<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[ ] Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to sec.240.14a-11(c) or sec.240.14a-12
ALPHA-BETA TECHNOLOGY, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
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(3) Filing party:
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(4) Date filed:
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<PAGE> 2
[ALPHA-BETA LOGO]
ALPHA-BETA TECHNOLOGY, INC.
THREE BIOTECH PARK
ONE INNOVATION DRIVE
WORCESTER, MA 01605
April 25, 1997
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Alpha-Beta Technology, Inc. (the "Company") to be held at 11:00 A.M. on May 28,
1997, at One Innovation Drive, Worcester, MA 01605 (the "Annual Meeting"). The
formal business to be considered and acted upon by the stockholders at this
meeting is (i) the election of two Class II Directors who shall serve until
2000, (ii) to consider and vote upon a proposal to approve the Alpha-Beta
Technology, Inc. 1997 Stock Option and Grant Plan and (iii) to consider and vote
upon such other business as may properly come before the Annual Meeting or any
adjournments or postponements thereof. These matters are described in detail in
the enclosed Notice of Annual Meeting and Proxy Statement.
The Board of Directors of the Company requests that you carefully review
the enclosed Proxy Statement and recommends that you vote "FOR" the election of
the nominees for the Board as Class II Directors of the Company and "FOR" the
proposal to approve the Alpha-Beta Technology, Inc. 1997 Stock Option and Grant
Plan.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE ANNUAL MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, YOU ARE REQUESTED TO
COMPLETE, DATE, SIGN AND MAIL THE ENCLOSED PROXY CARD IN THE REPLY ENVELOPE
PROVIDED AT YOUR EARLIEST CONVENIENCE. THE REPLY ENVELOPE REQUIRES NO POSTAGE IF
MAILED IN THE UNITED STATES.
Sincerely,
SPIROS JAMAS
President and Chief Executive Officer
<PAGE> 3
ALPHA-BETA TECHNOLOGY, INC.
WORCESTER, MA 01605
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 28, 1997
NOTICE IS HEREBY GIVEN that the Annual Meeting of the Stockholders of
Alpha-Beta Technology, Inc. will be held at 11:00 A.M. at One Innovation Drive,
Worcester, Massachusetts on Wednesday, May 28, 1997, to consider and act on the
following matters:
1. Election of D. Davidson Easson, Jr. and Bernard Canavan as the
Class II Directors of the Company to serve until the 2000 Annual Meeting of
Stockholders and until their successors are duly elected and qualified;
2. A proposal to approve the Alpha-Beta Technology, Inc. 1997 Stock
Option and Grant Plan; and
3. Any other matter that may properly come before the meeting or any
adjournment or postponement thereof.
The close of business on April 4, 1997 has been fixed as the record date
for the determination of the stockholders entitled to notice of and to vote at
the Annual Meeting.
By Order of the Board of Directors
D. DAVIDSON EASSON, JR.,
Clerk
Worcester, Massachusetts
April 25, 1997
IMPORTANT: MANAGEMENT INVITES YOU TO ATTEND THE ANNUAL MEETING, BUT IF YOU ARE
UNABLE TO BE PRESENT, PLEASE DATE, SIGN AND RETURN THE ENCLOSED PROXY AS
PROMPTLY AS POSSIBLE. NO POSTAGE IS REQUIRED IF THE PROXY IS RETURNED IN THE
ENCLOSED ENVELOPE AND MAILED IN THE UNITED STATES. IF YOU ATTEND THE ANNUAL
MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF YOU HAVE PREVIOUSLY
RETURNED YOUR PROXY CARD.
<PAGE> 4
ALPHA-BETA TECHNOLOGY, INC.
THREE BIOTECH PARK
ONE INNOVATION DRIVE
WORCESTER, MA 01605
(508) 798-6900
PROXY STATEMENT
This statement is furnished in connection with the solicitation by the
Board of Directors (the "Board") of Alpha-Beta Technology, Inc. (hereinafter the
"Company" or "Alpha-Beta") of proxies in the accompanying form to be used at the
Annual Meeting of Stockholders of the Company to be held at One Innovation
Drive, Worcester, MA 01605 at 11:00 A.M. on May 28, 1997, and at all
adjournments and postponements thereof (the "Annual Meeting"), for the purposes
set forth in the accompanying Notice of Annual Meeting. It is intended that this
statement and the proxies solicited hereby be mailed to stockholders on or
shortly after April 25, 1997. Any stockholder who signs and returns a proxy in
the form enclosed with this statement has the power to revoke the proxy at any
time before it is exercised by giving written notice to such effect to the Clerk
of the Company. A stockholder also may revoke a proxy by filing a duly executed
proxy bearing a later date or by appearing in person and voting by ballot at the
Annual Meeting. Any stockholder of record as of the record date stated below
attending the Annual Meeting may vote in person whether or not a proxy has been
previously given, but the presence (without further action) of a stockholder at
the Annual Meeting will not constitute revocation of a previously given proxy.
Proxies properly executed and received in time for the Annual Meeting will be
voted.
The close of business on April 4, 1997 has been fixed as the record date
for the determination of the stockholders entitled to notice of, and to vote at,
the Annual Meeting. As of such date, 16,743,308 shares of Common Stock were
outstanding and entitled to be voted at the Annual Meeting. Each share of Common
Stock is entitled to one vote on all matters voted on at the Annual Meeting.
The proxies in the accompanying form will be voted as specified, but if no
specification is made they will be voted in favor of the proposals set forth
herein. In the discretion of the proxy holders, the proxies also will be voted
for or against such other matters as may properly come before the Annual
Meeting. The Board of Directors is not aware that any other matters are to be
presented for action at the Annual Meeting.
The Company will pay the entire expense of soliciting proxies for the
Annual Meeting. In addition to solicitations by mail, solicitations also may be
made by personal interview or telephone. Banks, brokerage houses, custodians,
nominees and other fiduciaries have been requested to forward proxy materials to
the beneficial owners of shares held of record by them and will be reimbursed
for their expenses.
The Annual Report of the Company, including financial statements for the
fiscal year ended December 31, 1996, is being mailed to stockholders
concurrently with this proxy statement. The Annual Report, however, is not part
of the proxy solicitation material. A COPY OF THE COMPANY'S ANNUAL REPORT TO THE
SECURITIES AND EXCHANGE COMMISSION ON FORM 10-K, INCLUDING THE FINANCIAL
STATEMENTS, MAY BE OBTAINED WITHOUT CHARGE BY WRITING TO THE DIRECTOR OF FINANCE
OF THE COMPANY AT THE FOLLOWING ADDRESS: THREE BIOTECH PARK, ONE INNOVATION
DRIVE, WORCESTER, MA 01605, ATTN: WILLIAM D. ROMEO.
PROPOSAL I -- ELECTION OF DIRECTORS
The Company's By-Laws provide that the power to fix the number of Directors
each year shall rest with the Board. The Board has set the number of Directors
to serve until the next annual meeting at seven.
<PAGE> 5
Pursuant to the Company's By-Laws and Section 50A of the Massachusetts
Business Corporation Law, the Board of Directors is divided into three classes
of Directors, as nearly equal in number as possible, with the members of each
class to serve for three years. Pursuant to these requirements, Spiros Jamas and
Peter H. Levine are serving as the Class I Directors until the 1999 Annual
Meeting, D. Davidson Easson, Jr. and Bernard Canavan are serving as the Class II
Directors until the 1997 Annual Meeting, and Gustav A. Christensen, Lawrence C.
Hoff and Michael E. Porter are serving as the Class III Directors until the 1998
Annual Meeting. The Board has nominated Dr. Easson and Dr. Canavan for
re-election at the 1997 Annual Meeting to serve as Class II Directors until the
2000 Annual Meeting and until their successors are duly elected and qualified.
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE ELECTION OF DR. EASSON
AND DR. CANAVAN AS THE CLASS II DIRECTORS OF THE COMPANY.
The executive officers, Directors and key employees of the Company are as
follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------------- --- ---------------------------------------------
<S> <C> <C>
Gustav A. Christensen............ 49 Chairman of the Board of Directors
Spiros Jamas, Sc.D. ............. 36 President, Chief Executive Officer and
Director
D. Davidson Easson, Jr.,
Sc.D. ......................... 35 Executive Vice President, Treasurer, Clerk,
Chief Operating Officer and Director
Paul A. Bleicher, M.D., Ph.D. ... 42 Vice President, Clinical Affairs and
Strategic Technology Acquisition and Medical
Director
Nadine D. Cohen, Ph.D. .......... 46 Vice President, Quality
Katherine Evans ................. 54 Vice President, Strategic and Operational
Planning
Michael E. Fiander............... 47 Vice President, Human Resources
Parrish M. Galliher.............. 44 Vice President, Manufacturing Development
Peter H. Grassam................. 51 Vice President, Operations and General
Manager, Smithfield Site
William M. Mackin, Ph.D. ........ 43 Vice President, Biology Research and
Development
Gary R. Ostroff, Ph.D............ 42 Vice President, Discovery Research
Marian E. Smith, Ph.D............ 45 Vice President, Regulatory Affairs
Bernard Canavan, M.D.(1)......... 61 Director
Lawrence C. Hoff(1)(2)........... 68 Director
Peter H. Levine, M.D.(2)......... 58 Director
Michael E. Porter, Ph.D.(2)...... 49 Director
</TABLE>
- ---------------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
Mr. Christensen joined Alpha-Beta in December 1990 as a Director and has
served as Chairman of the Board of Directors since August 1991. Mr. Christensen
has also served as a Director and Executive Vice President of Commonwealth
BioVentures, Inc. since February 1992. Prior to joining the Company, Mr.
Christensen served as President and Chief Executive Officer of Immulogic
Pharmaceutical Corporation, a biotechnology company focusing on immune-related
disorders, from April 1988 to June 1990. From 1983 to April 1988, Mr.
Christensen was Senior Vice President, Commercial Affairs at Genetics Institute,
Inc., with
2
<PAGE> 6
responsibility for business development and licensing. Prior to Genetics
Institute, he held a variety of management positions at Baxter International.
Mr. Christensen received an M.Sc. degree in Economics from the University of
Aarhus (Denmark) and an M.B.A. degree from Harvard Business School. Mr.
Christensen also serves as a Director of Diatide, Inc.
Dr. Jamas is a founder of Alpha-Beta and has served as President, Chief
Executive Officer and a Director since the Company's inception in March 1988.
Dr. Jamas holds Sc.D. and M.S. degrees from the Massachusetts Institute of
Technology, where he conducted initial research on glucans prior to founding the
Company.
Dr. Easson is a founder of Alpha-Beta and has served as Executive Vice
President, Treasurer, Clerk and a Director of the Company since March 1988 and
as Chief Operating Officer since April 1991. Dr. Easson holds a Sc.D. degree in
Biochemical Engineering from the Massachusetts Institute of Technology, where he
developed carbohydrate engineering principles for bacterial polysaccharides
prior to founding the Company. Dr. Easson serves as a Director of the Worcester
Business Development Corporation and the University of Massachusetts Medical
Center Foundation.
Dr. Bleicher joined Alpha-Beta as Director of Clinical Affairs in 1993 from
PAREXEL International Corporation, a large clinical research organization. In
June 1994, Dr. Bleicher was promoted to Vice President, Clinical Affairs and
Medical Director, and he has also served as Vice President of Strategic
Technology Acquisition since April 1996. At PAREXEL he was Director of the Early
Phase Services where he was responsible for clinical trials and strategic
consulting for early-stage biotechnology companies. He holds an M.D. and Ph.D.
from the University of Rochester School of Medicine and Dentistry.
Dr. Cohen joined Alpha-Beta as Director of Quality in 1994 and has served
as Vice President of Quality since December 1995. From February 1993 until she
joined the Company, Dr. Cohen was Director of QA/QC at T Cell Sciences, Inc.
From 1984 to 1993, Dr. Cohen was the Associate Director of Quality Operations at
the Massachusetts Public Health Biologic Laboratories where she served as head
of the QA and QC departments, and also had responsibility for Regulatory
Affairs. Dr. Cohen holds a Ph.D. in Biochemistry from the University of
Rochester.
Ms. Evans joined Alpha-Beta as Director of Project Management in 1992 and
has served as Vice President of Strategic and Operational Planning since January
1997. Prior to joining Alpha-Beta, Ms. Evans was Director of Project Management
at Genetics Institute, Inc. During her 7 year tenure at Genetics Institute, Ms.
Evans served as Project Manager for t-PA, Factor VIII and EPO. Ms. Evans holds a
B.A. and M.A. in History from Smith College.
Mr. Fiander joined Alpha-Beta as Vice President of Human Resources in 1994
from Mariner Health Care, where he served as Corporate Vice President of Human
Resources. He previously held several senior human resource management positions
at St. Luke's Health Foundation of Greater New Bedford, South Shore Health &
Educational Foundation, and the American Red Cross Blood Services -- Northeast
Region. Mr. Fiander holds a B.A. in Education from Boston College and an M.A. in
Human Resource Management from Emmanuel College.
Mr. Galliher joined the Company as Director of Manufacturing Development in
1993 and has served as Vice President of Manufacturing Development since
December 1995. Prior to joining Alpha-Beta, Mr. Galliher was responsible for a
variety of functions during his 12 year tenure at Biogen, Inc., including
process engineering validation, process scale-up, bioprocess development,
clinical manufacturing, and production plant design and startup. Mr. Galliher
holds a B.S. in Biology from Boston University and an M.S. in Biochemical
Engineering from the Massachusetts Institute of Technology.
3
<PAGE> 7
Mr. Grassam joined Alpha-Beta as Vice President of Operations in 1993 from
Serono Laboratories, Inc. where he was Vice President of Operations. He was
previously Vice President of Immunex Manufacturing Corporation where he was
responsible for the start-up and licensing of a commercial facility to
manufacture GM-CSF. Mr. Grassam has over 20 years of pharmaceutical experience
in both the United States and Europe. He holds a Bachelors of Pharmacy degree
from the University of London.
Dr. Mackin joined Alpha-Beta in 1992 as a Senior Scientist in the Biology
Department and was named Vice President, Biology Research & Development in
January 1997. Previously, Dr. Mackin was a Senior Scientist engaged in
immune-based drug discovery efforts for 9 years at E.I. du Pont de Nemours and
Company and Dupont Merck Pharmaceutical Company. From 1980 to 1983, Dr. Mackin
was a recipient of a National Arthritis Foundation postdoctoral fellowship at
the University of Connecticut Health Center. Dr. Mackin holds a B.S. in
Microbiology from the University of Illinois and a Ph.D. in Medical Microbiology
and Immunology from the University of Illinois Medical School.
Dr. Ostroff joined the Company in 1988 and has served as Vice President of
Discovery Research since January 1995. Dr. Ostroff was previously Microbiology
Group Leader at Genzyme Corporation from July 1984 to September 1988. Dr.
Ostroff obtained his Ph.D. in Molecular Biology from the University of Delaware
in 1982. He was the recipient of an American Cancer Society and NIH postdoctoral
fellowship at University of Massachusetts Medical School from 1982 to 1984.
Dr. Smith joined the Company as Director of Regulatory Affairs in 1993 and
has served as Vice President of Regulatory Affairs since January 1997. Prior to
joining Alpha-Beta, Dr. Smith played a major role in the development of
recombinant erythropoietin at Johnson and Johnson. As Director of Development
Operations, she led the group responsible for writing the technical sections of
INDs and NDAs for both traditional and biotech pharmaceuticals. Dr. Smith holds
a Ph.D. in Genetics from the University of Wisconsin, an M.S. in Genetics from
Washington State University and a B.S. in Zoology from North Carolina State
University.
Dr. Canavan has been a Director of the Company since February 1994. Dr.
Canavan was President of American Home Products Corp., a pharmaceutical
manufacturer, from June 1990 until his retirement in February 1994. From
September 1987 to June 1990, Dr. Canavan was the Executive Vice President of
American Home Products Corp. and Chairman of Wyeth-Ayerst Laboratories. Dr.
Canavan also serves as a Director of Magainin Pharmaceuticals.
Mr. Hoff has been a Director of the Company since February 1992. Mr. Hoff
was President and Chief Operating Officer of the Upjohn Company until his
retirement in 1990. Mr. Hoff was employed by Upjohn for 39 years starting as a
pharmaceutical sales representative in 1950. He became Vice President and
General Manager of Pharmaceutical Operations in 1974 and President in 1984. Mr.
Hoff also served as Chairman of the Pharmaceutical Manufacturers Association in
1987 and Chairman-elect in 1986. Mr. Hoff serves on the boards of MedImmune,
Inc., Curative Technologies, Inc. and Pathogenesis, Inc.
Dr. Levine has been a Director of the Company since October 1995. He has
been the President and Chief Executive Officer of Memorial Health Care, Inc.
(formerly The Medical Center of Central Massachusetts, Inc.) since 1990, and is
a Professor of Medicine at the University of Massachusetts Medical School. He
currently serves on the boards of the Worcester Polytechnic Institute, the
Massachusetts Biotechnology Research Institute and the Massachusetts Hospital
Association.
Dr. Porter has been a Director of the Company since September 1991. He is
the C. Roland Christensen Professor of Business Administration at Harvard
Business School. Dr. Porter has served as a counselor on competitive strategy to
many leading U.S. and international corporations, including AT&T, Credit Suisse
First Boston, Procter & Gamble and Royal Dutch Shell. Dr. Porter joined the
Harvard faculty in 1973. He received a Ph.D. in Business Economics from Harvard
University and an M.B.A. from Harvard Business School.
4
<PAGE> 8
Dr. Porter also serves as a Director of ThermoQuest Corporation, Parametric
Technology, Inc. and Falcon Drilling Company, Inc.
BOARD MEETINGS, COMMITTEES, ATTENDANCE AND FEES
The Board of Directors held six regularly scheduled meetings and two
special meetings during the 1996 fiscal year. The Board has a compensation
committee (the "Compensation Committee") and an audit committee (the "Audit
Committee"), each of which is discussed below. The Board does not have a
nominating committee. Each of the incumbent Directors attended more than 75% of
the aggregate of the total number of meetings of the Board of Directors and the
committees of which he was a member which were held during the period he was a
Director or committee member.
COMPENSATION COMMITTEE
This committee reviews and makes recommendations to the Board concerning
salaries and incentive compensation for management level employees and
scientific consultants to the Company, in addition to administering the
Company's 1988 Stock Option and Grant Plan. See "Report of Executive
Compensation Committee." The Compensation Committee held one meeting during the
1996 fiscal year.
The committee members are Dr. Canavan and Mr. Hoff.
AUDIT COMMITTEE
This committee is responsible for reviewing the results and scope of the
audit and examination reports of the independent auditors and for reviewing the
letters to management prepared by the independent auditors. The Audit Committee
held two meetings during the 1996 fiscal year.
The committee members are Mr. Hoff, Dr. Levine and Dr. Porter.
ELECTION AND COMPENSATION OF DIRECTORS
All of the Directors are elected by the stockholders of the Company. There
are no existing understandings or arrangements regarding the election or
nomination for election of any of the Directors. Each of the non-employee
Directors receives a director fee of $10,000 per annum and up to $1,000 for each
Board and committee meeting he attends. In lieu of a director fee, each Director
may elect to receive stock options with a fair market value equal to the
director fee as determined by the Black-Scholes option pricing model, an
accepted model for stock option valuation. Each non-employee Director is also
eligible to participate in the Alpha-Beta Technology, Inc. 1988 Stock Option and
Grant Plan and will be eligible to participate in the Alpha-Beta Technology,
Inc. 1997 Stock Option and Grant Plan if such plan is approved by the
stockholders at the Annual Meeting. See "Proposal II -- Approval of the
Alpha-Beta Technology, Inc. 1997 Stock Option and Grant Plan."
5
<PAGE> 9
EXECUTIVE COMPENSATION
The following tables set forth (a) the compensation paid or accrued by the
Company's Chief Executive Officer and four other most highly-compensated
executive officers of the Company for the year ended December 31, 1996 (the
"Named Executive Officers") for services rendered to the Company in all
capacities during the fiscal years ended December 31, 1996, 1995 and 1994, and
(b) certain information related to stock options held by such individuals at
December 31, 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-------------------------------------
ANNUAL COMPENSATION AWARDS
-------------------------------- -------------------------
OTHER SECURITIES PAYOUTS ALL
ANNUAL RESTRICTED UNDERLYING ------- OTHER
COMPEN- STOCK OPTIONS/ LTIP COMPEN-
NAME AND PRINCIPAL SALARY BONUS SATION AWARD(S) SARS PAYOUTS SATION
POSITION YEAR ($) ($) ($) ($) (#) ($) ($)
- -------------------------- ---- -------- ------- ------- ----------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Spiros Jamas.............. 1996 $242,000 $40,000 none none 80,000 none none
President, Chief Executive 1995 220,000 17,600 none none 65,250 none none
Officer and Director 1994 220,000 none none none none none none
D. Davidson Easson,
Jr. .................... 1996 176,000 30,000 $557(1) none 40,000 none none
Executive Vice President, 1995 160,000 12,800 2,414(1) none 42,250 none none
Treasurer, Clerk, 1994 160,000 none none none none none none
Chief Operating Officer
and Director
Paul A. Bleicher.......... 1996 186,250 35,000 3,784(1) none 45,000 none none
Vice President, Clinical 1995 165,000 13,200 3,095(1) none 35,300 none none
Affairs and Strategic 1994 143,500 10,000 2,167(1) none 12,000 none none
Technology Acquisition and
Medical Director
Peter H. Grassam.......... 1996 178,500 25,000 707(1) none 20,000 none none
Vice President, Operations 1995 171,000 11,970 727(1) none 33,700 none none
and General Manager, 1994 171,000 none 54,336(2) none 20,000 none none
Smithfield Site
Augustine Lawlor(4)....... 1996 156,600 25,000 3,534(1) none 20,000 none none
Vice President, Finance
and 1995 150,000 12,000 10,686(3) $19,500 52,800 none none
Chief Financial Officer 1994 none none none none none none none
</TABLE>
- ---------------
(1) The amounts shown represent amounts paid for certain tax planning and
advice.
(2) The amount shown represents an amount reimbursed for the payment of housing
and related relocation expenses.
(3) The amount shown represents an amount reimbursed for the payment of certain
taxes related to a restricted stock grant.
(4) Mr. Lawlor resigned as an officer of the Company as of February 28, 1997.
6
<PAGE> 10
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE
--------------------------------------- AT ASSUMED ANNUAL RATES
% OF TOTAL OF STOCK PRICE
OPTIONS APPRECIATION
GRANTED TO EXERCISE OR FOR OPTION TERM(1)
OPTIONS EMPLOYEES BASE PRICE EXPIRATION -----------------------
NAME GRANTED IN 1996 ($/SH) DATE 5%($) 10%($)
- ------------------------- ------ ---------- ----------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Spiros Jamas............. 80,000 14.35% $ 9.63 12/27/06 $484,500 $1,227,819
D. Davidson Easson, Jr... 40,000 7.17 9.63 12/27/06 242,250 613,910
Paul A. Bleicher......... 25,000 4.48 12.50 04/01/06 196,530 498,045
20,000 3.59 9.63 12/27/06 121,125 306,955
Peter H. Grassam......... 20,000 3.59 9.63 12/27/06 121,125 306,955
Augustine Lawlor......... 20,000 3.59 9.63 05/28/97 3,927 7,746
</TABLE>
- ---------------
(1) Represents the value of the options granted at the end of the option terms
if the price of the Company's Common Stock were to appreciate annually by 5%
and 10%, respectively. There is no assurance that the stock price will
appreciate at the rates shown in the table. If the stock price appreciates,
the value of stock held by all shareholders will increase.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
SHARES FISCAL YEAR-END FISCAL YEAR-END(1)
ACQUIRED VALUE ------------------------- -------------------------
NAME ON EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ------------------------- ----------- -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Spiros Jamas............. none n/a 105,091/103,790 $ 190,353/149,161
D. Davidson Easson, Jr... none n/a 63,774/57,454 143,734/88,696
Paul A. Bleicher......... none n/a 49,650/64,650 64,910/79,154
Peter H. Grassam......... 11,250 $ 36,563 42,600/59,850 42,466/85,994
Augustine Lawlor......... none n/a 11,200/61,600 18,672/81,096
</TABLE>
- ---------------
(1) All information provided is with respect to stock options. No SARs have been
issued by the Company. The dollar values have been calculated by determining
the difference between the fair market value of the securities underlying
the options and the exercise price of the options. The fair market value of
unexercised in-the-money options was calculated on the basis of the closing
price per share for Common Stock on The Nasdaq National Market of $10.56 on
December 31, 1996.
EMPLOYMENT AGREEMENTS
Pursuant to an employment letter with the Company, Dr. Ostroff is entitled
to up to three months' salary and benefits if the Company terminates his
employment without cause. In connection with their initial offers of employment
with the Company, Mr. Lawlor was granted an option to purchase 40,000 shares of
Common Stock at a per share exercise price of $9.75, Mr. Grassam was granted an
option to purchase 40,000 shares of Common Stock at a per share exercise price
of $22.50 and Dr. Bleicher was granted an option to purchase 22,000 shares of
Common Stock at a per share exercise price of $27.00. Mr. Lawlor and Mr. Grassam
also were granted 2,000 shares of restricted Common Stock each which vested in
June 1995 and June 1994,
7
<PAGE> 11
respectively. Pursuant to an employment letter with the Company, Mr. Grassam is
entitled to four months' salary and health care insurance if the Company
terminates his employment without cause.
The Company has an employment agreement with Mr. Christensen pursuant to
which Mr. Christensen serves as Chairman of the Board and must commit a minimum
of one half of his business time to Alpha-Beta matters. Mr. Christensen
currently receives an annual salary of $118,000. In addition to his salary, the
agreement provides for the sale, subject to certain vesting conditions (which
conditions have previously been met), of 44,000 shares of Common Stock to Mr.
Christensen at a purchase price of $.51 per share and the issuance of options,
subject to certain vesting conditions, for the purchase of 88,000 shares of
Common Stock at an exercise price of $.51 per share. 44,000 of such option
shares have vested and the remainder shall vest, subject to certain conditions,
on December 31, 1998, subject to acceleration upon consummation of certain
corporate and financing transactions. The agreement also provides for the
payment of cash bonuses of up to 0.5% of the cumulative net proceeds received by
the Company from certain joint ventures, strategic alliances and private
placements.
REPORT OF EXECUTIVE COMPENSATION COMMITTEE
The Compensation Committee
The Compensation Committee currently consists of Mr. Hoff and Dr. Canavan.
The Compensation Committee's responsibilities include: (i) reviewing the
performance of the Chief Executive Officer and the other executive officers of
the Company and making recommendations as to their cash and equity-based
compensation and benefits; (ii) issuing options and stock grants under the
Company's 1988 Stock Option and Grant Plan (hereinafter the "1988 Option Plan");
and (iii) making recommendations as to the compensation policies for the
Company's non-officer employees.
Overall Objectives and Executive Compensation Philosophy
The overall objectives of the Compensation Committee are to set the
Company's executive compensation policies and programs for the Company's senior
management so as to ensure that executive compensation is appropriately tied to
the Company's performance and that the Company is capable of attracting,
retaining and motivating executive officers and other key employees. The
Compensation Committee established the following principles by which to achieve
its overall objectives. First, the Compensation Committee determined that
executive officer base salaries should, in general, be set at levels which are
at or slightly below industry averages. Second, the Company's executive officers
should be eligible for performance-based annual cash bonuses which are
conditioned upon significant achievement by both the Company and the individual.
Third, the Compensation Committee determined that it is appropriate to grant
stock options on a discretionary basis to ensure that key executives are
properly motivated in terms of future performance. The Compensation Committee
also believes that any such stock option or other equity-based compensation
should involve long-term vesting to encourage long-term tenure and enhancement
of shareholder value.
Upon the Compensation Committee's recommendations, the Company has adopted
a policy by which the performance and compensation of all executive officers and
key employees are reviewed annually at each calendar year end. In connection
with such review, the annual salary of such executive officers and other key
employees for the upcoming fiscal year is adjusted based upon a review of their
performance during the previous fiscal year, any new roles or responsibilities
undertaken during that year, a comparison of the Company's compensation packages
to those of comparable companies and consideration of the Company's performance
and financial condition. As part of the annual review, any annual cash bonus
awards would also be made on the basis of previously-established performance
guidelines and any annual stock option or grant awards would be made.
8
<PAGE> 12
For its 1996 annual compensation review, the Compensation Committee used a
comparison group of public biotechnology companies based upon company size. All
compensation data for this peer group was derived from a 1995 survey performed
by an independent compensation consulting agency. The Compensation Committee
also used a similar 1996 survey for the purposes of determining bonuses to be
paid for 1996. The members of the Compensation Committee also relied upon their
knowledge of the biotechnology industry and the general salary levels paid by
public biotechnology companies.
Base Salary
The Compensation Committee adjusted 1996 annual salaries for each of the
Company's executive officers. Such adjustments reflect an average increase for
the executive officer group of 8.6 percent. As part of these adjustments, two
officers who were promoted to vice president received salary adjustments
significantly greater than the average increase. In making these adjustments,
the Compensation Committee considered the fact that base compensation for the
Company's executive officers had not been increased in 1995 over 1994 levels,
and that the executive compensation survey used by the Committee concluded that
the Company's annual salaries were less than the competitive norm.
Annual Bonus
The Company previously established an annual bonus program for the
executive officers and key employees of the Company. Under this program, the
executive officers and key employees are eligible for annual bonuses based upon
the Committee's subjective assessment of each individual's attainment of his or
her performance goals as well as the Committee's assessment of the Company's
overall performance.
For 1996, the Compensation Committee determined to award cash and option
bonuses to executive officers. In awarding bonuses, the Compensation Committee
considered the Company's attainment of significant milestones, including
achievements in clinical trials, research and development, and manufacturing, as
well as a successful equity financing. The Compensation Committee also
considered the fact that the executive compensation survey used by the Committee
concluded that the Company's overall cash compensation was, on average,
approximately 14% less than the competitive market average.
Stock Options
Under the 1988 Option Plan, stock options are granted to Directors,
officers, other employees, scientific advisers and consultants and other key
persons. In general, stock options are granted to the Company's executive
officers at the time of their hire, annually as part of the Compensation
Committee's year-end review and at such other times as the Compensation
Committee may deem appropriate, such as a promotion. The Compensation Committee
bases its stock option award decisions upon its comparison of comparable
biotechnology companies, its assessment of an individual's performance and
importance to the Company and its determination that valued employees should
have a significant amount of unvested options as a long-term incentive.
Stock options are designed to align the interest of executives with those
of the shareholders. Stock options are granted to executive officers with an
exercise price equal to the fair market value of the common stock on the date of
grant and usually vest between three and five years. This approach is designed
to incentivize the executives to create long-term shareholder value, since the
full benefit of the compensation package cannot be realized unless stock price
appreciation occurs over a number of years.
As part of its 1996 annual compensation review, the Compensation Committee
determined to award an aggregate of 440,000 stock options to various executive
officers and director-level and associate director-level employees of the
Company at year-end as part of the bonus program described above. In determining
the
9
<PAGE> 13
number of option shares granted to individual executive officers, the
Compensation Committee considered the fact that the executive compensation
survey used by the Committee concluded that, for most senior level positions of
the Company, the amount of stock options granted was less to significantly less
than the competitive norm. The Committee also considered the factors described
above for the bonus program.
CEO Compensation
As discussed above, consistent with its treatment of the Company's other
executive officers, the Compensation Committee determined to increase Dr. Jamas'
annual salary for 1996 to $242,000. This salary level represents 76% of the
average 1996 annual base salary paid to chief executive officers in the
comparable group of public biotechnology companies used by the Compensation
Committee. In addition, Dr. Jamas received a cash bonus of $40,000 as a year-end
1996 bonus. Dr. Jamas also received stock options for 80,000 shares. Dr. Jamas'
total cash compensation represents 62% of the average total cash compensation of
chief executive officers compared with the survey group. In awarding a 1996
bonus, the Compensation Committee credited Dr. Jamas' leadership in helping to
achieve the significant milestones referenced above.
The Members of the Compensation Committee:
Bernard Canavan
Lawrence C. Hoff
The report of the Compensation Committee shall not be deemed to be
incorporated by reference as a result of any general incorporation by reference
of this Proxy Statement or any part hereof in the Company's Annual Report on
Form 10-K.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee consists of Dr. Canavan and Mr. Hoff. Neither of
these individuals is or formerly was an officer or employee of the Company or
has any other material business relationship or affiliation with the Company,
except his service as a Director.
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<PAGE> 14
STOCK PERFORMANCE GRAPH
Set forth below is a line graph comparing the quarterly cumulative total
stockholder return on the Company's Common Stock against the cumulative return
of the NASDAQ Composite Index and the American Stock Exchange ("AMEX") Biotech
Index, for the period commencing on the first trading day of the Company's
Common Stock, October 16, 1992, and ending on December 31, 1996. The graph
assumes that the value of an investment in the Company's Common Stock and each
index was $100 on October 16, 1992 and that all dividends were reinvested.
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
10/16/92 12/31/92 3/31/93 6/30/93 9/30/93 12/31/93 3/31/94 6/30/94 9/30/94 12/31/94
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Alpha-Beta Technology 100.00 197.00 234.00 313.00 338.00 403.00 269.00 134.00 167.00 109.00
AMEX Biotech Index 100.00 123.00 82.00 82.00 79.00 82.00 65.00 57.00 64.00 58.00
NASDAQ Composite 100.00 116.00 117.00 119.00 129.00 132.00 126.00 120.00 130.00 127.00
3/31/95 6/30/95 9/30/95 12/31/95 3/31/96 6/30/96 9/30/96 12/31/96
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Alpha-Beta Technology 94.00 62.00 102.00 155.00 156.00 111.00 134.00 132.00
AMEX Biotech Index 95.00 81.00 64.00 55.00 96.00 100.00 100.00 102.00
NASDAQ Composite 178.00 177.00 158.00 139.00 187.00 201.00 208.00 218.00
</TABLE>
11
<PAGE> 15
PRINCIPAL AND MANAGEMENT STOCKHOLDERS
The following table sets forth, to the best knowledge and belief of the
Company, certain information regarding the beneficial ownership of the Company's
Common Stock as of March 31, 1997 by (i) each person known by the Company to be
the beneficial owner of more than 5% of the outstanding Common Stock, (ii) each
of the Company's Directors, (iii) each of the Named Executive Officers and (iv)
all of the Company's executive officers and Directors as a group. Except as
indicated in the footnotes to this table, the Company believes that the persons
named in this table have sole voting and investment power with respect to the
shares of Common Stock indicated.
<TABLE>
<CAPTION>
DIRECTORS, EXECUTIVE SHARES PERCENTAGE
OFFICERS AND 5% STOCKHOLDERS BENEFICIALLY OWNED(1) OF CLASS
------------------------------------------------------ ---------------------- ----------
<S> <C> <C>
State of Wisconsin Investment Board(2)................ 1,610,000 9.62%
P.O. Box 7842
Madison, WI 53707
The Capital Group Companies, Inc.(3).................. 965,000 5.76%
333 South Hope Street
Los Angeles, CA 90071
Wellington Management Company, LLP(4)................. 876,500 5.23%
75 State Street
Boston, MA 02109
Spiros Jamas, Sc.D.(5)................................ 582,723 3.46%
D. Davidson Easson, Jr., Sc.D.(6)..................... 394,888 2.35%
Gustav A. Christensen(7).............................. 171,458 1.02%
Peter H. Grassam(8)................................... 48,725 *
Paul A. Bleicher, M.D., Ph.D.(9)...................... 60,275 *
Augustine Lawlor(10).................................. 10,709 *
Michael E. Porter, Ph.D.(11).......................... 61,245 *
Lawrence C. Hoff(12).................................. 26,000 *
Bernard Canavan, M.D.(13)............................. 28,000 *
Peter H. Levine, M.D.(14)............................. 4,500 *
All Directors and executive officers as a group (14
persons)(15)........................................ 1,593,943 9.16%
</TABLE>
- ---------------
* Less than 1%
(1) The numbers and percentages include shares of Common Stock issuable upon
exercise of certain outstanding options as described in the footnotes below.
(2) As reported in Amendment No. 3 to a Schedule 13G dated January 16, 1997 and
filed with the Securities and Exchange Commission.
(3) As reported in Amendment No. 2 to a Schedule 13G dated February 12, 1997 and
filed with the Securities and Exchange Commission.
(4) As reported in a Schedule 13G dated January 15, 1997 and filed with the
Securities and Exchange Commission.
(5) Represents 467,154 shares of Common Stock and 115,569 shares of Common Stock
that Dr. Jamas may acquire upon the exercise of options exercisable within
60 days after March 31, 1997. This also includes 25,492 shares of Common
Stock owned by Dr. Jamas' mother as to which Dr. Jamas disclaims beneficial
ownership.
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<PAGE> 16
(6) Represents 324,422 shares of Common Stock and 70,466 shares of Common Stock
that Dr. Easson may acquire upon the exercise of options exercisable within
60 days after March 31, 1997. This also includes 47,632 shares of Common
Stock owned by Dr. Easson's children, as to all of which Dr. Easson
disclaims beneficial ownership.
(7) Represents 73,819 shares of Common Stock and 97,639 shares of Common Stock
that may be acquired by Mr. Christensen upon the exercise of options
exercisable within 60 days after March 31, 1997.
(8) Represents 500 shares of Common Stock and 48,225 shares of Common Stock that
may be acquired by Mr. Grassam upon the exercise of options exercisable
within 60 days after March 31, 1997.
(9) Represents 60,275 shares of Common Stock that may be acquired by Dr.
Bleicher upon the exercise of options exercisable within 60 days after March
31, 1997.
(10) Mr. Lawlor resigned as an officer of the Company as of February 28, 1997.
(11) Represents 46,000 shares of Common Stock and 15,245 shares of Common Stock
that may be acquired by Dr. Porter upon the exercise of options exercisable
within 60 days after March 31, 1997.
(12) Represents 18,000 shares of Common Stock and 8,000 shares of Common Stock
that may be acquired by Mr. Hoff upon the exercise of options exercisable
within 60 days after March 31, 1997.
(13) Represents 1,000 shares of Common Stock and 27,000 shares of Common Stock
that may be acquired by Dr. Canavan upon the exercise of options
exercisable within 60 days after March 31, 1997.
(14) Represents 4,000 shares of Common Stock that may be acquired by Dr. Levine
upon the exercise of options exercisable within 60 days after March 31,
1997, and 500 shares of Common Stock owned by Dr. Levine's wife, as to
which Dr. Levine disclaims beneficial ownership.
(15) Includes 651,839 shares of Common Stock issuable upon the exercise of
options exercisable within 60 days after March 31, 1997.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's executive officers and Directors, and
persons who own more than 10% of a registered class of the Company's equity
securities to file reports of ownership and changes in ownership with the SEC
and The Nasdaq National Market. Officers, Directors and greater than 10%
stockholders are required to furnish the Company with copies of all Section
16(a) forms they file. To the Company's knowledge, based solely on review of the
copies of such reports furnished to the Company and representations that no
other reports were required during the fiscal year ended December 31, 1996, all
Section 16(a) filing requirements applicable to its executive officers,
Directors and greater than 10% beneficial owners were satisfied.
PROPOSAL II -- APPROVAL OF THE ALPHA-BETA TECHNOLOGY, INC.
1997 STOCK OPTION AND GRANT PLAN
The Board adopted the Alpha-Beta Technology, Inc. 1997 Stock Option and
Grant Plan (the "1997 Option Plan") on April 23, 1997 to provide for an adequate
number of shares of Common Stock available for grant by the Company, as options
may no longer be granted under the 1988 Option Plan after March 3, 1998. As in
the case of the 1988 Option Plan, the 1997 Option Plan is intended to promote
the interests of the Company by providing incentives to attract, motivate and
retain the services of highly qualified persons necessary to the Company's
future growth and success. The Directors believe that the 1997 Option Plan is in
the best interests of the Company and recommend its approval by stockholders. As
of April 23, 1997, no awards have been granted under the 1997 Option Plan.
13
<PAGE> 17
As of March 31, 1997, the Company had granted options pursuant to the 1988
Option Plan to purchase an aggregate of 2,371,252 shares of Common Stock at a
weighted average exercise price of $8.32 per share, of which options to purchase
891,920 shares were then exercisable. During 1996, Incentive Options (as defined
below) to purchase an aggregate of 557,588 shares of Common Stock were granted
to certain employees, officers and Directors of the Company at a weighted
average exercise price of $9.75 per share. During 1996, Non-Qualified Options
(as defined below) to purchase an aggregate of 8,448 shares of Common Stock were
granted to certain employees, officers and Directors of the Company at a
weighted average exercise price of $12.12 per share.
As of March 31, 1997, a total of 392,886 options granted pursuant to the
1988 Option Plan had been exercised. As of March 31, 1997, a total of 158,461
shares were available for future option grants or outright grants under the 1988
Option Plan. Based solely upon the closing price of the Company's Common Stock
on March 31, 1997, the maximum aggregate market value of the Common Stock
underlying the options outstanding and eligible for issuance under the 1988
Option Plan was $20,263,086.
A total of (i) 837,165 shares of Common Stock plus (ii) 5 percent of the
total number of shares of Common Stock issued by the Company after December 31,
1996 have been reserved for issuance under the 1997 Option Plan, subject to
certain limitations on the number of shares of stock that may be the subject of
outright grants and Incentive Stock Options under the 1997 Option Plan. Based
solely upon the closing price of the Company's Common Stock as reported by The
Nasdaq National Market on April 16, 1997, the maximum aggregate market value of
the securities to be issued under the 1997 Option Plan is $7,325,194. The total
number of shares available under the 1997 Option Plan will be subject to
adjustment upon the occurrence of a stock dividend, stock split or other change
affecting the Common Stock. The 1997 Option Plan also provides that stock
options with respect to no more than 200,00 shares of Common Stock may be
granted to any one individual in any one calendar year. The shares of Common
Stock issued by the Company under the 1997 Option Plan may be authorized but
unissued shares, or shares reacquired by the Company. To the extent that awards
under the 1997 Option Plan do not vest or otherwise revert to the Company, the
shares of Common Stock represented by such awards may be the subject of
subsequent awards.
The Company is seeking stockholder approval and ratification of the 1997
Option Plan in accordance with the requirements of The Nasdaq National Market
and in order to permit grants of stock options and unrestricted stock under the
1997 Option Plan. Options and other awards will not be granted under the 1997
Option Plan unless and until the 1997 Option Plan is approved by stockholders
(or will be granted subject to stockholder approval).
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE APPROVAL OF THE 1997
OPTION PLAN.
SUMMARY OF THE 1997 OPTION PLAN
The following description of certain features of the 1997 Option Plan is
intended to be a summary only. The summary does not purport to be complete and
is qualified in its entirety by reference to the 1997 Option Plan, the full text
of which is attached hereto as Appendix A.
Plan Administration; Eligibility. The 1997 Option Plan is administered by
the Board or by a committee appointed by the Board. All members of such
committee must be "Non-Employee Directors" as that term is defined under the
rules promulgated by the Securities and Exchange Commission under the Exchange
Act, and "outside directors" as defined in Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code"), and the regulations promulgated
thereunder. The Board or authorized committee will interpret and make any
determination under the 1997 Option Plan regarding any options or stock granted
thereunder.
14
<PAGE> 18
Persons eligible to participate in the 1997 Option Plan are officers,
employees, Directors who are not also employees of the Company or any subsidiary
("Independent Directors"), consultants, advisors and other key persons of the
Company and its subsidiaries upon whose judgment, initiative and efforts the
Company largely depends for the successful conduct of its business ("Eligible
Persons"), as selected from time to time by the Compensation Committee. The
Compensation Committee has full power to select from among the Eligible Persons
the individuals to whom awards will be granted, to make any combination of
awards to such individuals, and to determine the specific terms and conditions
of each award, subject to the provisions of the 1997 Option Plan.
The Compensation Committee, in its discretion, may delegate to the Chief
Executive Officer of the Company part of the Compensation Committee's authority
and duties with respect to the granting of awards to individuals who are not
subject to Section 16 of the Exchange Act and are not "covered employees" within
the meaning of Section 162(m) of the Code.
Stock Options. The 1997 Option Plan permits the grant of options to
purchase Common Stock intended to qualify as incentive stock options ("Incentive
Options") under Section 422 of the Code and options that do not so qualify
("Non-Qualified Options"). The option exercise price of each Incentive Option
will be determined by the Compensation Committee but may not be less than 100%
of the fair market value of the Common Stock on the date of grant. The option
exercise price of each Non-Qualified Option shall be determined by the
Compensation Committee at the time of grant.
In lieu of a director fee, an Independent Director may elect to receive
such fee in Non-Qualified Options with a fair market value equal to the director
fee as determined by the Black-Scholes Option pricing model, an accepted model
for stock option valuation.
The term of each option will be fixed by the Compensation Committee and may
not exceed ten years from date of grant in the case of an Incentive Option. The
Compensation Committee will determine at what time or times each option may be
exercised and, subject to the provisions of the 1997 Option Plan, the period of
time, if any, after retirement, death, disability or termination of employment
during which options may be exercised. Options may be made exercisable in
installments and the exercisability of options may be accelerated by the
Compensation Committee.
Upon exercise, the option exercise price must be paid in full either in
cash or by certified or bank check or other instrument acceptable to the
Compensation Committee or, if the Compensation Committee so permits, by delivery
of shares of Common Stock already owned by the optionee. The exercise price may
also be delivered to the Company by a broker pursuant to irrevocable
instructions to the broker from the optionee.
To qualify as Incentive Options, options must meet additional federal tax
requirements, including limits on the value of shares subject to Incentive
Options which first become exercisable in any one calendar year, and a shorter
term and higher minimum exercise price in the case of certain large
stockholders.
Amendments and Termination. The Board may at any time amend or discontinue
the 1997 Option Plan and the Compensation Committee may at any time amend or
cancel outstanding awards for the purpose of satisfying changes in the law or
for any other lawful purpose. However, no action may be taken which adversely
affects any rights under outstanding options without the option holder's
consent. Further, amendments to the 1997 Option Plan may be subject to approval
by the Company's stockholders if and to the extent required by the Code, to
preserve the qualified status of Incentive Options.
Change of Control Provisions. The 1997 Option Plan provides that in the
event of a dissolution or liquidation of the Company, a merger, reorganization
or consolidation in which a majority of the outstanding voting power of the
Company is acquired by a third-party or a sale to a third-party of all or
substantially all of the Company's assets or Common Stock, options (whether or
not otherwise exercisable) will be accelerated,
15
<PAGE> 19
unless provision is made in connection with such transaction for the assumption
or substitution of awards by the successor or entity with appropriate adjustment
to the number and kind of shares and, if appropriate, per share exercise prices.
TAX ASPECTS UNDER THE U.S. INTERNAL REVENUE CODE
The following is a summary of the principal federal income tax consequences
of option grants under the 1997 Option Plan. It does not describe all federal
tax consequences under the 1997 Option Plan, nor does it describe state or local
tax consequences.
Incentive Options. Under the Code, an employee generally will not realize
taxable income by reason of the grant or the exercise of an Incentive Option. If
an employee exercises an Incentive Option and does not dispose of the shares
until after the later of (a) two years from the date the option was granted and
(b) one year from the date shares were transferred to the employee, the entire
gain, if any, recognized upon a sale or exchange of such shares should be
taxable to the employee as long-term capital gain, and the Company will not be
entitled to any deduction. The exercise of an Incentive Option, however, may
result in alternative minimum tax liability for the employee. If an employee
disposes of shares within such one-year or two-year period in a manner so as to
violate the holding period requirements (a "disqualifying disposition"), the
employee will realize ordinary income in the year of disposition, and the
Company generally will receive a corresponding deduction, in an amount generally
equal to the excess of (1) the lesser of (x) the amount realized on the sale or
exchange of such shares (if the disposition is by sale or exchange) and (y) the
fair market value of the shares on the date the option was exercised over (2)
the exercise price for the shares. Any additional gain recognized on the
disposition should be treated as long-term or short-term capital gain and any
loss generally will be treated as long-term or short-term capital loss,
depending upon the holding period of the stock. A disqualifying disposition
generally includes any sale, exchange, gift or transfer of legal title (other
than by pledge) of shares during either of the holding periods described above.
Special rules apply in certain cases, including transfer to the employee's
spouse, transfer to the employee's former spouse incident to divorce, and
transfer on death. Special rules apply if an employee surrenders shares of
Common Stock in payment of the exercise price of the Incentive Option.
An Incentive Option that is exercised by an employee more than three months
after an employee's employment terminates will be treated as a Non-Qualified
Option for federal income tax purposes; provided that in the case of termination
by reason of disability, the three-month period is extended to one year, and in
the case of death during employment or within three months after termination,
the three-month limitation does not apply.
Non-Qualified Options. There are no federal income tax consequences to
either the optionee or the Company on the grant of a Non-Qualified Option. On
the exercise of a Non-Qualified Option, the optionee generally has taxable
ordinary income equal to the excess of the fair market value of the Common Stock
received on the exercise date over the option price of the shares. The
optionee's tax basis for the shares acquired upon exercise of a Non-Qualified
Option is increased by the amount of such taxable income. The Company generally
will be entitled to a federal income tax deduction in an amount equal to such
excess. Upon the sale of the shares acquired by exercise of a Non-Qualified
Option, the optionee generally will recognize long-term or short-term capital
gain or loss depending upon his or her holding period for such shares. Special
rules apply if an optionee surrenders shares of Common Stock in payment of the
exercise price of a Non-Qualified Option.
Limitation on Company's Deductions. As a result of Section 162(m) of the
Code, the Company's deduction for certain awards under the Plan may be limited
to the extent that the Chief Executive Officer or
16
<PAGE> 20
other named executive officer whose compensation is required to be reported in
the Summary Compensation Table receives compensation (other than
performance-based compensation) in excess of $1 million a year.
NEW PLAN BENEFITS
As of April 16, 1997, approximately 170 persons were eligible to
participate in the 1997 Option Plan. The number of options and shares of stock
to be granted under the 1997 Option Plan is undeterminable at this time as
grants of awards under the 1997 Option Plan are subject to the discretion of the
Compensation Committee.
REQUIRED VOTE
The presence in person or by proxy of at least a majority of the total
number of outstanding shares of the Common Stock of the Company is necessary to
constitute a quorum at the Annual Meeting for the transaction of business. A
quorum being present, Directors will be elected by a plurality of the votes cast
on such matter by the holders of Common Stock entitled to vote on the election
of Directors. A quorum being present, approval of the 1997 Option Plan requires
the affirmative vote of a majority of the votes cast on such matter by the
holders of Common Stock. In accordance with the provisions of Massachusetts law
and the Company's Articles of Organization and By-Laws, the Company will treat
abstentions and broker non-votes as present at the Annual Meeting solely for
purposes of determining whether or not a quorum exists. Accordingly, abstentions
and broker non-votes will not be considered to be voting on the matters as to
which such abstentions or broker non-votes exist and, thus, will not be counted
in determining whether such matters have been approved by a plurality of votes
cast, in the case of the election of Directors, or a majority of votes cast, in
the case of the proposal to approve the 1997 Option Plan, by the stockholders
who are voting on such matters.
RELATIONSHIP WITH INDEPENDENT AUDITORS
Management has selected the firm of Arthur Andersen LLP, independent
certified public auditors, to serve for the fiscal year ending December 31,
1997. Arthur Andersen LLP has served as the Company's independent accountants
since the fiscal year ended 1988.
A representative of Arthur Andersen LLP will be present at the Annual
Meeting of Stockholders and will be given the opportunity to make a statement if
he or she so desires. The representative of Arthur Andersen LLP also will be
available to respond to appropriate shareholder questions.
OTHER MATTERS
The Board of Directors of the Company knows of no other matters to be
presented for action at the Annual Meeting. If any other matters shall be
brought before the Annual Meeting, it is the intention of the persons named in
the accompanying proxy to vote on such matters in accordance with their
judgment.
STOCKHOLDER PROPOSALS
In order for a proposal by a stockholder to be included in the Board of
Directors' Proxy Statement for the Company's Annual Meeting in 1998, it must be
received at the Company's principal executive offices in Worcester on or before
December 21, 1997. Such a proposal must also comply with the requirements as to
form and substance established by applicable laws and regulations in order to be
included in the Proxy Statement and should be directed to the Clerk of the
Company.
17
<PAGE> 21
In addition, the By-Laws of the Company provide that a stockholder must
give written notice to the Clerk of the Company of any nominees for Directors
and any proposals the stockholder intends to make at the annual meeting. To be
timely for the Annual Meeting of Stockholders to be held in 1998, a
stockholder's notice shall be delivered to, or mailed and received at, the
principal executive offices of the Company no later than March 29, 1998 nor
earlier than January 28, 1998; provided, however, in the event that an annual
meeting is scheduled to be held on a date earlier than April 28, 1998 or later
than July 27, 1998, notice by the stockholder to be timely must be delivered not
earlier than the close of business on the 120th day prior to the scheduled date
of such annual meeting and not later than the close of business on the later of
the 60th day prior to the scheduled date of such annual meeting or the 10th day
following the first date on which the date of the annual meeting is publicly
disclosed.
D. DAVIDSON EASSON, JR.,
Clerk
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<PAGE> 22
APPENDIX A
ALPHA-BETA TECHNOLOGY, INC.
1997 STOCK OPTION AND GRANT PLAN
SECTION 1. General Purpose of the Plan; Definitions
The name of the plan is the Alpha-Beta Technology, Inc. 1997 Stock Option
and Grant Plan (the "Plan"). The purpose of the Plan is to encourage and enable
the officers, employees, Independent Directors (as defined below), consultants,
advisors and other key persons of Alpha-Beta Technology, Inc. (the "Company")
and its Subsidiaries (as defined below) upon whose judgment, initiative and
efforts the Company largely depends for the successful conduct of its business
to acquire a proprietary interest in the Company. It is anticipated that
providing such persons with a direct stake in the Company's welfare will assure
a closer identification of their interests with those of the Company, thereby
stimulating their efforts on the Company's behalf and strengthening their desire
to remain with the Company.
The following terms shall be defined as set forth below:
"Act" means the Securities Exchange Act of 1934, as amended.
"Award" or "Awards," except where referring to a particular category of
grant under the Plan, shall include Incentive Stock Options, Non-Qualified Stock
Options and outright grants of Stock under the Plan.
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended, and any
successor Code, and related rules, regulations and interpretations.
"Committee" has the meanings specified in Section 2.
"Director Fees" are defined in Section 5(b).
"Fair Market Value" of the Stock on any given date means (i) if the Stock
is admitted to quotation on the National Association of Securities Dealers
Automated Quotation System ("NASDAQ"), the Fair Market Value on any given date
shall not be less than the average of the highest bid and lowest asked prices of
the Stock reported for such date or, if no bid and asked prices were reported
for such date, for the last day preceding such date for which such prices were
reported; or (ii) if the Stock is admitted to trading on a national securities
exchange or the NASDAQ National Market System, the Fair Market Value on any date
shall not be less than the closing price reported for the Stock on such exchange
or system for such date or, if no sales were reported for such date, for the
last date preceding such date for which a sale was reported; or (iii) if the
Stock is not publicly traded on a securities exchange or traded in the
over-the-counter market or, if traded or quoted, there are no transactions or
quotations within the last ten trading days or trading has been halted for
extraordinary reasons, the Fair Market Value on any given date shall be
determined in good faith by the Committee with reference to the rules and
principles of valuation set forth in Section 20.2031-2 of the Treasury
Regulations.
"Incentive Stock Option" means any Stock Option designated and qualified as
an "incentive stock option" as defined in Section 422 of the Code.
"Independent Director" means a member of the Board who is not also an
employee of the Company or any Subsidiary.
"Non-Qualified Stock Option" means any Stock Option that is not an
Incentive Stock Option.
<PAGE> 23
"Option" or "Stock Option" means any option to purchase shares of Stock
granted pursuant to Section 5.
"Stock" means the Common Stock, par value $.01 per share, of the Company,
subject to adjustments pursuant to Section 3.
"Subsidiary" means any corporation or other entity (other than the Company)
in any unbroken chain of corporations or other entities, beginning with the
Company, if each of the corporations or entities (other than the last
corporation or entity in the unbroken chain) owns stock or other interests
possessing 50% or more of the economic interest or the total combined voting
power of all classes of stock or other interests in one of the other
corporations or entities in the chain.
SECTION 2. Administration of Plan; Committee Authority to Select Participants
and Determine Awards
(a) Committee. The Plan shall be administered by the Board of Directors of
the Company, or at the discretion of the Board by a committee of the Board of
not less than two "Non-Employee Directors" within the meaning of Rule
16b-3(b)(3)(i) under the Act, or any successor definition under said rule. Each
member of the Committee shall be an "Outside Director" within the meaning of
Section 162(m) of the Code and the regulations promulgated thereunder. All
references herein to the Committee shall be deemed to refer to the entity then
responsible for administration of this Plan at the relevant time (i.e., either
the Board of Directors or a committee of the Board, as applicable).
(b) Powers of Committee. The Committee shall have the power and authority
to grant Awards consistent with the terms of the Plan, including the power and
authority:
(i) to select the officers, employees, Independent Directors,
consultants, advisors and key persons of the Company and its Subsidiaries
to whom Awards may from time to time be granted;
(ii) to determine the time or times of grant, and the extent, if any,
of Incentive Stock Options, Non-Qualified Stock Options or Stock, or any
combination of the foregoing, granted under the Plan to any one or more
participants;
(iii) to determine the number of shares of Stock to be covered by any
Award;
(iv) to determine and modify from time to time the terms and
conditions, including restrictions, not inconsistent with the terms of the
Plan, of any Award, which terms and conditions may differ among individual
Awards and participants, and to approve the form of written instruments
evidencing the Awards;
(v) to accelerate at any time the exercisability or vesting of all or
any portion of any Award and/or to include provisions in Awards providing
for such acceleration;
(vi) to impose any limitations on Awards granted under the Plan,
including limitations on transfers, repurchase provisions and the like and
to exercise repurchase rights or obligations;
(vii) subject to the provisions of Section 5(a)(ii), to extend at any
time the period in which Stock Options may be exercised;
(viii) to determine at any time whether, to what extent, and under
what circumstances Stock and other amounts payable with respect to an Award
shall be deferred either automatically or at the election of the
participant and whether and to what extent the Company shall pay or credit
amounts constituting interest (at rates determined by the Committee) or
dividends or deemed dividends on such deferrals; and
(ix) at any time to adopt, alter and repeal such rules, guidelines and
practices for administration of the Plan and for its own acts and
proceedings as it shall deem advisable; to interpret the terms and
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<PAGE> 24
provisions of the Plan and any Award (including related written
instruments); to make all determinations it deems advisable for the
administration of the Plan; to decide all disputes arising in connection
with the Plan; and to otherwise supervise the administration of the Plan.
All decisions and interpretations of the Committee shall be binding on all
persons, including the Company and Plan participants.
(c) Delegation of Authority to Grant Awards. The Committee, in its
discretion, may delegate to the Chief Executive Officer of the Company all or
part of the Committee's authority and duties with respect to the granting of
Stock Options at Fair Market Value, to individuals who are not subject to the
reporting and other provisions of Section 16 of the Act or "covered employees"
within the meaning of Section 162(m) of the Code. Any such delegation by the
Committee shall include a limitation as to the amount of Stock Options that may
be granted each year. The Committee may revoke or amend the terms of a
delegation at any time but such action shall not invalidate any prior actions of
the Committee's delegate or delegates that were consistent with the terms of the
Plan.
SECTION 3. Stock Issuable under The Plan; Mergers; Substitution
(a) Stock Issuable. The maximum number of shares of Stock reserved and
available for issuance under the Plan (whether pursuant to outright grants or
options) shall be such aggregate number of shares of Stock as does not exceed
the sum of (i) 837,165 shares; plus (ii) as of each June 30 and December 31
after December 31, 1996, an additional positive number equal to five percent
(5%) of the shares of Stock issued by the Company during that six month period;
provided, however, that the maximum number of shares of Stock for which
Incentive Stock Options may be granted under the Plan shall not exceed 837,165
shares, and the maximum number of shares of stock which may be the subject of
outright grants shall not exceed 100,000 shares. For purposes of the foregoing
limitations, the shares of Stock underlying any Awards which are forfeited,
canceled, reacquired by the Company, satisfied without the issuance of Stock or
otherwise terminated shall be added back to the shares of Stock available for
issuance under the Plan. Stock Options with respect to no more than 200,000
shares of Stock may be granted to any one individual participant during any one
calendar year period. The shares available for issuance under the Plan may be
authorized but unissued shares of Stock or shares of Stock reacquired by the
Company.
(b) Recapitalizations. Subject to Section 3(c), if, through or as a result
of any merger, consolidation, sale of all or substantially all of the assets of
the Company, reorganization, recapitalization, reclassification, stock dividend,
stock split, reverse stock split or other similar transaction, the outstanding
shares of Stock are increased or decreased or are exchanged for a different
number or kind of shares or other securities of the Company or any successor
company, or additional shares or new or different shares or other securities of
the Company or any successor Company or other non-cash assets are distributed
with respect to such shares of Stock or other securities, the Committee shall
make an appropriate or proportionate adjustment in (i) the maximum number of
shares reserved for issuance under the Plan, (ii) the number of Stock Options
that can be granted to any one individual participant, (iii) the number and kind
of shares or other securities subject to any then outstanding Awards under the
Plan, and (iv) the price for each share subject to any then outstanding Stock
Options under the Plan, without changing the aggregate exercise price (i.e., the
exercise price multiplied by the number of shares) as to which such Stock
Options remain exercisable. The adjustment by the Committee shall be final,
binding and conclusive. No fractional shares of Stock shall be issued under the
Plan resulting from any such adjustment, but the Committee in its discretion may
make a cash payment in lieu of fractional shares.
(c) Mergers and Other Transactions. In the case of (i) the dissolution or
liquidation of the Company, (ii) a merger, reorganization or consolidation in
which a majority of the outstanding voting power of the
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<PAGE> 25
Company is acquired by another person or entity (other than a holding company
formed by the Company), (iii) the sale of all or substantially all of the assets
of the Company to an unrelated person or entity, or (iv) the sale of all of the
Stock of the Company to an unrelated person or entity (in each case, a
"Transaction"), the Plan and all Awards granted hereunder shall terminate upon
the effectiveness of the Transaction, unless provision is made in connection
with the Transaction for the assumption of Awards heretofore granted, or the
substitution of such Awards with new Awards of the successor entity or parent
thereof, with appropriate adjustment as to the number and kind of shares and, if
appropriate, the per share exercise prices, as provided in Section 3(b) above.
In the event of such termination, each optionee shall be permitted, within a
specified period determined by the Committee, to exercise all outstanding
Options held by such optionee whether or not otherwise exercisable during such
period, subject to the consummation of the Transaction.
(d) Substitute Awards. The Committee may grant Awards under the Plan in
substitution for stock and stock based awards held by employees of another
corporation who become employees of the Company or a Subsidiary as the result of
a merger or consolidation of the employing corporation with the Company or a
Subsidiary or the acquisition by the Company or a Subsidiary of property or
stock of the employing corporation. The Committee may direct that the substitute
awards be granted on such terms and conditions as the Committee considers
appropriate in the circumstances.
SECTION 4. Eligibility
Participants in the Plan will be such full and part-time officers and other
employees, Independent Directors, consultants, advisors and other key persons of
the Company and its Subsidiaries who are responsible for or contribute to the
management, growth or profitability of the Company and its Subsidiaries as are
selected from time to time by the Committee, in its sole discretion.
SECTION 5. Stock Options
Any Stock Option granted under the Plan shall be pursuant to a stock option
agreement which shall be in such form as the Committee may from time to time
approve. Option agreements need not be identical.
Stock Options granted under the Plan may be either Incentive Stock Options
or Non-Qualified Stock Options. Incentive Stock Options may be granted only to
employees of the Company or any Subsidiary that is a "subsidiary corporation"
within the meaning of Section 424(f) of the Code, including members of the Board
who are also employees of the Company or any such Subsidiary. Non-Qualified
Stock Options may be granted to officers, employees, Independent Directors,
consultants, advisors and other key persons of the Company and its Subsidiaries.
To the extent that any Option does not qualify as an Incentive Stock Option, it
shall be deemed a Non-Qualified Stock Option.
No Incentive Stock Option shall be granted under the Plan after April 23,
2007.
(a) Terms of Stock Options. Stock Options granted under the Plan shall be
subject to the following terms and conditions and shall contain such additional
terms and conditions, not inconsistent with the terms of the Plan, as the
Committee shall deem desirable:
(i) Exercise Price. The exercise price per share for the Stock
covered by an Incentive Stock Option shall be determined by the Committee
at the time of grant but shall not be less than 100% of the Fair Market
Value on the date of grant. If an employee owns or is deemed to own (by
reason of the attribution rules applicable under Section 424(d) of the
Code) more than 10% of the combined voting power of all classes of stock of
the Company or any parent or subsidiary corporation and an Incentive Stock
Option is granted to such employee, the option price of such Incentive
Stock Option shall be not less than 110% of the Fair Market Value on the
grant date. The purchase price per share of Stock covered
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<PAGE> 26
by a Non-Qualified Stock Option shall be determined by the Committee at the
time of grant and shall not be subject to the restrictions described in the
preceding two sentences.
(ii) Option Term. The term of each Stock Option shall be fixed by the
Committee, but no Incentive Stock Option shall be exercisable more than ten
years after the date the option is granted. If an employee owns or is
deemed to own (by reason of the attribution rules of Section 424(d) of the
Code) more than 10% of the combined voting power of all classes of stock of
the Company or any parent or subsidiary corporation and an Incentive Stock
Option is granted to such employee, the term of such option shall be no
more than five years from the date of grant.
(iii) Exercisability; Rights of a Stockholder. Stock Options shall
become vested and exercisable at such time or times, whether or not in
installments, as shall be determined by the Committee at or after the grant
date; provided, however, that Stock Options granted in lieu of cash
compensation shall be exercisable in full as of the grant date. The minimum
number of shares with respect to which an option may be exercised at any
one time shall be one hundred (100) shares, or such lesser number as is
subject to exercise under the Stock Option at the time. The Committee may
at any time accelerate the exercisability of all or any portion of any
Stock Option. An optionee shall have the rights of a stockholder only as to
shares acquired upon the exercise of a Stock Option and not as to
unexercised Stock Options.
(iv) Method of Exercise. Stock Options may be exercised in whole or
in part, by giving written notice of exercise to the Company, specifying
the number of shares to be purchased. Payment of the purchase price may be
made by one or more of the following methods:
(A) In cash, by certified or bank check or other instrument
acceptable to the Committee;
(B) In the form of shares of Stock that are not then subject to
restrictions under any Company plan and that have been held by the
optionee free of such restrictions for at least six months, if permitted
by the Committee in its discretion. Such surrendered shares shall be
valued at Fair Market Value on the exercise date; or
(C) By the optionee delivering to the Company a properly executed
exercise notice together with irrevocable instructions to a broker to
promptly deliver to the Company cash or a check payable and acceptable
to the Company to pay the purchase price; provided that in the event the
optionee chooses to pay the purchase price as so provided, the optionee
and the broker shall comply with such procedures and enter into such
agreements of indemnity and other agreements as the Committee shall
prescribe as a condition of such payment procedure.
Payment instruments will be received subject to collection. The delivery of
certificates representing the shares of Stock to be purchased pursuant to
the exercise of a Stock Option will be contingent upon receipt from the
optionee (or a purchaser acting in his or her stead in accordance with the
provisions of the Stock Option) by the Company of the full purchase price
for such shares and the fulfillment of any other requirements contained in
the Stock Option or applicable provisions of law.
(v) Termination. Stock Options shall terminate at such times as are
specified in the relevant Award.
(vi) Annual Limit on Incentive Stock Options. To the extent required
for "incentive stock option" treatment under Section 422 of the Code, the
aggregate Fair Market Value (determined as of the time of grant) of the
shares of Stock with respect to which Incentive Stock Options granted under
this Plan and any other plan of the Company or its parent and subsidiary
corporations become exercisable for the first time by an optionee during
any calendar year shall not exceed $100,000. To the extent that any Stock
Option exceeds this limit, it shall constitute a Non-Qualified Stock
Option.
A-5
<PAGE> 27
(b) Grant of Options in Lieu of Director Fees. Each Independent Director
may, pursuant to a written election delivered to the Company, receive all of
such Independent Director's cash retainer and other cash fees payable to such
Independent Director in respect of his or her attendance at any meetings of the
Board or any committee thereof ("Director Fees") in the form of Non-Qualified
Stock Options to purchase such number of shares of Stock having a present value
equal to the amount of such Director Fees as shall be determined in accordance
with the Black-Scholes option pricing model on the date or dates the Director
Fees would otherwise be paid in cash. All Non-Qualified Stock Options granted
under this Section 5(b) shall have a per share exercise price which is equal to
the per share Fair Market Value of the Stock on the date such Non-Qualified
Stock Options are granted. The Committee, in its discretion, may grant
additional Non-Qualified Stock Options to Independent Directors.
(c) Non-transferability of Options. No Stock Option shall be transferable
by the optionee otherwise than by will or by the laws of descent and
distribution and all Stock Options shall be exercisable, during the optionee's
lifetime, only by the optionee, or his or her guardian or legal representative.
Notwithstanding the foregoing, the Committee may provide in an option agreement
that the optionee may transfer, without consideration for the transfer, his or
her Non-Qualified Stock Options to members of his or her immediate family, to
trusts for the benefit of such family members, to partnerships in which such
family members are the only partners; or to charitable organizations; provided,
however, that the transferee agrees in writing with the Company to be bound by
the terms and conditions of this Plan and the applicable Option Agreement.
SECTION 6. Grants of Stock
Grants of Stock may be made to any officers, employees, Independent
Directors, consultants, advisors and other key persons of the Company and its
Subsidiaries. As a condition precedent to the grant of Stock to any grantee
under the Plan, the grantee shall grant to the Company such repurchase rights on
the Stock which is the subject of the grant as the Committee shall deem
necessary or appropriate. The Committee may also impose such other terms and
conditions on the grant of any Stock under the Plan as it may determine.
SECTION 7. Tax Withholding
(a) Payment by Participant. Each participant shall, no later than the date
as of which the value of an Award or of any Stock or other amounts received
thereunder first becomes includable in the gross income of the participant for
federal income tax purposes, pay to the Company, or make arrangements
satisfactory to the Committee regarding payment of, any federal, state, or local
taxes of any kind required by law to be withheld with respect to such income.
The Company and its Subsidiaries shall, to the extent permitted by law, have the
right to deduct any such taxes from any payment of any kind otherwise due to the
participant.
(b) Payment in Stock. Subject to approval by the Committee, a participant
may elect to have such tax withholding obligation satisfied, in whole or in
part, by (i) authorizing the Company to withhold from shares of Stock to be
issued pursuant to any Award a number of shares with an aggregate Fair Market
Value (as of the date the withholding is effected) that would satisfy the
withholding amount due, or (ii) transferring to the Company shares of Stock
owned by the participant with an aggregate Fair Market Value (as of the date the
withholding is effected) that would satisfy the withholding amount due.
SECTION 8. Transfer, Leave of Absence, Etc.
For purposes of the Plan, the following events shall not be deemed a
termination of employment:
(a) a transfer to the employment of the Company from a Subsidiary or from
the Company to a Subsidiary, or from one Subsidiary to another; or
A-6
<PAGE> 28
(b) an approved leave of absence for military service or sickness, or for
any other purpose approved by the Company, if the employee's right to
re-employment is guaranteed either by a statute or by contract or under the
policy pursuant to which the leave of absence was granted or if the Committee
otherwise so provides in writing.
SECTION 9. Amendments and Termination
The Board may, at any time, amend or discontinue the Plan and the Committee
may, at any time, amend or cancel any outstanding Award for the purpose of
satisfying changes in law or for any other lawful purpose, but no such action
shall adversely affect rights under any outstanding Award without the holder's
consent. The Committee may provide substitute Awards at the same or reduced
exercise or purchase price or with no exercise or purchase price in a manner not
inconsistent with the terms of the Plan, but such price, if any, must satisfy
the requirements which would apply to the substitute or amended Award if it were
then initially granted under this Plan, but no such action shall adversely
affect rights under any outstanding Award without the holder's consent. If and
to the extent determined by the Committee to be required by the Code to ensure
that Incentive Stock Options granted under the Plan are qualified under Section
422 of the Code, Plan amendments shall be subject to approval by the Company
stockholders who are eligible to vote at a meeting of stockholders.
SECTION 10. Status of Plan
With respect to the portion of any Award which has not been exercised and
any payments in cash, Stock or other consideration not received by a
participant, a participant shall have no rights greater than those of a general
creditor of the Company unless the Committee shall otherwise expressly determine
in connection with any Award or Awards.
SECTION 11. General Provisions
(a) No Distribution; Compliance with Legal Requirements. The Committee may
require each person acquiring Stock pursuant to an Award to represent to and
agree with the Company in writing that such person is acquiring the shares
without a view to distribution thereof.
No shares of Stock shall be issued pursuant to an Award until all
applicable securities law and other legal and stock exchange or similar
requirements have been satisfied. The Committee may require the placing of such
stop-orders and restrictive legends on certificates for Stock and Awards as it
deems appropriate.
(b) Other Compensation Arrangements; No Employment Rights. Nothing
contained in this Plan shall prevent the Board from adopting other or additional
compensation arrangements, including trusts, and such arrangements may be either
generally applicable or applicable only in specific cases. The adoption of this
Plan and the grant of Awards do not confer upon any employee any right to
continued employment with the Company or any Subsidiary.
SECTION 12. Effective Date of Plan
This Plan shall become effective upon approval by the holders of a majority
of the votes cast at a meeting of stockholders at which a quorum is present.
Subject to such approval by the stockholders and to the requirement that no
Stock may be issued hereunder prior to such approval, Stock Options and other
awards may be granted hereunder on and after adoption of this Plan by the Board.
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<PAGE> 29
SECTION 13. Governing Law
This Plan shall be governed by Massachusetts law except to the extent such
law is preempted by federal law.
DATE APPROVED BY BOARD OF DIRECTORS: April 23, 1997
DATE APPROVED BY STOCKHOLDERS:
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<PAGE> 30
1118-PR-97
<PAGE> 31
ALPHA-BETA TECHNOLOGY, INC.
Proxy for Annual Meeting of Stockholders
May 28, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
THE UNDERSIGNED hereby appoints Spiros Jamas, D. Davidson Easson, Jr.
and William D. Romeo, and each of them, proxies, with full power of
substitution, to represent and vote all shares of the Common Stock, $.01 par
value, of Alpha-Beta Technology, Inc. (the "Company") which the undersigned is
entitled to vote at the Annual Meeting of Stockholders to be held at the
Company's offices at One Innovation Drive, Worcester, MA 01605 at 11:00 A.M.,
local time, and at any adjournments and postponements thereof, upon the matters
set forth in the Notice of Annual Meeting and Proxy Statement, dated April 25,
1997.
THIS PROXY WILL BE VOTED AS SPECIFIED BY THE STOCKHOLDER, BUT IF NO
SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR THE PROPOSED ELECTION OF
DIRECTORS AND FOR THE PROPOSED APPROVAL OF THE COMPANY'S 1997 STOCK OPTION AND
GRANT PLAN. A STOCKHOLDER WISHING TO VOTE IN ACCORDANCE WITH THE BOARD OF
DIRECTORS' RECOMMENDATION NEED ONLY SIGN AND DATE THIS PROXY AND RETURN IT IN
THE ENCLOSED ENVELOPE.
SEE REVERSE
SIDE
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
<PAGE> 32
/X/ PLEASE MARK VOTES
AS IN THIS EXAMPLE.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE PROPOSALS LISTED BELOW.
THE PROXIES ARE INSTRUCTED TO VOTE AS FOLLOWS:
1. Proposal to elect the following persons as Class II Directors:
NOMINEES: D. Davidson Easson, Jr. and Bernard Canavan
FOR WITHHELD
/ / / /
MARK HERE / /
FOR ADDRESS
CHANGE AND
NOTE BELOW
/ / ---------------------------------------
For both nominees except as noted above
2. Approval of the Company's 1997
Stock Option and Grant Plan. FOR AGAINST ABSTAIN
/ / / / / /
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF A COPY OF THE ACCOMPANYING NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS, THE PROXY STATEMENT WITH RESPECT THERETO AND
THE COMPANY'S ANNUAL REPORT TO STOCKHOLDERS FOR THE YEAR ENDED DECEMBER 31,
1996, AND HEREBY REVOKES ANY PROXY OR PROXIES HERETOFORE GIVEN. THIS PROXY MAY
BE REVOKED AT ANY TIME BEFORE IT IS EXERCISED.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, PLEASE DATE, SIGN AND
PROMPTLY MAIL THIS PROXY IN THE RETURN ENVELOPE SO THAT YOUR SHARES MAY BE
REPRESENTED AT THE MEETING.
(Please sign exactly as your name appears on your stock certificate. Joint
owners should each sign personally. When signing as attorney, executor,
administrator, trustee or guardian, please give your full title as such. It is
requested that corporation proxies be signed by the President or Vice
President and the Secretary or Assistant Secretary.)
Signature: Date:
---------------------------- --------------------------------
Signature: Date:
------------------------------ --------------------------------
