<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:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
INVIVO 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)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transactions applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE> 2
INVIVO CORPORATION
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 10, 1997
To the Stockholders of
Invivo Corporation:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Invivo
Corporation ("the Company"), a Delaware corporation, will be held on December
10, 1997 at 10:00 a.m. at the Company's offices located at 4900 Hopyard Rd.,
Suite 210, Pleasanton, California, 94588 for the following purposes:
1. To elect directors to serve for the ensuing year and until their
successors are elected.
2. To amend the Company's 1994 Stock Option Plan to increase by
200,000 the number of shares covered by the Plan.
3. To ratify the selection of KPMG Peat Marwick LLP as independent
public auditors of the Company.
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The Board of Directors has fixed the close of business on November 10, 1997
as the record date for the determination of stockholders entitled to notice of
and to vote at this Annual Meeting and at any adjournment thereof.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE SIGN AND RETURN THE
ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN THE ENCLOSED POSTPAID ENVELOPE. IF YOU
ARE ABLE TO ATTEND THE MEETING AND WISH TO VOTE YOUR SHARES PERSONALLY, YOU MAY
DO SO AT ANY TIME BEFORE THE PROXY IS EXERCISED.
By Order of the Board of Directors
James B. Hawkins
Secretary
November 12, 1997
<PAGE> 3
INVIVO CORPORATION
------------------------
PROXY STATEMENT
------------------------
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors of
Invivo Corporation (the "Company") for use at the Annual Meeting of Stockholders
to be held on December 10, 1997 at 10:00 a.m. at the Company's offices located
at 4900 Hopyard Rd., Suite 210, Pleasanton, California, 94588.
VOTING
The record date for the determination of stockholders entitled to notice of
and to vote at the Annual Meeting or any adjournment thereof has been fixed as
November 10, 1997. As of that date, there were outstanding 3,258,668 shares of
Common Stock of the Company. Each stockholder will be entitled to one vote for
each share of common stock held on all matters to be voted upon. Abstentions are
considered as shares present and entitled to vote and therefore will have the
same effect as a vote against a matter presented at the meeting. Broker
non-votes are considered as shares not entitled to vote with respect to such
matters, but are counted toward the establishment of a quorum. Subject to prior
revocation, all shares represented at the meeting by properly executed proxies
will be voted in accordance with specifications on the proxy. If no
specification is made, the shares will be voted in favor of: (i) the election of
nominees provided for herein as directors; (ii) the amendment of the Company's
1994 Stock Option Plan to increase by 200,000 the number of shares covered by
the Plan; and (iii) the ratification of KPMG Peat Marwick LLP as independent
public auditors of the Company.
REVOCABILITY OF PROXIES
Any person giving a proxy pursuant to this solicitation has the power to
revoke it at any time before it is voted. It may be revoked by filing with the
Secretary of the Company at the Company's principal executive office, 4900
Hopyard Rd., Suite 210, Pleasanton, California, 94588, a written notice of
revocation or duly executed proxy bearing a later date, or by attending the
Annual Meeting and voting in person.
SOLICITATION
The Company will bear the entire cost of solicitation of proxies, including
preparation, assembly, printing and mailing of this proxy statement, the
enclosed proxy and any additional information furnished to stockholders. Copies
of solicitation material will be furnished to stockholders, and to brokerage
houses, fiduciaries and custodians holding in their names shares of Common Stock
beneficially owned by others to forward to such beneficial owners. The Company
may reimburse persons representing beneficial owners of shares for their
expenses in forwarding solicitation material to such beneficial owners. Original
solicitation of proxies by mail may be supplemented by telephone, telegram or
personal solicitation by directors, officers or other regular employees of the
Company. No additional compensation will be paid for any such services.
This proxy statement and the accompanying proxy card are being mailed to
all stockholders on or about November 12, 1997.
<PAGE> 4
PROPOSAL 1
NOMINATION AND ELECTION OF DIRECTORS
Each director to be elected will hold office until the next annual meeting
of stockholders and until his successor is elected and has qualified, or until
his death, resignation or removal. All of the nominees listed below are
currently directors of the Company. There are no family relationships among
executive officers or directors of the Company, except that Mr. Hawkins, the
President, Chief Executive Officer, Secretary and a director, and Mr. Glenn, the
Chief Financial Officer, are brothers-in-law.
MANAGEMENT RECOMMENDS A VOTE IN FAVOR
OF EACH NAMED NOMINEE
Shares of Common Stock represented by executed proxies will be voted, if
authority to do so is not withheld, for the election of the three nominees named
below. In the event that any nominee should become unavailable for election as a
result of an unexpected occurrence, such shares will be voted for the election
of such substitute nominee as management may propose. Each person nominated for
election has agreed to serve if elected, and management has no reason to believe
that any nominee will be unavailable to serve. The three candidates receiving
the highest number of the affirmative votes cast at the Annual Meeting will be
elected directors of the Company. Prior to the 1997 Annual Meeting, the
Company's Board of Directors consisted of four members. One member, Dr. Kutler,
is not standing for re-election and the Board of Director's size is being
reduced from four to three members.
NOMINEES
The names, ages and periods of service on the Company's Board of Directors
of the nominees, and certain other information about them, is set forth below:
<TABLE>
<CAPTION>
NAME AGE DIRECTOR SINCE
--------------------------------------- --- --------------
<S> <C> <C>
James B. Hawkins (1)................... 42 1985
Ernest C. Goggio (2,3)................. 74 1986
George S. Sarlo (1,2,3)................ 59 1991
</TABLE>
- - ---------------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
(3) Member of the Stock Option Committee.
Mr. Hawkins has been President, Chief Executive Officer and a director of
the Company, and its predecessor, since August 1985. He has served as Secretary
of the Company since September 1986. Mr. Hawkins has served as a director of
Pillar Corporation, a major stockholder of the Company, since August 1987.
Mr. Goggio has served as Chairman of the Board of Directors of the Company
since November 1986. He has been President and Chairman of the Board of
Directors of Pillar Corporation since 1966. Pillar Corporation, based in
Milwaukee, Wisconsin, manufactures corona treater equipment for the plastics
industry and heat induction and melting equipment for the metals industry.
Mr. Sarlo has been a director of the Company since January 1991. He has
been a general partner of the Walden Group of venture capital funds since 1974.
Mr. Sarlo also founded and has served as Chairman of the Board of Directors of
Ashfield and Co. Inc., an investment management company, since 1973.
2
<PAGE> 5
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock as of September 30, 1997 by
(i) each person known by the Company to beneficially own more than 5% of the
Company's Common Stock, (ii) each director and nominee to the Board of
Directors, (iii) the Chief Executive Officer and each other executive officer of
the Company as of June 30, 1997 whose salary and bonus for the year ended June
30, 1997 exceeded $100,000, and (iv) all officers and directors of the Company
as a group.
<TABLE>
<CAPTION>
AMOUNT OF PERCENTAGE
NAME* BENEFICIAL OWNERSHIP(1)(2) OF SHARES
- - ----------------------------------------------------------- --------------------------- ----------
<S> <C> <C>
Pillar Corporation......................................... 639,986 19.6%
330 E. Kilbourn Ave. Suite 710
Milwaukee, Wisconsin 53202
Ernest C. Goggio........................................... 702,986(3) 21.6%
James B. Hawkins........................................... 255,666(4) 7.8%
Botti Brown Asset Management............................... 234,450 7.2%
655 Montgomery Street, Suite 600
San Francisco, California 94111
George S. Sarlo............................................ 106,300(5) 3.2%
Paul Kutler................................................ 13,500(6) 0.4%
John F. Glenn.............................................. 16,250(7) 0.5%
F. Larry Young............................................. 11,250(8) 0.3%
All executive officers and directors as a group (6 1,105,952(3)(9) 31.5%
persons).................................................
</TABLE>
- - ---------------
* The address of each of the directors or executive officers is c/o Invivo
Corporation, 4900 Hopyard Rd. Suite 210, Pleasanton, CA 94588
(1) Each of the individuals included in the table has sole voting and investment
power over the shares listed, subject to the right of his spouse, if any,
under applicable community property laws.
(2) Except as indicated, amounts do not reflect shares reserved for issuance for
options granted under the Company's Stock Option Plan or non-qualified stock
option agreements.
(3) Includes the shares of Common Stock owned of record by Pillar Corporation,
of which Mr. Goggio is the President and majority stockholder and 10,000
shares of Common Stock issuable upon exercise of stock options exercisable
within 60 days.
(4) Includes 148,750 shares of Common Stock issuable upon exercise of stock
options exercisable within 60 days.
(5) Includes 60,000 shares of Common Stock issuable upon exercise of stock
options exercisable within 60 days.
(6) Includes 13,500 shares of Common Stock issuable upon exercise of stock
options exercisable within 60 days.
(7) Includes 16,250 shares of Common Stock issuable upon exercise of stock
options exercisable within 60 days.
(8) Includes 11,250 shares of Common Stock issuable upon exercise of stock
options exercisable within 60 days.
(9) Includes 256,250 shares of Common stock issuable upon exercise of stock
options exercisable within 60 days.
BOARD AND BOARD COMMITTEE MEETINGS
During the year ended June 30, 1997, the Board of Directors held four
meetings. All of the directors attended all of the Board meetings.
3
<PAGE> 6
During the year ended June 30, 1997, the Audit Committee of the Board of
Directors held one meeting. Each Committee member attended the meeting. The
Audit Committee recommends engagement of the Company's independent auditors,
reviews and approves services performed by such auditors, reviews and evaluates
the Company's accounting system and its system of internal controls and performs
other related duties delegated to such Committee by the Board.
During the year ended June 30, 1997, the Compensation Committee held one
meeting. Each Committee member attended the meeting. The Compensation Committee
determines the overall compensation policy for senior management of the Company,
and recommends to the Board of Directors new compensation programs or changes in
existing programs which the Committee finds appropriate.
During the year ended June 30, 1997, the Stock Option Committee held twelve
meetings. Each Committee member attended the meeting. The Committee members are
appointed by the Board of Directors and have the authority to administer the
Company's Stock Option Plan.
THE BOARD HAS NOT ESTABLISHED A NOMINATING COMMITTEE.
EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation of
the Chief Executive Officer of the Company and the other most highly compensated
executive officers of the Company as of June 30, 1997 whose total salary and
bonus for the fiscal year ended June 30, 1997 exceeded $100,000 for services in
all capacities to the Company and its subsidiaries during such fiscal year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
---------------------------
AWARDS
ANNUAL -----------
NAME AND COMPENSATION SECURITIES ALL
PRINCIPAL FISCAL ------------------ UNDERLYING OTHER
POSITION YEAR SALARY($) BONUS($) OPTIONS(#) COMP($)(1)
- - ------------------------------------- ------ ------- ------ ----------- -----------
<S> <C> <C> <C> <C> <C>
James Hawkins........................ 1997 231,000 -- 35,000 1,500
President and 1996 220,000 45,000 -- 1,500
Chief Executive 1995 210,000 87,000 40,000 1,500
Officer
John F. Glenn........................ 1997 121,000 -- 15,000 1,069
Vice President 1996 115,000 15,000 -- 1,444
Of Finance/ 1995 100,000 30,000 14,000 1,334
Chief Financial Officer
F. Larry Young....................... 1997 111,000 -- 15,000 1,224
Vice President 1996 105,000 14,000 -- 1,326
of Operations 1995 95,000 28,000 10,000 1,263
</TABLE>
- - ---------------
(1) The amounts shown represent Company contributions to the Company's 401(k)
Savings Plan.
4
<PAGE> 7
STOCK OPTIONS
The following table sets forth the stock options granted to the named
executive officers under the Company's 1994 Stock Option Plan during the fiscal
year ended June 30, 1997.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE OR GRANT DATE
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION PRESENT
NAME GRANTED(#)(1) FISCAL YEAR ($/SH) DATE VALUE($)(2)
- - ----------------------------- ------------- ------------ ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
James Hawkins................ 35,000 19.1% $ 11.50 11/15/06 $ 219,520
John F. Glenn................ 15,000 8.2% $ 11.50 11/15/06 $ 94,080
F. Larry Young............... 15,000 8.2% $ 11.50 11/15/06 $ 94,080
</TABLE>
- - ---------------
(1) Stock options granted on November 15, 1996 and become exercisable on a
cumulative basis as to one-quarter of the total number of shares covered
thereby on each of the first, second, third and fourth anniversary dates of
the grant of the option. The term of each option is ten years.
(2) The Black-Scholes option pricing model was used assuming dividend yield of
0%, a risk free rate of 6.39%, an expected stock price volatility of 55%,
and an average expected life of five years.
The following table sets forth the number of options exercised and the
value realized upon exercise by the named executive officers during the fiscal
year ended June 30, 1997 and the value of outstanding options held by such
executive officers as of June 30, 1997.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED IN-
UNEXERCISED THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
SHARES VALUE FY-END(#) FY-END($)
ACQUIRED ON REALIZED EXERCISABLE/ EXERCISABLE/
NAME EXERCISE(#) ($) UNEXERCISABLE UNEXERCISABLE(1)
- - ----------------------------------- -------------- -------- --------------- ---------------
<S> <C> <C> <C> <C>
James Hawkins...................... -- -- 130,000/55,000 572,500/15,000
John F. Glenn...................... -- -- 9,000/22,000 11,750/5,250
F. Larry Young..................... 4,000 38,000 5,000/15,000 3,750/--
</TABLE>
- - ---------------
(1) The value of unexercised options is calculated by multiplying the number of
options outstanding by the difference between the option exercise price and
the June 30, 1997 closing price of $7.75 per share of the Company's common
stock as reported on The Nasdaq National Market.
DIRECTOR COMPENSATION
Members of the Board of Directors who are not officers of the Company are
entitled to receive fees of $600 for, and reimbursement for travel expenses
incurred in connection with, each Board of Directors meeting attended.
Mr. Goggio and Mr. Sarlo each received options to purchase 4,000 shares of
the Company's Common Stock in fiscal 1997 pursuant to the automatic grant
provisions of the 1994 Stock Option Plan. The options are currently exercisable
at an exercise price equal to the fair market value of the Common Stock on the
date of grant. Mr. Goggio and Mr. Sarlo will be entitled to receive additional
annual grants of options to purchase 4,000 shares of Common Stock under the 1994
Stock Option Plan on the anniversary date of the annual meeting of stockholders
and each year for as long as they serve as independent directors of the Company.
5
<PAGE> 8
During fiscal years 1995, 1996 and 1997, the Company provided an automobile
and paid annual fees of $49,400, $64,700 and $64,700, respectively, to Mr.
Goggio for his efforts providing business consulting services to the Company.
The Company has entered into indemnification agreements with each of its
directors and executive officers. Such agreements require the Company to
indemnify such individuals to the full extent permitted by law.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Goggio, Mr. Sarlo and Dr. Kutler serve as the Compensation Committee of
the Board of Directors. None of the members of the Compensation Committee are an
employee of the Company. Mr. Hawkins, the Company's President and CEO, served as
a director of Pillar Corporation in fiscal 1997. Mr. Goggio is the President and
Chairman of the Board of Pillar Corporation.
COMPENSATION COMMITTEE AND STOCK OPTION COMMITTEE REPORTS
Compensation Committee
The Compensation Committee currently consists of Mr. Goggio and Mr. Sarlo
and Dr. Kutler. The Compensation Committee determines on an annual basis the
compensation to be paid to the Chief Executive Officer and the senior executive
officers of the Company. In this regard the Compensation Committee works in
consultation with the Stock Option Committee, which administers the Company's
stock option plans including the authorization of stock option grants. Both
members of the Stock Option Committee are members of the Compensation Committee.
The Compensation Committee believes that in order for the Company to
succeed it must be able to attract and retain qualified executive officers. In
determining the type and amount of executive officer compensation, the
objectives of the Compensation Committee are to provide levels of base
compensation and bonuses that will attract and retain talented executive
officers and align their interests with the success of the Company. The
Company's executive officer compensation program is comprised of base salary, an
annual cash bonus, and stock options. Under the supervision of the Compensation
Committee and the Board of Directors, the Company has developed and implemented
compensation policies, plans and programs which seek to enhance the
profitability of the Company and increase stockholder value.
Base Salaries
The Company's policy is to maintain base salaries competitive with salaries
paid to similarly situated executive officers in other middle market companies
(i.e. those with sales of $100 million or less) that are believed to be
comparable for compensation purposes by the Compensation Committee. Adjustments
to base compensation will generally be made based upon competitive market
conditions as well as assigned responsibility and performance as measured
against successful attainment of specific goals and objectives of the Company
and individual employees. The Compensation Committee has not established a
particular group or listing of generally comparable companies for this purpose
and may evaluate different companies on a year to year basis.
Bonuses
An integral part of the Company's compensation of senior executive officers
has been the annual payment of cash bonuses. The amount of these bonuses is
based in part on the review of compensation practices of comparable size
companies referred to in the above paragraph. Further, the amount of bonuses in
any year is significantly dependent on the Company's operating performance
relative to its goals, as well as to other considerations that may be deemed
relevant in any given year or instance by the Compensation Committee.
6
<PAGE> 9
Chief Executive Officer Compensation
In determining the compensation of Mr. Hawkins, the Compensation Committee
evaluated Mr. Hawkins' responsibilities and performance and the overall results
of the Company to determine the total compensation paid. Mr. Hawkins' base
compensation level was $231,000 for fiscal 1997 representing a slight increase
over the fiscal 1996 base compensation. For fiscal 1997, Mr. Hawkins did not
receive a bonus under the executive bonus plan. The absence of a bonus in fiscal
1997 was due to the decline in profitability in fiscal 1997 as compared to
fiscal 1996.
Ernest C. Goggio, Chairman George Sarlo Paul Kutler
Stock Option Committee
The Stock Option Committee consists of Mr. Goggio and Mr. Sarlo. The Stock
Option Committee administers the stock option plans including the grants of
stock options.
The specific objective of the Stock Option Plan is to align the long-term
interests of the Company's officers and employees with those of stockholders by
creating a strong link between executive pay and stockholder return.
Additionally, because options are subject to forfeiture if the employee leaves
the Company prior to their becoming exercisable, options provide an incentive to
remain with the Company long term. The Stock Option Committee, after
consultation with the Compensation Committee, makes specific awards of options
based on an individual's ability to impact Company-wide performance and in light
of the total compensation appropriate for the individual's position. A total of
65,000 stock options were granted to executive officers in fiscal 1997.
Ernest C. Goggio, Chairman George Sarlo
Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who beneficially own more than ten percent
of the Company's Common Stock to file reports of their initial ownership of the
Company's Common Stock and subsequent changes in such ownership with the
Securities and Exchange Commission (the "SEC") within prescribed time periods.
Officers, directors and greater than ten percent shareholders are required by
SEC regulations to furnish the Company copies of all Section 16(a) forms filed.
Based solely on review of copies of SEC Forms 3, 4, and 5, and any
amendments to such forms furnished to the Company, the Company believes that
with respect to the Company's most recent fiscal year all Section 16(a) filing
obligations were met on a timely basis, except for one Form 5 filing by Paul
Kutler that was filed approximately 50 days late.
7
<PAGE> 10
PERFORMANCE GRAPH
The following performance graph compares the performance of the Company's
Common Stock to the NASDAQ Stock Market (U.S.) Index and to the NASDAQ
Non-Financial Index. Given the large number of the Company's product lines, the
Company was unable to identify a peer group of companies based on a common
business. The graph assumes that the value of the investment in the Company's
common stock and each index was $100 at June 30, 1992 and that all dividends
were reinvested.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG INVIVO CORPORATION, THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE NASDAQ NON-FINANCIAL INDEX
<TABLE>
<CAPTION>
MEASUREMENT PERIOD NASDAQ STOCK NASDAQ NON-
(FISCAL YEAR COVERED) INVIVO CORPORATON MARKET (U.S.) FINANCIAL
<S> <C> <C> <C>
6/92 100 100 100
6/93 109 126 125
6/94 176 127 122
6/95 200 169 167
6/96 183 218 212
6/97 135 265 249
</TABLE>
- - ---------------------------
* $100 Invested on June 30, 1992 in stock or index, including reinvestment of
dividends. Fiscal year ending June 30.
PROPOSAL 2
APPROVAL OF AMENDMENT TO 1994 STOCK OPTION PLAN
In October 1994, the Company adopted an Incentive Stock Option Plan (the
"Plan"). The options granted under the Plan may be either incentive stock
options, within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended, or non-qualified stock options. The Plan is designed to enhance the
Company's ability to attract and retain qualified employees, directors and
consultants. In addition, the Plan is designed to provide an inducement to
selected employees and other persons to advance the interests of the Company by
providing or increasing the ownership interest of such persons in the Company.
Approximately 250 people are currently eligible to participate in the Plan which
includes directors, non-director officers, and employees including officers who
are not executive officers. The Plan is interpreted and is administered by the
Stock Option Committee (the "Committee") which has the authority to determine
the recipients of options under the Plan, the time of grant of the options, and
the number of shares covered by the grant and certain other terms and provisions
of each option granted. Any rights granted under the Plan must be granted within
ten years of the Plan's effective date of October 6, 1994.
8
<PAGE> 11
Each person who was a director and not an employee of the Company on the
date of adoption of the Plan received a non-qualified stock option covering
8,000 shares of Common Stock of the Company. Thereafter, each director of the
Company who is not an employee of the Company receives a non-qualified stock
option covering 4,000 shares of Common Stock of the Company immediately
following each annual meeting of stockholders of the Company (provided that a
person whose term expires on such day and who is not reelected to the Board of
Directors shall not receive such an option). Each such option has an exercise
price equal to the fair market value of the Common Stock of the Company on the
date of the annual meeting to which it relates. Each of the non-employee
nominees for director at this meeting who is elected will receive a
non-qualified option covering 4,000 shares.
Unless the stock option agreement executed by the optionee expressly
otherwise provides, (i) an option granted to an officer or other key employee or
consultant shall become exercisable on a cumulative basis as to one-quarter of
the total number of shares covered thereby on each of the first, second, third,
and fourth anniversary dates of the grant of the option, (ii) an option granted
to a director who is not an employee of the Company shall become exercisable on
a cumulative basis as to one-half of the total number of shares covered thereby
on each of the first and second anniversary dates of the date of grant of the
option, and (iii) an option shall not be exercisable after the expiration of ten
years from the date of grant. Any option granted to an executive officer or
director of the Company shall in no event be exercisable until the elapse of six
months from the date of its grant.
The exercise price for incentive stock options granted under the Plan may
not be less than 100% of the fair market value of the underlying shares as of
the date of grant, provided that if the recipient holds 10% or more of the
aggregate voting power of the Company, then the exercise price must not be less
than 110% of such fair market value. The exercise price of any non-qualified
stock option shall not be less than 85% of the fair market value of the
underlying shares on the date of grant. On September 30, 1997, the closing sale
price of Invivo's Common Stock as reported on the NASDAQ Stock Market was $6.94
per share. Payment of the exercise price shall be made in cash or in shares of
the outstanding Common Stock of the Company which have been held by the optionee
for at least six months (or such other period as is specified by the Board of
Directors or the Committee) or in a combination of cash and such stock, except
that the Board of Directors or the Committee in its sole discretion may
authorize payment by any optionee (for all or part of his or her purchase price)
by a promissory note or such other form of legal consideration that may be
acceptable to the Board of Directors or Committee. Payment may also be made by
delivering a copy of irrevocable instructions to a broker to deliver promptly to
the Company the amount of sale or loan proceeds sufficient to pay the purchase
price, and, if required, the amount of any federal, state, local or foreign
withholding taxes.
The grant of an incentive stock option should have no tax effect on the
Company or the optionee to whom it is granted, and there generally is no tax
upon exercise of the option. If an optionee does not dispose of shares acquired
upon exercise of the option within two years of the date of granting the option,
nor within one year after exercise of the option, any gain realized by the
optionee on the subsequent sale of such shares is treated as a long-term capital
gain for federal income tax purposes. If the shares are sold prior to the
expiration of such periods, the lesser of (a) the difference between the
exercise price and the value of the stock at the date of exercise and (b) the
amount realized on disposition over the purchase price is treated as
compensation to the optionee taxable as ordinary income. The excess gain, if
any, is treated as capital gain (which will be short-term or long-term capital
gain depending upon the length of time the shares were held). The Company is
allowed a deduction for tax purposes only to the extent, and at the time, that
the optionee receives ordinary income by reason of the optionee's sale of
shares.
The grant of a non-qualified stock option under the 1994 Option Plan also
should have no tax effect on the company or the recipient of the grant. The
spread between the exercise price and the market value of the Company's Common
Stock on the date of exercise of a non-qualified option is taxable to the
optionee as ordinary income on the exercise of the option, and the Company has a
corresponding deduction.
Stockholder approval is required to increase the aggregate number of shares
of the Company's Common Stock subject to options that may be granted under the
Plan. The Plan currently provides for the grant of options to purchase an
aggregate of 400,000 shares of the Company's Common Stock. Options to purchase
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<PAGE> 12
348,550 shares have been granted and are outstanding under the Plan as of
September 30, 1997, of which 123,000 of such options were held by directors and
54,000 by non-director officers.
The Company's Board of Directors has approved and submitted to the
stockholders of the Company amendments to the Plan to increase by 200,000 shares
(to an aggregate of 600,000 shares) the number of shares of the Company's Common
Stock subject to options that may be granted under the Plan.
The amendment to the Plan requires approval by a majority of the
outstanding shares of Common Stock of the Company represented at the annual
meeting.
THE BOARD OF DIRECTORS RECOMMENDS
THAT THE STOCKHOLDERS VOTE IN FAVOR
OF THESE AMENDMENTS TO THE PLAN
PROPOSAL 3
RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC AUDITORS
The Board of Directors has selected KPMG Peat Marwick LLP as the Company's
independent public auditors for the year ended June 30, 1998, and has further
directed that management submit the selection of independent public auditors for
ratification by a majority of the stockholders at the Annual Meeting. KPMG Peat
Marwick LLP has audited the Company's financial statements since 1985.
Representatives of KPMG Peat Marwick LLP are expected to be present at the
Annual Meeting, and will have an opportunity to make a statement if they so
desire and will be available to respond to appropriate questions.
Stockholder ratification of the selection of KPMG Peat Marwick LLP as the
Company's independent public auditors is not required by the Company's Bylaws or
otherwise. However, the Board is submitting the selection of KPMG Peat Marwick
LLP to the stockholders for ratification as a matter of good corporate practice.
In the event the stockholders fail to ratify the selection, the Board will
reconsider whether or not to retain that firm.
Even if the selection is ratified, the Board in its discretion may direct
the appointment of a different independent accounting firm at any time during
the year if the Board feels that such a change would be in the best interests of
the Company and its stockholders. The affirmative vote of the holders of a
majority of the votes attributable to outstanding shares present or represented
at the Annual Meeting will be required to ratify the selection of KPMG Peat
Marwick LLP.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF THE PROPOSAL.
STOCKHOLDER PROPOSALS
Proposals of stockholders that are intended to be presented by such
stockholders at the Company's next Annual Meeting of stockholders must be
received by the Company no later than July 15, 1998 in order to be included in
the proxy statement and proxy relating to that meeting.
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OTHER MATTERS
The Company knows of no other matters to be submitted to the meeting.
However, if any other matters are properly presented to the Annual Meeting it is
the intention of the persons named in the accompanying proxy to vote in respect
thereof in accordance with their best judgment.
The Board of Directors hopes that stockholders will attend the meeting.
Whether or not you plan to attend, you are urged to complete, sign and return
the enclosed proxy in the accompanying envelope. A prompt response will greatly
facilitate arrangements for the meeting, and your cooperation will be
appreciated. Stockholders who attend the meeting may vote their shares
personally even though they have sent in their proxies.
By Order of the Board of Directors
James B. Hawkins
Secretary
November 12, 1997
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<PAGE> 14
INVIVO CORPORATION
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR ANNUAL MEETING OF STOCKHOLDERS
The undersigned hereby appoints Ernest C. Goggio and James B. Hawkins, or either
of them, each with power of substitution and revocation, as the proxy or proxies
of the undersigned to represent the undersigned and vote all shares of the
Common Stock, $.0008 par value, of INVIVO CORPORATION, which the undersigned
would be entitled to vote if personally present at the Annual Meeting of
Stockholders of Invivo Corporation, to be held on December 10, 1997 at 10:00
a.m. at the Company's offices located at 4900 Hopyard Drive, Suite 210,
Pleasanton, California, and any adjournments thereof, upon the following
matters:
1. To elect directors.
For ALL Nominees Listed Below [ ]
For All Nominees Except as Crossed Out Below [ ]
INSTRUCTION: To withhold authority for any individual nominee, cross out the
nominee's name in the following list:
Ernest C. Goggio, James B. Hawkins, George Sarlo
WITHHOLD AUTHORITY: do not vote for any nominees [ ]
2. To amend the Company's 1994 Stock Option Plan to increase by 200,000 the
number of shares covered by the Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
<PAGE> 15
(Continued from other side)
3. To ratify the selection of KPMG Peat Marwick LLP as independent public
auditors of the Company.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. With discretionary authority on such matters as may properly come before the
meeting.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
The shares covered by this proxy will be voted in accordance with the choices
made. When no choice is made, this proxy will be voted for all listed nominees
for director and for proposals 2 ,3 and 4.
The Annual Meeting may be held as scheduled only if a majority of the shares
outstanding are represented at the meeting by attendance or proxy. Accordingly,
please complete this proxy and return it promptly in the enclosed envelope.
Please date and sign exactly as your
name(s) appear on your shares. If
signing for estates, trusts or
corporations, title or capacity should
be stated. If shares are held jointly,
each holder should sign.
----------------------------------------
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Signature of Stockholder(s)
Dated __________________, 1997
