<PAGE>
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
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 Materials
[_] 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:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3)Filing Party:
(4) Date Filed:
<PAGE>
CYTYC CORPORATION
85 Swanson Road
Boxborough, MA 01719
----------------
NOTICE OF ANNUAL MEETING
TO BE HELD ON JUNE 7, 2000
----------------
To the Stockholders of Cytyc Corporation:
Notice is hereby given that the annual meeting of Stockholders (the "Annual
Meeting") of Cytyc Corporation, a Delaware corporation (the "Company"), will
be held at 9:30 a.m., local time, on Wednesday, June 7, 2000, at the Company's
Headquarters located at 85 Swanson Road, Boxborough, Massachusetts 01719, to
consider and act upon the following proposals:
1. To elect three directors to Class I of the Company's Board of
Directors, each to serve for a term of three years or until his or her
successor is elected and qualified.
2. To approve an amendment to the Company's Third Amended and Restated
Certificate of Incorporation increasing from 60,000,000 to 200,000,000 the
number of authorized shares of Common Stock, $.01 par value per share, of
the Company.
3. To ratify and approve the Company's Amended and Restated 1995 Non-
Employee Director Stock Option Plan (the "Plan") which provides that in the
event of the retirement of any non-employee director of the Company, all
outstanding and unvested options granted to such non-employee director
under the Plan shall be immediately and automatically accelerated and
become fully vested and exercisable in full.
4. To ratify the selection of the firm of Arthur Andersen LLP,
independent public accountants, as auditors for the fiscal year ending
December 31, 2000.
5. To transact such other business as may properly come before the Annual
Meeting or any postponements or adjournments thereof.
Only Stockholders of record at the close of business on April 17, 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. To ensure your representation at the Annual 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,
A. Suzanne Meszner-Eltrich
Secretary
Boxborough, Massachusetts
April , 2000
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
----------------
April , 2000
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 Wednesday, June 7, 2000 (the "Annual Meeting") at
9:30 a.m., local time, at the Company's Headquarters located at 85 Swanson
Road, Boxborough, Massachusetts 01719, or at any adjournments or postponements
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,
1999, are being mailed together with this Proxy Statement to all Stockholders
entitled to vote at the Annual Meeting.
The Board of Directors has fixed the close of business on April 17, 2000 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 XXXXXX 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 date of this
proxy statement, above, (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 directors, the 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 directors. Approval of the amendment to
the Third Amended and Restated 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 proposals to amend the Company's Third Amended and
Restated Certificate of Incorporation, to ratify and approve the Amended and
Restated 1995 Non-Employee Director Stock Option Plan, 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 Annual 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. Unless
otherwise indicated, the address for each beneficial owner is c/o Cytyc
Corporation, 85 Swanson Road, Boxborough, MA 01719.
In January 2000, the Company effected a two-for-one stock split in the form
of a stock dividend to stockholders of record of the Company's Common Stock on
January 14, 2000. All share numbers in this table and elsewhere in this Proxy
Statement reflect such stock split.
<TABLE>
<CAPTION>
Amount and Percentage
Name and Address Nature of
of Beneficial Owner of Ownership(1) Class(2)
------------------- --------------- ----------
<S> <C> <C>
Massachusetts Financial Services Company(3)..... 2,173,292 --
500 Boylston Street,
Boston, MA 02116
FMR Corp.(4).................................... 1,509,447 --
82 Devonshire Street,
Boston, MA 02109
RS Investment Management Co. LLC(5)............. 2,214,500 --
388 Market Street, Suite 200
San Francisco, CA 94111
Patrick J. Sullivan(6).......................... 673,087 --
Daniel J. Levangie(7)........................... 217,311 *
Joseph W. Kelly(8).............................. 243,515 *
Ted S. Geiselman(9)............................. 141,173 *
A. Suzanne Meszner-Eltrich(10).................. 24,469 *
Alfred J. Battaglia(11)......................... 2,646 *
Walter E. Boomer(12)............................ 3,655 *
Sally W. Crawford(13)........................... 34,964 *
William G. Little(14)........................... 13,316 *
C. William McDaniel(15)......................... 15,500 *
Anna S. Richo(16)............................... 24,510 *
Monroe E. Trout, M.D.(17)....................... 88,556 *
All directors, nominees for director and
executive officers as a group
(12 persons)(18)............................... 1,482,702 --%
</TABLE>
- --------
* Less than one percent of the outstanding share of 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
XXXXXXX 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 after the Record Date
3
<PAGE>
("presently exercisable stock options") 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/A filed with the Securities and
Exchange Commission by Massachusetts Financial Services Company ("MFS")
on February 8, 2000. Of these shares, MFS has sole power to vote or
direct the vote of 1,849,292 shares and sole power to dispose or to
direct the disposition of all of such shares.
(4) Information obtained from Schedule 13G/A filed with the Securities and
Exchange Commission by FMR Corp. on February 11, 2000. Of these shares,
1,152,140 shares are beneficially owned by Fidelity Management & Research
Company, a wholly owned subsidiary of FMR Corp. and an investment adviser
registered under the Investment Advisers Act of 1940, as amended (the
"Investment Advisers Act"); 285,857 shares are beneficially owned by
Fidelity Management Trust Company, a wholly owned subsidiary of FMR Corp.
and a bank as defined under the Securities Exchange Act of 1934, as
amended; 13,400 shares are beneficially owned by Fidelity International
Limited; and 58,050 shares are beneficially owned by Edward C. Johnson 3d
or in trusts for the benefit of Edward C. Johnson 3d or an Edward C.
Johnson 3d family member for which Edward C. Johnson 3d serves as
trustee. FMR Corp. has the sole power to vote or to direct the vote of
163,007 of such shares and sole power to dispose or to direct the
disposition of all of such shares.
(5) Information obtained from Schedule 13G/A filed with the Securities and
Exchange Commission by RS Investment Management Co. LLC on March 8, 2000.
Of these shares, 1,267,300 shares are beneficially owned by RS Investment
Management, L.P., an investment advisor under the Investment Advisers Act
and of which RS Investment Management Co. LLC is a general partner;
947,200 shares are beneficially owned by RS Investment Management, Inc.,
an investment advisor under the Investment Advisers Act and of which RS
Investment Management Co. LLC is a controlling stockholder; and 934,600
shares are beneficially owned by RS Emerging Growth Fund, an investment
company under the Investment Company Act of 1940, as amended, and of
which RS Investment Management, Inc. is the investment advisor. RS
Investment Management Co. LLC has shared power to vote or direct the vote
of all of such shares and shared power to dispose or to direct the
disposition of all of such shares.
(6) Includes 579 shares of restricted stock awarded as bonus compensation for
fiscal 1999, which shares are subject to transfer and forfeiture
restrictions. Also includes 327,167 shares issuable pursuant to presently
exercisable stock options. Excludes 216,953 shares issuable pursuant to
stock options that are not presently exercisable.
(7) Includes 226 shares of restricted stock awarded as bonus compensation for
fiscal 1999, which shares are subject to transfer and forfeiture
restrictions. Also includes 208,179 shares issuable pursuant to presently
exercisable stock options. Excludes 119,375 shares issuable pursuant to
stock options that are not presently exercisable.
(8) Includes 197 shares of restricted stock awarded as bonus compensation for
fiscal 1999, which shares are subject to transfer and forfeiture
restrictions. Also includes 164,459 shares issuable pursuant to presently
exercisable stock options. Excludes 159,041 shares issuable pursuant to
stock options that are not presently exercisable.
(9) Includes 197 shares of restricted stock awarded as bonus compensation for
fiscal 1999, which shares are subject to transfer and forfeiture
restrictions. Also includes 121,587 shares issuable pursuant to presently
exercisable stock options. Excludes 98,605 shares issuable pursuant to
stock options that are not presently exercisable.
(10) Includes 124 shares of restricted stock awarded as bonus compensation for
fiscal 1999, which shares are subject to transfer and forfeiture
restrictions. Also includes 20,650 shares issuable pursuant to presently
4
<PAGE>
exercisable stock options. Excludes 55,650 shares issuable pursuant to
stock options that are not presently exercisable.
(11) Includes 2,500 shares issuable pursuant to presently exercisable stock
options. Excludes 27,500 shares issuable pursuant to stock options which
are not presently exercisable. Also excludes an annual stock award of 500
shares which was granted to all non-employee directors of the Company for
fiscal 2000, which award accrues at the rate of 1/12 per full month of
service and is payable on January 1, 2001 or within 30 days after such
non-employee director ceases to be a member of the Board of Directors for
any reason other than death or permanent disability ("non-employee
director Annual Stock Award"; see "Compensation of Directors").
(12) Includes 2,500 shares issuable pursuant to presently exercisable stock
options. Excludes 27,500 shares issuable pursuant to stock options which
are not presently exercisable. Also excludes the non-employee director
Annual Stock Award for fiscal 2000.
(13) Includes 22,500 shares issuable pursuant to presently exercisable stock
options. Excludes 7,500 shares issuable pursuant to stock options which
are not presently exercisable. Also excludes the non-employee director
Annual Stock Award for fiscal 2000. Also excludes 1,840 shares of Common
Stock issuable on January 1, 2001 under the Director Deferred
Compensation Plan as deferred compensation (see "Compensation of
Directors").
(14) Includes 5,000 shares issuable pursuant to presently exercisable stock
options. Excludes 25,000 shares issuable pursuant to stock options which
are not presently exercisable. Also excludes the non-employee director
Annual Stock Award for fiscal 2000 and 2,091 shares of Common Stock
issuable on the first day of the month following termination of service
or retirement as a member of the Board of Directors, whichever comes
first, under the Director Deferred Compensation Plan as deferred
compensation.
(15) Includes 2,500 shares issuable pursuant to presently exercisable stock
options. Excludes 27,500 shares issuable pursuant to stock options which
are not presently exercisable. Also excludes the non-employee director
Annual Stock Award for fiscal 2000.
(16) Includes 22,500 shares issuable pursuant to presently exercisable stock
options. Excludes 7,500 shares issuable pursuant to stock options which
are not presently exercisable. Also excludes the non-employee director
Annual Stock Award for fiscal 2000 and 1,975 shares of Common Stock
issuable on the first day of the month following termination of service
or retirement as a member of the Board of Directors, whichever comes
first, under the Director Deferred Compensation Plan as deferred
compensation.
(17) Includes 86,056 shares held by the Trout Family Trust. Also includes
2,500 shares issuable pursuant to presently exercisable stock options.
Excludes 27,500 shares issuable pursuant to stock options which are not
presently exercisable. Also excludes the non-employee director Annual
Stock Award for fiscal 2000.
(18) Includes 902,042 shares issuable pursuant to presently exercisable stock
options.
5
<PAGE>
PROPOSAL 1
ELECTION OF DIRECTORS
The Board of Directors is currently fixed at nine (9) members. There are
presently eight (8) individuals serving as Directors of the Company. Mr.
Franklin J. Iris, formerly a director of the Company, resigned on August 5,
1999. Mr. Walter E. Boomer was elected to fill the position vacated by Mr.
Iris as a result of such resignation. Mr. Alfred J. Battaglia was elected as a
director on March 1, 2000 to fill a vacancy on the Board. The Company's Third
Amended and Restated 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. Sally Crawford, Mr. C. William McDaniel and Mr. Patrick Sullivan are
Class I directors whose terms expire at this Annual Meeting. The Board is also
composed of (3) three Class II directors (Mssrs. Alfred J. Battaglia, Walter
E. Boomer and William G. Little), whose terms expire upon the election and
qualification of directors at the Annual Meeting to be held in 2001 and two
(2) Class III directors (Ms. Anna S. Richo and Monroe E. Trout, M.D.), whose
terms expire upon the election and qualification of directors at the Annual
Meeting to be held in 2002.
Three Class I Directors will be elected at this Annual Meeting for a term of
three years. The Class I nominees, Ms. Sally Crawford, Mr. C. William McDaniel
and Mr. Patrick 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 marked 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 to be held in 2003 or until their respective successors are
duly elected and qualified. All 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.
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>
ominee'sNor Director's Name
ndaYear 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:
Sally W. Crawford (1998) Director 2000 I
C. William McDaniel (1987) Director 2000 I
Patrick J. Sullivan (1994) President, Chief 2000 I
Executive Officer
and Director
Continuing Directors:
Alfred J. Battaglia (2000) Director 2001 II
Walter E. Boomer (2000) Director 2001 II
William G. Little (1998) Director 2001 II
Anna S. Richo (1998) Director 2002 III
Monroe E. Trout, M.D. Director and Chairman 2002 III
(1993) of the Board
</TABLE>
6
<PAGE>
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 current
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 48 President, Chief Executive Officer and Director
(3)....................
Joseph W. Kelly......... 55 Senior Vice President, Chief Financial Officer and
Treasurer
Daniel J. Levangie...... 49 Senior Vice President
A. Suzanne Meszner- 47 Vice President, Human Resources, General Counsel
Eltrich................ and Secretary
Monroe E. Trout, M.D. 69 Chairman of the Board of Directors
(3)(6).................
Alfred J. Battaglia 58 Director
(2)(5).................
Walter E. Boomer (2).... 61 Director
Sally W. Crawford 46 Director
(1)(2).................
William G. Little 57 Director
(1)(3).................
C. William McDaniel 59 Director
(1)(3)(4)..............
Anna S. Richo (2)....... 39 Director
</TABLE>
- --------
(1) Member of Compensation Committee.
(2)Member of Audit Committee.
(3)Member of Nominating and Corporate Governance Committee.
(4)Chairperson of Compensation Committee.
(5)Chairperson of Audit Committee.
(6)Chairperson of Nominating and Corporate Governance Committee.
Directors to be Elected at the Annual Meeting
Sally W. Crawford became a director of the Company in January 1998. From
April 1985 until January 1997, Ms. Crawford served as Chief Operating Officer
of Healthsource, Inc., a publicly-held managed care organization headquartered
in New Hampshire. During her tenure at Healthsource, Inc., Ms. Crawford held a
variety of positions and responsibilities, including leading that company's
Northern Region operations and marketing efforts. Prior to joining
Healthsource, Ms. Crawford served as the Marketing Director for Beacon Health
and Matthew Thornton Health Plan, both of which are New Hampshire health
maintenance organizations. Since January 1997, Ms. Crawford has been a health
care consultant in New Hampshire. Ms. Crawford serves as a director of
Chittenden Corporation and Medical Resources, Inc.
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.
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 of the
Company. Prior to joining the Company, Mr. Sullivan was employed in several
marketing
7
<PAGE>
positions for five years by Abbott Laboratories, a diversified healthcare
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 Annual Meeting
Alfred J. Battaglia became a director of the Company in March 2000. Mr.
Battaglia brings more than 25 years of experience in the medical device
industry. He has served in various senior executive positions at Becton
Dickinson & Company from 1970 to 1996 including Group President and Chief
Information Officer. From 1997 through 1999, Mr. Battaglia served as Senior
General Manager and Main Board member of Reckitt & Colman, a multi-billion
dollar global consumer goods company located in the United Kingdom. Mr.
Battaglia has an MBA with Distinction in Accounting from the Wharton School
and a BA in Economics from Ohio Wesleyan University.
Walter E. Boomer became a director of the Company in February 2000. Since
March 1997 he has served as President and Chief Executive Officer of Rogers
Corporation, a specialty materials manufacturer. Prior to joining Rogers, Mr.
Boomer was Executive Vice President of McDermott International, Inc., and
President of their Babcock and Wilcox Power Generation Group. Mr. Boomer
joined the Marine Corps in 1960, where he served until August 1994, achieving
the rank of General in August 1986. From August 1992 to August 1994, General
Boomer served as Assistant Commandant, the second highest position in the
Marine Corps. Mr. Boomer serves as a director of Baxter International Inc.,
Connecticut Business and Industry Association and Rogers Corporation. Mr.
Boomer fills the position vacated on the Company's Board of Directors as a
result of the retirement of Franklin J. Iris.
William G. Little became a director of the Company in January 1998. He is
currently the Chairman and Chief Executive Officer of West Pharmaceutical
Services, Inc. Prior to joining West, Mr. Little served as President of
Kendall's Health Care Division, as well as Senior Group Vice President for
C.R. Bard's United States Operations, Managing Director and Area Vice
President for Bard's European Operations and General Manager of Johnson &
Johnson's Patient Care Division in England. Mr. Little currently serves on the
Board of Directors for Fox Chase Cancer Center.
Anna S. Richo became a director of the Company in January 1998. She is
currently the associate general counsel at Baxter Healthcare Corporation,
Hyland Immuno Division. Ms. Richo has worked in various legal positions with
Baxter for the past nine years, including serving as their Chief Litigation
Counsel from 1994-1998. She is a member of the Baxter Senior Management Team
and serves as a Baxter Quality Award Examiner. Prior to joining Baxter, Ms.
Richo was an attorney for The NutraSweet Company.
Monroe E. Trout, M.D., became a director of the Company in 1993 and was
elected Chairman of the Board of Directors of the Company in January 1998.
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. From March 1996 until July 1996, Dr.
Trout served as President and Chief Executive Officer of Cytran Inc. 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., West Pharmaceutical Services, Inc., the
University of California San Diego Foundation and SAIC.
8
<PAGE>
Executive Officers
Joseph W. Kelly joined the Company in November 1995 as Vice President, Chief
Financial Officer, Treasurer and Secretary. From January 1997 to February
2000, Mr. Kelly served as Vice President, Chief Financial Officer and
Treasurer. Since February 2000, Mr. Kelly has served as Senior Vice President,
Chief Financial Officer and Treasurer. 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. He has been a member of the
faculty at Harvard University, Johns Hopkins University and Loyola College.
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 from October 1996 until the end of 1997,
he served as Vice President of Sales. From December 1997, Mr. Levangie served
as Vice President, Commercial Operations. Since February 2000, Mr. Levangie
has served as Senior Vice President. Prior to joining the Company, from 1975
through 1992, Mr. Levangie held a variety of sales and marketing positions
with Abbott Laboratories, a diversified health care company. Mr. Levangie
received a B.S. degree in Pharmacy from the College of Pharmacy & Allied
Health Sciences of Northeastern University.
A. Suzanne Meszner-Eltrich joined the Company as Vice President, Human
Resources and General Counsel in September 1997. Prior to joining the Company,
Ms. Meszner-Eltrich was an independent general counsel and human resources
executive for a number of private and public high technology companies in New
England including Pilot Software, Inc. and PC Connection, Inc. From April 1992
through June 1995, she was Vice President, Human Resources and General Counsel
of Easel Corporation of Burlington, Massachusetts. Ms. Meszner-Eltrich
received her Doctor of Jurisprudence from New England School of Law and a B.A.
from Ohio State University.
9
<PAGE>
MEETINGS OF THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors met six times and acted by unanimous written consent
once during the fiscal year ended December 31, 1999. The Board of Directors
has a standing Audit Committee, Compensation Committee and Nominating and
Corporate Governance Committee. The Audit Committee, which oversees and
monitors the financial activities of the Company, met six times during 1999.
Mr. Iris, a former director and Chairman of the Audit Committee, retired on
August 5, 1999. Mr. McDaniel served as interim Chairman of the Audit Committee
from August 5, 1999 to March 1, 2000, when Mr. Battaglia assumed this role. On
February 9, 2000, Mr. Boomer was elected to fill the position vacated by Mr.
Iris on the Board of Directors as a result of Mr. Iris's retirement.
Mssrs. Battaglia and Boomer, Ms. Crawford and Ms. Richo 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 four times and acted by written
consent thirteen times during 1999. Messrs. McDaniel and Little and Ms.
Crawford are the current members of the Compensation Committee. Mr. McDaniel
serves as Chairman of the Compensation Committee. During fiscal 1999, the
Nominating and Corporate Governance Committee was responsible for recommending
to the Board of Directors persons to be nominated for election or appointment
as directors of the Company as well as consideration of issues relating to the
corporate governance of the Company. The Nominating and Corporate Governance
Committee met twice during 1999. Messrs. Little, McDaniel, and Sullivan and
Dr. Trout are the current members of the Nominating and Corporate Governance
Committee. Dr. Trout serves as Chairman of the Nominating and Corporate
Governance Committee. The Nominating and Corporate Governance Committee
considers suggestions regarding possible candidates for director. Such
suggestions, together with appropriate biographical information, should be
submitted to the Secretary of the Company. During the year ended December 31,
1999, 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.
10
<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, 1999, 1998 and 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Long-Term
Compensation(1) Compensation Awards(2)
--------------------- -----------------------------------
Securities
Restricted Stock Underlying Options
Name and Principal Position Year Salary($) Bonus($)(3) Awards ($)(4) (# of Shares)
- --------------------------- ---- --------- ----------- ---------------- ------------------
<S> <C> <C> <C> <C> <C>
Patrick J. Sullivan..... 1999 $212,000 $417,579 $20,157 120,000
President and Chief 1998 200,000 100,000 -- 50,000
Executive Officer 1997 175,000 115,000 -- --
Joseph W. Kelly......... 1999 $166,000 $145,644 $ 6,858 60,000
Senior Vice President, 1998 160,000 35,000 -- 30,000
Chief Financial Officer 1997 150,000 60,000 -- --
and Treasurer
Daniel J. Levangie...... 1999 $166,000 $166,489 $ 7,868 60,000
Senior Vice President 1998 160,000 32,500 -- 30,000
1997 150,000 60,000 -- --
Ted S. Geiselman(5)..... 1999 $166,000 $145,645 $ 6,858 60,000
Senior Vice President 1998 160,000 37,500 -- 30,000
1997 150,000 70,000 -- --
A. Suzanne Meszner- 1999 $144,167 $ 93,528 $ 4,317 30,000
Eltrich(6)............. 1998 130,000 25,000 -- 20,000
Vice President, Human 1997 49,573 15,000 -- 32,000
Resources, General
Counsel and Secretary
</TABLE>
- --------
(1) The compensation described in this table does not include medical, group
life insurance and other benefits received by the Named Executive Officers
which are available generally to all salaried employees of the Company and
certain perquisites and other personal benefits received by the Named
Executive Officers which do not exceed the lesser of $50,000 or 10% of any
such officer's total salary and bonus reported in this table.
(2) The Company did not grant any stock appreciation rights or make any long
term incentive plan payouts to the Named Executive Officers during the
fiscal years ended December 31, 1999, 1998 and 1997.
(3) Includes the value of cash bonus and non-cash bonus in the form of
unrestricted bonus shares ("Bonus Shares"), but excludes the value of
restricted stock awards, which shares are included in the Restricted Stock
Awards column. Bonuses are reported in the year earned even if paid in a
subsequent year. Twenty-five percent (25%) of the estimated after-tax
bonus awarded to each Named Executive Officer for fiscal 1999 was awarded
in Bonus Shares. The number of Bonus Shares awarded was determined by
dividing such estimated after-tax bonus by the average closing market
price of the Company's Common Stock on the
11
<PAGE>
Nasdaq National Market over the last ten business days of fiscal 1999,
which was $27.66 (as adjusted for the two-for-one stock split effected by
the Company in January 2000) for Bonus Shares awarded for fiscal 1999.
Bonus shares for fiscal 1999 were awarded in February 2000 to the Named
Executive Officers as follows: Mr. Sullivan (2,317), Mr. Kelly (789), Mr.
Levangie (906), Mr. Geiselman (789) and Ms. Meszner-Eltrich (495). The
value of such Bonus Shares as disclosed in this table is determined by
multiplying the number of shares awarded by the closing market price of the
Company's Common Stock on the Nasdaq National Market on February 8, 2000,
the date such Bonus Shares were granted, which was $34.813 for Bonus Shares
awarded for fiscal 1999.
(4) The number of shares of restricted stock awarded to each Named Executive
Officer for fiscal 1999 was equal to 25% of the number of Bonus Shares
awarded to such person. Restricted stock awards for fiscal 1999 were
awarded in February 2000 to the Named Executive Officers as follows: Mr.
Sullivan (579 shares), Mr. Kelly (197 shares), Mr. Levangie (226 shares),
Mr. Geiselman (197 shares) and Ms. Meszner-Eltrich (124 shares). Such
restricted stock awards are subject to transfer and forfeiture
restrictions and vest over a three-year period. Dividends will be paid on
such shares when and if declared by the Board of Directors. The value of
restricted stock awards as disclosed in this table is determined by
multiplying the number of shares awarded by the closing market price of
the Company's Common Stock on the Nasdaq National Market on February 8,
2000, the date such restricted shares were granted, which was $34.813 for
restricted shares awarded for fiscal 1999. Restricted stock awards are
reported in the year earned even if paid in a subsequent year. As of
December 31, 1999, none of the Named Executive Officers held any shares of
restricted stock.
(5) Mr. Geiselman resigned from his position as Senior Vice President
effective April 1, 2000. He is currently employed by the Company on a
part-time basis.
(6) Ms. Meszner-Eltrich commenced employment with the Company in September
1997.
Option Grants in Last Fiscal Year
The following table sets forth certain information concerning grants of
stock options to the Named Executive Officers during the fiscal year ended
December 31, 1999. The options, which were granted under the Company's 1995
Stock Plan, become exercisable over a four year period, at a rate of 2.084%
per month, until such options are exercisable in full. Options are subject to
the employee's continued employment. The Company did not grant any stock
appreciation rights during the fiscal year ended December 31, 1999.
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates
Number of Percent of of Stock Price
Securities Total Options Appreciation for
Underlying Granted to Exercise or Option Term(2)
Options Employees in Base Price Expiration ---------------------
Name Granted (#) Fiscal Year (%) ($/Share)(1) Date 5% 10%
---- ----------- --------------- ------------ ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Patrick J. Sullivan..... 120,000 12.15% $9.75 4/28/09 $ 735,807 $ 1,864,679
Joseph W. Kelly......... 60,000 6.08 9.75 4/28/09 367,903 932,339
Daniel J. Levangie...... 60,000 6.08 9.75 4/28/09 367,903 932,339
Ted S. Geiselman (3).... 60,000 6.08 9.75 4/28/09 367,903 932,339
A. Suzanne Meszner-
Eltrich 30,000 3.03 9.75 4/28/09 183,952 466,170
</TABLE>
- --------
(1) 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.
(2) 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%
12
<PAGE>
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 any federal or state 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.
(3) Mr. Geiselman resigned from his position as Senior Vice President
effective April 1, 2000. He is currently employed by the Company on a
part-time basis.
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, 1999; (ii) the net
value realized upon such exercise; (iii) the number of unexercised options
outstanding at December 31, 1999; and (iv) the value of unexercised options at
exercise prices equal to or less than the market value of the Common Stock at
December 31, 1999 ("In-the-Money").
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised,
Underlying Unexercised In-the-Money
Shares Options at Options at
Acquired on December 31, 1999 December 31, 1999 ($)(2)
Exercise Value ------------------------- -------------------------
Name (#) Realized ($)(1) Exercisable/Unexercisable Exercisable/Unexercisable
---- ----------- --------------- ------------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C>
Patrick J. Sullivan..... 2,000 $ 9,188 298,068 209,352 $ 7,762,470 $ 4,838,427
Joseph W. Kelly......... 0 0 147,376 158,624 3,538,142 3,871,791
Daniel J. Levangie...... 0 0 199,013 118,041 5,160,534 2,725,983
Ted S. Geiselman(3)..... 30,000 686,525 148,105 98,187 3,629,499 2,128,377
A. Suzanne Meszner-
Eltrich................ 16,000 140,000 14,584 51,416 291,505 999,515
</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, and do not reflect amounts actually received by the Named
Executive Officers.
(2) Amounts calculated by subtracting the exercise price of the options from
the fair market value of the underlying Common Stock (as adjusted for the
two-for-one stock split effected by the Company in January 2000) as quoted
on The Nasdaq Stock Market on December 31, 1999 of $30.53 per share,
multiplied by the number of shares underlying the options, and do not
reflect amounts that may be actually received by the Named Executive
Officers upon exercise of options.
(3) Mr. Geiselman resigned from his position as Senior Vice President
effective April 1, 2000. He is currently employed by the Company on a
part-time basis.
13
<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 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 officers of the Company.
During fiscal year 1999, the Compensation Committee was comprised of C.
William McDaniel, Sally Crawford and William G. Little, none of whom was an
employee of the Company. This report addresses the compensation policies
determined by Ms. Crawford and Messrs. McDaniel and Little for fiscal year
1999 as they applied to Mr. Sullivan, in his capacity as President and Chief
Executive Officer of the Company, and other 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 officers and employees required to achieve the
Company's strategic objectives, as determined by the Board of Directors.
. To align the interest of officers with the success of the Company.
. To align the interest of 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, annual
stock (restricted and unrestricted) 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 officer's compensation contingent upon the
achievement of specific predetermined corporate objectives as well as upon
each officer's individual level of performance. In addition, the compensation
program includes various other 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 officer's compensation package for fiscal year 1999 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 officers,
including the Chief Executive Officer, are generally set within a moderate
range of salaries that the Compensation Committee believes are paid to
officers with comparable qualifications, experience, responsibilities and
performance 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 officers are made
after the end of each fiscal year.
14
<PAGE>
Fiscal 1999 base salaries were determined by the Compensation Committee
after considering the base salary level of the officers in prior years, and
taking into account for each officer the amount of 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 for each officer. Base salary levels for each of the Company's
officers, other than the Chief Executive Officer, were also based in part upon
evaluations and recommendations made by the Chief Executive Officer.
Bonus Compensation. Bonus compensation for executives is based on the
Company's achievement of predetermined corporate objective, individual
performance and on a comparison of the executive's actual performance against
his or her performance objectives. Bonuses are awarded on an annual basis.
Long Term Incentive Compensation. The Compensation Committee believes that
stock option participation aligns officers' interests with those of the
Stockholders. In addition, the Compensation Committee believes that equity
ownership by 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 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 year period as a means of encouraging executives to
remain with the Company and promote its success. In general, the Compensation
Committee awards 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
outside 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 1999, the Company's
President and Chief Executive Officer, Patrick J. Sullivan, received a base
salary of $212,000, which represents an increase of $12,000 or 6% over his
1998 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.
15
<PAGE>
Mr. Sullivan received bonus compensation valued at $401,000, of which 75% was
received in cash and 25% was received in unrestricted bonus shares of the
Company's Common Stock. In addition, Mr. Sullivan received shares of
restricted stock equal to 25% of the unrestricted bonus shares awarded to him
for fiscal 1999.
Tax Deductibility of Executive Compensation. In general, under Section
162(m) of the Internal Revenue Code of 1986, as amended (the "Code"), the
Company cannot deduct, for federal income tax purposes, compensation in excess
of $1,000,000 paid to certain executive officers. This deduction limitation
does not apply, however, to compensation that constitutes "qualified
performance-based compensation" within the meaning of Section 162(m) of the
Code and the regulations promulgated thereunder. The Compensation Committee
has considered the limitations on deductions imposed by Section 162(m) of the
Code, and it believes that substantially all tax deductions attributable to
executive compensation paid prior to the date of our Annual Meeting are not
currently subject to the deduction limitations of Section 162(m) of the Code.
Respectfully Submitted by the
Compensation Committee:
C. William McDaniel
Sally W. Crawford
William G. Little
Compensation Committee Interlocks and Insider Participation
The members of the Compensation Committee are Ms. Crawford and Messrs.
McDaniel and Little. No member of the Compensation Committee was at any time
during the past year an officer or employee of the Company (or any of its
subsidiaries), was formerly an officer of the Company (or any of its
subsidiaries), or had any relationship with the Company requiring disclosure
herein.
During the last year, no executive officer of the Company served as (i) a
member of the compensation committee (or other committee of the Board of
Directors performing equivalent functions or, in the absence of any such
committee, the entire Board of Directors) of another entity, one of whose
executive officers served on the Compensation Committee of the Company; (ii) a
director of another entity, one of whose executive officers served on the
Compensation Committee of the Company; or (iii) a member of the compensation
committee (or other committee of the Board of Directors performing equivalent
functions or, in the absence of any such committee, the entire Board of
Directors) of another entity, one of whose executive officers served as a
director of the Company.
16
<PAGE>
Compensation of Directors
On August 3, 1999, the Board of Directors adopted the following compensation
plan for non-employee directors, effective October 1, 1999:
<TABLE>
<CAPTION>
Per Per
In-person Telephonic
Annual Meeting Meeting
------- --------- ----------
<S> <C> <C> <C>
Board Meetings
Chairman of the Board......................... $35,000 $2,000 $1,000
Directors..................................... $20,000 $1,000 $ 500
Committee Meetings
Committee Chair............................... $1,000 $ 500
Committee Members............................. $ 750 $ 300
</TABLE>
Payments to non-employee directors for meetings attended prior to August 3,
1999 were paid in accordance with the following predecessor plan:
<TABLE>
<CAPTION>
Per Per
In-person Telephonic
Annual Meeting Meeting
------- --------- ----------
<S> <C> <C> <C>
Board Meetings
Chairman of the Board......................... $20,000 $2,000 $ 1,000
Directors..................................... $10,000 $1,000 $ 500
Committee Meetings
Committee Chair............................... $ 750 $ 500
Committee Members............................. $ 500 $ 300
</TABLE>
The sole employee director of the Company did not receive separate
compensation for services rendered as a director.
In addition, non-employee directors are eligible for participation in the
Company's 1995 Non-Employee Director Stock Option Plan and the Company's Non-
Employee Director Deferred Compensation Plan, and are eligible to receive an
annual stock award from shares authorized for issuance under the Company's
1995 Stock Plan. In general, the terms of such compensation is as follows.
1995 Non-Employee Director Stock Option Plan. The 1995 Non-Employee Director
Stock Option Plan provides for the formulaic grant of options to non-employee
directors of the Corporation. A detailed discussion of the material terms and
proposed amendment to the 1995 Non-Employee Director Stock Option Plan is
found under the heading "PROPOSAL 3. RATIFICATION AND APPROVAL OF THE AMENDED
AND RESTATED 1995 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN".
Director Deferred Compensation Plan. Each non-employee director is entitled,
under the Director Deferred Compensation Plan, with respect to any calendar
year, to receive payment of the annual retainer and meeting attendance fees
for such calendar year either in cash or in shares of the Company's Common
Stock, valued at the closing market price of the Company's Common Stock on the
Nasdaq National Market on the date on which such amounts become payable.
Alternatively, each non-employee director may elect to defer the
17
<PAGE>
payment of the annual retainer and meeting attendance fees, and such deferred
amounts are credited either to a cash account, which accrues interest
quarterly at a rate equal to 25% of the prime rate of interest computed in the
last day of the preceding quarter, or to a deferred share account, which is
credited as of the day the deferred fees would have been payable with share
units equal to the number of shares that could have been purchased on such day
with the amount of such deferred fees. Such share units appreciate (or
depreciate) as would an actual share of the Company's Common Stock purchased
on the deferral date. Each non-employee director designates one of the
following dates as a "distribution date" with respect to the deferred fees:
(i) the first day of a month following the termination of service or
retirement of the non-employee director as a member of the Board of Directors,
(ii) a fixed date in the future at least one year after the date such non-
employee director first elects to defer payment of the fees, but no later than
December 12, 2005, or (iii) the earlier to occur of (i) or (ii). On such
designated distribution date, cash deferrals will be paid in cash, and share
unit deferrals will be paid in shares of the Company's Common Stock, valued at
the closing market price of the Common Stock on the Nasdaq National Market on
the last business day for which such market price is available. Shares of
Common Stock issued under the Director Deferred Compensation Plan may be
issued from shares authorized for issuance under the Company's 1995 Stock Plan
or any shares repurchased by the Company on the open market.
Annual Stock Award. Each non-employee director is entitled to receive a
maximum annual stock award ("Annual Stock Award") of 500 shares of Common
Stock. This annual stock award vests at the rate of 1/12 per full month of
service and is payable in January of the year after such service is rendered
or within 30 days after such non-employee director ceases to be a member of
the Board of Directors for any reason other than death or permanent
disability. Shares of Common Stock issued pursuant to the Annual Stock Award
are issued from shares authorized for issuance under the Company's 1995 Stock
Plan.
Certain Relationships and Related Transactions
The Company has adopted a policy that all transactions between the Company
and its officers, directors, principal stockholders and their affiliates shall
be on terms no less favorable to the Company than could be obtained by the
Company from unrelated third parties, and shall be approved by a majority of
the outside independent and disinterested directors.
18
<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, 1999, with the
cumulative total return of the Nasdaq Market Value Index ("Nasdaq Market
Index") and the Laboratory Analytical Instruments (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.
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
FISCAL YEAR ENDING
------------------------------------------
COMPANY/INDEX/MARKET 3/8/96 12/31/96 12/31/97 12/31/98 12/31/99
-------------------- ------ -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
CYTYC Corp. 100.00 166.15 153.08 158.46 375.77
SIC Code Index 100.00 104.25 124.67 155.30 251.26
NASDAQ Market-U.S. Cos. 100.00 122.84 149.48 210.12 380.43
</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, whether 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 Media General Financial Services, Inc., a source believed to
be reliable, but the Company is not responsible for any errors or
omissions in such information.
19
<PAGE>
PROPOSAL 2
AMENDMENT OF THE CORPORATION'S THIRD AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION
By a Board of Directors vote dated February 9, 2000, the Board of Directors
recommended to the Stockholders that the Company amend the Company's Third
Amended and Restated Certificate of Incorporation to increase the number of
authorized shares of Common Stock, par value $.01 per share, from 60,000,000
to 200,000,000 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 Third Amended
and Restated Certificate of Incorporation is attached to this proxy statement
as Appendix A.
As of the Record Date, there were approximately XXXXXXXXXXX shares issued
and outstanding and approximately XXXXXXXX shares reserved for future issuance
pursuant to outstanding options granted under the Company's stock plans. If
the amendment to the Third Amended and Restated Certificate of Incorporation
is approved, the Board of Directors will have the authority to issue
approximately XXXXXXXXXXX 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:
acquiring other businesses or assets in exchange for shares of Common Stock;
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 or securities convertible into Common Stock;
and 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 plans. 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.
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
THIRD AMENDED AND RESTATED CERTIFICATE OF INCORPORATION.
20
<PAGE>
PROPOSAL 3
RATIFICATION AND APPROVAL OF THE AMENDED AND RESTATED
1995 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
The 1995 Non-Employee Director Stock Option Plan was adopted by the
Company's Board of Directors and approved by the Company's Stockholders in
December 1995. A maximum of 500,000 shares of Common Stock are currently
reserved for issuance under the 1995 Non-Employee Director Stock Option Plan
upon the exercise of options granted thereunder. The Board of Directors has
approved and recommended to the Stockholders that they ratify and approve the
Company's Amended and Restated 1995 Non-Employee Director Stock Option Plan
(the "1995 Non-Employee Director Plan") which, as amended and restated,
provides that in the event of the retirement of any non-employee director of
the Company, all options granted to such non-employee director under the 1995
Non-Employee Director Plan which are outstanding but unvested as of the
effective date of such retirement shall be immediately and automatically
accelerated and become fully vested and exercisable in full. A copy of the
1995 Non-Employee Director Plan is attached to this Proxy Statement as
Appendix B.
The Company relies on stock options as an inducement to obtain and retain
the services of qualified non-employee directors. The Board of Directors
believes that the 1995 Non-Employee Director Plan, as amended and restated, is
necessary in order to enable the Company to continue to attract and retain
non-employee directors of outstanding ability.
Description of the Amended and Restated 1995 Non-Employee Director Stock
Option Plan
The purpose of the 1995 Non-Employee Director Plan is to provide incentives
to promote the interests of the Company by providing an inducement to obtain
and retain the services of qualified persons who are not employees or officers
of the Company to serve as members of its Board of Directors. The 1995 Non-
Employee Director Plan provides these non-employee directors the opportunity
to purchase stock of the Company by granting them options. On the Record Date,
the closing market price of the Company's Common Stock on the Nasdaq National
Market was $[ ].
Administration. The 1995 Non-Employee Director Plan is administered by the
Board of Directors of the Company or a committee appointed by the Board of
Directors (the "Committee"). Subject to the terms of the 1995 Non-Employee
Director Plan, the Committee has the authority to construe the 1995 Non-
Employee Director Plan, to determine all questions thereunder and to adopt and
amend such rules and regulations for the administration of the 1995 Non-
Employee Director Plan as it may deem desirable.
Automatic Grant of Options. Under the 1995 Non-Employee Director Plan,
generally, each non-employee director of the Company who (i) was a director on
January 1, 1996 or (ii) is first elected a director on or after January 1,
1996 was or will be, as the case may be, automatically granted an option to
purchase 30,000 shares of Common Stock. Each non-employee director of the
Company who has no unexpired options outstanding under the 1995 Non-Employee
Director Plan on any January 1st thereafter was or will be, as the case may
be, automatically granted an additional option to purchase 30,000 shares of
Common Stock.
Exercise Price. The exercise price of the stock underlying the options
granted under the 1995 Non-Employee Director Plan is the fair market value of
such shares on the date the option is granted. Fair market value is the last
reported sale price of the Common Stock on the grant date as reported on the
Nasdaq National Market.
21
<PAGE>
Duration of Options. Subject to certain qualifications relating to the
termination of the optionee's tenure on the Board, or the optionee's death or
permanent disability, the 1995 Non-Employee Director Plan provides that each
option shall expire on the date which is ten (10) years after the date of
grant of the option.
Vesting of Options. Options granted under the 1995 Non-Employee Director
Plan are subject to vesting and become exercisable in twelve equal
installments on the last day of each calendar quarter after the date of grant,
provided that the non-employee director has served continuously on the Board
of Directors through such vesting date.
Payment for Exercise of Options. Payment for the exercise of options under
the 1995 Non-Employee Director Plan may be made (a) in cash or by check in US
Dollars, (b) in whole or in part through delivery of shares of Common Stock
already owned by such person exercising the option valued at fair market
value, or (c) through delivery of an assignment to the Company of the proceeds
from the sale of the Common Stock acquired upon exercise of the option and an
authorization to the broker or selling agent to pay the amount to the Company.
Assignability. Options granted under the 1995 Non-Employee Director Plan are
not assignable or transferable other than by will or by the laws of descent
and distribution or pursuant to a domestic relations order and shall be
exercisable during the optionee's lifetime only by him or her.
Effect of Termination, Retirement, Disability or Death of Director. If an
optionee ceases to be a member of the Board of Directors for any reason other
than retirement, death or permanent disability, then (i) any then unexercised
portion of options granted to such optionee shall, to the extent not then
vested, immediately terminate and become void, (ii) any portion of an option
which is then vested but has not been exercised at the time the optionee so
ceases to be a member of the Board of Directors may be exercised, to the
extent it is then vested, by the optionee within 90 days of the date the
optionee ceased to be a member of the Board of Directors, and (iii) all
options shall terminate after such 90 days have expired. In the event an
optionee ceases to be a member of the Board of Directors by reason of his or
her retirement, death or permanent disability, any option granted to such
optionee shall be immediately and automatically accelerated and become fully
vested and all unexercised options shall be exercisable by the optionee (or by
the optionee's personal representative, heir or legatee, in the event of
death) until the scheduled expiration date of the option. For purposes of the
1995 Non-Employee Director Plan, "retirement" shall mean the resignation from
the Board of Directors or the election not to stand for re-election to the
Board of Directors by a non-employee director being of at least 65 years of
age and having served at least 5 years on the Board of Directors. Any such
retirement shall become effective as of the effective date of such non-
employee director's resignation or the due election and qualification of such
non-employee director's successor, as the case may be.
Miscellaneous. Option holders are protected against dilution in the event of
a stock dividend, recapitalization, stock split, merger or similar
transaction. The Board of Directors may from time to time adopt amendments,
certain of which are subject to shareholder approval, and may terminate the
1995 Non-Employee Director Plan at any time (although such action shall not
affect options previously granted). Any shares subject to an option which for
any reason expires or terminates unexercised may again be available for option
grants under the 1995 Non-Employee Director Plan. Unless terminated sooner,
the 1995 Non-Employee Director Plan will terminate on December 26, 2005.
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 Non-Employee
Director Plan is based upon the provisions of the Internal
22
<PAGE>
Revenue Code of 1986, as amended, 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 the 1995 Non-Employee Director
Plan 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 Federal income tax
law to all options granted under the 1995 Non-Employee Director Plan.
1. The optionee generally does not realize any taxable income upon the
grant of an option, and the Company is not allowed a federal income tax
deduction by reason of such grant.
2. The optionee generally will recognize ordinary compensation income at
the time of exercise of an option 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.
3. When the optionee sells the shares, 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
shares (generally, the exercise price plus the amount taxed to the
optionee as compensation 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 corresponding tax
deduction for Federal income tax purposes when compensation income is
recognized by the optionee.
5. An optionee may be entitled to exercise an option by delivering shares
of the Company's Common Stock to the Company in payment of the exercise
price. If an optionee exercises an option in such fashion, special rules
will apply.
6. 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.
Stock Options Granted Under the 1995 Non-Employee Director Plan Since its
Inception
The following table sets forth as of the Record Date all options granted
under the 1995 Non-Employee Director Plan since its inception to (i) each non-
employee nominee for election as a director and (ii) all current non-employee
directors as a group. To date, no person has received five percent or greater
of the options granted under the 1995 Non-Employee Director Plan.
<TABLE>
<CAPTION>
Number of
Name and Position Options
----------------- ---------
<S> <C>
Sally W. Crawford, Director....................................... 30,000
C. William McDaniel, Director..................................... 60,000
All Current Non-Employee Directors as a Group (7 Persons)......... 270,000
</TABLE>
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE "FOR" THE RATIFICATION AND APPROVAL OF
THE AMENDED AND RESTATED 1995 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
23
<PAGE>
PROPOSAL 4
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, 2000. 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(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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 period ended December 31, 1999, the Company believes that all
Reporting Persons complied with Section 16(a) filing requirements in the
period ended December 31, 1999.
STOCKHOLDER PROPOSALS
Proposals of Stockholders intended to be presented at the Annual Meeting for
the fiscal year ended December 31, 2000 must be received by the Secretary of
the Company, no later than the close of business on December 7, 2000 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.
Under the Company's by-laws, Stockholders who wish to make a proposal at the
Annual Meeting for the fiscal year ended December 31, 2000, other than one
that will be included in the Company's proxy materials, must notify the
Company no earlier than the close of business on November 7, 2000 and no later
than December 7, 2000. If a Stockholder who wishes to present a proposal fails
to notify the Company by December 7, 2000, the Stockholder would not be
entitled to present the proposal at the Annual Meeting. If, however,
notwithstanding the requirements of the Company's by-laws, the proposal is
brought before the Annual Meeting, then under the proxy rules of the
Securities and Exchange Commission, the proxies solicited by management with
respect to the next Annual Meeting will confer discretionary voting authority
with respect to the Stockholder's proposal on the persons selected by
management to vote the proxies. If a Stockholder makes a timely notification,
the persons appointed as proxies may still exercise discretionary voting
authority under circumstances consistent with the proxy rules promulgated by
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. In addition, the Company has
retained Innisfree M & A Incorporated of New York, New York to assist the
Company in the solicitation of proxies at a cost estimated to be $9,000.
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
April , 2000
25
<PAGE>
Appendix A
CERTIFICATE OF AMENDMENT
OF
THIRD AMENDED AND RESTATED
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 205,000,000 shares,
consisting of 200,000,000 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 XXth day of June,
2000.
_____________________________________
Patrick J. Sullivan, President
A-1
<PAGE>
Appendix B
CYTYC CORPORATION
AMENDED AND RESTATED
1995 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
WHEREAS, on December 26, 1995, the Board of Directors of Cytyc Corporation
(the "Company") adopted this 1995 Non-Employee Director Stock Option Plan,
which was approved by the stockholders of the Company on December 26, 1995;
WHEREAS, the Board of Directors reserved 250,000 shares of Common Stock for
issuance under the 1995 Non-Employee Director Stock Option Plan;
WHEREAS, in January 2000, the Company effected a two-for-one stock split in
the form of a stock dividend to holders of record of the Company's Common
Stock on January 14, 2000 (the "January 2000 Stock Split");
WHEREAS, on February 9, 2000, the Board of Directors of the Company voted to
amend the Plan to provide that in the event of the retirement of any non-
employee director of the Company, all options granted to such non-employee
director under the 1995 Non-Employee Director Stock Option Plan which are
outstanding but unvested as of the effective date of such retirement shall be
immediately and automatically accelerated and become fully vested and
exercisable in full;
NOW THEREFORE, this 1995 Non-Employee Director Stock Option Plan is amended
and restated, and as amended and restated, reads in its entirety as follows:
1. Purpose. This Non-Qualified Stock Option Plan, to be known as the Amended
and Restated 1995 Non-Employee Director Stock Option Plan (hereinafter, this
"Plan"), is intended to promote the interests of the Company by providing an
inducement to obtain and retain the services of qualified persons who are not
employees or officers of the Company to serve as members of its Board of
Directors (the "Board").
2. Available Shares. The total number of shares of Common Stock, par value
$0.01 per share, of the Company (the "Common Stock") for which options may be
granted under this Plan shall not exceed 500,000 shares, subject to adjustment
in accordance with paragraph 10 of this Plan. Shares subject to this Plan are
authorized but unissued shares or shares that were once issued and
subsequently reacquired by the Company. If any options granted under this Plan
are surrendered before exercise or lapse without exercise, in whole or in
part, the shares reserved therefor shall continue to be available under this
Plan. All share totals set forth in the Plan have been adjusted to reflect the
January 2000 Stock Split.
3. Administration. This Plan shall be administered by the Board or by a
committee appointed by the Board (the "Committee"). In the event the Board
fails to appoint or refrains from appointing a Committee, the Board shall have
all power and authority to administer this Plan. In such event, the word
"Committee" wherever used herein shall be deemed to mean the Board. The
Committee shall, subject to the provisions of the Plan, have the power to
construe this Plan, to determine all questions hereunder, and to adopt and
amend such rules and regulations for the administration of this Plan as it may
deem desirable. No member of the Board or the Committee shall be liable for
any action or determination made in good faith with respect to this Plan or
any option granted under it.
A-2
<PAGE>
4. Automatic Grant of Options. Subject to the availability of shares under
this Plan and subject to paragraph 19 below,
(a) each director who is not an employee or officer of the Company and
who is (i) a member of the Board on January 1, 1996 or (ii) is first
elected to the Board on or after January 1, 1996 shall be automatically
granted on January 1, 1996 or the date such person first becomes a member
of the Board, without further action by the Board, an option to purchase
30,000 shares of the Common Stock (subject to adjustment in accordance with
paragraph 10 of this Plan) and no director shall receive more than one
grant under this Section 4(a); and
(b) each director who is not an employee or officer of the Company and
who has no unexpired options outstanding under this Plan on January 1 shall
be automatically granted on January 1, without further action by the Board,
an additional option to purchase 30,000 shares of the Common Stock (subject
to adjustment in accordance with paragraph 10 of this Plan).
As amended and restated, this Plan is subject to approval by a majority of
the Company's stockholders given by written consent or by voting on such a
matter at the first meeting of the stockholders of the Company on or after
February 9, 2000.
5. Option Price. The purchase price of the stock covered by an option
granted pursuant to this Plan shall be 100% of the fair market value of such
shares on the day the option is granted. The option price will be subject to
adjustment in accordance with the provisions of paragraph 10 of this Plan. For
purposes of this Plan, if, at the time an option is granted under the Plan,
the Company's Common Stock is publicly traded, "fair market value" shall be
determined as of the last business day for which the prices or quotes
discussed in this sentence are available prior to the date such option is
granted and shall mean (i) the average (on that date) of the high and low
prices of the Common Stock on the principal national securities exchange on
which the Common Stock is traded, if the Common Stock is then traded on a
national securities exchange; or (ii) the last reported sale price (on that
date) of the Common Stock on the Nasdaq Stock Market, if the Common Stock is
not then traded on a national securities exchange; or (iii) the closing bid
price (or average of bid prices) last quoted (on that date) by an established
quotation service for over-the-counter securities, if the Common Stock is not
reported on the Nasdaq Stock Market. However, if the Common Stock is not
publicly traded at the time an option is granted under the Plan, "fair market
value" shall be deemed to be the fair value of the Common Stock as determined
by the Committee after taking into consideration all factors which it deems
appropriate, including, without limitation, recent sale and offer prices of
the Common Stock in private transactions negotiated at arm's length; provided,
however, that the "fair market value" of the stock issuable upon exercise of
an option granted pursuant to the Plan within 120 days prior to the time the
Company's Common Stock is publicly traded shall be deemed to be equal to the
initial per share purchase price at which the Company's Common Stock is
offered to the public.
6. Period of Option. Unless sooner terminated in accordance with the
provisions of paragraph 8 of this Plan, an option granted hereunder shall
expire on the date which is ten (10) years after the date of grant of the
option.
7. (a) Vesting of Shares and Non-Transferability of Options. Options granted
under this Plan shall not be exercisable until they become vested. Options
granted under this Plan shall vest in the optionee and thus become exercisable
in twelve equal installments of 2,500 shares on the last day of each calendar
quarter, provided that the optionee has continuously served as a member of the
Board through such vesting date. The number of shares as to which options may
be exercised shall be cumulative, so that once the option shall become
exercisable as to any shares it shall continue to be exercisable as to said
shares, until expiration or termination of the option as provided in the Plan.
A-3
<PAGE>
(b) Non-transferability. Any option granted pursuant to this Plan shall not
be assignable or transferable other than by will or the laws of descent and
distribution or pursuant to a domestic relations order and shall be
exercisable during the optionee's lifetime only by him or her.
8. Termination of Option Rights.
(a) Except as otherwise specified in the agreement relating to an option, in
the event an optionee ceases to be a member of the Board for any reason other
than retirement, death or permanent disability, any then unexercised portion
of options granted to such optionee shall, to the extent not then vested,
immediately terminate and become void; any portion of an option which is then
vested but has not been exercised at the time the optionee so ceases to be a
member of the Board may be exercised, to the extent it is then vested, by the
optionee within 90 days of the date the optionee ceased to be a member of the
Board; and all options shall terminate after such 90 days have expired.
(b) In the event that an optionee ceases to be a member of the Board by
reason of his or her death or permanent disability, any option granted to such
optionee shall be immediately and automatically accelerated and become fully
vested and all unexercised options shall be exercisable by the optionee (or by
the optionee's personal representative, heir or legatee, in the event of
death) until the scheduled expiration date of the option.
(c) In the event that an optionee ceases to be a member of the Board by
reason of his or her retirement from the Board, any option granted to such
optionee shall be immediately and automatically accelerated and become fully
vested and all unexercised options shall be exercisable by the optionee until
the scheduled expiration date of the option. For purposes of this Plan,
"retirement from the Board" shall mean the resignation from the Board or the
election not to stand for re-election to the Board by a non-employee director
being of at least 65 years of age and having served at least 5 years on the
Board. Any such retirement shall become effective as of the effective date of
such non-employee director's resignation or the due election and qualification
of such non-employee director's successor, as the case may be.
9. Exercise of Option. Subject to the terms and conditions of this Plan and
the option agreements, an option granted hereunder shall, to the extent then
exercisable, be exercisable in whole or in part by giving written notice to
the Company by mail or in person addressed to Cytyc, at its principal
executive offices, stating the number of shares with respect to which the
option is being exercised, accompanied by payment in full for such shares.
Payment may be (a) in United States dollars in cash or by check, (b) in whole
or in part in shares of the Common Stock of the Company already owned by the
person or persons exercising the option or shares subject to the option being
exercised (subject to such restrictions and guidelines as the Board may adopt
from time to time), valued at fair market value determined in accordance with
the provisions of paragraph 5 or (c) consistent with applicable law, through
the delivery of an assignment to the Company of a sufficient amount of the
proceeds from the sale of the Common Stock acquired upon exercise of the
option and an authorization to the broker or selling agent to pay that amount
to the Company, which sale shall be at the participant's direction at the time
of exercise. There shall be no such exercise at any one time as to fewer than
two hundred (200) shares or all of the remaining shares then purchasable by
the person or persons exercising the option, if fewer than two hundred (200)
shares. The Company's transfer agent shall, on behalf of the Company, prepare
a certificate or certificates representing such shares acquired pursuant to
exercise of the option, shall register the optionee as the owner of such
shares on the books of the Company and shall cause the fully executed
certificate(s) representing such shares to be delivered to the optionee as
soon as practicable after payment of the option price in full. The holder of
an option shall not have any rights of a stockholder with respect to the
shares covered by the option, except to the extent that one or more
certificates for such shares shall be delivered to him or her upon the due
exercise of the option.
A-4
<PAGE>
10. Adjustments Upon Changes in Capitalization and Other Events. Upon the
occurrence of any of the following events, an optionee's rights with respect
to options granted to him or her hereunder shall be adjusted as hereinafter
provided:
(a) Stock Dividends and Stock Splits. If the shares of Common Stock shall
be subdivided or combined into a greater or smaller number of shares or if
the Company shall issue any shares of Common Stock as a stock dividend on
its outstanding Common Stock, the number of shares of Common Stock
deliverable upon the exercise of options shall be appropriately increased
or decreased proportionately, and appropriate adjustments shall be made in
the purchase price per share to reflect such subdivision, combination or
stock dividend.
(b) Recapitalization Adjustments. If there occurs any (i) sale, issuance,
exchange or transfer, in a single transaction or a series of related
transactions, of greater than fifty percent (50%) of the outstanding
capital stock of the Corporation to a third party, (ii) sale of all or
substantially all of the assets of the Corporation, or (iii) merger,
consolidation or other reorganization involving the Corporation and one or
more other entities in which the shares of the Corporation's outstanding
capital stock immediately prior to such transaction are converted into,
exchanged for or represent less than a majority of the voting power of the
surviving or resulting entity, then each option granted under this Plan
which is outstanding but unvested as of the effective date of such event
shall become exercisable in full immediately prior to the effective date of
such event. In the event of a reorganization, recapitalization, or any
other change in the corporate structure or shares of the Company, to the
extent permitted by Rule 16b-3 under the Securities Exchange Act of 1934,
adjustments in the number and kind of shares authorized by this Plan and in
the number and kind of shares covered by, and in the option price of
outstanding options under this Plan necessary to maintain the proportionate
interest of the optionee and preserve, without exceeding, the value of such
option, shall be made. Notwithstanding the foregoing, no such adjustment
shall be made which would, within the meaning of any applicable provisions
of the Internal Revenue Code of 1986, as amended, constitute a
modification, extension or renewal of any option or a grant of additional
benefits to the holder of an option.
(c) Issuances of Securities. Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or
price of shares subject to options. No adjustments shall be made for
dividends paid in cash or in property other than securities of the Company.
(d) Adjustments. Upon the happening of any of the foregoing events, the
class and aggregate number of shares set forth in paragraph 2 of this Plan
that are subject to options which previously have been or subsequently may
be granted under this Plan shall also be appropriately adjusted to reflect
such events. The Board shall determine the specific adjustments to be made
under this paragraph 10 and its determination shall be conclusive.
11. Restrictions on Issuance of Shares. Notwithstanding the provisions of
paragraphs 4 and 9 of this Plan, the Company shall have no obligation to
deliver any certificate or certificates upon exercise of an option until one
of the following conditions shall be satisfied:
(a) The issuance of shares with respect to which the option has been
exercised is at the time of the issue of such shares effectively registered
under applicable Federal and state securities laws as now in force or
hereafter amended; or
(b) Counsel for the Company shall have given an opinion that the issuance
of such shares is exempt from registration under Federal and state
securities laws as now in force or hereafter amended; and the
A-5
<PAGE>
Company has complied with all applicable laws and regulations with respect
thereto, including without limitation all regulations required by any stock
exchange upon which the Company's outstanding Common Stock is then listed.
12. Legend on Certificates. The certificates representing shares issued
pursuant to the exercise of an option granted hereunder shall carry such
appropriate legend, and such written instructions shall be given to the
Company's transfer agent, as may be deemed necessary or advisable by counsel
to the Company in order to comply with the requirements of the Securities Act
of 1933 or any state securities laws.
13. Representation of Optionee. If requested by the Company, the optionee
shall deliver to the Company written representations and warranties upon
exercise of the option that are necessary to show compliance with Federal and
state securities laws, including representations and warranties to the effect
that a purchase of shares under the option is made for investment and not with
a view to their distribution (as that term is used in the Securities Act of
1933).
14. Option Agreement. Each option granted under the provisions of this Plan
shall be evidenced by an option agreement, which agreement shall be duly
executed and delivered on behalf of the Company and by the optionee to whom
such option is granted. The option agreement shall contain such terms,
provisions and conditions not inconsistent with this Plan as may be determined
by the officer executing it.
15. Termination and Amendment of Plan. Options may no longer be granted
under this Plan after December 26, 2005, and this Plan shall terminate when
all options granted or to be granted hereunder are no longer outstanding. The
Board may at any time terminate this Plan or make such modification or
amendment thereof as it deems advisable; provided, however, that the Board may
not, without approval by the affirmative vote of the holders of a majority of
the shares of Common Stock present in person or by proxy and voting on such
matter at a meeting, (a) increase the maximum number of shares for which
options may be granted under this Plan (except by adjustment pursuant to
Section 10), (b) materially modify the requirements as to eligibility to
participate in this Plan, (c) materially increase benefits accruing to option
holders under this Plan or (d) amend this Plan in any manner which would cause
Rule 16b-3 under the Securities Exchange Act (or any successor or amended
provision thereof) to become inapplicable to this Plan; and provided further
that the provisions of this Plan specified in Rule 16b-3(c)(2)(ii)(A) (or any
successor or amended provision thereof) under the Securities Exchange Act of
1934 (including without limitation, provisions as to eligibility, amount,
price and timing of awards) may not be amended more than once every six
months, other than to comport with changes in the Internal Revenue Code, the
Employee Retirement Income Security Act, or the rules thereunder. Termination
or any modification or amendment of this Plan shall not, without consent of a
participant, affect his or her rights under an option previously granted to
him or her, except as to options granted subject to the conditions identified
in paragraph 4 above.
16. Withholding of Income Taxes. Upon the exercise of an option, the
Company, in accordance with Section 3402(a) of the Internal Revenue Code, may
require the optionee to pay withholding taxes in respect of amounts considered
to be compensation includable in the optionee's gross income.
17. Compliance with Regulations. It is the Company's intent that the Plan
comply in all respects with Rule 16b-3 under the Securities Exchange Act of
1934 (or any successor or amended provision thereof) and any applicable
Securities and Exchange Commission interpretations thereof. If any provision
of this Plan is deemed not to be in compliance with Rule 16b-3, the provision
shall be null and void.
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<PAGE>
18. Governing Law. The validity and construction of this Plan and the
instruments evidencing options shall be governed by the laws of the State of
Delaware, without giving effect to the principles of conflicts of law thereof.
19. Definition of "employee" and "officer." For purposes of paragraph 4 of
this Plan, (i) a person who is an employee or officer of the Company shall be
deemed to continue to be an employee or officer of the Company for three (3)
years after such person ceases to be an employee or officer of the Company;
and (ii) service as Chairman or Vice Chairman of the Board, if no additional
compensation is paid to the individual with respect to such service other than
reimbursement of expenses approved by the Board, shall be deemed not to
constitute service as an employee or officer of the Company.
Date originally approved by Board of Directors of the Company: December 26,
1995
Date originally approved by Stockholders of the Company: December 26, 1995
As amended and restated, date approved by Board of Directors of the Company:
As amended and restated, date approved by Stockholders of the Company:
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<PAGE>
2. To approve an amendment to the Company's
Third Amended and Restated Certificate
of Incorporation increasing from
60,000,000 to 200,000,000 the number of
authorized shares of Common Stock, $.01
par value, of the Company.
[_] FOR [_] AGAINST [_] ABSTAIN
3. To ratify and approve the Company's
Amended and Restated 1995 Non-Employee
Director Stock Option Plan (the "Plan")
which provides that in the event of the
retirement of any non-employee director
of the Company, all outstanding and
unvested options granted to such non-
employee director under the Plan shall
be immediately and automatically
accelerated and become fully vested and
exercisable in full.
[_] FOR [_] AGAINST [_] ABSTAIN
4. To ratify the selection of the firm of
Arthur Andersen LLP, independent public
accountants, as auditors for the fiscal
year ending December 31, 2000.
[_] FOR [_] AGAINST [_] ABSTAIN
5. To transact such other business as may properly come before the Annual
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.
Signature:_________ Date:________________
Signature:_________ Date:________________
