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:
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Preliminary Proxy Statement
x
Definitive Proxy Statement
¨
Definitive Additional Materials
¨
Soliciting Material Pursuant to §240.14a-11(c) or
§240.14a-12
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¨
Confidential, for Use of the Commission Only (as Permitted by Rule
14a-6(e)(2))
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CATALYTICA,
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):
¨
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Fee computed on
table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
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(1)
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Title of each class
of securities to which transaction applies:
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(2)
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Aggregate number of
securities to which transaction applies:
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(3)
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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):
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(4)
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Proposed maximum
aggregate value of transaction:
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¨
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Fee paid previously
with preliminary materials.
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¨
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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.
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(1)
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Amount Previously
Paid:
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(2)
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Form, Schedule or
Registration Statement No.:
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[CATALYTICA, INC.
LOGO]
Notice of Annual
Meeting of Stockholders
to be held on June
8, 2000
TO THE
STOCKHOLDERS:
NOTICE IS HEREBY
GIVEN that the 2000 Annual Meeting of Stockholders of Catalytica, Inc., a
Delaware corporation (the “Company” or “Catalytica”),
will be held on June 8, 2000, at 10:00 a.m., local time, in the Mandarin
Oriental Hotel, 222 Sansome Street, San Francisco, California 94101 for the
following purposes:
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1. To
elect Directors to serve for the following year and until their successors
are duly elected.
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2. To
consider and vote to approve an amendment to the Company’s 1992 Stock
Option Plan to increase the number of shares of Common Stock reserved for
issuance thereunder by 2,500,000 shares.
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3. To
ratify the appointment of Ernst & Young LLP as the Company’s
independent accountants for the 2000 fiscal year.
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4. To
transact such other business as may properly come before the Annual
Meeting or any adjournments thereof.
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Nominees for
Directors are set forth in the Proxy Statement accompanying this
Notice.
Only stockholders of
record at the close of business on April 21, 2000 are entitled to notice of
and to vote at the Annual Meeting.
All stockholders are
cordially invited to attend the Annual Meeting in person. However, to assure
your representation at the Annual Meeting, you are urged to mark, sign, date
and return the enclosed Proxy as promptly as possible in the envelope
enclosed for that purpose. Any stockholder attending the Annual Meeting may
vote in person even if he or she has previously returned a
Proxy.
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Vice President,
Finance and Administration Chief Financial Officer
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Mountain View,
California
April 28,
2000
[CATALYTICA, INC.
LOGO]
PROXY
STATEMENT
2000 ANNUAL
MEETING OF STOCKHOLDERS
INFORMATION
CONCERNING SOLICITATION AND VOTING
General
The enclosed Proxy is
solicited on behalf of Catalytica, Inc. (the “Company” or
“Catalytica”) for the 2000 Annual Meeting of Stockholders (the
“Annual Meeting”) to be held on June 8, 2000, at 10:00 a.m., local
time, in the Mandarin Oriental Hotel, 222 Sansome Street, California 94101,
or any adjournment or adjournments thereof, for the purposes set forth
herein and in the accompanying Notice of Annual Meeting of Stockholders. The
Company’s principal executive offices are located at 430 Ferguson
Drive, Mountain View, California 94043 and its telephone number is (650)
960-3000.
These proxy
solicitation materials and the Annual Report for the year ended December 31,
1999 are expected to be mailed on or about May 8, 2000 to all stockholders
entitled to vote at the Annual Meeting.
Record Date and
Outstanding Shares
Only stockholders of
record at the close of business on April 21, 2000 (the “Record
Date”) are entitled to receive notice of and to vote at the Annual
Meeting. The outstanding voting securities of the Company as of April 21,
2000, consisted of 46,288,106 shares of Common Stock, which includes
13,270,000 shares of Class A Common Stock and excludes 11,730,000 shares of
non-voting Class B Common Stock. For information regarding holders of more
than 5% of the outstanding Common Stock of the Company, see “Proposal
No. 1—Election of Directors—Security Ownership of Principal
Stockholders and Management.”
Revocability of
Proxies
The enclosed Proxy is
revocable at any time before its use by delivering to the Company a written
notice of revocation or a duly executed Proxy bearing a later date. If a
person who has executed and returned a Proxy is present at the Annual
Meeting and wishes to vote in person, he or she may elect to do so and
thereby suspend the power of the proxy holders to vote his or her
Proxy.
Voting and
Solicitation
Except as provided
below with respect to cumulative voting, every stockholder of record on the
Record Date is entitled, for each share held, to one vote on each proposal
or item that comes before the Annual Meeting. In the election of Directors,
each stockholder will be entitled to vote for seven nominees, and the seven
nominees receiving the greatest number of votes will be elected.
Every stockholder
voting for the election of directors may cumulate such stockholder’s
votes and give one candidate a number of votes equal to the number of
Directors to be elected, multiplied by the number of votes to which the
stockholder’s shares are entitled, or distribute the stockholder’s
votes on the same principle among as many candidates as the stockholder
thinks fit, provided that votes cannot be cast for more than seven
candidates. However, no stockholder shall be entitled to cumulate votes
unless the candidate’s name has been placed in nomination prior to the
voting and the stockholder, or any other stockholder, has given notice at
the meeting prior to the voting of the intention to cumulate the
stockholder’s votes.
The cost of this
solicitation will be borne by the Company. The Company may reimburse
expenses incurred by brokerage firms and other persons representing
beneficial owners of shares in forwarding solicitation material
to beneficial owners. Proxies may be solicited by certain of the
Company’s Directors, officers and regular employees, without additional
compensation, personally or by telephone, telegram, letter, electronic mail
or facsimile.
Stockholders
representing an aggregate of 23,144,053 shares of the Company’s Common
Stock, including the Class A Common Stock, present or represented by proxy
at the Annual Meeting will constitute a quorum for purposes of
voting.
Deadline for
Receipt of Stockholder Proposals
Proposals of
stockholders of the Company that are intended to be presented by such
stockholders at the Company’s 2001 Annual Meeting of Stockholders must
be received by the Company no later than February 9, 2001 in order that they
may be considered for inclusion in the proxy statement and form of proxy
relating to that meeting.
Pursuant to the
Company’s Bylaws, stockholders who wish to bring matters or propose
nominees for Director at the Company’s 2001 Annual Meeting of
Stockholders must provide specified information in writing to the secretary
of the Company not less than 90 days nor more than 120 days prior to the
first anniversary of the 2000 annual meeting (i.e., June 8, 2000), unless
such matters are included in the Company’s proxy statement pursuant to
Rule 14a-8 under the Securities Exchange Act, as amended. If such
stockholders fail to comply with the foregoing notice provision, then the
proxy holders will be allowed to use their voting discretionary authority
when the proposal is raised at the 2001 Annual Meeting of
Stockholders.
PROPOSAL NO.
1—ELECTION OF DIRECTORS
At the Annual Meeting
of Stockholders, a Board of seven Directors is to be elected. Unless
otherwise instructed, the proxyholders will vote all of the proxies received
by them for the Company’s seven nominees named below, all of whom are
currently Directors of the Company. If any nominee of the Company is unable
or declines to serve as a Director at the time of the Annual Meeting, the
proxies will be voted for any nominee who is designated by the current Board
of Directors to fill the vacancy. In the event that additional persons are
nominated for election as Directors and if cumulative voting has been
properly invoked, the proxyholders intend to cumulate their votes and to
vote all proxies received by them in accordance with cumulative voting
procedures in such a manner as they believe will ensure the election of as
many of the nominees listed below as possible. In such event, the specific
nominees for whom such votes will be cast will be determined by the
proxyholders. It is not expected that any nominee will be unable or will
decline to serve as a Director. Directors Hoffen and Goldberg are nominated
to the Company’s Board of Directors pursuant to certain agreements. See
“Transactions with Management.” The term of office of each person
elected as a Director will continue until the next Annual Meeting of
Stockholders and until a successor has been elected and
qualified.
Vote
Required
The seven nominees
receiving the highest number of affirmative votes of the shares entitled to
be voted shall be elected to the Board of Directors. Votes withheld from any
Director are counted for purposes of determining the presence or absence of
a quorum, but have no other legal effect under Delaware law. Abstentions and
broker non-votes will be counted for purposes of determining whether a
quorum is present at the Annual Meeting.
THE BOARD OF
DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” EACH OF THE
NOMINEES LISTED BELOW.
Nominees
The names of and
certain information about the nominees of management are set forth
below:
Name of
Nominee
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Age
|
|
Position/Principal Occupation
|
|
Director
Since
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| James A.
Cusumano |
|
57 |
|
Chairman of the
Board |
|
1974 |
| Richard Fleming
(2) |
|
75 |
|
President and Chief
Executive Officer of Richard
Fleming Associates, Inc. |
|
1985 |
| Alan
Goldberg |
|
45 |
|
Managing Director
of Morgan Stanley Dean Witter |
|
1997 |
| Howard I. Hoffen
(1)(2) |
|
36 |
|
Managing Director
of Morgan Stanley Dean Witter |
|
1997 |
| Ricardo B.
Levy |
|
55 |
|
President and Chief
Executive Officer of the Company |
|
1974 |
| Ernest Mario
(1) |
|
61 |
|
Co-Chairman and
Chief Executive Officer of ALZA |
|
1996 |
| John A.
Urquhart |
|
71 |
|
Senior Advisor to
the Chairman of Enron Corp. |
|
1997 |
(1)
|
Member of the
Compensation Committee
|
(2)
Member of the Audit Committee.
Except as set forth
below, each of the nominees has been engaged in the principal occupation
described above during the past five years. There is no family relationship
between any of the directors or executive officers of the
Company.
James A.
Cusumano, a founder of Catalytica and a Director since 1974, served as
President of the Company from its inception in 1974 until 1985, when he
assumed his current position of Chairman of the Board. Dr. Cusumano also
remains as Chairman of the Board of Catalytica Pharmaceuticals, Inc., a
subsidiary of Catalytica, Inc. Dr. Cusumano served as Chief Strategic
Officer of Catalytica, Inc. and Catalytica Pharmaceuticals, Inc. from
October 29, 1998 until his retirement on December 31, 1999. Dr. Cusumano
served as the Company’s Chief Technical Officer from 1985 through
October 29, 1998. He also served as President of Catalytica Pharmaceuticals,
Inc., a subsidiary of the Company from February 1995 until October 29, 1998.
Dr. Cusumano served as Director of Catalysis Research and Development at
Exxon Corporation’s Corporate Research Laboratory from 1967 to 1974.
Dr. Cusumano has a Ph.D. in physical chemistry from Rutgers
University.
Richard
Fleming has been a director of Catalytica since 1985 and also serves as
an advisor and consultant to Catalytica. Mr. Fleming was President and Chief
Executive Officer of the Company from 1985 through August 1991. He has
served as President and Chief Executive Officer of Richard Fleming
Associates, Inc., a consulting firm, since May 1981 and was Vice Chairman
for Membership and Fiscal Affairs of the Chemical Industry Institute of
Toxicology until 1997. From 1969 to 1980, Mr. Fleming served at Air Products
and Chemicals, most recently as Executive Vice President, and from 1980 to
1981, he served as President and Chief Operating Officer of GAF Corporation,
a multi-industry company. Mr. Fleming is also a director of Catalytica
Pharmaceuticals, Inc. Mr. Fleming has an M.S. in chemical engineering from
New York University.
Alan E. Goldberg
has been a director of Catalytica since August 1997. Mr. Goldberg is
Chairman and Chief Executive Officer of Morgan Stanley Dean Witter Private
Equity. Mr. Goldberg joined Morgan Stanley in 1979. He was elected Vice
President in 1984 and in July 1984, he participated in the formation of the
Private Equity Business. He was promoted to Principal in 1986 and elected
Managing Director in 1988. Mr. Goldberg is Chairman and President of Morgan
Stanley Leveraged Equity Fund I, Inc. is a Managing Director and Director of
Morgan Stanley Leverage Equity Fund II, Inc. and is a Managing Director of
Morgan Stanley Capital Partners III, Inc.. He also serves as director of
Direct Response Corporation, Enterprise Reinsurance, Equant N.V., Homeowners
Direct Corporation, Smurfit-Stone Container Corporation and LifeTrust
America. Mr. Goldberg received his B.A. in Philosophy and Economics in 1975
from New York University. In 1979, he earned an M.B.A. from New York
University and a J.D. from Yeshiva University. Mr. Goldberg became a member
of the New York Bar in 1979.
Howard I. Hoffen has
been a director of Catalytica since August 1997. Mr. Hoffen is a Managing
Director of MSDW Capital Partners IV, Inc. and Morgan Stanley Dean Witter.
He joined Morgan Stanley in 1985 and Private Equity in 1986. He is a
Managing Director of Morgan Stanley Capital Partners, Inc. and of MSLEF II,
Inc. Mr. Hoffen is a Director of Somerset Energy and Union Drilling. Mr.
Hoffen has a B.S. from Columbia University and an M.B.A. from the Harvard
Business School.
Ricardo B.
Levy, a founder of Catalytica and a director since 1974, served as Chief
Operating Officer from the Company’s inception in 1974 until August
1991, when he was promoted to his current position of President and Chief
Executive Officer. Mr. Levy is also a director of Catalytica
Pharmaceuticals, Inc. and Catalytica Combustion Systems, Inc. Prior to
founding Catalytica, Dr. Levy was a founding member of Exxon
Corporation’s Chemical Physics Research Team. Dr. Levy is an alumnus of
Princeton and Harvard University’s Executive Management Program and has
a Ph.D. in chemical engineering from Stanford University.
Ernest Mario
has been a director of Catalytica since 1996. Dr. Mario is Chairman of ALZA
and has been Chief Executive Officer of ALZA since August 1993. Prior to
joining ALZA, Dr. Mario was Deputy Chairman and Chief Executive Officer of
Glaxo Holdings p.l.c., and has served in a variety of executive positions
with Glaxo Inc. beginning in 1986. From 1977 to 1984, he held various
executive level positions with Squibb Corporation, ending as President and
Chief Executive Officer of Squibb Medical Products. Dr. Mario has a Ph.D.
and M.S. in physical sciences from the University of Rhode Island, and a
B.S. in pharmacy from Rutgers University.
John A.
Urquhart has been a director of Catalytica, Inc. since April 1997 and
has served as a special board advisor to Catalytica Combustion Systems,
Inc., since July 1995. He currently serves as Senior Advisor to the Chairman
of Enron Corporation, a global integrated natural gas company, and has also
served as the Vice Chairman of Enron Corporation since 1990. Mr. Urquhart
also serves on a number of other corporate Boards of Directors, including
Enron Corp., Aquarion Company, Hubbell Incorporated, TECO Energy, Inc., Weir
Group PLC, and Tampa Electric Co. He previously served as the Senior Vice
President of Industrial and Power Systems at General Electric. In addition,
he served five years as a Committee Member on the Board of US Council for
Energy Awareness.
Security
Ownership of Principal Stockholders and Management
The following table
sets forth, as of April 14, 2000, certain information with respect to the
beneficial ownership of the Company’s Common Stock by (i) each person
known by the Company to own beneficially more than five percent of the
outstanding shares of Common Stock, (ii) each director of the Company, (iii)
each of the executive officers named in the table under “Executive
Compensation—Summary Compensation Table” and (iv) all directors
and executive officers as a group. Percentage beneficial ownership is based
on 46,285,806 shares of common stock, which includes 13,270,000 shares of
Class A common stock, that are outstanding as of April 14, 2000. Except as
otherwise indicated in the footnotes to this table, the persons and entities
named in the table have sole voting and investment power with respect to all
shares beneficially owned, subject to community property laws, where
applicable.
| |
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Shares of Common
Stock
Beneficially Owned
|
Name of Person
or Identity of Group
|
|
Number
|
|
Percentage
Ownership
|
| Franklin Resources,
Inc. |
|
2,777,754 |
|
6.00 |
% |
| 777 Mariners Island Blvd. |
|
|
|
|
|
| San Mateo, California
94404 |
|
|
|
|
|
|
| Morgan Stanley
Capital Partners III, L.P. (1) |
|
13,270,000 |
|
28.67 |
% |
| Alan Goldberg/Howard
Hoffen |
|
|
|
|
|
| 1221 Avenue of the
Americas |
|
|
|
|
|
| New York, New York 10020 |
|
|
|
|
|
|
| Ricardo B. Levy
(2) |
|
899,697 |
|
1.94 |
% |
|
| James A. Cusumano
(3) |
|
729,531 |
|
1.57 |
% |
|
| Richard Fleming
(4) |
|
529,073 |
|
1.14 |
% |
|
| Ralph Dalla Betta
(5) |
|
434,428 |
|
* |
|
|
| Lawrence W. Briscoe
(6) |
|
124,959 |
|
* |
|
|
| Ernest Mario
(7) |
|
25,666 |
|
* |
|
|
| John A. Urquhart
(8) |
|
30,666 |
|
* |
|
|
| John M. Hart
(9) |
|
18,734 |
|
* |
|
|
| All officers and
directors as a group (10 persons) (10) |
|
16,067,372 |
|
34.40 |
% |
(1)
|
Represents
13,270,000 voting shares of Class A stock held by Morgan Stanley Capital
Partners III, L.P. and two affiliated funds. Excludes 11,730,000
non-voting shares of Class B stock also held by Morgan Stanley. Mr.
Goldberg and Mr. Hoffen are Managing Directors of Morgan Stanley Dean
Witter. Mr. Goldberg and Mr. Hoffen disclaim beneficial ownership of the
shares owned by Morgan Stanley.
|
(2)
|
Includes shares
held by the following trusts, of which Dr. Levy serves as trustee: (i)
680,877 shares held by the Levy Family Trust; (ii) 38,757 shares held by
the Polly Jean Cusumano Trust; and (iii) 37,208 shares held by the Doreen
Ann Nelson Trust. Dr. Levy disclaims beneficial ownership for the shares
owned by the Polly Jean Cusumano Trust and the Doreen Ann Nelson
Trust.
|
(3)
|
Includes shares
held by the following trusts, of which Dr. Cusumano serves as trustee: (i)
435,132 shares held by the Cusumano Family Trust; (ii) 114,028 shares held
by the Brian K. Levy Trust; and (iii) 115,350 shares held by the Tamara
Levy Trust. Dr. Cusumano disclaims beneficial ownership of the shares
owned by the Brian K. Levy Trust and the Tamara Levy Trust.
|
(4)
|
Includes 10,666
shares issuable upon exercise of options held by Mr. Fleming, which
options are exercisable within 60 days of April 14, 2000.
|
(5)
|
Includes
20,725 shares issuable upon exercise of options held by Dr.
Dalla Betta, which options are exercisable within 60 days of April 14,
2000.
|
(6)
|
Includes 102,959
shares issuable upon exercise of options held by Mr. Briscoe, which
options are exercisable within 60 days of April 14, 2000.
|
(7)
|
Includes 25,666
shares issuable upon exercise of options held by Dr. Mario, which options
are exercisable within 60 days of April 14, 2000.
|
(8)
|
Includes 30,666
shares issuable upon exercise of options held by Mr. Urquhart, which
options are exercisable within 60 days of April 14, 2000.
|
(9)
|
Includes 17,774
shares issuable upon exercise of options held by Mr. Hart, which options
are exercisable within 60 days of April 14, 2000.
|
(10)
|
Includes 419,665
shares issuable upon exercise of options held by three directors and four
executive officers, which options are exercisable within 60 days of April
14, 2000.
|
Board Meetings and
Committees
The Board of
Directors of the Company held a total of six meetings during the year
ended December 31, 1999.
The current members
of the Audit Committee are Richard Fleming and Howard I. Hoffen. The Audit
Committee met twice during the year ended December 31, 1999. This Committee
recommends engagement of the Company’s independent public accountants
and is primarily responsible for approving the services performed by such
accountants and for reviewing and evaluating the Company’s accounting
principles and its system of internal accounting controls.
The Compensation
Committee, which during the year ended December 31, 1999, consisted of
Directors Hoffen and Mario, met three times during the last fiscal
year. This Committee establishes the salary and incentive compensation of
the executive officers of the Company and the general compensation policies
for all employees. See “Report of the Compensation Committee of the
Board of Directors on Executive Compensation.”
The Nominating
Committee, which for the year ended December 31, 1999, consisted of
Directors Fleming and Levy, did not meet during the past fiscal year. The
Nominating Committee reviews candidates and makes recommendations for
nominees to serve on the Board of Directors. If there are vacancies on the
Board of Directors, the Nominating Committee will consider nominees
recommended by stockholders. Candidates for consideration by the Nominating
Committee should be submitted to the attention of Dr. Levy at the Company by
no later than February 9, 2001. Any stockholder wishing to make a
recommendation to the Nominating Committee must submit the candidate’s
resume, together with a statement describing why the candidate should be
considered by the Nominating Committee.
During the fiscal
year ended December 31, 1999, Directors Jim Cusumano, Richard Fleming,
Ricardo Levy and Ernest Mario attended all meetings of the Board of
Directors and any committees on which such Director serves. During Fiscal
1999, Alan Goldberg attended 17% of the meetings of the Board of Directors,
Howard Hoffen attended 67% of the meetings of the Board of Directors and all
of the meetings of the Compensation Committee and John Urquhart attended 83%
of the meetings of the Board of Directors.
Director
Compensation
Directors who are not
officers of the Company, with the exception of Mr. Hoffen and Mr. Goldberg,
each receive an annual retainer for their services in the amount of $20,000
per year, plus reimbursement of expenses. Mr. Fleming, Dr. Mario and Mr.
Urquhart each serve as Director for one of the subsidiaries of the Company,
as well, and receive similar compensation for that service. During the
fiscal year ended December 31, 1999, Mr. Fleming, Dr. Mario and Mr. Urquhart
each received $40,000 in connection with their services as directors of the
Company and its subsidiaries.
During the year ended
December 31, 1999, the Company paid Richard Fleming Associates, a consulting
organization of which Richard Fleming, a Director of the Company, is the
President and Chief Executive Officer,
approximately $297,000. These payments were for services provided to the
Company by Mr. Fleming in his capacity as a consultant to the Company at a
rate of $20,000 per month from January through December 1999 plus expenses
and for additional consulting during 1999 in conjunction with special
projects in the amount of $57,000. Mr. Fleming provided assistance to the
Company on various development programs and in identifying and investigating
new business opportunities.
During the fiscal
year ended December 31, 1999, Mr. Fleming, Dr. Mario and Mr. Urquhart each
received options to purchase 4,000 shares of Common Stock at an exercise
price of $18.00. Mr. Fleming’s, Dr. Mario’s and Mr.
Urquhart’s options become exercisable at the rate of one-twelfth of the
shares subject to the option at the end of each month that the Director
remains on the Board following the date of grant such that the options
become fully vested within one year of the date of grant.
Certain directors who
served on the Board of Directors of a subsidiary or acted as a consultant to
that subsidiary received stock options during the fiscal year ended December
31, 1999. Mr. Fleming and Dr. Mario each received options to purchase 2,000
shares of Catalytica Pharmaceuticals, Inc. at an exercise price of $24.65.
Mr. Urquhart received options to purchase 2,000 shares of Catalytica
Combustion Systems, Inc. at an exercise prices of $15.75.
Report of the
Compensation Committee of the Board of Directors
on Executive
Compensation
The following is
the Report of the Compensation Committee of the Company, describing the
compensation policies and rationale applicable to the Company’s
executive officers with respect to the compensation earned by such executive
officers for the year ended December 31, 1999.
The Compensation
Committee of the Board of Directors of Catalytica establishes the general
compensation policies of the Company as well as the compensation plans and
specific compensation levels for executive officers. The Compensation
Committee during the year ended December 31, 1999 consisted of two
independent, non-employee Directors, Howard Hoffen and Ernest
Mario.
The Company’s
compensation philosophy is to provide a total compensation package that will
enable the Company to attract and retain top executive talent, while
emphasizing the linkage of compensation to corporate, business and
individual performance.
The compensation
program for the executive officers is, except for 2 programs, identical to
that for all employees and consists of base salary, stock options and bonus.
Other benefits, such as health and welfare insurance, a defined contribution
401k pension plan, and an employee stock purchase plan, are also available
to all eligible employees. The two programs offered only to executives are a
Change of Control Plan and a Financial Management Plan.
The Compensation
Committee establishes the compensation of the Chief Executive Officer and
the other executive officers based on several criteria related to
competitive compensation levels, the performance of the individual and the
company’s performance relative to plan.
Competitive
Compensation. In order to establish competitive
compensation, a market basket of companies from both pharmaceuticals and
combustion-related industries was created and the base salaries, bonus
opportunities and stock option awards for their top executives were
analyzed. The intent of the Compensation Committee is to set the total
compensation for the Company’s executive officers at approximately the
50th percentile of the market basket of companies. Any such cross-company
comparisons require some adjustments to reflect varying levels of specific
responsibilities, complexity of the business, its ultimate potential and the
background and training of the incumbent. Such considerations set the base
level of compensation assuming an acceptable level of performance.
Performance variations on an individual and business level are then
applied.
Individual
Performance. Personal performance is appraised
against a budget and business plan laid out at the beginning of each year.
The plan includes a set of personal objectives regarding such things as
budgetary control, achieving milestones in the Company’s development
programs, successful execution and implementation of collaborative
agreements or contracts, achieving planned revenues and other criteria.
Assessment of performance in these regards determines the annual increase in
base salary and also determines, in part, the level of cash bonus and long
term incentive compensation. Bonus and options are also affected by
corporate performance.
Corporate
Performance. Achievement of corporate objectives,
designed to enhance stockholder value, is a key factor in establishing stock
option awards and bonus. Typical corporate objectives would include
profitable commercial operation, sound management of all balance sheet
items, appropriate balancing of new opportunities and risks and the creation
of profitable opportunities for future business activity. The bonus plan for
executives is based on the achievement of a combination of financial and
non-financial goals. The financial portion of the bonus does not pay out
below achievement of 80% of the planned goal; it does, however, provide for
over-achievement of the financial objectives. Overall personal performance
for 1999 was also taken into consideration in the final bonus
amount.
In determining the
Chief Executive Officer’s compensation, the Committee considered all of
the above factors in relation to specific corporate plan and CEO objectives
and accomplishments in 1999, as well as progress toward longer range Company
goals under his leadership. The salary increase of 4.9% to $367,000 was
effective March 1, 2000, the bonus of $295,000 for the 1999 calendar year,
and the option award of 38,000 shares on March 1, 2000 at an exercise price
of $12.00 per share, were all within the general guidelines we are following
and are consistent with the 1999 performance of the Company. In addition,
the Chief Executive Officer received Catalytica Combustion Systems, Inc.
stock options of 5,000 at an exercise price of $21.00 per share.
The Company intends
to take the necessary steps to comply with the $1 million compensation
deduction limitation pursuant to Section 162(m) of the Omnibus
Reconciliation Act of 1993. In addition, the non-equity-based compensation
paid to the Named Officers in fiscal 1997, 1998 and 1999 did not exceed $1
million for any individual.
PERFORMANCE
GRAPH
The following is a
graph comparing the cumulative total return to stockholders, calculated on a
dividend reinvested basis, from December 31, 1994 through December 31, 1999,
to the cumulative total return over such period of (i) Nasdaq U.S. Stock
Market Index and (ii) Standard and Poor Chemical Specialty Index. The graph
assumes that $100 was invested in the Company’s Common Stock on
December 31, 1994, the Nasdaq U.S. Stock Market, and in the Standard and
Poor Chemical Specialty. The information contained in the performance graph
shall not be deemed to be “soliciting material” or to be
“filed” with the SEC, nor shall such information be incorporated
by reference into any future filing under the Securities Act or the Exchange
Act, except to the extent that the Company specifically incorporates it by
reference into such filing.
[PERFORMANCE GRAPH
APPEARS HERE]
Data
Points
|
|
12/31/94
|
|
12/31/95
|
|
12/31/96
|
|
12/31/97
|
|
12/31/98
|
|
12/31/99
|
| Catalytica,
Inc. |
|
$ 2.88 |
|
$ 4.38 |
|
$ 4.00 |
|
$ 11.88 |
|
$ 18.00 |
|
$ 13.56 |
| NASDAQ US Stock
Market |
|
244.533 |
|
345.610 |
|
425.223 |
|
521.034 |
|
734.049 |
|
1,334.350 |
| S&P Specialty
Chemicals Index |
|
222.576 |
|
287.943 |
|
291.167 |
|
354.117 |
|
295.727 |
|
321.000 |
|
Conversion to
Index Point
|
|
12/31/94
|
|
12/31/95
|
|
12/31/96
|
|
12/31/97
|
|
12/31/98
|
|
12/31/99
|
| Catalytica,
Inc. |
|
100 |
|
152 |
|
139 |
|
412 |
|
625 |
|
471 |
| NASDAQ US Stock
Market |
|
100 |
|
141 |
|
174 |
|
213 |
|
300 |
|
546 |
| S&P Specialty
Chemicals Index |
|
100 |
|
129 |
|
131 |
|
159 |
|
133 |
|
144 |
(1)
|
Stock closing price
on last business day of quarter
|
(2)
|
Index Point = Data
Point/Baseline X 100
|
EXECUTIVE
COMPENSATION
The following table
sets forth the compensation paid by the Company with respect to the years
ended December 31, 1997, December 31, 1998, and December 31, 1999, to the
Chief Executive Officer and each of the other four most highly compensated
executive officers (collectively, the “Named Officers”) of the
Company:
Summary
Compensation Table
| |
|
|
|
Annual
Compensation
|
|
Long-Term
Compensation
Awards
|
Name and
Principal Position
|
|
Fiscal
Year
|
|
Salary($)
|
|
Bonus($)
|
|
Securities
Underlying
Options(#)
|
|
All Other
Compensation($)
|
| Ricardo B.
Levy |
|
1999 |
|
$350,000 |
|
$295,000 |
|
34,500 |
|
$22,955 |
(1) |
| President and Chief Executive
Officer |
|
1998 |
|
$330,000 |
|
$315,000 |
|
38,000 |
|
$33,450 |
(2) |
| |
|
1997 |
|
$229,000 |
|
$ 76,000 |
|
60,000 |
|
$17,064 |
(3) |
|
| James A.
Cusumano |
|
1999 |
|
$300,000 |
|
$230,000 |
|
21,000 |
|
$22,187 |
(1) |
| Chairman of the Board and
Chief |
|
1998 |
|
$300,000 |
|
$245,000 |
|
3,000 |
|
$29,547 |
(2) |
| Technical Officer |
|
1997 |
|
$210,000 |
|
$ 64,000 |
|
60,000 |
|
$16,052 |
(3) |
|
| Lawrence W.
Briscoe |
|
1999 |
|
$265,000 |
|
$170,000 |
|
17,300 |
|
$ 8,000 |
(1) |
| Vice President, Finance
and |
|
1998 |
|
$250,000 |
|
$178,000 |
|
19,000 |
|
$ 4,000 |
(2) |
| Administration, and Chief Financial
Officer |
|
1997 |
|
$198,000 |
|
$ 54,000 |
|
100,000 |
|
$ 4,000 |
(3) |
|
| Ralph A. Dalla
Betta |
|
1999 |
|
$175,000 |
|
$ 17,000 |
|
2,400 |
|
$15,062 |
(1) |
| Vice President and Chief
Scientist |
|
1998 |
|
$166,000 |
|
$ 16,000 |
|
1,500 |
|
$11,680 |
(2) |
| |
|
1997 |
|
$162,000 |
|
$ 3,000 |
|
— |
|
$10,808 |
(3) |
|
| John M.
Hart |
|
1999 |
|
$226,000 |
|
$ 85,000 |
|
3,800 |
|
$ 8,000 |
(1) |
| Vice President, Human
Resources |
|
1998 |
|
$ 85,432 |
|
$ 30,000 |
|
40,000 |
|
— |
|
| |
|
1997 |
|
— |
|
— |
|
— |
|
— |
|
(1)
|
Includes (i) $8,000
contributed by the Company to each Named Officer’s account under the
defined contribution pension plan and (ii) the following amounts
contributed by the Company to the Named Officer’s account under the
Supplemental Severance Benefits Plan: Dr. Levy $14,955; Dr. Cusumano
$14,187; and Dr. Dalla Betta $7,062.
|
(2)
|
Includes (i) $4,000
contributed by the Company to each Named Officer’s account under the
defined contribution pension plan and (ii) the following amounts
contributed by the Company to the Named Officer’s account under the
Supplemental Severance Benefits Plan: Dr. Levy $29,450; Dr. Cusumano
$25,547; and Dr. Dalla Betta $7,680.
|
(3)
|
Includes (i) $4,000
contributed by the Company to each Named Officer’s account under the
defined contribution pension plan and (ii) the following amounts
contributed by the Company to the Named Officer’s account under the
Supplemental Severance Benefits Plan: Dr. Levy $13,064; Dr. Cusumano
$12,052; and Dr. Dalla Betta $6,808.
|
The
Subsidiaries’ Summary Stock Option Table
The following table
sets forth the stock options granted in each of the company subsidiaries
with respect to the years ended December 31, 1997, December 31, 1998 and
December 31, 1999 to the Company’s Chief Executive Officer and the
Named Officers of the Company.
| |
|
|
|
|
|
Long-Term
Compensation
Awards
|
|
|
Name and
Principal Position
|
|
Fiscal
Year
|
|
Securities
Underlying
CPI
Options(#)(1)
|
|
Securities
Underlying
CCSI
Options(#)(2)
|
|
Securities
Underlying
CAT
Options(#)(3)
|
| Ricardo B.
Levy |
|
1999 |
|
— |
|
4,500 |
|
— |
| President and Chief Executive
Officer |
|
1998 |
|
2,000 |
|
2,400 |
|
— |
| |
|
1997 |
|
86,000 |
|
20,500 |
|
— |
|
| James A.
Cusumano |
|
1999 |
|
— |
|
3,000 |
|
— |
| Chairman of the Board and
Chief |
|
1998 |
|
20,000 |
|
1,500 |
|
— |
| Technical Officer |
|
1997 |
|
80,000 |
|
— |
|
— |
|
| Lawrence W.
Briscoe |
|
1999 |
|
— |
|
2,200 |
|
— |
| Vice President, Finance
and |
|
1998 |
|
5,000 |
|
1,200 |
|
— |
| Administration, and Chief Financial
Officer |
|
1997 |
|
30,000 |
|
— |
|
— |
|
| Ralph A. Dalla
Betta |
|
1999 |
|
— |
|
4,900 |
|
— |
| Vice President and Chief
Scientist |
|
1998 |
|
700 |
|
11,750 |
|
— |
| |
|
1997 |
|
— |
|
— |
|
— |
|
| John M.
Hart |
|
1999 |
|
— |
|
500 |
|
— |
| Vice President, Human
Resources |
|
1998 |
|
15,000 |
|
15,000 |
|
— |
| |
|
1997 |
|
— |
|
— |
|
— |
(1)
|
Represents long
term compensation awards by Catalytica Pharmaceuticals, Inc.
(CPI)
|
(2)
|
Represents long
term compensation awards by Catalytica Combustion Systems, Inc.
(CCSI)
|
(3)
|
Represents long
term compensation awards by Catalytica Advanced Technologies, Inc.
(CAT)
|
Company Option
Grants in Last Fiscal Year
The following table
sets forth the stock options granted during the fiscal year ended December
31, 1999 to each of the Named Officers:
| |
|
|
|
Individual
Grants(1)
|
|
|
|
Potential
Realizable
Value at Assumed
Annual Rates of
Stock Price
Appreciation for
Option Term(3)
|
Name
|
|
Number of
Securities
Underlying
Options
Granted(#)(1)
|
|
% of Total
Options
Granted to
Employees in
Fiscal Year(2)
|
|
Exercise
Price($/sh.)
|
|
Expiration
Date
|
|
|
|
|
|
|
|
|
5%($)
|
|
10%($)
|
| Ricardo B.
Levy |
|
34,500 |
|
3.3 |
% |
|
$14.25 |
|
3/1/09 |
|
$309,180 |
|
$783,524 |
| James A.
Cusumano |
|
21,000 |
|
2.0 |
% |
|
$14.25 |
|
3/1/09 |
|
$188,197 |
|
$476,927 |
| Lawrence W.
Briscoe |
|
17,300 |
|
1.6 |
% |
|
$14.25 |
|
3/1/09 |
|
$155,038 |
|
$392,897 |
| Ralph A. Dalla
Betta |
|
2,400 |
|
0.2 |
% |
|
$14.25 |
|
3/1/09 |
|
$ 21,508 |
|
$ 54,506 |
| John M.
Hart |
|
3,800 |
|
0.4 |
% |
|
$14.25 |
|
3/1/09 |
|
$ 34,055 |
|
$ 86,301 |
(1)
|
These options were
granted under the Company’s Stock Option Plan (the “Option
Plan”). Options granted under the Option Plan generally have a
ten-year term. Generally, 12.5% of the grant becomes exercisable six
months after the date of grant. The balance of the grant then vests
monthly, with full exercisability
occurring on the fourth anniversary date. The per share exercise price is
the Nasdaq closing price for the Company’s Common Stock on the date
of grant. Unless otherwise determined by the Board of Directors, the
Option Plan provides for the automatic acceleration of vesting of all
outstanding options (such that they become exercisable in full) in the
event of a “change in control,” as defined in the Option
Plan.
|
(2)
|
Based on options to
purchase an aggregate of 1,062,421 shares granted to employees during
1999.
|
(3)
|
Potential
realizable value is based on an assumption that the stock price
appreciates at the annual rate shown (compounded annually) from the date
of grant until the end of the ten-year option term. These numbers are
calculated based on the requirements promulgated by the SEC and do not
reflect the Company’s estimate of future stock price.
|
Subsidiary Option
Grants in Last Fiscal Year
The following table
sets forth the stock options granted by the Company’s subsidiaries
during the fiscal year ended December 31, 1999 to each of the Named
Officers:
| |
|
|
|
Individual
Grants(1)
|
|
|
|
Potential
Realizable
Value at Assumed
Annual Rates of
Stock Price
Appreciation for
Option Term(3)
|
Name
|
|
Subsidiaries
|
|
Number of
Securities
Underlying
Options
Granted(1)(#)
|
|
% of Total
Options
Granted to
Employees in
Fiscal Year(2)
|
|
Exercise
Price($/sh.)
|
|
Expiration
Date
|
|
|
|
|
|
|
5%($)
|
|
10%($)
|
| Ricardo B.
Levy |
|
CPI |
|
— |
|
— |
|
|
— |
|
— |
|
— |
|
— |
| |
|
CCSI |
|
4,500 |
|
5.0 |
% |
|
$21.60 |
|
3/1/09 |
|
$61,129 |
|
$154,912 |
|
| James A.
Cusumano |
|
CPI |
|
— |
|
— |
|
|
— |
|
— |
|
— |
|
— |
| |
|
CCSI |
|
3,000 |
|
3.3 |
% |
|
$21.60 |
|
3/1/09 |
|
$40,752 |
|
$103,275 |
|
| Lawrence W.
Briscoe |
|
CPI |
|
— |
|
— |
|
|
— |
|
— |
|
— |
|
— |
| |
|
CCSI |
|
2,200 |
|
2.4 |
% |
|
$21.60 |
|
3/1/09 |
|
$29,885 |
|
$ 75,735 |
|
| Ralph A. Dalla
Betta |
|
CPI |
|
— |
|
— |
|
|
— |
|
— |
|
— |
|
— |
| |
|
CCSI |
|
4,900 |
|
5.4 |
% |
|
$21.60 |
|
3/1/09 |
|
$66,562 |
|
$168,682 |
|
| John M.
Hart |
|
CPI |
|
— |
|
— |
|
|
— |
|
— |
|
— |
|
— |
| |
|
CCSI |
|
500 |
|
0.6 |
% |
|
$21.60 |
|
3/1/09 |
|
$ 6,792 |
|
$ 17,212 |
(1)
|
These options were
granted under the Catalytica Combustion Systems, Inc. (CCSI) Stock Option
Plan (the “Subsidiary Option Plan”). Options granted under the
Subsidiary Option Plan generally have a ten-year term and vest ratably
over a four-year period. The per share exercise price is based on the fair
market value of the subsidiary’s common stock on the date of grant,
as determined by the subsidiary’s Board of Directors. Unless
otherwise determined by the Board of Directors, the Subsidiary Option Plan
provides for the automatic acceleration of vesting of all outstanding
options (such that they become exercisable in full) in the event of a
“change in control,” as defined in the Subsidiary Option
Plan.
|
(2)
|
The percent of
total options granted to employees during the fiscal year is based on the
total number of options issued to employees at each particular subsidiary
and is broken down accordingly. Particularly, the percent of total options
granted to employees of Catalytica Combustion Systems during 1999 is based
on options to purchase an aggregate of 90,220 shares.
|
(3)
|
Potential
realizable value is based on an assumption that the stock price
appreciates at the annual rate shown (compounded annually) from the date
of grant until the end of a ten-year option term. These numbers are
calculated based on the requirements promulgated by the SEC and do not
reflect the Company’s estimate of future stock price.
|
Company Aggregate
Option Exercises in Last Fiscal Year and Fiscal Year-End
Values
The following table
sets forth for each of the Named Officers, information with respect to stock
options exercised during the fiscal year ended December 31, 1999 and stock
options held at fiscal year end:
Name
|
|
Shares
Acquired on
Exercise(#)
|
|
Value
Realized($)(1)
|
|
Number of
Securities
Underlying Unexercised
Options at Fiscal Year End(#)
|
|
Value of
Unexercised
In-the-Money Options
at Fiscal Year End ($)(2)
|
|
|
|
Exercisable
|
|
Unexercisable
|
|
Exercisable
|
|
Unexercisable
|
| Ricardo B.
Levy |
|
— |
|
— |
|
107,968 |
|
115,865 |
|
$670,963 |
|
$425,994 |
| James A.
Cusumano |
|
— |
|
— |
|
49,021 |
|
60,979 |
|
$237,317 |
|
$174,311 |
| Lawrence W.
Briscoe |
|
15,000 |
|
$152,500 |
|
92,845 |
|
74,555 |
|
$733,277 |
|
$452,624 |
| Ralph A. Dalla
Betta |
|
— |
|
— |
|
15,484 |
|
9,992 |
|
$140,902 |
|
$ 72,574 |
| John M.
Hart |
|
— |
|
— |
|
13,213 |
|
30,587 |
|
$ 36,725 |
|
$ 80,795 |
(1)
|
Market value of
underlying securities on the exercise date minus the exercise
price.
|
(2) Market value of
underlying securities at December 31, 1999 minus the exercise
price.
Subsidiary
Aggregate Option Exercises in Last Fiscal Year and Fiscal Year-End
Values
The following table
sets forth for each of the Named Officers, information with respect to
subsidiary stock options exercised during the fiscal year ended December 31,
1999 and stock options held at fiscal year end:
Name
|
|
Subsidiaries
|
|
Number of
Securities
Underlying Unexercised
Options at Fiscal Year End(#)
|
|
Value of
Unexercised
In-the-Money Options
at Fiscal Year End ($)(2)
|
|
|
Exercisable
(1)
|
|
Unexercisable
|
|
Exercisable
(1)
|
|
Unexercisable
|
| Ricardo B.
Levy |
|
CPI |
|
62,917 |
|
39,083 |
|
$1,035,442 |
|
$594,358 |
| |
|
CCSI |
|
42,220 |
|
14,680 |
|
$ 795,840 |
|
$186,510 |
| |
|
CAT |
|
— |
|
16,000 |
|
— |
|
— |
|
| James A.
Cusumano |
|
CPI |
|
185,292 |
|
48,708 |
|
$3,449,754 |
|
$636,446 |
| |
|
CCSI |
|
22,605 |
|
3,895 |
|
$ 435,794 |
|
$ 19,156 |
| |
|
CAT |
|
— |
|
12,000 |
|
— |
|
— |
|
| Lawrence W.
Briscoe |
|
CPI |
|
43,450 |
|
3,150 |
|
$ 828,118 |
|
$ 17,862 |
| |
|
CCSI |
|
22,830 |
|
3,070 |
|
$ 444,782 |
|
$ 17,668 |
| |
|
CAT |
|
— |
|
14,000 |
|
— |
|
— |
|
| Ralph A. Dalla
Betta |
|
CPI |
|
292 |
|
408 |
|
$ 1,314 |
|
$ 1,836 |
| |
|
CCSI |
|
102,606 |
|
14,044 |
|
$1,986,846 |
|
$127,829 |
| |
|
CAT |
|
— |
|
— |
|
— |
|
— |
|
| John M.
Hart |
|
CPI |
|
4,688 |
|
10,313 |
|
$
0 |
|
$
0 |
| |
|
CCSI |
|
4,782 |
|
10,718 |
|
$ 28,128 |
|
$ 61,872 |
| |
|
CAT |
|
— |
|
— |
|
— |
|
— |
(1)
|
Subsidiaries Option
Plans, except for Advanced Technologies, Inc. provide for stock option to
be exercisable effective in 1998.
|
(2)
Market value of underlying securities at December 31, 1999 minus the
exercise price.
Compensation
Committee Interlocks and Insider Participation
The Compensation
Committee consisted of Directors Hoffen and Mario in 1999. No executive
officer of the Company serves as a member of the Board of Directors or on
the Compensation Committee of any entity that has an executive officer
serving as a member of the Company’s Board of Directors or Compensation
Committee.
During the year ended
December 31, 1999, the Company paid Richard Fleming Associates, a consulting
organization of which Richard Fleming, a Director of the Company, is the
President and Chief Executive Officer, approximately $297,000. These
payments were for services provided to the Company by Mr. Fleming in his
capacity as a consultant to the Company at a rate of $20,000 per month from
January through December 1999 plus expenses and, $57,000 for additional
consulting during 1999 in conjunction with special projects. Mr. Fleming
provided assistance to the Company on various development programs and in
identifying and investigating new business opportunities.
TRANSACTIONS WITH
MANAGEMENT
Morgan Stanley
Capital Partners III, Inc. In June 1997, the
Company entered into a Stock Purchase Agreement (the “Investment
Agreement”) with Morgan Stanley Capital Partners III, Inc. and two
other affiliated equity funds (the “Morgan Stanley Equity Funds”),
pursuant to which the Company sold 30,000,000 shares of Class A Common Stock
and Class B Common Stock to the Morgan Stanley Equity Funds for an aggregate
purchase price of $120 million. The proceeds were used to fund the
acquisition of the pharmaceutical manufacturing facility in Greenville,
North Carolina. The Morgan Stanley Equity Funds are entitled to certain
registration rights, which came into effect on July 1, 1998, and certain
rights of repurchase held by the Morgan Stanley Equity Funds, which will
come into effect on July 1, 2005.
The Investment
Agreement also provides that the Morgan Stanley Equity Funds are entitled to
have the Company nominate for election to the Board of Directors (i) 3
persons for so long as such funds own at least 30% of the outstanding Common
Stock of the Company, (ii) 2 persons for so long as such funds own between
10% and 30% of the outstanding Common Stock of the Company or (iii) 1 person
for so long as they own between 6% and 10% of the outstanding Common Stock
of the Company. (Common Stock for the purpose of these percentages assumes
conversion of the Class A and Class B Common Stock into Common Stock of the
Company).
In August 1997,
pursuant to the Investment Agreement, the Company amended its bylaws to
increase the size of the Board of Directors from 7 to 9 and appointed
Messrs. Howard Hoffen and Alan Goldberg to the Board of Directors. Messrs.
Hoffen and Goldberg were subsequently elected as Directors to the
Company’s Board of Directors in connection with the 1998 Annual Meeting
of Stockholders. In April 1999, the Board of Directors amended its bylaws to
decrease the size of the Board of Directors from 9 to 7.
With the proceeds
received from exercise of warrants that the Company distributed in August
1997 to its stockholders in connection with the financing of the acquisition
of the pharmaceutical manufacturing facility in Greenville, North Carolina,
the Company redeemed in October 1997 an aggregate of 5,000,000 shares of
Class B Common Stock held by the Morgan Stanley Equity Funds at a redemption
price of $4.75 per share.
On April 21, 1999 the
Company entered into Change of Control Severance Agreements with the
following members of Management: Ricardo Levy, Lawrence Briscoe and John
Hart. The Change of Control Severance Agreements provide for the following
benefits in the event an officer is involuntarily terminated (as defined in
the Change of Control Severance Agreement): (1) 200% of the officer’s
annual compensation plus a pro rata payment of their projected bonus, (2)
continued employee benefits for up to 2 years from the date of an
Involuntary Termination and (3) accelerated vesting of all of the
officer’s options.
Section 16(a)
Beneficial Ownership Reporting Compliance
Section 16(a) of the
Securities Exchange Act of 1934, as amended (“Exchange Act”)
requires the Company’s executive officers, 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
Securities and Exchange Commission (“SEC”) and the National
Association of Securities Dealers, Inc. Executive Officers, Directors and
greater than ten percent stockholders are required by SEC regulation to
furnish the Company with copies of all Section 16(a) forms they file. Based
solely in its review of the copies of such forms received by it, or written
representation from certain reporting persons, the Company believes that,
during fiscal year 1999, all reporting persons complied with Section 16(a)
filing requirements applicable to them, except that Ms. Jackie Cossmon, VP
of Investor Relations, filed one Form 3 late with respect to her appointment
as an Officer of the Company.
PROPOSAL NO.
2—APPROVAL OF AMENDMENT TO THE COMPANY’S
1992 STOCK OPTION
PLAN
General
The 1992 Stock Option
Plan (the “1992 Plan”) was adopted by the Board of Directors in
March 1992, approved by the stockholders in May 1992, and amended in May
1996, July 1997 and June 1998. There are currently 5,050,000 shares of
Common Stock reserved under the 1992 Plan. The 1992 Plan provides for the
granting to employees of the Company of incentive stock options within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended
(“the Code”) and for the granting of nonstatutory stock options to
employees and consultants of the Company. As of March 31, 2000, options to
purchase 4,023,849 shares were outstanding under the 1992 Plan and 384,530
shares remained available for future grants (without giving effect to the
increase in shares being presented to the stockholders for approval at the
Annual Meeting).
Proposal
On April 24, 2000 ,
the Board of Directors approved an amendment to the 1992 Plan to increase
the number of shares reserved for issuance thereunder by an additional
2,500,000 shares for an aggregate of 7,550,000 shares reserved for issuance
thereunder. At the Annual Meeting, the stockholders are being requested to
approve this amendment. The amendment to the 1992 Plan is proposed in order
to give the Board of Directors flexibility to grant stock options. The
Company believes that grants of stock options motivate high levels of
performance and provide an effective means of recognizing employee
contributions to the success of the Company. At present, all newly hired
full-time employees are eligible to be granted stock options. The Company
believes that this policy is of great value in recruiting and retaining
highly qualified technical and other key personnel who are in great demand.
The Board of Directors believes that the ability to grant options will be
important to the future success of the Company by allowing it to remain
competitive in attracting and retaining such key personnel.
Required Vote;
Recommendation of the Board of Directors
The affirmative vote
of the holders of a majority of the shares represented in person or by
proxy, and voting at the Annual Meeting (which shares voting affirmatively
also constitute at least a majority of the required quorum) will be required
to approve and ratify the increase in the number of shares reserved under
the 1992 Plan.
THE COMPANY’S
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THIS
PROPOSAL.
Summary of the
1992 Plan
The essential
features of the 1992 Plan are outlined below.
Purpose.
The purposes of the 1992 Plan are to attract and
retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to employees and consultants
of the Company and to promote the success of the Company’s
business.
Administration. The 1992 Plan may be
administered by the Board or a committee of the Board, which committee is
required to be constituted to comply with Section 16(b) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), and
applicable laws (the “Administrator”). Subject to the other
provisions of the 1992 Plan, the Administrator has the power to determine
the terms of any options granted, including the exercise price, the number
of shares subject to the option and the exercisability thereof. The 1992
Plan is currently administered by the Stock Option Committee of the Board of
Directors.
Eligibility and
Terms of Options. The 1992 Plan provides that
nonstatutory stock options may be granted only to employees and consultants.
Incentive stock options may be granted only to employees. An optionee who
has been granted an option may, if he or she is otherwise eligible, be
granted additional options. With respect to any optionee who owns stock
possessing more than 10% of the voting power of all classes of stock of the
Company (a “10% Stockholder”), the exercise price of any incentive
stock option granted must equal at least 110% of the fair market value on
the grant date and the maximum term of the option must not exceed five
years. The term of all other options under the 1992 Plan may not exceed ten
years. The Administrator selects the optionees and determines the number of
shares to be subject to each option. In making such determination, there is
taken into account the duties and responsibilities of the employee or
consultant, the value of his or her services, his or her present and
potential contribution to the success of the Company, the anticipated number
of years of future service and other relevant factors.
Terms and
Conditions of Options. Each option granted under
the 1992 Plan is evidenced by a written stock option agreement between the
optionee and the Company and is subject to the following terms and
conditions:
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(a)
Exercise Price. The Administrator
determines the exercise price of options to purchase shares of Common
Stock at the time the options are granted. However, the exercise price of
an option must not be less than 100% (110% if issued to a 10% Stockholder)
of the fair market value of the Common Stock on the date the option is
granted. For so long as the Company’s Common Stock is traded on The
NASDAQ National Market the fair market value of a share of Common Stock
shall be closing sales price for such stock (or the closing bid if no
sales were reported) as quoted on such system.
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(b)
Exercise of the Option. Each stock
option agreement will specify the term of the option and the date when the
option is to become exercisable. The terms of such vesting are to be
determined by the Administrator. Options granted under the 1992 Plan to
date generally become exercisable at a rate of 1/48th of the shares
subject to the options per month and have a ten-year term. An option is
exercised by giving written notice of exercise to the Company, specifying
the number of full shares of Common Stock to be purchased and by tendering
full payment of the purchase price to the Company.
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(c)
Form of Consideration. The
consideration to be paid for the shares of Common Stock issued upon
exercise of an option shall be determined by the Administrator and is set
forth in the option agreement. Such form of consideration may vary for
each option, and may consist entirely of cash, check, promissory note,
other shares of the Company’s Common Stock, any combination thereof,
or any other legally permissible form of consideration as may be provided
in the option agreement.
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(d)
Termination of Employment. In the
event an optionee’s continuous status as an employee or consultant
terminates for any reason (other than upon the optionee’s death or
disability), the optionee may exercise his or her option, but only within
such period of time not to exceed six months form the date of such
termination, as is determined by the Administrator (with such
determination being made at the time of
grant and not exceeding ninety days in the case of an incentive stock
option) and only to the extent that the optionee was entitled to exercise
it at the date of such termination (but in no event later than the
expiration of the term of such option as set forth in the option
agreement). Options granted under the 1992 Plan to date have generally
provided that optionees may exercise their options within ninety days from
the date of termination of employment (other than for death or
disability).
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(e)
Disability. In the event an
optionee’s continuous status as an employee or consultant terminates
as a result of permanent and total disability (as defined in Section
22(e)(3) of the Code), the optionee may exercise his or her option, but
only within twelve months from the date of such termination, and only to
the extent that the optionee was entitled to exercise it at the date of
such termination (but in no event later than the expiration of the term of
such option as set forth in the option agreement).
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(f)
Death. In the event of an optionee’s death, the
optionee’s estate or a person who acquired the right to exercise the
deceased optionee’s option by bequest or inheritance may exercise the
option, but only within twelve months following the date of death, and
only to the extent that the optionee was entitled to exercise it at the
date of death (but in no event later than the expiration of the term of
such option as set forth in the option agreement).
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(g)
Termination of Options. Excluding options
issued to 10% Stockholders, options granted under the 1992 Plan expire ten
years from the date of grant. No option may be exercised by any person
after the expiration of its term.
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(h)
Nontransferability of Options. An option
is nontransferable by the optionee, other than by will or the laws of
descent and distribution, and is exercisable during the optionee’s
lifetime only by the optionee. In the event of the optionee’s death,
options may be exercised by a person who acquires the right to exercise
the option by bequest or inheritance.
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(i)
Value Limitation. If the aggregate fair
market value of all shares of Common Stock subject to an optionee’s
incentive stock option which are exercisable for the first time during any
calendar year exceeds $100,000, the excess options shall be treated as
nonstatutory options.
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(j)
Other Provisions. The stock option
agreement may contain such other terms, provisions and conditions not
inconsistent with the 1992 Plan as may be determined by the
Administrator.
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Adjustment Upon
Changes in Capitalization; Corporate
Transactions. In the event of changes in the
outstanding Common Stock of the Company by reason of any stock splits,
reverse stock splits, stock dividends, mergers, recapitalizations or other
change in the capital structure of the Company, an appropriate adjustment
shall be made by the Administrator in: (i) the number of shares of Common
Stock subject to the 1992 Plan, (ii) the number and class of shares of stock
subject to any option outstanding under the 1992 Plan, (iii) and the
exercise price of any such outstanding option. The determination of the
Administrator as to which adjustments shall be made shall be conclusive. In
the event of a proposed dissolution or liquidation of the Company, all
outstanding options will terminate immediately prior to the consummation of
such proposed action, unless otherwise provided by the Board. The Board may,
in the exercise of its sole discretion in such instances, declare that any
option shall terminate as of a date fixed by the Board and give each
optionee the right to exercise his option as to all or any part of the
optioned stock, including shares as to which the option would not otherwise
be exercisable.
Notwithstanding the
above, in the event of a merger of the Company with or into another
corporation or the acquisition by a person of fifty percent or more of the
Company’s then outstanding securities, the 1992 Plan requires that each
outstanding option be assumed or an equivalent option be substituted by the
successor corporation; provided, however, if such successor or purchaser
refuses to assume the then outstanding options, the 1992 Plan provides for
the full acceleration of the exercisability of all outstanding options for a
period of fifteen days from the date of notice of acceleration to the
optionee.
Amendment and Termination
of the 1992 Plan. The Board may at any time
amend, alter, suspend or terminate the 1992 Plan. The Company shall obtain
stockholder approval of any amendment to the 1992 Plan in such a manner and
to such a degree as is necessary and desirable to comply with Rule 16b-3
under the Exchange Act or Section 422 of the Code (or any other applicable
law or regulation, including the requirements of any exchange or quotation
system on which the Common Stock is traded). Any amendment or termination of
the 1992 Plan shall not affect options already granted and such options
shall remain in full force and effect as if the 1992 Plan had not been
amended or terminated, unless mutually agreed otherwise between the optionee
and the Company, which agreement must be in writing and signed by the
optionee and the Company. In any event, the 1992 Plan shall terminate in May
2002. Any options outstanding under the 1992 Plan at the time of its
termination shall remain outstanding until they expire by their
terms.
Federal Tax
Information
Options granted under
the 1992 Plan may be either “incentive stock options,” as defined
in Section 422 of the Code, or nonstatutory options.
An optionee who is
granted an incentive stock option will not recognize taxable income either
at the time the option is granted or upon its exercise, although the
exercise may subject the optionee to the alternative minimum tax. Upon the
sale or exchange of the shares more than two years after grant of the option
and one year after exercising the option, any gain or loss will be treated
as long-term capital gain or loss. If these holding periods are not
satisfied, the optionee will recognize ordinary income at the time of sale
or exchange equal to the difference between the exercise price and lower of
(i) the fair market value of the shares at the date of the option exercise
or (ii) the sale price of the shares. A different rule for measuring
ordinary income upon such a premature disposition may apply if the optionee
is also an officer, Directors, or 10% Stockholder of the Company. The
Company will be entitled to a deduction in the same amount as the ordinary
income recognized by the optionee. Any gain or loss recognized on such a
premature disposition of the shares in excess of the amount treated as
ordinary income will be characterized as long-term or short-term capital
gain or loss, depending on the holding period.
All other options
which do not qualify as incentive stock options are referred to as
nonstatutory options. An optionee will not recognize any taxable income at
the time he is granted a nonstatutory option. However, upon its exercise,
the optionee will recognize taxable income generally measured as the excess
of the then fair market value of the shares purchased over the purchase
price. Any taxable income recognized in connection with an option exercise
by an optionee who is also an employee of the Company will be subject to tax
withholding by the Company. Upon resale of such shares by the optionee, any
difference between the sale price and the optionee’s purchase price, to
the extent not recognized as taxable income as described above, will be
treated as long-term or short-term capital gain or loss, depending on the
holding period.
The Company will be
entitled to a tax deduction in the same amount as the ordinary income
recognized by the optionee with respect to shares acquired upon exercise of
a nonstatutory option.
The foregoing is only
a summary of the effect of federal income taxation upon the optionee and the
Company with respect to the grant and exercise of options under the 1992
Plan, does not purport to be complete, and does not discuss the tax
consequences of the optionee’s death or the income tax laws of any
municipality, state or foreign country in which an optionee may
reside.
Participation. The Company is unable to
predict the amount of benefits that will be received or allocated to any
particular participant under the Director Option Plan, the Purchase Plan or
the 1992 Plan. The following table sets forth the dollar amount and the
number of shares that were granted and/or allowed under the Purchase Plan
and the 1992 Plan during the fiscal year ended December 31, 1997 to (i) each
of the Company’s Named Executive Officers, (ii) all current executive
officers as a group, (iii) all current Directors who are not executive
officers as a group and (iv) all employees other than executive officers as
a group.
PROPOSAL NO.
3—RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Company has
selected Ernst & Young, LLP independent accountants, to audit the
financial statements of the Company for the current fiscal year ending
December 31, 2000. Ernst & Young, LLP has audited the Company’s
financial statements since the fiscal year ended December 31, 1982. A
representative of Ernst & Young, LLP is expected to be available at the
Annual Meeting to make a statement if such representative desires to do so
and to respond to appropriate questions.
THE BOARD OF
DIRECTORS RECOMMENDS VOTING “FOR” APPROVAL AND RATIFICATION OF THE
SELECTION OF ERNST & YOUNG, LLP IN THE EVENT THAT A MAJORITY OF THE
VOTES CAST AT THE MEETING ARE CAST AGAINST SUCH RATIFICATION, THE BOARD OF
DIRECTORS WILL RECONSIDER ITS SELECTION.
OTHER
MATTERS
The Company does not
currently intend to bring before the Annual Meeting any matters other than
those set forth herein, and has no present knowledge that any other matters
will or may be brought before the meeting by others. However, if any other
matters properly come before the meeting, it is the intention of the persons
named in the enclosed form of proxy to vote the proxies in accordance with
their judgment.
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BY ORDER OF THE
BOARD OF DIRECTORS
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Vice President,
Finance and Administration, and Chief Financial Officer
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Mountain View,
California
April 28,
2000
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R
O
X
Y
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THIS PROXY
IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
CATALYTICA, INC.
2000 ANNUAL MEETING OF STOCKHOLDERS
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June 8, 2000
The undersigned stockholder of
Catalytica, Inc., a Delaware corporation, hereby acknowledges receipt of
the Notice of Annual Meeting of Stockholders and Proxy Statement, each
dated April 28, 2000, and hereby appoints Ricardo B. Levy and Lawrence W.
Briscoe, and each of them, proxies and attorneys-in-fact, with full power
to each of substitution, on behalf and in the name of the undersigned, to
represent the undersigned at the 2000 Annual Meeting of Stockholders of
Catalytica, Inc., to be held on Thursday, June 8, 2000, at 10:00 a.m.,
Pacific Daylight Savings Time, in the Mandarin Oriental Hotel located at
222 Sansome Street, San Francisco, California 94101 and at any
continuation(s) or adjournment(s) thereof, and to vote all shares of Common
Stock that the undersigned would be entitled to vote if then and there
personally present, on the matters set forth on the reverse side and, in
their discretion, upon such other matter or matters that may properly come
before the meeting and any adjournment(s) thereof.
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION
IS INDICATED, WILL BE VOTED (1) FOR THE ELECTION OF DIRECTORS, (2) FOR THE
APPROVAL OF AMENDMENT TO THE COMPANY'S 1992 STOCK OPTION PLAN, (3) FOR THE
RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT
AUDITORS AND (4) AS SAID PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS AS
MAY PROPERLY COME BEFORE THE MEETING.
COMMENTS/ADDRESS CHANGE: PLEASE MARK COMMENT/ADDRESS BOX ON THE
REVERSE SIDE
(Continued and to be signed on reverse side)
(FOLD AND DETACH HERE)
[LOGO OF CATALYTICA]
ANNUAL MEETING OF STOCKHOLDERS
Thursday, June 8, 2000
10:00 a.m.
Mandarin Oriental Hotel
333 Battery Street
San Francisco, California 94101
Insert LOGO
THE BOARD OF DIRECTORS RECOMMENDS
VOTING "FOR"
EACH OF THE FOLLOWING PROPOSALS.
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Please Mark [X]
your votes as
indicated in
this example |
| 1. |
ELECTION OF DIRECTORS |
FOR all nominees
listed (except as
indicated)
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WITHHOLD
for all
nominees
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| IF YOU WISH TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
NOMINEE, STRIKE A LINE THROUGH THAT NOMINEE'S NAME IN THE LIST BELOW:
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| James A. Cusumano, Richard Fleming, Alan Goldberg, Howard
Hoffen, Ricardo S. Levy, Ernest Mario and John A. Urquhart |
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FOR
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AGAINST
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ABSTAIN
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| 2. |
Proposal to approve and ratify the appointment of Ernst &
Young as the independent auditors of the Company for the fiscal year
ending December 31, 2000. |
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| 3. |
Proposal to approve and amend the Company's Stock Option
Plan. |
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| 4. |
The proxies are authorized to vote in their discretion upon
such other business as may properly come before the meeting. |
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I PLAN TO ATTEND THE MEETING |
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COMMENTS/ADDRESS CHANGE
Please mark this if you have written comments/address on the reverse
side |
[_]
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Signature _____________________ Signature ______________________ Date
___________________
(This Proxy should be marked, dated, signed by the stockholder(s) exactly
as his or her name appears hereon, and returned promptly in the enclosed
envelope. Persons signing in a fiduciary capacity should so indicate. If
shares are held by joint tenants or as community property, both should
sign.)
(FOLD AND DETACH HERE)
