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
[ ] Definitive Proxy Statement permitted by Rule 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
DYNAGEN, 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] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
not applicable
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(2) Aggregate number of securities to which transactions applies:
not applicable
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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):
not applicable
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(4) Proposed maximum aggregate value of transaction:
not applicable
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(5) Total fee paid:
not applicable
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[ ] Fee paid previously with preliminary materials.
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[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
not applicable
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(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
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DYNAGEN, INC.
99 ERIE STREET
CAMBRIDGE, MA 02139
(617) 491-2527
-------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
-------------------
To The Stockholders:
The Annual Meeting of Stockholders of DynaGen, Inc., a Delaware
corporation (the "Corporation"), will be held on Tuesday, October 1, 1996, at
9:30 a.m., at the DoubleTree Guest Suites Hotel, 400 Soldiers Field Road,
Boston, Massachusetts 02134, for the following purposes:
1. To elect a Board of Directors for the ensuing year.
The nominees the Board proposes to present for election are: Dr.
Ian R. Ferrier, Steven Georgiev, Dr. Indu A. Muni, Dr. F. Howard
Schneider and Dhananjay G. Wadekar.
2. To consider and act upon a proposal to approve an amendment to
the Corporation's Certificate of Incorporation to increase the
number of authorized shares of Common Stock, $.01 par value per
share ("Common Stock"), from 40,000,000 to 60,000,000 shares.
3. To consider and act upon a proposal to approve an amendment to
the Corporation's 1991 Stock Plan to increase the number of
shares of Common Stock of the Corporation authorized to be issued
thereunder from 1,200,000 to 2,200,000 shares.
4. To transact such other business as may properly come before the
meeting and any adjournments thereof.
Stockholders entitled to notice of and to vote at the meeting shall be
determined as of August 16, 1996, the record date fixed by the Board of
Directors for such purpose.
All stockholders are cordially invited to attend the Meeting. To ensure
your representation at the meeting, however, you are urged to sign 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,
DHANANJAY G. WADEKAR
Chairman
August 19, 1996
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING. WHETHER
OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE SIGN THE ENCLOSED PROXY CARD AND
RETURN IT PROMPTLY IN THE ENCLOSED STAMPED ENVELOPE BY RETURN MAIL.
DYNAGEN, INC.
99 ERIE STREET
CAMBRIDGE, MA 02139
--------------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
---------------------
AUGUST 19, 1996
Proxies in the form enclosed with this Proxy Statement are solicited by
the Board of Directors of DynaGen, Inc., a Delaware corporation (the
"Corporation"), for use at the Annual Meeting of Stockholders to be held on
Tuesday, October 1, 1996, at 9:30 a.m. (the "Meeting"), at the DoubleTree Guest
Suites Hotel, 400 Soldiers Field Road, Boston, Massachusetts 02134.
Only stockholders of record as of August 16, 1996 will be entitled to
notice of and to vote at the Meeting and any adjournments thereof. As of that
date, [28,559,999] shares of the Corporation's Common Stock, $.01 par value per
share (the "Common Stock"), were issued and outstanding. The holders of Common
Stock are entitled to one vote per share on any proposal presented at the
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 Meeting and vote in
person. Any stockholder giving a proxy has the right to revoke it at any time
before it is exercised. Proxies may be revoked by (1) filing with the Secretary
of the Corporation, before the taking of the vote at the Meeting, a written
notice of revocation bearing a later date than the proxy, (2) duly executing a
later dated proxy relating to the same shares and delivering it to the Secretary
of the Corporation before the taking of the vote at the Meeting or (3) attending
the Meeting and voting in person (although attendance at the 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 DynaGen,
Inc., 99 Erie Street, Cambridge, MA 02139, Attention: Secretary, at or before
the taking of the vote at the Meeting.
The persons named as attorneys in the proxy are directors and officers
of the Corporation. All properly executed proxies returned in time to be counted
at the Meeting will be voted and, with respect to the election of the Board of
Directors, will be voted as stated below under "Election of Directors." Any
stockholder submitting 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
on the space provided on the proxy.
-2-
In addition to the election of directors, the stockholders will
consider and vote upon proposals (i) to amend the Corporation's Certificate of
Incorporation to increase the number of authorized shares of Common Stock from
40,000,000 to 60,000,000 shares and (ii) to approve an amendment to the
Corporation's 1991 Stock Plan to increase the number of shares of Common Stock
of the Corporation authorized to be issued thereunder from 1,200,000 to
2,200,000 shares, all as further described in this Proxy Statement.
The representation in person or by proxy of at least a majority of the
outstanding shares of Common Stock entitled to vote at the Meeting is necessary
to establish a quorum for the transaction of business. Votes withheld from any
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 the broker does not have
discretionary voting power and has not received instructions from the beneficial
owner. Directors are elected by a plurality of the votes cast by stockholders
entitled to vote at the Meeting. All other matters being submitted to
stockholders require the affirmative vote of the majority of shares present in
person or represented by proxy at the Meeting, except that the proposal to amend
the Corporation's Certificate of Incorporation requires the affirmative vote of
a majority of the outstanding shares of Common Stock entitled to vote at the
Meeting. 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 and, therefore, with respect to votes
on specific proposals, will have the effect of negative votes. Broker
"non-votes" are not so included but have the effect of a vote "against" the
proposal to amend the Certificate of Incorporation.
Where a choice has been specified on the proxy with respect to the
foregoing matters, the shares represented by the proxy will be voted in
accordance with the specification. The shares will be voted FOR the matter in
question if no specification is made.
The Board of Directors knows of no other matter to be presented at the
Meeting. If any other matter should be presented at the Meeting upon which a
vote properly may be taken, shares represented by all proxies received by the
Corporation will be voted with respect thereto in accordance with the best
judgment of the persons named as attorneys in the proxies.
The Corporation's Annual Report, containing financial statements and
Management's Discussion and Analysis of Financial Condition and Results of
Operations for the fiscal year ended June 30, 1996, is being mailed
contemporaneously with this Proxy Statement to all stockholders entitled to
vote. This Proxy Statement and the form of proxy were first mailed to
stockholders on or about August 19, 1996.
-3-
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of August 16, 1996, certain
information concerning the ownership of the Corporation's Common Stock by: (i)
each person who is known by the Corporation to own beneficially five percent or
more of the outstanding shares of the Corporation's Common Stock; (ii) each of
the Corporation's directors; (iii) the chief executive officer and each other
executive officer of the Corporation whose annual compensation exceeded
$100,000; and (iv) all directors and executive officers as a group. Except as
otherwise indicated, to the knowledge of the Corporation, the persons listed in
the table have sole voting and investment powers with respect to the shares
indicated.
PERCENTAGE OF
SHARES OUTSTANDING
BENEFICIALLY COMMON
NAME OF BENEFICIAL OWNER OWNED STOCK(1)
------------------------ ----- --------
Dhananjay G. Wadekar......................... 1,651,250 5.8%
99 Erie Street
Cambridge, Massachusetts 02139
Dr. Indu A. Muni.............................. 1,437,250 5.0%
99 Erie Street
Cambridge, Massachusetts 02139
Dr. F. Howard Schneider(2).................... 270,000 *
99 Erie Street
Cambridge, Massachusetts 02139
Dr. Ian R. Ferrier............................ 0 0%
c/o Bogart Delafield Ferrier, Inc.
North Tower, 5th Floor
49 Headquarters Plaza
Morristown, New Jersey 07960
Steven Georgiev............................... 0 0%
c/o Palomar Medical Technologies, Inc.
66 Cherry Hill Drive
Beverly, Massachusetts 01915
All Directors and Executive Officers as a
group (6 persons)(2) 3,447,250 12.0%
- - - ----------------
* INDICATES LESS THAN 1%.
(1) As of August 16, 1996, there were [28,559,999] shares of the
Corporation's Common Stock outstanding. Pursuant to the rules of the
Securities and Exchange Commission, shares of Common Stock that an
individual or group has a right to
-4-
acquire on or before October 15, 1996 (i.e., within 60 days of August
16, 1996) pursuant to the exercise of presently exercisable or
outstanding options, warrants or conversion privileges are deemed to be
outstanding for the purpose of computing the percentage ownership of
such individual or group, but are not deemed to be outstanding for the
purpose of computing the percentage ownership of any other person shown
in the table. Information with respect to beneficial ownership is based
upon information furnished by such stockholder.
(2) Includes 200,000 shares issuable to Dr. Schneider pursuant to
immediately exercisable stock options. Does not include 100 shares
owned by Dr. Schneider's wife, of which he disclaims any beneficial
interest or control.
ELECTION OF DIRECTORS
Each Director of the Corporation is elected to hold office until the
next annual meeting of stockholders, and until his successor is elected and
qualified. Shares represented by all proxies received by the Corporation and not
so marked as to withhold authority to vote for any individual nominee for
Director or for all nominees will be voted (unless one or more nominees are
unable or unwilling to serve) for the election of the five nominees named below.
The Board of Directors knows of no reason why any such nominee should be unable
or unwilling to serve, but if such should be the case, proxies will be voted for
the election of another person or for fixing the number of Directors at a lesser
number. All of the nominees are currently Directors of the Corporation. Proxies
cannot be voted for more than five nominees.
NOMINEES FOR DIRECTOR
The nominees for Directors of the Corporation are as follows:
NAME AGE POSITION
---- --- --------
Dr. Ian R. Ferrier......... 53 Director
Steven Georgiev............ 61 Director
Dr. Indu A. Muni........... 53 President, Chief Executive Officer,
Treasurer and Director
Dr. F. Howard Schneider.... 57 Senior Vice President - Technology and
Director
Dhananjay G. Wadekar....... 42 Chairman of the Board, Executive Vice
President and Director
-5-
DR. IAN R. FERRIER. Dr. Ferrier has served as a Director of the
Corporation since July 1996. In 1983, he founded Bogart Delafield Ferrier,
Inc.("Bogart Delafield Ferrier"), a healthcare consulting firm that provides
strategic consulting services to pharmaceutical and biotechnology companies. Dr.
Ferrier has served as Chief Executive Officer of Bogart Delafield Ferrier since
1983 and as Chairman since 1989. He earned a medical degree from Edinburgh
University and specialized in clinical pharmacology during postgraduate
training. Prior to founding Bogart Delafield Ferrier, he held various clinical
research and management positions with ICI Pharmaceuticals, Kalipharma Inc., and
the Tech America Group. He serves as a director on the board of NASTECH
Pharmaceuticals Co., Inc., a publicly traded company, and on the boards of
several privately held biotechnology and pharmaceutical companies.
STEVEN GEORGIEV. Mr. Georgiev has served as a Director of the
Corporation since July 1996. Since November 12, 1993, he has been Chief
Executive Officer of Palomar Medical Technologies, Inc. ("Palomar"), a publicly
traded Massachusetts firm specializing in medical applications of lasers, and
from November 12, 1993 until August 3, 1994 he was also President of Palomar.
Mr. Georgiev was a consultant to Palomar's predecessor, Dymed Corporation, from
June 1991 until Palomar's September 1991 merger with Dymed Corporation, at which
time he became Palomar's Chairman of the Board of Directors. Mr. Georgiev has
been a director of Excel Technology, Inc., a publicly traded laser system and
electro-optical component company, since October 1992, and XXSYS Technology,
Inc. since June 1994. Mr. Georgiev earned a B.S. degree in Engineering Physics
from Cornell University and a M.S. in Management from the Massachusetts
Institute of Technology.
DR. INDU A. MUNI. Dr. Muni is a co-founder of the Corporation and has
served as President and a Director of the Corporation since inception and as
Chief Executive Officer and Treasurer since July 1990. From May 1988 to November
1988, Dr. Muni served as Vice President of Biomaterial and Environmental Science
and Engineering for Holometrix, Inc., a publicly traded thermal instrumentation
company. Between July 1987 and May 1988, Dr. Muni provided biological consulting
services to pharmaceutical and biotechnology companies as an independent
consultant. From February 1981 to July 1987, Dr. Muni served as Executive Vice
President of Bioassay Systems Corporation, a publicly traded provider of
contract research and development services in the areas of pharmaceutical and
diagnostic systems.
DR. F. HOWARD SCHNEIDER. Dr. Schneider has served as a Director of the
Corporation since September 1989, was Chairman of the Board of the Corporation
from July 1990 until February 1991 and became Senior Vice President - Technology
effective June 1991. Dr. Schneider was previously a partner and Senior Vice
President of Bogart Delafield Ferrier. Dr. Schneider participated in the
management buy out of Bogart Delafield from its parent corporation, McCann
Healthcare Group, a subsidiary of Inter Public Group.
DHANANJAY G. WADEKAR. Mr. Wadekar is a co-founder of the Corporation
and has served as a Director of the Corporation since inception and as Chairman
of the Board and Executive Vice President of the Corporation since November
1991. In addition, he served as the Chairman, Chief Executive Officer and
Treasurer of the Corporation from its inception until July 1990 and as a
consultant to the Corporation during the period July 1990 to October 1991. Since
April 1996, Mr. Wadekar has served as a director of CSL Lighting Manufacturing,
Inc., a publicly traded manufacturer of high-end lighting fixtures. Mr. Wadekar
was a director of Holometrix, Inc., a publicly traded thermal instrumentation
company which he founded, from 1985 until November 1994.
-6-
BOARD MEETINGS AND COMMITTEES
The Board of Directors met six times during the fiscal year ended June
30, 1996. Each incumbent Director who served during the fiscal year ended June
30, 1996 attended at least 75% of the meetings of the Board held during the
period in which he served. The Board of Directors has a Stock Option Committee,
of which Dr. Muni and Mr. Wadekar are currently members, which administers the
Corporation's 1989 Stock Option Plan and 1991 Stock Plan. The Stock Option
Committee did not meet during the fiscal year ended June 30, 1996. The Board of
Directors has an Audit Committee, of which Dr. Ferrier and Mr. Georgiev are
currently members, which oversees all financial functions of the Corporation,
including matters relating to the appointment and activities of the
Corporation's auditors, audit plans and procedures, various accounting and
financial reporting issues and changes in accounting policies. The Audit
Committee met two times during the fiscal year ended June 30, 1996. Henry E.
Blair and Mark Skaletsky, who served as directors of the Corporation and the
sole members of the Audit Committee until July 1996 and June 1996, respectively,
both attended all meetings of the Audit Committee. The Board of Directors does
not currently have a standing compensation or nominating committee.
Although the Board of Directors did not have a compensation committee
during the fiscal year ended June 30, 1996, on July 24, 1996, the Board
established an Executive Compensation Committee, of which Dr. Ferrier and Mr.
Georgiev are the members. The Executive Compensation Committee will review and
set cash and non-cash compensation for Dr. Muni and Mr. Wadekar and will provide
guidance to the Board of Directors and the Stock Option Committee on the cash
and non-cash compensation payable to other officers and employees of the
Corporation.
COMPENSATION OF DIRECTORS
Directors are not compensated for attending meetings of the Board of
Directors. Directors are reimbursed for out-of-pocket expenses incurred in
connection with attendance at meetings and other services as Directors.
Directors are entitled to receive stock options under the 1991 Stock Plan and
the 1989 Stock Option Plan. To date, Messrs. Wadekar and Muni have received no
options, and Mr. Schneider has received options to purchase a total of 310,000
shares of the Corporation's Common Stock under the 1991 Stock Plan and 1989
Stock Option Plan. In addition, the Board of Directors granted to Messrs.
Ferrier and Georgiev options to purchase 330,000 shares each, which options were
granted outside of the 1991 Stock Plan and 1989 Stock Option Plan. The
Corporation's Stock Option Committee, which administers the Corporation's 1989
Stock Option Plan and 1991 Stock Plan, has a general policy of awarding stock
options at not less than fair market value at the date of grant, and options
generally vest over 2, 3 or 4 years. During the fiscal year ended June 30, 1996,
however, the Stock Option Committee awarded stock options to Mr. Schneider and
certain other officers of the Corporation at an exercise price of $.01, which
options were fully vested on the date of grant.
-7-
EXECUTIVE COMPENSATION AND OTHER INFORMATION
CONCERNING OFFICERS AND DIRECTORS
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning the annual and
long-term compensation for services in all capacities to the Corporation for the
fiscal years ended June 30, 1996, 1995 and 1994, of those persons who were at
June 30, 1996 (i) the chief executive officer and (ii) each other executive
officer of the Corporation whose annual compensation exceeded $100,000 (the
"Named Officers"):
<TABLE>
<CAPTION>
LONG-TERM
---------
COMPENSATION(2)
---------------
AWARDS
ANNUAL COMPENSATION(1) ------
---------------------- NUMBER OF
FISCAL SALARY BONUS OTHER ANNUAL OPTIONS/ ALL OTHER
NAME AND PRINCIPAL POSITION YEAR ($) ($) COMPENSATION($) SARS(#) COMPENSATION($)
- - - --------------------------- ---- --- --- --------------- ------- ---------------
<S> <C> <C> <C> <C> <C> <C>
DR. INDU A. MUNI.............. 1996 115,500 -- -- -- 304(3)
President, Chief Executive 1995 115,500 -- -- -- 304(3)
Officer and Treasurer 1994 112,875 -- -- -- 304(3)
DHANANJAY G. WADEKAR........... 1996 115,500 -- -- -- 304(3)
Chairman of the Board and 1995 115,500 -- -- -- 304(3)
Executive Vice President 1994 112,875 -- -- -- 304(3)
DR. F. HOWARD SCHNEIDER........ 1996 115,500 -- -- 10,000 304(3)
Senior Vice President - 1995 115,500 -- -- -- 304(3)
Technology 1994 112,875 -- -- 150,000(4) 15,476(5)
</TABLE>
- - - ---------------
(1) Excludes perquisites and other personal benefits, the aggregate annual
amount of which for each officer was less than the lesser of $50,000 or
10% of the total salary and bonus reported.
(2) The Corporation did not grant any restricted stock awards or stock
appreciation rights ("SARs") or make any long-term incentive plan
payouts during the fiscal years ended June 30, 1996, 1995 and 1994.
(3) Amount represents the dollar value of group-term life insurance
premiums paid by the Corporation for the benefit of the Named Officer.
(4) The Corporation repriced certain of Dr. Schneider's outstanding options
in Fiscal 1994 as follows: Options to purchase 150,000 shares granted
in July 1992 at an exercise price of $5.25 were canceled in exchange
for options to purchase 150,000 shares at an exercise price of $.75 per
share, the fair market value of the Corporation's Common Stock on the
date of exchange, April 27, 1994.
(5) Amount is comprised of: (i) $15,172 representing forgiveness from
repayment of a loan owed to the Corporation by Dr. Schneider and (ii)
$304 representing the dollar value of group-term life insurance
premiums paid by the Corporation for the benefit of Dr. Schneider.
-8-
OPTIONS/SAR GRANTS TABLE
The following table sets forth each grant of stock options made during
the year ended June 30, 1996 to each of the Named Officers:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
------------------------------------------------------------- VALUE AT ASSUMED
% OF TOTAL ANNUAL RATES OF
NUMBER OF OPTIONS MARKET STOCK PRICE APPRECIATION
SECURITIES GRANTED TO PRICE ON FOR OPTION TERM (2)
UNDERLYING EMPLOYEES EXERCISE DATE OF --------------------------------
OPTIONS IN FISCAL PRICE GRANT EXPIRATION
NAME GRANTED(1) YEAR ($/SHARE) ($/SHARE) DATE 0%($) 5%($) 10%($)
- - - ---- ---------- ---- --------- --------- ---- ----- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Dr. Indu A. Muni....... ----- ----- ----- ----- ----- ----- ----- -----
Dhananjay G. Wadekar... ----- ----- ----- ----- ---- ----- ----- -----
Dr. F. Howard Schneider. 10,000 18.2% 0.01 3.19 2/02/03 31,775 44,751 62,015
</TABLE>
- - - ----------------
(1) All options granted are reflected in the Summary Compensation Table,
were granted on February 2, 1996 and were fully exercisable immediately
upon grant.
(2) Amounts reported in these columns represent amounts that may be realized
upon exercise of the options immediately prior to the expiration of
their term assuming the specified compounded rates of appreciation (0%,
5% and 10%) on the market value of the Corporation's Common Stock over
the term of the options. These numbers are calculated based on rules
promulgated by the Commission and do not reflect the Corporation's
estimate of future stock price growth. Actual gains, if any, on stock
option exercises and Common Stock holdings are dependent on the timing
of such exercises and the future performance of the Corporation's Common
Stock. There can be no assurance that the rates of appreciation assumed
in this table can be achieved or that the amounts reflected will be
received by the individuals.
OPTION EXERCISES AND FISCAL YEAR END VALUES
Presented below is further information with respect to unexercised
stock options to purchase the Corporation's Common Stock held by each Named
Officer as of June 30, 1996. None of the Named Officers exercised any stock
options during fiscal 1996.
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS HELD AT IN-THE-MONEY OPTIONS AT
JUNE 30, 1996(#) JUNE 30, 1996($)
---------------- ----------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - - ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Dr. Indu A. Muni 0 0 -- --
Dhananjay G. Wadekar 0 0 -- --
Dr. F. Howard Schneider 200,000 60,000 332,400 101,250
</TABLE>
Stock Plans. The Corporation currently maintains two employee stock
plans: the 1989 Stock Option Plan and the 1991 Stock Plan. Each plan is
administered by the Stock Option Committee of the Board of Directors. The 1991
Stock Plan currently provides for the grant of incentive stock options,
non-qualified options, awards and authorizations to purchase up to
-9-
1,200,000 shares of Common Stock. At the Meeting, the stockholders will consider
and vote upon a proposal to approve an amendment to the 1991 Stock Plan to
increase the number of shares of Common Stock authorized to be issued thereunder
from 1,200,000 to 2,200,000 shares (see "Proposal to Amend the 1991 Stock Plan"
below). The terms of options issued under the 1991 Stock Plan, including number
of shares, exercise price, duration and vesting, are generally determined by the
Stock Option Committee. As of June 30, 1996, options to purchase a total of
640,900 shares of Common Stock were outstanding under the 1991 Stock Plan, of
which options for 418,300 shares were then exercisable, and 506,900 shares of
Common Stock were reserved for future option grants.
The 1989 Stock Option Plan provides for the grant of incentive stock
options and non-qualified options to purchase up to an aggregate of 600,000
shares of Common Stock to the Corporation's employees, officers, directors and
consultants. The terms of such options, including number of shares, exercise
price, duration and vesting, are generally determined by the Stock Option
Committee. As of June 30, 1996, options to purchase a total of 220,000 shares of
Common Stock were outstanding under the 1989 Stock Option Plan, of which options
for 197,500 shares were then exercisable, and no shares of Common Stock were
reserved for future option grants.
BOARD OF DIRECTORS AND STOCK OPTION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Corporation's executive compensation program was administered by
the Board of Directors during fiscal 1996. The Board of Directors' informal
executive compensation philosophy (which applies generally to all of the
Corporation's management) considers a number of factors, which may include
providing levels of compensation competitive with companies at a comparable
stage of development and in the Corporation's geographic area, recognizing the
overall cost of living in the Corporation's geographical region, integrating
management's pay with the achievement of performance goals, rewarding above
average corporate performance, recognizing and providing incentive for
individual initiative and achievement, and promoting a cooperative spirit among
the executive officers of the Corporation. Senior management's compensation is
weighted more heavily toward compensation contingent upon the Corporation's
achieving certain business objectives. The Board of Directors also endorses the
position that equity ownership by management is beneficial in aligning
management's and stockholders' interest in the enhancement of stockholder value
by providing management with longer-term incentives. Accordingly, compensation
structures for management generally include a combination of salary and stock
options.
In setting cash compensation for Dr. Muni and Mr. Wadekar and reviewing
and approving the cash compensation for all other executive officers, the Board
of Directors reviews salaries for all executive officers annually. The Board of
Directors' policy is to fix base salaries at levels comparable to the amounts
paid to senior executives with comparable qualifications, experience and
responsibilities at other companies of similar size and engaged in a similar
business to that of the Corporation in the metropolitan Boston area (which
together comprise a subset of the Corporation's Peer Group Index referred to in
the Performance Graph below). In addition, the base salaries take into account
the Corporation's relative performance as compared to these
-10-
companies and the attainment of certain planned objectives. The Corporation
believes the present compensation for its executive officers is comparable to
these similarly situated companies.
The cash compensation program for Dr. Muni and Mr. Wadekar is designed
to reward performance that enhances stockholder value. The cash compensation
package is comprised only of base pay as a function of the several factors
mentioned above. Dr. Muni and Mr. Wadekar have not been issued any stock
options. As co-founders of the Corporation, each of Dr. Muni and Mr. Wadekar
have an appreciable share of the Corporation's outstanding Common Stock. As a
result, the Board of Directors currently believes that in the near term, Dr.
Muni's and Mr. Wadekar's equity interests are sufficiently aligned with the
Corporation's stockholders with respect to the goal of enhancing stockholder
value.
Incentive-based compensation is an integral part of the overall
compensation package of the remaining members of the executive group. Incentive
compensation in the form of stock options is designed to provide long-term
incentives to executive officers and other employees, to encourage the executive
officers and other employees to remain with the Corporation and to enable them
to develop and maintain a stock ownership position in the Corporation's Common
Stock. The Corporation's 1989 Stock Option Plan and 1991 Stock Plan,
administered by the Stock Option Committee (of which Dr. Muni and Mr. Wadekar
are the only members), have been used for the granting of stock options to
eligible employees, including executive officers. Because some of the
Corporation's products are still in a developmental stage and the Corporation is
only beginning to sell certain of its products, the Stock Option Committee has
granted stock options to all employees, officers and directors of the
Corporation in order to foster a spirit of cooperation and common purpose in
making the Corporation a successful enterprise.
During fiscal 1996, the Stock Option Committee granted options to
purchase 55,000 shares of Common Stock to the directors, officers and employees
of the Corporation. Options generally become exercisable based upon a vesting
schedule tied to years of future service to the Corporation. The value
realizable from exercisable options is dependent upon the extent to which the
Corporation's performance is reflected in the market price of the Corporation's
Common Stock at any particular point in time. Equity compensation in the form of
stock options is designed to provide long-term incentives to executive officers
and other employees. The Stock Option Committee has granted options in order to
motivate these employees to maximize stockholder value. Generally, options
granted to officers and employees vest over 2, 3 or 4 years and expire after a 7
or 10-year period. In addition, the Stock Option Committee has a general policy
of awarding stock options at not less than the fair market value at the date of
grant in order to reward executives and other employees only to the extent that
the stockholders also benefit through appreciation in the value of the
Corporation. On February 2, 1996, however, the Stock Option Committee granted
immediately exercisable options to purchase 55,000 shares of Common Stock to
certain officers of the Corporation at an exercise price of $0.01. In addition,
the Board of Directors awarded 117,250 shares of common stock, outside of the
1991 Stock Plan and the 1989 Stock Option Plan, without consideration to a
number of employees of the Corporation. The common stock and stock option awards
were made to recognize the past performance of all employees and to provide an
incentive to all employees to remain with the Corporation. The Board of
Directors believes that these awards foster a spirit of common purpose towards
making the corporation a successful enterprise.
-11-
Options granted to employees are based on such factors as individual
initiative, achievement and performance. In making specific grants to
executives, the Stock Option Committee evaluates each officer's total equity
compensation package. The Stock Option Committee generally reviews the option
holdings of each of the executive officers including vesting and exercise price
and the then current value of such unvested options. The Stock Option Committee
considers equity compensation to be an integral part of a competitive executive
compensation package and an important mechanism to align the interests of
management with those of the Corporation's stockholders.
The Board of Directors is satisfied that the executive officers of the
Corporation are dedicated to achieving significant improvements in the long-term
financial performance of the Corporation and that the compensation policies and
programs implemented and administered have contributed and will continue to
contribute towards achieving this goal.
This report has been submitted by the members of the Board of Directors
and the Stock Option Committee:
DR. IAN R. FERRIER
STEVEN GEORGIEV
DR. INDU A. MUNI
DR. F. HOWARD SCHNEIDER
DHANANJAY G. WADEKAR
-12-
PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return
(assuming reinvestment of dividends, if any) from investing $100 on June 30,
1991 in each of (i) the Corporation's Common Stock, (ii) The Nasdaq Stock Market
("Nasdaq") Market Index of U.S. Companies ("Nasdaq Index"), and (iii) the Nasdaq
Pharmaceutical Stock Index ("Peer Group Index"). The Peer Group Index reflects
the performance of all corporations that are members of the pharmaceutical
industry with 2830 as their Primary Standard Industrial Classification Code
Number. The values of all three indexes are set at $100 as of June 30, 1991 and
are plotted as of the end of each fiscal quarter through the most recent fiscal
year end.
[GRAPH]
<TABLE>
<CAPTION>
JUNE 30, 1991 JUNE 30, 1992 JUNE 30, 1993 JUNE 30, 1994 JUNE 30, 1995 JUNE 30, 1996
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
DYNAGEN, INC. $100 $ 82 $ 67 $ 9 $ 59 $ 32
NASDAQ INDEX 100 120 151 153 204 261
PEER GROUP 100 125 108 91 120 177
</TABLE>
-13-
EMPLOYMENT AND CONSULTING AGREEMENTS
The Corporation has entered into employment agreements with Dr. Muni,
the Corporation's President, Chief Executive Officer and Treasurer, Mr. Wadekar,
the Corporation's Chairman of the Board and Executive Vice President, and Dr.
Schneider, the Corporation's Senior Vice President -- Technology. Dr. Muni's
agreement expires in August 1997, and Mr. Wadekar's and Dr. Schneider's
agreements expire in October 1997. Under the agreements, Dr. Muni, Mr. Wadekar
and Dr. Schneider were paid annual base salaries of $115,500, effective October
1, 1993.
In addition, Dr. Muni, Mr. Wadekar and Dr. Schneider have each agreed
that (i) during his respective period of employment with the Corporation and for
a period of one year thereafter, he will not engage in any business activity
engaged in or under development by the Corporation and (ii) for a period of
three years following his respective period of employment, he will not engage in
any activities for any direct competitor similar or related to those activities
engaged in during the preceding two years of employment with the Corporation. In
the event the Corporation terminates Dr. Muni's, Mr. Wadekar's or Dr.
Schneider's employment without cause, the Corporation is obligated to pay to him
an amount equal to three months base salary.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Corporation did not have a Compensation Committee during fiscal
1996. The Board of Directors and the Stock Option Committee were responsible for
determining compensation of executive officers of the Corporation. During fiscal
1996, Drs. Muni and Schneider and Mr. Wadekar served on the Board of Directors.
None of these three officers was present during discussion of and abstained from
voting with respect to his own compensation as an executive officer of the
Corporation. The Stock Option Committee, of which Dr. Muni and Mr. Wadekar are
members, did not grant any options to Dr. Muni or Mr. Wadekar during fiscal
1996.
PROPOSAL TO AMEND THE CERTIFICATE OF INCORPORATION
By a Board of Directors resolution dated July 31, 1996, the Board of
Directors recommended to the stockholders that the Corporation amend the
Corporation's Certificate of Incorporation (the "Charter") to increase the
number of authorized shares of Common Stock from 40,000,000 to 60,000,000
shares. Shares of the Corporation's Common Stock, including the additional
shares proposed for authorization, do not have preemptive or similar rights.
As of August 16, 1996, there were approximately [28,559,999] shares
issued and outstanding and approximately 5,160,000 shares reserved for future
issuance pursuant to outstanding warrants, convertible debt and options. If the
amendment to the Charter is approved, the Board of Directors will have the
authority to issue approximately 31,440,000 additional shares of Common Stock
without further stockholder approval. The Board of Directors believes that 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
-14-
Directors to be necessary or desirable. These purposes may include, without
limitation, acquiring other businesses in exchange for shares of the
Corporation's 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 Corporation's Common Stock by effecting a stock split or issuing a stock
dividend, raising capital through the sale of 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
Corporation's existing stock plans. The Corporation at present has no plans,
commitments, agreements or undertakings to issue any such additional shares,
although it will continue to monitor market conditions in order to determine the
advisability of such action. 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.
Under the Delaware General Corporation Law, the Board of Directors
generally may issue authorized but unissued shares of Common Stock without
further stockholder approval. The Board of Directors does not currently intend
to seek stockholder approval prior to any future issuance of additional shares
of Common Stock, unless stockholder action is required in a specific case by
applicable law, the rules of any exchange or market on which the Corporation's
securities may then be listed, or the Charter or By-Laws of the Corporation then
in effect. Frequently, opportunities arise that require prompt action, and the
Corporation believes that the delay necessitated for stockholder approval of a
specific issuance could be to the detriment of the Corporation and its
stockholders.
The additional shares of Common Stock authorized for issuance pursuant
to this proposal will have all of the rights and privileges which the presently
outstanding shares of Common Stock possess under the Corporation's Charter. The
increase in authorized shares would not affect the terms or rights of holders of
existing shares of Common Stock. All outstanding shares of Common Stock would
continue to have one vote per share on all matters to be voted on by the
stockholders, including the election of directors.
The issuance of any additional shares of Common Stock by the
Corporation may, depending on the circumstances under which those shares are
issued, reduce stockholders' equity per share and may reduce the percentage
ownership of Common Stock of existing stockholders. The Corporation, however,
will receive consideration for any additional shares of Common Stock issued,
thereby reducing or eliminating the economic effect to each stockholder of such
dilution.
The authorized but unissued shares of Common Stock could be used to
make more difficult a change in control of the Corporation. For example, such
shares could be sold to purchasers who might side with the Board of Directors in
opposing a takeover bid that the Board determines not to be in the best
interests of the Corporation and its stockholders. Such a sale could have the
effect of discouraging an attempt by another person or entity, through the
acquisition of a substantial number of shares of the Corporation's Common Stock,
to acquire control of the Corporation, since the issuance of new shares could be
used to dilute the stock ownership of the acquirer. Neither the Charter nor
By-Laws of the Corporation now contain any provisions that are generally
considered to have an anti-takeover effect, and the Board of Directors does not
now plan to propose any anti-takeover measures in future proxy solicitations.
The Corporation is not aware of any pending or threatened efforts to obtain
control of the Corporation, and the Board of Directors has no current intention
to use the additional shares of Common Stock to impede a takeover attempt.
The proposal to amend the Charter requires the affirmative vote of a
majority of the outstanding shares of Common Stock entitled to vote at the
Meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL OF
THE AMENDMENT TO THE CORPORATION'S CERTIFICATE OF INCORPORATION.
PROPOSAL TO AMEND THE 1991 STOCK PLAN
AMENDMENT TO INCREASE THE NUMBER OF AUTHORIZED SHARES UNDER THE 1991 STOCK PLAN
The Corporation's 1991 Stock Plan (the "1991 Plan") was adopted by the
Board of Directors on October 14, 1991 and approved by the stockholders of the
Corporation on June 30, 1992. Originally, 1,200,000 shares of Common Stock were
reserved for issuance thereunder. On July 31, 1996, the Board of Directors
approved an amendment (the "Amendment") to the 1991 Plan increasing the number
of shares reserved for issuance thereunder from 1,200,000 to 2,200,000 shares,
subject to stockholder approval of the Amendment. At the Meeting, the
stockholders are being requested to consider and approve the Amendment.
The Board of Directors believes that the Corporation's ability to
continue to attract and retain qualified employment candidates is in large part
dependent upon the Corporation's ability to provide such employment candidates
long-term, equity-based incentives in the form of stock options as part of their
compensation. As of August 16, 1996, [506,900] shares remained available for
issuance under the 1991 Plan. The Board of Directors
-15-
believes that the remaining shares available for issuance under the 1991 Plan
are insufficient for such purposes.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR
AMENDMENT OF THE 1991 PLAN.
The essential features of the 1991 Plan are outlined below:
The 1991 Plan currently provides for the issuance of a maximum of
1,200,000 shares of Common Stock pursuant to the grant to employees of incentive
stock options ("ISOs") within the meaning of Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code"), and the grant of non-qualified stock
options ("NQSOs"), stock awards ("Awards") or opportunities to make direct
purchases of stock in the Corporation ("Purchases") to employees, consultants,
directors and officers of the Corporation. Currently, 24 employees (including
directors who are also employees of the Corporation and officers), 2
non-employee directors and approximately 12 consultants are eligible to
participate in the 1991 Stock Plan.
The 1991 Plan is administered by the Stock Option Committee of the
Board of Directors, which currently consists of two directors, Dr. Indu A. Muni
and Dhananjay G. Wadekar. Subject to the provisions of the 1991 Plan, the Stock
Option Committee has the authority to (i) determine to whom options, Awards and
authorizations to make Purchases may be granted; (ii) determine the time or
times at which options or Awards may be granted or Purchases made; (iii)
determine whether each option granted shall be an ISO or an NQSO; (iv) determine
the time or times when each option shall become exercisable and the duration of
the exercise period; (v) determine whether restrictions such as repurchase
options are to be imposed on shares subject to options, Awards and Purchases and
the nature of such restrictions, if any; and (vi) interpret the 1991 Plan and
prescribe and rescind rules and regulations relating to it. The Stock Option
Committee determines the exercise price per share for NQSOs, Awards and
Purchases under the 1991 Plan, so long as such exercise price is no less than
the minimum legal consideration required therefor under the laws of any
jurisdiction in which the Corporation may be organized. The exercise price per
share for each ISO granted under the 1991 Plan may not be less than the fair
market value per share of Common Stock on the date of such grant. In the case of
an ISO to be granted to an employee owning stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Corporation, the price per share for such ISO shall not be less than one hundred
ten percent (110%) of the fair market value per share of Common Stock on the
date of grant.
An option is not transferable by the optionholder except by will or by
the laws of descent and distribution or, with respect to NQSOs, pursuant to a
qualified domestic relations order. Each option expires on the date specified by
the Stock Option Committee, but not more than (i) ten years and one day from the
date of grant in the case of NQSOs, (ii) ten years from the date of grant in the
case of ISOs generally, and (iii) five years from the date of grant in the case
of ISOs granted to an employee owning stock possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of the
Corporation. Generally, no ISO may be
-16-
exercised more than 90 days following termination of employment. However, in the
event that termination is due to death or disability, the option is exercisable
for a maximum of 180 days after such termination. Options, Awards and
opportunities to make Purchases may be granted under the 1991 Plan at any time
prior to October 14, 2001.
As of August 16, 1996, options to purchase [640,900] shares of Common
Stock at a weighted average exercise price of $1.04 per share were outstanding
under the 1991 Plan. On August 16, 1996, the market price, as reported by the
Nasdaq SmallCap Market, of the Common Stock, the class of stock underlying all
options, Awards and Purchases under the 1991 Plan, was $[1.84] per share.
The following table sets forth as of August 16, 1996, options granted
under the 1991 Plan to (i) the individuals named in the Summary Compensation
Table, (ii) each nominee for election as a director, (iii) all current executive
officers as a group, (iv) all current directors who are not executive officers
as a group, and (v) all employees, excluding executive officers, as a group.
NUMBER OF SHARES
NAME AND POSITION UNDERLYING OPTIONS GRANTED
----------------- --------------------------
Dr. Ian R. Ferrier, Director 0
Steven Georgiev, Director 0
Dr. Indu A. Muni, President, 0
Chief Executive Officer,
Treasurer and Director
Dr. F. Howard Schneider, Senior Vice 160,000
President - Technology and Director
Dhananjay G. Wadekar, Chairman of the Board, 0
Executive Vice President and Director
All executive officers as a group 225,000
(4 persons)
All current directors who are not executive 0
officers as a group (2 persons)
All employees, excluding executive officers, 219,500
as a group
-17-
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
THE FOLLOWING DISCUSSION OF UNITED STATES FEDERAL INCOME TAX
CONSEQUENCES OF THE ISSUANCE AND EXERCISE OF OPTIONS AND CERTAIN OTHER RIGHTS
GRANTED UNDER THE 1991 PLAN IS BASED UPON THE PROVISIONS OF THE CODE AS IN
EFFECT ON THE DATE OF THIS PROXY STATEMENT, CURRENT REGULATIONS, AND EXISTING
ADMINISTRATIVE RULINGS OF THE INTERNAL REVENUE SERVICE. IT IS NOT INTENDED TO BE
A COMPLETE DISCUSSION OF ALL OF THE UNITED STATES FEDERAL INCOME TAX
CONSEQUENCES OF THESE PLANS OR OF THE REQUIREMENTS THAT MUST BE MET IN ORDER TO
QUALIFY FOR THE DESCRIBED TAX TREATMENT. IN ADDITION THERE MAY BE FOREIGN,
STATE, AND LOCAL TAX CONSEQUENCES THAT ARE NOT DISCUSSED HEREIN.
The following general rules are applicable under current United States
federal income tax law to ISOs granted under the 1991 Plan:
1. In general, no taxable income results to the optionee upon the grant
of an ISO or upon the issuance of shares to him or her upon the exercise of
the ISO, and no federal income tax deduction is allowed to the Corporation
upon either the grant or exercise of an ISO.
2. If shares acquired upon exercise of an ISO are not disposed of
within (i) two years following the date the ISO was granted or (ii) one
year following the date the shares are issued to the optionee pursuant to
the ISO exercise (the "Holding Periods"), the difference between the amount
realized on any subsequent disposition of the shares and the exercise price
will generally be treated as capital gain or loss to the optionee.
3. If shares acquired upon exercise of an ISO are disposed of on or
before the expiration of one or both of the requisite Holding Periods (a
"Disqualifying Disposition"), then in most cases the lesser of (i) any
excess of the fair market value of the shares at the time of exercise of
the ISO over the exercise price or (ii) the actual gain on disposition,
will be treated as compensation to the optionee and will be taxed as
ordinary income in the year of such disposition.
4. In any year that an optionee recognizes compensation income on a
Disqualifying Disposition of stock acquired by exercising an ISO, the
Corporation generally should be entitled to a corresponding deduction for
federal income tax purposes.
5. Any excess of the amount realized by the optionee as the result of a
Disqualifying Disposition over the sum of (i) the exercise price and (ii)
the amount of ordinary income recognized under the above rules will be
treated as capital gain.
6. Capital gain or loss recognized on a disposition of shares will be
long-term capital gain or loss if the optionee's holding period for the
shares exceeds one year.
7. An optionee may be entitled to exercise an ISO by delivering shares
of the Corporation's Common Stock to the Corporation in payment of the
exercise price, if the
-18-
optionee's ISO agreement so provides. If an optionee exercises an ISO in
such fashion, special rules will apply.
8. In addition to the tax consequences described above, the exercise of
ISOs may result in a further "minimum tax" under the Code. The Code
provides that an "alternative minimum tax" (at a maximum rate of 28%) will
be applied against a taxable base which is equal to "alternative minimum
taxable income," reduced by a statutory exemption. In general, the amount
by which the value of the Common Stock received upon exercise of the ISO
exceeds the exercise price is included in the optionee's alternative
minimum taxable income. A taxpayer is required to pay the higher of his
regular tax liability or the alternative minimum tax. A taxpayer who pays
alternative minimum tax attributable to the exercise of an ISO may be
entitled to a tax credit against his or her regular tax liability in later
years.
9. Special rules apply if the Common Stock acquired through the
exercise of an ISO is subject to vesting, or is subject to certain
restrictions on resale under federal securities laws applicable to
directors, officers or 10% stockholders.
The following general rules are applicable under current federal income
tax law to options granted under the 1991 Plan that do not qualify as ISOs
(collectively, "NQSOs"):
1. The optionee generally does not recognize any taxable income upon
the grant of a NQSO, and the Corporation 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 the NQSO in an amount equal to the excess, if
any, of the fair market value of the shares on the date of exercise over
the exercise price. The Corporation may be required to withhold income tax
on this amount.
3. When the optionee sells the shares acquired through the exercise of
a NQSO, he or she generally will recognize a capital gain or loss in an
amount equal to the difference between the amount realized upon the sale of
the shares and his or her basis in the stock (generally, the exercise price
plus the amount taxed to the optionee as 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 Corporation generally should be entitled to a federal income tax
deduction when compensation income is recognized by the optionee.
5. An optionee may be entitled to exercise a NQSO by delivering shares
of the Corporation's Common Stock to the Corporation in payment of the
exercise price. If an optionee exercises a NQSO in such fashion, special
rules will apply.
-19-
6. Special rules apply if the Common Stock acquired through the
exercise of a NQSO is subject to vesting, or is subject to certain
restrictions on resale under federal securities laws applicable to
directors, officers or 10% stockholders.
The following general rules are applicable under current federal income
tax law to the grant of Awards and Purchases under the 1991 Plan:
Under current federal income tax law, persons receiving Common Stock
pursuant to an Award or a grant of an opportunity to make a Purchase generally
recognize ordinary compensation income equal to the fair market value of the
shares received, reduced by any purchase price paid. The Corporation generally
should be entitled to a corresponding federal income tax deduction. When such
stock is sold, the seller generally will recognize capital gain or loss. Special
rules apply if the stock acquired is subject to vesting, or is subject to
certain restrictions on resale under federal securities laws applicable to
directors, officers or 10% stockholders.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In fiscal 1996, the Corporation entered into a strategic marketing
relationship for certain of the Corporation's technologies with Bogart Delafield
Ferrier. In connection with this relationship, the Corporation paid to Bogart
Delafield Ferrier $30,000 in fees plus $2,377 for expenses. Bogart Delafield
Ferrier is also entitled to royalties of 1 1/2% of the dollar value of any
transaction with respect to certain of the Corporation's technologies initiated
with a pharmaceutical or managed care company between March 12, 1996 and
September 30, 1996. No such transaction was initiated during fiscal 1996. Dr.
Ferrier, a director of the Corporation, is Chief Executive Officer and Chairman
of Bogart Delafield Ferrier.
OTHER BUSINESS
The Board of Directors knows of no business which will be presented for
consideration at the Meeting other than that stated above. If any other business
should come before the Meeting, votes may be cast pursuant to proxies in respect
to any such business in the best judgment of the person or persons acting under
the proxies.
STOCKHOLDER PROPOSALS
It is contemplated that the 1997 Annual Meeting of Stockholders will be
held on or about October 1, 1997. Proposals of stockholders intended for
inclusion in the proxy statement to be mailed to all stockholders entitled to
vote at the next annual meeting of stockholders of the Corporation must be
received at the Corporation's principal executive offices not later than April
21, 1997. In order to curtail controversy as to the date on which a proposal was
received by the Corporation, it is suggested that proponents submit their
proposals by Certified Mail, Return Receipt Requested.
AUDITORS FOR FISCAL 1997
The Board of Directors has selected the firm of Wolf & Company, P.C.,
independent certified public accountants, to serve as independent auditors for
the fiscal year ending June 30, 1997. Wolf & Company, P.C. has acted as the
Corporation's auditors commencing with the period ending June 30, 1989. It is
expected that a member of Wolf & Company, P.C. will be present at the Meeting
with the opportunity to make a statement if so desired and will be available to
respond to appropriate questions.
- 20 -
REPORTS ABOUT OWNERSHIP OF THE CORPORATION'S COMMON STOCK
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Corporation's officers and directors, and persons who own more than
ten percent of a registered class of the Corporation's equity securities, to
file reports of ownership and changes in ownership with the Securities and
Exchange Commission and The Nasdaq Stock Market. Officers, directors and
greater-than-ten percent stockholders are required by Securities and Exchange
Commission regulations to furnish the Corporation with all Section 16(a) forms
they file.
Based solely on its review of the copies of such forms received by it,
the Corporation believes that during fiscal 1996 all of its officers, directors
and greater-than-ten percent stockholders complied with all Section 16(a) filing
requirements.
EXPENSES AND SOLICITATION
The cost of solicitation of proxies will be borne by the Corporation,
and in addition to soliciting stockholders by mail through its regular
employees, the Corporation may request banks and brokers to solicit their
customers who have stock of the Corporation registered in the name of a nominee
and, if so, will reimburse such banks and brokers for their reasonable
out-of-pocket costs. Also, the Corporation may retain a professional proxy
solicitation firm to assist in the proxy solicitation and, if so, will pay such
proxy solicitation firm customary fees plus expenses. Solicitation by officers
and employees of the Corporation may also be made of some stockholders in person
or by mail, telephone or telegraph, following the original solicitation.
SIDE A
- - - ------
DYNAGEN, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
OCTOBER 1, 1996
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF DYNAGEN, INC.
The undersigned hereby appoints Dhananjay G. Wadekar and Dr. Indu A.
Muni, and each of them alone, proxies, with full power of substitution, to vote
all shares of Common Stock of DynaGen, Inc. (the "Corporation") that the
undersigned is entitled to vote at the Annual Meeting of Stockholders of the
Corporation, to be held on Tuesday, October 1, 1996, at 9:30 a.m. at the
DoubleTree Guest Suites Hotel, 400 Soldiers Field Road, Boston, Massachusetts
02134, and at any adjournments thereof, upon the matters set forth in the Notice
of Annual Meeting of Stockholders and related Proxy Statement dated August 19,
1996 a copy of which has been received by the undersigned.
1. To elect a Board of Directors for the ensuing year.
[ ] FOR all nominees [ ] WITHHOLD AUTHORITY
listed below to vote for all
(except as marked nominees listed below:
to the contrary
below):
Dr. Ian R. Ferrier
Steven Georgiev
Dr. Indu A. Muni
Dr. F. Howard Schneider
Dhananjay G. Wadekar
INSTRUCTIONS: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below:
-------------------------------------------------------
2. To consider and act upon a proposal to approve an amendment to
the Corporation's Certificate of Incorporation to increase the
number of authorized shares of Common Stock, $.01 par value
per share ("Common Stock"), from 40,000,000 to 60,000,000
shares.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. To consider and act upon a proposal to approve an amendment to
the Corporation's 1991 Stock Plan to increase the number of
shares of Common Stock of the Corporation authorized to be
issued thereunder from 1,200,000 to 2,200,000 shares.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. To transact such other business as may properly come before
the meeting.
-2-
SIDE B
- - - ------
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED OR, IF
NO DIRECTION IS GIVEN, WILL BE VOTED FOR THE ELECTION OF DIRECTORS AND FOR THE
PROPOSALS IN ITEMS 2 AND 3, AND AUTHORITY WILL BE DEEMED GRANTED UNDER ITEM 4.
Dated:______________________, 1996
---------------------------------
Signature(s) of Stockholder(s)
---------------------------------
Please Print Name:
(If signing as attorney,
executor, trustee or
guardian, please give your
full title as such. If
stock is held jointly, each
owner should sign.)
DYNAGEN, INC.
1991 STOCK PLAN
---------------
1. PURPOSE. This 1991 Stock Plan (the "Plan") is intended to provide
incentives: (a) to the officers and other employees of DynaGen, Inc., a Delaware
corporation (the "Company"), its parent (if any) and any present or future
subsidiaries of the Company (collectively, "Related Corporations") by providing
them with opportunities to purchase stock in the Company pursuant to options
granted hereunder which qualify as "incentive stock options" under Section
422(b) of the Internal Revenue Code of 1986, as amended (the "Code") ("ISO" or
"ISOs"); (b) to directors, officers, employees and consultants of the Company
and Related Corporations by providing them with opportunities to purchase stock
in the Company pursuant to options granted hereunder which do not qualify as
ISOs ("Non-Qualified Option" or "Non-Qualified Options"); (c) to directors,
officers, employees and consultants of the Company and Related Corporations by
providing them with awards of stock in the Company ("Awards"); and (d) to
directors, officers, employees and consultants of the Company and Related
Corporations by providing them with opportunities to make direct purchases of
stock in the Company ("Purchases"). Both ISOs and Non-Qualified Options are
referred to hereafter individually as an "Option" and collectively as "Options."
Options, Awards and authorizations to make Purchases are referred to hereafter
collectively as "Stock Rights." As used herein, the terms "parent" and
"subsidiary" mean "parent corporation" and "subsidiary corporation,"
respectively, as those terms are defined in Section 424 of the Code.
2. ADMINISTRATION OF THE PLAN.
A. BOARD OR COMMITTEE ADMINISTRATION. The Plan shall be administered by
the Board of Directors of the Company (the "Board") or by a committee
appointed by the Board (the "Committee"); provided, that, to the extent
required by Rule 16b-3, or any successor provision ("Rule 16b-3"), of the
Securities Exchange Act of 1934, with respect to specific grants of Stock
Rights, the Plan shall be administered by a disinterested administrator or
administrators within the meaning of Rule 16b-3. Hereinafter, all
references in this Plan to the "Committee" shall mean the Board if no
Committee has been appointed. Subject to ratification of the grant or
authorization of each Stock Right by the Board (if so required by
applicable state law), and subject to the terms of the Plan, the Committee
shall have the authority to (i) determine the employees of the Company and
Related Corporations (from among the class of employees eligible under
paragraph 3 to receive ISOs) to whom ISOs may be granted, and to determine
(from among the class of individuals and entities eligible under paragraph
3 to receive Non-Qualified Options and Awards and to make Purchases) to
whom Non-Qualified Options, Awards and authorizations to make Purchases
may be granted; (ii) determine the time or times at which Options or
Awards may be granted or Purchases made; (iii) determine the option price
of shares subject to each Option, which price shall not be less than the
minimum price specified in paragraph 6, and the purchase
2
price of shares subject to each Purchase; (iv) determine whether each
Option granted shall be an ISO or a Non-Qualified Option; (v) determine
(subject to paragraph 7) the time or times when each Option shall become
exercisable and the duration of the exercise period; (vi) determine
whether restrictions such as repurchase options are to be imposed on
shares subject to Options, Awards and Purchases and the nature of such
restrictions, if any, and (vii) interpret the Plan and prescribe and
rescind rules and regulations relating to it. If the Committee determines
to issue a Non-Qualified Option, it shall take whatever actions it deems
necessary, under Section 422 of the Code and the regulations promulgated
thereunder, to ensure that such Option is not treated as an ISO. The
interpretation and construction by the Committee of any provisions of the
Plan or of any Stock Right granted under it shall be final unless
otherwise determined by the Board. The Committee may from time to time
adopt such rules and regulations for carrying out the Plan as it may deem
best. No member of the Board or the Committee shall be liable for any
action or determination made in good faith with respect to the Plan or any
Stock Right granted under it.
B. COMMITTEE ACTIONS. The Committee may select one of its members as
its chairman, and shall hold meetings at such time and places as it may
determine. Acts by a majority of the Committee, or acts reduced to or
approved in writing by a majority of the members of the Committee (if
consistent with applicable state law), shall be the valid acts of the
Committee. From time to time the Board may increase the size of the
Committee and appoint additional members thereof, 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.
C. GRANT OF STOCK RIGHTS TO BOARD MEMBERS. Stock Rights may be granted
to members of the Board consistent with the provisions of the first
sentence of paragraph 2(A) above, if applicable. All grants of Stock
Rights to members of the Board shall in all other respects be made in
accordance with the provisions of this Plan applicable to other eligible
persons. Members of the Board who are either (i) eligible for Stock Rights
pursuant to the Plan or (ii) have been granted Stock Rights may vote on
any matters affecting the administration of the Plan or the grant of any
Stock Rights pursuant to the Plan, except that no such member shall act
upon the granting to himself of Stock Rights, but any such member may be
counted in determining the existence of a quorum at any meeting of the
Board during which action is taken with respect to the granting to him of
Stock Rights.
3. ELIGIBLE EMPLOYEES AND OTHERS. ISOs may be granted to any employee
of the Company or any Related Corporation. Those officers and directors of the
Company who are not employees may not be granted ISOs under the Plan.
Non-Qualified Options, Awards and authorizations to make Purchases may be
granted to any employee, officer or director (whether or not also an employee)
or consultant of the Company or any Related Corporation. The Committee may take
into consideration a recipient's individual circumstances in determining whether
to grant an ISO, a Non-Qualified Option, an Award or an authorization to make a
Purchase. Granting of any Stock Right to any individual or entity shall neither
entitle that individual or entity to, nor disqualify him from, participation in
any other grant of Stock Rights.
3
4. STOCK. The stock subject to Options, Awards and Purchases shall be
authorized but unissued shares of Common Stock of the Company, par value $.01
per share (the "Common Stock"), or shares of Common Stock reacquired by the
Company in any manner. The aggregate number of shares which may be issued
pursuant to the Plan is 1,200,000, subject to adjustment as provided in
paragraph 13. Any such shares may be issued as ISOs, Non-Qualified Options or
Awards, or to persons or entities making Purchases, so long as the number of
shares so issued does not exceed such number, as adjusted. If any Option granted
under the Plan shall expire or terminate for any reason without having been
exercised in full or shall cease for any reason to be exercisable in whole or in
part, the unpurchased shares subject to such Options shall again be available
for grants of Stock Rights under the Plan.
5. GRANTING OF STOCK RIGHTS. Stock Rights may be granted under the Plan
at any time after October 14, 1991 and prior to October 14, 2001. The date of
grant of a Stock Right under the Plan will be the date specified by the
Committee at the time it grants the Stock Right; provided, however, that such
date shall not be prior to the date on which the Committee acts to approve the
grant. The Committee shall have the right, with the consent of the optionee, to
convert an ISO granted under the Plan to a Non-Qualified Option pursuant to
paragraph 16.
6. MINIMUM OPTION PRICE; ISO LIMITATIONS.
A. PRICE FOR NON-QUALIFIED OPTIONS. The exercise price per share
specified in the agreement relating to each Non-Qualified Option granted
under the Plan shall in no event be less than the minimum legal
consideration required therefor under the laws of the State of Delaware or
the laws of any jurisdiction in which the Company or its successors in
interest may be organized.
B. PRICE FOR ISOS. The exercise price per share specified in the
agreement relating to each ISO granted under the Plan shall not be less
than the fair market value per share of Common Stock on the date of such
grant. In the case of an ISO to be granted to an employee owning stock
possessing more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company or any Related Corporation, the
price per share specified in the agreement relating to such ISO shall not
be less than one hundred ten percent (110%) of the fair market value per
share of Common Stock on the date of grant.
C. $100,000 ANNUAL LIMITATION ON ISOS. Each eligible employee may be
granted ISOs only to the extent that, in the aggregate under this Plan and
all incentive stock option plans of the Company and any Related
Corporation, the value of Common Stock (determined at the time ISOs were
granted) which is subject to ISOs that become exercisable for the first
time by such employee during any calendar year does not exceed $100,000.
Any options granted to an employee in excess of such amount will be
granted as Non-Qualified Options.
D. DETERMINATION OF FAIR MARKET VALUE. 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
4
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 National Market List, 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 National Market List. 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.
7. OPTION DURATION. Subject to earlier termination as provided in
paragraphs 9 and 10, each Option shall expire on the date specified by the
Committee, but not more than (i) ten years and one day from the date of grant in
the case of Non-Qualified Options, (ii) ten years from the date of grant in the
case of ISOs generally, and (iii) five years from the date of grant in the case
of ISOs granted to an employee owning stock possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of the Company
or any Related Corporation. Subject to earlier termination as provided in
paragraphs 9 and 10, the term of each ISO shall be the term set forth in the
original instrument granting such ISO, except with respect to any part of such
ISO that is converted into a Non-Qualified Option pursuant to paragraph 16.
8. EXERCISE OF OPTION. Subject to the provisions of paragraphs 9
through 12, each Option granted under the Plan shall be exercisable as follows:
A. VESTING. The Option shall either be fully exercisable on the date of
grant or shall become exercisable thereafter in such installments as the
Committee may specify.
B. FULL VESTING OF INSTALLMENTS. Once an installment becomes
exercisable it shall remain exercisable until expiration or termination of
the Option, unless otherwise specified by the Committee.
C. PARTIAL EXERCISE. Each Option or installment may be exercised at any
time or from time to time, in whole or in part, for up to the total number
of shares with respect to which it is then exercisable.
D. ACCELERATION OF VESTING. The Committee shall have the right to
accelerate the date of exercise of any installment of any Option; provided
that the Committee shall not, without the consent of an optionee,
accelerate the exercise date of any installment of any Option granted to
any employee as an ISO (and not previously converted into a Non-Qualified
Option pursuant to paragraph 16) if such acceleration would violate the
annual vesting limitation contained in Section 422(d) of the Code, as
described in paragraph 6(C).
5
E. EXTENSION OF EXERCISE PERIOD. Notwithstanding any provision herein
to the contrary, the Committee may, in its discretion, extend the exercise
period with respect to any Non-Qualified Option.
9. TERMINATION OF EMPLOYMENT. If an ISO optionee ceases to be employed
by the Company and all Related Corporations other than by reason of death or
disability as defined in paragraph 10, no further installments of his ISOs shall
become exercisable, and his ISOs shall terminate after the passage of ninety
(90) days from the date of termination of his employment, but in no event later
than on their specified expiration dates, except to the extent that such ISOs
(or unexercised installments thereof) have been converted into Non-Qualified
Options pursuant to paragraph 16. Employment shall be considered as continuing
uninterrupted during any bona fide leave of absence (such as those attributable
to illness, military obligations or governmental service) provided that the
period of such leave does not exceed 90 days or, if longer, any period during
which such optionee's right to reemployment is guaranteed by statute. A bona
fide leave of absence with the written approval of the Committee shall not be
considered an interruption of employment under the Plan, provided that such
written approval contractually obligates the Company or any Related Corporation
to continue the employment of the optionee after the approved period of absence.
ISOs granted under the Plan shall not be affected by any change of employment
within or among the Company and Related Corporations, so long as the optionee
continues to be an employee of the Company or any Related Corporation. Nothing
in the Plan shall be deemed to give any grantee of any Stock Right the right to
be retained in employment or other service by the Company or any Related
Corporation for any period of time.
10. DEATH; DISABILITY.
A. DEATH. If an ISO optionee ceases to be employed by the Company and
all Related Corporations by reason of his death, any ISO of his may be
exercised, to the extent of the number of shares with respect to which he
could have exercised it on the date of his death, by his estate, personal
representative or beneficiary who has acquired the ISO by will or by the
laws of descent and distribution, at any time prior to the earlier of the
specified expiration date of the ISO or 180 days from the date of the
optionee's death.
B. DISABILITY. If an ISO optionee ceases to be employed by the Company
and all Related Corporations by reason of his disability, he shall have
the right to exercise any ISO held by him on the date of termination of
employment, to the extent of the number of shares with respect to which he
could have exercised it on that date, at any time prior to the earlier of
the specified expiration date of the ISO or 180 days from the date of the
termination of the optionee's employment. For the purposes of the Plan,
the term "disability" shall mean "permanent and total disability" as
defined in Section 22(e)(3) of the Code or successor statute.
11. ASSIGNABILITY. No Option shall be assignable or transferable by the
optionee except by will or by the laws of descent and distribution or, with
respect to Non-qualified Options only, pursuant to a qualified domestic
relations order as defined in the Code or Title I of
6
the Employee Retirement Income Security Act, or the rules thereunder. During the
lifetime of the optionee each ISO shall be exercisable only by him.
12. TERMS AND CONDITIONS OF OPTIONS. Options shall be evidenced by
instruments (which need not be identical) in such forms as the Committee may
from time to time approve. Such instruments shall conform to the terms and
conditions set forth in paragraphs 6 through 11 hereof and may contain such
other provisions as the Committee deems advisable which are not inconsistent
with the Plan, including restrictions applicable to shares of Common Stock
issuable upon exercise of Options. In granting any Non-Qualified Option, the
Committee may specify that such Non-Qualified Option shall be subject to the
restrictions set forth herein with respect to ISOs, or to such other termination
and cancellation provisions as the Committee may determine. The Committee may
from time to time confer authority and responsibility on one or more of its own
members and/or one or more officers of the Company to execute and deliver such
instruments. The proper officers of the Company are authorized and directed to
take any and all action necessary or advisable from time to time to carry out
the terms of such instruments.
13. ADJUSTMENTS. Upon the occurrence of any of the following events, an
optionee's rights with respect to Options granted to him hereunder shall be
adjusted as hereinafter provided, unless otherwise specifically provided in the
written agreement between the optionee and the Company relating to such Option:
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. CONSOLIDATIONS OR MERGERS. If the Company is to be consolidated with
or acquired by another entity in a merger, sale of all or substantially
all of the Company's assets or otherwise (an "Acquisition"), the Committee
or the board of directors of any entity assuming the obligations of the
Company hereunder (the "Successor Board"), shall, as to outstanding
Options, either (i) make appropriate provision for the continuation of
such Options by substituting on an equitable basis for the shares then
subject to such Options the consideration payable with respect to the
outstanding shares of Common Stock in connection with the Acquisition; or
(ii) make appropriate provision for the continuation of such Options by
substituting on an equitable basis for the shares then subject to such
Options any equity securities of the successor corporation; or (iii) upon
written notice to the optionees, provide that all Options must be
exercised, to the extent then exercisable, within a specified number of
days of the date of such notice, at the end of which period the Options
shall terminate; or (iv) terminate all Options in exchange for a cash
payment equal to the excess of the fair market value of the shares subject
to such Options (to the extent then exercisable) over the exercise price
thereof; or (v) accelerate the date of exercise of such Options or of any
installment of such Options; or (vi) terminate all Options in exchange for
7
the right to participate in any stock option or other employee benefit
plan of any successor corporation.
C. RECAPITALIZATION OR REORGANIZATION. In the event of a
recapitalization or reorganization of the Company (other than a
transaction described in subparagraph B above) pursuant to which
securities of the Company or of another corporation are issued with
respect to the outstanding shares of Common Stock, an optionee upon
exercising an Option shall be entitled to receive for the purchase price
paid upon such exercise the securities he would have received if he had
exercised his Option prior to such recapitalization or reorganization.
D. MODIFICATION OF ISOS. Notwithstanding the foregoing, any adjustments
made pursuant to subparagraphs A, B or C with respect to ISOs shall be
made only after the Committee, after consulting with counsel for the
Company, determines whether such adjustments would constitute a
"modification" of such ISOs (as that term is defined in Section 424 of the
Code) or would cause any adverse tax consequences for the holders of such
ISOs. If the Committee determines that such adjustments made with respect
to ISOs would constitute a modification of such ISOs, it may refrain from
making such adjustments.
E. DISSOLUTION OR LIQUIDATION. In the event of the proposed dissolution
or liquidation of the Company, each Option will terminate immediately
prior to the consummation of such proposed action or at such other time
and subject to such other conditions as shall be determined by the
Committee.
F. 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.
G. FRACTIONAL SHARES. No fractional shares shall be issued under the
Plan and the optionee shall receive from the Company cash in lieu of such
fractional shares.
H. ADJUSTMENTS. Upon the happening of any of the events described in
subparagraphs A, B or C above, the class and aggregate number of shares
set forth in paragraph 4 hereof that are subject to Stock Rights which
previously have been or subsequently may be granted under the Plan shall
also be appropriately adjusted to reflect the events described in such
subparagraphs. The Committee or the Successor Board shall determine the
specific adjustments to be made under this paragraph 13 and, subject to
paragraph 2, its determination shall be conclusive.
If any person or entity owning restricted Common Stock obtained by
exercise of a Stock Right made hereunder receives shares or securities or cash
in connection with a corporate transaction described in subparagraphs A, B or C
above as a result of owning such restricted Common Stock, such shares or
securities or cash shall be subject to all of the conditions and
8
restrictions applicable to the restricted Common Stock with respect to which
such shares or securities or cash were issued, unless otherwise determined by
the Committee or the Successor Board.
14. MEANS OF EXERCISING STOCK RIGHTS. A Stock Right (or any part or
installment thereof) shall be exercised by giving written notice to the Company
at its principal office address. Such notice shall identify the Stock Right
being exercised and specify the number of shares as to which such Stock Right is
being exercised, accompanied by full payment of the purchase price therefor
either (a) in United States dollars in cash or by check, or (b) at the
discretion of the Committee, through delivery of shares of Common Stock having a
fair market value equal as of the date of the exercise to the cash exercise
price of the Stock Right, (c) at the discretion of the Committee and 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 Stock Right 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, or (d) at the discretion of the
Committee, by any combination of (a), (b) and (c) above. If the Committee
exercises its discretion to permit payment of the exercise price of an ISO by
means of the methods set forth in clauses (b), (c) or (d) of the preceding
sentence, such discretion shall be exercised in writing at the time of the grant
of the ISO in question. The holder of a Stock Right shall not have the rights of
a shareholder with respect to the shares covered by his Stock Right until the
date of issuance of a stock certificate to him for such shares. Except as
expressly provided above in paragraph 13 with respect to changes in
capitalization and stock dividends, no adjustment shall be made for dividends or
similar rights for which the record date is before the date such stock
certificate is issued.
15. TERM AND AMENDMENT OF PLAN. This Plan was adopted by the Board on
October 14, 1991, subject (with respect to the validation of ISOs granted under
the Plan) to approval of the Plan by the stockholders of the Company at the next
Meeting of Stockholders or, in lieu thereof, by written consent. If the approval
of stockholders is not obtained prior to October 14, 1992, any grants of ISOs
under the Plan made prior to that date will be rescinded. The Plan shall expire
at the end of the day on October 14, 2001 (except as to Options outstanding on
that date). Subject to the provisions of paragraph 5 above, Stock Rights may be
granted under the Plan prior to the date of stockholder approval of the Plan.
The Board may terminate or amend the Plan in any respect at any time, except
that, without the approval of the stockholders obtained within 12 months before
or after the Board adopts a resolution authorizing any of the following actions:
(a) the total number of shares that may be issued under the Plan may not be
materially increased (except by adjustment pursuant to paragraph 13); (b) the
provisions of paragraph 3 regarding eligibility for grants of ISOs may not be
modified; (c) the provisions of paragraph 6(B) regarding the exercise price at
which shares may be offered pursuant to ISOs may not be modified (except by
adjustment pursuant to paragraph 13); and (d) the expiration date of the Plan
may not be extended. Except as otherwise provided in this paragraph 15, in no
event may action of the Board or stockholders alter or impair the rights of a
grantee, without his consent, under any Stock Right previously granted to him.
9
16. CONVERSION OF ISOS INTO NON-QUALIFIED OPTIONS; TERMINATION OF ISOS.
The Committee, at the written request of any optionee, may in its discretion
take such actions as may be necessary to convert such optionee's ISOs (or any
installments or portions of installments thereof) that have not been exercised
on the date of conversion into Non-Qualified Options at any time prior to the
expiration of such ISOs, regardless of whether the optionee is an employee of
the Company or a Related Corporation at the time of such conversion. Such
actions may include, but not be limited to, extending the exercise period or
reducing the exercise price of the appropriate installments of such ISOs. At the
time of such conversion, the Committee (with the consent of the optionee) may
impose such conditions on the exercise of the resulting Non-Qualified Options as
the Committee in its discretion may determine, provided that such conditions
shall not be inconsistent with this Plan. Nothing in the Plan shall be deemed to
give any optionee the right to have such optionee's ISOs converted into
Non-Qualified Options, and no such conversion shall occur until and unless the
Committee takes appropriate action. The Committee, with the consent of the
optionee, may also terminate any portion of any ISO that has not been exercised
at the time of such termination.
17. APPLICATION OF FUNDS. The proceeds received by the Company from the
sale of shares pursuant to Options granted and Purchases authorized under the
Plan shall be used for general corporate purposes.
18. GOVERNMENTAL REGULATION. The Company's obligation to sell and
deliver shares of the Common Stock under this Plan is subject to the approval of
any governmental authority required in connection with the authorization,
issuance or sale of such shares.
19. WITHHOLDING OF ADDITIONAL INCOME TAXES. Upon the exercise of a
Non-Qualified Option, the grant of an Award, the making of a Purchase of Common
Stock for less than its fair market value, the making of a Disqualifying
Disposition (as defined in paragraph 20) or the vesting of restricted Common
Stock acquired on the exercise of a Stock Right hereunder, the Company, in
accordance with Section 3402(a) of the Code, may require the optionee, Award
recipient or purchaser to pay additional withholding taxes in respect of the
amount that is considered compensation includible in such person's gross income.
The Committee in its discretion may condition (i) the exercise of an Option,
(ii) the grant of an Award, (iii) the making of a Purchase of Common Stock for
less than its fair market value, or (iv) the vesting of restricted Common Stock
acquired by exercising a Stock Right, on the grantee's payment of such
additional withholding taxes.
20. NOTICE TO COMPANY OF DISQUALIFYING DISPOSITION. Each employee who
receives an ISO must agree to notify the Company in writing immediately after
the employee makes a Disqualifying Disposition of any Common Stock acquired
pursuant to the exercise of an ISO. A Disqualifying Disposition is any
disposition (including any sale) of such Common Stock before the later of (a)
two years after the date the employee was granted the ISO, or (b) one year after
the date the employee acquired Common Stock by exercising the ISO. If the
employee has died before such stock is sold, these holding period requirements
do not apply and no Disqualifying Disposition can occur thereafter.
10
21. GOVERNING LAW; CONSTRUCTION. The validity and construction of the
Plan and the instruments evidencing Stock Rights shall be governed by the laws
of the State of Delaware, or the laws of any jurisdiction in which the Company
or its successors in interest may be organized. In construing this Plan, the
singular shall include the plural and the masculine gender shall include the
feminine and neuter, unless the context otherwise requires.
