<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
COVALENT GROUP INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
COVALENT GROUP, INC.
ONE GLENHARDIE CORPORATE CENTER, SUITE 100
1275 DRUMMERS LANE
WAYNE, PA 19087
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 22, 2000
To the Stockholders of
Covalent Group, Inc.
The Annual Meeting of Stockholders (the "Meeting") of Covalent Group, Inc. (the
"Company") will be held at the Company's headquarters, 1275 Drummers Lane, Suite
100, Wayne, Pennsylvania 19087 on June 22, 2000, at 1:00 p.m. to consider
proposals:
1. To elect five directors for the ensuing year;
2. To amend and restate the 1996 Stock Incentive Plan to increase the number of
shares of Common Stock reserved for issuance by 500,000 shares; among other
things;
3. To ratify the selection of Arthur Andersen LLP as the Company's independent
public accountants for the year ending December 31, 2000; and
4. To transact any other business as may properly be brought before the
Meeting.
Any action may be taken on the foregoing matters at the Meeting on the date
specified above, or on any date or dates to which the Meeting may be adjourned.
The Board of Directors has fixed the close of business on May 5, 2000 as the
record date for determining the stockholders entitled to notice of and to vote
at the Meeting and at any adjournments or postponements thereof. Only
stockholders of record of the Company's Common Stock at the close of business on
that date will be entitled to notice of and to vote at the Meeting and at any
adjournments or postponements thereof. The Company will maintain a complete
list of its stockholders entitled to vote at the annual meeting at its
headquarters, located at 1275 Drummers Lane, Suite 100, Wayne, Pennsylvania, for
ten days before the annual meeting.
Your attention is directed to the accompanying Proxy Statement for the text of
the resolutions to be proposed at the Meeting and further information regarding
each proposal to be made. A copy of the Company's Annual Report on Form 10-KSB
for the year ended December 31, 1999 is enclosed herewith. The annual report is
not part of this proxy statement.
STOCKHOLDERS UNABLE TO ATTEND THE MEETING IN PERSON ARE ASKED TO VOTE, SIGN,
DATE AND RETURN PROMPTLY THE ENCLOSED PROXY IN THE ENCLOSED SELF-ADDRESSED
ENVELOPE, WHICH DOES NOT REQUIRE ANY POSTAGE IF MAILED IN THE UNITED STATES.
By order of the Board of Directors
/s/ David Weitz
----------------
David Weitz, Secretary
May 22, 2000
Wayne, Pennsylvania
<PAGE>
COVALENT GROUP, INC.
ONE GLENHARDIE CORPORATE CENTER, SUITE 100
1275 DRUMMERS LANE
WAYNE, PA 19087
________________________
PROXY STATEMENT
________________________
Proxies, in the form enclosed with this Proxy Statement, are solicited by the
Board of Directors of Covalent Group, Inc. (the "Company") for the Annual
Meeting of Stockholders (the "Meeting") to be held on June 22, 2000 at 1:00 p.m.
at the Company's headquarters, 1275 Drummers Lane, Suite 100, Wayne, PA 19087
and any adjournments or postponements thereof.
Stockholders of record as of the close of business on May 5, 2000 (the "Record
Date") will be entitled to vote at the Meeting and any adjournment thereof. As
of the Record Date, 12,145,967 shares of Common Stock of the Company were
outstanding and entitled to one vote each. Execution of a proxy will not in any
way affect a stockholder's right to attend the Meeting and vote in person. Any
stockholder submitting a proxy has the right to revoke it at any time before it
is exercised by another instrument or transmission revoking it or by filing a
properly created proxy bearing a later date than the Stockholder's filed proxy
card before the Meeting with the Secretary of the Company, or by voting in
person at the Meeting.
Shares represented by properly executed proxies for which no instructions are
received will be voted for all the nominees identified below under "Proposal No.
1 - Election of Directors," to increase the number of shares reserved for the
Company's 1996 Stock Incentive Plan identified below under "Proposal No. 2 -
Amendment to and Restatement of the 1996 Stock Incentive Plan," and for the
approval of accountants identified below under "Proposal No. 3 - Appointment of
Accountants." The persons named as proxies are either officers or directors of
the Company.
The presence, in person or by proxy, of stockholders entitled to cast at least a
majority of the votes that all stockholders are entitled to cast on a particular
matter to be acted upon at the Meeting, shall constitute a quorum for the
purposes of consideration and action on such matter. Abstentions and broker
non-votes are each included in the number of shares present at the Meeting for
purposes of establishing a quorum. The affirmative vote of a plurality of the
votes cast is required for the election of Directors. For all other proposals,
the affirmative vote of the holders of a majority of shares of Common Stock
voted, in person or by proxy, at the Meeting is required. If any other matter
should be presented at the Meeting upon which it is proper to take a vote,
shares represented by all proxies received will be voted with respect thereto in
accordance with the judgment of the persons named as proxies.
This Proxy Statement and the accompanying materials were first sent to the
stockholders on May 22, 2000.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of May 5, 2000 certain information with
regard to beneficial ownership of outstanding shares of the Company's Common
Stock by (i) each person or group known by the Company to beneficially own five
percent or more of the outstanding shares of the Company's Common Stock, (ii)
each director and Named Executive Officer individually, and (iii) all executive
officers and directors of the Company as a group. Information contained in the
following table is based on information known to the Company from its own
records and from publically available information.
<TABLE>
<CAPTION>
Name and Address of Percentage of
Beneficial Owner (1) Shares Outstanding Shares
- ------------------------------------ ---------------------------- -----------------------------------
<S> <C> <C>
Bedford Oak Partners, L..P. 610,000 5.0%
100 South Bedford Road
Mount Kisco, NY 10594
Covalent Partners, LLC 5,759,500 47.4%
4350 LaJolla Village Dr., Suite 970
San Diego, CA 92037
Richard D. Propper, M.D 6,092,500 50.1%(2)
2890 Moon Ridge Drive
La Jolla, CA 92037
Michael D. Chermak 5,802,500 47.7%(2)
14 Sandpiper Strand
Coronado, CA 92118
Hassan Nemazee 1,000,000 8.2%(3)
720 5th Avenue
New York, NY 10019
Kenneth M. Borow, M.D. 936,171 (4) 7.7%
407 Wyntre Lea Drive
Bryn Mawr, PA 19010
Anthony Cerami, Ph.D. 10,000 (5) *
765 Old Saw Mill River Road
Tarrytown, NY 10591
Donald C. Holdsworth 10,000 (5) *
350 South River Road
New Hope, PA 18938
David Weitz 123,300 (6) 1.0%
704 Delaware Avenue
Lansdale, PA 19446
William K. Robinson 80,000 (7) *
1501 Wilson Lane
West Chester, PA 19380
All Executive Officers 1,159,471 (8) 9.5%
and Directors as
a Group (five persons)
</TABLE>
<PAGE>
___________________
* Less than 1% of the outstanding Common Stock.
(1) The percentages of beneficial ownership shown below are based on 12,145,967
shares of Common Stock outstanding as of May 5, 2000, unless otherwise
stated. Beneficial ownership is determined in accordance with the rules of
the Securities and Exchange Commission and generally includes those
securities over which a person may exercise voting or investment power. In
addition, shares of common stock which a person has the right to acquire
upon the conversion of preferred stock or the exercise of stock options and
warrants within 60 days of the date of this table are deemed outstanding for
the purpose of computing the percentage ownership of that person, but are
not deemed outstanding for computing the percentage ownership of any other
person. Except as indicated in the footnotes to this table or as affected by
applicable community property laws, the persons named in the table have sole
voting and investment power with respect to all shares of Common Stock
beneficially owned.
(2) Includes beneficial ownership of 6,219,500 shares of Common Stock otherwise
beneficially owned by Covalent Partners, LLC.
(3) Includes beneficial ownership of 500,000 shares of Common Stock otherwise
beneficially owned by Houston Venture, Inc.
(4) Includes 391,664 shares of Common Stock underlying stock options which are
vested or exercisable within 60 days of the date of this table.
(5) Includes 10,000 shares of Common Stock underlying stock options which are
vested or exercisable within 60 days of the date of this table.
(6) Includes 2,000 shares of Common Stock underlying stock options which are
vested or exercisable within 60 days of the date of this table.
(7) Includes 80,000 shares of Common Stock underlying stock options which are
vested or exercisable within 60 days of the date of this table.
(8) Includes 493,664 shares of Common Stock underlying stock options which are
vested or exercisable within 60 days of the date of this table.
On November 1, 1999, Bruce LaMont entered into an Option Agreement (the "Option
Agreement") with Covalent Partners, LLC, a Delaware limited liability company
("Covalent Partners"). The Option Agreement granted Covalent Partners the
option to acquire up to an aggregate of 6,015,500 shares of the Company's common
stock held by Mr. LaMont at a purchase price of $2.00 per share. At the time of
the grant, Mr. LaMont was the President, Chief Executive Officer and a director
of the Company and held approximately 51% of the issued and outstanding common
stock of the Company.
On November 1, 1999, pursuant to the terms of the Option Agreement, Covalent
Partners elected to purchase 1,000,000 shares of common stock of the Company
from Mr. LaMont for an aggregate purchase price of $2,000,000. On November 27,
1999, pursuant to the terms of the Option Agreement. Covalent Partners elected
to purchase 250,000 shares of common stock of the Company from Mr. LaMont for an
aggregate purchase price of $500,000. On January 15, 2000, pursuant to the
terms of the Option Agreement, Covalent Partners elected to exercise the option
to purchase from Mr. LaMont his remaining 4,765,500 shares of common stock of
the Company. On January 26, 2000, Covalent Partners completed the purchase of
4,765,500 shares of common stock of the Company held by Mr. LaMont for an
aggregate purchase price of $9,531,000.
Covalent Partners was formed for the purpose of acquiring Mr. LaMont's shares of
common stock of the Company in order to acquire a controlling interest in the
Company. Richard D. Proper, M.D. and Michael D. Chermak are each members and
managers of Covalent Partners and Salman J. Chaudhry is a financial consultant
to Covalent Partners. Mr. LaMont resigned as a Director, President and Chief
Executive Officer of the Company on January 26, 2000 upon Covalent Partners'
purchase of his remaining shares.
PROPOSAL NO. 1 - ELECTION OF DIRECTORS
Five directors are to be elected at the Meeting, each to serve until the next
annual meeting and until his or her successor shall have been elected and
qualified. Each of the nominees named below is presently a member of the Board
of Directors. In case any of the nominees should become unavailable for
election, for any reason not presently known or contemplated, the persons named
on the proxy card will have discretionary authority to vote pursuant to the
proxy for a substitute.
<PAGE>
<TABLE>
<CAPTION>
NAME AGE SINCE PRINCIPAL OCCUPATION
- ------------------------- -------- ---------- ----------------------------------------------
<S> <C> <C> <C>
Kenneth M. Borow, M.D. 52 1998 Chief Executive Officer and Chief Medical
Officer of the Company
Anthony Cerami, Ph.D. 59 2000 Founder and Director, The Kenneth S. Warren
Laboratories and President, Cerami Consulting
Corporation
Donald C. Holdsworth 46 2000 President, MatchPower Interactive Systems, LLC
William K. Robinson 60 1996 Chief Financial Officer of the Company
Stephen E. Sallan, M.D. 58 2000 Director
</TABLE>
KENNETH M. BOROW, M.D., Chief Executive Officer, Chief Medical Officer and
Director joined the Company in 1997. For the previous four years, Dr. Borow was
Senior Director, in the Medical Research Associates Department, at Merck
Research Laboratories where he directed clinical research operations for 163
different protocols, and developed a Merck-based contract group consisting of
field monitors, data coordinators and statisticians. Previously, he was a
Professor of Medicine and Pediatrics at the University of Chicago, and
originator of a worldwide clinical research program in cardiac function which
included investigative sites in the United States, United Kingdom, Norway,
Israel and South Africa. Dr. Borow graduated from the Temple Medical School in
1974. Dr. Borow is a Harvard-trained Internist, Pediatrician, Adult
Cardiologist and Pediatric Cardiologist.
Dr. Borow was appointed Chief Executive Officer of the Company in January 2000
following the resignation of Bruce LaMont.
ANTHONY CERAMI, Ph.D., Chairman of the Board and Director. Dr. Cerami was
appointed a Director in January 2000 and Chairman of the Board in February 2000.
He is currently the Founder and Director of The Kenneth S. Warren Laboratories,
a nonprofit research institution, and President of Cerami Consulting
Corporation. In 1991 he established The Picower Institute for Medical Research.
For the previous 20 years, he was a professor and head of the Laboratory of
Medical Biochemistry and Dean of Graduate and Postgraduate Studies at The
Rockefeller University.
DONALD C. HOLDSWORTH, Director. Mr. Holdsworth was appointed a Director in
January 2000. He is President of the consulting firm of MatchPower Interactive
Systems, LLC. From 1995 to 1997 he served as a Senior Vice President Worldwide
Marketing at Merck & Co., Inc. Previously, he held senior management positions
at PepsiCo Inc. Prior to joining PepsiCo in 1991, he was a partner with the
consulting firm of McKinsey & Company.
WILLIAM K. ROBINSON, Chief Financial Officer and Director, joined the Company in
1996. He has over 25 years of diverse healthcare management experience, both
domestic and international, in large corporate and emerging company operations.
From 1994 to June 1996, he was Vice President of Finance for Scott Specialty
Gases, Inc., a manufacturer of calibration and medical gases. He was President
and Chief Executive Officer of Tektagen, Inc., a biopharmaceutical testing
laboratory from 1991 to 1994, and Chief Financial Officer from 1990 to 1991.
Previously, he was employed by SmithKline Beckman for 17 years, where he held
the top financial positions in the U.S. Pharmaceuticals, Clinical Laboratories
and Animal Health Divisions.
STEPHEN E. SALLAN, M.D., Director. Dr. Sallan was appointed a Director in April
2000. He is Chief of Staff at Dana-Farber Cancer Institute, Firm Chief of
Oncology and Vice Chair for Clinical Research at Children's Hospital in Boston.
He is also Professor of Pediatrics at Harvard Medical School. He is one of the
world's foremost experts on childhood leukemia and his research led to the
highly innovative and successful bone marrow transplantation program pioneered
at Dana-Farber Cancer Institute. Dr. Sallan has authored over 160 scientific
papers and reports, and is a member of several prominent national committees and
societies. In 1987, he was named the first recipient of the Sir James Carreras
Award of Variety Clubs International in recognition of his outstanding
contributions to pediatric medicine.
<PAGE>
Effective January 26, 2000, Bruce LaMont resigned as President, Chief Executive
Officer and Director of the Company, and John J. Whittle resigned as a Director
of the Company in connection with a change in control of the Company. Mr LaMont
and Mr. Whittle each served as Directors for the entire 1999 fiscal year.
COMMITTEES OF THE BOARD
- -----------------------
The Company's Board of Directors has a Compensation Committee and an Audit
Committee.
The Compensation Committee reviews and approves salaries for corporate officers
and reviews, approves and administers the Company's stock option plans and
grants thereunder. The Compensation Committee met twice in 1999. The
Compensation Committee is presently composed of two non-employee directors,
Anthony Cerami, Ph.D. and Donald C. Holdsworth.
The Audit Committee recommends outside accountants, reviews the results and
scope of the annual audit and the services provided by the Company's independent
auditors and the recommendations of the auditors with respect to the accounting
systems and controls. The Audit Committee met once in 1999. The Audit
Committee is presently composed of two non-employee directors, Anthony Cerami,
Ph.D. and Donald C. Holdsworth. Representatives of the Company's independent
auditing firm, Arthur Andersen LLP, met with the Committee on April 13, 2000,
and reviewed their examination of the Company's financial statements for the
year ended December 31, 1999.
The Board of Directors had two meetings during 1999. There was no director who,
during the last full fiscal year, attended in person or by phone fewer than 75%
of board or committee meetings while such person was a director.
DIRECTOR'S REMUNERATION
- -----------------------
Directors receive no cash compensation for service as directors. Non-employee
directors receive an initial option grant under the 1996 Stock Incentive Plan to
purchase 10,000 shares of Common Stock at fair market value upon becoming a
director and an annual option grant on the date of the Company's annual meeting
to purchase 10,000 shares of Common Stock at fair market value. Both initial
and annual options are exercisable after 12 months of continuous service as a
director.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE ENTIRE SLATE
OF NOMINEES IN PROPOSAL NO. 1
EXECUTIVE OFFICERS
- ------------------
Executive officers serve at the discretion of the Board and serve until their
successors have been duly elected and qualified or until their earlier
resignation or removal. The current executive officers of the Company are as
follows:
<TABLE>
<CAPTION>
NAME AGE POSITION(S) HELD WITH COMPANY
- ---------------------------- --------- ----------------------------------------------------------
<S> <C> <C>
Kenneth M. Borow, M.D. 52 Chief Executive Officer, Chief Medical Officer, Director
William K. Robinson 60 Chief Financial Officer, Director
David Weitz 49 Vice President, Chief Information Officer, Secretary,
Treasurer
</TABLE>
DAVID WEITZ, Secretary and Treasurer. In January 1995, Mr. Weitz was appointed
Chief Information Officer. He is responsible for planning, implementation, and
use of Information Technologies. For the previous 12 years he was employed by
Merck Research Laboratories as Manager of Technical Support and Training where
he was responsible for planning, implementing and operating a computer technical
support program and computer application training program for all divisional
employees located at five geographical locations.
<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
- -------------------------------------------------------
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors to file initial reports of ownership and
reports of change of ownership with the Securities and Exchange Commission (the
"SEC"). Executive officers and directors are required by SEC regulations to
furnish the Company with copies of all Section 16(a) forms they file. Based
solely upon a review of copies of reports furnished to the Company during the
fiscal year ended December 31, 1999, all executive officers and directors were
in compliance.
EXECUTIVE COMPENSATION
The following table sets forth the total compensation paid by the Company to the
Named Executive Officers for or with respect to their services during the year
ended December 31, 1999. The Named Executive Officers include the Company's
Chief Executive Officer and other executive officers who were paid more than
$100,000 in 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Long Term
Compensation Compensation
-------------------------------- -----------------
Securities
Underlying Other Annual
Name and Principal Position Year Salary Bonus Options Compensation
- -------------------------------- -------- ------------ ------------- ----------------- ------------------
<S> <C> <C> <C> <C> <C>
Bruce LaMont 1999 $209,500 $50,000 - $ 8,589 (4)
President and Chief Executive 1998 250,000 - - 8,517 (4)
Officer(1) 1997 250,000 30,000 - 8,197 (4)
Kenneth M. Borow, M.D. 1999 225,000 47,750 - 31,537 (3)
Chief Executive Officer 1998 225,000 - 500,000 (2) -
and Chief Medical Officer(1) 1997 219,000 15,000 250,000 (2) -
William K. Robinson 1999 132,667 6,050 - -
Chief Financial Officer 1998 121,000 - 60,000 -
1997 121,000 - - -
David Weitz 1999 122,500 6,250 - 1,184 (5)
Secretary, Treasurer and Chief 1998 115,000 - - 1,184 (5)
Information Officer 1997 115,000 10,000 - 1,184 (5)
(1) Dr. Borow was appointed Chief Executive Officer of the Company in January 2000 following the resignation of Mr. LaMont.
(2) Dr. Borow was granted 250,000 stock options in 1996 as part of acceptance of an employment offer and 250,000 stock options in
1997. On August 6, 1998, all options granted to Dr. Borow were canceled and 500,000 new options were issued at the closing
market price of the Company's stock as of that date.
(3) Subject to a compensation agreement, Mr. LaMont gave 12,307 shares of his stock to Dr. Borow. The transaction was valued at the
closing price of the Company's Common Stock on the Nasdaq Small Cap market on the day of transfer.
(4) Company contribution to additional life and disability insurance.
(5) Company contribution to additional life insurance.
</TABLE>
All executive officers of the Company are full-time employees of the Company.
In connection with the Company's change in control, the Company entered into an
employment agreement with Kenneth M. Borow, M.D., its Chief Executive Office and
Chief Medical Officer. Terms of employment include a base salary of $250,000 per
year, plus a possible bonus as determined by the Company's Board of Directors
and the option to acquire 500,000 shares
<PAGE>
of the Company's Common Stock upon the effective date of the employment
agreement. Such option shall vest over a three year term, and is exercisable at
the then fair market value under such terms of the Company's stock option plan.
Other benefits include those made available under any executive plan in effect
during the term of the employment agreement.
The Company has the right to terminate Dr. Borow's employment with or without
cause. Dr. Borow had the right to terminate his employment at any time. Dr.
Borow is entitled to base salary earned through the date of termination if
terminated for cause. If terminated without cause, Dr. Borow is entitled to
base salary earned through the date of termination, base salary for the greater
of three years after the effective date or one year after the termination date,
reimbursement of health benefits and the immediate acceleration of options so
that certain options are exercisable on the date of termination.
The table below sets forth certain information regarding the number and value of
unexercised options held by Named Executive Officers of the Company as of
December 31, 1999.
<TABLE>
<CAPTION>
AGGREGATED FISCAL YEAR-END OPTION VALUES
Securities Underlying Options Value of In-the-Money Options
at December 31, 1999 at December 31, 1999 (1)
---------------------------------------- ----------------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---------------------------- ------------------- ------------------- ------------------- -------------------
<S> <C> <C> <C> <C>
Kenneth M. Borow, M.D. 350,000 150,000 $1,290,625 $553,125
William K. Robinson 80,000 - 195,000 -
</TABLE>
(1) Based on the closing price of the Common Stock on the Nasdaq SmallCap Market
on that date, $4.375, net of the exercise price.
PROPOSAL NO. 2 - AMENDMENT TO AND RESTATEMENT OF 1996 STOCK INCENTIVE PLAN
On March 16, 2000, the Board of Directors unanimously approved an amendment to
the Company's 1996 Stock Incentive Plan (the "Plan") to increase the number of
Common Stock shares reserved for issuance thereunder from 2,500,000 shares to
3,000,000. The following is a description of the Plan.
At the Annual Meeting of Stockholders held on September 20, 1996, stockholders
approved the adoption of the Plan. The Plan provides for the grant of
incentive and non-qualified stock options. The Board of Directors has the
authority under the Plan to set the terms of options, including the option price
and term, subject to the limit in the plan that the exercise price of any
incentive stock option generally must be at least 100% of fair market value of
the Company's Common Stock on the date of the grant, and incentive stock options
expire five years after grant. Further, any non-employee Director shall be
automatically granted an option to purchase 10,000 shares of the Company's
Common Stock at an exercise price equal to the market value at date of grant for
each year that such person serves as a Director. Such options shall vest 100%
after one year of continuous service for non-employee Directors. Under the Plan,
options granted to employees vest 25% for each 12 months of continuous service
until fully vested, unless such vesting schedule is modified or superseded by
the Board of Directors.
The Plan is administered by the Board of Directors through the Compensation
Committee which is composed of non-employee Directors. The Compensation
Committee has discretion to select the employees to whom stock options or awards
will be granted and to determine the type, size and terms and conditions of each
option grant or award, and has the authority to interpret, construe and
administer the provisions of the Plan.
Currently, 2,500,000 shares of Common Stock are reserved for issuance in
accordance with the terms of the Plan. As of the Record Date, approximately
230,000 shares of the Company's Common Stock remain available for the granting
of new options. The Board of Directors believes it is important and in the best
interests of the Company to amend the Plan to increase the number of shares
reserved for issuance thereunder by 500,000 to 3,000,000 in order to provide for
additional grants to be made to retain key personnel and to have available
shares in order to attract further key personnel. The Plan is also proposed to
be amended to increase the term of newly granted incentive stock options
generally from five (5) to ten (10) years.
<PAGE>
The Form of the Plan is proposed to be amended and restated in other nonmaterial
regard. A copy of the Form of Plan, as amended and restated, can be found at the
end of this proxy statement as Annex A. Proposed No. 2 seeks shareholder
approval of the increase in the number of shares available under the Plan, and
the amendment and restatement of the Form of the Plan.
Prior to the date of this proxy, option grants have been made under the Plan to
the following persons and groups (with the underlying share amounts immediately
following each person or group): Kenneth M. Borow, M.D., Chief Executive Officer
and Chief Medical Officer (1,000,000); David Weitz, Secretary and Treasurer
(10,000); William K. Robinson, Chief Financial Officer (80,000); all current
directors who are not executive officers as a group (100,000); all current
executive officers as a group (1,090,000); all other employees as a group
(552,650).
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" PROPOSAL NO. 2
PROPOSAL NO. 3 - APPOINTMENT OF ACCOUNTANTS
Subject to stockholder ratification, the Board of Directors intends to appoint
Arthur Andersen LLP as its independent auditors for the year ending December 31,
2000. One or more members of Arthur Andersen LLP are expected to be present at
the Meeting, and will have the opportunity to make a statement if they desire to
do so and will be available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" PROPOSAL NO. 3
STOCKHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
- ---------------------------------------------
Any stockholder proposal intended to be presented at the Company's 2001 Annual
Meeting of Stockholders must be received by the Company at its office in Wayne,
Pennsylvania on or before January 19, 2001 in order to be considered for
inclusion in the Company's proxy statement and form of proxy relating to such
meeting.
With respect to stockholder proposals not included in the Company's proxy
statement, the Company may utilize discretionary authority conferred by proxy in
voting on any such proposals if the stockholder does not give the Company notice
of such matter by April 3, 2001.
EXPENSES OF SOLICITATION
- ------------------------
The cost of preparing, assembling, mailing and soliciting the proxies will be
borne by the Company. In addition to the use of the mails, proxies may be
solicited by regular employees of the Company, either personally or by
telephone, telegram or facsimile. The Company does not expect to pay any
compensation for the solicitation of proxies, but may reimburse brokers and
other persons holding shares in their names or in the names of nominees for
expenses in sending proxy materials to beneficial owners and obtaining proxies
from such owners.
OTHER MATTERS
- -------------
The Board of Directors does not intend to bring any matters before the Meeting
other than as stated in this Proxy Statement, and is not aware that any other
matters will be presented for action at the Meeting. If any other matters come
before the Meeting, the persons named in the enclosed form of proxy will vote
the proxy with respect thereto in accordance with their best judgment, pursuant
to the discretionary authority granted by the proxy.
All properly executed proxies delivered pursuant to this solicitation and not
revoked will be voted at the Meeting in accordance with the directions given.
In voting by proxy in regard to the election of four Directors to serve until
the 2001 Annual Meeting of Stockholders, stockholders may vote in favor of all
nominees or withhold their votes as to all nominees or withhold their votes as
to specific nominees. With respect to other items to be voted upon,
stockholders may vote in favor of the item or against the item or may abstain
from voting. Stockholders should specify their choices on the enclosed proxy
card. If no specific instructions are given with respect to the matters to be
acted upon, and the proxy is returned properly executed then the shares
represented by the proxy will be voted FOR the election of all directors and FOR
all other proposals contained herein.
<PAGE>
PLEASE DATE AND SIGN THE ENCLOSED PROXY WHICH IS BEING SOLICITED BY THE BOARD OF
DIRECTORS AND RETURN IT IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF IT
IS MAILED IN THE UNITED STATES.
COVALENT GROUP, INC.
By: /s/ David Weitz
--------------------------
David Weitz
Secretary
<PAGE>
ANNEX A
AMENDED AND RESTATED
COVALENT GROUP, INC.
1996 STOCK INCENTIVE PLAN
-------------------------
SECTION 1. PURPOSE; DEFINITIONS. The purpose of the Covalent Group,
Inc. 1996 Incentive Plan (the "Plan") is to offer to certain employees and
Directors of Covalent Group, Inc. (the "Company"), equity interests in the
Company, options to acquire equity interests in the Company, and other
performance-based incentive awards, thereby attracting, retaining and motivating
such persons, and strengthening the mutuality of interests between such persons
and the Company's shareholders.
The Plan was originally effective September 20, 1996, and has been
amended and restated effective as of March 16, 2000. Options granted and any
other awards before that date shall remain subject to their terms and the Plan
as in effect on the date of grant, except as this amended and restated Plan
shall specifically provide otherwise.
For purposes of the Plan, the following initially capitalized words
and phrases shall be defined as set forth below, unless the context clearly
requires a different meaning:
a. "Affiliate" means, with respect to a person or entity, a person
that directly or indirectly controls, or is controlled by, or is under common
control with such person or entity.
b. "Associate" means a consultant, contractor or other provider of
services to the Company.
c. "Board" means the Board of Directors of the Company, as
constituted from time to time.
d. "Cause" occurs when the Participant, as determined by the Board:
(i) has engaged in any type of disloyalty to the Company,
including without limitation, fraud, embezzlement, theft,
or dishonesty in the course of his employment or
engagement, or has otherwise breached any fiduciary duty
owed to the Company;
(ii) has been convicted of a felony;
(iii) has disclosed trade secrets or confidential information
of the Company; or
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(iv) has breached any agreement with or duty to the Company in
respect of confidentiality, non-disclosure, non-competition
or otherwise.
e. "Change of Control" means:
(i) the acquisition in one or more transactions by any "Person"
(as the term person is used for purposes of Sections 13(d)
or 14(d) of the Exchange Act) of "Beneficial ownership"
(within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of twenty-five percent (25%) or more of the
combined voting power of the Company's then outstanding
voting securities (the "Voting Securities"), provided that
for purposes of this clause (i) Voting Securities acquired
directly from the Company by any Person shall be excluded
from the determination of such Person's Beneficial
ownership of Voting Securities (but such Voting Securities
shall be included in the calculation of the total number of
Voting Securities then outstanding); or
(ii) approval by shareholders of the Company of:
(A) a merger, reorganization or
consolidation involving the Company if
the shareholders of the Company
immediately before such merger,
reorganization or consolidation do not
or will not own directly or indirectly
immediately following such merger,
reorganization or consolidation, more
than fifty percent (50%) of the
combined voting power of the
outstanding voting securities of the
company resulting from or surviving
such merger, reorganization or
consolidation in substantially the same
proportion as their ownership of the
Voting Securities outstanding
immediately before such merger,
reorganization or consolidation; or
(B) a complete liquidation or dissolution
of the Company;
(C) an agreement for the sale or other
disposition of all or substantially all
of the assets of the Company; or
(iii) acceptance by shareholders of the Company of shares in a
share exchange if the shareholders of the Company
immediately before such share exchange do not or will not
own directly or indirectly immediately following such share
exchange more than fifty percent (50%) of the combined
voting power of the outstanding voting
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securities of the entity resulting from or surviving such
share exchange in substantially the same proportion as
their ownership of the Voting Securities outstanding
immediately before such share exchange.
f. "Code" means the Internal Revenue Code of 1986, as amended from
time to time, and any successor thereto.
g. "Committee"shall mean the Committee appointed by the Board in
accordance with Section 2 of the Plan, if one is appointed, in which event in
connection with this Plan, the Committee shall possess all of the power and
authority of, and shall be authorized to take any and all actions required to be
taken hereunder by, and make any and all determinations required to be taken
hereunder by, the Board.
h. "Director" means a member of the Board.
i. "Disability"shall mean a disability of an employee or a Director
which renders such employee or Director unable to perform the full extent of his
duties and responsibilities by reason of his illness or incapacity which would
entitle that employee or Director to receive Social Security Disability Income
under the Social Security Act, as amended, and the regulations promulgated
thereunder. "Disabled" shall mean having a Disability. The determination of
whether a Participant is Disabled shall be made by the Board, whose
determination shall be conclusive; provided that,
(i) if a Participant is bound by the terms of an employment
agreement between the Participant and the Company, whether
the Participant is "Disabled" for purposes of the Plan
shall be determined in accordance with the procedures set
forth in said employment agreement, if such procedures are
therein provided; and
(ii) a Participant bound by such an employment agreement shall
not be determined to be Disabled under the Plan any earlier
than he would be determined to be disabled under his
employment agreement.
j. "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
k. "Fair Market Value" means, as of any date: (i) the closing price
of the Shares as reported on the principal nationally recognized stock exchange
on which the Shares are traded on such date, or if no Share prices are reported
on such date, the closing price of the Shares on the next preceding date on
which there were reported Share prices; or (ii) if the Shares are not listed or
admitted to unlisted trading privileges on a nationally recognized stock
exchange, the closing price of the Shares as reported by The NASDAQ Stock Market
on such date, or if no Share prices are reported on such date, the closing price
of the Shares on the next
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preceding date on which there were reported Share prices; or (3) if the Shares
are not listed or admitted to unlisted trading privileges on a nationally
recognized stock exchange or traded on The NASDAQ Stock Market, then the Fair
Market Value shall be determined by the Board acting in its discretion, which
determination shall be conclusive.
l. "Incentive Stock Option" means any Option intended to be and
designated as an "Incentive Stock Option" within the meaning of Section 422 of
the Code.
m. "Non-Employee Director" shall have the meaning set forth in Rule
16b-3(b)(3)promulgated by the Securities and Exchange Commission under the
Exchange Act, or any successor definition adopted by the Securities and Exchange
Commission; provided, however, that the Board or the Committee may, in its sole
discretion, substitute the definition of "outside director" provided in the
regulations under Section 162(m) of the Code in place of the definition of Non-
Employee Director contained in the Exchange Act.
n. "Non-Qualified Stock Option" means any Option that is not an
Incentive Stock Option.
o. "Participant" means an employee, Director, or Associate of the
Company or a Subsidiary to whom an award is granted pursuant to the Plan.
p. "Performance Share" means an award made pursuant to Section 9
hereof of the right to receive Shares at the end of a specified performance
period.
q. "Performance Unit" means an award made pursuant to Section 10
hereof of the right to receive cash at the end of a specified performance
period.
r. "Restricted Stock" means an award of Shares that is subject to
restrictions pursuant to Section 7 hereof.
s. "Retirement" means termination of the employment of a Participant
with the Company, an Affiliate (including parent) or a Subsidiary other than (i)
a termination effected at the direction of the Company or parent (whether or not
the Company effects such termination for Cause), (ii) termination on account of
Disability, or (iii) termination on account of death. With respect to a Director
who is not also an employee of the Company, Retirement shall occur at such time
as the individual ceases to be a Director.
t. "Rules" means Section 16 of the Exchange Act and the regulations
promulgated thereunder.
u. "SAR" means a share appreciation right granted under the Plan and
described in Section 6 hereof.
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v. "Securities Broker" means a registered securities broker
acceptable to the Company who agrees to effect the cashless exercise of an
Option pursuant to Section 5(l) hereof.
w. "Share" means a share of stock of the Company, subject to
substitution or adjustment as provided in Section 3(c) hereof.
x. "Stock Bonus" means an award described in Section 8.
y. "Stock Option" or "Option" means any option to purchase Shares
(including Restricted Stock, if the Committee so determines) granted pursuant to
Section 5 hereof.
z. "Subsidiary" means, in respect of the Company or parent, a
subsidiary company, whether now or hereafter existing, as defined in Sections
424(f) and (g) of the Code.
SECTION 2. ADMINISTRATION. The Plan shall be administered by the
Board. The Board may at any time by a unanimous vote, with each member voting,
appoint a Committee consisting of not less than two Directors to administer the
Plan on behalf of the Board, subject to such terms and conditions as the Board
may prescribe. Members of the Committee shall serve for such period of time as
the Board may determine. Members of the Board or the Committee who are eligible
for awards or have been granted awards may vote on any matters affecting the
administration of the Plan or any awards pursuant to the Plan, except that no
such member shall act upon an award to himself or herself, but any such member
may be counted in determining the existence of a quorum at any meeting of the
Board or Committee during which action is taken with respect to an award to
himself or herself.
If a Committee is appointed, all references to actions to be taken by
the Board in the administration of the Plan shall be construed as references to
the Committee.
From time to time the Board may increase the size of the Committee and
appoint additional members thereto (provided such new members are Non-Employee
Directors), remove members (with or without cause) and appoint new members in
substitution therefor, fill vacancies however caused, or remove all members of
the Committee and thereafter directly administer the Plan.
The Board shall have full authority to grant to eligible persons under
Section 4: (i) Options, (ii) SARs, (iii) Restricted Stock, (iv) Stock Bonuses
and/or, (v) Cash Bonus Rights. In particular, the Board shall have the
authority:
a. to select the persons to whom Options, SARs, Restricted Stock,
Stock Bonuses and Cash Bonus Rights may from time to time be granted hereunder;
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b. to determine whether and to what extent Incentive Stock Options, Non-
Qualified Stock Options, SARs, Restricted Stock, Stock Bonuses and Cash Bonus
Rights, or any combination thereof, are to be granted hereunder;
c. to determine the number of Shares, if any, to be covered by each such
award granted hereunder;
d. to determine the terms and conditions, not inconsistent with the terms
of the Plan, of any award granted hereunder, including, but not limited to, the
Share price and any restriction or limitation, any vesting provisions, or any
vesting acceleration or forfeiture waiver regarding any Option or other award
and/or the Shares relating thereto, or the length of the period following
termination of employment of any Participant during which any Option or SAR may
be exercised (which, in the case of an Incentive Stock Option, shall be no
longer than one year in the case of the termination of employment of a
Participant by reason of death or Disability, or three months in the case of the
termination of employment of a Participant for any reason other than death or
Disability), based on such factors as the Board shall determine, in its sole
discretion;
e. to determine whether and under what circumstances an Option may be
exercised without a payment of cash under Section 5(l); and
f. to determine whether, to what extent and under what circumstances
Shares and other amounts payable with respect to an award under the Plan may be
deferred either automatically or at the election of the Participant.
The Board shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it shall,
from time to time, deem advisable; to interpret the terms and provisions of the
Plan and any award issued under the Plan (and any agreements relating thereto);
to amend the terms of any agreement relating to any award issued under the Plan,
provided that the Participant consents to such amendment; and to otherwise
supervise the administration of the Plan. The Board may correct any defect,
supply any omission or reconcile any inconsistency in the Plan or in any award
granted in the manner and to the extent it shall deem necessary to carry out the
intent of the Plan.
All decisions made by the Board pursuant to the provisions of the Plan
shall be final and binding on all persons, including the Company and
Participants. No member of the Board shall be liable for any good faith
determination, act or failure to act in connection with the Plan or any award
made under the Plan.
SECTION 3. SHARES SUBJECT TO THE PLAN.
a. Shares Subject to the Plan. The Shares to be subject or related
to awards under the Plan shall be authorized and unissued Shares of the Company,
whether or not previously issued and subsequently acquired by the Company. The
maximum number of Shares
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that may be the subject of awards under the Plan is 3,000,000 or such lesser
amount as the Board shall determine, and the Company shall reserve for the
purposes of the Plan, out of its authorized and unissued Shares, such number of
Shares.
b. Effect of the Expiration or Termination of Awards. If and to the
extent that an award made under the Plan expires, terminates or is canceled or
forfeited for any reason without having been exercised in full, the Shares
associated with the expired, terminated, canceled or forfeited portion of the
award shall again become available for award under the Plan.
c. Other Adjustment. In the event of any merger, reorganization,
consolidation, recapitalization, Share distribution or dividend, Share split or
combination, or other change in entity structure affecting the Shares, such
substitution or adjustment shall be made in the aggregate number, type and
issuer of the securities reserved for issuance under the Plan, in the number and
Option price of securities subject to outstanding Options granted under the Plan
and in the number and price of securities subject to other awards made under the
Plan, as may be determined to be appropriate by the Board in its sole
discretion, provided that the number of securities subject to any award shall
always be a whole number. The Board, in its sole discretion, shall make
appropriate equitable anti-dilution adjustments to the number of then-
outstanding SARs, and to the Fair Market Value upon which the value of such SARs
is based.
SECTION 4. ELIGIBILITY. Employees and Directors of the Company, and
non-employee consultants to the Company, are eligible to be granted awards under
the Plan. Directors who are not employees of the Company or a Subsidiary are
eligible to be granted awards under the Plan, but are not eligible to be granted
Incentive Stock Options.
SECTION 5. OPTIONS. Options granted under the Plan may be of two
types: (i) Incentive Stock Options or (ii) Non-Qualified Stock Options. Options
may be granted alone, in addition to or in tandem with other awards granted
under the Plan. Any Option granted under the Plan shall be in such form as the
Board may from time to time approve.
The Board shall have the authority to grant any eligible Participant
Incentive Stock Options, Non-Qualified Stock Options, or both types of Options
(in each case with or without SARs). To the extent that any Option does not
qualify as an Incentive Stock Option, it shall constitute a separate Non-
Qualified Stock Option .
Options granted under the Plan shall be subject to the following terms
and conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Board shall deem appropriate;
provided, however, that the provisions of Option awards need to be the same with
respect to each Participant:
a. Option Price. The exercise price per Share purchasable under a
Non-Qualified Stock Option shall be determined by the Board. The exercise price
per Share purchasable under an Incentive Stock Option shall be 100% of the Fair
Market Value of the
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Share on the date of the grant. However, any Incentive Stock Option granted to
any Participant who, at the time the Option is granted, owns more than 10% of
the voting power of all classes of shares of the Company or of a Subsidiary
shall have an exercise price per Share of not less than 110% of Fair Market
Value per Share on the date of the grant.
b. Option Term. The term of each Option shall be fixed by the
Board, but no Incentive Stock Option shall be exercisable more than ten years
after the date the Option is granted. However, any Incentive Stock Option
granted to any Participant who, at the time the Option is granted, owns more
than 10% of the voting power of all classes of shares of the Company or of a
Subsidiary may not have a term of more than five years. No Option may be
exercised by any person after expiration of the term of the Option.
c. Exercisability. Options shall vest and be exercisable at such
time or times and subject to such terms and conditions as shall be determined by
the Board at the time of grant. If the Board provides, in its discretion, that
any Option is exercisable only in installments, the Board may waive such
installment exercise provisions at any time at or after grant, in whole or in
part, based on such factors as the Board shall determine, in its sole
discretion.
d. Method of Exercise. Subject to the exercise provisions under
Section 5(c) and the termination provisions set forth in Sections 5(f) through
(i), Options may be exercised in whole or in part at any time and from time to
time during the term of the Option, by giving written notice of exercise to the
Company specifying the number of Shares to be purchased. Such notice shall be
accompanied by payment in full of the purchase price, either by certified or
bank check, or such other instrument as the Board may accept. As determined by
the Board, in its sole discretion, at or after grant, payment in full or in part
of the exercise price of an Option may be made in the form of unrestricted Stock
based on the Fair Market Value of the Shares on the date the Option is
exercised; provided, however, that, in the case of an Incentive Stock Option,
the right to make a payment in the form of already owned Shares may be
authorized only at the time the Option is granted.
No Shares shall be issued upon exercise of an Option until full
payment therefor has been made. A Participant shall not have the right to
distributions or dividends or any other rights of a shareholder with respect to
Shares subject to the Option until the Participant has given written notice of
exercise, has paid in full for such Shares, and, if requested, has given the
representation described in Section 13(a) hereof. The Company may require the
Participant to enter into any agreement or be subject to any restrictions
applicable to shareholders' generally, including any agreement or restrictions
relating to the Participant's right to dispose of any Shares and the
circumstances under which the shareholder may be required to resell any Shares
to the Company.
e. Non-transferability of Options. No Option shall be transferable
by the Participant otherwise than by will or by the laws of descent and
distribution, and all Options shall
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be exercisable, during the Participant's lifetime, only by the Participant or,
in the event of his Disability, by his personal representative.
f. Termination by Reason of Death. Subject to Section 5(i), if a
Participant's service with the Company or any Subsidiary terminates by reason of
death, any Option held by such Participant may thereafter be exercised, to the
extent then exercisable or on such accelerated basis as the Board may determine
at or after grant, by the legal representative of the estate or by the legatee
of the Participant under the will of the Participant, for a period expiring (i)
at such time as may be specified by the Board at or after the time of grant, or
(ii) if not specified by the Board, then one year from the date of death, or
(iii) if sooner than the applicable period specified under (i) or (ii) above,
then upon the expiration of the stated term of such Option.
g. Termination by Reason of Disability. Subject to Section 5(i), if
an Participant's service with the Company or any Subsidiary terminates by reason
of Disability, any Option held by such Participant may thereafter be exercised
by the Participant or his personal representative, to the extent it was
exercisable at the time of termination, or on such accelerated basis as the
Board may determine at or after grant, for a period expiring (i) at such time as
may be specified by the Board at or after the time of grant, or (ii) if not
specified by the Board, then one year from the date of termination of service,
or (iii) if sooner than the applicable period specified under (i) or (ii) above,
then upon the expiration of the stated term of such Option.
h. Termination for Cause. If the Participant's employment is
terminated for Cause, any Option held by such Participant shall immediately
expire.
i. Other Termination. Subject to Section 5(i), if a Participant's
service with the Company or any Subsidiary terminates for any reason other than
death or Disability, any Option held by such Participant may thereafter be
exercised by the Participant, to the extent it was exercisable at the time of
such termination or on such accelerated basis as the Board may determine at or
after the time of grant, for a period expiring (i) at such time as may be
specified by the Board at or after the time of grant, or (ii) if not specified
by the Board, then ninety (90) days from the date of termination of service, or
(iii) if sooner than the applicable period specified under (i) or (ii) above,
then upon the expiration of the stated term of such Option.
j. Change of Control. Upon a Change in Control, the Board in its
sole discretion may cause all previously unvested options to become vested
and/or exercisable. In addition, the Board may (i) substitute options in any
successor entity for the Options outstanding hereunder, including a substitution
that meets the requirements of Treas. Reg. 1.125-1(a)(4)(i), with respect to
Incentive Stock Options, (ii) cancel an Option in exchange for cash and/or other
substitute consideration with a value equal to the difference between the
exercise price of that Option and the value of the Shares subject to that Option
on the date of the Change in Control, (iii) cause the Options to remain
outstanding in whole or part, or (iv) take any other or further action with
respect to disposition of outstanding Options.
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k. Incentive Stock Option Limitations. To the extent required for
"incentive stock option" status under Section 422 of the Code, the aggregate
Fair Market Value (determined as of the time of grant) of the Shares with
respect to which Incentive Stock Options are exercisable for the first time by
the Participant during any calendar year under the Plan and/or any other plan of
the Company or any Subsidiary shall not exceed $100,000. For purposes of
applying the foregoing limitation, Incentive Stock Options shall be taken into
account in the order granted.
l. Cashless Exercise. The Company may, in the sole discretion of the
Board, cooperate in a "cashless exercise" of an Option. The cashless exercise
shall be effected by the Participant delivering to the Securities Broker
instructions to sell a sufficient number of Shares to cover the costs and
expenses associated therewith.
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SECTION 6. SHARE APPRECIATION RIGHTS.
a. Grant. SARs may be granted alone ("Stand-Alone SARs") or in
conjunction with all or part of any Option granted under the Plan ("Tandem
SARs"). In the case of a Non-Qualified Stock Option, a Tandem SAR may be granted
either at or after the time of the grant of such Option. In the case of an
Incentive Stock Option, a Tandem SAR may be granted only at the time of the
grant of such Option.
b. Exercise.
(i) Tandem SARs. A Tandem SAR or applicable portion thereof shall
terminate and no longer be exercisable upon the termination or exercise of the
related Option or portion thereof, except that, unless otherwise determined by
the Board, in its sole discretion at the time of grant, a Tandem SAR granted
with respect to less than the full number of Shares covered by a related Option
shall be reduced only after such related Option is exercised or otherwise
terminated with respect to the number of Shares not covered by the Tandem SAR.
A Tandem SAR may be exercised by a Participant by surrendering the
applicable portion of the related Option, only at such time or times and to the
extent that the Option to which such Tandem SAR relates shall be exercisable in
accordance with the provisions of Section 5 and this Section 6. Options which
have been so surrendered, in whole or in part, shall no longer be exercisable to
the extent the related Tandem SARs have been exercised.
Upon the exercise of a Tandem SAR, a Participant shall be entitled to
receive, upon surrender to the Company of all (or a portion) of an Option in
exchange for cash and/or Shares, an amount equal to the excess of (A) the Fair
Market Value, as of the date such Option (or such portion thereof) is
surrendered, of the Shares covered by such Option (or such portion thereof) over
(B) the aggregate exercise price of such Option (or such portion thereof).
Upon the exercise of a Tandem SAR, the Option or part thereof to which
such Tandem SAR is related, shall be deemed to have been exercised for the
purpose of the limitation set forth in Section 3 of the Plan on the number of
Shares to be issued under the Plan, but only to the extent of the number of
Shares issued under the Tandem SAR at the time of exercise based on the value of
the Tandem SAR at such time.
A Tandem SAR may be exercised only if and when the Fair Market Value
of the Shares subject to the Option exceeds the exercise price of such Option.
(ii) Stand-Alone SARs. A Stand-Alone SAR may be exercised by a
Participant giving notice of intent to exercise to the Company, provided that
all or a portion of such Stand-Alone SAR shall have become vested and
exercisable as of the date of exercise.
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Upon the exercise of a Stand-Alone SAR, a Participant shall be
entitled to receive, in either cash and/or Shares, an amount equal to the
excess, if any, of (A) the Fair Market Value, as of the date such SAR (or
portion of such SAR) is exercised, of the Shares covered by such SAR (or portion
of such SAR) over (B) the Fair Market Value of the Shares covered by such SAR
(or a portion of such SAR ) as of the date such SAR (or a portion of such SAR)
was granted.
c. Terms and Conditions. SARs shall be subject to such
terms and conditions, not inconsistent with the provisions of the Plan, as shall
be determined from time to time by the Board, in its sole discretion; provided,
however, that the provisions of SAR awards need not be the same with respect to
each Participant. Such terms and conditions include the following:
(i) Non-Transferability. No SAR shall be transferable by the
Participant otherwise than by will or by the laws of descent and distribution
and all SARs shall be exercisable, during the Participant's lifetime, only by
the Participant or, in the event of his Disability, by his personal
representative.
(ii) Term of SAR. The term of each SAR shall be fixed by the
Board, provided that the term of a Tandem SAR shall be determined by the terms
of the applicable Option, and provided further that the term of a Stand-Alone
SAR shall be ten (10) years, unless another term is specified by the Board.
(iii) Exercisability. SARs shall vest and be exercisable at such
time or times and subject to such terms and conditions as shall be determined by
the Board at the time of grant, provided that the term of a Tandem SAR shall be
determined by the terms of the applicable Option. A Participant shall not have
any rights as a shareholder with respect to any SAR.
(iv) Termination of Employment. Unless otherwise specified in
the terms of an award, SARs shall be subject to the terms of Sections 5(f)-(i)
with respect to exercise upon termination of employment.
(v) Change of Control. Upon a Change in Control, the Board in
its sole discretion may cause all previously unvested SARs to become vested
and/or exercisable. In addition, the Board may (i) substitute SARs in any
successor entity for the SARs outstanding hereunder, (ii) cancel an SAR in
exchange for cash and/or other substitute consideration with a value equal to
the value of the outstanding SAR, (iii) cause the SARs to remain outstanding in
whole or part, or (iv) take any other or further action with respect to
disposition of outstanding SARs.
SECTION 7. RESTRICTED STOCK.
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a. Administration. Restricted Stock may be issued either alone or in
addition to other awards granted under the Plan. The Board shall determine the
persons to whom, and the time or times at which, grants of Restricted Stock will
be made, the number of Shares to be awarded, the price (if any) to be paid by
the recipient of Restricted Stock, the time or times within which such awards
may be subject to forfeiture, and all other conditions of the awards.
The Board may condition the vesting of Restricted Stock upon the
attainment of specified performance goals or such other factors as the Board may
determine, in its sole discretion, at the time of the award.
The provisions of Restricted Stock awards need not be the same with
respect to each Participant.
b. Awards and Certificates. The prospective recipient of a
Restricted Stock award shall not have any rights with respect to such award,
unless and until such recipient has executed an agreement evidencing the award
and has delivered a fully executed copy thereof to the Company, and has
otherwise complied with the applicable terms and conditions of such award. The
purchase price for Restricted Stock may be zero.
Each Participant receiving a Restricted Stock award shall be issued a
share certificate in respect of such Restricted Stock. Such certificate shall
be registered in the name of such Participant, and shall bear an appropriate
legend referring to the terms, conditions, and restrictions applicable to such
award, substantially in the following form:
"The transferability of this certificate and the shares represented
hereby are subject to the terms and conditions (including forfeiture) of the
Covalent Group 1996 Stock Incentive Plan and an Agreement entered into between
the registered owner and Covalent Group Inc. Copies of such Plan and Agreement
are on file in the principal offices of Covalent Group, Inc. and will be made
available to any Shareholder without charge upon request to the Secretary of the
Company."
The Board shall require that the share certificates evidencing
Restricted Stock be held in custody by the Company until the restrictions
thereon shall have lapsed, and that, as a condition of any Restricted Stock
award, the Participant shall have delivered to the Company a share power,
endorsed in blank, relating to the Shares covered by such award.
c. Restrictions and Conditions. The Restricted Stock awarded
pursuant to this Section 7 shall be subject to the following restrictions and
conditions:
(i) During a period set by the Board commencing with the date
of such award (the "Restriction Period"), the Participant shall not be permitted
to sell, transfer, pledge, assign or otherwise encumber Restricted Stock awarded
under the Plan. The Board, in its sole discretion, may provide for the lapse of
such restrictions in installments and may accelerate
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<PAGE>
or waive such restrictions in whole or in part, based on service, performance
and/or such other factors or criteria as the Board may determine, in its sole
discretion.
(ii) Except as provided in this paragraph (ii) and Section
7(c)(i), once the Participant has been issued a certificate or certificates for
Restricted Stock, the Participant shall have, with respect to the Restricted
Stock, all of the rights of a shareholder of the Company, including the right to
vote the Shares, and the right to receive any cash distributions or dividends.
The Board, in its sole discretion, as determined at the time of award, may
permit or require the payment of cash distributions or dividends to be deferred
and, if the Board so determines, reinvested in additional Restricted Stock to
the extent Shares are available under Section 3 of the Plan.
(iii) Subject to the applicable provisions of the award agreement
and this Section 7, upon termination of a Participant's service with the Company
for reasons other than death or Disability during the Restriction Period, all
Restricted Stock still subject to restriction shall be forfeited by the
Participant. Subject to the provisions of the Plan, the Board, in its sole
discretion, may provide for the lapse of such restrictions in installments and
may waive such restrictions, in whole or in part, at any time, based on such
factors as the Board shall deem appropriate in its sole discretion. Upon the
death or Disability of a Participant during the Restriction Period, restrictions
will lapse with respect to a percentage of the Restricted Stock award granted to
the Participant that is equal to the percentage of the Restriction Period that
has elapsed as of the date of death or the date on which such Disability
commenced (as determined by the Board in its sole discretion), and a share
certificate or share certificates representing such Shares, without bearing the
restrictive legend described in Section 7(b), shall be delivered by the Company
to the Participant or the Participant's estate, as the case may be, in exchange
for the share certificate or share certificates that contain such restrictive
legend.
(iv) In the event of hardship or other special circumstances of
a Participant whose service with the Company is involuntarily terminated (other
than for Cause), the Board may, in its sole discretion, waive in whole or in
part any or all remaining restrictions with respect to such Participant's
Restricted Stock, based on such factors as the Board may deem appropriate.
(v) If and when the Restriction Period expires without a prior
forfeiture of the Restricted Stock subject to such Restriction Period, the
certificates for such Shares, without bearing the restrictive legend described
in Section 7(b), shall be promptly delivered by the Company to the Participant,
in exchange for the share certificate or share certificates that contain such
restrictive legend.
(vi) Upon a Change in Control, the Board in its sole discretion
may cause all previously unvested Restricted Stock to become vested and/or
unrestricted. In addition, the Board may (i) substitute Restricted Stock in any
successor entity for the Restricted Stock outstanding hereunder, (ii) cancel
Restricted Stock in exchange for cash and/or other substitute
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consideration with a value equal to the value of the outstanding Restricted
Stock, (iii) cause the Restricted Stock to remain outstanding in whole or part,
or (iv) take any other or further action with respect to disposition of
outstanding Restricted Stock.
SECTION 8. STOCK BONUSES.
a. Awards and Administration. Shares may be awarded from time to time
as Stock Bonuses, either alone or in addition to other awards under the Plan.
Any such award shall be subject to such terms, restrictions or conditions as the
Board may determine, including (i) any requirement that the person to whom such
award is made enter into a shareholders' agreement or any other agreement with
respect to disposition of the shares; (ii) any restriction on transfer; or (iii)
any requirement of an investment representation. As a further condition of any
award, the Company may withhold such amount as may be necessary to meet any tax
withholding obligations from Shares, compensation or other amounts as may be due
to the person to whom any award is made.
b. Termination of Service. Stock Bonus awards shall be subject to such
vesting conditions as the Board may impose, including any forfeiture conditions
for competition, dismissal for cause, or breach of any representation or
obligation of the person to whom such award is made.
SECTION 9. CASH BONUS RIGHTS.
a. Grant. The Board of Directors may grant cash bonus rights under the
Plan in connection with (i) Options granted or previously granted; (ii) Stock
Appreciation Rights granted or previously granted; (iii) Stock Bonuses awarded
or previously awarded; and (iv) shares sold or previously sold under the Plan.
Cash Bonus Rights will be subject to rules, terms and conditions as the Board of
Directors may prescribe. The payment of a cash bonus shall not reduce the number
of shares of Common Stock reserved for issuance under the Plan.
b. Cash Bonus Rights in Connection with Options. A Cash Bonus Right
granted in connection with an Option will entitle an optionee to a cash bonus
when the related Option is exercised (or terminates in connection with the
exercise of a Stock Appreciation Right related to the Option) in whole or in
part. If an optionee purchases shares upon exercise of an Option, and does not
exercise a related Stock Appreciation Right, the amount of the bonus shall be
determined by multiplying the excess of the total fair market value of the
shares to be acquired upon the exercise over the total price for the shares by
the applicable bonus percentage. If the optionee exercises a related Stock
Appreciation Right in connection with the termination of an Option, the amount
of the bonus shall be determined by multiplying the total fair market value of
the shares and cash received pursuant to the exercise of the Stock Appreciation
Right by the applicable bonus percentage. The bonus percentage applicable to a
bonus right shall be determined from time to time by the Board of Directors but
shall in no event exceed 75 percent.
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<PAGE>
c. Cash Bonus Rights in Connection with Stock Bonus. A Cash Bonus
Right granted in connection with a Stock Bonus will entitle the recipient to a
cash bonus payable when the Stock Bonus is awarded or restrictions if any, to
which the stock is subject lapse. If bonus stock awarded is subject to
restrictions and is repurchased by the Company or forfeited by the holder, the
Cash Bonus Right granted in connection with the Stock Bonus shall terminate and
may not be exercised. The amount and timing of payment of a cash bonus shall be
determined by the Board of Directors.
d. Taxes. The Company shall withhold from any cash bonus paid pursuant
to Section 9 the amount necessary to satisfy any applicable federal, state and
local withholding requirements.
SECTION 10. OPTION GRANTS TO NON-EMPLOYEE DIRECTORS.
a. Initial Non-Discretionary Grants. Each person who is or becomes a
Non-Employee Director after the Effective Date shall be automatically granted an
option to purchase 10,000 shares of Common Stock on the date he or she becomes a
Non-Employee Director. A "Non-Employee Director" is a director who is not an
employee of the Company or any of its subsidiaries and has not been an employee
of the Company or any of its subsidiaries within one year of any date as of
which a determination of eligibility is made.
b. Annual Non-Discretionary Grants to Continuing Non-Employee
Directors. Each person who is or becomes a Continuing Non-Employee Director
after the Effective Date shall automatically annually receive on the day of the
Company's regular annual meeting of its shareholders, a nondiscretionary grant
of the option to purchase up to 10,000 shares of the Company's Common Stock. A
"Continuing Non-Employee Director" is a Non-Employee Director who continuously
serves as a Non-Employee Director of the Company during a period of time which
includes the date(s) upon which one or more annual shareholder meetings of the
Company are held.
c. Exercisability. All options granted pursuant to paragraph (b) above
shall be immediately exercisable after 12 complete months of continuous service
following the date of grant for the total number of shares covered by the option
(the "Option Shares"). However, no portion of the Option is exercisable prior to
12 complete months of continuous service.
d. Exercise Price. The exercise price of any option granted pursuant
to this Section 10 shall be equal to the Fair Market Value of the shares for
which the Option is granted.
e. Term of Option. The terms of each option granted pursuant to this
Section 10 shall be five (5) years from the date of grant.
f. "Complete Month". For all purposes of this Section 10 a complete
month shall be deemed to be the period which starts on the day of grant and ends
on the same day of the
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<PAGE>
following calendar month, so that each successive "complete month" ends on the
same day of each successive calendar month (or, in respect of any calendar month
which does not include such a day, that "complete month" shall end on the first
day of the next following calendar month).
g. Termination as a Director. If an optionee ceases to be a director
of the Company for any reason, including death, all options granted pursuant to
this Section 10 may be exercised at any time prior to the expiration date of the
option or the expiration of 60 days (or 12 months in the event of death) after
the last day the optionee served as a director, whichever is the shorter period,
but only if and to the extent the optionee was entitled to exercise the option
as of the last day the optionee served as a director.
h. Nontransferability. Each option granted pursuant to this Section 10
by its terms shall be nonassignable and nontransferable by the optionee, either
voluntarily or by operation of law, except by will or by the laws of descent and
distribution of the state or country of the optionee's domicile at the time of
death.
i. Exercise of Options. Any options granted pursuant to this Section
10 may be exercised upon payment of cash or shares of Company stock. Unless
otherwise determined by the Board of Directors, if an option is exercised within
six months of the date of grant, the shares acquired upon such exercise may not
be sold until six months after the date of grant.
SECTION 11. AMENDMENTS AND TERMINATION. The Board may amend, alter or
discontinue the Plan at any time, but no amendment, alteration or
discontinuation shall be made which would impair the rights of a Participant
with respect to an Option, SAR, Restricted Stock, Stock Bonus or Cash Bonus
Right which has been granted under the Plan, without the Participant's consent,
or which, without the approval of such amendment within one year (365 days) of
its adoption by the Board, by a majority of the votes cast at a duly held
shareholder meeting at which a quorum representing a majority of the Company's
outstanding voting shares is present (either in person or by proxy), would:
a. except as expressly provided in the Plan, increase the total
number of Shares reserved for the purposes of the Plan;
b. change the persons or class of persons eligible to participate in
the Plan; or
c. extend the maximum Option term under Section 5(b) of the Plan.
The Board may substitute new Options for previously granted Options,
including previously granted Options having higher exercise prices.
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<PAGE>
Subject to the above provisions, the Board shall have broad authority
to amend the Plan to take into account changes in applicable tax laws and
accounting rules, as well as other developments.
SECTION 12. UNFUNDED STATUS OF PLAN. The Plan is intended to
constitute an "unfunded" plan for incentive and deferred compensation. With
respect to any payments not yet made to a Participant by the Company, nothing
contained herein shall give any such Participant any rights that are greater
than those of a general creditor of the Company. In its sole discretion, the
Board may authorize the creation of trusts or other arrangements to meet the
obligations created under the Plan to deliver Shares or payments in lieu of
Shares or with respect to awards hereunder.
SECTION 13. GENERAL PROVISIONS.
a. The Board may require each person acquiring Shares or a Share-
based award under the Plan to represent to and agree with the Company in writing
that the Participant is acquiring the Shares or Share-based award for investment
purposes and without a view to distribution thereof and as to such other matters
as the Board believes are appropriate to ensure compliance with applicable
Federal and state securities laws. The certificate evidencing such award and any
securities issued pursuant thereto may include any legend which the Board deems
appropriate to reflect any restrictions on transfer and compliance with
securities laws.
All certificates for Shares or other securities delivered under the
Plan shall be subject to such share-transfer orders and other restrictions as
the Board may deem advisable under the rules, regulations, and other
requirements of the Securities Act of 1933, as amended, the Exchange Act, any
stock exchange upon which the Shares are then listed, and any other applicable
Federal or state securities laws, and the Board may cause a legend or legends to
be put on any such certificates to make appropriate reference to such
restrictions.
b. Nothing contained in the Plan shall prevent the Board from
adopting other or additional compensation arrangements, subject to shareholder
approval if such approval is required; and such arrangements may be either
generally applicable or applicable only in specific cases.
c. The adoption of the Plan shall not confer upon any employee of
the Company or a Subsidiary any right to continued employment with the Company
or such Subsidiary, nor shall it interfere in any way with the right of the
Company or such Subsidiary to terminate the employment of any of its employees
at any time.
d. No later than the date as of which an amount first becomes
includable in the gross income of the Participant for Federal income tax
purposes with respect to any award under the Plan, the Participant shall pay to
the Company, or make arrangements satisfactory to the Board regarding the
payment, of any Federal, state or local taxes of any kind required by law
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<PAGE>
to be withheld with respect to such amount. Unless otherwise determined by the
Board, the minimum required withholding obligations may be settled with Shares,
including Shares that are part of the award that gives rise to the withholding
requirement. The obligations of the Company under the Plan shall be conditional
on such payment or arrangements and the Company shall, to the extent permitted
by law, have the right to deduct any such taxes from any payment of any kind
otherwise due to the Participant.
e. At the time of grant of an award under the Plan, the Board may
provide that the Shares received as a result of such grant shall be subject to a
right of first refusal, pursuant to which the Participant shall be required to
offer to the Company any Shares that the Participant wishes to sell, with the
price being the then Fair Market Value of the Shares, subject to such other
terms and conditions as the Board may specify at the time of grant.
f. The reinvestment of distributions or dividends in additional
Restricted Stock (or in other types of Plan awards) at the time of any
distribution or dividend payment shall only be permissible if sufficient Shares
are available under Section 3 of the Plan for such reinvestment (taking into
account then outstanding Options and other Plan awards).
g. The Board shall establish such procedures as it deems appropriate
for a Participant to designate a beneficiary to whom any amounts payable in the
event of the Participant's death are to be paid.
h. The Plan and all awards made and actions taken thereunder shall
be governed by and construed in accordance with the laws of the Commonwealth of
Pennsylvania.
SECTION 14. EFFECTIVE DATE OF PLAN. The original effective date of
the Plan was September 20, 1996, the date on which it was approved by
shareholders. This amended and restated Plan is effective as of March 16, 2000,
the date on which the Board approved the increase in the number of Shares
subject to award. No Option granted after March 16, 2000 shall be treated as an
ISO unless the increase in the number of Shares subject to Option, effective
that date, is approved by vote of the shareholders on or before March 15, 2001.
SECTION 15. TERM OF PLAN. No Option, SAR, Restricted Stock, Long-Term
Performance Award, Performance Share or Performance Unit shall be granted
pursuant to the Plan on or after September 20, 2006. Awards granted prior to
such tenth (10th) anniversary may extend beyond that date.
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PROXY CARD -- COVALENT GROUP, INC. 2000 ANNUAL MEETING
The undersigned hereby constitutes and appoints William K. Robinson and David
Weitz, or each or any of them, as proxies for the undersigned, with full power
of substitution, for and in the name of the undersigned, to appear at the Annual
Meeting of Stockholders of Covalent Group, Inc. to be held on June 22, 2000 and
at any postponement or adjournment thereof, and to vote all of the shares of
Covalent Group, Inc. that the undersigned is entitled to vote, with all power
and authority the undersigned would possess if personally present. The
undersigned hereby directs this proxy to be voted as follows:
[X] Please mark your votes as in this example.
<TABLE>
<CAPTION>
1. Election of Directors:
FOR WITHHELD
<S> <C> <C>
Kenneth M. Borow, M.D. [ ] [ ]
Anthony Cerami, Ph.D. [ ] [ ]
Donald C. Holdsworth [ ] [ ]
William K. Robinson [ ] [ ]
Stephen Sallan, M.D. [ ] [ ]
</TABLE>
[ ] FOR all nominees listed except as marked to the contrary below:
- -----------------------------
- -----------------------------
[ ] WITHHOLD all nominees.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C> <C>
2. Proposal to approve an amendment
to the 1996 Stock Incentive Plan to
increase the number of Common Stock
shares reserved for issuance from
2,500,000 to 3,000,000. [ ] [ ] [ ]
FOR AGAINST ABSTAIN
<S> <C> <C> <C>
3. Proposal to ratify the selection of
Arthur Andersen LLP to serve as the Company's
independent accountants for the fiscal year
ending December 31, 2000. [ ] [ ] [ ]
</TABLE>
The proxies will vote in their discretion upon such other business as may
properly come before the Annual Meeting or any postponement or adjournment
thereof.
YOUR PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. YOUR PROXY WILL BE
VOTED AS DIRECTED. IN THE ABSENCE OF DIRECTION, YOUR PROXY WILL BE VOTED FOR
THE FOUR NOMINEES FOR ELECTION AS DIRECTORS AND FOR PROPOSAL 2 AND PROPOSAL 3.
STOCKHOLDERS ARE URGED TO DATE, MARK, SIGN AND RETURN THE PROXY PROMPTLY IN THE
ENVELOPE PROVIDED, WHICH REQUIRES NO POSTAGE IF MAILED WITHIN THE UNITED STATES.
<PAGE>
SIGNATURE_________________________________ DATE_________________
(Signature of Stockholder)
SIGNATURE_________________________________ DATE_________________
(Signature of Stockholder)
Note: Please sign exactly as your name appears on stock certificate (as
indicated hereon).
