<PAGE>
================================================================================
SCHEDULE 14A INFORMATION
(RULE 14A-101)
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
CYTYC CORPORATION
- --------------------------------------------------------------------------------
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
- --------------------------------------------------------------------------------
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
NOT APPLICABLE
________________________________________________________________________
(2) Aggregate number of securities to which transaction applies:
NOT APPLICABLE
________________________________________________________________________
(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):
NOT APPLICABLE
________________________________________________________________________
(4) Proposed maximum aggregate value of transaction:
NOT APPLICABLE
________________________________________________________________________
[_] 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:
NOT APPLICABLE
________________________________________________________________________
(2) Form, Schedule or Registration Statement No.:
NOT APPLICABLE
________________________________________________________________________
(3) Filing Party:
CYTEC CORPORATION
________________________________________________________________________
(4) Date Filed:
MARCH 19, 1997
________________________________________________________________________
================================================================================
<PAGE>
[PRELIMINARY PROXY STATEMENT FILED PURSUANT TO RULE 14A-6]
CYTYC CORPORATION
85 SWANSON ROAD
BOXBOROUGH, MA 01719
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 9, 1997
----------------
To the Stockholders of Cytyc Corporation:
Notice is hereby given that the annual meeting of stockholders of Cytyc
Corporation, a Delaware corporation (the "Company"), will be held at 9:30
a.m., local time, on Friday, May 9, 1997, at the Holiday Inn, One Adams Place,
Boxborough, Massachusetts to consider and act upon the following proposals:
1. To elect three directors to Class I of the Company's Board of
Directors, to serve for a term of three years or until successors are
elected and qualified.
2. To approve an amendment to the Company's Third Amended and Restated
Certificate of Incorporation increasing from 30,000,000 to 60,000,000 the
number of authorized shares of Common Stock, $.01 par value, of the
Company.
3. To ratify the selection of the firm of Arthur Andersen LLP,
independent public accountants, as auditors for the fiscal year ending
December 31, 1997.
4. To transact such other business as may properly come before the
meeting or any postponements or adjournments thereof.
Only stockholders of record at the close of business on March 24, 1997 are
entitled to notice of and to vote at the meeting.
All stockholders are cordially invited to attend the meeting in person. To
ensure your representation at the meeting, however, you are urged to mark,
sign, date and return the enclosed proxy card as promptly as possible in the
enclosed postage-prepaid envelope. You may revoke your proxy in the manner
described in the accompanying Proxy Statement at any time before it has been
voted at the annual meeting. Any stockholder attending the annual meeting may
vote in person even if he or she has returned a proxy.
By Order of the Board of Directors,
Joseph W. Kelly
Secretary
Boxborough, Massachusetts
March 31, 1997
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND
SIGN THE ENCLOSED PROXY CARD AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE IN
ORDER TO ASSURE REPRESENTATION OF YOUR SHARES. NO POSTAGE NEED BE AFFIXED IF
THE PROXY CARD IS MAILED IN THE UNITED STATES.
<PAGE>
CYTYC CORPORATION
85 SWANSON ROAD
BOXBOROUGH, MA 01719
----------------
PROXY STATEMENT
----------------
March 31, 1997
This Proxy Statement is being furnished in connection with the solicitation
of proxies by the Board of Directors of Cytyc Corporation, a Delaware
corporation (the "Company") for use at the Annual Meeting of the Company's
stockholders to be held on Friday, May 9, 1997 (the "Annual Meeting") at 9:30
a.m., local time, at the Holiday Inn, One Adams Place, Boxborough,
Massachusetts 01719, or at any adjournments thereof. The Company's Summary
Annual Report and Form 10-K, which includes financial statements and
Management's Discussion and Analysis of Financial Condition and Results of
Operations for the fiscal year ended December 31, 1996, are being mailed
together with this Proxy Statement to all stockholders entitled to vote at the
Annual Meeting. This Proxy Statement and the form of proxy were first mailed
to stockholders on or about March 31, 1997.
The Board of Directors has fixed the close of business on March 24, 1997 as
the record date (the "Record Date"). Accordingly, only holders of record of
Common Stock as of the close of business on the Record Date will be entitled
to notice of, and to vote at, the Annual Meeting or an adjournment thereof. As
of the Record Date, an aggregate of [17,230,736] shares of Common Stock, $.01
par value per share (the "Common Stock"), of the Company were issued and
outstanding. The holders of Common Stock are entitled to one vote per share on
any proposal presented at the Annual Meeting. Stockholders may vote in person
or by proxy. Execution of a proxy will not in any way affect a stockholder's
right to attend the Annual Meeting and vote in person. Any proxy given
pursuant to this solicitation may be revoked by the person giving it at any
time before it is voted. Proxies may be revoked by (1) filing with the
Secretary of the Company, before the taking of the vote at the Annual Meeting,
a written notice of revocation bearing a later date than the proxy, (2) duly
executing a later dated proxy relating to the same shares and delivering it to
the Secretary of the Company before the taking of the vote at the Annual
Meeting or (3) attending the Annual Meeting and voting in person (although
attendance at the Annual Meeting will not in and of itself constitute a
revocation of a proxy). Any written notice of revocation or subsequent proxy
should be sent so as to be delivered to Cytyc Corporation, 85 Swanson Road,
Boxborough, MA 01719, Attention: Secretary, at or before the taking of the
vote at the Annual Meeting.
QUORUM AND VOTES REQUIRED
The representation in person or by proxy of at least a majority of the
outstanding shares of Common Stock entitled to vote at the Annual Meeting is
necessary to establish a quorum for the transaction of business at the Annual
Meeting. Votes withheld from the nominee, abstentions and broker "non-votes"
are counted as present or represented for purposes of determining the presence
or absence of a quorum. A "non-vote" occurs when a broker holding shares for a
beneficial owner votes on one proposal, but does not vote on another proposal
because, in respect of such other proposal, the broker does not have
discretionary voting power and has not received instructions from the
beneficial owner.
<PAGE>
In the election of Class I Directors, the three nominees receiving the
highest number of affirmative votes of the shares present or represented and
entitled to vote at the Annual Meeting shall be elected as Class I Directors.
Approval of the amendment to the Third Amended and Restated Certificate of
Incorporation ("Certificate of Incorporation") will require the affirmative
vote of a majority of the outstanding shares of Common Stock of the Company.
On all other matters being submitted to stockholders, the affirmative vote of
a majority of shares present, in person or represented by proxy, and voting on
each such matter is required for approval. An automated system administered by
the Company's transfer agent tabulates the votes. The vote on each matter
submitted to stockholders is tabulated separately. Abstentions are included in
the number of shares present or represented and voting on each matter. Broker
"non-votes" are not considered voted for the particular matter and have the
effect of reducing the number of affirmative votes required to achieve a
majority for such matter by reducing the total number of shares from which the
majority is calculated.
The persons named as attorneys in the proxies, Patrick J. Sullivan and
Joseph W. Kelly, were selected by the Board of Directors and are officers of
the Company. All properly executed proxies returned in time to be counted at
the Annual Meeting will be voted. Any stockholder giving a proxy has the right
to withhold authority to vote for any individual nominee to the Board of
Directors by writing that nominee's name in the space provided on the proxy.
In addition to the election of three Class I Directors, the stockholders will
consider and vote upon a proposal to amend the Company's Certificate of
Incorporation and to ratify the selection of auditors, all as further
described in this Proxy Statement. ALL PROXIES WILL BE VOTED IN ACCORDANCE
WITH THE STOCKHOLDERS' INSTRUCTIONS, AND IF NO CHOICE IS SPECIFIED, THE
ENCLOSED PROXY CARD (OR ANY SIGNED AND DATED COPY THEREOF) WILL BE VOTED IN
FAVOR OF THE MATTERS SET FORTH IN THE ACCOMPANYING NOTICE OF ANNUAL MEETING.
The Board of Directors knows of no other matter to be presented at the
Annual Meeting. If any other matter should be presented at the meeting upon
which a vote may properly be taken, shares represented by all proxies received
by the Board of Directors will be voted with respect thereto in accordance
with the judgment of the persons named as attorneys in the proxies.
2
<PAGE>
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of the Record Date by: (i) each
person who is known by the Company to own beneficially more than 5% of the
outstanding shares of Common Stock; (ii) each director or nominee for director
of the Company; (iii) each executive officer of the Company named in the
Summary Compensation Table set forth below; and (iv) all directors, nominees
for director and executive officers of the Company as a group.
<TABLE>
<CAPTION>
AMOUNT AND
NAME AND ADDRESS NATURE
OF BENEFICIAL OWNER OF OWNERSHIP(1) PERCENTAGE OF CLASS(2)
------------------- --------------- ----------------------
<S> <C> <C>
Ardsley Advisory Partners(3)......... 931,500 [5.41]%
646 Steamboat Road
Greenwich, CT 06830
Patricof Managed Funds(4)............ 1,076,598 [6.25]
445 Park Avenue
New York, NY 10022
Putnam Investments, Inc.(5).......... 1,801,481 [10.46]
One Post Office Square
Boston, MA 02109
Patrick J. Sullivan(6)............... 162,519 *
Joseph W. Kelly(7)................... 12,500 *
Daniel J. Levangie(8)................ 16,237 *
Ted S. Geiselman(9).................. 47,591 *
Michael F. Adams(10)................. 10,000 *
Frederick R. Blume(11)............... 603,244 [3.50]
Guy de Chazal(12).................... 8,250 *
Janet G. Effland(13)................. 1,084,848 [6.29]
Franklin J. Iris(14)................. 26,436 *
Edwin M. Kania, Jr.(15).............. 52,248 *
C. William McDaniel(16).............. 36,941 *
Monroe Trout, M.D.(17)............... 33,493
All directors, nominees for director
and executive officers as a group
(16 persons)(18).................... 2,157,279 [12.53]
</TABLE>
- --------
*Less than one percent of the outstanding Common Stock.
(1) The persons named in the table have sole voting and investment power with
respect to all shares shown as beneficially owned by them, except as noted
in the footnotes below.
(2) Applicable percentage ownership as of the Record Date is based upon
[17,230,736] shares of Common Stock outstanding. Beneficial ownership is
determined in accordance with the rules of the Securities and Exchange
Commission and includes voting and investment power with respect to
shares. Shares of Common Stock subject to options currently exercisable or
exercisable within 60 days of the Record Date are deemed outstanding for
computing the percentage ownership of the person holding such options, but
are not deemed outstanding for computing the percentage ownership of any
other person.
(3) Information obtained from Schedule 13G filed with the Securities and
Exchange Commission by Ardsley Advisory Partners, a Connecticut general
partnership ("Ardsley"), on February 10, 1997. Ardsley is an investment
adviser registered under Section 203 of the Investment Advisers Act of
1940, as amended (the
3
<PAGE>
"Investment Advisers Act"), and may be deemed to beneficially own the
shares owned by accounts of certain clients, including investment
partnerships for which (i) Ardsley serves as the management company and
(ii) a general partnership comprised of the partners that comprise Ardsley
serves as general partner (the "Discretionary Accounts"). Mr. Philip J.
Hempleman, the managing general partner of Ardsley, may be deemed to have
the shared power to vote or direct the vote of, and the shared power to
dispose or direct the disposition of, the shares held by the Discretionary
Accounts.
(4) Consists of 542,385 shares held by APA Excelsior IV, L.P., 95,715 shares
held by APA Excelsior IV/Offshore, L.P., and 438,498 shares held by
APA/Fostin Pennsylvania Venture Capital Fund.
(5) Information obtained from Schedule 13G filed by Putnam Investments, Inc.
with the Securities and Exchange Commission on or about March 7, 1997.
Includes 1,483,764 shares beneficially owned by Putnam Investment
Management, Inc. and 317,717 shares beneficially owned by The Putnam
Advisory Company, Inc. Putnam Investments, Inc., a wholly-owned subsidiary
of Marsh & McLellan Companies, Inc., wholly owns two investment advisers
registered under Section 203 the Investment Advisers Act: Putnam
Investment Management, Inc. and The Putnam Advisor Company, Inc. The
Putnam Advisory Company, Inc. is an institutional investment advisor.
(6) Includes 7,333 shares issuable pursuant to presently exercisable stock
options. Excludes 365,487 shares issuable pursuant to stock options that
are not presently exercisable.
(7) Includes 2,500 shares issuable pursuant to presently exercisable stock
options. Excludes 183,500 shares issuable pursuant to stock options that
are not presently exercisable.
(8) Includes 11,047 shares issuable pursuant to presently exercisable stock
options. Excludes 144,045 shares issuable pursuant to stock options that
are not presently exercisable.
(9) Includes 2,500 shares issuable pursuant to presently exercisable stock
options. Excludes 119,828 shares issuable pursuant to stock options that
are not presently exercisable.
(10) Includes 10,000 shares issuable pursuant to presently exercisable stock
options. Excludes 62,000 shares issuable pursuant to stock options that
are not presently exercisable.
(11) Includes 404,876 shares held by American Healthcare Fund, 176,813 shares
held by American Healthcare Fund II, L.P. and 7,911 shares held by
Capital Health Management, the general partner of American Healthcare
Fund, L.P., over which Mr. Blume may be deemed to share voting and
investment power. Mr. Blume disclaims beneficial ownership of such shares
except to the extent of his pecuniary interest therein. Also includes
8,250 shares issuable pursuant to presently exercisable stock options.
Excludes 8,750 shares issuable pursuant to stock options that are not
presently exercisable.
(12) Mr. de Chazal is a director and President of Morgan Stanley Venture
Capital II, Inc., the managing general partner of Morgan Stanley Venture
Partners II, L.P. which is the general partner of Morgan Stanley Venture
Capital Fund II, L.P., Morgan Stanley Venture Capital Fund II, C.V. and
Morgan Stanley Venture Investors, L.P. Mr. de Chazal disclaims beneficial
ownership of such shares except to the extent of his pecuniary interest
therein. Consists of 8,250 shares issuable pursuant to presently
exercisable stock options. Excludes 8,750 shares issuable pursuant to
stock options that are not presently exercisable.
(13) Consists of 542,385 shares held by APA Excelsior IV, L.P., 95,715 shares
held by APA Excelsior IV/Offshore, L.P., and 438,498 shares held by
APA/Fostin Pennsylvania Venture Capital Fund over which Ms. Effland the
may be deemed to share voting and investment power. Ms. Effland disclaims
beneficial ownership of such shares except to the extent of her
proportionate pecuniary interest therein. Also includes 8,250 shares
issuable pursuant to presently exercisable stock options. Excludes 8,750
shares issuable pursuant to stock options that are not presently
exercisable.
(14) Includes 23,251 shares issuable pursuant to presently exercisable stock
options. Excludes 13,749 shares issuable pursuant to stock options that
are not presently exercisable.
4
<PAGE>
(15) Includes 38,189 shares held by Morgan, Holland Fund, L.P. over which Mr.
Kania may be deemed to share voting and investment power. Mr. Kania
disclaims beneficial ownership of such shares except to the extent of his
proportionate pecuniary interest therein. Includes 8,250 shares issuable
pursuant to presently exercisable stock options. Excludes 8,750 shares
issuable pursuant to stock options that are not presently exercisable.
(16) Includes 15,750 shares issuable pursuant to presently exercisable stock
options. Excludes 8,750 shares issuable pursuant to stock options that
are not presently exercisable.
(17) Consists of 31,576 shares held by the Trout Family Trust. Includes 1,917
shares issuable pursuant to presently exercisable stock options. Excludes
13,749 shares issuable pursuant to stock options that are not presently
exercisable.
(18) Includes 140,965 shares issuable pursuant to presently exercisable stock
options.
PROPOSAL 1
ELECTION OF DIRECTORS
The Board of Directors is currently fixed at nine members. The Company's
Certificate of Incorporation divides the Company's Board of Directors into
three classes. The members of each class of directors serve for staggered
three-year terms.
Ms. Janet G. Effland and Messrs. C. William McDaniel and Patrick J. Sullivan
are Class I directors whose terms expire at this Annual Meeting of
Stockholders. The Board is also composed of (i) three Class II directors
(Messrs. Frederick C. Blume, Franklin J. Iris and Edwin M. Kania, Jr.), whose
terms expire upon the election and qualification of directors at the Annual
Meeting of Stockholders to be held in 1998 and (ii) two Class III directors
(Messrs. Guy de Chazal and Monroe Trout, M.D.), whose terms expire upon the
election and qualification of directors at the Annual Meeting of Stockholders
to be held in 1999. One directorship in Class III is currently vacant. Any
vacancy in the Board of Directors may be filled by the directors or the
stockholders pursuant to the Company's Certificate of Incorporation and
Amended and Restated Bylaws.
Three Class I Directors will be elected at this Annual Meeting of
Stockholders for a term of three years. The Class I nominees, Ms. Effland and
Messrs. McDaniel and Sullivan are each currently serving as Class I Directors
of the Company. Shares represented by all proxies received by the Board of
Directors and not so marked as to withhold authority to vote for the nominees
will be voted FOR the election of all three nominees, to hold office until the
Annual Meeting of Stockholders to be held in 2000 or until their respective
successors are duly elected and qualified. All three of the nominees have
indicated their willingness to serve, if elected; however, if any nominee
should be unable or unwilling to serve, the proxies may vote for the election
of a substitute nominee designated by the Board of Directors.
5
<PAGE>
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE "FOR" THE NOMINEES LISTED BELOW.
The following table sets forth for each nominee to be elected at the Annual
Meeting and for each director whose term of office will extend beyond the
Annual Meeting, the year each such nominee or director was first elected a
director, the positions currently held by each nominee or director with the
Company, the year each nominee's or director's term will expire and the class
of director of each nominee or director:
<TABLE>
<CAPTION>
NOMINEE'S OR DIRECTOR'S
NAME AND YEAR
NOMINEE OR DIRECTOR POSITION(S) HELD YEAR TERM
FIRST BECAME A DIRECTOR WITH THE COMPANY WILL EXPIRE CLASS OF DIRECTOR
- ----------------------- -------------------------- ----------- -----------------
<S> <C> <C> <C>
NOMINEES:
Janet G. Effland
(1995) Director 1997 I
C. William McDaniel
(1987) Director 1997 I
Patrick J. Sullivan President, Chief Executive 1997 I
(1994) Officer and Director
CONTINUING DIRECTORS:
Frederick R. Blume
(1989) Director 1998 II
Franklin J. Iris
(1989) Director 1998 II
Edwin M. Kania, Jr.
(1989) Director 1998 II
Guy de Chazal (1995) Director 1999 III
Monroe Trout, M.D.
(1993) Director 1999 III
</TABLE>
OCCUPATIONS OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth for each Class I nominee to be elected at the
Annual Meeting, the current Class II Directors and Class III Directors who
will continue to serve as directors beyond the Annual Meeting, and the
executive officers of the Company, their ages and present positions with the
Company as of the date of the Annual Meeting:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Patrick J. Sullivan..... 45 President, Chief Executive Officer and Director
Joseph W. Kelly......... 52 Vice President, Finance, Chief Financial Officer,
Treasurer and Secretary
Daniel J. Levangie...... 46 Vice President of Sales
Ted S. Geiselman........ 41 Vice President of Engineering and Operations
Michael F. Adams........ 40 Vice President of Regulatory Affairs
David J. Zahniser,
Ph.D................... 45 Vice President of Scientific Affairs
Victoria S. Robinson.... 39 Vice President of Service Operations
Robert J. Silverman..... 37 Vice President of Marketing
James Linder, M.D....... 42 Medical Director
Frederick R. Blume(1)... 54 Director
Guy de Chazal(2)........ 49 Director
Janet G. Effland(1)..... 48 Director
Franklin J. Iris(2)..... 66 Director
Edwin M. Kania, Jr...... 39 Director
C. William McDaniel(2).. 56 Director
Monroe Trout, M.D.(1)... 65 Director
</TABLE>
- --------
(1) Member of Compensation Committee.
(2) Member of Audit Committee.
6
<PAGE>
DIRECTORS TO BE ELECTED AT THE ANNUAL MEETING
Janet G. Effland became a director of the Company in 1995. Since 1988, Ms.
Effland has served as a Vice President of Patricof & Co. Ventures, Inc., a
venture capital firm. Prior to joining Patricof & Co. Ventures, Inc., Ms.
Effland was the Managing Director of a portfolio of United States investments
for CIN Investment Company. While with CIN Investment Company, she was
President and Chief Executive Officer of a portfolio company which provides
software for inventory control and warehouse management. Ms. Effland is a
member of the Boards of Directors of Urologix, Inc. and several privately-held
companies.
C. William McDaniel became a director of the Company in April 1987 and
served as a consultant to the Company from March 1995 to February 1997. Mr.
McDaniel served as a consultant to and a director of CP Ventures, Inc., a
venture capital firm, from April 1995 to April 1996 and June 1996,
respectively. From 1987 to March 1995, Mr. McDaniel was the President and a
director of CP Ventures, Inc. He is a director of Natural MicroSystems Corp.,
a corporation with core enabling technology products for the call processing
and mixed media market.
Patrick J. Sullivan has served as President and Chief Executive Officer and
as a director of the Company since March 1994. From January 1991 to March
1994, Mr. Sullivan served as Vice President of Sales and Marketing. Prior to
joining the Company, Mr. Sullivan was employed in several marketing positions
for five years by Abbott Laboratories, a diversified health care company.
Prior to that, Mr. Sullivan was a consultant with McKinsey and Company, an
international management consulting firm. Mr. Sullivan is a graduate of the
United States Naval Academy and received an M.B.A. from Harvard University.
DIRECTORS WHOSE TERMS EXTEND BEYOND THE MEETING
Frederick R. Blume became a director of the Company in 1989. Since 1985, Mr.
Blume has been a General Partner of Capital Health Management and Capital
Health Venture Partners, venture capital firms which manage American
Healthcare Fund and American Healthcare Fund II, L.P., respectively. Prior to
founding Capital Health Venture Partners, Mr. Blume served as a Managing
Director of PaineWebber Incorporated and as a Vice President of Kidder,
Peabody & Co., Incorporated. He is also a part-time member of the faculty of
the Carroll School of Management of Boston College and serves as a director of
US Servis, Inc., a health provider management service company, and Washington
National Corporation, an insurance company.
Guy de Chazal became a director of the Company in 1995. Mr. de Chazal is a
Managing Director of Morgan Stanley & Co., Incorporated ("Morgan Stanley"), a
director and President of Morgan Stanley Venture Capital II, Inc., which is
the managing general partner of Morgan Stanley Venture Partners II, L.P., the
general partner of Morgan Stanley Venture Investors, L.P., Morgan Stanley
Venture Capital Fund II, L.P. and Morgan Stanley Venture Capital Fund II,
C.V., and is a general partner of Morgan Stanley Venture Partners II, L.P. He
joined Morgan Stanley, an investment banking firm, in 1986. Prior to joining
Morgan Stanley, Mr. de Chazal was a Vice President of Citicorp Venture Capital
from 1981 through 1985. From 1976 to 1981, he was a consultant with McKinsey &
Co. He is also a director of PageMart Inc., PageMart Wireless, Inc., and
several private companies.
Franklin J. Iris became a director of the Company in 1989. Since 1986, Mr.
Iris has served as the President of Iris and Associates, a firm providing
investment consulting services for venture capital and emerging growth
companies in the medical industry. He serves on the board of a number of
privately-held health care companies and institutions and also on the board of
a publicly-held company, Photon Technology International, Inc. Mr. Iris was
formerly a senior executive at Becton Dickinson and Company where, at various
times, he served as Group President, President of the Clay Adams Division and
Corporate Controller.
7
<PAGE>
Edwin M. Kania, Jr. became a director of the Company in 1989. Since 1985,
Mr. Kania has been a Special Limited Partner of Morgan, Holland Partners,
L.P., which is the General Partner of Morgan, Holland Fund, L.P., a venture
capital fund. Mr. Kania also serves as a General Partner of Morgan, Holland
Fund II, L.P., a venture fund organized in 1988, and as Managing General
Partner of OneLiberty Fund III, L.P., a venture fund organized in 1995. Mr.
Kania is a director of Anesta Corp., a pharmaceutical company, and PerSeptive
Biosystems, Inc., a supplier to the pharmaceutical and biotechnology
industries.
Monroe E. Trout, M.D., became a director of the Company in 1993. Following
his retirement from American Healthcare Systems ("AmHS"), a major national
consortium of more than 1,000 hospitals, in January 1995, Dr. Trout was named
Chairman Emeritus of AmHS. Prior to his retirement, from 1986 to January 1995,
Dr. Trout held various positions with AmHS, including Chairman, Chief
Executive Officer and President. Prior to his employment at AmHS, Dr. Trout
was a senior vice president and a member of the Board of Directors of Sterling
Drug, Inc. Dr. Trout serves as a director of Baxter International, Inc., The
West Company, Incorporated and SAIC.
EXECUTIVE OFFICERS
Joseph W. Kelly joined the Company in November 1995 as Vice President, Chief
Financial Officer, Treasurer and Secretary. From 1984 through March 1995, Mr.
Kelly held a variety of positions including Chairman, Chief Executive Officer
and Chief Financial Officer of Crop Genetics International, a publicly held
biotechnology company. From 1966 to 1983, Mr. Kelly held various positions,
including Partner, with Deloitte Haskins & Sells (now Deloitte & Touche), an
international consulting and accounting firm. Mr. Kelly is a Certified Public
Accountant and received his B.B.A. from Niagara University.
Daniel J. Levangie joined the Company in June 1992 as Director of Sales,
North America. From March 1994 to October 1996, Mr. Levangie served as Vice
President of Sales and Marketing and since October 1996, has served as Vice
President of Sales. Prior to joining the Company, Mr. Levangie held a variety
of sales and marketing positions with Abbott Laboratories, a diversified
health care company, from 1975 through 1992. Mr. Levangie received a B.S.
degree in Pharmacy from the College of Pharmacy & Allied Health Sciences of
Northeastern University.
Ted S. Geiselman joined the Company in October 1993 as Vice President of
Engineering. In April 1994, Mr. Geiselman assumed responsibility for
manufacturing operations. Mr. Geiselman was the Director of Instrument
Systems/Technology Management at Baxter Diagnostics, a medical diagnostic
company, from March 1991 through October 1993. Mr. Geiselman received a B.S.
in Mechanical Engineering from Pennsylvania State University.
Michael F. Adams joined the Company as Vice President of Regulatory Affairs
in November 1994. Mr. Adams held a variety of positions for the USCI Division
of C.R. Bard, a medical device manufacturer, from February 1991 through
November 1994, most recently as Vice President, Regulatory Affairs-
Interventional Cardiology. From 1986 to 1991, Mr. Adams was the Manager,
Regulatory Affairs and Quality Assurance for the Sterimatics Division of
Millipore Corporation, a biotechnology company. Mr. Adams is a Certified
Regulatory Affairs Professional and holds a B.S. degree in Applied Chemistry
from the University of Massachusetts-Lowell.
David J. Zahniser, Ph.D., joined the Company in February 1989 as Scientific
Director. In April 1993 he was appointed Vice President of Scientific Affairs.
Prior to joining the Company, Dr. Zahniser was Associate
8
<PAGE>
Director of the Image Analysis Laboratory at Tufts University Medical Center,
from 1980 through 1989. Dr. Zahniser's research centered around the management
and development of biomedical image analysis techniques. Dr. Zahniser has
published over 50 articles covering cytology preparation and image analysis.
Dr. Zahniser received a Ph.D. in Biophysics at the University of Nijmegan in
the Netherlands. His thesis topic was "The Development of a Fully Automatic
System for the Prescreening of Cervical Smears: BioPEPR." This work involved
both improved preparation technology and computer imaging. Dr. Zahniser
received a B.S. and an M.S. in Physics from the Massachusetts Institute of
Technology.
Victoria S. Robinson joined the Company in May 1996 as Vice President of
Service Operations. Prior to joining the Company, Ms. Robinson served as Vice
President of Business Development for Occupational Health and Rehabilitation
Inc., a health care company from September 1994 to May 1996. Prior to that,
she served as Director of Marketing and Operations of Cytyc from June 1991 to
March 1994. Ms. Robinson received a B.S. from University of Texas and an
M.B.A. from Harvard University.
Robert J. Silverman joined the Company in October 1996 as Vice President of
Marketing. Prior to joining the Company, Mr. Silverman served as Vice
President of Marketing for Pasteur-Marieux-Connaught, Inc., a pharmaceutical
company, from August 1994 until September 1996. From May 1988 to July 1994, he
held a variety of positions for the Pharmaceutical Products Division of Abbott
Laboratories, most recently as Director, New Product Development. Mr.
Silverman has also been a consultant with Bain and Company, Inc., and a sales
representative for the Upjohn Company. Mr. Silverman is a graduate of the
University of Michigan College of Pharmacy, and he received an M.B.A. from
Northwestern University.
James Linder, M.D., joined the Company as Medical Director in March 1996 and
has served as a consultant to the Company from December 1995 to the present.
Since 1995, Dr. Linder has served as Associate Dean at the University of
Nebraska College of Medicine. From 1990 to 1995, Dr. Linder was a Professor
and Vice-Chair of the Department of Pathology at the University of Nebraska
and from 1983 to 1992, he served as the University's Director of
Cytopathology. He has published over 100 scientific articles and is the author
of two textbooks. He serves on the editorial boards of seven scientific
journals and is a member of the Board of Directors of the American Society of
Clinical Pathologists. Dr. Linder received his M.D. from the University of
Nebraska Medical Center and completed his post-degree training in Pathology at
Duke University Medical Center and the University of Nebraska Medical Center.
MEETINGS OF THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors met seven times during the fiscal year ended December
31, 1996. The Board of Directors has a standing Audit Committee and a standing
Compensation Committee. The Audit Committee, which oversees the accounting,
financial functions and regulatory affairs of the Company, met five times
during 1996. Messrs. de Chazal, Iris and McDaniel are the current members of
the Audit Committee. The Compensation Committee of the Company, which
determines the compensation of the Company's senior management and administers
the Company's stock plans, met five times during 1996. Mr. Blume, Ms. Effland
and Dr. Trout are the current members of the Compensation Committee. The Board
of Directors does not currently have a standing Nominating Committee. During
the year ended December 31, 1996, each of the Company's directors attended at
least 75 percent of the total number of meetings of the Board of Directors and
all committees of the Board of Directors on which he or she served.
9
<PAGE>
COMPENSATION AND OTHER INFORMATION CONCERNING DIRECTORS AND OFFICERS
EXECUTIVE COMPENSATION SUMMARY
The following table sets forth the annual and long-term compensation of the
Company's Chief Executive Officer and each of the Company's four other most
highly compensated executive officers (collectively, the "Named Executive
Officers") for fiscal years ended December 31, 1996, 1995 and 1994.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL
COMPENSATION AWARDS(1)
------------------ -------------
SECURITIES
UNDERLYING
OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) (# OF SHARES) COMPENSATION
- --------------------------- ---- --------- -------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Patrick J. Sullivan.......... 1996 $157,500 $80,000 40,000
President and Chief
Executive Officer 1995 150,000 45,000 158,276 --
1994 143,383 35,000 327,000 --
Joseph W. Kelly(2)........... 1996 140,000 50,000 30,000
Vice President, Chief 1995 22,975 20,000 195,000 25,000(3)
Financial Officer, Treasurer
and Secretary
Daniel J. Levangie........... 1996 137,900 40,000 30,000
Vice President of Sales 1995 125,000 30,000 93,545 --
1994 121,281 27,000 63,500 --
Ted S. Geiselman............. 1996 127,500 50,000 30,000
Vice President of
Engineering and 1995 120,000 20,000 43,910 --
Operations 1994 116,666 27,000 82,000 --
Michael F. Adams(4).......... 1996 113,750 30,000 60,000 --
Vice President of Regulatory
Affairs 1995 110,000 15,000 0 --
1994 14,666 5,000 20,000
</TABLE>
- --------
(1) The Company did not grant any restricted stock awards or stock
appreciation rights or make any long term incentive plan payouts during
the fiscal years ended December 31, 1996, 1995 and 1994.
(2) Mr. Kelly commenced employment with the Company in November 1995.
(3) Represents payment made by the Company for reimbursement of moving and
relocation expenses.
(4) Mr. Adams commenced employment with the Company in November 1994.
10
<PAGE>
OPTIONS GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information concerning grants of
stock options pursuant to the Company's 1995 Stock Plan to the Named Executive
Officers during the fiscal year ended December 31, 1996.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------
POTENTIAL REALIZABLE
NUMBER OF VALUE AT ASSUMED ANNUAL
SECURITIES PERCENT OF EXERCISE RATES OF STOCK
UNDERLYING TOTAL OPTIONS OR PRICE APPRECIATION
OPTION GRANTED TO BASE FOR OPTION TERM(4)
GRANTED EMPLOYEES IN PRICE(3) EXPIRATION -----------------------
NAME (#) FISCAL YEAR ($/SH) DATE 5%($) 10%($)
---- ---------- ------------- -------- ---------- -----------------------
<S> <C> <C> <C> <C> <C> <C>
Patrick J. Sullivan(1).. 40,000 7.65% $27.00 12/31/06 $ 679,206 $ 1,721,242
Joseph W. Kelly(1)...... 30,000 5.74 27.00 12/31/06 509,405 1,290,931
Daniel J. Levangie(1)... 30,000 5.74 27.00 12/31/06 509,405 1,290,931
Ted S. Geiselman(1)..... 30,000 5.74 27.00 12/31/06 509,405 1,290,931
Michael F. Adams(2)..... 50,000 9.57 22.13 5/01/06 695,872 1,763,476
Michael F. Adams(2)..... 10,000 1.91 13.38 9/11/06 84,146 213,243
</TABLE>
- --------
(1) The options, which were granted under the Company's 1995 Plan, become
exercisable over a four year period, at a rate of 2.084% per month, until
such options are exercisable in full. Options are subject to the
employee's continued employment.
(2) The options, which were granted under the Company's 1995 Plan, became
exercisable over a five year period, at a rate of 20% per year. Options
are subject to the employee's continued employment.
(3) The exercise price per share of each option was determined by the Board of
Directors to be equal to the fair market value per share of Common Stock
on the date of grant.
(4) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based on assumed rates of stock price appreciation of 5% and 10%
compounded annually from the date the respective options were granted to
their expiration date. These assumptions are not intended to forecast
future appreciation of the Company's stock price. The potential realizable
value computation does not take into account federal or state income tax
consequences of option exercises or sales of appreciated stock. This table
does not take into account any appreciation in the price of the Common
Stock since the date of grant.
AGGREGATE OPTION EXERCISES AND YEAR-END VALUES
The following table sets forth certain information with respect to options
to purchase the Company's Common Stock granted to the Named Executive
Officers, including (i) the number of shares of Common Stock purchased upon
exercise of options in the fiscal year ended December 31, 1996; (ii) the net
value realized upon such exercise; (iii) the number of unexercised options
outstanding at December 31, 1996; and (iv) the value of unexercised options at
with exercise prices equal to or less than the market value of the Common
Stock at December 31, 1996 ("In-the-Money").
11
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL
YEAR AND FISCAL-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED,
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
SHARES DECEMBER 31, 1996 DECEMBER 31, 1996 ($)(2)
ACQUIRED ON VALUE ------------------------- -------------------------
NAME EXERCISE (#) REALIZED ($)(1) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ------------ --------------- ------------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C>
Patrick J. Sullivan..... 197,456 $2,757,311 0 372,820 0 $ 8,290,227
Joseph W. Kelly......... 39,000 477,750 0 186,000 0 3,607,500
Daniel J. Levangie...... 50,000 1,108,128 7,547 147,545 $ 185,451 2,918,823
Ted S. Geiselman........ 53,582 963,494 0 122,328 0 2,295,647
Michael F. Adams........ 8,000 172,000 0 72,000 0 597,200
</TABLE>
- --------
(1) Amounts calculated by subtracting the aggregate exercise price of the
options from the market value of the underlying Common Stock on the date
of exercise.
(2) Amounts calculated by subtracting the exercise price of the options from
the market value of the underlying Common Stock using the average of the
closing bid and ask price on the Nasdaq National Market of $25.625 per
share of Common Stock on December 31, 1996 and do not reflect amounts that
may be actually received by the Named Executive Officer upon exercise of
options.
All of the stock options set forth in the table above become fully vested
and immediately exercisable upon a consolidation, merger or sale of
substantially all of the assets of the Company.
STOCK PLANS
1995 Stock Plan. The Company's 1995 Stock Plan (the "1995 Plan") was adopted
by the Board of Directors and approved by the Company's stockholders in
December 1995. The 1995 Plan provides for the issuance of Common Stock
pursuant to the grant to employees of "incentive stock options" ("ISOs")
within the meaning of the Internal Revenue Code of 1986, as amended, (the
"Code") and the grant of non-qualified stock options ("NQSOs"), stock awards
or opportunities to make direct purchases of stock in the Company to
employees, consultants, directors and officers of the Company. The aggregate
number of shares of Common Stock which may be issued pursuant to the 1995 Plan
is 1,000,000 plus, effective as of the first trading day of each calendar year
beginning in 1997, the excess, if any, of (i) the number of shares equal to
five percent of the total number of shares of Common Stock issued and
outstanding as of the close of business on December 31 of the preceding year
or then reserved for issuance upon the exercise or conversion of outstanding
options, warrants or convertible securities, over (ii) the number of shares
then remaining reserved and available for grant under the 1995 Plan, subject
to certain adjustments, provided, however, that in no event shall more than
2,000,000 shares of Common Stock be issued pursuant to incentive stock options
under the 1995 Plan.
The 1995 Plan is administered by the Compensation Committee of the Board of
Directors, which currently consists of three outside directors. Subject to the
provisions of the 1995 Plan, the Compensation Committee has the authority to
select the optionees and determine the terms of the options granted,
including: (i) the number of shares subject to each option, (ii) when the
option becomes exercisable, (iii) the exercise price of the option (which in
the case of an incentive stock option cannot be less than the market price of
the Common Stock as of the date of grant), (iv) the duration of the option and
(v) the time, manner and form of payment upon exercise of an option. An option
is not transferable by the optionholder except by will or by the laws of
descent and distribution. Generally, no incentive stock option may be
exercised more than three months following termination
12
<PAGE>
of employment. However, in the event that termination is due to death or
disability, the option is exercisable for a maximum of 180 days after such
termination. As of December 31, 1996, 470,850 options are outstanding under
the 1995 Plan.
1995 Employee Stock Purchase Plan. The Company's 1995 Employee Stock
Purchase Plan ("the 1995 Purchase Plan") was adopted by the Board of Directors
and approved by the Company's stockholders in December 1995. The 1995 Purchase
Plan provides for the issuance of a maximum of 140,000 shares of Common Stock
pursuant to the exercise of nontransferable options granted to participating
employees.
The 1995 Purchase Plan is administered by the Compensation Committee of the
Board of Directors. All employees of the Company, except employees who own
five percent or more of the Company's stock, whose customary employment is 20
hours or more per week and who were employed by the Company as of December 31,
1995 or who have completed at least 90 days of employment are eligible to
participate in the 1995 Purchase Plan. Employees who, immediately after the
option was granted, would be treated as owning five percent or more of the
Company's Common Stock and directors who are not employees of the Company may
not participate in the 1995 Purchase Plan. To participate in the 1995 Purchase
Plan, an employee must authorize the Company to deduct an amount (not less
than one percent nor more than ten percent of a participant's total cash
compensation) from his or her pay during six-month periods commencing on
January 1 and July 1 of each year (each a "Payment Period"), but in no case
shall an employee be entitled to purchase more than 300 shares in any Payment
Period. The exercise price for the option for each Payment Period is 85% of
the lesser of the average market price of the Common Stock on the first or
last business day of the Payment Period. If an employee is not a participant
on the last day of the Payment Period, such employee is not entitled to shares
pursuant to the 1995 Purchase Plan, and the amount of his or her accumulated
payroll deductions will be refunded. An employee's rights under the 1995
Purchase Plan terminate upon his or her voluntary withdrawal from the plan at
any time or upon termination of employment. As of December 31, 1996, 6,022
shares of Common Stock have been issued under the 1995 Purchase Plan.
1995 Non-Employee Director Stock Option Plan. The Company's 1995 Non-
Employee Director Stock Option Plan (the "1995 Director Option Plan") was
adopted by the Board of Directors and approved by the Company's stockholders
in December 1995. The 1995 Director Option Plan, administered by the
Compensation Committee of the Board of Directors, provides for the grant of
options to purchase a maximum of 250,000 shares of Common Stock of the Company
to non-employee directors of the Company.
Under the 1995 Director Option Plan, each director who is not an employee or
officer of the Company who serves on the Board on January 1, 1996 or is first
elected to the Board on or after January 1, 1996, receives an automatic one
time initial grant of an option vesting over three years to purchase 15,000
shares of Common Stock ("Initial Grant"); and each director who is not an
employee or officer of the Company and who has only expired options
outstanding on January 1 receives an automatic grant of an option vesting over
three years to purchase an additional 15,000 shares of Common Stock on January
1 ("Recurring Grant"). All options granted under the 1995 Director Option Plan
have an exercise price equal to the fair market value of the Common Stock on
the date of grant and become exercisable in twelve equal installments of 1,250
shares of Common Stock on the last day of each calendar quarter, provided that
the director has continuously served as a member of the Board through such
date. Options may not be assigned or transferred except by will or by the laws
of descent and distribution or pursuant to a domestic relations order and are
exercisable to the extent vested only while the optionee is serving as a
director of the Company or within 90 days after the optionee ceases to serve
as a director of the Company (except that if a director dies or becomes
disabled while he or she is serving as a director of the Company, the option
automatically becomes fully vested and is exercisable until the scheduled
expiration date of the option). In
13
<PAGE>
January 1996, the Company granted options to purchase an aggregate of 105,000
shares of Common Stock to seven non-employee directors under the 1995 Director
Option Plan at an exercise price of $16.00 per share. Other than as described
above, no options have been granted to date under the 1995 Director Option
Plan.
1989 Stock Plan. The Company's 1989 Stock Plan (the "1989 Plan") was adopted
by the Board of Directors and by the Company's stockholders in July 1989. The
1989 Plan is administered by the Compensation Committee of the Board of
Directors, and provides for the accelerated vesting of options if the Company
is to be consolidated with or acquired by another entity in a merger or sale
of all or substantially all of the Company's assets. As of December 31, 1996,
1,133,676 options were outstanding under the 1989 Plan. The Board of Directors
voted that no further options be granted under the 1989 Plan after the closing
of the Company's initial public offering.
1988 Stock Option Plan. The Company's 1988 Stock Option Plan (the "1988
Plan") was adopted by the Board of Directors and by the Company's stockholders
in August 1988. On July 6, 1989, the Board terminated granting further options
under the 1988 Plan. There are no options outstanding under the 1988 Plan. The
authorized shares thereunder were aggregated with the authorized shares under
the 1989 Plan.
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
THE FOLLOWING DISCUSSION OF UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF
THE ISSUANCE AND EXERCISE OF OPTIONS GRANTED UNDER THE 1995 PLAN, THE 1995
PURCHASE PLAN, THE 1995 DIRECTOR OPTION PLAN, THE 1989 PLAN AND THE 1988 PLAN
AND AWARDS AND PURCHASES GRANTED UNDER THE 1995 PLAN IS BASED UPON THE
PROVISIONS OF THE CODE AS IN EFFECT ON THE DATE OF THIS PROXY STATEMENT,
CURRENT REGULATIONS, AND EXISTING ADMINISTRATIVE RULINGS OF THE INTERNAL
REVENUE SERVICE. IT IS NOT INTENDED TO BE A COMPLETE DISCUSSION OF ALL OF THE
FEDERAL INCOME TAX CONSEQUENCES OF THESE PLANS OR OF THE REQUIREMENTS THAT
MUST BE MET IN ORDER TO QUALIFY FOR THE DESCRIBED TAX TREATMENT.
The following general rules are applicable under current United States
federal income tax law to ISOs granted under the 1995 Plan, the 1989 Plan and
the 1988 Plan:
1. In general, no taxable income results to the optionee upon the grant of
an ISO or upon the issuance of shares to him or her upon the exercise of the
ISO, and no federal income tax deduction is allowed to the Company upon either
the grant or exercise of an ISO.
2. If shares acquired upon exercise of an ISO are not disposed of within (i)
two years from the date the ISO was granted or (ii) one year after the date
the shares are issued to the optionee pursuant to the ISO exercise (the
"Holding Periods"), the difference between the amount realized on any
subsequent disposition of the shares and the exercise price will generally be
treated as capital gain or loss to the optionee.
3. If shares acquired upon exercise of an ISO are disposed of on or before
the expiration of one or both of the requisite Holding Periods (a
"Disqualifying Disposition"), then in most cases the lesser of (i) any excess
of the fair market value of the shares at the time of exercise of the ISO over
the exercise price or (ii) the actual gain on disposition, will be treated as
compensation to the optionee and will be taxed as ordinary income in the year
of such disposition.
4. In any year that an optionee recognizes ordinary income on a
Disqualifying Disposition of stock acquired by exercising an ISO, the Company
generally should be entitled to a corresponding deduction for federal income
tax purposes.
14
<PAGE>
5. The difference between the amount realized by the optionee as the result
of a Disqualifying Disposition and the sum of (i) the exercise price and (ii)
the amount of ordinary income recognized under the above rules will be treated
as capital gain or loss.
6. Capital gain or loss recognized by an optionee on a disposition of shares
will be long-term capital gain or loss if the optionee's holding period for
the shares exceeds one year.
7. An optionee may be entitled to exercise an ISO by delivering shares of
the Company's Common Stock to the Company in payment of the exercise price, if
the optionee's ISO agreement so provides. If an optionee exercises an ISO in
such fashion, special rules will apply.
8. In addition to the tax consequences described above, the exercise of ISOs
may result in a further "alternative minimum tax" under the Code. The Code
provides that an "alternative minimum tax" (at a maximum rate of 28%) will be
applied against a taxable base which is equal to "alternative minimum taxable
income," reduced by a statutory exemption. In general, the amount by which the
value of the Common Stock received upon exercise of the ISO exceeds the
exercise price is included in the optionee's alternative minimum taxable
income. A taxpayer is required to pay the higher of his regular tax liability
or the alternative minimum tax. A taxpayer who pays alternative minimum tax
attributable to the exercise of an ISO may be entitled to a tax credit against
his or her regular tax liability in later years.
9. Special rules apply if the Common Stock acquired through the exercise of
an ISO is subject to vesting, or is subject to certain restrictions on resale
under federal securities laws applicable to directors, officers or 10%
stockholders.
The following general rules are applicable under current U.S. federal income
tax law to NQSOs under the 1995 Plan, the 1995 Director Option Plan, the 1989
Plan and the 1988 Plan:
1. The optionee generally does not recognize any taxable income upon the
grant of a NQSO, and the Company is not allowed a federal income tax deduction
by reason of such grant.
2. The optionee generally will recognize ordinary income at the time of
exercise of the NQSO in an amount equal to the excess, if any, of the fair
market value of the shares on the date of exercise over the exercise price.
The Company may be required to withhold income tax on this amount.
3. When the optionee sells the shares acquired through the exercise of a
NQSO, he or she generally will recognize a capital gain or loss in an amount
equal to the difference between the amount realized upon the sale of the
shares and his or her basis in the stock (generally, the exercise price plus
the amount taxed to the optionee as ordinary income). If the optionee's
holding period for the shares exceeds one year, such gain or loss will be a
long-term capital gain or loss.
4. The Company generally should be entitled to a federal income tax
deduction when ordinary income is recognized by the optionee.
5. An optionee may be entitled to exercise a NQSO by delivering shares of
the Company's Common Stock to the Company in payment of the exercise price. If
an optionee exercises a NQSO in such fashion, special rules will apply.
6. Special rules apply if the Common Stock acquired through the exercise of
a NQSO is subject to vesting, or is subject to certain restrictions on resale
under federal securities laws applicable to directors, officers or 10%
stockholders.
15
<PAGE>
The following general rules are applicable under current federal income tax
law to Awards and Purchases under the 1995 Plan:
Under current U.S. federal income tax law, persons receiving Common Stock
under the 1995 Plan pursuant to an award of Common Stock or a grant of an
opportunity to purchase Common Stock generally recognize ordinary income equal
to the fair market value of the shares received, reduced by any purchase price
paid. The Company generally should be entitled to a corresponding federal
income tax deduction. When such stock is sold, the seller generally will
recognize capital gain or loss. Special rules apply if the stock acquired is
subject to vesting, or is subject to certain restrictions on resale under
federal securities laws applicable to directors, officers or 10% stockholders.
The following general rules are currently applicable under current U.S.
federal income tax law to options under the 1995 Purchase Plan:
1. The amounts deducted from an employee's pay under the 1995 Purchase Plan
will be included in the employee's compensation subject to federal income tax.
In general, no additional income will be realized by the employee either at
the time options are granted pursuant to the 1995 Purchase Plan or at the time
the employee purchases shares pursuant to the 1995 Purchase Plan.
2. If the employee disposes of shares of Common Stock purchased pursuant to
the 1995 Purchase Plan more than two years after the first business day of the
Payment Period in which the employee acquired the shares, then upon such
disposition the employee will recognize ordinary income in an amount equal to
the lesser of:
(a) the excess, if any, of the fair market value of the shares on the
date of disposition over the amount the employee paid for the shares, or
(b) the excess of the fair market value of the shares on the first
business day of the Payment Period over the option price.
In addition, the employee generally will recognize capital gain or loss in
an amount equal to the difference between the amount realized upon the sale of
shares and the employee's tax basis in the shares (i.e., the amount the
employee paid for the shares plus the amount, if any, taxed as ordinary
income). If the employee's holding period for the shares is more than one
year, such gain or loss will be long-term capital gain or loss.
3. If the employee disposes of shares of Common Stock purchased pursuant to
the 1995 Purchase Plan within two years after the first business day of the
Payment Period in which the employee acquired the shares, then upon
disposition the employee will recognize ordinary income in an amount equal to
the excess, if any, of the fair market value of the shares on the last
business day of the Payment Period over the amount the employee paid for the
shares.
In addition, the employee generally will recognize capital gain or loss in
an amount equal to the difference between the amount realized upon the sale of
shares and the employee's tax basis in the shares (i.e., the amount the
employee paid for the shares plus the amount, if any, taxed as ordinary
income). If the employee's holding period for the shares is more than one
year, such gain or loss will be long-term capital gain or loss.
4. If the two-year holding period is satisfied, the Company will not receive
any deduction for federal income tax purposes with respect to the options or
the shares of Common Stock issued upon their exercise. If the two-year holding
period is not satisfied, the Company generally will be entitled to a federal
income tax deduction in an amount equal to the amount which is considered
ordinary income as a result of such disposition.
16
<PAGE>
OPTION INFORMATION
As of December 31, 1996, the Company had approximately 120 employees and
directors with outstanding option grants under the 1995 Plan, the 1995 Director
Option Plan, the 1989 Plan and/or the 1988 Plan. The following table sets forth
as of December 31, 1996, all options granted pursuant to the 1995 Plan, the
1995 Director Option Plan, the 1989 Plan and 1988 Plan to (i) the Named
Executive Officers, (ii) all current executive officers of the Company as a
group, (iii) all current directors of the Company who are not executive
officers, as a group, and (iv) all employees, including all current officers
who are not executive officers, as a group.
<TABLE>
<CAPTION>
NO. OF OPTIONS
NAME TITLE GRANTED (#)(1)
---- ----- --------------
<S> <C> <C>
Patrick J. Sullivan..... President, Chief Executive Officer and 570,276(2)
Director
Joseph W. Kelly......... Vice President, Finance, Chief Financial 225,000(3)
Officer, Treasurer and Secretary
Daniel J. Levangie...... Vice President of Sales 205,092(4)
Ted S. Geiselman........ Vice President of Engineering and 175,910(5)
Operations
Michael F. Adams........ Vice President of Regulatory Affairs 80,000(6)
Frederick R. Blume...... Director 17,000(7)
Guy de Chazal........... Director 17,000(8)
Janet G. Effland........ Director 17,000(9)
Franklin J. Iris........ Director 37,000(10)
Edwin M. Kania, Jr...... Director 17,000(11)
C. William McDaniel..... Director 54,500(12)
Monroe Trout, M.D. ..... Director 27,000(13)
All current executive officers as a group (9 persons)............... 1,653,824(14)
All current directors who are not executive officers as a group (7 186,500(15)
persons)...........................................................
All employees including all current officers who are not executive
officers as a group................................................ 534,250(16)
</TABLE>
- --------
(1) The options reflected in the table above generally have a ten year term.
(2) Consists of options to purchase (i) 20,000 shares at an exercise price of
$0.50 per share, (ii) 20,000 shares at an exercise price of $0.85 per
share, (iii) 5,000 shares at an exercise price of $1.25 per share, (iv)
327,000 options at an exercise price of $0.625 per share, and (v) 158,276
shares at an exercise price of $0.84 per share, each of which become
exercisable over a five year period vesting at a rate of 20% per year; and
(vi) 40,000 shares at an exercise price of $27.00 per share, which become
exercisable over a four year period vesting monthly at a rate of 2.084% per
month, until such options are exercisable in full.
(3) Consists of options to purchase (i) 195,000 shares at an exercise price of
$2.50 per share, which become exercisable over a five year period vesting
at a rate of 20% per year; and (ii) 30,000 shares at an exercise price of
$27.00 per share, which become exercisable over a four year period vesting
monthly at a rate of 2.084% per month, until such options are exercisable
in full.
(4) Consists of options to purchase (i) 13,047 shares at an exercise price of
$0.85 per share, (ii) 5,000 shares at an exercise price of $1.25 per share,
(iii) 5,000 shares at an exercise price of $1.25 per share, (iv) 58,500
shares at an exercise price of $0.625 per share, (v) 93,545 shares at an
exercise price of $0.84 per share, each of which become exercisable over a
five year period vesting at a rate of 20% per year; and (vi) 30,000 shares
at an exercise price of $27.00 per share, which become exercisable over a
four year period vesting monthly at a rate of 2.084% per month, until such
options are exercisable in full.
(5) Consists of options to purchase (i) 20,000 shares at an exercise price of
$1.25 per share, (ii) 82,000 shares at an exercise price of $0.625 per
share, (iii) 43,910 shares at an exercise price of $0.84 per share, each of
17
<PAGE>
which become exercisable over a five year period vesting at a rate of 20%
per year; and (iv) 30,000 shares at an exercise price of $27.00 per share,
which become exercisable over a four year period vesting monthly at a rate
of 2.084% per month, until such options are exercisable in full.
(6) Consists of options to purchase (i) 20,000 shares at an exercise price of
$0.625 per share, (ii) 50,000 shares at an exercise price of $22.125 per
share, and (iii) 10,000 shares at an exercise price of $13.38 per share,
each of which become exercisable over a five year period vesting at a rate
of 20% per year.
(7) Consists of options to purchase (i) 15,000 shares at an exercise price of
$16.00 per share, which become exercisable in twelve equal installments of
1,250 shares on the last day of each calendar quarter over a three year
period; and (ii) 2,000 shares at an exercise price of $15.00 per share,
which are immediately exercisable.
(8) Consists of options to purchase (i) 15,000 shares at an exercise price of
$16.00 per share, which become exercisable in twelve equal installments of
1,250 shares on the last day of each calendar quarter over a three year
period; and (ii) 2,000 shares at an exercise price of $15.00 per share,
which are immediately exercisable.
(9) Consists of options to purchase (i) 15,000 shares at an exercise price of
$16.00 per share, which become exercisable in twelve equal installments of
1,250 shares on the last day of each calendar quarter over a three year
period; and (ii) 2,000 shares at an exercise price of $15.00 per share,
which are immediately exercisable.
(10) Consists of options to purchase (i) 8,000 shares at an exercise price of
$0.50 per share and (ii) 2,000 shares at an exercise price of $0.84 per
share, each of which is exercisable over a five year period at a rate of
20% per year; (iii) 5,000 shares at an exercise price of $10.00 per share
and (iv) 5,000 at an exercise price of $10.00 per share, each of which is
exercisable over a three year period at a rate of 33.33% per year, until
such options are exercisable in full; (v) 15,000 shares at an exercise
price of $16.00 per share, which become exercisable in twelve equal
installments of 1,250 shares on the last day of each calendar quarter
over a three year period; and (vi) 2,000 shares at an exercise price of
$15.00 per share, which are immediately exercisable.
(11) Consists of options to purchase (i) 15,000 shares at an exercise price of
$16.00 per share, which become exercisable in twelve equal installments
of 1,250 shares on the last day of each calendar quarter over a three
year period; and (ii) 2,000 shares at an exercise price of $15.00 per
share, which are immediately exercisable.
(12) Consists of options to purchase (i) 15,000 shares at an exercise price of
$16.00 per share, which become exercisable over a two year period vesting
quarterly per year; (ii) 15,000 shares at an exercise price of $16.00 per
share, which become exercisable in twelve equal installments of 1,250
shares on the last day of each calendar quarter over a three year period;
and (iii) 2,000 shares at an exercise price of $15.00 per share, which
are immediately exercisable.
(13) Consists of options to purchase (i) 5,000 shares at an exercise price of
$0.84 per share and (ii) 5,000 shares at an exercise price of $10.00 per
share, each of which is exercisable over a three year period at a rate of
33.33% per year, until such options are exercisable in full; (iii) 15,000
shares at an exercise price of $16.00 per share, which become exercisable
in twelve equal installments of 1,250 shares on the last day of each
calendar quarter over a three year period; and (iv) 2,000 shares at an
exercise price of $15.00 per share, which are immediately exercisable.
(14) Includes options to purchase 396,348 shares, which shares have been
exercised at various times and at various exercise prices in 1996.
(15) Includes options to purchase an aggregate 105,000 shares of Common Stock
which have been granted to the non-employee directors under the 1995
Director Option Plan.
(16) Includes options to purchase 472,900 shares granted under the 1995 Plan,
of which no shares have been exercised; options to purchase 1,966,614
shares granted under the 1989 Plan, of which 500,188 shares have been
exercised; and options to purchase 69,110 shares granted under the 1988
Plan, of which 43,600 shares have been exercised.
18
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Pursuant to authority delegated by the Board of Directors, the Compensation
Committee is responsible for the policy and administration of compensation of
the Company's executive officers. The Compensation Committee is also
responsible for the administration of the Company's stock ownership plans
under which option grants and direct stock issuances may be made to executive
officers of the Company. The Compensation Committee is comprised of Mr. Blume,
Ms. Effland and Dr. Trout, none of whom is an employee of the Company. This
report addresses the compensation policies for fiscal year 1996 as they
applied to Mr. Sullivan, in his capacity as President and Chief Executive
Officer of the Company, and other executive officers of the Company.
Overview and Philosophy. The Company uses its compensation program to
achieve the following objectives:
. To provide compensation that attracts, motivates and retains the
talented, high caliber executive officers and employees to achieve the
Company's strategic objectives, as determined by the Board of Directors.
. To align the interest of executive officers with the success of the
Company.
. To align the interest of executive officers with stockholders by
including long-term equity incentives.
. To increase the long-term profitability of the Company and, accordingly,
increase stockholder value.
Compensation under the executive compensation program is comprised of cash
compensation in the form of base salary, annual cash incentive bonuses, and
long-term incentive awards in the form of stock option grants. It is the
Compensation Committee's objective to have a portion of each executive
officer's cash compensation contingent upon the achievement of specific
predetermined corporate objectives as well as upon each executive officer's
own level of performance. In addition, the compensation program is comprised
of various benefits, including medical and insurance plans, the Company's
401(k) Plan, the 1995 Stock Plan and the 1995 Employee Stock Purchase Plan,
which plans are generally available to all employees of the Company.
The principal factors which the Compensation Committee considered with
respect to each executive officer's compensation package for fiscal year 1996
are summarized below. The Compensation Committee may, however, in its
discretion apply different or additional factors in making decisions with
respect to executive compensation in future years.
Base Salary. Compensation levels for each of the Company's executive
officers, including the Chief Executive Officer, are generally set within the
range of salaries that the Compensation Committee believes are paid to
executive officers with comparable qualifications, experience and
responsibilities at similar companies. In setting compensation levels, the
Compensation Committee takes into account such factors as (i) the Company's
past performance and future expectations, (ii) individual performance and
experience and (iii) past salary levels. The Compensation Committee does not
assign relative weights or rankings to these factors, but instead makes a
determination based upon the consideration of all of these factors as well as
the progress made with respect to the Company's long-term goals and
strategies. Generally, salary decisions for the Company's executive officers
are made near the end of each calendar year.
Fiscal 1996 base salaries were determined by the Compensation Committee
after considering the base salary level of the executive officers in prior
years, and taking into account for each executive officer the amount of
19
<PAGE>
base salary as a component of total compensation. Base salary, while reviewed
annually, is only adjusted as deemed necessary by the Compensation Committee
in determining total compensation to each executive officer. Base salary
levels for each of the Company's executive officers, other than the Chief
Executive Officer, were also based in part upon evaluations and
recommendations made by the Chief Executive Officer.
Bonus and Commission Compensation. Bonus compensation for executives is
based on the Company's achievement of predetermined corporate objectives for
the executive's business unit and individual performance, and on a comparison
of the executive's actual performance against his performance objectives.
Bonuses are awarded on an annual basis.
Long Term Incentive Compensation. The Compensation Committee believes that
stock option participation aligns executive officers' interests with those of
the stockholders. In addition, the Compensation Committee believes that equity
ownership by executive officers helps to balance the short term focus of
annual incentive compensation with a longer term view and may help to retain
key executive officers. Long-term incentive compensation, in the form of stock
options, allows the executive officers to share in any appreciation in the
value of the Company's Common Stock. The Committee generally grants options
that become exercisable over a four or five-year period as a means of
encouraging executives to remain with the Company and promote its success. In
fiscal 1996, the Compensation Committee only awarded executives of the Company
stock options with exercise prices equal to the market price of the Common
Stock on the date of grant. As a result, executives will benefit from these
stock option grants only to the extent that the price of the Company's Common
Stock increases and the Company's stockholders have also benefited.
When establishing stock option grant levels, the Compensation Committee
considers general corporate performance, the Chief Executive Officer's
recommendations, level of seniority and experience, existing levels of stock
ownership, previous grants of stock options, vesting schedules of outstanding
options and the current stock price.
It is the standard policy of the Company to grant an initial stock option
grant to all executive officers at the time they commence employment
consistent with the number of options granted to executive officers within and
without the industry at similar levels of seniority. In addition, the
Compensation Committee may from time-to-time make performance-based grants as
it deems appropriate. In making such performance-based grants, the
Compensation Committee considers individual contributions to the Company's
financial, operational and strategic objectives.
Other Benefits. The Company also has various broad-based employee benefit
plans. Executive officers participate in these plans on the same terms as
eligible, non-executive employees, subject to any legal limits on the amounts
that may be contributed or paid to executive officers under these plans. The
Company offers a stock purchase plan, under which employees may purchase
Common Stock at a discount, and a 401(k) plan, which allows employees to
invest in a wide array of funds on a pre-tax basis. The Company also maintains
insurance and other benefit plans for its employees, including executive
officers of the Company.
Chief Executive Officer Compensation. In fiscal year 1996, the Company's
President and Chief Executive Officer, Patrick J. Sullivan, received a base
salary of $157,500, which represents an increase of $7,500 or 5% over his 1995
base salary. The base salary is believed by the Committee to be consistent
with the range of salary levels received by executives in a similar capacity
in companies of comparable size and stage of development. Mr. Sullivan
received bonus compensation of $80,000, which was determined based on
corporate performance and the achievement of various milestones in the
Company's growth and development over the year. In addition, in December 1996,
Mr. Sullivan was granted an additional 40,000 stock options under the 1995
Plan in recognition of the Company's achievements under his leadership.
20
<PAGE>
Tax Deductibility of Executive Compensation. Section 162(m) of the Code
limits the tax deduction to the Company to $1 million for compensation paid to
any of the Named Executive Officers unless certain requirements are met. The
Compensation Committee has considered these requirements and the regulations.
It is the Compensation Committee's present intention that, so long as it is
consistent with its overall compensation objectives, substantially all
executive compensation be deductible for United States federal income tax
purposes. The Compensation Committee believes that any compensation deductions
attributable to options granted under the 1995 Plan currently qualify for an
exception to the requirements of Section 162(m).
Respectfully Submitted by the
Compensation Committee:
Frederick R. Blume
Janet G. Effland
Monroe Trout, M.D.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Compensation Committee consists of Ms. Effland, Mr. Blume, and
Dr. Trout. Mr. Blume is a General Partner of Capital Health Management and
Capital Health Venture Partners, which manage American Healthcare Fund and
American Healthcare Fund II, L.P., stockholders of the Company, respectively.
Ms. Effland is a Vice President of Patricof & Co. Ventures, Inc., a firm
affiliated with certain principal stockholders of the Company.
COMPENSATION OF DIRECTORS
Non-employee directors receive a fee of $1,000 for each meeting of the
Board, $500 for each committee meeting that they attend in person and are
reimbursed for their reasonable out-of-pocket expenses incurred in attending
such meetings. No director who is an employee of the Company will receive
separate compensation for services rendered as a director. Non-employee
directors are also eligible for participation in the Company's 1995 Director
Option Plan.
21
<PAGE>
STOCK PERFORMANCE GRAPH
The following graph compares the percentage change in the cumulative total
stockholder return on the Company's Common Stock during the period from the
Company's initial public offering through December 31, 1996, with the
cumulative total return of the Nasdaq Market Value Index ("Nasdaq Index") and
the Laboratory Analytical Instruments (SIC Code 3826) Index ("SIC Code 3826
Index"). The comparison assumes $100 was invested on March 8, 1996 in the
Company's Common Stock and in each of the foregoing indices and assumes any
dividends were reinvested.
COMPARISON OF CUMULATIVE TOTAL RETURN(1)(2)
<TABLE>
<CAPTION>
MARCH 8, 1996 DECEMBER 31, 1996
<S> <C> <C>
Cytyc Corporation $100.00 $169.00
NASDAQ Index $100.00 $122.00
SIC Code 3826 Index $100.00 $105.00
</TABLE>
- --------
(1) Prior to March 8, 1996 the Company's Common Stock was not publicly traded.
Comparative data is provided only for the period since that date. This
graph is not "soliciting material," is not deemed filed with the
Securities and Exchange Commission and is not to be incorporated by
reference in any filing of the Company under the Securities Act of 1933 or
the Securities Exchange Act of 1934 where made before or after the date
hereof and irrespective of any general incorporation language in any such
filing.
(2) The stock price information shown on the graph is not necessarily
indicative of future price performance. Information used on the graph was
obtained from Research Data, San Francisco, California, a source believed
to be reliable, but the Company is not responsible for any errors or
omissions in such information.
22
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company entered into a two year management consulting agreement with C.
William McDaniel, a director of the Company, commencing March 1, 1995 and
terminating February 28, 1997. Under the consulting agreement, Mr. McDaniel
agreed to perform consulting and advisory services as reasonably requested
from time to time by the Board of Directors. Mr. McDaniel has provided
consulting and advisory services relating to a wide range of issues, including
financing, regulatory and strategic issues. Under the terms of the agreement,
Mr. McDaniel received cash compensation of $8,333.33 per month, and was
granted non-qualified stock options to purchase up to 37,500 shares of the
Company's Common Stock at the price of $0.625 per share under the Company's
1989 Plan. The options vested at a rate of 4,687.50 shares per calendar
quarter.
On February 25, 1997, the Company advanced an aggregate of $85,000 to Robert
Silverman, Vice President of Marketing of the Company, and his spouse, which
is evidenced by a promissory note. The loan carries an 8% interest rate and
must be repaid in full on the earlier of the sale of a house located in
Chester, New Jersey or February 25, 1998. The entire principal amount of
$85,000 and accrued interest are currently outstanding under the promissory
note.
PROPOSAL 2
AMENDMENT OF THE CORPORATION'S CERTIFICATE OF INCORPORATION
By a Board of Directors vote dated February 19, 1997, the Board of Directors
recommended to the stockholders that the Company amend the Company's
Certificate of Incorporation to increase the number of authorized shares of
Common Stock, par value $.01 per share, from 30,000,000 to 60,000,000 shares.
Shares of the Company's Common Stock, including the additional shares proposed
for authorization, do not have preemptive or similar rights. The full text of
the proposed amendment to the Certificate of Incorporation is attached to this
proxy statement as Exhibit A.
As of the Record Date, there were approximately [17,230,736] shares issued
and outstanding and approximately [2,525,942] shares reserved for future
issuance pursuant to outstanding options granted under the Company's stock
plans. If the amendment to the Certificate of Incorporation is approved, the
Board of Directors will have the authority to issue approximately [42,769,264]
additional shares of Common Stock without further stockholder approval. The
Board of Directors believes the authorized number of shares of Common Stock
should be increased to provide sufficient shares for such corporate purposes
as may be determined by the Board of Directors to be necessary or desirable.
These purposes may include, without limitation: entering into collaborative
research and development arrangements with other companies in which Common
Stock or the right to acquire Common Stock are part of the consideration;
facilitating broader ownership of the Company's Common Stock by effecting a
stock split or issuing a stock dividend; raising capital through the sale of
Common Stock; attracting and retaining valuable employees by the issuance of
additional stock options, including additional shares reserved for future
option grants under the Company's existing stock plan; and acquiring other
businesses in exchange for shares of the Company's Common Stock. While the
Company continually evaluates potential acquisitions, the Company has no
present agreements or commitments with respect to any acquisition, nor are any
negotiations regarding any acquisition currently ongoing. The Board of
Directors considers the authorization of additional shares of Common Stock
advisable to ensure prompt availability of shares for issuance should the
occasion arise.
23
<PAGE>
The issuance of additional shares of Common Stock could have the effect of
diluting earnings per shares and book value per share, which could adversely
affect the Company's existing stockholders. In addition, the Company's
authorized but unissued shares of common Stock could be used to make a change
in control of the Company more difficult or costly. Issuing additional shares
of Common Stock could have the effect of diluting stock ownership of the
persons seeking to obtain control of the Company. The Company is not aware,
however, of any pending or threatened efforts to obtain control of the
Company, and the Board of Directors has no current intention to use the
additional shares of Common Stock in order to impede a takeover attempt.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE
AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION.
PROPOSAL 3
RATIFICATION OF SELECTION OF AUDITORS
Subject to ratification by the stockholders, the Board of Directors has
selected the firm of Arthur Andersen LLP, independent certified accountants,
to serve as auditors for the year ending December 31, 1997. It is expected
that a member of the firm of Arthur Andersen LLP will be present at the Annual
Meeting with an opportunity to make a statement if so desired and will be
available to respond to appropriate questions from the Company's stockholders.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A
VOTE "FOR" THE RATIFICATION OF THIS SELECTION.
SECTION 16 REQUIREMENTS
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and holders of more than 10% of the Company's Common
Stock (collectively, the "Reporting Persons") to file with the Securities and
Exchange Commission initial reports of ownership and reports of changes in
ownership of Common Stock of the Company. Such persons are required by
regulations of the Commission to furnish the Company with copies of all such
filings. Based on its review of the copies of such filings received by it with
respect to the fiscal year ended December 31, 1996, the Company believes that
all Reporting Persons complied with all Section 16(a) requirements in the
fiscal year ended December 31, 1996.
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the 1998 Annual
Meeting of Stockholders must be received no later than the close of business
on December 1, 1997 at the Company's principal executive offices in order to
be included in the Company's proxy statement for that meeting. Any such
proposal must comply with the rules and regulations of the Securities and
Exchange Commission.
24
<PAGE>
EXPENSES AND SOLICITATION
All costs of solicitation of proxies will be borne by the Company. In
addition to solicitations by mail, certain of the Company's directors,
officers and regular employees, without additional remuneration, may solicit
proxies in person or by telephone or telegraph. Brokers, custodians and
fiduciaries will be requested to forward proxy soliciting material to the
owners of stock held in their names, and the Company will reimburse them for
their reasonable out-of-pocket costs. Solicitation by officers and employees
of the Company may also be made of some stockholders in person or by mail,
telephone or telegraph following the original solicitation.
Boxborough, Massachusetts
March 31, 1997
25
<PAGE>
EXHIBIT A
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
CYTYC CORPORATION
Cytyc Corporation (the "Corporation"), a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of the Corporation adopted resolutions
proposing and declaring advisable the following amendment to the Third Amended
and Restated Certificate of Incorporation of the Corporation:
RESOLVED: That the first paragraph of Article FOURTH of the Corporation's
Third Amended and Restated Certificate of Incorporation shall be amended to
read in its entirety as follows:
"FOURTH. The total number of shares of all classes of capital stock which
the Corporation shall have authority to issue is 65,000,000 shares,
consisting of 60,000,000 shares of common stock with a par value of $.01
per share (the "Common Stock") and 5,000,000 shares of preferred stock with
a par value of $.01 per share (the "Preferred Stock")."
SECOND: The foregoing amendment to the Third Amended and Restated
Certificate of Incorporation of the Corporation was duly adopted by the
stockholders of the Corporation in accordance with the applicable provisions
of Section 242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment
to be executed by Patrick J. Sullivan, its President, this th day of May,
1997.
_____________________________________
Patrick J. Sullivan, President
26
<PAGE>
- --------------------------------------------------------------------------------
CYTYC CORPORATION
Proxy For Annual Meeting of Stockholders
May 9, 1997
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Patrick J. Sullivan and Joseph W. Kelly and
each or both of them, proxies, with full power of substitution, to vote all
shares of stock of Cytyc Corporation (the "Company") which the undersigned is
entitled to vote at the Annual Meeting of Stockholders of the Company to be held
on Friday, May 9, 1997 at 9:30 A.M. at the Holiday Inn, One Adams Place,
Boxborough, Massachusetts, and at any adjournment thereof, upon matters set
forth in the Notice of Annual Meeting of Stockholders and Proxy Statement dated
March 31, 1996, a copy of which has been received by the undersigned. The
proxies are further authorized to vote, in their discretion, upon such other
business as may properly come before the meeting or any adjournment thereof.
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED, OR, IF NO
DIRECTION IS GIVEN, WILL BE VOTED FOR THE ELECTION OF DIRECTORS AS DESCRIBED IN
ITEM 1 AND FOR THE PROPOSALS IN ITEMS 2, 3 AND 4.
Please mark
votes as in this
example.
/ X /
1. To fix the Board of Directors at eight and to elect a Board of Directors for
the ensuing year:
FOR WITHHELD Nominees: Patrick J. Sullivan, Janet G.
Effland, C. William McDaniel
--------------------------------------------
For all nominees except as noted above
2. To amend the Company's Third Amended and Restated Certificate of
Incorporation increasing from 30,000,000 to 60,000,000 the number of authorized
shares of common Stock, $.01 par value, of the Company.
FOR AGAINST ABSTAIN
3. To ratify the selection of the firm of Arthur Andersen LLP, as independent
public accountants, as auditors for the fiscal year ending December 31, 1997.
FOR AGAINST ABSTAIN
4. To transact such other business as may properly come before the meeting and
any adjournments thereof.
MARK HERE FOR ADDRESS CHANGE
AND NOTE AT LEFT
Please sign exactly as your
name appears hereon. Joint
owners should each sign. When
signing as attorney,
executor, administrator,
trustee or guardian, please
give full title as such.
<TABLE>
<CAPTION>
<S> <C>
Signature:____________________ Date:__________ Signature:____________________ Date:__________
</TABLE>
- --------------------------------------------------------------------------------
