TABLE>
<CAPTION>
HAS BEEN A
DIRECTOR OF THE
NAME OF DIRECTOR AGE CORPORATION SINCE
- ---------------- --- -----------------
<S> <C> <C>
Lawrence E. Tilton.......................................... 64 1996
Matthew C. Weisman.......................................... 58 1992
</TABLE>
Wade Fetzer, III has been a director of the Corporation since December
1997. Mr. Fetzer joined the Goldman Sachs Group in 1971 where he has served as a
General Partner from 1986 to 1994 and as a Limited Partner since 1994. Mr.
Fetzer currently serves on the boards of four privately held corporations. In
addition, he serves as Chairman for the University of Wisconsin Foundation and
the Kellogg Alumni Advisory Board.
Samuel A. Penninger, Jr. has served as Chairman of the Board of Directors
of the Corporation since March 1993 and from March 1983 until March 1993 he
served as President and a director of the Corporation. Mr. Penninger founded the
Corporation in 1971. He has served as a director of the American Blood Resource
Association and is a member of the American Association of Blood Banks. Although
he will remain a director, Mr. Penninger will step down as Chairman of the Board
of Directors immediately prior to the Annual Meeting.
Desmond H. O'Connell, Jr. has served as interim President and Chief
Executive Officer of the Corporation since September 1999, and has been a
director since July 1998. Since 1990, Mr. O'Connell has been an independent
management consultant. Mr. O'Connell was with the BOC Group, PLC, an industrial
gas and health care company, in senior management positions from 1980 to 1990
and was a member of the Board of Directors of BOC Group, PLC from 1983 to 1990.
From April 1990 until September 1990, Mr. O'Connell was President and Chief
Executive Officer of BOC Healthcare. From 1986 to April 1990, he
2
<PAGE> 5
was Group Managing Director of BOC Group, PLC. Prior to joining BOC, Mr.
O'Connell held various positions at Baxter Laboratories, Inc. including Chief
Executive of the Therapeutic and Diagnostic Division and Vice President,
Corporate Development. Mr. O'Connell is currently a member of the Board of
Directors of Abiomed, Inc., a publicly traded manufacturer and marketer of
cardiac assist devices.
George M. Shaw, M.D., Ph.D. has been a director of the Corporation and a
member of its Scientific Advisory Board since August 1993. Dr. Shaw is an
Investigator with the Howard Hughes Medical Institute and Professor of Medicine,
Division of Hematology/Oncology (Department of Internal Medicine) at the
University of Alabama at Birmingham, where he has served on the faculty since
1985. Dr. Shaw has served as the Deputy Director and Senior Scientist at the
Center for AIDS Research and as Senior Scientist at the Comprehensive Cancer
Center at the University of Alabama at Birmingham since July 1988. Dr. Shaw is
also currently a member of the Scientific Advisory Board of the Pediatric AIDS
Foundation Ariel Project and an External Advisory Committee Member of the Aaron
Diamond AIDS Research Center and the University of California at San Francisco
Center for AIDS Research.
Lawrence E. Tilton has been a director of the Corporation since July 1996.
Mr. Tilton retired from American Cyanamid Company, a diversified chemical and
pharmaceutical company, in December 1994. Since 1960, Mr. Tilton served in
various capacities within American Cyanamid, including as President of the
Lederle Laboratories Division from December 1993 until his retirement and
President, Lederle Consumer Health from December 1990 to December 1993.
Matthew C. Weisman has been a director of the Corporation since May 1992.
Since 1983, Mr. Weisman has been the President and Chief Executive Officer of
Cobey Corporation, a consulting and private investment company. Since 1993, Mr.
Weisman has served as a trustee of the Hebrew Rehabilitation Center for the
Aged, a chronic care hospital and geriatric teaching and research facility
affiliated with Harvard Medical School. Mr. Weisman also serves on the board of
one additional privately held corporation and one not-for-profit organization.
MEETINGS OF THE BOARD
During the fiscal year ended December 26, 1999, thirteen meetings of the
Board of Directors were held. Each of the directors attended 75% or more of the
aggregate number of meetings of the Board of Directors and committees on which
he served.
The Board of Directors has a Compensation Committee, which currently
consists of Messrs. Tilton (Chairman) and Weisman. The Compensation Committee is
responsible for approving (or, at the election of the Compensation Committee,
recommending to the Board) compensation arrangements for officers and directors
of the Corporation and succession planning, reviewing benefit plans and
administering the Corporation's various stock option and other equity-related
plans. This Committee held three meetings during the Corporation's last fiscal
year.
The Board of Directors has an Audit Committee, which currently consists of
Messrs. Fetzer (Chairman) and Weisman and Dr. Shaw. The Audit Committee is
responsible for providing oversight of the Corporation's activities, primarily
as they relate to financial matters, to ensure that they are conducted in a
legal and ethical manner. This Committee oversees the Corporation's financial
reporting control and audit functions, and is responsible for selecting (or, at
the election of the Audit Committee, recommending to the Board) the independent
auditors of the Corporation, evaluating the independent auditors, consulting
with management and the independent auditors as to the systems of internal
accounting controls and reviewing any non-audit services performed by the
independent auditors. This Committee held three meetings during the
Corporation's last fiscal year.
The Board of Directors has a Corporate Governance and Nominating Committee,
which currently consists of Messrs. Weisman (Chairman) and Penninger. The
Corporate Governance and Nominating Committee is responsible for making
recommendations to the Board on Board organization and procedures, performance
evaluation of the Board, individual directors and the Chief Executive Officer
and nomination of directors. This Committee held one meeting during the
Corporation's last fiscal year.
3
<PAGE> 6
The Board of Directors has a Regulatory Compliance Committee, which
consists of Dr. Shaw (Chairman) and Mr. Penninger. The Regulatory Compliance
Committee is responsible for overseeing the Corporation's compliance with
respect to non-financial regulatory matters. This committee was created
subsequent to the Corporation's fiscal year end and thus did not meet during
1999.
SECURITY OWNERSHIP OF CERTAIN STOCKHOLDERS AND MANAGEMENT
The following table provides information as of April 14, 2000 (except as
otherwise disclosed in the footnotes to the table) as to (i) each person who is
known to the Corporation to be the beneficial owner of more than 5% of the
Corporation's voting securities, (ii) each director and nominee, (iii) each of
the Named Executive Officers (as defined in "Executive Compensation" below), and
(iv) all current directors and executive officers as a group.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER(1) OWNERSHIP(1) COMMON STOCK(2)
- --------------------------------------- ------------ ---------------
<S> <C> <C>
SAFECO Asset Management and affiliated companies(3)......... 3,215,256 14.4%
SAFECO Plaza
Seattle, WA 98185-0001
T Rowe Price Associates, Inc. and affiliated companies(4)... 2,832,835 12.7%
100 E. Pratt Street,
Baltimore, MD 21202
Franklin Resources, Inc. and affiliated companies(5)........ 2,727,750 12.2%
777 Mariners Island Blvd.
P.O. Box 7777
San Mateo, CA 94403-7777
FMR Corp. and affiliated companies(6)....................... 1,150,000 5.2%
82 Devonshire Street
Boston, MA 02109
Samuel A. Penninger, Jr.(7)................................. 810,665 3.5%
Timm M. Hurst(8)............................................ 326,112 1.4%
Charles P. Harrison(9)...................................... 262,971 1.1%
George M. Shaw, M.D., Ph.D.(10)............................. 57,775 *
P. Ann Hoppe(11)............................................ 60,114 *
Toby L. Simon, M.D.(12)..................................... 65,875 *
Lawrence E. Tilton(13)...................................... 39,000 *
Wade Fetzer, III(14)........................................ 55,000 *
Matthew C. Weisman(15)...................................... 20,425 *
Desmond H. O'Connell(16).................................... 113,000 *
Harold J. Tenoso, Ph.D.(17)................................. 1,181,636 5.0%
All current executive officers and directors as a group
(consisting of 11 individuals)(18)........................ 1,609,864 6.8%
</TABLE>
- ---------------
* Less than 1%.
(1) This table identifies persons having sole voting and investment power with
respect to the shares, or shares underlying options, set forth opposite
their names as of April 14, 2000, except as otherwise disclosed in the
footnotes to the table, according to information publicly filed or
furnished to the Corporation by each of them.
4
<PAGE> 7
(2) Shares beneficially owned, as recorded in this table, expressed as a
percentage of the shares of Common Stock of the Corporation outstanding as
of April 14, 2000. For purposes of calculating each person's beneficial
ownership, any shares subject to options exercisable within 60 days of
April 14, 2000 are deemed to be beneficially owned by, and outstanding with
respect to, such person.
(3) Based on a joint Schedule 13G dated February 10, 2000 filed with the
Securities and Exchange Commission, as of December 31, 1999 SAFECO
Corporation was the beneficial owner with shared voting and dispositive
power of 3,215,256 shares of Common Stock; SAFECO Common Stock Trust was
the beneficial owner with shared voting and dispositive power of 2,346,756
shares of Common Stock; and SAFECO Asset Management Company was the
beneficial owner with shared voting and dispositive power of 3,215,256
shares of Common Stock. SAFECO Asset Management Company and SAFECO
Corporation disclaim beneficial ownership of the shares reported.
(4) Based on a joint Schedule 13G dated February 14, 2000 filed with the
Securities and Exchange Commission, as of December 31, 1999 T. Rowe Price
Associates, Inc. was the beneficial owner of 2,832,835 shares of Common
Stock, with shared voting with respect to 254,800 shares and sole
dispositive power with respect to 2,832,835 shares of Common Stock. T. Rowe
Price Associates, Inc. disclaims beneficial ownership to any of these
shares. T. Rowe Price New Horizons Fund, Inc. was the beneficial owner with
sole voting power of 1,825,000 shares of Common Stock, and had no
dispositive powers.
(5) Based on a joint Schedule 13G dated January 31, 2000 filed with the
Securities and Exchange Commission, as of December 31, 1999 Franklin
Resources, Inc., Charles B. Johnson, Rupert H. Johnson, Jr. and Franklin
Advisers, Inc. were each the beneficial owner of 2,727,750 shares of Common
Stock. Franklin Resources, Inc., Charles B. Johnson and Rupert H. Johnson,
Jr. each disclaim beneficial ownership of these shares. Franklin Advisers,
Inc. had sole voting and dispositive power for all shares beneficially
owned.
(6) Based on a joint Schedule 13G dated February 14, 2000 filed with the
Securities and Exchange Commission, as of December 31, 1999 FMR Corp.,
Fidelity Management & Research Company, Edward C. Johnson, III and Abigail
P. Johnson were each the beneficial owner of 1,150,000 shares of Common
Stock.
(7) Includes 795,665 shares held jointly with Mr. Penninger's spouse, and 7,500
shares held in each of two trusts for certain members of his family and of
which his spouse is trustee.
(8) Includes 124,112 shares of Common Stock that Mr. Hurst has the right to
acquire pursuant to options exercisable within 60 days.
(9) Includes 245,687 shares of Common Stock that Mr. Harrison has the right to
acquire pursuant to options exercisable within 60 days.
(10) Includes 52,775 shares of Common Stock that Dr. Shaw has the right to
acquire pursuant to options exercisable within 60 days.
(11) Includes 52,625 shares of Common Stock that Ms. Hoppe has the right to
acquire pursuant to options exercisable within 60 days.
(12) Includes 61,875 shares of Common Stock that Dr. Simon has the right to
acquire pursuant to options exercisable within 60 days.
(13) Represents Common Stock that Mr. Tilton has the right to acquire pursuant
to options exercisable within 60 days.
(14) Includes 36,000 shares of Common Stock that Mr. Fetzer has the right to
acquire pursuant to options exercisable within 60 days.
(15) Includes 11,250 shares of Common Stock that Mr. Weisman has the right to
acquire pursuant to options exercisable within 60 days.
(16) Includes 93,000 shares of Common Stock that Mr. O'Connell has the right to
acquire pursuant to options exercisable within 60 days.
5
<PAGE> 8
(17) Based on a Schedule 13G dated February 4, 2000 filed with the Securities
and Exchange Commission, as of December 31, 1999 Dr. Tenoso was the
beneficial owner of 1,181,636 shares of Common Stock, 1,174,136 of which he
had the right to acquire pursuant to options exercisable within 60 days of
such date.
(18) Excludes an aggregate of 1,444,607 shares beneficially owned by Dr. Tenoso
and Mr. Harrison, who are no longer officers of the Corporation. Includes
517,793 shares of Common Stock which members of the group have the right to
acquire pursuant to options exercisable within 60 days.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth for the fiscal years ended December 26,
1999, December 27, 1998 and December 28, 1997, the compensation for services in
all capacities to the Corporation of the individuals serving or having served as
chief executive officer and the other four most highly compensated executive
officers of the Corporation during the fiscal year ended December 26, 1999
(collectively, the "Named Executive Officers"):
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION ------------
--------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
SALARY BONUS(4) COMPENSATION OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) (#) ($)
- --------------------------- ---- ------- -------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Desmond H. O'Connell, Jr.(1)........... 1999 101,000 -- 17,000 75,000 --
President and Chief 1998 -- -- 4,000 36,000 --
Executive Officer 1997 -- -- -- -- --
Harold J. Tenoso, Ph.D.(2)............. 1999 211,600 75,000 23,546(5) 69,880(6) 88,132(7)
Former President and Chief 1998 245,202 37,116 34,229 -- 8,575
Executive Officer 1997 200,000 65,000 37,126 120,125 6,208
Charles P. Harrison(3)................. 1999 185,000 -- -- 155,000(6) 9,604(7)
Former Vice President, 1998 180,000 26,000 -- -- 4,031
Therapeutic Business Unit 1997 165,000 45,000 -- 72,000 2,562
P. Ann Hoppe........................... 1999 177,500 -- -- 141,000(6) 9,384(7)
Vice President, 1998 160,384 27,000 -- -- 6,832
Regulatory Affairs 1997 113,192 60,000 85,348 61,000 1,606
Timm M. Hurst.......................... 1999 175,000 -- 21,738(5) 155,000(6) 8,206(7)
Vice President, 1998 149,997 28,500 29,888 -- 5,158
Sales and Marketing 1997 125,000 45,000 -- 50,050 2,146
Toby L. Simon, M.D..................... 1999 170,000 -- -- 31,000(6) 9,813(7)
Vice President, 1998 165,000 24,000 -- -- 5,904
Medical and Scientific Affairs 1997 121,577 50,000 83,365 75,000 1,121
</TABLE>
- ---------------
(1) Mr. O'Connell, a director of the Corporation, assumed the role of interim
President and Chief Executive Officer effective September 10, 1999. The
column entitled "Other Annual Compensation" includes cash compensation paid
to Mr. O'Connell for service on the Corporation's Board of Directors.
(2) Dr. Tenoso resigned from all offices and as a director of the Corporation
effective September 10, 1999.
(3) Mr. Harrison resigned from the Corporation effective March 24, 2000.
(4) Represents cash bonuses earned in the year stated and paid in the subsequent
year. The bonus payable to Dr. Tenoso was the amount required to be paid
under his employment agreement and is being paid in 26 biweekly
installments.
(5) Consists of $15,199 and $8,347 for Dr. Tenoso which relates to additional
life insurance and automobile expenses and reimbursement for taxes related
thereto, respectively, and $14,032 and $7,706 for Mr. Hurst which relates to
housing and travel expenses and reimbursement for taxes related thereto,
respectively.
6
<PAGE> 9
(6) Includes options to purchase 69,880, 55,000, 55,000 and 41,000 shares of
Common Stock granted to Dr. Tenoso, Mr. Harrison, Mr. Hurst and Ms. Hoppe in
calendar year 1998, respectively.
(7) Consists of Corporation contributions to the Corporation's 401(k) plan of
$3,523, $8,194, $7,760, $7,111 and $5,863 for Dr. Tenoso, Mr. Harrison, Dr.
Simon, Ms. Hoppe and Mr. Hurst, respectively, and premiums paid for term
life insurance of $3,843, $1,410, $2,053, $2,273 and $2,343 for Dr. Tenoso,
Mr. Harrison, Dr. Simon, Ms. Hoppe and Mr. Hurst, respectively. Includes
$80,766 of severance paid to Dr. Tenoso pursuant to the terms of his
employment agreement.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth each grant of stock options made during the
fiscal year ended December 26, 1999 to each of the Named Executive Officers who
received option grants during such year.
<TABLE>
<CAPTION>
POTENTIAL REALIZED
VALUE OF ASSUMED ANNUAL
NUMBER OF RATES OF STOCK PRICE
SECURITIES APPRECIATION FOR
UNDERLYING % OF TOTAL OPTION TERM(1)
OPTIONS OPTIONS GRANTED EXERCISE -----------------------
GRANTED TO EMPLOYEES IN PRICE EXPIRATION 5.0% 10.0%
NAME (#) FISCAL YEAR ($/SH) DATE ($) ($)
- ---- ---------- --------------- -------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Desmond H. O'Connell...... 75,000(2) 5.89% $4.813 11/12/2005 $122,766 $ 278,514
Harold J. Tenoso, Ph.D.... 69,880(3) 5.49 30.00 12/31/2004 330,445 693,908
Charles P. Harrison....... 100,000(4) 7.85 5.00 9/14/2005 170,048 385,781
55,000(4) 4.32 30.00 12/31/2004 561,158 1,273,076
Timm M. Hurst............. 100,000(5) 7.85 5.00 9/14/2005 170,048 385,781
55,000(6) 4.32 30.00 12/31/2004 561,158 1,273,076
P. Ann Hoppe.............. 100,000(5) 7.85 5.00 9/14/2005 170,048 385,781
41,000(6) 3.22 30.00 12/31/2004 418,318 949,020
Toby L. Simon, M.D........ 31,000(6) 2.43 30.00 12/31/2004 316,289 717,552
</TABLE>
- ---------------
(1) Potential realizable values are based on the fair market value per share on
the date of the grant and represent hypothetical gains that could be
achieved for the respective options if exercised at the end of the option
term. The dollar amounts set forth in these columns are the result of
calculations at the five percent and ten percent rates set by the Securities
and Exchange Commission, and are not intended to forecast possible future
appreciation, if any, of the Corporation's Common Stock price. There can be
no assurance that such potential realizable values will not be more or less
than that indicated in the table above.
(2) 50% of these options vested immediately upon the date of grant, which was
November 12, 1999, and 50% vested on March 10, 2000.
(3) These options expired concurrent with Dr. Tenoso's resignation on September
9, 1999.
(4) These options expired concurrent with Mr. Harrison's resignation on March
24, 2000.
(5) These options vest at the rate of 25% of the shares covered by the option on
each of the first four anniversary dates of the grant of the option, which
was September 14, 1999, and are subject to early vesting provisions in
certain events of termination.
(6) These options vest on the third anniversary of the date of grant, which was
December 31, 1998.
7
<PAGE> 10
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth information with respect to (i) each
exercise of options by the Named Executive Officers during the fiscal year ended
December 26, 1999, (ii) the number of unexercised options held by each of the
Named Executive Officers who held options as of December 26, 1999 and (iii) the
value of unexercised in-the-money options as of December 26, 1999.
<TABLE>
<CAPTION>
NUMBER OF
SHARES SECURITIES UNDERLYING VALUE OF UNEXERCISED
ACQUIRED ON VALUE UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS
EXERCISE REALIZED FISCAL YEAR END(#) AT FISCAL YEAR END($)
NAME (#) ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE(1)
- ---- ----------- -------- ------------------------- ----------------------------
<S> <C> <C> <C> <C>
Desmond H. O'Connell, Jr..... -- $ -- 46,500/64,500 $61,013/$61,013
Harold J. Tenoso, Ph.D....... 40,000 743,874 1,174,136/-- 4,154,801/--
Charles P. Harrison.......... 20,000 382,916 167,874/240,126 --/144,000
Timm M. Hurst................ 20,000 467,450 111,455/173,770 25,600/144,000
P. Ann Hoppe................. 6,000 210,333 35,750/180,750 --/144,000
Toby L. Simon, M.D........... 4,500 63,656 39,375/81,625 --/--
</TABLE>
- ---------------
(1) Calculated on the basis of the fair market value of $6.44 of the Common
Stock on December 26, 1999, minus the per share exercise price.
COMPENSATION OF DIRECTORS
Non-employee directors are paid $2,000 for each Board meeting attended and
$1,000 or $2,000 for each Committee meeting attended, depending on whether such
Committee meeting was held in conjunction with a full Board meeting.
Non-employee directors are also reimbursed for out-of-pocket expenses in
connection with attendance at such meetings.
In December 1999, the Corporation entered into a letter agreement with
Samuel A. Penninger, Jr., the Chairman of the Board of Directors of the
Corporation. Pursuant to the letter agreement, among other things, Mr. Penninger
agreed to resign as the Chairman of the Board not later than the day before the
Annual Meeting (but continue as a director) and to waive any lump sum grant of
options granted to non-employee directors upon election to the Board. The
Corporation agreed to pay Mr. Penninger $275,000 on or prior to January 14, 2000
and to grant to Mr. Penninger options to purchase 9,000 shares of Common Stock
in lieu of any other severance payments payable to him.
In addition to compensation received for serving as a director, Dr. Shaw is
compensated pursuant to a consulting arrangement in the amount of $22,500 per
annum. Dr. Shaw provides technical and scientific consulting services to the
Corporation relating to research and development matters as requested by the
Corporation from time to time.
In 1995, the Board of Directors adopted the Amended and Restated
Non-Employee Directors Stock Option Plan (the "NED Plan") which was subsequently
amended in May 1998. The NED Plan currently provides for the grant of options to
purchase 36,000 shares of Common Stock (the "Lump Sum Grant"), which generally
vest over four years, to each eligible director upon each person's first
election to the Board. In addition, the NED Plan also currently provides for the
automatic grant of options to purchase 9,000 shares of Common Stock on an annual
basis to each non-employee director of the Corporation who (or would have, but
for the non-employee director having declined a Lump Sum Grant) vested in full
in their Lump Sum Grant. The Compensation Committee administers the NED Plan.
In May 1998, the Board of Directors adopted the Serologicals Corporation
Compensation Plan for Non-Employee Directors (the "Director Compensation Plan").
Pursuant to the Director Compensation Plan, each non-employee director of the
Corporation may elect to receive their Board compensation either in cash, shares
of Common Stock or partly in cash and partly in shares of Common Stock. In
addition, an eligible director may defer the receipt of the Common Stock.
8
<PAGE> 11
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS
In connection with the commencement of Mr. O'Connell's role as interim
President and Chief Executive Officer, the Corporation entered into an agreement
with him pursuant to which he is paid $2,000 for each full business day worked.
In addition, pursuant to this agreement, Mr. O'Connell received options to
purchase 75,000 shares of Common Stock with an exercise price of $4.81 per
share, none of which has been exercised as of April 14, 2000. The options vested
at a rate of 50% upon grant and 50% on March 10, 2000. On April 18, 2000, the
Corporation and Mr. O'Connell entered into another agreement pursuant to which
the Corporation agreed to grant Mr. O'Connell options to purchase 37,500 shares
at an exercise price of $4.69 per share, 12,500 of which vested on the date of
grant and 12,500 of which vest on each of May 10 and June 10, 2000, provided
that Mr. O'Connell is still employed as President and Chief Executive Officer on
such dates.
Pursuant to an employment agreement entered into between the Corporation
and Dr. Tenoso in March 1993 and subsequently renewed, at the time of his
resignation, Dr. Tenoso became eligible for severance payments in the aggregate
amount of $300,000 and a bonus payment in the amount of $75,000. Such severance
and bonus amounts are being paid in 26 biweekly installments. Dr. Tenoso is also
eligible for reimbursement of outplacement expenses up to $10,000.
In connection with the commencement of Ms. Hoppe's employment, the
Corporation entered into an employment agreement with her in March 1997 for an
initial term of one year and subsequent automatic one-year renewals unless
terminated earlier pursuant to the provisions thereof. The agreement provides
for a current base salary of $185,000 per annum, participation in all bonus and
incentive plans of the Corporation available to officers and certain insurance
and other benefits. In addition, pursuant to such agreement, Ms. Hoppe received
options to purchase 67,500 shares of Common Stock with an exercise price of
$12.67 per share (of which 16,000 have been exercised as of April 14, 2000).
Such options vest at the rate of 25% per annum, commencing with the first
anniversary of the commencement of Ms. Hoppe's employment. Ms. Hoppe's agreement
provides that if her employment is terminated for any reason other than "for
cause", Ms. Hoppe shall receive severance payments equivalent to her base salary
plus benefits for a nine-month period. Such agreement also contains
non-competition provisions for the period of employment and 12 months
thereafter.
Pursuant to a transition agreement entered into between the Corporation and
Ms. Hoppe in January 2000, Ms. Hoppe will continue to serve as Vice President,
Regulatory Affairs of the Corporation during a transition period ending
September 30, 2000. At the end of the transition period, Ms. Hoppe will become
entitled to nine months salary continuation pursuant to the terms of her March
1997 employment agreement. Ms. Hoppe will also become entitled to reimbursement
of outplacement expenses up to $10,000.
In connection with the commencement of Dr. Simon's employment, the
Corporation entered into an employment agreement with him in March 1997 for an
initial term of one year and subsequent automatic one-year renewals unless
terminated earlier pursuant to the provisions thereof. The agreement provides
for a current base salary of $170,000 per annum, participation in all bonus and
incentive plans of the Corporation available to officers and certain insurance
and other benefits. In addition, pursuant to such agreement, Dr. Simon received
options to purchase 90,000 shares of Common Stock with an exercise price of
$11.67 per share (of which 22,500 have been exercised as of April 14, 2000).
Such options vest at the rate of 25% per annum, commencing with the first
anniversary of the commencement of Dr. Simon's employment. Dr. Simon's agreement
provides that if his employment is terminated for any reason other than "for
cause", Dr. Simon shall receive payments equivalent to his base salary plus
benefits for a nine-month period. Such agreement also contains non-competition
provisions for the period of employment and 12 months thereafter.
Pursuant to a severance agreement entered into between the Corporation and
Mr. Hurst in September 1999, Mr. Hurst will become entitled to certain benefits
payable under a severance agreement entered into between the Corporation and Mr.
Hurst in August of 1993. In connection therewith, and unless Mr. Hurst is
terminated for "substantial cause" as defined therein, Mr. Hurst will become
entitled at the time of his termination, which shall be prior to September 30,
2000, to severance payments in the amount of $253,333. Such severance shall be
payable over a 16-month period or, at the Corporation's option, in a lump sum
amount.
9
<PAGE> 12
In March 1998, the Corporation entered into severance agreements with each
named Executive Officer and certain other officers of the Corporation. The
Corporation entered into a senior executive severance agreement with Mr. Hurst
(the "Senior Executive Agreement"). Pursuant to the Senior Executive Agreement,
Mr. Hurst is entitled to a termination payment equal to 2.99 times his salary
and bonus averaged over the most recent three-year period, a gross-up for excise
taxes, if any, the continuation of benefits for three years and the vesting of
all outstanding and unvested stock options in the event that (a) such executive
elects to terminate his employment within twelve months following a "Change in
Control" (as defined therein) or (b) within two years after the occurrence of a
Change in Control, either (i) the Corporation terminates such executive's
employment or (ii) such executive terminates his employment following a
"Constructive Dismissal" (as defined therein). "Change in Control" is defined as
(a) a majority change in the Board of Directors not approved by the incumbent
Board, (b) any person or group (not including such executive) acquires (i)
beneficial ownership of thirty percent or more of the Corporation's voting
securities or (ii) all or substantially all of the assets of the Corporation,
(c) commencement of a tender offer for capital stock of the Corporation or (d)
the stockholders of the Corporation approve the liquidation of the Corporation
or the sale of all or substantially all of its assets. "Constructive Dismissal"
is defined as (a) demotion, (b) changes in title or reporting relationship
resulting in a diminution of position, duties, authority or responsibility, (c)
significant reduction of duties, (d) material decrease in benefits or
compensation by 10% or greater, (e) significant increase in duties or
responsibilities without a corresponding change of title and increase in
compensation or (f) relocation. The Corporation entered into executive severance
agreements with Dr. Simon and Ms. Hoppe (the "Executive Agreements"). The
Executive Agreements are substantially equivalent to the Senior Executive
Agreement except that (a) the termination payment provided for in the Executive
Agreements is equal to 2.0 times such executive's salary and bonus averaged over
the most recent three-year period, (b) the benefits are to be continued for two
years and (c) the executive's signatory thereto are not entitled to trigger such
termination payment by resigning within twelve months following a Change of
Control.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee are described under "Meetings of
the Board" and their relationship to the Corporation is described under
"Information as to Nominees and Other Directors."
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Compensation
Committee") establishes and reviews the Corporation's arrangements and programs
for compensating its officers, including the Named Executive Officers and all
compensation-related arrangements involving the Corporation's stock or stock
options. The Compensation Committee is composed of directors who are neither
officers nor employees of the Corporation.
Philosophy and Strategy
The Compensation Committee's philosophy is to design executive compensation
packages that are competitive and reward employees for the Corporation's
achievement of its strategic objectives and, in the long term, the creation of
stockholder value. Under this approach, the Compensation Committee believes that
the Corporation's executives and select key managers should receive an annual
base salary which approximates the median for the market, the market being
defined as a peer group of comparable companies. Annual cash incentive
compensation, which is largely based upon the attainment of predetermined
earnings, cash flow and divisional earnings targets of the Corporation, as well
as the achievement of individual performance objectives, is targeted to
approximate the market median, resulting in annual cash compensation (base
salary plus incentives) being at or near the market median if the Corporation
achieves its financial objectives. To align the long-term interests of the
Corporation's executives and managers with those of its stockholders and to
encourage and reward above-average performance over time, the Compensation
Committee believes that the Corporation's executives and select key managers
should remain eligible to receive equity-based incentives, primarily in the form
of stock options, at the market median, resulting in the Corporation's
10
<PAGE> 13
executives and select key managers receiving total direct compensation (base
salary plus short-term and long-term incentives) in the 50th to 75th percentile
of the market.
In 1997, a nationally recognized consulting firm retained by the
Corporation prepared an analysis of the Corporation's executive compensation
practices. The resulting analysis suggested that the Corporation's compensation
practices relating to its executive officers were less than competitive and
inconsistent with its compensation strategy as stated above. In 1998, the
Compensation Committee altered the mix of executive compensation to better
reflect the Corporation's compensation philosophy and to ensure the Corporation
remains competitive in the market and continues to be able to attract and retain
qualified personnel. In 1999, the Compensation Committee again utilized the
expertise of an outside consulting firm to review the competitiveness of
executive compensation in light of recent Corporation performance and changes in
organizational structure.
Determination of Compensation
Salaries for all officers, other than the Chief Executive Officer, are
recommended by the Chief Executive Officer to the Compensation Committee for its
approval. The Compensation Committee, pursuant to the Chief Executive Officer's
employment agreement, determines the salary of the Chief Executive Officer.
Annual cash incentive compensation, and, if applicable, the acceleration of
the vesting period associated with certain stock options granted to executives
and select key managers, are based largely on the attainment of predetermined
earnings, cash flow and divisional earnings targets as well as upon the
attainment of predetermined individual performance objectives. These earnings
targets are recommended by management, approved by the Chief Executive Officer
and approved by the Compensation Committee and the Board of Directors at the
beginning of each fiscal year. Cash incentives are earned, and, generally, the
vesting period of a portion of the options annually granted are eligible for
accelerated vesting, if the targeted levels of cash flow and earnings are
achieved. The Chief Executive Officer has the discretion, in limited
circumstances and subject to approval of the Compensation Committee, to adjust
annual cash incentives in the event that the achievement of corporate or
divisional results does not adequately reflect a participant's effort. The
percentage of a respective executive's salary, which may be earned as a cash
incentive, varies depending on the individual's position and role with the
Corporation during the plan year.
Long-term incentives are provided primarily through the granting of stock
options that typically vest at the end of a three-year period but are subject to
the acceleration provisions described above. During 1999, the Corporation
granted certain stock options that vest ratably over a four-year period and are
subject to early vesting provisions in certain cases of termination not for
cause. The Compensation Committee determines the recipients of stock option
grants and the size of the grants consistent with these principles, based on the
individual's position and role with the Corporation.
Compensation of the Chief Executive Officer
Dr. Tenoso's compensation and severance payments for fiscal year 1999 were
determined by his employment agreement entered into in March 1993, which was
renewed automatically for an additional year in March 1999 and effective until
his resignation from the Corporation in September 1999.
Mr. O'Connell's compensation is determined based on a letter agreement
entered into between him and the Corporation in November 1999. The terms of the
arrangement were based in part on the analysis done by the Compensation
Committee's external compensation consultant, and the short-term nature of Mr.
O'Connell's engagement as interim President and Chief Executive Officer.
11
<PAGE> 14
Deductibility of Executive Compensation
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code") generally limits the annual tax deduction for applicable remuneration
paid to the Corporation's Chief Executive Officer and certain other highly
compensated executive officers to $1,000,000. The Compensation Committee does
not believe that the compensation to be paid to the Corporation's executives
will exceed the deduction limit set by Section 162(m).
COMPENSATION COMMITTEE
Lawrence E. Tilton, Chairman
Matthew C. Weisman
The foregoing report of the Compensation Committee shall not be deemed to
be incorporated by reference by any general statement incorporating by reference
this Proxy Statement into any filing under the Securities Act of 1933, as
amended, or the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), unless the Corporation specifically incorporates this information by
reference, and shall not otherwise be deemed filed under such Acts.
12
<PAGE> 15
PERFORMANCE GRAPH
The graph below compares the cumulative total return on the Corporation's
Common Stock from June 15, 1995 (the date of the Corporation's initial public
offering) through December 26, 1999 with the cumulative total return of the
Nasdaq Stock Market Total Return Index and the Nasdaq Pharmaceutical Stock
Index. Cumulative total return values were calculated assuming an investment of
$100 on June 15, 1995 and reinvestment of dividends.
SEROLOGICALS CORPORATION
TOTAL RETURN ANALYSIS
<TABLE>
<CAPTION>
DATE NASDAQ PHARMACEUTICAL STOCKS THE NASDAQ STOCK MARKET SEROLOGICALS CORPORATION
---- ---------------------------- ----------------------- ------------------------
<S> <C> <C> <C>
6/15/95 100.00 100.00 100.00
12/31/95 153.05 117,34 143.48
12/29/96 152.36 144.54 266.30
12/28/97 153.55 170.26 306.52
12/27/98 190.36 245.91 528.26
12/26/99 350.20 439.13 125.96
</TABLE>
APPROVAL OF AN AMENDMENT TO THE SECOND
AMENDED AND RESTATED
1994 OMNIBUS INCENTIVE PLAN
In October 1994, the Board of Directors approved the Omnibus Plan, which
was amended in April 1995, February 1996 and March 1998 and subsequently
approved in each case by the Corporation's stockholders. The Omnibus Plan is
designed to provide an incentive to the officers and certain other key employees
of and consultants to the Corporation and its affiliates by making available to
them an opportunity to acquire an equity interest or to increase their equity
interest in the Corporation.
The Board of Directors has approved, and recommends that the stockholders
approve, the Omnibus Plan Amendment to increase the maximum number of shares of
Common Stock that may be issued pursuant to awards to any participant in any
given fiscal year from two hundred twenty-five thousand (225,000) shares (after
giving effect to stock splits) to five hundred twenty-five thousand (525,000)
shares.
13
<PAGE> 16
DESCRIPTION
The following description of the Second Amended and Restated 1994 Omnibus
Incentive Plan is qualified in its entirety by reference to the full text of the
Second Amended and Restated 1994 Omnibus Incentive Plan, As Amended set forth as
Attachment A to this Proxy Statement.
The Compensation Committee (the "Committee") administers the Omnibus Plan.
Persons eligible to participate in the Omnibus Plan include any officer,
director, consultant, or other employee who is a regular full-time employee of
the Corporation or its present or future affiliates (as defined in the Omnibus
Plan). The Committee has the full power and authority, subject to the provisions
of the Omnibus Plan, to designate participants from among the eligible class
thereof, grant compensatory awards ("Awards") and determine the terms of all
Awards. The Committee has the right to make adjustments with respect to Awards
granted under the Omnibus Plan in order to prevent dilution of the rights of any
holder. Members of the Committee are not eligible to receive Awards under the
Omnibus Plan and are non-employee directors within the meaning of Section 16 of
the Exchange Act and outside directors within the meaning of Section 162(m) of
the Internal Revenue Code of 1986, as amended (the "Code").
Stock Awards. The Committee has the right to grant Awards of shares of
Common Stock that are subject to such restrictions (including restrictions on
transferability and limitations on the right to vote or receive dividends with
respect to the restricted shares) and such terms regarding the lapse of
restrictions as the Committee deems appropriate. Generally, upon termination of
employment for any reason during the restriction period, restricted shares shall
be forfeited to the Corporation.
Options Issued Under Omnibus Plan. The Committee determines the terms of
specific options. Options granted may be non-qualified ("NQSO's") or incentive
stock options within the meaning of Code Section 422 ("ISO's"). The exercise
price per share for a NQSO is subject to the determination of the Committee.
ISOs may not be granted at less than 100% of the fair market value at the date
of grant. Each option will be exercisable after the period or periods specified
in the option agreement, which will generally not exceed 10 years from the date
of grant. Options may be issued in tandem with stock appreciation rights
("SARs") as a performance award ("Tandem Options"). SARs may be granted upon
such terms as the Board of Directors or the Committee may from time to time
determine.
Upon the exercise of an option, the option holder shall pay to the
Corporation the exercise price plus the amount of the required Federal and state
withholding taxes, if any. Options may be exercised and the withholding
obligation may be paid for with cash and, with the consent of the Committee,
shares of Common Stock, other securities (including options) or other property.
The periods after termination of employment during which an option may be
exercised is as determined by the Committee. In the absence of any specific
determination by the Committee, the following rules will generally apply. The
unexercised portion of any option granted under the Omnibus Plan will generally
be terminated (a) three months after the date on which the optionee's employment
is terminated for any reason other than (i) cause, (ii) mental or physical
disability, (iii) death or (iv) retirement; (b) immediately upon the termination
of the optionee's employment for cause; (c) six months after the date on which
the optionee's employment is terminated by reason of mental or physical
disability; or (d)(i) 12 months after the date on which the optionee's
employment is terminated by reason of retirement or the death of the employee,
or (ii) nine months after the date on which the optionee shall die if such death
shall occur during the three-month period following the termination of the
optionee's employment by reason of retirement or mental or physical disability.
SARS. An Award may consist of SARs. Upon exercising an SAR, the holder
will be paid by the Corporation an amount in cash equal to the difference
between the fair market value of the shares of Common Stock on the date of
exercise and the fair market value of the shares of Common Stock on the date of
the grant of the SAR, less applicable withholding of Federal and state taxes.
Performance Awards Consisting Of Options And SARS Issued In Tandem Under
Omnibus Plan. Upon exercise of a Tandem Option, the optionee will be entitled
to a credit toward the exercise price equal to the value of the SARs issued in
tandem with the option exercised, but not to exceed the amount of the Federal
income tax deduction allowed to the Corporation in respect of such SAR. Upon
exercise of a Tandem Option,
14
<PAGE> 17
the related SAR shall terminate, the value being limited to the credit which can
be applied only toward the purchase price of Common Stock. In all cases, full
payment of the net purchase price of the shares must be made in cash or its
equivalent at the time the Tandem Option is exercised, together with the amount
of the required Federal and state withholding taxes, if any. When an SAR issued
as part of a Tandem Option is exercised, the option to which it related will
cease to be exercisable to the extent of the number of shares with respect to
which the SAR was exercised.
Other Performance Awards Issued Under The Omnibus Plan. The Omnibus Plan
authorizes the Committee to grant, to the extent permitted under Rule 16b-3
promulgated under the Exchange Act and applicable law, other Awards that are
denominated or payable in, valued by reference to, or otherwise based on or
related to Common Stock. Furthermore, the amount or terms of an Award may be
related to the performance of the Corporation or to such other criteria or
measure of performance as the Committee may determine.
FEDERAL INCOME TAX CONSEQUENCES
Set forth below is a description of the federal income tax consequences
relating to the grant and exercise of the benefits awarded under the Omnibus
Plan. This description does not purport to be a complete description of the
income tax aspects of the Omnibus Plan. The summary does not include any
discussion of state, local or foreign income tax consequences or the effect of
gift, estate or inheritance taxes, any of which may be significant to a
particular employee eligible to receive awards.
There are generally no federal income tax consequences to optionees, or the
Corporation, on the grant of a NQSO. Upon the exercise of a NQSO, the optionee
generally recognizes taxable ordinary income, subject, in the case of an
employee, to withholding, equal to the excess of the fair market value of the
shares of Common Stock on the exercise date over the option price of the shares.
The Corporation is entitled to a tax deduction in an amount equal to the amount
of taxable ordinary income recognized by the optionee, provided the Corporation
complies with applicable withholding and/or reporting rules. Any taxable
ordinary income recognized by an optionee upon exercise of a NQSO will increase
his tax basis in the share of Common Stock thereby acquired.
Any gain or any loss recognized upon the subsequent disposition of the
acquired Common Stock will be a capital gain or loss, and will be a long-term
gain or loss if such shares of Common Stock are held for more than one year. The
maximum long-term capital gains rate for individuals currently is 20%.
An optionee who surrenders shares of Common Stock as payment for the
exercise price of a NQSO will not recognize gain or loss on his surrender of
such shares, but will recognize taxable ordinary income on the exercise of the
NQSO as described above. Of the shares received in such an exchange, that number
of shares equal to the number of shares surrendered will have the same tax basis
and capital gains holding period as the shares surrendered. The balance of the
shares received will have a tax basis equal to their fair market value on the
date of exercise, and the capital gains holding period will begin on the date of
exercise.
With respect to ISOs, an employee generally does not recognize taxable
ordinary income, and no tax deduction is available to the Corporation, upon
either the grant or exercise of an ISO. However, the difference between the
exercise price of an ISO and the market price of the Common Stock on the
exercise date will be included in the alternative minimum taxable income of a
participant for purposes of the "alternative minimum tax ("AMT")." Generally, if
an optionee holds the shares acquired upon the exercise of ISOs until the later
of (i) two years from the grant of the ISOs or (ii) one year from the date of
acquisition of the shares upon exercise of ISOs, any gain recognized by the
participant on a sale of such shares will be treated as a capital gain. The gain
recognized upon the sale is the difference between the option price and the sale
price of the Common Stock. Generally, the income tax consequences to the holder
of ISOs is to defer (except for AMT purposes) until the shares are sold the
recognition of any increase in the value of the Common Stock from the time of
grant to the time of exercise, and to treat such increase as a capital gain. If
the optionee sells the shares prior to the expiration of the requisite holding
period set forth above, the optionee will recognize taxable ordinary income in
the amount equal to the difference between the fair market value on the exercise
date and the exercise price. The amount of taxable ordinary income will be added
to the optionee's basis for purposes of
15
<PAGE> 18
determining the gain on the sale of the shares of Common Stock. If the
application of the above-described rules would result in a loss to the optionee,
the taxable ordinary income required to be recognized thereby would be limited
to the excess, if any, of the amount realized on the sale over the basis of the
shares sold. The use by an optionee of shares previously acquired pursuant to
the exercise of an ISO to exercise an incentive stock option will be treated as
a taxable disposition if the transferred shares have not been held by the
optionee for the requisite holding period described above. If an optionee
disposes of shares obtained upon exercise of an ISO prior to the expiration of
the requisite holding period described above, the Corporation generally will be
entitled to a deduction in the amount of the taxable ordinary income that the
optionee recognizes as a result of the disposition.
With respect to SARs, when a participant exercises an SAR grant under the
Omnibus Plan, the amount of cash received will be ordinary income subject, in
the case of an employee, to withholding, and will be allowed as a deduction the
Corporation, subject to the Corporation satisfying its reporting and/or
withholding obligations.
Restricted stock and restricted stock units are not transferable and are
generally subject to forfeiture by a participant should a participant leave the
Corporation's employ during a specified period. For federal income tax purposes
the restricted stock and restricted stock units will be subject to a
"substantial risk of forfeiture" during such period. Thus, a participant will
defer the recognition of taxable ordinary income until the end of that period
and recognize such income equal to the fair market value of the restricted stock
and restricted stock units at such time, unless the participant elects within 30
days of the transfer of the restricted stock or restricted stock units to
recognize taxable income on the date of grant. Subject to the Corporation
satisfying certain reporting and/or withholding obligations, the Corporation
will be entitled to a deduction at the time and in an amount equal to the
taxable ordinary income recognized by the participant. Any additional gain or
any loss recognized upon the subsequent disposition of the acquired shares will
be a capital gain or loss, and will be a long-term gain or loss if the shares
are held for more than one year. The maximum long-term capital gains rate for
individuals is 20%.
If the Corporation delivers cash in lieu of fractional shares, the employee
will recognize taxable income equal to the cash paid and the fair market value
of any shares issued as of the date of exercise. An amount equal to such
ordinary income will be deductible by the Corporation, provided it complies with
applicable withholding requirements.
Section 162(m) of the Code generally disallows a tax deduction for annual
compensation in excess of $1,000,000 paid to the Chief Executive Officer or
certain other highly compensated executive officers. "Performance-based"
compensation will not be subject to this $1,000,000 deduction limitation.
Generally, since an employer is not entitled to a deduction upon the grant or
exercise of an ISO in any event, this provision does not affect the
Corporation's tax treatment with regard to ISOs. Options (other than ISOs) and
SARs granted under a plan approved by stockholders with an exercise price equal
to the fair market value of the underlying stock as of the date of grant are
considered performance-based compensation, if certain requirements are met. The
Omnibus Plan meets such requirements and, upon approval of the Omnibus Plan
Amendment, the Omnibus Plan, as amended, will meet such requirements and,
accordingly, any income realized by employees with respect to options or SARs
granted with an exercise price equal to the fair market value at the time of
grant under the Omnibus Plan will not be subject to the deduction limitation of
Section 162(m). The Committee may, but will not be required to, take such
additional steps as are necessary to ensure that other Awards under the Omnibus
Plan qualify for exemption from the deduction limitations of Code Section
162(m).
The Omnibus Plan is not subject to any provisions of the Employee
Retirement Income Security Act of 1974 and is not qualified under Section 401(a)
of the Code.
16
<PAGE> 19
STOCK PRICE
The closing price of the Common Stock on April 14, 2000 was $4.69.
NEW PLAN BENEFITS
SECOND AMENDED AND RESTATED 1994
OMNIBUS INCENTIVE PLAN, AS AMENDED
<TABLE>
<CAPTION>
DOLLAR NUMBER OF SHARES
NAME AND POSITION VALUE(1)(2) SUBJECT TO OPTIONS(1)(3)
- ----------------- ----------- ------------------------
<S> <C> <C>
Desmond H. O'Connell, Jr.
President and Chief Executive Officer..................... $122,250 75,000
Harold J. Tenoso, Ph.D.
Former President and Chief Executive Officer.............. $ -- 69,880
P. Ann Hoppe
Vice President, Regulatory Affairs........................ $144,000 141,000
Toby L. Simon, M.D.
Vice President, Medical and Scientific Affairs............ $ -- 31,000
Charles P. Harrison
Former Vice President, Therapeutic Business Unit.......... $144,000 155,000
Timm M. Hurst
Vice President, Sales and Marketing....................... $144,000 155,000
Current Executive Officers as a Group (6 individuals)....... $747,105 676,000
All Employees and Current Non-Executive Officers as a Group
(58 individuals).......................................... $ -- 266,025
</TABLE>
- ---------------
(1) Reflects benefits under the Omnibus Plan received during the fiscal year
ended December 26, 1999.
(2) Based on difference between the exercise price of the options and the
December 26, 1999 closing sale price of the Common Stock of $6.44.
(3) Options granted during the fiscal year ended December 26, 1999. Persons and
groups listed in the table may also receive grants under the Omnibus Plan in
the future at the discretion of the Compensation Committee.
BOARD RECOMMENDATION
The Board has concluded that the existing annual grant limitation is
insufficient to grant equity incentives to key management and other personnel,
primarily a chief executive officer, at a level that would enable the
Corporation to attract top-quality personnel. The ability of the Board to make
equity incentives a large portion of compensation packages enables the
Corporation to preserve its cash resources for investment in the Corporation's
business. Moreover, in the current stock and employment markets, equity
incentives are often a greater inducement to attract highly qualified
individuals than is cash compensation. Therefore, the Board desires to have the
flexibility to be able to attract and retain highly qualified individuals who
can assist in maximizing stockholder value.
It is also important to note that the Board is not requesting that
stockholders increase the maximum aggregate number of shares available for grant
under the Omnibus Plan. Therefore, approval of the Omnibus Plan Amendment will
not increase dilution to existing stockholders to a level greater than that
which has already been approved by stockholders.
The Board of Directors believes that the Omnibus Plan Amendment will be
beneficial in enabling the Corporation to retain its key employees and to
attract qualified and experienced employees by providing them the opportunity to
participate in the ownership of the Corporation and in the increased value which
they help the Corporation's stockholders realize. In addition, the Board of
Directors believes that the Omnibus Plan Amendment will be beneficial in
furthering a unity of economic interests between the Corporation's employees and
its stockholders.
17
<PAGE> 20
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THIS PROPOSAL. Proxies
solicited by the Board of Directors will be so voted unless stockholders specify
otherwise in their proxy. Approval of the Omnibus Plan Amendment requires the
affirmative vote of the holders of a majority of the total number of votes cast
at the Annual Meeting on this proposal.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Corporation's executive officers, directors and greater than ten
percent beneficial owners are required under the Exchange Act to file reports of
ownership and changes in ownership with the Securities and Exchange Commission.
Copies of those reports must also be furnished to the Corporation. Based solely
on the Corporation's review of the copies of such reports it has received, and
written representations from its executive officers and directors, the
Corporation believes that all its executive officers and directors and greater
than ten percent beneficial owners complied with all filing requirements
applicable to them.
OTHER BUSINESS
The Board of Directors of the Corporation knows of no other matters to be
presented at the Annual Meeting. However, if any other matters properly come
before the meeting, or any adjournment thereof, it is intended that proxies in
the accompanying form will be voted in accordance with the judgment of the
persons named therein.
STOCKHOLDER PROPOSALS
In accordance with the Corporation's Bylaws, any proposal by a stockholder
which he or she believes should be voted upon at the Annual Meeting must be
submitted in writing to the Secretary of the Corporation not less than 60 days
or more than 90 days prior to the first anniversary of the preceding year's
annual meeting of stockholders; provided, however, that in the event that the
annual meeting with respect to which such notice is to be tendered is not held
within 30 days before or after such anniversary date, notice by the stockholder
to be timely must be received no later than the close of business on the tenth
day following the day on which notice of the date of the annual meeting or
public disclosure thereof was given or made. In accordance with the
Corporation's Certificate of Incorporation, nominations for directors made by
stockholders must be submitted in the same manner. Each such submission must
include certain specified information concerning the proposal or nominee, as the
case may be, and information as to the proponent's ownership of Common Stock of
the Corporation. Proposals or nominations not meeting these requirements will
not be entertained at the Annual Meeting. The Secretary should be contacted in
writing at the address on the first page of this Proxy Statement to make any
submission or to obtain additional information as to the proper form and content
of submissions. In addition, in accordance with the Exchange Act, proposals of
Stockholders intended to be presented at the next annual meeting of the
Corporation's stockholders must be received by the Corporation for inclusion in
the Corporation's 2001 Proxy Statement and form of proxy on or prior to December
27, 2000.
ANNUAL REPORTS AND FINANCIAL STATEMENTS
The Annual Report to Stockholders of the Corporation for the fiscal year
ended December 26, 1999 (the "Annual Report") as well as the Corporation's Form
10-K are being furnished simultaneously herewith. Such Annual Report and Form
10-K are not to be considered parts of this Proxy Statement.
INDEPENDENT AUDITORS
The Board of Directors has selected Arthur Andersen LLP as the
Corporation's independent auditors for the 2000 fiscal year. Representatives of
Arthur Andersen LLP will be present at the Annual Meeting and will be available
to respond to questions from stockholders.
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<PAGE> 21
COST OF SOLICITATION
The cost of soliciting proxies in the accompanying form has been or will be
borne by the Corporation. Directors, officers and employees of the Corporation
may solicit proxies personally or by telephone or other means of communications.
Although there is no formal agreement to do so, arrangements may be made with
brokerage houses and other custodians, nominees and fiduciaries to send proxies
and proxy material to their principals, and the Corporation may reimburse them
for any attendant expenses.
It is important that your shares be represented at the meeting. If you are
unable to be present in person, you are respectfully requested to sign the
enclosed proxy and return it in the enclosed stamped and addressed envelope as
promptly as possible.
By Order of the Board of Directors,
Peter J. Pizzo, III
Secretary
Dated: April 26, 2000
Atlanta, Georgia
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<PAGE> 22
ATTACHMENT A
SEROLOGICALS CORPORATION
SECOND AMENDED AND RESTATED
1994 OMNIBUS INCENTIVE PLAN, AS AMENDED
SECTION 1. PURPOSE
The purposes of the Serologicals Corporation Second Amended and Restated
1994 Omnibus Incentive Plan (the "Plan") are to encourage certain directors and
selected employees (or consultants) of Serologicals Corporation (together with
any successor thereto, the "Company") and its Affiliates (as defined below) to
acquire a proprietary interest in the growth and performance of the Company, to
generate an increased incentive to contribute to the Company's future success
and prosperity, thus enhancing the value of the Company for the benefit of its
stockholders, and to enhance the ability of the Company and its Affiliates to
attract and retain qualified individuals upon whom, in large measure, the
sustained progress, growth, and profitability of the Company depend.
SECTION 2. DEFINITIONS
As used in the Plan, the following terms shall have the meanings set forth
below:
(a) "Affiliate" shall mean any entity that, directly or through one or
more intermediaries, is controlled by, controls or is under common control
with, the Company; for purposes of this definition only, control shall
include, without limitation, the direct or indirect beneficial ownership of
10% or more of an entity's equity securities or economic interests.
(b) "Award" shall mean any Option, Stock Appreciation Right,
Restricted Stock, Restricted Stock Unit, Performance Award, Dividend
Equivalent, or other Stock Award or Stock-Based Award granted under the
Plan.
(c) "Award Agreement" shall mean a written agreement, contract, or
other instrument or document evidencing an Award granted under the Plan.
(d) "Board" shall mean the Board of Directors of the Company.
(e) "Cause" shall have the meaning provided in the Participant's
employment agreement; provided that if the Participant does not have an
employment agreement, Cause shall mean (i) the Participant's willful
misconduct, gross negligence or dishonesty in the performance of his duties
on behalf of the Company, (ii) the willful and repeated neglect, failure or
refusal of the Participant to carry out any reasonable request of the
Board, the Chief Executive Officer or any officer having supervisory
authority over the Participant, (iii) the material breach of any provision
of any employment, consulting, or other services agreement between the
Participant and the Company or (iv) the entering of a plea of guilty or
nolo contendere to, or the Participant's conviction of, a felony or other
crime involving moral turpitude, dishonesty, theft or unethical business
conduct.
(f) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time-to-time.
(g) "Committee" shall mean a committee of the Board designated by the
Board to administer the Plan and composed of not less than two (2)
directors, each of whom qualifies as a "disinterested person" within the
meaning of Rule 16b-3, and an "outside director" as defined for purposes of
Section 162(m) of the Code.
(h) "Dividend Equivalent" shall mean any right granted under Section
6(d) of the Plan.
(i) "Fair Market Value" shall mean, with respect to Shares (i) if the
Shares are listed on a registered securities exchange or quoted on the
National Market System, the closing price per share of the Shares on such
date (or, if there was no trading reported on such date, on the next
preceding day on which there was trading reported); (ii) if the Shares are
not listed on a registered securities exchange and
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not quoted on the National Market System, but the bid and asked prices per
share for the Shares are provided by Nasdaq, the National Quotation Bureau
Incorporated or any similar organization, the average of the closing bid
and asked prices per share of the Shares on such date (or, if there was no
trading in the Shares on such date, on the next preceding day on which
there was trading) as provided by such organization; and (iii) if the
Shares are not traded on a registered securities exchange and not quoted on
the National Market System and the bid and asked prices per share of the
Shares are not provided by Nasdaq, the National Quotation Bureau
Incorporated or any similar organization, solely as determined by the
Committee in good faith; the "Fair Market Value" of any property (other
than Shares), shall mean the fair market value of such property determined
by such methods or procedures as shall be established from time-to-time by
the Committee.
(j) "Incentive Stock Option" shall mean an option granted under
Section 6(a) of the Plan that meets the requirements of Section 422 of the
Code or any successor provision thereto.
(k) "Key Employee" shall mean any officer, director, consultant, or
other employee who is a regular full-time employee of the Company or its
present and future Affiliates.
(l) "Non-Qualified Stock Option" shall mean an option granted under
Section 6(a) of the Plan that is not an Incentive Stock Option.
(m) "Option" shall mean an Incentive Stock Option or a Non-Qualified
Stock Option.
(n) "Participant" shall mean a Key Employee who has been granted an
Award under the Plan.
(o) "Performance Award" shall mean any right granted under Section
6(f) of the Plan.
(p) "Person" shall mean any individual, corporation, partnership,
association, joint-stock company, trust, unincorporated organization, or
government or political subdivision thereof.
(q) "Released Securities" shall mean securities that were Restricted
Securities with respect to which all applicable restrictions have expired,
lapsed, or been waived.
(r) "Restricted Securities" shall mean Restricted Stock or any other
Award under which issued and outstanding Shares are held subject to
restrictions imposed by the terms of the Award.
(s) "Restricted Stock" shall mean any Share granted under Section 6(c)
of the Plan.
(t) "Restricted Stock Unit" shall mean any right granted under Section
6(c) of the Plan that is denominated in Shares.
(u) "Rule 16b-3" shall mean Rule 16b-3 promulgated by the Securities
and Exchange Commission under the Securities Exchange Act of 1934, as
amended, or any successor rule or regulation thereto.
(v) "Shares" shall mean the common stock of the Company, $.01 par
value, and such other securities or property as may become the subject of
Awards pursuant to an adjustment made under Section 4(b) of the Plan.
(w) "Stock Appreciation Right" shall mean any right granted under
Section 6(b) of the Plan.
(x) "Stock Award" shall mean an Award of an Option, Restricted Stock,
or other right or security consisting of or convertible into Shares.
(y) "Stock-Based Award" shall mean an Award of a Stock Appreciation
Right, Dividend Equivalent, Restricted Stock Unit or other right, the value
of which is determined by reference to Shares.
(z) "Tandem Option" shall mean a Non-Qualified Option issued in tandem
with a Stock Appreciation Right.
SECTION 3. ADMINISTRATION
(a) Generally. The Plan shall be administered by the Committee.
Unless otherwise expressly provided in the Plan, all designations,
determinations, interpretations and other decisions under or with
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respect to the Plan or any Award shall be within the sole discretion of the
Committee, may be made at any time, and shall be final, binding and
conclusive upon all Persons, including the Company, any Affiliate, any
Participant, any holder or beneficiary of any Award, any Stockholder, and
any employee of the Company or of any Affiliate. Notwithstanding anything
to the contrary contained in this Section 3, no member of the Committee
shall participate in any action of the Committee directly affecting his
rights under the Plan.
(b) Powers. Subject to the terms of the Plan and applicable law, the
Committee shall have the full power and authority to: (i) designate
Participants; (ii) determine the type or types of Awards to be granted to
each Participant under the Plan; (iii) determine the number of shares to be
covered by (or with respect to which payments, rights or other matters are
to be calculated in connection with), Awards; (iv) determine the terms and
conditions of any Award; (v) determine whether, to what extent, and under
what circumstances Awards may be settled or exercised in cash, Shares,
other Awards, or other property, or canceled, forfeited, or suspended, and
the method or methods by which Awards may be settled, exercised, canceled,
forfeited, or suspended; (vi) determine whether, to what extent, and under
what circumstances cash, Shares, other Awards, other property, and other
amounts payable with respect to an Award under the Plan shall be deferred;
(vii) interpret and administer the Plan and any instruments or agreements
relating to, or Award made under, the Plan; (viii) establish, amend,
suspend, or waive such rules and regulations and appoint such agents as it
shall deem appropriate for the proper administration of the Plan; and (ix)
make any other determination and take any other action that the Committee
deems necessary or desirable for the administration of the Plan.
(c) Reliance. Indemnification. The Committee may employ attorneys,
consultants, accountants or other persons and the Committee, the Company
and its officers and directors shall be entitled to rely upon the advice,
opinions or valuations of any such persons. No member of the Committee
shall be personally liable for any action, determination or interpretation
taken or made in good faith with respect to the Plan, or Awards made
thereunder, and all members of the Committee shall be fully indemnified and
protected by the Company in respect of any such action, determination or
interpretation.
SECTION 4. SHARES AVAILABLE FOR AWARDS
(a) Shares Available. Subject to adjustment as provided in Section
4(b):
(i) Limitation on Number of Shares. Awards issuable under the Plan
are limited such that the maximum aggregate number of Shares with
respect to which Stock Awards and Stock-Based Awards may be granted to
any recipient are 525,000 in any fiscal year, to an aggregate maximum
for all recipients in all years of 4,875,000 (after giving effect to the
3-for-2 stock split of the Shares in August 1998) any or all of which
may be subject to Incentive Stock Options or other Awards in the
discretion of the Committee. To the extent that an Award ceases to
remain outstanding by reason of termination of rights granted
thereunder, forfeiture or otherwise, the Shares subject to such Award
shall again become available for Award under the Plan; provided,
however, that in the case of the cancellation or termination of an
Option in the same fiscal year that such Option was granted (or for
purposes of determining the maximum number of Options which may be
granted to any recipient under the Plan, the cancellation or termination
of the Option at any time) both the canceled Option and the newly
granted Option shall be counted in determining whether the recipient has
received the maximum number of Options permitted to be issued to any one
recipient under the Plan.
(ii) Accounting for Awards. For purposes of this Section 4, for
any Award which is denominated in, or with respect to, Shares, the
number of Shares covered by such Award, or to which such Award relates,
shall be counted on the date of grant of such Award against the
aggregate number of Shares available for granting Awards under the Plan;
provided, however, that Awards that operate in tandem with (whether
granted simultaneously with or at a different time from), or that are
substituted for, other Awards may be counted or not counted under
procedures adopted by the Committee in order to avoid double counting.
Any Shares that are delivered by the Company pursuant to any Award, and
any Awards that are granted by or become obligations of the Company
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through the assumption by the Company or an Affiliate of, or in
substitution for, outstanding awards previously granted by an acquired
company shall be counted against the Shares available for granting
Awards under the Plan.
(iii) Sources of Shares Deliverable Under Awards. Any Shares
delivered pursuant to an Award may consist, in whole or in part, of
authorized and unissued Shares or of treasury Shares.
(b) Adjustments. In the event that the Committee shall determine that
any (i) subdivision or consolidation of Shares, (ii) stock dividend or
other distribution of property other than cash, (iii) recapitalization or
other capital adjustment of the Company or (iv) merger, consolidation or
other reorganization of the Company or other rights to purchase Shares or
other securities of the Company, or other similar corporate transaction or
event, affects the Shares such that an adjustment is determined by the
Committee to be appropriate in order to prevent dilution or enlargement of
the benefits or potential benefits intended to be made available under the
Plan, then the Committee shall, in such manner as it may deem equitable,
adjust any or all of (x) the number and type of Shares (or other securities
or property) which thereafter may be made the subject of Awards, (y) the
number and type of Shares (or other securities or property) subject to
outstanding Awards, and (z) the grant, purchase, or exercise price with
respect to any Award or, if deemed appropriate, make provision for a cash
payment to the holder of an outstanding Award; provided, however, in each
case, that with respect to Awards of Incentive Stock Options no such
adjustment shall be authorized to the extent that such adjustment would
cause the Plan to violate Section 422 of the Code or for compensation
otherwise exempt from the application of Code Section 162(m) to fail to so
qualify for such exemption; and provided further, however, that the number
of Shares subject to any Award denominated in Shares shall always be a
whole number.
SECTION 5. ELIGIBILITY FOR AWARDS
(a) Eligibility for Awards. Awards may be granted only to Key
Employees and, solely as provided in Section 5(b) hereof, to directors who
are not otherwise Key Employees. In determining the employees to whom
Awards shall be granted and the number of shares or units to be covered by
each Award, the Committee shall take into account the nature of employees'
duties, their present and potential contributions to the success of the
Company and such other factors as it shall deem relevant in connection with
accomplishing the purposes of the Plan. A director of the Company or a
subsidiary who is not also a regular full-time employee will not be
eligible to receive an Award except as provided in Section 5(b). A Key
Employee who has been granted an Award or Awards under the Plan may be
granted an additional Award or Awards, subject to such limitations as may
be imposed by the Code on the grant of Incentive Stock Options.
(b) Awards to Directors. (i) The following provisions shall apply to
the Options to purchase an aggregate of 48,000 Shares (after giving effect
to the 6-for-5 stock split declared by the Board of Directors on April 13,
1995) granted to the directors who are not Key Employees, which Options
were outstanding on November 15, 1994;
(1) Subject to clauses (2) through (4) below, such Options shall
vest as follows: 25% on April 26, 1994 and 25% on each of the first,
second and third anniversaries of such date;
(2) In the event such director ceases to serve as a director and is
otherwise no longer affiliated with the Company prior to the vesting in
full of the exercisability of such Options according to the schedule set
forth above in clause (1), vesting of previously unvested Options shall
be calculated on a quarterly basis for full calendar quarters served;
(3) Such Options shall immediately vest in full on the earlier of
(x) the Company's becoming subject to the reporting requirements under
the Securities Exchange Act of 1934, as amended, and (y) the merger or
other business combination of the Company in which the Company is not
the surviving corporation or survives only as a subsidiary of another
corporation, the sale of all or substantially all of the assets or
outstanding stock of the Company or other similar transaction that
results in the change in control of the Company; and
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<PAGE> 26
(4) In the event of a voluntary resignation or involuntary removal
of the holder of such Options and the occurrence of any of the events
specified in clauses (x) or (y) of Section 5(b)(3) within twelve months
of such resignation or removal, such options shall immediately vest in
full as of the date of the event specified in clause (x) or (y) of
Section 5(b)(3).
(ii) No other directors who are not Key Employees shall be entitled to
Option grants hereunder.
SECTION 6. AWARDS
(a) Options. The Committee is hereby authorized to grant Options to
Participants with the following terms and conditions and with such
additional terms and conditions, in either case not inconsistent with the
provisions of the Plan, as the Committee shall determine:
(i) Exercise Price. The purchase price per Share purchasable under
a Non-Qualified Stock Option shall be determined by the Committee. The
purchase price per Share purchasable under an Incentive Stock Option
shall not be less than 100% (110% in the case of a 10% shareholder as
deemed for purposes of Section 422(c)(5) of the Code) of the Fair Market
Value of a Share on the date of grant of such Incentive Stock Option.
(ii) Option Term. The term of each Non-Qualified Stock Option
shall be faced by the Committee but generally shall not exceed ten (10)
years (five (5) years in the case of a 10% shareholder, as defined for
purposes of Section 422(c)(5) of the Code) from the date of grant. The
term of each Incentive Stock Option shall in no event be more than ten
(10) years from the date of grant.
(iii) Time and Method of Exercise. The Committee shall determine
the time or times at which an Option may be exercised in whole or in
part, and the method or methods by which, and the form or forms
(including, without limitation, cash, Shares, outstanding Awards or
other consideration, or any combination thereof, having a Fair Market
Value on the exercise date equal to the relevant option price) in which,
payment of the option prices with respect thereto may be made or deemed
to have been made.
(iv) Early Termination. The unexercised portion of any option
granted under the Plan will generally be terminated (a) three (3) months
after the date on which the Participant's employment is terminated for
any reason other than (i) cause, (ii) mental or physical disability,
(iii) death or (iv) retirement; (b) immediately upon the termination of
the Participant's employment for cause; (c) Six (6) months after the
date on which the Participant's employment is terminated by reason of
mental or physical disability, or (d) (i) twelve (12) months after the
date on which the Participant's employment is terminated by reason of
retirement or the death of the employee, or (ii) nine (9) months after
the date on which the Participant shall die if such death shall occur
during the three (3) month period following the termination of the
Participant's employment by reason of retirement or mental or physical
disability.
(v) Incentive Stock Options. All terms of any Incentive Stock
Option granted under the Plan shall comply in all respects with the
provisions of Section 422 of the Code, or any successor provision
thereto, and any regulations promulgated thereunder. The Fair Market
Value of Shares subject to Incentive Stock Options (determined as of the
date such Incentive Stock Options are granted) exercisable for the first
time by any individual during any calendar year shall in no event exceed
$100,000.
(b) Stock Appreciation Rights. The Committee is authorized to grant
Stock Appreciation Rights to Participants. Subject to the terms of the Plan
and any applicable Award Agreement, a Stock Appreciation Right granted
under the Plan shall confer upon the holder thereof a right to receive,
upon exercise thereof, an amount in cash equal of the excess of (i) the
Fair Market Value of one Share on the date of exercise over (ii) the Fair
Market Value of one Share on the date of grant of the Stock Appreciation
Right. Subject to the terms of the Plan and any applicable Award Agreement,
the grant price, term, methods of exercise, methods of settlement, and any
other terms and conditions of any Stock
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<PAGE> 27
Appreciation Right shall be as determined by the Committee. The Committee
may impose such conditions or restrictions on the exercise of any Stock
Appreciation Right as it may deem appropriate, including, but not limited
to the following: a Participant may not exercise a Stock Appreciation Right
if the aggregate amount to be received as a result of his or her exercise
of Stock Appreciation Rights in the preceding twelve (12) month period
exceeds such Participant's current base salary.
(c) Restricted Stock and Restricted Stock Units. The Committee is
hereby authorized to grant Awards of Restricted Stock and Restricted Stock
Units to Participants subject to such restrictions as the Committee may
impose (including, without limitation, any limitation on the right to vote
a Share of Restricted Stock or the right to receive any dividend or other
right or property), which restrictions may lapse separately or in
combination at such time or times, in such installments or otherwise, as
the Committee may deem appropriate but not inconsistent with the provisions
of the Plan:
(i) Registration. Any Restricted Stock granted under the Plan may
be evidenced in such manner as the Committee may deem appropriate,
including, without limitation, book-entry registration or issuance of a
stock certificate or certificates. In the event any stock certificate is
issued in respect of shares of Restricted Stock granted under the Plan,
such certificate shall be registered in the name of the Participant and
shall bear an appropriate legend referring to the terms, conditions, and
restrictions applicable to such Restricted Stock.
(ii) Forfeiture. Except as otherwise determined by the Committee,
upon termination of employment (as determined under criteria established
by the Committee) for any reason during the applicable restriction
period, all shares of Restricted Stock and all Restricted Stock Units
still, in either case, subject to restriction shall be forfeited to and
reacquired by the Company; provided, however, that the Committee may,
when it finds that a waiver would be in the best interest of the
Company, waive in whole, or in part, any or all remaining restrictions
with respect to shares of Restricted Stock or Restricted Stock Units.
(iii) Lapse of Restrictions. Unrestricted Shares, evidenced in
such manner as the Committee shall deem appropriate, shall be delivered
to the holder of Restricted Stock promptly after such Restricted Stock
shall become Released Securities.
(d) Dividend Equivalents. The Committee is hereby authorized to grant
Awards to Participants under which the holders thereof shall be entitled to
receive payments equivalent to dividends with respect to a number of Shares
and payable on such date or dates as determined by the Committee, and the
Committee may provide that such amounts (if any) shall be deemed to have
been reinvested in additional Shares or otherwise reinvested. Subject to
the terms of the Plan any applicable Award Agreement, such Awards may have
such terms and conditions as the Committee shall determine.
(e) Other Awards. The Committee is hereby authorized, to the extent
permitted under Rule 16b-3 and applicable law, to grant to Participants
such other Awards that are denominated or payable in, valued in whole or in
part by reference to, or otherwise based on or related to, Shares
(including, without limitation, securities, convertible into Shares), as
are deemed by the Committee to be consistent with the purposes of the Plan.
Subject to the terms of the Plan and any applicable Award Agreement, the
Committee shall determine the terms and conditions of such Awards. Shares
or other securities delivered to a Participant pursuant to a purchase right
granted under this Section 6(e) shall be purchased for such consideration,
which may be paid by such method or methods and in such form or forms,
including, without limitation, cash, Shares, outstanding Awards, or other
consideration, or any combination thereof, as the Committee shall
determine.
(f) Performance Awards. The Committee is hereby authorized to grant
Performance Awards to Participants. Subject to the terms of the Plan and
any applicable Award Agreement, a Performance Award granted under the Plan
(i) may be denominated as a Stock Award or a Stock Based Award and payable
in cash, Shares, other securities or other property and (ii) shall confer
on the holder thereof rights valued as determined by the Committee and
payable to, or exercisable by, the holder of the Performance Award, in
whole or in part, upon the achievement of such performance goals and during
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such performance periods as the Committee shall establish. Subject to the
terms of the Plan and applicable Award Agreement, the performance goals to
be achieved during any performance period, the length of any performance
period, and the amount of any payment or transfer to be made pursuant to
any Performance Award shall be determined by the Committee.
(g) General.
(i) No Cash Consideration for Awards. Awards shall be granted for
no cash consideration or such minimal cash consideration as may be
required by applicable law.
(ii) Awards may be Granted Separately or Together. Awards may, at
the discretion of the Committee, be granted either alone or in addition
to, in tandem with, or in substitution for any other Award or any award
granted under any other plan of the Company or any Affiliate. Awards
granted in addition to or in tandem with other Awards, in addition to or
in tandem with awards granted under any other plan of the Company or any
Affiliate, may be granted either at the same time as or at a different
time from the grant of such other Awards or awards; provided, that any
Tandem Option shall be subject to the following provisions: upon
exercise of an Option issued as part of a Tandem Option, the participant
shall be entitled to a credit toward the option exercise price equal to
the value of the Stock Appreciation Rights issued in tandem with the
Option exercised, but not in an amount that would exceed the amount of
the federal income tax deduction allowed to the Company in respect of
such Stock Appreciation Rights. Upon such exercise of a Tandem Option,
the related Stock Appreciation Right shall terminate and the value of
such Stock Appreciation Right shall be limited to such credit. Upon the
exercise of a Stock Appreciation Right issued as part of a Tandem
Option, the Option to which such Stock Appreciation Right relates shall
cease to be exercisable to the extent of the number of Shares with
respect to which the Stock Appreciation Right was exercised.
(iii) Forms of Payment Under Awards. Subject to the terms of the
Plan and of any applicable Award Agreement, payment or transfers to be
made by the Company or an Affiliate upon the grant or exercise of an
Award may be made in such form or forms as the Committee shall
determine, including, without limitation, cash, Shares, other
securities, other Awards, or other property, or any combination thereof,
and may be made in a single payment or transfer, in installments, or on
a deferred basis, in each case in accordance with rules and procedures
established by the Committee. Such rules and procedures may include,
without limitation, provisions for the payment or crediting of
reasonable interest on installment or deferred payments or the grant of
crediting of Dividend Equivalents in respect of installment or deferred
payments denominated in Shares on other securities.
(iv) Limits on Transfer of Awards. No Award (other than Released
Securities), and no right under any such Award, shall be assignable,
alienable, salable, or transferable by a Participant otherwise than by
will or by the laws of descent and distribution (or, in the case of an
Award of Restricted Securities, to the Company); provided, however,
that, if so determined by the Committee, a Participant may, in the
manner established by the Committee, designate a beneficiary or
beneficiaries to exercise the rights of the Participant, and to receive
any property distributable, with respect to any Award upon the death of
the Participant. Each Award, and each right under any Award, shall be
exercisable, during the Participant's lifetime, only by the Participant
or, if permissible under applicable law with respect to any Award that
is not an Incentive Stock Option, by the Participant's guardian or legal
representative. No Award (other than Released Securities), and no right
under any such Award, may be pledged, alienated, attached, or otherwise
encumbered, and any purported pledge, alienation, attachment, or
encumbrance thereof shall be void and unenforceable against the Company
or any Affiliate.
(v) Term of Awards. Except as set forth in Section 6(a)(ii), the
term of each Award shall be for such period as may be determined by the
Committee.
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(vi) Share Certificates. All certificates for Shares or other
securities of the Company or any Affiliate delivered under the Plan
pursuant to any Award or the exercise thereof shall be subject to such
stop transfer orders and other restrictions as the Committee may deem
advisable under the Plan or the rules, regulations, and other
restrictions of the Securities and Exchange Commission, any stock
exchange upon which such Shares or other securities are then listed, and
any applicable Federal or state securities laws, and the Committee may
cause a legend or legends to be put on any such certificates to make
appropriate reference to such restrictions.
SECTION 7. AMENDMENT AND TERMINATION
Except to the extent prohibited by applicable law and unless otherwise
expressly provided in an Award Agreement or in the Plan:
(a) Amendments to the Plan. The Board may amend, alter, suspend,
discontinue, or terminate the Plan, except that any amendment, alteration,
suspension, discontinuation, or termination that would impair the rights of
any Participant, or any other holder or beneficiary of any Award
theretofore granted, shall require the consent of such Participant, other
holder or beneficiary of an Award. Notwithstanding the foregoing, the Board
may condition any amendment on the approval of the stockholders of the
Company if such approval is necessary or advisable with respect to tax
(including Code Sections 162(m) and 422), securities or other applicable
laws and rules and regulations to which the Company, this Plan,
Participants or other applicable Persons are subject.
(b) Correction of Defects, Omissions, and Inconsistencies. The
Committee may correct any defect, supply any omission or reconcile any
inconsistency in the Plan or any Award in the manner and to the extent it
shall deem desirable to carry the Plan into effect.
SECTION 8. GENERAL PROVISIONS.
(a) No Rights to Awards. No Key Employee or Participant shall have
any claim to be granted any Award under the Plan, and there is no
obligation for uniformity of treatment of Key Employees, Participants, or
holders or beneficiaries of Awards under the Plan. The terms and conditions
of Awards need not be the same with respect to each recipient.
(b) Withholding. The Company or any Affiliate shall be authorized to
withhold from any Award granted or any payment due or transfer made under
any Award or under the Plan the amount (in cash, Shares, other securities,
or other property) of withholding taxes due in respect of an Award, its
exercise, or any payment or transfer under such Awards or under the Plan
and to take such other action as may be necessary in the opinion of the
Company to satisfy all obligations for the payment of such taxes. In case
of Awards paid in Shares, the Participant or other person receiving such
Shares may be required to pay the Company or Affiliate, as appropriate, the
amount of any such withholding taxes which is required to be withheld with
respect to such Shares.
(c) No Limit on Other Plans. Nothing contained in the Plan shall
prevent the Company or any Affiliate from adopting or continuing in effect
other or additional compensation arrangements and such arrangements may be
either generally applicable or applicable only in specific cases.
(d) No Right to Employment. The grant of an Award shall not be
construed as giving a Participant the right to be retained in the employ of
the Company or any Affiliate. the Company or an Affiliate may at any time
dismiss a Participant from employment, free from any liability, or any
claim under the Plan, unless otherwise expressly provided in the Plan or in
any Award Agreement.
(e) Governing Law. The validity, construction, and effect of the Plan
and any rules and regulations relating to the Plan shall be determined in
accordance with the laws of the State of Delaware and applicable federal
law.
(f) Severability. If any provision of the Plan or any Award is or
becomes or is deemed to be invalid, illegal, or unenforceable in any
jurisdiction, or would disqualify the Plan or any Award under any
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law deemed applicable by the Committee, such provision shall be construed
or deemed amended to conform to applicable laws, or if it cannot be
construed or deemed amended without, in the determination of the Committee,
materially altering the intent of the Plan, such provision shall be deemed
void, stricken and the remainder of the Plan and any such Award shall
remain in full force and effect.
(g) No Trust or Fund Created. Neither the Plan nor any Award shall
create or be construed to create a trust or separate fund of any kind or a
fiduciary relationship between the Company or any Affiliate and a
Participant or any other Person. To the extent that any Person acquires a
right to receive payments from the Company or any Affiliate pursuant to an
Award, such right shall be no greater than the right of any unsecured
general creditor of the Company or any Affiliate.
(h) No Fractional Shares. No fractional Shares shall be issued or
delivered pursuant to the Plan or any Award, and the Committee shall
determine whether cash, other securities, or other property shall be paid
or transferred in lieu of any fractional Shares or whether such fractional
Shares or any rights thereto shall be canceled, terminated, or otherwise
eliminated.
(i) Headings. Headings are given to the Sections and subsections of
the Plan solely as a convenience to facilitate reference. Such headings
shall not be deemed in any way material or relevant to the construction or
interpretation of the Plan or any provision hereof.
SECTION 9. EFFECTIVE DATE OF THE PLAN
The Plan is effective as of November 14, 1994. The amendments to the Plan
are effective upon stockholder approval thereof.
SECTION 10. TERM OF THE PLAN
The Plan shall continue until the earlier of (i) the date on which all
Stock Awards and Stock Based Awards issuable hereunder have been issued, or (ii)
the termination of the Plan by the Board. However, unless otherwise expressly
provided in the Plan or in an applicable Award Agreement, any Award theretofore
granted may extend beyond such date and the authority of the Committee to amend,
alter, adjust, suspend, discontinue, or terminate any such Award or to waive any
conditions or rights under any such Award, and the authority of the Board to
amend the Plan, shall extend beyond such date. Notwithstanding anything to the
contrary in this Section 10, no Incentive Stock Options may be granted under the
Plan more than ten (10) years after the date of adoption of the Plan.
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