SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registration |X|
Filed by a party other than the Registrant |_|
Check the appropriate:
|_| Preliminary Proxy Statement
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
|_| Confidential, For Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
SAGE LABORATORIES, INC.
(Name of Registrant as Specified in Its Charter)
----------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of filing fee (Check the appropriate box):
|X| No Fee required.
|_| Fee computed on table below per Exchange Act Rule 14a-6(i)(l) and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
|_| 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 and registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement no.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE>
SAGE LABORATORIES, INC.
ELEVEN HURON DRIVE
NATICK, MASSACHUSETTS 01760
------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
-----------------------------
Notice is hereby given that the annual meeting of the stockholders of Sage
Laboratories, Inc., a Massachusetts corporation, will be held at 2:00 o'clock
p.m. on Tuesday, November 11, 1997 at the corporation's headquarters, Eleven
Huron Drive, Natick, Massachusetts, to consider and act upon each of the
following matters:
1. To fix the number of directors and to elect directors for the coming year.
The management recommends that the number of directors be fixed at four and that
the persons named in the accompanying proxy statement be elected as directors.
2. To approve the adoption of the corporation's 1997 Incentive Stock Option
Plan.
3. To transact such other business as may properly come before the meeting or
any adjournments thereof.
Information relating to the above matters is set forth in the attached
Proxy Statement. Only stockholders of record at the close of business on
September 26, 1997, the record date fixed by the Board of Directors, are
entitled to notice of and to vote at the meeting and any adjournments thereof.
By order of the Board of Directors
/s/ George M. Hughes
----------------------------------
GEORGE M. HUGHES
Assistant Clerk
Natick, Massachusetts
Dated: October 15, 1997
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE THE
DATE AND SIGN THE ENCLOSED PROXY CARD AND MAIL IT PROMPTLY IN THE
ENCLOSED ENVELOPE IN ORDER TO ASSURE REPRESENTATION OF YOUR SHARES.
<PAGE>
SAGE LABORATORIES, INC.
ELEVEN HURON DRIVE
NATICK, MASSACHUSETTS 01760
---------------
PROXY STATEMENT
---------------
INFORMATION CONCERNING THE PROXY SOLICITATION
The enclosed proxy is solicited by and on behalf of the Board of Directors
of Sage Laboratories, Inc. (hereinafter the "Company") for use at the Annual
Meeting of Stockholders of the Company to be held on Tuesday, November 11, 1997
at the Company's headquarters, Eleven Huron Drive, Natick, Massachusetts and at
any adjournments thereof. It is subject to revocation at any time prior to the
exercise thereof by giving written notice to the Company, by submission of a
later dated proxy or by voting in person at the meeting. The costs of
solicitation, including the preparation, assembly and mailing of proxy
statements, notices and proxies, will be paid by the Company. Officers and
employees of the Company may also solicit by mail, telephone, letter or
personally without additional compensation.
On September 26, 1997 the Company had 1,081,765 shares of common stock,
$.10 par value (hereinafter the "Common Stock"), issued, outstanding and
entitled to vote. Stockholders of record at the close of business on September
26, 1997 will be entitled to vote at the meeting. With respect to all matters
which will come before the meeting, each stockholder may cast one vote for each
share registered in such stockholder's name on the record date. 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 proxy may be
revoked by a stockholder at any time before it is exercised by delivery of a
written revocation or a later dated proxy to the Assistant Clerk of the Company
or by attending the Annual Meeting of Stockholders and voting in person.
Shares represented by valid proxies will be voted in accordance with the
specifications in the proxies. If no specifications are made, the proxies will
be voted to fix the number of directors at four and to elect the directors
nominated by the Board of Directors and for approval of the 1997 Incentive Stock
Option Plan.
The Company's Annual Report to Stockholders containing financial statements
for the fiscal year ended June 30, 1997 is being mailed together with the Proxy
Statement to all Stockholders entitled to vote. The approximate date on which
this proxy statement and accompanying proxy are first being sent or given to
stockholders is October 15, 1997.
Quorum and Votes Required
The representation, in person or by proxy, of at least a majority of the
outstanding shares of Common Stock entitled to vote at the Annual Meeting of
Stockholders is necessary to constitute a quorum for the transaction of
business. Shares represented by proxies pursuant to which votes have been
withheld from any nominee for director, or which contain one or more abstentions
or broker "non-votes," are counted as present or represented for purposes of
determining the presence or absence of a quorum for the Annual Meeting of
Stockholders. A "non-vote" occurs when a broker or other nominee holding shares
for a beneficial owner indicates on the proxy that the broker does not vote on a
proposal because the broker does not have discretionary voting power and has not
received instructions from the beneficial owner with respect to the proposal.
<PAGE>
Directors will be elected by a plurality of the votes cast at the meeting;
abstentions are not treated as votes cast for this purpose. The affirmative vote
of a majority of shares present, in person or represented by proxy, and voting
is required for approval of the 1997 Incentive Stock Option Plan. Abstentions
and broker "non-votes" will not be considered voted and will have the practical
effect of reducing the number of affirmative votes required to achieve a
majority by reducing the total number of shares from which the majority is
calculated.
The Board of Directors knows of no other matter to be presented at the
Annual Meeting of Stockholders. If any other matter upon which a vote may
properly be taken should be presented at the Annual Meeting of Stockholders,
shares represented by all proxies received by the Board of Directors will be
voted with respect thereto in accordance with the judgment of the persons named
as attorneys in the proxies.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table provides information as of September 26, 1997 with
respect to (i) all persons known to the Company to be beneficial owners of more
than 5% of the Company's outstanding Common Stock, (ii) the Chief Executive
Officer and each of the other executive officers of the Company named in the
Summary Compensation Table under the caption "Executive Compensation," (iii)
each director, or nominee for director, of the Company, and (iv) all current
executive officers, directors, and nominees for director of the Company as a
group:
Amount and Nature of Percent
Beneficial Owner Beneficial Ownership(1) of Class
- ---------------- ----------------------- --------
Carl A. Marguerite(2) 291,680 26.1%
Royce Associates, Inc. 118,500 11.0
(Formerly Quest Advisory Corp.)(3)
21414 Avenue of the Americas
New York, NY 70019
Louis J. Lanzillo, Jr.(4) 102,500 8.7
Fenimore Asset Management, Inc(5) 94,500 8.7
118 North Grand Street,
P.O. Box 310
Cobleskill, NY 12043
Anthony J. Cieri(6) 38,570 3.5
John J. Leary 35,000 3.1
Janusz J. Majewski(7) 45,000 4.0
John E. Miller(8) 18,000 1.7
David M. Pozar 0 *
All directors, nominees and 530,750 40.5%
executive officers
as a group (7 persons)(9)
- ----------
* Indicates less than 1%.
2
<PAGE>
(1) Unless otherwise indicated, the beneficial owners of these shares have sole
voting power and sole investment power over such shares.
(2) Includes 37,500 shares issuable pursuant to stock options exercisable at
September 26, 1997 or within 60 days thereafter.
(3) Based solely on information provided in a Schedule 13G filed with the
Securities and Exchange Commission in February 1997, Charles M. Royce may
be deemed to be a controlling person of Royce Associates, Inc. ("Royce"),
an investment advisor, due to his ownership position in Royce. Accordingly,
both Mr. Royce and Royce may be deemed the beneficial owner of the shares
reported.
(4) Includes 69,167 shares issuable pursuant to stock options exercisable at
September 26, 1997 or within 60 days thereafter.
(5) Based solely on information provided in a Schedule 13G filed with the
Securities and Exchange Commission in January 1997.
(6) Includes 5,000 shares issuable pursuant to stock options exercisable at
September 26, 1997 or within 60 days thereafter.
(7) Includes 16,500 shares issuable pursuant to stock options exercisable at
September 26, 1997 or within 60 days thereafter.
(8) Includes 6,000 shares issuable pursuant to stock options exercisable at
September 26, 1997 or within 60 days thereafter.
(9) Includes 134,167 shares issuable pursuant to stock options exercisable at
September 26, 1997 or within 60 days thereafter.
PROPOSAL I
ELECTION OF DIRECTORS
The management recommends that the number of directors for the coming year
be fixed at four. The management recommends that the current directors, John E.
Miller, Carl A. Marguerite, David M. Pozar, and Louis J. Lanzillo, Jr. be
elected for one-year terms. Each has consented to serve if elected. If any of
them should become unavailable for election, the persons voting the accompanying
proxy may in their discretion vote for a substitute. The management is not
presently aware of any reason that would prevent Messrs. Miller, Marguerite,
Pozar and Lanzillo from serving as a director if elected. All directors will
hold office until their successors have been duly elected and qualified. Shares
represented by all proxies received by the Board of Directors and not so marked
as to withhold authority to vote for Messrs. Miller, Marguerite, Lanzillo or
Pozar will be voted for the election of such nominees.
Information concerning the nominees for director is given in the following
table:
<TABLE>
<CAPTION>
Has Been a
Business Experience Director of the
Name and Age During Past Five Years Company Since Term Expires
------------ ---------------------- ------------- ------------
<S> <C> <C> <C>
John E. Miller Director of Intermetrics, Inc, Cambridge, 1976 1997
Age 72 Massachusetts, producers of computer systems
and software, through August 31, 1995. Mr.
Miller was President and Chief Executive
Officer of the same firm until 1986 and
Chairman of the Board until 1993.
Carl A. Marguerite Chairman of the Board, Chief Executive Officer 1981 1997
Age 57 and Treasurer of the Company. President until
1996.
</TABLE>
3
<PAGE>
<TABLE>
<S> <C> <C> <C>
Louis J. Lanzillo, Jr. President and Chief Operating Officer of the 1995 1997
Age 39 Company since 1996. President of New England
Division of UNICCO Service Company from 1993
until 1995; Vice President Finance and
Administration from 1986 to 1993.
David M. Pozar Professor of Electrical Engineering, University 1997 1997
Age 45 of Massachusetts at Amherst since 1980.
</TABLE>
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
The Company has an audit committee, whose members are Messrs. Pozar, Miller
and Soukup. The audit committee reviews with the independent auditors the
results of the auditing engagement. The Company also has a compensation
committee, which consisted during the last fiscal year of Messrs. Pozar, Miller,
and Soukup. The compensation committee makes recommendations to the directors
regarding the compensation of executive officers.
The Company's Board of Directors held four meetings during its last fiscal
year. The compensation committee met three times and the audit committee once.
The entire Board of Directors functions as a nominating committee,
considering nominations submitted to the Chairman of the Board.
Director Compensation. The Company pays each non-employee director a
quarterly payment of $750 for services as a director and a fee of $750 for each
meeting of the Board of Directors attended. Directors are paid $500 for
attendance at committee meetings, with no payment if a committee meeting is held
on the same day as a Board of Directors meeting.
Under the 1992 Director Stock Option Plan, options to purchase 2,500 shares
of the Company's Common Stock are automatically granted to each non-employee
director on the first trading day after the Company's annual meeting. The
options become exercisable with respect to the full 2,500 shares six months
following the grant date. The options have a term of ten years and an exercise
price equal to 100% of the fair market value of the Company's Common Stock on
the grant date.
The Company has purchased directors' and officers' liability insurance
covering all of the Company's directors' and officers'. The aggregate premium
for this insurance policy in 1997 was $16,068.
EXECUTIVE COMPENSATION
The following tables set forth certain compensation information for the
Chief Executive Officer of the Company and each of the other most highly
compensated executive officers of the Company whose salary and bonus for the
latest fiscal year exceeded $100,000 (such four officers collectively, the
"Named Executive Officers").
4
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
----------------------------------------- ----------------------------------------------------
Awards Payouts
---------- ------------------------------------
Other Annual Securities
Name and Compensation Underlying LTIP All Other
Principal Position Year Salary($) Bonus($) ($)(1) Options(#) Payout($)(2) Compensation($)(3)
- ------------------ ---- --------- -------- ------ ---------- ------------ ------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Carl A. Marguerite 1997 178,976 40,000 87,136 -- 131,250 24,168
Chairman, Chief 1996 151,951 80,000 87,631 37,500 158,100 24,030
Executive Officer 1995 148,441 125,000 72,372 -- 128,000 24,030
and Treasurer
Louis J. Lanzillo 1997 126,931 40,000 18,995 100,000 0 1,112
President and Chief
Operating Officer
Janusz J. Majewski 1997 104,485 10,000 3,062 25,000 0 19,076
Vice President of 1996 91,157 20,000 1,343 10,000 0 17,392
Research &
Development
Anthony J. Cieri 1997 84,521 6,000 1,642 -- 0 15,661
Vice President of 1996 92,956 15,000 449 5,000 0 15,791
Customer Servicef 1995 82,956 17,500 1,022 -- 0 15,533
</TABLE>
(1) Amounts for Mr. Marguerite in 1997 include $4,948 in interest, $31,996 in
principal forgiven on certain loans, $42,930 for tax gross-up payments and
$8,085 in auto expense. In 1996 such amounts for Mr. Marguerite were
$7,234, $31,996, $39,733 and $5,329, respectively. In 1995 such amounts for
Mr. Marguerite were $5,829, $31,996 and $34,004 respectively. See "Certain
Transactions." Louis J. Lanzillo, Jr. amounts include $9,550 in auto
expense and tax gross-up payments of $7,170.
(2) Represents shares of restricted stock grant to Mr. Marguerite as to which
the conditions of forfeiture lapsed upon the achievement of certain
corporate performance goals. 10,000 shares of such stock vested in each of
fiscal years 1995, 1996 and 1997. See "Certain Transactions." Based upon
the fair market value of the Company's Common Stock at fiscal year end.
(3) Amounts in this column are derived from the following: for 1997, Messrs.
Marguerite, Majewski and Cieri, respectively $22,500, $18,673 and $14,928
for contributions to the Company's Profit Sharing Plan and $1,688, $403 and
$723 for insurance premiums. Mr. Lanzillo is deemed to have received $1,113
for insurance premiums. For 1996, Messrs. Marguerite, Majewski and Cieri,
respectively, $22,500, $16,989 and $15,068 for contributions to the
Company's Profit Sharing Plan, and $1,530, $403 and $723 for insurance
premiums. For 1995, Messrs. Marguerite and Cieri respectively had $22,500
and $14,843 for contributions to the Company's Profit Sharing Plan and
$1,530 and $723 for insurance premiums.
5
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
The follow table sets forth information with respect to options to purchase
the Company's Common Stock under the Company's 1987 Stock Option Plan granted to
the Named Executive Officers, including, (i) the number of shares of Common
Stock purchased upon exercise of options in the fiscal year ended June 30, 1997;
(ii) the net value realized upon such exercise; (iii) the number of unexercised
options outstanding at June 30, 1997; and (iv) the value of such unexercised
options at June 30, 1997.
<TABLE>
<CAPTION>
Value of Unexercised
Numbers of Unexercised In-the-Money
Options at Options at
fiscal year-end (#) fiscal year-end ($)(2)
Shares Acquired on
Name Exercise (#) Value Realized ($)(1) Exercisable/Unexercisable Exercisable/Unexercisable
- ---- ------------ --------------------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Carl A. Marguerite 0 0 37,500/0 0/0
Louis J. Lanzillo, Jr. 0 0 35,833/66,667 0/0
Janusz J. Majewski 3,500 $37,667 16,500/25,000 $68,738/$9,388
Anthony J. Cieri 0 0 5,000/0 0/0
</TABLE>
(1) Amounts disclosed in this column do not reflect amounts actually
received by the Named Executive Officers but are calculated based on the spread
between the fair market value of the Company's Common Stock on the date of
exercise and the exercise price of the options. The Named Executive Officers
will receive cash only if and when they sell the Common Stock issued upon
exercise of the options, and the amount of cash received by such individuals is
dependent on the price of the Company's Common Stock at the time of such sale.
(2) Value is based on the spread between the option price and the fair
market value of the Common Stock on June 30, 1997 ($13.125) multiplied by the
number of shares underlying the options.
STOCK OPTIONS GRANTED DURING FISCAL 1997
The following table sets forth each grant of stock options pursuant to the
1987 Stock Option Plan granted during the year ended June 30, 1997 to the Named
Executive Officers. No stock appreciation rights were granted during fiscal year
1997.
<TABLE>
<CAPTION>
Number of Securities % of Total Options
Underlying Options Granted to Employees in
Name Granted Fiscal Year % Exercise or Base Price Expiration Date
---- ------- ------------- ---------------------- ---------------
<S> <C> <C> <C> <C>
Carl A. Marguerite -- -- -- --
Louis J. Lanzillo, Jr.(1) 100,000 58.4% $15.00 09/04/03
Janusz J. Majewski(2) 25,000 14.6% $12.75 12/09/03
Anthony J. Cieri -- -- -- --
</TABLE>
(1) One third of such shares are exercisable upon grant; one third exercisable
twelve months from date of grant; balance exercisable twelve months
thereafter.
(2) Twenty percent (20%) of such shares are exercisable on December 9, 1997;
balance exercisable as to twenty-percent (20%) per year until 2001.
6
<PAGE>
EXECUTIVE EMPLOYMENT AGREEMENT
Mr. Lanzillo and the Company entered into an employment agreement on
September 4, 1996. The employment agreement provides that Mr. Lanzillo will
serve as President and Chief Operating Officer of the Company until September 3,
1999 unless terminated earlier due to death, disability, cause or good reason
following a change in control. If the Company terminates the agreement for other
than the above reasons, Mr. Lanzillo will be entitled to the salary and bonus
benefits guaranteed under the employment agreement until the end of the
employment term. Under the employment agreement, Mr. Lanzillo is entitled to an
annual base salary of $150,000. He is also entitled to participate in the
Company's executive bonus plan, under which he is eligible to receive a bonus of
not less than 50% of base salary to the extent consistent with the plan as well
as any other Company benefit plans or programs. Upon execution of the agreement,
Mr. Lanzillo received a stock option for 100,000 shares of the Company's Common
Stock which vested 33 1/3% upon execution with the balance vesting equally on
September 3, 1997 and September 3, 1998. Mr. Lanzillo may terminate the
agreement upon written notice to the Company. Mr. Lanzillo has agreed not to
compete with the Company for a period of two years following the termination of
his agreement.
PROPOSAL II
APPROVAL OF 1997 STOCK OPTION PLAN
The Board of Directors recommends approval of the Sage Laboratories, Inc.
1997 Incentive Stock Option Plan (the "1997 Plan" or the "Plan") to replace the
Company's 1987 Stock Option Plan ("1987 Plan") which expired on August 31, 1997.
A copy of the Plan is attached hereto as Exhibit A.
The Company's success depends in large part on its ability to attract,
retain and motivate key employees. Stock options are a significant element of
compensation for the Company. Options benefit the Company in a number of ways.
For example, they tie compensation to company performance; they conserve cash
and reduce fixed costs; they result in no charge to reported earnings; the
exercise of options increases the Company's capital; and the Company is entitled
to a tax deduction upon the exercise of non-statutory options or the
disqualifying disposition of incentive stock options.
Approximately 25 key employees will be eligible to receive options under
the Plan. In fiscal 1997, the Company granted options under the 1987 Plan to 24
employees. The Board of Directors believes that it is important for the
Company's future competitiveness to continue to offer equity compensation to
employees as has been the Company's long term practice.
PRINCIPAL TERMS OF THE 1997 OPTION PLAN
The 1997 Plan provides for the grant of incentive stock options,
non-qualified stock options, and stock appreciation rights. If an option expires
without having been exercised in full, the shares not purchased under the option
will be available again for the purposes of the Plan.
Except for the provision that no options may be granted under the Plan
after November 10, 2007, the provisions of the Plan do not differ materially
from the recently expired plan.
Options may be granted under the Plan to any individual, including an
officer of the Company, who at the time of grant is a key employee of the
Company.
7
<PAGE>
In the case of incentive stock options, the price at which shares may from
time to time be optioned may not be less than the fair market value of a share
of the Company's common stock on the granting date. If the employee to whom the
option is granted owns on the granting date stock representing more than 10 per
cent of the total combined power voting power of all classes of stock of the
Company or of any parent or subsidiary corporation, then the option price may
not be less than 110 per cent of the fair market value of the Company's common
stock on the granting date.
In the case of non-statutory stock options, the price at which shares may
from time to time be optioned is determined by the Board of Directors, but such
price may not be less than 50% of the fair market value of the of the company's
common stock on the granting date. Within such limitation, the Board of
Directors may subsequently reduce the price to obtain an exercise price for a
non-statutory option which takes into account any tax benefits to be realized by
the Company due to the exercise of the non-statutory options.
The closing bid and asked prices for the Company's common stock on
September 26, 1997 were $13 3/8 per share and $14 3/8 per share, respectively.
The Board of Directors may grant stock appreciation rights to persons
eligible to receive options, either separately or in relation to options granted
under the Plan. When stock appreciation rights are granted in relation to an
option, the exercise of the option or the exercise of the stock appreciation
rights causes a corresponding reduction of related stock appreciation rights or
of the related option, respectively. Upon the exercise of a stock appreciation
right, the holder receives, in cash, in shares of the Company's common stock or
in a combination thereof as the Board of Directors may determine, an amount
equal to the amount, if any, by which the fair market value of the Company's
common stock on the exercise date exceeds the base price. The base price is (i)
the option exercise price in the case of stock appreciation rights granted in
relation to options and (ii) the price determined by the Board of directors in
each other case.
Dates of Exercise
Stock options granted under the Plan become exercisable as the Board of
directors may establish by vote with respect to a particular option. The
expiration date of each option is determined by the Board of Directors, provided
that (i) the term of a stock option may not exceed a period of ten years from
the date of its grant, and (ii) if the employee to whom an incentive stock
option is granted owns on the granting date stock representing more than 10
percent of the total combined voting power of all classes of stock of the
Company or of any parent or subsidiary corporation, the term of such incentive
stock option under this Plan may not exceed a period of five years from the date
of its grant. Unless otherwise provided in the option, stock appreciation rights
granted in relation to stock options will be automatically exercised upon the
termination or expiration of the related option.
Non-Transferability; Termination of Employment
Options are not transferable otherwise than by will or the laws of descent
and distribution, and are exercisable, during the option holder's lifetime, only
by him.
If an option holder's employment with the Company is terminated otherwise
than by his death, he may exercise the rights which he had under the Plan at the
time of such termination only as follows:
(a) If the option holder has retired, he may exercise such rights at any
time within three months from the date of his retirement; and
(b) If the option holder's employment has been terminated for any other
reason, he may exercise such rights at any time within 60 days from
such termination.
8
<PAGE>
Upon the death of an option holder, those entitled to do so by his will or
the laws of descent and distribution shall have the right, at any time within
twelve months after the date of death, to exercise in whole or in part any
rights which were available to the option holder at the time of his death.
Amendment and Termination of the Plan
The Board of directors may amend or terminate the Plan at any time, but,
except as to amendments relating to adjustments upon changes in the Company's
common stock, no amendment may be made without stockholder approval which would
increase the number of shares reserved for options or rights or which would
change the class of employees eligible to receive options or rights under the
Plan. No option may be granted under the Plan after November 10, 2007.
Federal Income Tax Consequences and Accounting Treatment
Incentive Stock Options. An optionee will not realize taxable income upon
the grant or exercise of an ISO under the 1997 Option Plan. If the optionee does
not dispose of shares issued upon exercise of an ISO within two years from the
date of grant or within one year of the date of exercise, then, upon the sale of
such shares, any amount realized in excess of the exercise price is taxed to the
optionee as long-term capital gain, and any loss sustained will be a long-term
capital loss. No deduction would be allowed to the Company for Federal income
tax purposes. The exercise of ISOs gives rise to an adjustment in computing
alternative minimum taxable income that may result in alternative minimum tax
liability for the optionee. If shares of Common Stock acquired upon the exercise
of an ISO are disposed of before the expiration of the two-year and one-year
holding periods described above (a "disqualifying disposition"), the optionee
would realize ordinary income in the year of disposition in an amount equal to
the excess (if any) of the fair market value of the shares at exercise (or, if
less, the amount realized on a sale of such shares) over the exercise price
thereof, and the Company would be entitled to deduct such amount. Any further
gain realized would be taxed as a short-term or long-term capital gain and would
not result in any deduction to the Company. A disqualifying disposition in the
year of exercise will generally avoid the alternative minimum tax consequences
of the exercise of an ISO.
Nonstatutory Stock Options. No income is realized by the optionee at the
time a nonstatutory option is granted. Upon exercise, the optionee realizes
ordinary income in an amount equal to the difference between the exercise price
and the fair market value of the shares on the date of exercise, and the Company
is entitled to a tax deduction for the same amount. Upon disposition of the
shares, appreciation or depreciation after the date of exercise is treated as a
short-term or long-term capital gain or loss and will not result in any
deduction for the Company.
RECOMMENDATION OF THE BOARD
The Board of Directors considers the Company's ongoing program of granting
stock options broadly across the employee base to be important to the Company's
ability to compete for top talent and a significant incentive to promote the
Company's success and, therefore, in the best interests of the Company's
stockholders. The Board recommends a vote for approval of the 1997 Incentive
Stock Option Plan. The enclosed proxy will be voted for approval of the 1997
Incentive Stock Option Plan unless a contrary specification is made or it is a
broker non-vote.
CERTAIN TRANSACTIONS
Restricted Stock Plan. On February 18, 1992, the Company adopted a 1992
Restricted Stock Plan for Mr. Marguerite, pursuant to which the Company issued
50,000 shares of Common Stock to him, subject to forfeiture upon a voluntary
termination of his employment or upon a termination of his employment by the
Company for cause. These conditions of forfeiture lapsed as to 10,000 shares on
January 1 of each of the years 1993 through 1997 as certain corporate
performance goals were achieved. In connection with the stock grant, the Company
loaned Mr. Marguerite $113,000 interest free to meet
9
<PAGE>
certain tax obligations. The loan is payable in five equal annual installments
beginning in December 1993. The Company also provided Mr. Marguerite with
interest-free loans in connection with prior stock grants. During the fiscal
year ended June 30, 1997, $31,996 in principal on such loans was forgiven by the
Company. The largest aggregate amount of all of Mr. Marguerite's indebtedness to
the Company outstanding during the fiscal year ending June 30, 1997 was $55,043,
the amount outstanding as of October 3, 1997 was $55,043.
SELECTION OF AUDITORS
The Board of Directors has selected the firm of Arthur Andersen & Co., 225
Franklin Street, Boston, Massachusetts 02110, which has served as auditors for
the Company since it was formed, to serve as auditors for the Company for the
fiscal year ending June 30, 1998. Representatives of Arthur Andersen & Co. are
expected to be present at the annual meeting of stockholders with an opportunity
to make a statement if they desire to do so. Such representatives will be
available to respond to appropriate questions.
PROPOSALS OF SECURITY HOLDERS FOR 1998 ANNUAL MEETING
Proposals of security holders intended to be presented at the annual
meeting of the Company's stockholders scheduled for November 10, 1998 must be
received by the Company for inclusion in its proxy statement and form of proxy
relating to that meeting not later than June 12, 1998.
MISCELLANEOUS
The management does not know of any business which will come before the
meeting except the matters described in the notice. If other business is
properly presented for consideration at the meeting, it is intended that the
proxies will be voted by the persons named therein in accordance with their
judgment on such matters.
In the event that a quorum is not present when the meeting is convened, it
is intended to vote the proxies in favor of adjourning from time to time until a
quorum is obtained.
By order of the Board of Directors
/s/ George M. Hughes
------------------------------------
GEORGE M. HUGHES
Assistant Clerk
Dated: October 15, 1997
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Exhibit A
SAGE LABORATORIES, INC.
1997 Stock Option Plan
This Stock Option Plan dated November 11, 1997 governs options to purchase
common stock of and stock appreciation rights with respect to Sage Laboratories,
Inc. (the "Company") granted by the Company to its employees. It supersedes all
prior plans for the granting of such options.
1. Shares Subject to the Plan
There are reserved for issue hereunder 500,000 shares of the Company's
common stock, $.10 par value, of which 187,400 shares are presently available
for grant. Shares subject to options under this Plan and stock appreciation
rights which lapse, terminate or otherwise become unexercisable may be
reoptioned under this Plan. In the event that the number of outstanding shares
of common stock of the Company shall be changed by reason of split-up,
combinations of shares, recapitalizations or stock dividends, the number of
shares subject to the Plan, the number of shares subject to outstanding options
and the option exercise price shall be appropriately adjusted to reflect any
change.
2. Employees Eligible to Receive Options
Options may be granted from time to time by the Company's Board of
Directors, within the limits set forth in Section 1 of this Plan, to any
individual who at the time of the grant is a key employee of the Company. The
term "key employee" shall include officers of the Company.
3. Plan Administration
The selection of key employees for participation in this Plan and decisions
concerning the timing, pricing and amount of grants or awards shall be made by
the Board of Directors; provided that, if at the time of any grant or award to
an officer of the Company who is subject to Section 16(b) of the Securities
Exchange Act of 1934, as amended, each member of the Board is not a
"disinterested person" as defined in Rule 16b-3(2)(i) under said Act, such grant
or award shall be made by a committee consisting of those directors (but not
less than two) who are disinterested persons, and in that event, references
herein to the Board of Directors shall be deemed to refer to such committee.
4. Granting of Options
Options shall be granted under this Plan either as incentive stock options
("incentive stock options") as defined in Section 422A of the Internal Revenue
Code (the "Code"), or as options which do not meet the requirements of Section
422A ("non-statutory stock options"). All options shall be substantially in the
form of Attachment A. The granting date for each option granted hereunder shall
be the date on which it is approved by the Company's Board of Directors or such
later date as the directors may specify. No options shall be granted hereunder
after November 10, 2007.
5. Option Price
In the case of incentive stock options, the price at which shares may from
time to time be optioned shall be not less than the fair market value of a share
of the Company's common stock on the granting date. If the employee to whom the
option is granted owns on the granting date stock representing more than 10
percent of the total combined voting power of all classes of stock of the
Company or of any parent or subsidiary corporation, then the option price shall
not be less than 110 percent of the fair market value of the Company's common
stock on the granting date. In determining
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such value, the Board of Directors shall consider all relevant information and
shall act in good faith to ensure that the option price is not less than such
value.
In the case of non-statutory stock options, the price at which shares may
from time to time be optioned shall be determined by the Board of Directors,
provided that such price shall be not less than 50% of the fair market value of
the Company's common stock on the granting date. Within such limitation, the
Board of directors may subsequently reduce the price to obtain an exercise price
for a non-statutory option which takes into account any tax benefit expected to
be realized by the Company due to the exercise of the non-statutory option.
6. Stock Appreciation Rights
The Board of Directors may in its discretion grant stock appreciation
rights to persons eligible to receive options, either separately or in relation
to options granted under this Plan. When stock appreciation rights are granted
in relation to an option, the exercise of the option or the exercise of the
stock appreciation rights shall cause a corresponding reduction of related stock
appreciation rights or of the related option, respectively. Upon the exercise of
a stock appreciation right, the holder shall receive, in cash, in shares of the
Company's common stock or in a combination thereof as the Board of Directors
shall determine, an amount equal to the amount, if any, by which the fair market
value of the Company's common stock on the exercise date exceeds the base price.
The base price shall be (i) the option exercise price in the case of stock
appreciation rights granted in relation to options and (ii) the price determined
by the Board of Directors in each other case.
7. Dates of Exercise
Stock options granted hereunder shall become exercisable at the expiration
of two years from the granting date of the option or at the expiration of such
period of time after the granting date as the Board of Directors may establish
by vote with respect to a particular option. The expiration date of each option
shall be determined by the Board of Directors, provided that (i) the term of
each stock option granted under this Plan shall not exceed a period of ten years
from the date of its grant, and (ii) if the employee to whom an incentive stock
option is granted owns on the granting date stock representing more than 10
percent of the total combined voting power of all classes of stock of the
Company or of any parent or subsidiary corporation, the term of such incentive
stock option under this Plan shall not exceed a period of five years from the
date of its grant. Unless otherwise provided in the option, stock appreciation
rights granted in relation to stock options will be automatically exercised upon
the termination or expiration of the related option.
8. Non-transferability
Options and stock appreciation rights granted under this Plan shall not be
transferable by the holder otherwise than by will or the laws of descent and
distribution or pursuant to a qualified domestic relations order as defined in
the Code or Title I of the Employment Retirement Income Security Act, or the
rules thereunder; and shall be exercisable, during the holder's lifetime, only
by him.
9. Withholding Taxes
Upon the exercise of non statutory stock options or stock appreciation
rights, the holder shall be required to pay to the Company or authorize the
Company to deduct from other amounts payable to him the amount of any taxes
which the Company is required to withhold with respect to such exercise or
issue. Such payment by the holder in the case of the exercise of non-statutory
stock options may be made at the election of the holder in cash, already owned
shares of common stock, or the retention of shares which would otherwise be
delivered to the holder upon such exercise.
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10. Amendment or Termination
The Company's board of Directors may amend or terminate this Plan at any
time, provided that the aggregate number of shares of the Company which may be
optioned or which may be subject to stock appreciation rights hereunder may not
be increased (except as permitted by section 1) and the class of employees
eligible to receive options or rights under this Plan may not be changed without
the affirmative vote of the holders of a majority of the common shares of the
Company outstanding and entitled to vote at a meeting held for the purpose.
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Attachment A
SAGE LABORATORIES, INC.
[Incentive] [Non-Statutory] Stock Option
Sage Laboratories, Inc. (the "Company"), a Massachusetts corporation, as an
incentive and inducement to _____________________(hereinafter called the
Optionee), who is presently an employee of the Company, to devote his best
efforts to the affairs of the Company, which incentive and inducement the Board
of Directors of the Company has determined to be a sufficient consideration for
the grant of this Option, hereby grants to the Optionee the right and option
(herein called the Option) to purchase from the Company up to _____ shares of
its common stock, $.10 par value. This Option is granted under, and is subject
to the provisions of, the Company's Stock Option Plan dated November 11, 1997,
and shall be exercisable only on the following terms and conditions:
[1. The price to be paid for each share upon exercise of the whole or any
part of this Option shall be $____, which is not less than the fair market value
of a common share of the Company on the granting date or, if the Optionee owns
on the granting date stock representing more than ten percent of the total
combined voting power of all classes of stock of the Company or of its parent or
subsidiary corporation, is not less than 110 percent of the fair market value of
a common share of the Company on the granting date.]/1
[1. The basic price to be paid for each share of the Company's common stock
upon exercise of the whole or any part of this Option shall be $_______,
provided that such basic price may be reduced by the Board of Directors to
account for any tax benefit expected to be realized by the Company due to the
grant or exercise of this Option.]/2
2. Except as otherwise provided herein, this Option may be exercised at any
time after _______________________. ____. This Option may not be exercised as to
any shares after the expiration of ten years from the granting date. [except
that if, on the granting date, the Optionee owns more than 10 percent of the
total combined voting power of all classes of stock of the Company or of its
parent or subsidiary corporation, this Option may not be exercised after the
expiration of five years from the granting date.]/3
[2A. Subject to the terms and conditions hereof, the Optionee is hereby
granted the right and option to exercise stock appreciation rights with respect
to not exceeding ________________________ of the shares subject to this Option.
Such rights may be exercised at any time when this Option is exercisable and
will be automatically exercised upon the termination or expiration of this
Option. The stock appreciation rights are granted in direct relation to this
Option and, accordingly, the exercise of this Option or the exercise of the
stock appreciation rights shall cause a corresponding reduction of the related
stock appreciation rights or of the related optioned shares, respectively. Upon
exercise of a stock appreciation right, the Optionee shall be entitled to
receive for each share as to which the right is exercised, in cash, in shares of
the Company's common stock or in a combination thereof as the Board of Directors
shall determine, an amount equal to the amount, if any, by which the fair market
value of a share of the Company's common stock as determined in good faith by
the Board of Directors exceeds the option price.]
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1 This provision is for incentive stock options.
2 This provision is for non-statutory stock options.
3 The five year limit is necessary only for incentive stock options.
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3. This Option may be exercised at any time and from time to time, subject
to the limitations set forth elsewhere herein, up to the aggregate number of
shares specified herein, but in no event for the purchase of other than full
shares. Notice of exercise shall be delivered to the Company specifying the
number of shares with respect to which the Option is being exercised and
specifying a date not later than fifteen days after the date of the delivery of
such notice as the date on which the Optionee will take up and pay for such
shares. On the date specified in such notice, the Company will deliver to the
Optionee a certificate for the number of shares with respect to which the Option
is being exercised, against payment therefor in cash or by certified check, or
with the consent of the Company, in whole or in part in common stock of the
Company valued at fair market value, in which case the certificates for such
shares shall be delivered to the Company duly endorsed for transfer, free and
clear of all liens, encumbrances, charges or adverse claims and in which case
Optionee shall pay all state and federal taxes imposed upon the transfer of such
shares.
4. The Optionee shall not be deemed, for any purpose, to have any rights
whatever in respect of shares as to which the Option shall not have been
exercised and payment made as aforesaid.
5. If any change is made in the Company's common stock resulting in the
change of such stock into, or the right to exchange such stock for, a larger or
smaller number of shares or for other stock or property, the Optionee shall be
entitled to receive such shares or such other stock or property in lieu of the
common shares purchasable under this Option without any change in the option
price upon the exercise of this Option as a whole, and a proportionate amount
thereof upon any partial exercise of this Option. The Optionee shall also be
similarly entitled to receive upon the exercise of this Option, in whole or in
part, the equivalent of any and all stock dividends (whether in common stock or
preferred stock of the Company) declared and paid after the granting date of
this Option to the holders of the Company's common shares which he would have
received if on the record date for determination of the stockholders entitled to
receive such dividend or dividends he had been the holder of record of the
shares purchased on such exercise.
6. This Option is not transferable by the Optionee otherwise than by will
or the laws of descent and distribution, or pursuant to a qualified domestic
relations order as defined in the Internal Revenue Code of 1986 or Title I of
the Employment Retirement Income Security Act, or the rules thereunder; and is
exercisable, during the Optionee's lifetime, only by him.
7. If the Optionee's employment with the Company, or a parent or subsidiary
corporation of the Company, or a corporation or a parent or subsidiary
corporation of such corporation issuing or assuming a stock option in a
transaction to which Section 425(a) of the Code applies, is terminated otherwise
than by his death, he may exercise the rights which he had hereunder at the time
of such termination only as follows:
(a) If the Optionee has retired, he may exercise such rights at any
time within three months from the date of his retirement; and
(b) If the Optionee's employment has been terminated for any other
reason, he may exercise such right at any time within 60 days from such
termination. Upon the death of the Optionee, those entitled to do so by the
Optionee's will or the laws of descent and distribution shall have the
right, at any time within twelve months after the date of death, to
exercise in whole or in part any rights which were available to the
Optionee at the time of his death.
Notwithstanding the foregoing provisions of this Section 7, the exercise of
this Option is subject to the limitations set forth elsewhere herein.
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8. [It shall be a condition to the Optionee's right to purchase stock
hereunder that the Optionee shall notify the Company in writing within 30 days
of the disposition of one or more shares of stock which were transferred to him
pursuant to his exercise of this Option if such disposition occurs within two
years from the granting date or within one year after the transfer of such
shares to him.] The Company may, in its discretion, require that (i) the shares
of stock reserved for issue upon the exercise of this Option shall have been
duly listed, upon official notice of issuance, upon any national securities
exchange on which the Company's common stock may then be listed, and that either
(ii) a Registration Statement under the Securities Act of 1933, as amended, with
respect to said shares shall have become effective, or (iii) the Optionee shall
have represented in form and substance satisfactory to the Company that it is
his intention to purchase for investment the shares at the time being purchased
under this Option, and such other steps, if any, as counsel for the Company
shall deem necessary to comply with any law applicable to the issue of such
shares by the Company shall have been taken by the Company or the Optionee, or
both.
9. Any exercise of this Option is conditioned upon the payment, if the
Company so requests, by the Optionee or by his heirs by will or by the laws of
descent and distribution, of all state and federal taxes imposed upon the
exercise of this Option and the issue to the Optionee of the shares covered
hereby.
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This provision is for incentive stock options.
IN WITNESS WHEREOF, Sage Laboratories, Inc. has caused this Option to be
executed on its behalf and its corporate seal to be hereunto affixed as of
__________________________.
SAGE LABORATORIES, INC.
By:_________________________________
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|X| PLEASE MARK VOTES
AS IN THIS EXAMPLE
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SAGE LABORATORIES, INC.
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Mark box at right if an address change or comment has been noted on the
reverse side of this card. |_|
RECORD DATE SHARES:
-------------------------
Please be sure to sign and date this Proxy. Date
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- ----------Stockholder sign here-----------------------Co-owner sign here--------
DETACH CARD
1. ELECTION OF DIRECTORS For All With- For All
Nominees Hold Except
To fix the number of directors at four and to
elect the following nominees |_| |_| |_|
Louis J. Lanzillo, Jr.
Carl A. Marguerite
John E. Miller
David M. Pozar
NOTE: If you do not wish your shares voted "For" a particular nominee, mark
the "For All Except" box and strike a line through the name(s) of the
nominee(s). Your shares will be voted for the remaining nominee(s).
2. ADOPTION OF CORPORATION'S 1997 INCENTIVE STOCK For Against Abstain
OPTION PLAN. |_| |_| |_|
DETACH CARD
<PAGE>
SAGE LABORATORIES, INC.
Proxy Solicited by the Board of Directors for the Annual Meeting
of Stockholders to be held November 11, 1997
The undersigned, revoking all prior proxies, appoints Carl A. Marguerite and
George M. Hughes, or either of them, the attorneys and proxies of the
undersigned, with power of substitution, to vote all the shares of Sage
Laboratories, Inc. which the undersigned is entitled to vote at the annual
meeting of stockholders to be held on November 11, 1997, and at any adjournments
thereof, as indicated on the reverse side, and, in their discretion, upon such
other matters as may properly come before the meeting.
THIS PROXY WILL BE VOTED FOR THE ABOVE-NAMED NOMINEES FOR DIRECTOR AND FOR THE
ADOPTION OF THE CORPORATION'S 1997 INCENTIVE STOCK OPTION PLAN IF NO CONTRARY
INSTRUCTIONS THEREFOR ARE GIVEN.
Receipt of the notice of the annual meeting and of the accompanying proxy
statement is acknowledged.
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PLEASE COMPLETE, SIGN AND DATE ON REVERSE SIDE AND MAIL IN ENCLOSED ENVELOPE.
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This proxy should be signed by the registered holder. Where stock is registered
in the names of more than one person, all such persons should sign. When signing
as executors, administrators, trustees, guardians, etc., please indicate your
title as such.
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HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
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