<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED.
Filed by the registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/ / Preliminary proxy statement
/X/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
Oncor, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
/ / 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
ONCOR, INC.
209 Perry Parkway
Gaithersburg, Maryland 20877
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO THE HOLDERS OF COMMON STOCK OF ONCOR, INC.:
The annual meeting of stockholders of Oncor, Inc. will be held on June 28,
1996, at the Gaithersburg Hilton Hotel, 620 Perry Parkway, Gaithersburg,
Maryland, 20877, telephone number (301) 977-8900, at 9:00 a.m., for the
following purposes:
1. To elect five (5) directors.
2. To ratify the selection of Arthur Andersen LLP as independent
public accountants of the Company for the year 1996.
3. To approve an amendment to the Company's 1992 Stock Option Plan to
increase the total number of shares authorized for issuance thereunder by
500,000 shares to a total of 5,015,604 shares.
4. To transact such other business as may properly come before the
meeting.
Holders of Common Stock of record at the close of business on May 10, 1996
will be entitled to vote at the meeting.
By order of the Board of Directors
/s/JOHN L. COKER
----------------------------------
John L. Coker
Secretary
Gaithersburg, Maryland
- --------------------------------------------------------------------------------
IMPORTANT NOTICE
To assure your representation at the meeting, please complete, date, sign,
and mail promptly the enclosed proxy for which a return envelope is provided.
- --------------------------------------------------------------------------------
<PAGE> 3
ONCOR, INC.
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
JUNE 28, 1996
GENERAL INFORMATION
The accompanying proxy is solicited by the Board of Directors of the
Company. Stockholders may revoke their proxies at any time prior to the time
they are voted at the meeting by filing with the Secretary of the Company a
written notice of revocation, by duly executing and delivering a subsequent
proxy bearing a later date or by attending the meeting and voting in person.
The record date for stockholders entitled to vote at the Annual Meeting is
May 10, 1996.
The Company has only one class of outstanding shares of capital stock,
Common Stock, par value $0.01 per share, of which, as of April 26, 1996, there
were 23,190,906 shares outstanding. Each share is entitled to one vote.
The shares represented by each valid proxy will be voted at the Annual
Meeting or any adjournment thereof, and, if a choice is specified in the proxy,
the shares will be voted in accordance with such specification. If no vote is
specified, the shares will be voted as set forth in the proxy.
Under Maryland law, there is a statutory presumption that a proposal passes
if it receives a majority of the votes cast at a meeting at which a quorum is
present. The Company's by-laws contain similar provisions. Abstentions and
"broker non-votes" count for quorum purposes, but have no effect on the outcome
of the vote on any of the matters to be considered at the Annual Meeting. A
"broker non-vote" occurs if a broker or other nominee does not have
discretionary authority and has not received instructions with respect to a
particular item. Stockholders may not cumulate their votes.
So far as the Directors of the Company are aware, no matters will be
presented to the meeting for action on the part of the stockholders other than
those stated in the notice. If any other matter is properly brought before the
meeting, it is the intention of the persons named in the accompanying proxy to
vote thereon the shares to which the proxy relates in accordance with their best
judgment.
The Company has engaged Morrow & Co., Inc. to aid in the solicitation,
which will be undertaken by mail, telephone, telegraph and personal contact and
which may include solicitation by officers and employees of the Company. Costs
of the solicitation are expected to be approximately $4,000 plus out of pocket
expenses and will be borne by the Company. This Proxy Statement, the
accompanying proxy, and a copy of the Company's Annual Report to Stockholders
are first being mailed to stockholders on or about May 24, 1996.
1
<PAGE> 4
VOTING SECURITIES AND PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of March 31, 1996 by each person
known by the Company to own beneficially more than 5% of the outstanding Common
Stock. In addition, this table includes the outstanding voting securities
beneficially owned by directors, director nominees and the Named Executive
Officers (as defined below) and the number of shares owned by directors and
executive officers as a group.
<TABLE>
<CAPTION>
DIRECTORS, OFFICERS AMOUNT AND NATURE OF PERCENT
AND 5% STOCKHOLDERS BENEFICIAL OWNERSHIP(1) OF CLASS(1)
------------------------------------------------------ ----------------------- -----------
<S> <C> <C>
Charles Atwood Company and Stanton-Barnes 1,318,599(3) 5.9%
Company(2)..........................................
1201 Old Kent Bank Building
Kalamazoo, MI 49007
John Pappajohn........................................ 1,205,000(4) 5.4%
c/o Equity Dynamics, Inc.
2116 Financial Center
Des Moines, Iowa 50309
Stephen and Nancy H. Turner........................... 1,330,401(5) 6.0%
c/o Oncor, Inc.
209 Perry Parkway
Gaithersburg, MD 20877
Timothy J. Triche..................................... 82,500(6) *
William H. Taylor II.................................. 14,854(7) *
Philip S. Schein...................................... 12,500(8) *
George W. Scherer..................................... 12,500(9) *
John L. Coker......................................... 66,666(10) *
Robert J. Hohman...................................... 49,750(11) *
All Directors and Executive Officers of the Company as 1,603,754(12) 8.2%
a group (10 persons)................................
</TABLE>
- ---------------
* Less than 1%.
(1) Based on 22,351,398 shares of Common Stock outstanding as of March 31,
1996. Gives effect to the shares of Common Stock issuable within 60 days
after April 30, 1996 upon the exercise of all options, unit purchase
options, warrants and other rights beneficially held by the indicated
stockholder on that date.
(2) Charles Atwood Company and Stanton-Barnes Company are nominees of Jerry B.
Love, James S. Hilboldt and James C. Westin as trustees of several trusts
for whom the trustees serve as investment advisers registered under the
Investment Advisers Act of 1940, as amended. The trustees share voting and
investment power with respect to these shares of Common Stock.
(3) Includes 63,400 shares of Common Stock issuable upon the exercise of unit
purchase options to purchase 20,000 units, each unit consisting of two
shares of Common Stock and one warrant to purchase 1.17 additional shares
of Common Stock, and upon the exercise of such warrant.
(4) Includes 65,000 shares of Common Stock issuable upon exercise of two stock
options.
(5) Includes (i) 975,455 shares of Common Stock owned jointly by Stephen and
Nancy Turner, (ii) 300,000 shares of Common Stock issuable upon exercise of
two stock options held by Mr. Turner, individually, and (iii) 54,946 shares
of Common Stock issuable upon the exercise of unit purchase options held
jointly by Stephen and Nancy Turner to purchase 17,333 units, each unit
consisting of two shares of Common Stock and one warrant to purchase 1.17
additional shares of Common Stock, and upon the exercise of such warrant.
Stephen Turner and Nancy Turner are husband and wife.
(6) Includes 37,500 shares of Common Stock issuable upon exercise of two stock
options.
(7) Includes 12,500 shares of Common Stock issuable upon exercise of a stock
option. Excludes 200 shares held by Dr. Taylor's wife as custodian of two
trusts established pursuant to the California Uniform Trust for Minors Act,
as to which Dr. Taylor disclaims beneficial ownership.
2
<PAGE> 5
(8) Includes 12,500 shares of Common Stock issuable upon exercise of a stock
option.
(9) Includes 12,500 shares of Common Stock issuable upon exercise of a stock
option.
(10) Includes 66,666 shares of Common Stock issuable upon exercise of a stock
option.
(11) Includes 48,750 shares of Common Stock issuable upon exercise of three
stock options.
(12) Includes 574,945 shares of Common Stock which may be acquired at or within
60 days of April 30, 1996 pursuant to various stock options.
3
<PAGE> 6
ELECTION OF DIRECTORS
The Amended and Restated By-Laws of the Company provide that the Board of
Directors shall consist of no less than three, and no more than eight directors.
The Board of Directors has determined that the Board shall consist of five (5)
directors. Directors elected at the 1996 Annual Meeting will continue in office
until the next annual meeting of stockholders or until their successors are duly
elected and qualified.
The persons named in the accompanying proxy will vote in favor of electing
the nominees, unless otherwise specified in the proxy. If any nominee shall
become unavailable for election, the proxies will be voted for the election of
such persons, if any, as shall be designated by the Board of Directors.
A plurality of the votes cast at the Annual Meeting is required to elect a
director.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THESE NOMINEES. Certain
information concerning such nominees is set forth below:
<TABLE>
<CAPTION>
FIRST BECAME
NAME AGE A DIRECTOR PRINCIPAL OCCUPATION OR EMPLOYMENT
- ------------------------- --- ------------ -------------------------------------------------
<S> <C> <C> <C>
Stephen Turner........... 51 1983 Mr. Turner has been Chairman of the Board of
Directors, Chief Executive Officer and a director
of the Company since its inception in 1983. Mr.
Turner has also been a director of OncorMed,
Inc. since July 1993 and of OncorPharm, Inc.
since 1994. Prior to founding the Company, from
1976 to 1983, Mr. Turner was the founder and
Chairman of the Board of Bethesda Research
Laboratories, Inc. ("BRL"), now a division of
Life Technologies, Inc. BRL is a biotechnology
company engaged in the business of molecular
biology. Prior to BRL, Mr. Turner was employed
by Becton, Dickinson and Company, a health care
company. Mr. Turner is a director of Drug
Screening Systems, Inc., a company that
manufactures medical devices.
Philip S. Schein......... 56 1986 Dr. Schein became a director of the Company in
April 1986. He is currently Chairman and Chief
Executive Officer of U.S. BioScience, Inc., a
biotechnology company located in West
Conshohocken, Pennsylvania. He is also an
Adjunct Professor of Medicine and Pharmacology
at the University of Pennsylvania School of
Medicine in Philadelphia, Pennsylvania. From
1983 until 1986, he was Vice President of
Clinical Research and Development for Smith
Kline & French Laboratories in Philadelphia,
Pennsylvania. Prior to joining Smith Kline &
French Laboratories, Dr. Schein was affiliated
with the Georgetown University School of
Medicine where he was a Scientific Director of
the Vincent T. Lombardi Cancer Research Center,
Chief of the Division of Medical Oncology, and
professor in the Departments of Medicine and
Pharmacology. Dr. Schein is also a director of
Medicis Corporation.
</TABLE>
4
<PAGE> 7
<TABLE>
<CAPTION>
FIRST BECAME
NAME AGE A DIRECTOR PRINCIPAL OCCUPATION OR EMPLOYMENT
- ------------------------- --- ------------ -------------------------------------------------
<S> <C> <C> <C>
Timothy J. Triche........ 51 1988 Dr. Triche became a director of the Company in
December 1988. In 1994, he became Chairman of
the Board and Chief Executive Officer of
OncorMed, Inc., a clinical services company. He
is currently Pathologist-in-Chief for the
Children's Hospital of Los Angeles in Los
Angeles, California and Professor of Pathology
and Pediatrics at, and Vice Chairman of, the
University of Southern California School of
Medicine, Los Angeles, California. Prior to
June 1988, he was Chief of the Ultrastructural
Laboratory of the Division of Pathology at the
National Cancer Institute of the National
Institutes of Health in Bethesda, Maryland.
William H. Taylor II..... 57 1990 Dr. Taylor became a director of the Company in
November 1990. He is currently the Managing
General Partner of Taylor & Company, an
investment company. He has been a principal in
several venture capital firms since 1968. Since
1982, Dr. Taylor has been a general partner of
several affiliated venture capital partnerships
located in San Francisco, including Taylor and
Turner, L.P. and Rotan Mosle Technology
Partners Ltd. He serves as a director of Sierra
Growth Fund, Aura Memories, Inc. and TPL, Inc.
and is also Chairman of the Business Advisors
Board of AMT Ventures, a materials science
venture capital fund.
George W. Scherer........ 65 1995 Mr. Scherer became a director of the Company in
February 1995. He is currently President of GWS
Consultants, a corporation concentrating on
activities in the field of health care and
diagnostics. From 1987 to 1990, he was the
Manager of Worldwide Strategic Planning for
Eastman Kodak, Co. ("EKC"). Prior to 1987, he
was the Manager of Equipment Development,
Manufacturing and Systems Integration for the
Clinical Products Division of EKC. He was one
of the principals who created the Ektochem
technology and business for EKC.
</TABLE>
BOARD MEETINGS AND ATTENDANCE OF DIRECTORS
The Board of Directors met four (4) times during 1995. During 1995, all
incumbent directors, with the exception of Dr. Philip S. Schein, attended all of
the meetings of the Board. Dr. Schein attended three (3) of the meetings.
COMMITTEES OF THE BOARD OF DIRECTORS
The Compensation and Stock Option Committee comprises George W. Scherer,
William H. Taylor II and Philip S. Schein, and administers the Company's
compensation and stock option plans. The Compensation and Stock Option Committee
acted by unanimous written consent seven (7) times during 1995.
The Audit Committee comprises George W. Scherer, William H. Taylor II and
Philip S. Schein, and recommends the Company's independent public accountants
annually to the Board of Directors and consults with such accountants on the
planning of the annual audit and periodic reviews, and on any issues arising
from
5
<PAGE> 8
audits and periodic reviews. The Audit Committee met three (3) times in 1995.
All incumbent members attended all of the meetings of the Audit Committee.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1995, Philip S. Schein, William H. Taylor II and George W. Scherer
served as members of the Compensation and Stock Option Committee. There were no
compensation interlocks during 1995.
DIRECTOR COMPENSATION
Directors of the Company do not receive cash compensation for service as
directors despite the provision in the Company's By-Laws that the Board of
Directors by resolution may allow directors a fixed sum and expenses for
attendance at Board or Committee meetings. During 1995, Dr. Taylor, Dr. Triche
and Mr. Scherer received cash compensation for consulting of $8,000, $29,000 and
$30,750, respectively. Directors are reimbursed for their expenses associated
with their participation on the Board.
EXECUTIVE COMPENSATION
The executive officers of the Company on March 31, 1996 were the following:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------ --- ----------------------------------------------
<S> <C> <C>
Stephen Turner................ 51 Chairman of the Board of Directors and Chief
Executive Officer
Cecil Kost.................... 42 President and Chief Operating Officer
John L. Coker................. 49 Vice President -- Finance and Administration,
Chief Financial Officer, Secretary and
Treasurer
Barbara H. Keech.............. 47 Vice President -- Regulatory Affairs and
Quality Assurance
Robert J. Hohman.............. 42 Vice President -- Research and Development
John P. Kennealy.............. 55 Vice President and General Manager -- Imaging
Division
</TABLE>
6
<PAGE> 9
The following table sets forth the annual and long-term compensation for
the Company's Chief Executive Officer and the three highest paid executive
officers in 1995 (the "Named Executive Officers"), as well as the compensation
paid to each individual, for the Company's three previous fiscal years:
SUMMARY COMPENSATION TABLE*
<TABLE>
<CAPTION>
ANNUAL LONG-TERM ALL OTHER
COMPENSATION COMPENSATION COMPENSATION
----------------- ------------ ------------
OPTIONS
SALARY BONUS GRANTED
NAME AND PRINCIPAL POSITION YEAR ($) ($) (#) ($)
---------------------------------- ---- ------- ------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Stephen Turner.................... 1995 240,000 0 0 10,000(b)
Chairman and Chief 1994 240,000 50,000(a) 0 908(b)
Executive Officer 1993 240,000 101 200,000 4,119(b)
George R. Evanega................. 1995 150,000(c) 0 0 0
Former President and Chief 1994 180,000 0 0 0
Operating Officer 1993 180,000 108 200,000 0
John L. Coker..................... 1995 147,500 0 20,000 0
Vice President -- 1994 112,500(d) 0 100,000 0
Finance and Administration,
Secretary, Treasurer and
Chief Financial Officer
Robert J. Hohman.................. 1995 122,040 0 55,000 0
Vice President -- 1994 105,800(e) 0 0 2,716(b)
Research and Development
</TABLE>
- ---------------
* Columns for Other Annual Compensation, Stock Awards and Long-Term
Compensation Payouts are not included in the above table, since there were
no transactions to report.
(a) Reflects a special performance bonus paid to Mr. Turner.
(b) Miscellaneous cash reimbursements.
(c) Reflects the portion of Dr. Evanega's annual compensation prior to his
leaving the Company on November 1, 1995.
(d) Represents the portion of Mr. Coker's annual compensation subsequent to his
joining the Company on March 1, 1994.
(e) Dr. Hohman became an executive officer of the Company in March 1994.
7
<PAGE> 10
STOCK OPTION GRANTS
The following table contains information concerning the grant of stock
options under the Company's 1992 Stock Option Plan (the "Option Plan") to the
Named Executive Officers for the 1995 fiscal year:
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
-------------------------------------------------------------------------------- VALUE AT ASSUMED ANNUAL
OPTIONS % OF TOTAL OPTIONS RATES OF STOCK PRICE
UNDERLYING UNDERLYING SECURITIES/ MARKET APPRECIATION FOR OPTION
SECURITIES/ SARS GRANTED TO EXERCISE OR PRICE ON TERM(3)
SARS GRANTED EMPLOYEES IN FISCAL BASE PRICE DATE OF EXPIRATION ------------------------
NAME (#)(1) YEAR ($/SHARE)(2) GRANT DATE 5% 10%
- ----------------- ------------ ---------------------- ------------ -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Stephen Turner... 0 0 0 0 -- 0 0
George R.
Evanega........ 0 0 0 0 -- 0 0
John L. Coker.... 20,000 1.4% $6.875 $6.875 8/9/2005 $ 86,473 $ 219,140
Robert J.
Hohman......... 55,000 3.9% $5.045 $5.045 5/16/2005 $ 174,518 $ 442,264
</TABLE>
- ---------------
(1) Each option has a maximum term of 10 years, subject to earlier termination
in the event of the optionee's cessation of service with the Company. Each
option is immediately exercisable for all the option shares, but any shares
purchased under such option will be subject to repurchase by the Company, at
the original exercise price per share, should the optionee leave the
Company's service prior to vesting in such shares.
(2) The exercise price may be paid in (i) cash, (ii) shares of Common Stock held
for the requisite period necessary to avoid a charge to the Company's
earnings for financial reporting purposes and valued at fair market value on
the exercise date, (iii) a combination of (i) and (ii), or (iv) through a
broker-dealer sale.
(3) Potential realizable value is based on assumption that the stock price of
the Common Stock appreciates at the annual rate shown (compounded annually)
from the date of grant until the end of the ten-year option term. These
numbers are calculated based on the requirements promulgated by the
Securities and Exchange Commission and do not reflect the Company's estimate
of future stock price growth. There is no assurance provided to any
executive officer or any other holder of the Company's securities that the
actual stock price appreciation, if any, over the 10-year option term will
be at the assumed 5% and 10% levels or at any other defined level. With
respect to options granted at fair market value, unless the market price of
the Common Stock does in fact appreciate over the option term, no value will
be realized from the option grants made to the named executive officers.
For a description of the material terms of the options, see "Approval of
Amendment to 1992 Stock Option Plan."
8
<PAGE> 11
STOCK OPTION EXERCISES AND FISCAL YEAR END VALUES
The following table sets forth information regarding the exercise of stock
options by each of the Named Executive Officers of the Corporation during the
fiscal year ended December 31, 1995 as well as the number and value of any
unexercised stock options held by the Named Executive Officers as of December
31, 1995:
AGGREGATED OPTION EXERCISES IN LAST
FISCAL YEAR AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
TOTAL NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
IN-THE-MONEY OPTIONS AT
SHARES OPTIONS AT FISCAL YEAR END FISCAL YEAR END(A)
ACQUIRED VALUE ---------------------------- ----------------------------
ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
NAME # ($) (#) (#) ($) ($)
- -------------------------------- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Stephen Turner.................. 0 0 233,334 66,666 50,100 0
George R. Evanega............... 0 0 333,333 0 0 0
John L. Coker................... 0 0 33,333 86,667 0 0
Robert J. Hohman................ 0 0 26,666 68,334 0 17,500
</TABLE>
- ---------------
(a) At December 31, 1995, the closing bid stock price was $4.50 per share.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Under the securities laws of the United States, the Company's directors,
executive officers and any persons holding more than ten percent of the
Company's Common Stock are required to report initial ownership of the Company's
Common Stock and any subsequent changes in ownership to the Securities and
Exchange Commission ("SEC"). Specific due dates have been established by the SEC
and the Company is required to disclose in this Proxy Statement any failure to
file by the appropriate dates. Officers, directors and greater than 10%
stockholders are required by SEC regulations to furnish the Company with copies
of all Section 16(a) forms they file.
To the Company's knowledge, based solely upon the copies of Section 16(a)
reports which the Company received from such persons for their 1995 fiscal year
transactions, the Company believes that all Section 16(a) filing requirements
applicable to such officers, directors and ten-percent beneficial owners were
complied with.
COMPENSATION AND STOCK OPTION COMMITTEE REPORT
To: The Board of Directors
It is the responsibility of the Company's Compensation and Stock Option
Committee (the "Committee") to exercise the authority of the Board of Directors
with respect to (i) evaluation of performance of management, (ii) compensation
of executive officers and (iii) administration of the Company's stock option
plan.
EXECUTIVE COMPENSATION POLICY
The Company's overall compensation philosophy is as follows:
- Attract and retain quality talent, which is critical to both the
short-term and long-term success of the Company.
- Reinforce financial and strategic performance objectives through
incentive stock option compensation that shares the rewards and risks
of strategic decision making.
To reflect this philosophy in determining executive compensation levels,
the Committee conducts annual reviews of all executives to evaluate the
performance of each individual employee, including each person's decision-making
responsibilities and work-related accomplishments, and the performance of the
Company over the previous year.
9
<PAGE> 12
In determining the level of executive compensation, including the executive
compensation level for 1995, the Board of Directors and the Committee weigh the
performance of the Company during the prior year and the contribution of the
executive officers of the Company to such performance. The performance of the
Company is determined by the Company's research developments, progress in its
clinical trials, sales performance and progress in its product approval process.
The compensation levels of the Company's executives are also compared to the
levels of executive compensation paid by other corporations in the health care
industry. In particular, comparisons are made by the Committee with respect to
salary levels, bonuses, and stock option awards. Such comparisons are made to
companies in the health care industry with which the members of the Committee
are familiar and to other companies which are similar in size and complexity of
research and operations. These companies are not chosen based on any published
index or the peer group index used in the stock performance graph below. The
Company strives to set its overall compensation level, as well as the individual
components of such compensation, near the median of such comparison companies.
BASE COMPENSATION
The Committee's approach to base compensation is to offer competitive
salaries in comparison to competitive market practices. The Committee uses
market compensation levels as a frame of reference for starting salary offers
and annual salary adjustments. Salary reviews are conducted annually with input
from the CEO and President. The Committee considers the decision-making
responsibilities for each position and the experience and work performance of
position incumbents. While it is the general policy of the Company not to award
performance-based cash bonuses, the Committee has from time to time authorized
cash bonuses if deemed to be in the best interest of the Company. The
circumstances for such awards vary but have included bonus payments pursuant to
the terms of negotiated employment agreements; arrangement of transactions,
acquisition and financing; and the development of certain technology.
STOCK OPTIONS
Historically, the Committee has awarded stock options to each of the
Company's executive officers (i) to attract new quality officers to join the
Company and (ii) to reward executive officers for accomplishing performance
objectives. Performance objectives are generally set based on the Company's
sales performance, research developments and progress in its clinical trials and
its product approval process, and are specifically set based on the measure
which corresponds to the position held by the executive officer. The Committee
considers market practices for similar positions in similar industries and the
amount and terms of prior awards to an individual in granting stock options.
There were 200,000 stock options granted to executive officers in 1995.
CEO COMPENSATION
The annual compensation package for Stephen Turner, the Company's Chairman
and Chief Executive Officer, is determined in the same manner as the other
executives of the Company. The annual base salary of Mr. Turner was set at
$150,000 in 1990 and was not increased in 1991. Mr. Turner's salary was
increased in 1992 to $200,000 per year and in 1993 to $240,000 per year and was
not increased in 1994 or 1995. Mr. Turner was granted stock options to purchase
200,000 shares of Common Stock at an exercise price of $5.375 per share in 1993,
in recognition of the Company's increased revenues and research and development
accomplishments and to keep pace with options being granted to other chief
executive officers in the biotechnology industry. Mr. Turner was paid a bonus of
$50,000 in 1994 in recognition of his role in the two acquisitions the Company
made in 1994, the OncorMed, Inc. initial public offering and the formation of
OncorPharm, Inc.
Compensation and Stock Option
Committee
William H. Taylor II, Chairman
George W. Scherer, Member
Philip S. Schein, Member
10
<PAGE> 13
STOCK PERFORMANCE GRAPH
The following graph compares the yearly percentage change in the cumulative
total stockholder return on the Company's Common Stock during the five years
ended December 31, 1995 with the cumulative return on The Russell 2000 Index and
a peer group index. The Russell 2000 Index is published from time to time in
various business periodicals. The peer group index is the Value-Line Survey of
Standard Healthcare Companies as published by Value-Line in 1992 and used by the
Company for comparison purposes in previous years. The composition of the
Value-Line Survey of Standard Healthcare Companies was altered from 1992 to
1993. The Company has chosen to use the index as comprised in 1992. The
following companies are included in the index as used by the Company: American
Home Products Corp., Amgen Inc., ALZA Corp. "A", Biogen, Inc., Bristol-Myers
Squibb Company, Chiron Corp., Forest Laboratories, Inc., Genentech, Inc., IVAX
Corporation, Eli Lilly and Company, Marion Merrell Dow Inc., Merck & Co., Inc.,
Mylan Laboratories Inc., Pfizer Inc., Rhone-Poulenc Rorer Inc., SmithKline
Beecham p.1.c., Schering-Plough Corp., Upjohn Co., and Warner-Lambert Company.
COMPARATIVE FIVE-YEAR TOTAL RETURNS*
ONCOR, INC., RUSSELL 2000, PEER GROUP
(PERFORMANCE RESULTS THROUGH 12/31/95)
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) ONCOR RUSSELL 2000. PEER GROUP
<S> <C> <C> <C>
1990 100.00 100.00 100.00
1991 232.56 146.05 161.54
1992 173.64 172.94 135.99
1993 257.36 205.64 124.76
1994 111.63 201.56 137.77
1995 111.63 258.89 222.67
</TABLE>
Assumes $100 invested at the close of trading on the last trading day preceding
the first day of the fifth preceding fiscal year in the Company's Common Stock,
The Russell 2000 Index and the peer group index and that dividends were
re-invested.
- ---------------
* Cumulative total return assumes reinvestment of dividends.
11
<PAGE> 14
DESIGNATION OF AUDITORS
Upon the recommendation of the Audit Committee, the Board of Directors
proposes that Arthur Andersen LLP, the independent public accountants of the
Company since the Company's inception, be re-elected as independent public
accountants of the Company to serve until the annual meeting of stockholders in
1997. A majority of the votes cast at the Annual Meeting is required to elect
the auditors. A representative of Arthur Andersen LLP will attend the annual
meeting of stockholders with the opportunity to make a statement if he or she so
desires and will also be available to answer reasonable inquiries.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THIS PROPOSAL.
APPROVAL OF AMENDMENT TO
1992 STOCK OPTION PLAN
INTRODUCTION
Stockholders are being asked to vote on a proposal to ratify an amendment
to the Company's 1992 Stock Option Plan (the "Option Plan") to increase the
number of shares authorized for issuance thereunder by 500,000 shares to a total
of 5,015,604 shares. Without taking into effect any such increase, there are
502,957 options available for grant at March 31, 1996, and contractual
obligations to grant 400,000 options. At March 31, 1996, there are 3,109,152
options outstanding, of which 1,675,480 are exercisable. The affirmative vote of
a majority of the votes cast at the Annual Meeting is required for approval of
the amendment.
The Option Plan was adopted by the Board of Directors and became effective
March 17, 1992 (the "Effective Date"), as the successor to the Company's
Incentive Stock Option Plan, as amended (the "ISO Plan"), the Company's
Non-Qualified Stock Option Plan, as amended (the "NQSO Plan") and the Company's
1991 Non-Qualified Stock Option Plan for Non-Employee Directors (the "Director
Plan") (the ISO, NQSO and Director Plans collectively hereinafter referred to as
the "Predecessor Plans"). The Option Plan was approved by the Company's
Stockholders at the Annual Meeting of Stockholders held on May 27, 1992. All
options outstanding under the Predecessor Plans were incorporated into the
Option Plan and are treated as outstanding options under the Option Plan.
However, each outstanding option so incorporated continues to be governed solely
by the express terms and conditions of the instrument evidencing such grant. No
further option grants were made under the Predecessor Plans after the Effective
Date.
The terms and provisions of the Option Plan, as amended, are summarized
below. The summary, however, does not purport to be a complete description of
the Option Plan. Copies of the actual Option Plan document may be obtained by
any stockholder upon written request to the attention of John L. Coker, Company
Secretary, at the corporate offices in Gaithersburg, Maryland.
ISSUABLE SHARES
The aggregate number of shares available for issuance under the Option Plan
may not exceed 5,015,604 shares of Common Stock (after consideration of the
500,000 share increase proposed herein), subject to adjustment from time to time
in the event of certain changes to the Company's capital structure.
Should any option under the Option Plan expire or terminate prior to
exercise or surrender in full, the shares subject to the portion of the option
not so exercised or surrendered will be available for subsequent option grants.
Shares subject to any option surrendered or cancelled in accordance with the
option surrender or cash-out provisions of the Option Plan will not be available
for subsequent grants.
As of March 31, 1996, approximately 3,109,152 shares of Common Stock were
subject to outstanding options under the Option Plan and approximately 502,957
shares of Common Stock were available for issuance under future option grants
after recognition of the Company's contractual obligations under certain
employment agreements to grant options for an additional 400,000 shares of
Common Stock.
The table below shows, as to each of the Named Executive Officers and each
of the indicated groups, the following information with respect to stock option
transactions effected during the period from January 1, 1994
12
<PAGE> 15
to March 31, 1996, (i) the number of shares of the Company's Common Stock
subject to options granted under the Option Plan during that period, (ii) the
average exercise price per share for such options and (iii) the net value
realized from options exercised during that period.
OPTION GRANTS
<TABLE>
<CAPTION>
OPTIONS GRANTED WEIGHTED AVERAGE EXERCISE NET VALUE REALIZED FROM
NAME AND POSITION (NUMBER OF SHARES) PRICE OF OPTIONS GRANTED OPTIONS EXERCISED
- ---------------------------------- ------------------ ------------------------- -----------------------
<S> <C> <C> <C>
Stephen Turner
Chairman and Chief Executive
Officer......................... 0 0 0
George R. Evanega
Former President and Chief
Operating Officer............... 0 0 0
John L. Coker
Vice President -- Finance and
Administration, Secretary,
Treasurer and Chief Financial
Officer......................... 120,000 $ 6.458 0
Robert J. Hohman
Vice President -- Research and
Development..................... 55,000 $ 5.045 0
All current executive officers as
a group (6 persons)............. 300,000 $ 6.133 0
Philip S. Schein,
Director........................ 50,000 $ 4.375 $ 193,800
Timothy J. Triche,
Director........................ 50,000 $ 4.375 $ 141,250
William H. Taylor II,
Director........................ 50,000 $ 4.375 $ 31,300
George W. Scherer,
Director........................ 50,000 $ 4.500 0
All directors (other than
executive officers) as a group
(4 persons)..................... 200,000 $ 4.406 $ 366,350
All employees, including current
officers who are not executive
officers as a group (75
persons)........................ 871,740 $ 4.649 $ 471,112
</TABLE>
STRUCTURE
The Option Plan is divided into two separate components: the Discretionary
Grant Program and the Automatic Grant Program. Under the Discretionary Grant
Program, options may be issued to key employees (including officers and
directors) and consultants of the Company or its subsidiaries who contribute to
the management, growth and financial success of the Company or its subsidiaries.
Under the Automatic Grant Program, an option grant is made upon initial election
to the Board and additional grants are made after each three years of
consecutive service to all current and future non-employee members of the Board.
As of March 31, 1996, approximately 176 employees (including six (6)
executive officers) were eligible to participate in the Discretionary Grant
Program, and four (4) non-employee Board members were eligible to participate in
the Automatic Grant Program.
13
<PAGE> 16
ADMINISTRATION
The Discretionary Grant Program is being administered by one or more
committees comprising Board members. The primary committee (the "Primary
Committee") comprises two or more Board members, none of whom are eligible to
participate in the Option Plan or any other stock plan of the Company or its
subsidiaries, except to the extent such individuals may become entitled to a
special option grant under the Automatic Grant Program. Stock options may be
granted under the Discretionary Grant Program to all eligible employees and
consultants by either the Primary Committee or a second committee comprising two
or more employee-Board Members (the "Secondary Committee"). The committee
granting the option, whether the Primary Committee or the Secondary Committee,
shall be referred to herein as the "Committee."
The Committee has full authority, subject to the provisions of the Option
Plan, to determine the eligible individuals who are to receive options under the
Discretionary Grant Program, the number of shares to be covered by each granted
option, the date or dates on which the option is to become exercisable and the
maximum term for which the option is to remain outstanding. The Committee also
has the authority to determine whether the granted option is to be an incentive
stock option ("Incentive Option") under the Federal tax laws and to establish
rules and regulations for proper plan administration.
Option grants under the Automatic Grant Program are being made in strict
compliance with the express provisions of that program, and the Committee has no
discretionary authority with respect to such option grants.
OPTION PRICE AND EXERCISABILITY
The exercise price of options issued under the Discretionary Grant Program
may not be less than 50% of the fair market value of the Common Stock on the
date of grant (100% of such fair market value for Incentive Options), and the
maximum period during which any option may remain outstanding may not exceed ten
(10) years. To date, no options have been granted pursuant to the Discretionary
Grant Program at an exercise price less than the fair market value at the date
of grant.
Options issued under the Discretionary Grant Program may either be
immediately exercisable for the full number of shares purchasable thereunder or
may become exercisable in cumulative increments over a period of months or years
as determined by the Committee.
The option price may be paid in cash or in shares of Common Stock valued at
fair market value on the exercise date. Outstanding options may also be
exercised through a same-day sale program, pursuant to which a designated
brokerage firm is to effect an immediate sale of the shares purchased under the
option and pay over to the Company, out of the sales proceeds available on the
settlement date, sufficient funds to cover the option price for the purchased
shares plus all applicable withholding taxes.
VALUATION
For purposes of establishing the option price and for all other valuation
purposes under the Option Plan, the fair market value per share of Common Stock
on any relevant date will be the last reported sales price per share on the
appropriate stock exchange.
On March 31, 1996, the fair market value of the Company's Common Stock was
$5.375 per share.
STOCKHOLDER RIGHTS AND ASSIGNABILITY OF OPTIONS
No optionee is to have any stockholder rights with respect to the option
shares until such optionee has exercised the option, paid the option price and
been issued a stock certificate for the purchased shares. Options are not
assignable or transferable other than by will or by the laws of inheritance,
and, during the optionee's lifetime, the option may be exercised only by the
optionee.
14
<PAGE> 17
CORPORATE TRANSACTION
In the event of any of the following stockholder-approved transactions (a
"Corporate Transaction"):
(i) a merger or acquisition in which the Company is not the surviving
entity, except for a transaction the principal purpose of which is to
change the state of the Company's Incorporation,
(ii) the sale of all or substantially all of the assets of the Company
in liquidation or dissolution of the Company, or
(iii) any reverse merger in which the Company is the surviving entity
but in which securities possessing more than fifty percent (50%) of the
total combined voting power of the Company's outstanding securities are
transferred to holders different from those who held such securities
immediately prior to such merger, each outstanding option under the
Discretionary Grant Program will automatically become exercisable as to all
of the option shares and may be exercised for any or all of such shares.
However, an outstanding option under the Discretionary Grant Program will
not be so accelerated if and to the extent: (i) such option is either to be
assumed by the successor corporation (or its parent corporation) in such
Corporate Transaction or is otherwise to be replaced with a comparable
option to purchase shares of the capital stock of the successor corporation
(or its parent corporation), (ii) such option is to be replaced by a
comparable cash incentive program of the successor corporation based on the
option spread at the time of the Corporate Transaction or (iii) the
acceleration of such option is subject to other limitations imposed by the
Committee granting the option at the time of such grant.
Upon the consummation of a Corporate Transaction, all outstanding options
under the Option Plan will terminate and cease to be exercisable, except to the
extent assumed by the successor corporation.
STOCK APPRECIATION RIGHTS
The Option Plan includes a stock appreciation rights program, pursuant to
which one or more optionees may, subject to Committee approval, surrender their
outstanding options under the Discretionary Grant Program in return for a
payment from the Company in an amount equal to the excess of (i) the fair market
value (on the option surrender date) of the shares of Common Stock subject to
the surrendered option over (ii) the aggregate option price payable for such
shares. The payment may, at the discretion of the Committee, be made either in
cash or in shares of Common Stock, or a combination of cash and shares of Common
Stock.
In addition, one or more officers of the Company subject to the short-swing
profit restrictions of the Federal securities laws may, in the Committee's
discretion, be granted limited stock appreciation rights in tandem with their
outstanding options. Any option with such a limited stock appreciation right in
effect for at least six (6) months will automatically be cancelled upon the
occurrence of a Hostile Take-Over (defined below), and the optionee will in
return be entitled to a cash distribution from the Company in an amount equal to
the excess of (i) the Take-Over Price (defined below) of the shares of Common
Stock at the time subject to the cancelled option (whether or not the option is
otherwise at the time exercisable for such shares) over (ii) the aggregate
exercise price payable for such shares.
For purposes of such option cancellation provisions, the following
definitions are in effect under the Option Plan:
Hostile Take-Over: the acquisition by any person or related group of
persons (other than the Company or its affiliates) of securities possessing
more than 40% of the combined voting power of the Company's outstanding
securities pursuant to a tender or exchange offer which the Board does not
recommend the Company's stockholders to accept; provided that at least 50%
of the securities so acquired in such tender or exchange offer are obtained
from holders other than the officers and directors of the Company
participating in the Option Plan.
Take-Over Price: the greater of (A) the fair market value of the
shares subject to the cancelled option, measured on the cancellation date
in accordance with the valuation provisions of the Option Plan
15
<PAGE> 18
described above, or (B) the highest reported price per share paid by the
acquiring entity in effecting the Hostile Take-Over. However, if the
cancelled option is an Incentive Option, the Take-Over Price shall not
exceed the clause (A) price per share.
TERMINATION OF SERVICE
Outstanding options under the Discretionary Grant Program will terminate
within ninety (90) days following the optionee's cessation of service with the
Company or its subsidiaries, unless the optionee's service terminates by reason
of permanent disability, in which case the outstanding options will terminate
within twelve (12) months following the optionee's cessation of service. Under
no circumstances, however, may any such option remain exercisable after the
specified expiration date of the option term. Should the optionee die while
holding one or more outstanding options, then those options may be exercised by
the personal representatives of the optionee's estate or by the persons to whom
such options are transferred by the optionee's will or by the laws of
inheritance.
During the applicable exercise period following the optionee's cessation of
service, the option may not be exercised for more than the number of option
shares for which the option is exercisable at the time of such cessation of
service. However, the Committee will have the discretionary authority to
accelerate in whole or in part the vesting of any outstanding options held by
the optionee at the time of such cessation of service and may exercise this
authority either before or after the optionee ceases service.
REPURCHASE RIGHTS
Unvested shares of Common Stock acquired under the Discretionary Grant
Program will be subject to repurchase by the Company, at the original option
price paid per share, upon the optionee's cessation of service. The Committee
will have complete discretion in establishing the vesting schedule for any
unvested shares issued under the Discretionary Grant Program and will have full
authority to cancel the Company's outstanding repurchase rights with respect to
one or more unvested shares held by the optionee at the time of his or her
cessation of service. All shares subject to the Company's repurchase rights
under the Discretionary Grant Program will immediately vest upon a Corporate
Transaction, except to the extent (i) the repurchase rights are to be assigned
to the successor entity or (ii) such termination is precluded by other
limitations imposed by the Committee making the grant at the time the repurchase
right is issued. The Committee shall have the discretionary authority to vest
any shares subject to the Company's outstanding repurchase rights upon a Change
in Control.
CANCELLATION AND NEW GRANT OR OPTIONS
The Committee has the authority to effect, on one or more separate
occasions, the cancellation of outstanding options under the Discretionary Grant
Program (including options incorporated from the Incentive Plan and the
Non-Qualified Plan) and to grant replacement options covering the same or
different numbers of shares of Common Stock but having an option price per share
not less than 50% of the fair market value of the Common Stock on the new grant
date (or 100% of such fair market value in the case of an Incentive Option). It
is anticipated that the option price in effect under the replacement grant will
in all instances be less than the option price in effect under the cancelled
option.
AUTOMATIC GRANT PROGRAM
The Automatic Grant Program is the successor to the Directors Plan. Under
the Automatic Grant Program, special one-time option grants have been made to
the current non-employee members of the Board and new grants will be made to
individuals who subsequently join the Board as non-employee directors. All
non-employee members of the Board of Directors are eligible to receive
additional option grants upon re-election to the Board of Directors, after every
three years of consecutive service. These special grants may be summarized as
follows:
1. New Board Members. Each individual who first becomes a
non-employee Board member at any time after the effective date of the
Option Plan, whether through election at an Annual Stockholders
16
<PAGE> 19
Meeting or through appointment by the Board, will automatically be granted,
at the time of such initial election or appointment, a non-statutory stock
option to purchase 50,000 shares of Common Stock.
2. Re-elected Board Members. Each non-employee Board member who is
re-elected after each three years of consecutive service as a Director will
receive an additional grant of a non-statutory stock option under the
Option Plan to purchase 50,000 shares of Common Stock on the date of the
Annual Meeting at which the non-employee director is elected as a Director
after three years of consecutive service. For example, a non-employee Board
member would receive a 50,000 stock option grant at the Annual Meeting at
which he or she is elected to the Board for the fourth consecutive year,
the seventh consecutive year and the tenth consecutive year.
Each option grant under the automatic grant program will be subject to the
following terms and conditions:
(i) The option price per share will be equal to 100% of the fair
market value per share of Common Stock on the grant date.
(ii) Each option is to have a maximum term of five (5) years measured
from the automatic grant date.
(iii) The option will become exercisable for (a) 12,500 option shares
upon completion of six (6) continuous months of Board service measured from
the grant date, (b) an additional 12,500 shares upon the completion of
eighteen (18) continuous months of Board service, (c) an additional 12,500
shares upon the completion of thirty (30) continuous months of Board
service, and (d) the final 12,500 shares upon the completion of forty-two
(42) continuous months of Board service.
(iv) The option will remain exercisable for a twelve (12)-month period
following the optionee's termination of service as a Board member for any
reason. Should the optionee die while holding the automatic grant, then
such option will remain exercisable for a twelve (12)-month period
following such optionee's death and may be exercised by the personal
representatives of the optionee's estate or the person to whom the grant is
transferred by the optionee's will or the laws of inheritance. In no event,
however, may the option be exercised after the expiration date of the five
(5)-year option term. During the applicable exercise period, the option may
not be exercised for more than the number of shares (if any) for which it
is exercisable at the time of the optionee's cessation of Board service.
(v) The option will become immediately exercisable for all of the
option shares in the event of a Corporate Transaction (as defined above in
the section entitled "Corporate Transaction"). Upon the consummation of the
Corporate Transaction, all automatic option grants will terminate and cease
to be outstanding.
(vi) Upon the occurrence of a Hostile Take-Over (as defined in the
section above entitled "Stock Appreciation Rights"), each automatic option
grant which has been outstanding for a period of at least six (6) months
will automatically be cancelled in return for a cash distribution from the
Company in an amount equal to the excess of (i) the Take-Over Price (as
defined above in the section entitled "Stock Appreciation Rights") of the
shares of Common Stock at the time subject to the cancelled option (whether
or not the option is otherwise at the time exercisable for such shares)
over (ii) the aggregate exercise price payable for such shares.
(vii) The remaining terms and conditions of the option will in general
conform to the terms described above for option grants made under the
Discretionary Grant Program and will be incorporated into the option
agreement evidencing the automatic grant.
(viii) The terms and provisions of the Automatic Grant Program and the
outstanding options thereunder may not be amended or modified at intervals
more frequently than once every six (6) months, except as otherwise
required to comply with applicable Federal tax laws and regulations.
17
<PAGE> 20
CHANGES IN CAPITALIZATION
In the event any change is made to the Common Stock issuable under the
Option Plan by reason of any stock split, stock dividend, combination of shares,
exchange of shares, or other change affecting the outstanding Common Stock as a
class without receipt of consideration, then appropriate adjustments will be
made to (i) the number and/or class of shares issuable under the Option Plan,
(ii) the number and/or class of shares and price per share of the Common Stock
subject to each outstanding option (including all discretionary and automatic
option grants under the Option Plan and all option grants incorporated from the
Incentive Plan, the Non-Qualified Plan and the Directors Plan), and (iii) the
number and/or class of shares per non-employee Board member for which the
special option grants will subsequently be made under the Automatic Grant
Program.
Outstanding options which are assumed or are otherwise to continue in
effect after a Corporate Transaction will be appropriately adjusted to apply and
pertain to the number and class of securities which would have been issuable, in
the consummation of such Corporate Transaction, to an actual holder of the same
number of shares as are subject to each such option immediately prior to such
Corporate Transaction. Appropriate adjustments will also be made to the option
price payable per share and to the number and class of securities available for
issuance under the Option Plan.
Option grants under the Option Plan will not affect the right of the
Company to adjust, reclassify, reorganize or otherwise change its capital or
business structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.
AMENDMENT AND TERMINATION OF THE OPTION PLAN
The Board of Directors may amend or modify the Option Plan in any or all
respects whatsoever, subject, however, to the limitation on plan amendments to
the Automatic Grant Program. No such amendment may adversely affect the rights
of outstanding option holders without their consent, and the Board may not,
without the approval of the Company's stockholders, (i) materially increase the
maximum number of shares issuable under the Option Plan or the number of shares
for which automatic grants may be made to non-employee Board members, except in
the event of certain changes to the Company's capital structure as indicated
above, (ii) materially modify the eligibility requirements for option grants, or
(iii) otherwise materially increase the benefits accruing to participants under
the Option Plan.
The Board may terminate the Option Plan at any time, but the Option Plan
will in all events terminate on March 17, 2002, or (if earlier) on the date all
shares available for issuance under the Option Plan are issued or cancelled
pursuant to the exercise, surrender or cash-out of outstanding options under the
Option Plan.
FEDERAL TAX CONSEQUENCES
Options granted under the Option Plan may be either Incentive Options which
satisfy the requirements of Section 422 of the Internal Revenue Code or
non-statutory options which do not meet such requirements. The Federal income
tax treatment for the two types of options differs as follows:
Incentive Options. No taxable income is recognized by the optionee at the
time of the option grant, and no taxable income is generally recognized at the
time the option is exercised. The optionee will, however, recognize taxable
income in the year in which the purchased shares are sold or otherwise made the
subject of disposition.
For Federal tax purposes, dispositions are divided into two categories: (i)
qualifying and (ii) disqualifying. The optionee will make a qualifying
disposition of the purchased shares if the sale or disposition is made more than
two (2) years after the grant date of the option and more than one (1) year
after the exercise date. If the optionee fails to satisfy either of these two
holding periods prior to sale or disposition, then a disqualifying disposition
of the purchased shares will result.
Upon a qualifying disposition, the optionee will recognize long-term
capital gain in an amount equal to the excess of (i) the amount realized upon
the sale or other disposition of the purchased shares over (ii) the
18
<PAGE> 21
option price paid for the shares. If there is a disqualifying disposition of the
shares, then the excess of (i) the fair market value of those shares on the date
of exercise over (ii) the option price paid for the shares will be taxable as
ordinary income. Any additional gain recognized upon the disposition will be
capital gain.
If the optionee makes a disqualifying disposition of the purchased shares,
then the Company will be entitled to an income tax deduction, for the taxable
year in which such disposition occurs, equal to the excess of (i) the fair
market value of such shares on the date the option was exercised over (ii) the
option price paid for such shares. In no other instance will the Company be
allowed a deduction with respect to the optionee's disposition of the purchased
shares.
Non-Statutory Options. No taxable income is recognized by an optionee upon
the grant of a non-statutory option granted at fair market value on the date of
grant. The optionee will in general recognize ordinary income, in the year in
which the option is exercised, equal to the excess of the fair market value of
the purchased shares on the date of exercise over the exercise price paid for
such shares, and the optionee will be required to satisfy the tax withholding
requirements applicable to such income.
Special provisions of the Internal Revenue Code apply to the acquisition of
Common Stock under a non-statutory option, if the purchased shares are subject
to repurchase by the Company. These special provisions may be summarized as
follows:
(a) If the shares acquired upon exercise of the non-statutory option
are subject to repurchase by the Company at the original option price in
the event the optionee should terminate service prior to vesting in the
shares, the optionee will not recognize any taxable income at the time of
exercise but is required to report as ordinary income, as and when the
Company's repurchase right lapses, an amount equal to the excess of (i) the
fair market value of the shares on the date the Company's repurchase right
lapses over (ii) the option price paid for the shares.
(b) The optionee may, however, elect under Section 83(b) of the
Internal Revenue Code to include as ordinary income in the year of exercise
an amount equal to the excess of (i) the fair market value of the purchased
shares on the date of exercise (determined as if the shares were not
subject to the Company's repurchase right) over (ii) the option price paid
for such shares. If the Section 83(b) election is made, the optionee will
not recognize any additional income as and when the Company's repurchase
right lapses.
The Company will be entitled to a business expense deduction equal to the
amount of ordinary income recognized by the optionee with respect to the
exercised non-statutory option. The deduction will in general be allowed for the
taxable year of the Company in which ordinary income is recognized by the
optionee in connection with the acquisition of the option shares. However, for
shares subject to repurchase by the Company, the deduction will be allowed for
the taxable year of the Company ending immediately after the close of the
calendar year in which the optionee recognizes ordinary income with respect to
those shares.
Surrender Rights. An optionee who surrenders an outstanding option for a
cash or stock distribution from the Company will recognize ordinary income in
the year of surrender equal to the amount of the appreciation distribution. The
Company will be entitled to a corresponding business expense deduction for such
appreciation distribution. The deduction will be allowed in the taxable year of
the Company in which the ordinary income is recognized by the optionee.
ACCOUNTING TREATMENT
Under present accounting rules, neither the grant nor the exercise of
options issued at fair market value under the Option Plan will result in any
charge to the Company's earnings. However, the grant of options with exercise
prices less than the fair market value of the option shares at the time of grant
will result in a compensation expense for the Company equal to the discount at
the time of the grant. The Company is required to report such expense over the
vesting period in effect for the option shares. Whether or not granted at a
discount, the number of outstanding options under the Option Plan may be a
factor in determining earnings per share on a fully-diluted basis.
19
<PAGE> 22
Should one or more optionees be granted the unqualified right to surrender
their options under the Option Plan for a cash or stock distribution,
compensation expense will arise as a charge to the Company's earnings.
Accordingly, at the end of each fiscal quarter, the amount (if any) by which the
fair market value of the shares of Common Stock subject to each such
surrenderable option has increased from prior quarter-end will be accrued as
compensation expense, to the extent such amount is in excess of the aggregate
exercise price payable for such shares. In the event the fair market value of
such shares declines from quarter to quarter, appropriate adjustments to current
compensation expense will be made.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors believes that a competitive employee stock option
plan is crucial to the Company's ability to recruit and retain highly qualified
technical and management employees. Traditionally, stock option plans provide a
significant incentive to managers and technical personnel to perform their
responsibilities in ways that increase return on equity to stockholders.
THE BOARD THEREFORE RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
AMENDMENT TO THE OPTION PLAN TO INCREASE THE NUMBER OF SHARES AUTHORIZED FOR
ISSUANCE THEREUNDER.
STOCKHOLDER APPROVAL
The affirmative vote of a majority of the votes cast at the Annual Meeting
is required for approval of the amendment to the Option Plan. If such
stockholder approval is not obtained, then the amendment approved by the Board
for the Option Plan will not be adopted.
STOCKHOLDER PROPOSALS
The Company has not received any proposals for action at the meeting from
its stockholders. The Company anticipates that its 1997 annual meeting of
stockholders will be held during June 1997. Stockholder proposals intended to be
presented at such meeting and to be included in the Company's proxy statement
and form of proxy for that meeting must have been received at the Company not
later than February 1, 1997.
OTHER INFORMATION
Management knows of no other matters which may be presented at the meeting.
However, if any matters are properly brought before the meeting, the persons
named in the enclosed proxy will vote thereon in accordance with their judgment.
ADDITIONAL INFORMATION
THE COMPANY WILL FURNISH TO ANY STOCKHOLDER OF THE COMPANY, WITHOUT CHARGE,
A COPY OF ITS ANNUAL REPORT ON FORM 10-K, INCLUDING FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULE, UPON RECEIPT OF A WRITTEN REQUEST FOR SUCH REPORT
DELIVERED TO JOHN L. COKER, VICE PRESIDENT OF FINANCE AND ADMINISTRATION, AT THE
COMPANY'S ADDRESS.
BY ORDER OF THE BOARD OF DIRECTORS
/s/JOHN L. COKER
----------------------------------
John L. Coker
Secretary
20
<PAGE> 23
ONCOR, INC.
209 PERRY PARKWAY
GAITHERSBURG, MARYLAND 20877
Stephen Turner, Cecil Kost, John L. Coker, or any of them, are hereby
authorized, with full power of substitution, to represent and to vote the stock
of the undersigned at the Annual Meeting of Stockholders of the Corporation to
be held on June 28, 1996, or at any adjournment of such meeting, upon such
business as may properly come before the meeting, including the following items
as set forth in the Proxy Statement:
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1. ELECTION OF FIVE (5) DIRECTORS FOR ALL NOMINEES LISTED BELOW (EXCEPT AS WITHHOLD AUTHORITY TO VOTE FOR
MARKED TO THE CONTRARY BELOW) / / ALL NOMINEES LISTED BELOW / /
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Stephen Turner, Philip S. Schein, Timothy J. Triche, William H. Taylor II,
George W. Scherer
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE
(NOMINEES), WRITE THE NAME OF SUCH NOMINEE (NOMINEES) IN THE SPACE
BELOW:
- --------------------------------------------------------------------------------
2. RATIFICATION OF SELECTION OF ARTHUR ANDERSEN LLP AS INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS.
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/ / FOR / / AGAINST / / ABSTAIN
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3. APPROVAL OF AMENDMENT TO THE COMPANY'S 1992 STOCK OPTION PLAN TO INCREASE THE
TOTAL NUMBER OF SHARES AUTHORIZED FOR ISSUANCE THEREUNDER BY 500,000 SHARES
TO A TOTAL OF 5,015,604 SHARES.
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/ / FOR / / AGAINST / / ABSTAIN
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THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS AND WILL BE VOTED AS
SPECIFIED. IF NO SPECIFICATION IS MADE, IT WILL BE VOTED FOR THE ELECTION OF
DIRECTORS AND FOR ITEMS 2 & 3.
(Continued on other side)
<PAGE> 24
(Continued from other side)
PLEASE MARK, DATE, SIGN AND MAIL PROMPTLY
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS
AS MAY PROPERLY COME BEFORE THE MEETING.
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Dated , 1996
---------------------------------------------
---------------------------------------------
Print Name
---------------------------------------------
Signature(s)
PLEASE SIGN EXACTLY AS NAME APPEARS ABOVE. IF
SHARES ARE HELD JOINTLY, EACH STOCKHOLDER
SHOULD SIGN. EXECUTORS, ADMINISTRATORS,
TRUSTEES, ETC. SHOULD USE FULL TITLE AND, IF
MORE THAN ONE, ALL SHOULD SIGN. IF THE STOCK-
HOLDER IS A CORPORATION, PLEASE SIGN FULL
CORPORATE NAME BY AN AUTHORIZED OFFICER.
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