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SCHEDULE 14A
(RULE 14a-101)
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:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or 14a-12
</TABLE>
BIO-PLEXUS, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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BIO-PLEXUS, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON OCTOBER 26, 2000
TO THE SHAREHOLDERS OF BIO-PLEXUS, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
Bio-Plexus, Inc., a Connecticut corporation (the "Company"), will be held at
9:30 a.m. local time on Thursday, October 26, 2000, at Rensselaer at Hartford,
275 Windsor Street, Hartford, Connecticut for the following purposes:
I. To elect seven members of the Board of Directors, each to serve
until the next annual meeting.
II. To approve amendments to the Company's 1991 Long-Term Incentive
Plan.
III. To ratify the appointment of Mahoney Sabol & Company, LLP as
independent accountants to audit the Company's 2000 financial
statements.
IV. To transact such other business as may properly come before the
meeting.
The Board of Directors has fixed the close of business on September 14,
2000 as the record date for the determination of shareholders entitled to notice
of and to vote at the Annual Meeting and any adjournments or postponements
thereof. Consequently, only holders of record of Common Stock on the record date
are entitled to notice of and to vote at the Annual Meeting.
In order to vote your shares at the Annual Meeting, if your shares are held
by a broker, bank, or other nominee, you must obtain from such person a Proxy
Card in your name. YOU CAN ENSURE THAT YOUR SHARES ARE VOTED AT THE ANNUAL
MEETING BY PROMPTLY COMPLETING, SIGNING, AND DATING THE ENCLOSED PROXY CARD AND
RETURNING IT IN THE ENVELOPE PROVIDED, WHICH REQUIRES NO POSTAGE IF MAILED IN
THE UNITED STATES. Sending in a signed Proxy Card will not affect your right to
attend the Annual Meeting and vote in person. You may revoke your Proxy Card at
any time before it is voted by delivering to the Secretary of the Company before
the Annual Meeting a written revocation or a subsequently executed Proxy Card,
or by attending the Annual Meeting and voting in person.
By Order of the Board of Directors,
NANCY S. LAUTENBACH
Secretary
Vernon, Connecticut
September 21, 2000
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BIO-PLEXUS, INC.
129 RESERVOIR ROAD, VERNON, CONNECTICUT 06066
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PROXY STATEMENT
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The accompanying proxy is solicited by and on behalf of the Board of
Directors of Bio-Plexus, Inc., a Connecticut corporation having its principal
offices at 129 Reservoir Road, Vernon, Connecticut 06066 (the "Company"), for
use at the 2000 annual meeting of shareholders (the "Annual Meeting") to be held
on Thursday, October 26, 2000, at 9:30 a.m. local time at Rensselaer at
Hartford, 275 Windsor Street, Hartford, Connecticut and at any adjournments or
postponements thereof, for the purposes set forth in the accompanying Notice of
Annual Meeting. Copies of this proxy statement and the accompanying proxy are
being mailed to shareholders on or about September 21, 2000 to the holders of
record of the Company's Common Stock, no par value per share ("Common Stock") as
of September 14, 2000. The expense of this solicitation will be paid by the
Company. Some of the directors, officers and regular employees of the Company
may, without additional remuneration, solicit proxies personally and by
telephone or mail.
Any person submitting a proxy in the form accompanying this proxy statement
has the power to revoke such proxy at any time before it is exercised. Proxies
may be revoked by either (i) sending to the Secretary of the Company, Nancy S.
Lautenbach, a duly executed written instrument of revocation or a duly executed
proxy bearing a date later than that on the proxy being revoked, or (ii)
attending the Annual Meeting and voting in person. Attendance at the Annual
Meeting without voting will not in and of itself constitute revocation of a
proxy. If not revoked, properly executed proxies will be voted in accordance
with the instructions contained thereon. Unless a contrary specification is made
thereon, it is the intention of the persons named on the accompanying proxy Card
to vote "FOR" each of the proposals on the accompanying Notice of Annual Meeting
(the "Proposals").
Shareholders of record at the close of business on September 14, 2000 (the
"Record Date") will be entitled to one vote per share of Common Stock upon each
matter properly submitted for the vote of shareholders at the Annual Meeting. On
September 14, 2000, there were 14,942,157 shares of Common Stock outstanding and
entitled to vote. Pursuant to Connecticut law and the Company's By-laws, the
presence at the meeting, in person or by proxy, of the holders of a majority of
the shares of Common Stock outstanding on the Record Date will constitute a
quorum to conduct business at the meeting. Proxies submitted which are marked
"abstain" or "withhold authority" will be deemed present at the meeting for
purposes of determining the presence of a quorum to conduct business at the
meeting.
All votes will be tabulated by the inspector of election appointed for the
Annual Meeting, who will separately tabulate affirmative and negative votes,
abstentions, and broker "non-votes" (proxies that are returned by the record
holder, typically a brokerage house, but not voted on a particular matter
because no instructions were received from the beneficial owner). Once a share
is represented for any purpose at the meeting, it is deemed present for quorum
purposes for the remainder of the meeting. In certain circumstances, a
shareholder will be considered to be present at the Annual Meeting for quorum
purposes, but will not be deemed to have voted on the matters presented for
approval at the meeting. Such circumstances will exist where a shareholder is
present but specifically abstains from voting, or where shares are represented
at a meeting by a proxy conferring authority to vote on certain matters but not
on other matters (i.e., broker non-votes). Under Connecticut law, such
abstentions and non-votes have a neutral effect on the approval or disapproval
of the matters presented for shareholder action. As of the Record Date, the
Common Stock was the only outstanding voting security of the Company.
Unless otherwise noted in this proxy statement, all the Proposals require,
to be approved, the affirmative vote of a majority of those shares present in
person or represented by proxy and voting on such Proposals at the Annual
Meeting, assuming a quorum is present.
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All directors of the Company holding shares of Common Stock as of the
Record Date, namely Messrs. Herman Gross, Richard Higgins, David Himick, John S.
Metz, Carl Sahi, Scott Tepper and Richard Ribakove, have stated their present
intentions to vote all of such shares in favor of approval and adoption of the
Proposals. These directors as of the Record Date own, in the aggregate,
approximately 27% of the outstanding shares of Common Stock.
PROPOSAL I
ELECTION OF DIRECTORS
Seven directors are to be elected at the 2000 Annual Meeting of
Shareholders to serve until the 2001 Annual Meeting of Shareholders and until
their respective successors are elected and qualify. The persons named in the
accompanying proxy card intend to vote for the election of the nominees
identified below unless authority to vote for one or more of such nominees is
specifically withheld in the proxy card.
The Board of Directors is informed that all of the nominees are willing to
serve as directors, but if any of them should decline to serve or become
unavailable for election as a director at the meeting, an event which the Board
of Directors does not anticipate, the persons named in the proxy card will vote
for such nominee or nominees as may be designated by the Board of Directors,
unless the Board of Directors reduces the number of directors accordingly.
The nominees for election to the Company's Board of Directors are:
HERMAN GROSS. Mr. Gross, 82, is a Director of the Company and a retired
business executive. He became a Director of the Company in November 1998. He was
Chairman of Elliot International, a company that imports apparel, from 1948 to
1981. He is a graduate of both City College of New York and Harvard Law School.
Mr. Gross is a member of the New York Bar.
RICHARD L. HIGGINS. Mr. Higgins, 57, is a Director of the Company and
between January 1998 and September 1999 he served as the Company's President and
Chief Executive Officer. Mr. Higgins retired from the Company in December 1999.
He joined the Company on a part-time basis as a consultant in May 1992 and
became a full time employee in September 1993. From July 1996 to January 1998,
Mr. Higgins served as the Company's Vice President, Finance. He served as the
Executive Director of the Connecticut Development Authority from 1975 to 1992.
Mr. Higgins holds a Bachelor of Arts degree from the University of Connecticut.
DAVID HIMICK. Mr. Himick, 74, is a Director of the Company, a retired
business executive, and a business consultant. Mr. Himick became a Director of
the Company in April 1997. He was the founder of several companies including
Commercial Wire Rope & Supply of Detroit, Commercial Wire Rope & Supply of
Flint, Commercial Wire Rope & Supply of Toledo, and Detroit Chain Products Co.
He was a Director of Heritage Federal Savings Bank located in Taylor, Michigan
between 1982 and 1993 and a Director of Heritage Bankcorp Inc. (the holding
company of Heritage Federal Savings), between 1989 and 1993. Mr. Himick
currently serves on the board of directors of Community Bank of Dearborn and the
board of directors of Dearborn Bancorp (the holding company of Community Bank of
Dearborn), both of which positions he assumed in 1994.
JOHN S. METZ. Mr. Metz, 57, is a Director of the Company and, since April
28, 2000, has served as the Company's President and Chief Executive Officer. Mr.
Metz became a Director when he joined the Company from Kimberly-Clark
Corporation where he served from June 1997 until April 2000 as President,
Professional HealthCare, Strategic Acquisitions. For 15 years prior to this
position Mr. Metz held positions of increasing responsibility with
Kimberly-Clark Corporation. Prior to joining Kimberly-Clark, Mr. Metz held
marketing manager positions with Becton-Dickinson & Company (1976-82), McKesson
Corporation (1974-76) and The Coca-Cola Company (1970-74). Mr. Metz was a First
Lieutenant in the U.S. Army and holds both Bachelor's and Master's degrees from
the University of Mississippi and an MBA from Stanford University.
RICHARD D. RIBAKOVE. Mr. Ribakove, 45, is a Director and the Chairman of
the Board of Directors of the Company, and an attorney in private practice in
New York City. Mr. Ribakove has been a Director of the
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Company since its founding in September 1987. He is also the Vice President of
Mooney-General Paper Co., a large distributor of paper products. He is a
graduate of Hofstra University with a Bachelor's degree in Business
Administration and is a graduate of Brooklyn Law School.
CARL R. SAHI. Mr. Sahi, 43, is a Director of the Company and currently
serves as a consultant to the Company. Mr. Sahi founded the Company in September
1987 and has been a Director since that time. From September 1999 to April 2000,
Mr. Sahi served as President and Chief Executive Officer of the Company. Prior
to December 1999, Mr. Sahi served as the Company's Vice President, Technology
and Business Development and Treasurer, and from September 1987 to October 1997,
Mr. Sahi served as President of the Company. Mr. Sahi is the principal inventor
of the Company's self-blunting needle. Mr. Sahi holds a Bachelor's degree in
pathobiology from the University of Connecticut and has six years of graduate
training in chemistry.
SCOTT M. TEPPER. Mr. Tepper, 39, is a Director of the Company and has
served in such capacity since June 28, 2000. Mr. Tepper has served as a
consultant to the Company since September 1999. Mr. Tepper was appointed to the
Company's Board of Directors by Appaloosa Management, L.P. ("Appaloosa") as one
of the two designees it is entitled to appoint to the Board as provided in the
Convertible Note Purchase Agreement entered into by the Company, Appaloosa and
certain other parties named therein on April 28, 2000. As of September 14, 2000
Appaloosa has not yet appointed its other designee to the Board. Mr. Tepper is
the founder of and lead integration consultant for KST Consulting, a healthcare
and healthcare technology consulting firm, since July 1994. From August 1994 to
June 1998, Mr. Tepper served as the Senior Vice President for Medisolution Ltd.,
a healthcare company in Canada. Prior to that, Mr. Tepper was a Senior Director
for Foxmeyer Health, a pharmaceutical distribution and product logistics firm.
Mr. Tepper also serves on the Board of Directors of the Grand Union Corporation.
Mr. Tepper is the brother of David Tepper, the sole shareholder and President of
Appaloosa Partners Inc., the general partner of Appaloosa, which is a major
shareholder of the Company.
All directors hold office until the next annual meeting of the Company's
shareholders and until the election and qualification of their successors, or
their earlier resignation or removal.
DIRECTOR COMPENSATION
Each director who is not also an employee of the Company (an "Outside
Director") receives an automatic annual grant of stock options to purchase 1,000
shares of Common Stock upon his election or re-election to the Board of
Directors. These stock options are granted under the Company's 1995 Non-Employee
Directors' Stock Option Plan (the "Directors' Plan"), which was adopted on July
6, 1995. Only Outside Directors are eligible to receive grants of stock options
under the Directors' Plan. During 1999 Messrs. Ribakove, Himick and Gross each
received a stock option to purchase 1,000 shares of Common Stock under the
Directors' Plan. All such stock options vest one year after the date of grant,
and expire on the first to occur of (x) one year from the date the director
ceases to serve as a director or (y) five years from the date of grant, and have
an exercise price equal to the fair market value of the Company's Common Stock
on the date of grant. Vesting of outstanding stock options is accelerated upon
the death, disability or retirement of an Outside Director. If an Outside
Director terminates his or her service for any other reason, any unvested
portion of the stock option will be forfeited. Payment of the stock option
exercise price may be made (i) by cash payment, (ii) by transfer to the Company
of shares of Common Stock having a fair market value equal to the stock option
exercise price, or (iii) by withholding from the shares that would otherwise be
issued under a stock option, that number of shares having a fair market value
equal to the stock option exercise price.
Fifty thousand (50,000) shares of Common Stock are reserved for issuance
under the Directors' Plan. As of December 31, 1999, 28,000 shares of Common
Stock were subject to outstanding stock options issued pursuant to the
Directors' Plan.
In addition, pursuant to Board policy, Outside Directors receive $2,500 per
quarter, paid in Common Stock valued at 85% of the 30-day average market price
for the Common Stock during the month prior to the month in which the Outside
Director payments are to be made. Under this policy, during 1999, 13,544 shares
of Common Stock were issued to Outside Directors as compensation for service on
the Board of Directors.
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Directors who are employees may receive stock options in their capacity as
Company employees, as described elsewhere in this Proxy Statement. Furthermore,
if Proposal II is approved by the shareholders Outsider Directors will also be
eligible to receive awards under the Company's 1991 Long-Term Incentive Plan.
For further information, please see the discussion accompanying Proposal II.
The Company seeks to attract as Outside Directors highly qualified
individuals who are both willing and able to devote the time and apply the
resources necessary to assist the Company in achieving its strategic mission of
becoming a global leader in the safety medical product market. In furtherance of
this objective, the Board of Directors is in the process of reviewing the
adequacy and nature of Outside Director compensation. As a result of this
review, it is possible that Outside Director compensation may change materially
prior to or shortly after the 2000 Annual Meeting of Shareholders.
The Board of Directors held 14 regular meetings during 1999. Each of the
incumbent directors attended at least 75% of the aggregate of all meetings of
the Board and committees of which he was a member, held during the period he
served thereon.
The standing committees of the Board of Directors are the Audit Committee,
the Compensation Committee, the Finance Committee and the Directors' Plan
Committee.
The Audit Committee has responsibility for reviewing the Company's annual
and quarterly financial results and financial position, the scope and results of
independent accountant reviews and audits of the Company's financial statements,
and the accounting standards and principles followed in preparing the Company's
financial statements; evaluating the Company's system of internal accounting
controls; recommending to the Board the appointment of the independent
accountants; and reviewing the Company's financial reporting activities. The
Audit Committee did not meet during 1999 and its responsibilities were fulfilled
by the entire Board of Directors. The members of the Audit Committee during
1999, of which Mr. Himick is the Chairman, were Messrs. Himick and Ribakove.
The Compensation Committee, which met on four occasions during 1999, is
responsible for (i) reviewing and making recommendations to the Board of
Directors with respect to executive officer compensation and employee
compensation policies generally, and (ii) administering the Company's 1991
Long-Term Incentive Plan. The members of the Compensation Committee during 1999,
of which Mr. Himick is the Chairman, were Messrs. Gross, Himick and Ribakove.
The Finance Committee, which met on six occasions during 1999, is
responsible for reviewing and approving proposals for financing the operations
of the Company. The members of the Finance Committee during 1999 were Messrs.
Gross and Himick.
There is no family relationship between any of the executive officers or
Directors of the Company.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16 of the Securities Exchange Act of 1934 (the "Exchange Act")
requires directors and executive officers and persons, if any, owning more than
ten percent of a class of the Company's equity securities ("10% Shareholders")
to file with the Securities and Exchange Commission (the "SEC") initial reports
of ownership and reports of changes in ownership of the Company's equity and
equity derivative securities. Based solely upon a review of the copies of such
reports furnished to the Company, or written representations from reporting
persons, the Company believes that during 1999 Messrs. Gross and Himick were
delinquent in filing Form 4s reporting the conversion of loans made to the
Company into shares of Common Stock, the granting of warrants issued in
connection with such loans, and, in the case of Mr. Gross, Common Stock purchase
transactions. In addition, a Form 3 was not timely filed for Ms. Cady upon her
becoming an executive officer of the Company; and each of Messrs. Gross,
Higgins, Himick and Ribakove was delinquent in filing a Form 5 reflecting
Outside Director compensation paid in the fourth quarter of 1999. Each is now in
compliance.
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PROPOSAL II
APPROVAL OF AMENDMENTS TO THE INCENTIVE PLAN
The shareholders are being asked to approve certain amendments (the
"Incentive Plan Amendments") to the Company's 1991 Long-Term Incentive Plan (the
"Incentive Plan"). Under the proposed Incentive Plan Amendments, the maximum
number of shares of Common Stock which can be included in awards to any
"eligible Participant" (as such term is defined in the Incentive Plan) under the
Incentive Plan in any calendar year will be increased from 50,000 shares to
700,000 shares. In addition, the Incentive Plan Amendments provide that the
limitation on the number of shares which can be included in awards under the
Incentive Plan shall apply to all "eligible Participants" and not just to
"covered employees" (as such term is defined in the Incentive Plan.)
The Incentive Plan Amendments also provide that Outside Directors will be
included in the definition of an "eligible Participant" under the Incentive Plan
and, thus, will be eligible to participate in awards under the Incentive Plan.
The Incentive Plan currently does not provide for awards to Outside Directors.
The Company has determined that its current compensation structure for Outside
Directors is not sufficient to attract and retain qualified individuals for
service on the Board of Directors. By including Outside Directors as "eligible
Participants" under the Incentive Plan, the Company will be able to design a
competitive compensation structure which more accurately reflects (1) the
existing market level for compensation for outside directors for similar
companies and (2) the dedication and effort required of directors at this stage
of the Company's development, thereby enhancing the Company's ability to attract
and retain qualified individuals to serve on the Board of Directors.
The Board approved the Incentive Plan Amendments on September 13, 2000 and
they are being submitted for shareholder approval in order to comply with the
terms of the Incentive Plan and with Section 162(m) of the Internal Revenue Code
of 1986, as amended (the "Code"), which limits the deductibility of compensation
paid to certain "covered employees" in excess of $1,000,000 in any calendar
year.
On April 28, 2000 the Company's shareholders approved an amendment to the
Incentive Plan which increased the number of shares of Common Stock available
for issuance pursuant to the Incentive Plan from 1,000,000 to 2,500,000. This
increase in the total number of shares was designed to allow the Company to
implement its long-term business plan, which provides, in part, for a
substantial increase in the number of employees of the Company, by offering
awards under the Incentive Plan as incentives for its new and existing
employees.
The proposed increase in the maximum number of shares of Common Stock which
can be included in awards to individual eligible Participants under the
Incentive Plan in any calendar year from 50,000 shares to 700,000 shares is
designed initially to allow the Company to satisfy its obligations to John S.
Metz, the Company's Chief Executive Officer. In connection with the commencement
of Mr. Metz' employment with the Company on April 27, 2000, the Company agreed
to issue Mr. Metz an option pursuant to the Incentive Plan to acquire up to
700,000 shares of Common Stock. The proposed Incentive Plan Amendments will
allow the Company to satisfy this obligation. The Company does not currently
anticipate making awards of this magnitude to any other individuals. However,
the Company may make awards in the future under the Incentive Plan to eligible
individuals in amounts greater than the current 50,000 share limit.
The Incentive Plan Amendments involve only such changes as are necessary to
put into effect the foregoing changes and improve the clarity of its existing
provisions. IT IS IMPORTANT TO NOTE THAT THE NUMBER OF SHARES OF COMMON STOCK
RESERVED FOR ISSUANCE UNDER THE INCENTIVE PLAN REMAINS AT 2,500,000, AS APPROVED
BY THE SHAREHOLDERS AT THE APRIL 28, 2000 SPECIAL SHAREHOLDERS MEETING, AND IS
NOT AFFECTED BY THIS AMENDMENT.
The affirmative vote of the holders of a majority of the shares of Common
Stock present in person or by proxy and voting on such proposal at the Annual
Meeting is required to approve the Incentive Plan Amendments. Abstentions will
be counted toward the tabulation of votes cast on proposals presented to the
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shareholders and will have the same effect as negative votes. Broker non-votes
are counted towards a quorum, but are not counted for any purpose in determining
whether this matter has been approved.
The principal features of the Incentive Plan are described in summary form
below. This summary is qualified in its entirety by reference to the complete
text of the Incentive Plan, as amended, a copy of which is attached to this
Proxy Statement as Annex A. A copy of the Incentive Plan is also on file with
the SEC.
As of September 14, 2000, the closing bid price of a share of Common Stock
on the Nasdaq SmallCap Market was $2.3125.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE
SHAREHOLDERS VOTE "FOR" THE INCENTIVE PLAN AMENDMENTS.
SUMMARY OF THE INCENTIVE PLAN
General
The purpose of the Incentive Plan is to encourage stock ownership of key
employees, directors, consultants and certain other persons who provide services
to the Company, to attract and retain key employees with requisite experience
and ability, and to align more closely the interests of employees and other key
contributors with the interest of shareholders. The following summary assumes
the Incentive Plan Amendments are approved by the Company's shareholders.
Awards under the Incentive Plan may include any of the following: stock
options, either incentive stock options ("ISOs") or non-statutory stock options
("NSOs"), with or without stock appreciation rights; restricted stock awards,
with or without performance shares (contractual rights to compensation measured
by increases in the value of Common Stock and payable in cash); and warrants
(collectively "Awards"). To date, only stock options have been awarded under the
Incentive Plan.
All of the Company's officers, directors, employees, consultants and other
service providers are eligible for consideration by the Board of Directors for
awards under the Incentive Plan (the "Participants"). As of September 14, 2000,
in addition to the Company's two executive officers, the Company had 74
full-time employees.
The Incentive Plan is administered by a committee of the Company's Board of
Directors (the "Plan Committee") which consists of at least two directors who
are not employees of the Company and who are not remunerated by the Company in
any capacity other than as a member of the Company's Board of Directors (the
"Outside Directors"). Among other things, the Plan Committee determines, subject
to the provisions of the Incentive Plan, who is eligible to receive an award
under the Incentive Plan, the size and form of each award, and the terms and
conditions of each award. If a Plan Committee has not been appointed, the
Incentive Plan is administered by all the members of the Company's Board of
Directors who are Outside Directors. No individual may be granted, in any
twelve-month period, stock options or stock appreciation rights under the
Incentive Plan which are exercisable with respect to more than 700,000 shares of
Common Stock.
Stock Options
ISOs and NSOs may be granted under the Incentive Plan for such number of
shares of Common Stock as the Plan Committee may determine. The Plan Committee
establishes the exercise period for the stock options subject to the limitation
that no option may be exercised after ten (10) years from the date of grant.
Payment of the exercise price may be made by cash, shares of Common Stock, or a
combination of cash and shares. A stock option designated as an ISO by the Plan
Committee is intended to qualify as an incentive stock option within the meaning
of Section 422 of the Code. An ISO can be granted only to common law employees.
The ISO exercise price must equal or exceed the fair market value of the Common
Stock on the date of the grant. For individuals who on the date of grant own
shares of capital stock of the Company with an aggregate voting power of 10% or
more of all shares, the stock option price must be 110% of the fair market
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value on the date the stock option was granted and the stock option exercise
period cannot exceed five years. Upon exercise of the stock option, the employee
must hold the shares so acquired for at least two years from the date of grant
and one year from the date of exercise in order to be entitled to the favorable
tax treatment afforded to ISOs. Should the employee fail to comply with the
holding periods, the stock option will be deemed an NSO. The number of shares
subject to ISOs that first become exercisable by an optionee during a given year
must not exceed a fair market value, measured as of the date of the grant, of
$100,000.
A stock option designated as an NSO by the Plan Committee is not intended
to qualify as an ISO under the Code. Except for the general limitations
applicable to all stock options described above, there are no special terms and
provisions related to NSOs.
Stock Appreciation Rights
Stock Appreciation Rights ("SARs") are rights to receive cash and/or Common
Stock in lieu of the purchase of shares under a related stock option. SARs are
only granted in conjunction with a stock option and are exercisable at the same
times and with regard to the same number of shares as the related stock option.
If an SAR is exercised, the related portion of the stock option underlying the
SAR will be cancelled. Upon the exercise of an SAR, the Company will pay the
holder an amount in cash, shares of Common Stock, or a combination thereof,
equal to the difference between the stock option price of a share and the fair
market value of such shares, multiplied by the number of SARs being exercised.
The method of payment is elected by the holder but is subject to approval by the
Plan Committee, in its sole discretion.
Restricted Stock/Performance Shares
Under the Incentive Plan, the Plan Committee may grant restricted stock
awards. Such awards may be granted in tandem with "performance shares", which
represent a right to payment in cash of an amount equal to the fair market value
of the Company's Common Stock on the date the restrictions lapse on the
accompanying restricted stock award. The restricted stock awards are grants of
Common Stock subject to certain restrictions (as determined by the Plan
Committee), including a limitation on sale, transfer, or other disposition.
Restricted stock awards made to employees whose employment is terminated for any
reason other than death, retirement or disability are automatically forfeited to
the Company. Restrictions on restricted shares will automatically terminate upon
the death, retirement or permanent disability of a recipient. Likewise, the Plan
Committee may provide for accelerated lapsing of restrictions in the case of
acquisitions or other changes of ownership of the Company.
Warrants
The Incentive Plan permits the Plan Committee to grant a participant a
warrant to acquire shares of Common Stock. Warrants granted under the Incentive
Plan are generally treated the same as an NSO, except that no SARs may accompany
a warrant. Warrants are not entitled to the favorable tax treatment afforded to
ISOs.
Amendment, Suspension and Termination of the Incentive Plan
The Board of Directors may at any time and from time to time modify, amend,
suspend or terminate the Incentive Plan, except to the extent shareholder
approval is required by law. No termination or modification or amendments of the
Incentive Plan will in any manner adversely affect any outstanding award without
the consent of the Participant holding such award unless the agreement pursuant
to which such award was made provides otherwise. Unless earlier terminated by
the Board of Directors, the Incentive Plan will terminate on the earlier of May
23, 2002 or the date on which all shares available for issuance under the
Incentive Plan shall have been issued (without being subject to forfeiture)
pursuant to awards under the Incentive Plan.
Restrictions on Awards to Certain Employees
Section 162(m) of the Code limits the deductibility of certain types of
compensation paid to a public company's chief executive officer and certain
other highly compensated employees ("Covered Employees") to
7
<PAGE> 10
the extent that the amount of compensation for a taxable year paid to such
employees exceeds $1 million. Section 162(m) excludes "performance based"
compensation from its deductibility limits. Compensation realized upon the
exercise of stock options or SARS is considered "performance based" if, among
other requirements, (i) the plan pursuant to which the options or SAR's are
granted has been approved by the sponsoring company's shareholders; (ii) a
committee of Outside Directors makes the awards; (iii) the plan under which the
awards are made sets the maximum number of shares that may be subject to awards
in favor of any eligible Participant during a specific period under the plan;
and (iv) under the terms of the grant, the amount of compensation received by
any Covered Employee is based solely on an increase in the value of the stock
after the date of the grant. The Incentive Plan contains provisions designed to
meet these conditions, and, upon receipt of shareholder approval of the
Incentive Plan Amendments, will fix at 700,000 the maximum number of shares
subject to awards that an eligible Participant under the Incentive Plan may be
awarded in any given year. Restricted shares awarded under the Incentive Plan
will not be deemed to be "performance based" compensation and therefore will not
be excluded from the Section 162(m) deductibility limits.
Federal Income Tax Consequences
Stock Options
There are no federal income tax consequences to a Participant by reason of
the grant of an ISO under the Incentive Plan. No income or gain must be
recognized upon the exercise of an ISO unless the Participant (i) is subject to
the alternative minimum tax, (ii) is utilizing the net issuance method (if
permitted) of exercising his ISO or (iii) has ceased to be an employee for more
than three (3) months before the date of exercise. However, income or gain must
be recognized upon the disposition of shares obtained upon exercise of an ISO.
If the shares are held for at least two years from the date of grant of the ISO
and one year from the date of issuance of the shares underlying such ISO, any
gain recognized on disposition of the shares would generally be treated as a
long-term capital gain for federal income tax purposes. However, if the shares
are disposed of within the periods described in the preceding sentence (a
"disqualifying disposition"), in general, the Participant would recognize
ordinary income upon such disposition equal to the excess, if any, of (i) the
lesser of (A) the fair market value of the shares on the date of exercise and
(B) the amount received by the Participant from such disposition, over (ii) the
exercise price. Currently, the federal maximum tax rate imposed on net capital
gain with respect to individuals is 28 percent (20 percent for most capital
assets held for over 12 months), while the federal maximum ordinary income tax
rate with respect to individuals is 39.6 percent. Net capital gain means the
excess of net long-term capital gain over net short-term capital loss, if any.
The Company will generally not be entitled to take an income tax deduction upon
the grant or exercise of an ISO, but will be entitled to a business deduction
with respect to any income recognized by an option holder upon a disqualifying
disposition (provided the Company satisfies certain reporting requirements).
There are no federal income tax consequences to a Participant by reason of
the grant of an NSO. Taxable ordinary income will normally be recognized by a
Participant upon the exercise of an NSO in an amount equal to the excess of the
fair market value of the shares on the date of exercise over the exercise price.
The Company will be entitled to a business deduction in the amount of the
ordinary income recognized by the Participant, provided the Company satisfies
certain reporting requirements. Upon disposition of such shares the optionee
will generally recognize a capital gain or loss in an amount equal to the
difference between the selling price and the sum of the amount paid for such
shares plus any amount recognized as ordinary income upon exercise of the
option. The Company will not realize any tax consequences as a result of the
disposition of shares acquired upon exercise of an NSO.
If an option holder utilizes the net issuance method to exercise either an
ISO or an NSO, in addition to any federal income tax consequences described
above, such holder would recognize ordinary income equal to the consideration
received or deemed received by the holder with respect to the stock options
surrendered to the Company in order to pay for such exercise. If an option
holder pays the exercise price in Common Stock, special rules would apply which
could affect such holder's basis in, and holding period of, the shares acquired
upon exercise, and, consequently, the amount and character of the gain or loss
recognized by the option holder upon subsequent disposition of such shares.
8
<PAGE> 11
Restricted Stock/Performance Shares
Generally, there will be no federal income tax consequences to either the
Company or a Participant upon the award of restricted shares under the Incentive
Plan which are not vested and are subject to forfeiture. A Participant will
recognize compensation income, for federal income tax purposes, to the extent
that any of the restricted shares are no longer subject to forfeiture, in an
amount equal to the fair market value of the shares that unconditionally vest at
such time less the amount paid (if any) by the recipient for such shares. The
Company generally will be entitled to a federal income tax deduction equal to
the amount of ordinary income recognized by the Participant provided the Company
meets certain reporting requirements. The Company may claim this deduction in
its tax year ending with, or immediately after, the end of the Participant's tax
year in which the Participant recognized such income. To accelerate the timing
of the tax event to the Participant, a Participant who is awarded restricted
shares may elect to recognize ordinary income in the taxable year in which the
restricted shares are awarded, in an amount equal to the fair market value of
the restricted shares received (even if such restricted shares are subject to
forfeiture) less the amount paid (if any) by the Participant for such restricted
shares. For purposes of this election, fair market value will be determined as
of the date the restricted share award is made. Cash received as "Performance
Shares" upon lapse of Restricted Stock restrictions will be taxable to the award
recipient as ordinary income upon receipt.
Stock Appreciation Rights
If the Company delivers cash or Common Stock to a Participant upon his
exercise of an SAR, the amount of such cash or the fair market value of such
shares will be treated as ordinary income to the Participant and the Company
will be entitled to a corresponding deduction.
Warrants
For federal income tax purposes, warrants will generally be treated in the
same manner as a NSO.
NEW PLAN BENEFITS
The following table sets forth the number of NSOs which the Company is
obligated to award to John S. Metz, the Company's President and Chief Executive
Officer, if the Incentive Plan Amendments are approved by the shareholders.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
COMMON STOCK
SUBJECT TO
NON-STATUTORY STOCK
NAME AND POSITION DOLLAR VALUE($) OPTIONS
----------------- --------------- -------------------
<S> <C> <C>
John S. Metz
President and Chief Executive Officer..................... (a) 700,000
</TABLE>
---------------
(a) The exercise price of the NSOs to be granted to Mr. Metz pursuant to the
Incentive Plan will be the fair market value for a share of Common Stock on
the date of grant. The actual value, if any, that Mr. Metz may realize will
depend on the excess of the Common Stock's market price over the exercise
price on the date the stock option is exercised. As of September 14, 2000,
the closing bid price of a share of Common Stock on the Nasdaq SmallCap
Market was $2.3125.
The actual value, if any, of awards to be made under the Incentive Plan to
the Company's directors who are not executive officers is undeterminable, as
such individuals are not entitled to receive such awards automatically upon the
approval of the Incentive Plan Amendments by the shareholders.
9
<PAGE> 12
PROPOSAL III
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
Subject to shareholder ratification, the Board of Directors has appointed
the firm of Mahoney Sabol & Company, LLP as independent accountants to audit the
Company's financial statements for 2000. If the shareholders do not ratify this
appointment, the appointment will be reconsidered by the Board of Directors.
Mahoney Sabol & Company, LLP has audited the Company's financial statements
since January 5, 1998. Services provided by Mahoney Sabol & Company, LLP for the
year ended December 31, 1999 included: audit of the Company's financial
statements, review of the Company's filings with the Securities and Exchange
Commission, and consultation on matters related to accounting, taxation, and
financial reporting. Representatives of Mahoney Sabol & Company, LLP are
expected to be present at the 2000 Annual Meeting of Shareholders, at which they
will have an opportunity to make a statement if they desire to do so and are
expected to be available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS
VOTE "FOR" SUCH RATIFICATION
OTHER BUSINESS
The Board of Directors does not intend to present to the meeting any
business other than the matters described in this proxy statement. If any other
matter is presented to the meeting which under applicable proxy regulations need
not be included in this proxy statement or of which the Board of Directors did
not know a reasonable time before this solicitation would be presented, the
persons named in the accompanying proxy will vote proxies with respect to such
matter in accordance with their best judgment.
10
<PAGE> 13
COMPENSATION COMMITTEE REPORT
Dear Shareholders:
The Compensation Committee of the Board of Directors establishes the
general compensation policies of the Company, administers the Company's 1991
Long-Term Incentive Plan, and sets specific compensation levels for executive
officers of the Company. The goal of the Compensation Committee is to provide
such levels and forms of compensation as will allow the Company to attract,
retain, and motivate persons important to the growth and success of the Company
and to link such compensation to corporate performance and returns to
shareholders. The key elements of the Company's executive compensation are
generally base salary, bonus and awards under the Incentive Plan. The
Compensation Committee's policies with respect to each of the elements are
discussed below. While the elements of compensation are considered separately,
the Compensation Committee also takes into account the complete compensation
package provided by the Company to the individual executive officer.
Compensation Programs
Base Salary. The Committee establishes base salaries for each of the
executive officers based upon the responsibilities of the position, the
experience of the individual, their individual performance and by reference to
the competitive marketplace for pertinent executive talent, including a
comparison to base salaries for comparable positions at other companies. Base
salaries are subject to adjustment by the Compensation Committee, from time to
time, in its discretion.
Bonuses. Executive officers are eligible to receive cash bonuses at the
discretion of the Compensation Committee. The bonuses may be awarded at any time
during the year and may be based on specific corporate performance objectives or
achievements, the overall individual performance of an executive officer or the
performance of a business unit, where appropriate.
Incentive Plan. The purpose of the Company's Incentive Plan is to provide
an additional incentive to retain certain employees of the Company and to
provide a long-term incentive to achieve or exceed the Company's performance
goals. Executive officers are eligible to participate in the Incentive Plan.
Awards under the Incentive Plan may be made in a variety of forms including
warrants to purchase Common Stock, stock options, incentive stock options within
the meaning of Section 422 of the Code and restricted stock. Stock options may
be accompanied by stock appreciation rights and restricted stock may be
accompanied by grants of performance shares (contractual rights to compensation
measured by increases in the value of Common Stock payable in cash). Vesting
periods for executive officers vary. Generally, stock options are granted to
each executive officer at or near the date of hire and subsequent stock options
are granted as the Compensation Committee deems appropriate. In the event of
poor corporate performance, the Compensation Committee may elect not to make
Incentive Plan awards to executive officers.
On January 20, 1999, the Board of Directors, at the recommendation of the
Compensation Committee, decided to adjust the exercise price of employee stock
options to $2.75 per share as of the initial date of grant under the Incentive
Plan. This reduction was made in an effort to more appropriately value the stock
options given the decline in the Company's stock price since the original grant
dates. (See "Compensation Committee Report on Stock Option Repricing" elsewhere
in this Proxy Statement).
Compensation of Chief Executive Officer
Mr. Higgins served as the Chief Executive Officer of the Company during
1999, until his retirement from the Company on September 21, 1999. His
compensation consisted of a base salary plus bonus. In 1999, he received an
annual base salary of $180,017 and was awarded a stock option to purchase 50,000
shares of Common Stock at an exercise price of $2.16 per share.
Mr. Sahi was appointed Chief Executive Officer on September 21, 1999. His
compensation for 1999 consisted of a base salary of $180,000.
11
<PAGE> 14
With respect to the base salaries granted to Messrs. Higgins and Sahi
during 1999, the Compensation Committee took into account base salaries of chief
executive officers of certain other companies, the Company's financial
performance in 1998, the performance of the Common Stock and the assessment by
the Compensation Committee of the individual performance of each of Messrs.
Higgins and Sahi. The Compensation Committee also considered the longevity of
each of Messrs. Higgins' and Sahi's service to the Company and its belief that
Messrs. Higgins and Sahi have served as excellent representatives of the Company
to the public by virtue of their understanding and experience in the safety
medical device industry.
Code Section 162(m)
Under Section 162(m) of the Code and regulations thereunder, no federal
income tax deduction by a publicly-held company is allowed for certain types of
compensation paid to certain highly compensated employees to the extent that the
amount of such compensation for a taxable year for any such individual exceeds
$1 million. Section 162(m) excludes "performance based" compensation from its
deductibility limits. The compensation realized upon the exercise of stock
options is considered "performance based" if, among other requirements, the plan
pursuant to which the options are granted has been approved by the company's
stockholders and has a limit on the total number of shares that may be covered
by options issuable to any plan participant in any twelve-month period. The
Company believes that the Incentive Plan complies with such requirements. The
limitations of Section 162(m) did not affect the deductibility of compensation
paid by the Company in 1999.
The Compensation Committee believes that while tax deductibility is an
important factor, it is not the sole factor to be considered in setting
executive compensation policy. This is especially true while the Company remains
in the development stage and continues to generate operating losses, or has net
operating loss carryforwards available to be applied against its taxable income.
Nevertheless, the Compensation Committee intends to continue to evaluate the
Company's compensation programs in light of the Section 162(m) requirements.
Herman Gross
David Himick
Richard Ribakove
12
<PAGE> 15
EXECUTIVE COMPENSATION
The following tables show for the periods indicated the compensation paid
to, or accrued for the benefit of, the Company's Chief Executive Officer and
each other executive officer of the Company whose aggregate remuneration
exceeded $100,000 for services rendered to the Company during the year ended
December 31, 1999 (collectively, the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION SECURITIES
----------------------- UNDERLYING OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) OPTIONS/SARS COMPENSATION
--------------------------- ---- ---------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Carl R. Sahi(1).................... 1999 180,000
President and Chief Executive 1998 190,769
Officer 1997 220,000
Richard L. Higgins(2).............. 1999 180,017 50,000
Director 1998 180,017 100,000
1997 100,000 25,000
Thomas K. Sutton(3)................ 1999 125,000 32,500
Senior Vice President, Sales and 1998 119,077 30,000
Marketing 1997 103,000 14,401(4) 30,000
Lucio Improta(5)................... 1999 165,318
1998 150,000
1997 144,231 30,000 4,248(6)
</TABLE>
---------------
(1) Mr. Sahi served as President and Chief Executive Officer from September 21,
1999 through April 27, 2000. On September 1, 2000, Mr. Sahi became a
Consultant to the Company.
(2) Mr. Higgins stepped down as President and Chief Executive Officer of the
Company on September 21, 1999 and retired from the Company on December 31,
1999. Mr. Higgins continues to serve on the Company's Board of Directors.
(3) Mr. Sutton first became an employee of the Company in November 1996.
(4) Represents a signing bonus paid to Mr. Sutton in 1997.
(5) Mr. Improta resigned from the Company on September 16, 1999.
(6) Represents premiums paid for a personal term life insurance policy. Mr.
Improta has no interest in any cash surrender value under the insurance
policy.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
NUMBER OF PERCENTAGE OF STOCK VALUE
SECURITIES TOTAL OPTIONS EXERCISE APPRECIATION FOR
UNDERLYING GRANTED TO OR BASE OPTION TERM ($)(1)
OPTIONS EMPLOYEES IN ($/SHARE) EXPIRATION --------------------
NAME GRANTED (#) 1999 PRICE DATE 5% 10%
---- ----------- ------------- --------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Richard L. Higgins.............. 50,000 33% 2.16 04/01/09 $68,000 $172,000
Thomas K. Sutton................ 32,500 21% 2.16 04/01/09 $44,200 $111,800
</TABLE>
---------------
(1) Represents the potential realizable value of each grant assuming the market
price of the underlying security appreciates in value from the date of grant
to the end of the option term at 5% and 10% annually.
13
<PAGE> 16
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY
SHARES OPTIONS/WARRANTS AT OPTIONS/WARRANTS AT
ACQUIRED VALUE DECEMBER 31, 1999 DECEMBER 31, 1999
UPON REALIZED --------------------------- ---------------------------
NAME EXERCISE (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Carl Sahi.................... -- -- -- -- -- --
Richard L. Higgins........... -- -- -- -- -- --
Thomas K. Sutton............. 30,000 $97,500 32,500 30,000 $59,800 $37,500
Lucio Improta................ -- -- -- -- -- --
</TABLE>
COMPENSATION COMMITTEE REPORT ON STOCK OPTION REPRICING
The Company's Incentive Plan is intended to encourage Company employees,
through their individual efforts, to improve the Company's overall performance
and to promote profitability by providing them an opportunity to participate in
increases in the market value of the Company's securities. In January 1999, the
Compensation Committee determined that the imbalance between the exercise prices
of certain of the employee stock options then outstanding (equal to the
respective market prices for the Common Stock at the times they were granted)
and the lower market prices which prevailed for the Common Stock at that time
did not provide an incentive for employees holding such stock options. To
restore that incentive, the Board, upon the recommendation of the Committee,
extended to all of the Company's employees the opportunity, at such employee's
election, to receive a repriced stock option under the Incentive Plan,
exercisable at $2.75 per share, which exercise price was $.50 greater than the
market price of the Company's Common Stock on the date of repricing.
Upon its assessment of the performance of the Company's executive officers
and to enhance the incentive for the executive officers to implement the
Company's business plan, the Committee also recommended, and the Board approved,
the extension to each of the executive officers holding stock options, the
opportunity, at his or her election, to receive a repriced stock option under
the Incentive Plan, exercisable at $2.75 per share, which exercise price was
$.50 greater than the market price of the Common Stock at the time the Board
approved the repricing.
Stock options to purchase an aggregate of 245,000 shares of Common Stock
were affected by the repricing. Except as described above, each repriced stock
option continues to be governed by the same terms as applied to the surrendered
stock options. The surrendered stock options were currently exercisable.
The participation by executive officers in the stock option repricing
program is shown in the table entitled "Ten-Year Stock Option Repricings" below.
Herman Gross
David Himick
Richard Ribakove
14
<PAGE> 17
TEN-YEAR STOCK OPTION REPRICINGS
<TABLE>
<CAPTION>
YEARS OF
NUMBER OF ORIGINAL OPTION
SECURITIES MARKET PRICE TERM
DATE OF UNDERLYING OF STOCK AT EXERCISE PRICE REMAINING AT
GRANT OF OPTIONS TIME OF AT TIME OF NEW ($) DATE OF
REPRICED REPRICED OR REPRICING OR REPRICING OR EXERCISE REPRICING OR
NAME OPTION AMENDED AMENDMENT ($) AMENDMENT ($) PRICE AMENDMENT
---- -------- ----------- ------------- -------------- -------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Richard L. Higgins(1).... 3/15/99 5,000 2.25 9.25 2.75 5
Chief Executive Officer 3/15/99 25,000 2.25 6.25 2.75 8
3/15/99 100,000 2.25 4.75 2.75 9
Thomas K. Sutton......... 3/15/99 30,000 2.25 6.25 2.75 8
Senior Vice President, 3/15/99 30,000 2.25 4.75 2.75 9
Sales and Marketing
Kimberley A. Cady........ 3/15/99 2,500 2.25 9.25 2.75 5
Chief Financial Officer 3/15/99 22,500 2.25 4.75 2.75 9
and Vice President,
Finance
Lucio Improta(2)......... 10/1/99 30,000 3.313 7.75 2.75 7
Vice President,
International Business
Development
</TABLE>
---------------
(1) Mr. Higgins stepped down as President and Chief Executive Officer on
September 21, 1999 and retired from the Company on December 31, 1999. Mr.
Higgins continues to serve as a director of the Company.
(2) Mr. Improta resigned from the Company on September 16, 1999.
The Company does not have a defined benefit or actuarial pension plan.
During 1999, the Company did not have a "long-term incentive plan", and the
Company did not make any "long-term incentive awards," as such terms are defined
in Item 402 of Regulation S-K.
15
<PAGE> 18
PERFORMANCE GRAPH
The following line graph compares the cumulative total shareholder return
on the Company's Common Stock for the fiscal year ended December 31, 1999 with
the cumulative total shareholder return on the Nasdaq Stock Market (U.S.) Index
and the S&P Healthcare Composite Index. The comparison assumes $100 was invested
on June 20, 1994, at the initial public offering price in the Common Stock and
in each of the indices and assumes reinvestment of dividends.
COMPARISON OF CUMULATIVE TOTAL RETURN
FOR THE PERIOD DECEMBER 31, 1994 TO DECEMBER 31, 1999 BETWEEN BIO-PLEXUS, INC.,
THE NASDAQ STOCK MARKET (U.S.) INDEX AND THE S&P HEALTHCARE COMPOSITE INDEX
[LINE GRAPH]
<TABLE>
<CAPTION>
NASDAQ STOCK MARKET S&P HEALTHCARE COMPOSITE
BIO-PLEXUS, INC. (US) INDEX
---------------- ------------------- ------------------------
<S> <C> <C> <C>
1994 100.00 100.00 100.00
1995 80.39 141.34 157.86
1996 70.59 173.90 189.28
1997 37.25 211.13 272.02
1998 18.63 300.26 392.29
1999 31.37 542.45 359.96
</TABLE>
EMPLOYMENT AGREEMENTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
John S. Metz
In April of 2000, the Company entered into a three-year employment
agreement (the "Employment Agreement") with Mr. Metz pursuant to which the
Company is obligated to pay Mr. Metz an annual salary of $250,000 or such
greater amount as the Company's Board of Directors may approve from time to time
("Base Salary"). The Company is also required to pay Mr. Metz annual cash
bonuses for each fiscal year, ranging from 50% to 100% of Base Salary based on
the Company's and Mr. Metz's performance relative to certain performance goals.
So long as Mr. Metz has been continuously employed by the Company from April 27,
2000 through December 31, 2000, the Company will pay Mr. Metz a guaranteed
minimum cash bonus for fiscal 2000 of $75,000.
Upon receipt of shareholder approval of an amendment of the Incentive Plan,
the Company is obligated to grant to Mr. Metz an NSO to purchase up to 700,000
shares of Common Stock (the "Initial Options"). The Initial Options vest ratably
over a three year period. In addition, the Company will grant to Mr. Metz up to
50,000 ISOs (the "Performance Options") per fiscal year if the Company exceeds
certain agreed upon performance targets. The Company will grant to Mr. Metz no
more than 50,000 Performance Options in any one year and no more than 200,000
Performance Options over a four-year period.
16
<PAGE> 19
In the event the Company, or any successor thereto, terminates Mr. Metz
during the nine (9) month period following a Change in Control (as defined in
the Employment Agreement), the Company (or any successor thereto) must pay Mr.
Metz a lump sum payment of twice his Base Salary, and the Initial Options and
any Performance Options previously granted will become immediately fully vested.
Upon termination by the Company of Mr. Metz's employment without Cause (as
defined in Employment Agreement), as a result of a Permanent Disability (as
defined in the Employment Agreement) or by Mr. Metz due to a Diminution in
Responsibility (as defined in Employment Agreement), the Company becomes
obligated to pay to Mr. Metz his salary for 18 months, and a pro-rata portion of
all of the Initial Options and any Performance Options previously granted become
fully vested.
The Employment Agreement contains a non-competition provision limiting Mr.
Metz's ability to compete with the Company upon the termination of his
employment and Mr. Metz has executed the Company's standard form of
confidentiality and inventions assignment agreement.
Scott M. Tepper
In September 1999, the Company entered into a one-year consulting agreement
(the "Original Agreement") with Mr. Tepper. As provided for in the Original
Agreement and prior to Mr. Tepper becoming a director of the Company, the
Company issued Mr. Tepper warrants to purchase up to 50,000 shares of Common
Stock. The Original Agreement was amended and restated in September, 2000
pursuant to an oral agreement between Mr. Tepper and the Company and the term
extended through August 31, 2001 (the Original Agreement as amended and restated
is hereinafter referred to as the "Consulting Agreement"). Pursuant to the
Consulting Agreement the Company is obligated to pay Mr. Tepper a monthly fee of
$4,166. Mr. Tepper is acting as an independent contractor of the Company and the
Consulting Agreement may be terminated with the mutual consent of the parties,
by either party upon 60 days prior written notice, as otherwise required by law
or for "cause" (as defined in the Consulting Agreement). The Company has agreed
to reimburse Mr. Tepper's reasonable, ordinary and necessary expenses incurred
in connection with the performance of his services on behalf of the Company.
Upon termination of the Consulting Agreement, the Company's sole obligation is
to pay Mr. Tepper for services rendered and authorized expenses incurred through
the date of termination. In event of Mr. Tepper's death or disability, the
Company has no ongoing obligations to Mr. Tepper or his estate.
Carl Sahi
As of September 1, 2000 Mr. Sahi became a consultant to the Company
pursuant to the terms of an oral consulting agreement (the "Consulting
Agreement"). The Company and Mr. Sahi are currently negotiating the terms of a
definitive written agreement. Pursuant to the terms of the Consulting Agreement,
the Company is paying Mr. Sahi $5,000 per month in exchange for certain agreed
upon consulting services. Mr. Sahi will also receive an additional fee of $5,000
per month in partial consideration of his agreement not to compete with the
Company. Mr. Sahi also continues to be eligible to receive health benefits from
the Company.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Ribakove, Himick and Gross are the members of the Compensation
Committee. Each is an Outside Director of the Company. No executive officers of
the Company serve on the Compensation Committee or in a like capacity for any
other entity.
17
<PAGE> 20
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of the Common Stock as of September 14, 2000 (unless
otherwise specified) for: (i) each person who is known by the Company to
beneficially own more than 5% of the Common Stock; (ii) each of the Company's
directors; (iii) each of the Company's Named Executive Officers; and (iv) all of
the directors, Named Executive Officers and officers as a group.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY PERCENTAGE
NAME(1) OWNED(2) OWNED(3)
------- ------------ ----------
<S> <C> <C>
Appaloosa Management L.P. and David A. Tepper(4)............ 10,033,333 41%
26 Main Street, First Floor
Chatham, NJ 07928
Herman Gross(5)............................................. 1,674,928 11.2%
Richard L. Higgins.......................................... 65,577 *
Carl R. Sahi(6)............................................. 540,970 3.6%
David Himick(7)............................................. 1,608,134 10.7%
John S. Metz................................................ 10,000 *
Richard D. Ribakove(8)...................................... 57,352 *
Thomas K. Sutton(9)......................................... 30,450 *
Scott M. Tepper(10)......................................... 62,415 *
All directors, Named Executive Officers and Officers as a
group (9 persons)(11)..................................... 4,094,826 26.8%
</TABLE>
---------------
* Less than 1% of the class.
(1) Unless otherwise indicated, the address of each named holder is c/o
Bio-Plexus, Inc., 129 Reservoir Road, Vernon, Connecticut 06066.
(2) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of Common Stock subject
to options, warrants and convertible notes currently exercisable or
convertible, or exercisable or convertible within sixty (60) days are
deemed outstanding for purposes of computing the percentage ownership of
the person holding such securities, but are not deemed outstanding for
computing the ownership percentage of any other person. Except as indicated
and subject to community property laws where applicable, the persons named
in the table have sole voting and investment power with respect to all
shares of Common Stock shown as beneficially owned by them.
(3) The "Percentage Owned" calculations are based on the outstanding shares of
Common Stock as of September 14, 2000.
(4) Based on the Schedule 13D filed with the SEC on behalf of Appaloosa and Mr.
Tepper on November 1, 1999, as amended by Amendment No. 1 filed on January
5, 2000, Amendment No. 2 filed on April 3, 2000 and Amendment No. 3 filed
on May 12, 2000. Includes (i) warrants to acquire up to 4,200,000 shares of
Common Stock issued in connection with both the Permanent Financing and the
Bridge Transactions, (ii) 250,000 shares of Common Stock issued in
connection with the Permanent Financing and (iii) 5,583,333 shares of
Common Stock (subject to adjustment) issuable upon the conversion of the
Convertible Notes. (See "Appaloosa Financing" elsewhere in this Proxy
Statement).
(5) Includes 1,597,928 shares owned by Mr. Gross, 75,000 shares of Common Stock
issuable upon the exercise of warrants and 2,000 shares issuable upon the
exercise of options owned by Mr. Gross which are presently exercisable.
(6) Includes 510,970 shares owned by Mr. Sahi and 30,000 shares of Common Stock
issuable upon the exercise of warrants.
(7) Includes 1,249,113 shares owned by Mr. Himick; 155,021 shares owned jointly
by Mr. Himick and his wife and as to which they share voting and investment
power; 125,000 shares held in the Himick Family
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Investment Club, an entity in which Mr. Himick owns a 53% partnership
stake; 75,000 shares of Common Stock issuable upon the exercise of
warrants; and 4,000 shares issuable upon the exercise of options owned by
Mr. Himick which are presently exercisable.
(8) Includes 700 shares owned by Mr. Ribakove, 37,052 shares of Common Stock
owned jointly by Mr. Ribakove and his wife in tenancy by their entirety and
as to which they share voting and investment power, and 600 shares of
Common Stock held in custodial accounts for the Ribakoves' minor children.
Also includes 19,000 shares of Common Stock issuable upon the exercise of
warrants and options owned by Mr. Ribakove which are presently exercisable.
(9) Includes 10,450 shares of Common Stock owned by Mr. Sutton and 20,000
shares of Common Stock issuable upon the exercise of options owned by Mr.
Sutton which are presently exercisable. Excludes 10,000 of Common Stock
issuable upon the exercise of options owned by Mr. Sutton which are not
presently exercisable.
(10) Includes 11,415 shares of Common Stock owned by Mr. Tepper, 50,000 shares
of Common Stock issuable upon the exercise of warrants owned by Mr. Tepper
which are presently exercisable and 1,000 shares of Common Stock issuable
upon the exercise of options owned by Mr. Tepper which are presently
exercisable.
(11) Includes 3,773,826 shares of Common Stock and 321,000 shares of Common
Stock issuable upon the exercise of warrants and options which are
presently exercisable. Excludes 17,500 shares of Common Stock issuable upon
the exercise of warrants and options which are not presently exercisable.
CERTAIN TRANSACTIONS
CONVERTIBLE DEBENTURES
On April 27, 1999, the Company sold an aggregate principal amount of
$2,500,000 of its 6% Convertible Debentures due June 30, 2004 (the "6%
Debentures") to several purchasers (the "Debenture Holders"). The 6% Debentures
are convertible at any time at the option of the Debenture Holders into shares
of the Company's common stock at the lesser of a fixed conversion price of $3.06
per share (as may be adjusted from time to time) or a floating conversion price
at the time of the conversion if the floating price is less than $3.06 per share
(as may be adjusted from time to time). The 6% Debentures may be wholly or
partially redeemed at the option of the Company for an amount not to exceed 130%
of the face value thereof plus accrued and unpaid interest at any time after the
date of issuance. The Company and the Debenture Holders have limited put and
call options, respectively, for additional 6% Debentures. In connection with the
Appaloosa Financing (see below), the Company agreed not to exercise its put
right under the 6% Debentures (the "Call Right"). During the ninety day period
commencing April 27, 2000 the Debenture Holders had the right to cause the
Company to issue to them up to $1,000,000 additional principal amount of the 6%
Debentures. The Debenture Holders did not exercise the Call Right. The 6%
Debentures also included a warrant to purchase up to 500,000 shares of Common
Stock at an exercise price of $3.38. As of September 14, 2000, the Debenture
Holders had converted the total $2,500,000 of the outstanding principal balance
of the 6% Debentures into 880,733 shares of Common Stock.
APPALOOSA FINANCING
On September 21, 1999, the Company received a commitment from Appaloosa for
a total financing package of $17.5 million, comprised of (i) $16.75 million of
zero-coupon, secured convertible notes due 2005 (the "Convertible Notes"), (ii)
250,000 shares of Common Stock issued at a purchase price of $3.00 per share
(the "Permanent Financing Shares") and (iii) nine-year warrants to purchase up
to 1.5 million shares of Common Stock at an initial exercise price of $7.00 per
share (the "$7 Warrants" and, collectively with the Convertible Notes and the
Permanent Financing Shares, the "Permanent Financing"). The Permanent Financing
was consummated on April 28, 2000 after receipt of stockholder approval of the
terms of the Permanent Financing and certain related matters.
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BRIDGE TRANSACTIONS
Pending consummation of the Permanent Financing, on October 21, 1999, the
Company issued to Appaloosa and entities affiliated therewith (the "Purchasers")
a 7.5% non-convertible secured note in the aggregate principal amount of $3
million (the "First Bridge Note"). In January 2000, the interest rate on the
First Bridge Note was increased to 12% per annum. In connection with the
issuance of the First Bridge Note, the Company also issued to the Purchasers (i)
a five-year warrant to purchase up to 1.0 million shares of Common Stock, at an
initial exercise price of $3.00 per share (the "$3 Warrants") and (ii) a
nine-year warrant to purchase up to 1.5 million shares of Common Stock at an
initial exercise price of $5.00 per share (the "$5 Warrants") (the $3 Warrants
and $5 Warrants are collectively referred to herein as the "First Bridge
Warrants"). At the Purchaser's election and upon the closing of the Permanent
Financing, the exercise price of the $3 Warrants increased to $4.00 per share of
Common Stock. The exercise price of the $5 Warrants increased to $7.00 per share
of Common Stock upon the closing of the Permanent Financing. The $5 Warrants
contain a net-exercise provision.
On January 5, 2000, the Company issued to the Purchasers a 15%
non-convertible secured note in the aggregate principal amount of $1.65 million
(the "Second Bridge Note"). In connection with the issuance of the Second Bridge
Note, the Company also agreed to issue and sell on the earlier of (i) April 30,
2000 and (ii) the closing of the Permanent Financing, five-year warrants to
acquire up to 200,000 shares of Common Stock at an initial exercise price of
$3.00 per share (the "Second Bridge Warrants"). The Second Bridge Warrants
contain a net-exercise provision.
On April 3, 2000, the Company issued to the Purchasers a 15%
non-convertible secured note in the aggregate principal amount of $2.2 million
(the "Third Bridge Note"). No warrants or convertible securities were issued in
connection with the Third Bridge Note. The First Bridge Note, the Second Bridge
Note and the Third Bridge Note are collectively referred to as the "Bridge
Notes". The issuance of the Bridge Notes, the First Bridge Warrants and the
Second Bridge Warrants are collectively referred to as the "Bridge
Transactions".
The Bridge Notes were not convertible into shares of Common Stock and were
paid-in-full (together with accrued interest in the amount of $265,000) at the
closing of the Permanent Financing on April 28, 2000.
PERMANENT FINANCING
In order to consummate the Permanent Financing, the Company was required by
the rules of The NASDAQ Stock Market to obtain the approval of a majority of the
Company's stockholders of the terms and conditions of the Permanent Financing
("Stockholder Approval"). Coinciding with Stockholder Approval obtained on April
28, 2000, the Company issued to the Purchasers the Convertible Notes, the
Permanent Financing Shares and the $7 Warrants. The Convertible Notes are
convertible into shares of Common Stock at an initial conversion price of $3.00.
The $7 Warrants contain a net-exercise provision.
The Permanent Financing generated aggregate proceeds to the Company of
$17.5 million. After repayment of the Bridge Notes and costs and expenses
associated with the financing, the Company realized net proceeds of
approximately $9.6 million which will be available, along with existing
resources, for general working capital purposes, subject to the terms and
conditions of the Permanent Financing transaction agreements discussed below.
In connection with the Permanent Financing the Company entered into, among
other agreements, a Convertible Note Purchase Agreement, Registration Rights
Agreement and Security Agreement (collectively, the "Appaloosa Agreements"),
each of which was previously filed by the Company with the SEC.
CONVERTIBLE NOTE PURCHASE AGREEMENT
The Convertible Note Purchase Agreement provides for the purchase by the
Purchasers of the Convertible Notes and contains covenants and provisions
standard for such agreements. Among the covenants contained in the Convertible
Note Purchase Agreement was an agreement that Appaloosa would have the right to
designate up to two members to the Company's Board of Directors. On June 28,
2000 Appaloosa
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designated Scott M. Tepper as one of its designees. As of September 14, 2000
Appaloosa has not yet appointed its other Designee to the Board.
THE REGISTRATION RIGHTS AGREEMENT
Under the Registration Rights Agreement, the Purchasers have the right to
demand that the Company effect the registration under the Securities Act of
1933, as amended (the "Securities Act"), of all or part of their "Registrable
Securities" having an aggregate anticipated offering price of at least $1
million. Registrable Securities are defined to mean (i) the shares of Common
Stock issuable upon conversion of the Convertible Notes, (ii) the Permanent
Financing Shares, (iii) the shares of Common Stock issuable upon exercise of the
$7 Warrants, the First Bridge Warrants and the Second Bridge Warrants, and (iv)
any other additional shares of Common Stock the Purchasers may otherwise
acquire.
The Purchasers are also entitled to request inclusion in any registration
of securities by the Company, of all or part of their Registrable Securities. If
the number of Registrable Securities requested to be included in such
registration would materially adversely affect an underwritten offering (as
determined by the underwriter), then the Company will include in such
registration, first, the securities proposed by the Company to be sold for its
own account, and, second, the Registrable Securities and all other securities of
the Company to be included in such registration on behalf of other selling
stockholders to the extent of the number and type approved by the underwriter,
pro rata among the participating holders of Registrable Securities and such
other selling stockholders of securities requesting such registration.
The Company has agreed to pay all registration expenses incident to the
registration and disposition of the Registrable Securities registered pursuant
to the Registration Rights Agreement (other than underwriting discounts and
commissions in respect thereof, which shall be paid by the selling stockholders
of the Registrable Securities); provided, however, that with respect to the
demand registrations, the Company is only required to pay such expenses for the
first three of such demand registrations.
The Registration Rights Agreement and the registration and other rights
contained therein may be assigned by each of the Purchasers to subsequent
holders of such Purchaser's Registrable Securities. The Registration Rights
Agreement contains customary provisions relating to registration procedures and
indemnification and contribution relating to the exercise by the holders of
Registrable Securities of their registration rights thereunder.
THE SECURITY AGREEMENT
In connection with the Permanent Financing, the Company granted a first
priority security interest to Appaloosa, as the collateral agent, for the
ratable benefit of the holders of the Convertible Notes, in all of the assets of
the Company (including all of its patents) not encumbered by certain
pre-existing perfected first priority security interests or certain equipment
lease facilities. In these latter assets, the Company granted a second priority
security interest to Appaloosa.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange
Act, and in accordance therewith files periodic reports, proxy statements, and
other information with the SEC. The reports, proxy statements, and other
information filed by the Company with the SEC may be inspected and copied at the
public reference facilities maintained by the SEC at 450 Fifth Street, N.W.,
Room 1024, Washington, D.C. 20549, and also are available for inspection at the
SEC's Regional Offices at Seven World Trade Center, Suite 1300, New York, New
York 10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such material also may be obtained, at prescribed rates, from the
Public Reference Section of the SEC at 450 Fifth Street, N.W., Washington, D.C.
20549. In addition, the Company is required to file electronic versions of
certain materials with the SEC through the SEC's Electronic Data Gathering,
Analysis and Retrieval (EDGAR) system. The SEC maintains a site on the
Internet's World Wide Web at http://www.sec.gov that contains reports, proxy
statements, and other information regarding registrants that file electronically
with the SEC.
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SHAREHOLDER INFORMATION
ANY PERSON FROM WHOM PROXIES FOR THE ANNUAL MEETING ARE SOLICITED MAY
OBTAIN, IF NOT ALREADY RECEIVED, FROM THE COMPANY, WITHOUT CHARGE, A COPY OF THE
COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31,
1999, BY WRITTEN REQUEST ADDRESSED TO BIO-PLEXUS, INC., 129 RESERVOIR ROAD,
VERNON, CONNECTICUT 06066, ATTENTION: INVESTOR RELATIONS DEPARTMENT.
FUTURE SHAREHOLDER PROPOSALS
The Company must receive at its principal office before April 27, 2001, any
proposal which a shareholder wishes to submit for the 2001 Annual Meeting of
Shareholders, if the proposal is to be considered by the Board of Directors in
the proxy materials for that meeting.
Nancy S. Lautenbach
Secretary
September 21, 2000
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ANNEX A
BIO-PLEXUS, INC.
1991 LONG-TERM INCENTIVE PLAN
SECTION I. PREAMBLE. Bio-Plexus, Inc., a corporation incorporated under
the laws of the State of Connecticut (the "Company"), hereby adopts the
Bio-Plexus, Inc. 1991 Long-Term Incentive Plan (the "Plan"). Capitalized nouns
not otherwise defined herein shall have the meaning attributed to them in
Section V hereof.
SECTION II. PURPOSE OF THE PLAN. The purposes of the Plan are: (i) to
encourage stock ownership by employees, members of the Board of Directors of,
and consultants and advisors to, the Company, (ii) to assist the Company in
retaining and attracting such employees, members of the Board of Directors,
consultants and advisors with requisite experience and ability; and (iii) to
associate more closely the interests of certain key contributors to the success
of the Company with the interests of the Company's stockholders.
SECTION III. ADMINISTRATION.
(a) The Committee. The Plan shall be administered by a Plan Committee
composed of at least two (2) members of the Company's Board of Directors (the
"Committee"); provided, however, that only Outside Directors shall be eligible
to be members of the Committee. If the Board of Directors has not appointed a
Committee, the Plan shall be administered by all of the members of the Board of
Directors who are Outside Directors, and in such event, references in the Plan
to the Committee shall be deemed to be to all of the Outside Directors as a
group.
(b) Authority and Discretion of Committee. Subject to the express
provisions of the Plan and provided that all actions taken shall be consistent
with the purposes of the Plan, the Committee shall have full and complete
authority and the sole discretion to: (i) select the Participants; (ii)
determine the size and the form of the award or awards to be granted to any
Participant; (iii) determine the time or times such awards shall be granted;
(iv) establish the terms and conditions upon which such awards may be exercised
and/or transferred; (v) alter any restrictions; and (vi) adopt such rules and
regulations, establish, define and/or interpret any other terms and conditions,
and make all other determinations (which may be on a case-by-case basis) deemed
necessary or desirable for the administration of the Plan.
SECTION IV. AWARDS. Awards under the Plan may include any or all of the
following, as described herein: Options, either Incentive Stock Options or
Non-Qualified Stock Options with or without Stock Appreciation Rights,
Restricted Share Awards with or without Performance Shares, or Warrants. No
Participant may be granted or awarded, in any calendar year, Options or Stock
Appreciation Rights under the Plan which are exercisable with respect to more
than 700,000 shares of common stock ("Common Stock").
(a) Options. Stock options ("Options") are rights to purchase, for a
predetermined period of time, shares of common stock of the Company ("Common
Stock") at a stated price determined by the Committee on the date of grant.
(i) The Committee may grant Options either alone or in conjunction
with Stock Appreciation Rights as described in Paragraph (d) below. It
shall determine the number of shares of Common Stock to be covered by each
such Option.
(ii) The Committee will determine the type of Option (i.e. Incentive
Stock Option or Non-Qualified Stock Option), the conditions of Option
exercise, as well as the conditions upon which Options shall lapse, but in
no event may any portion of an Option be exercisable later than ten (10)
years from the date of the grant.
(iii) The Committee may provide for acceleration of Option exercise in
case of acquisition or significant change in ownership of the Company.
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(iv) The purchase price of shares purchased pursuant to any Option
shall be paid in full upon exercise, either (a) in cash, (b) by delivery of
shares of Common Stock (valued at their Fair Market Value on the date of
purchase), or (c) a combination of cash and Common Stock.
(b) Incentive Stock Options. Options intended to qualify as "Incentive
Stock Options" within the meaning of Subsection (b) of Section 422 of the
Internal Revenue Code of 1986, as it may be amended from time to time (the
"Code") Options must meet the following conditions:
(i) The option price must be equal to, or exceed, the Fair Market
Value of the underlying stock on the date of the grant.
(ii) Incentive Stock Options must not be exercisable after ten (10)
years from the date of the grant.
(iii) All shares acquired from the exercise of Incentive Stock Options
must be held for two (2) years from the date of the grant and one (1) year
from the date of the transfer of such shares (exercise date).
(iv) The aggregate Fair Market Value, determined on the grant date, of
the shares of Common Stock with respect to which Incentive Stock Options
are exercisable for the first time by an individual in any calendar year
shall not exceed One Hundred Thousand ($100,000) Dollars.
(v) Incentive Stock Options may only be granted to common law
employees of the Company.
(vi) An Incentive Stock Option shall not be granted to an individual
who, on the date of grant, owns stock possessing more than ten (10%)
percent of the total combined voting power of all classes of stock of the
Company or of any subsidiary corporation unless (a) the option price equals
at least one hundred ten (110%) percent of the Fair Market Value of the
stock on the date the Option is granted, and (b) the option, by its terms,
may not be exercisable more than five (5) years after the date of grant.
(vii) Unexercised Incentive Stock Options shall lapse three (3) months
after termination of the recipient's employment with the Company.
(c) Non-Qualified Stock Options. Non-Qualified Stock Options are Options
that do not qualify for the tax treatment provided in Section 421 of the Code.
Non-Qualified Stock Options may be granted to any person entitled to participate
in the Plan as the Committee shall determine from time to time.
(d) Stock Appreciation Rights. "Stock Appreciation Rights" are rights to
receive cash and/or Common Stock in lieu of the purchase of shares under a
related Option. The Committee may grant Stock Appreciation Rights to any
recipient of an Option either at the time of the grant of the Option or
subsequently by amendment to such grant. All Stock Appreciation Rights shall be
granted under and subject to the following terms and conditions and such other
terms and conditions as the Committee may establish:
(i) Each Stock Appreciation Right shall be exercisable at the same
times and with regard to the same number of shares as the related Option is
exercisable.
(ii) Each Stock Appreciation Right shall entitle the holder thereof to
surrender to the Company a portion of or all of the unexercised, but
exercisable, related Option, and to receive with respect to each share of
Common Stock represented by such surrendered portion cash or shares of
Common Stock of a value equal to the amount by which the Fair Market Value
of each such share on the date of exercise exceeds the option price
provided in the related Option. The recipient shall not be required to pay
the Option exercise price upon surrender of the Option or exercise of the
related Stock Appreciation Right. The right to receive cash shall only be
available for a Stock Appreciation Right held for at least six (6) months
from the date of acquisition to the date of cash settlement.
(iii) Each surrender of a portion of or all of an Option upon the
exercise of a Stock Appreciation Right shall cause a share for share
reduction in the number of shares of Common Stock covered by the related
Option.
(iv) The Committee in its sole discretion shall have the right to
approve or disapprove the election of a holder to receive cash in whole or
in part in settlement of a Stock Appreciation Right.
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(v) The election of a holder to receive cash in full or partial
satisfaction of a Stock Appreciation Right, as well as the exercise of the
Stock Appreciation Right for cash must be made between the third (3rd)
business day following the date of release of financial data meeting the
requirements of Rule 16b-3(e)(1)(ii) promulgated under the Securities
Exchange Act of 1934, as amended, and the twelfth (12th) business day
following such date.
(vi) Notwithstanding any other provisions of the Plan, the Committee
may from time to time determine the maximum amount of cash or stock which
may be paid or issued upon exercise of Stock Appreciation Rights (a) in any
year and/or (b) to any particular recipient. In no event, however, may the
cash portion of such payment exceed fifty (50%) percent of the total amount
due. Any other limitation on payments may be changed by the Committee from
time to time, provided that no such change shall require the holder to
return to the Company any amount theretofore received upon the exercise of
Stock Appreciation Rights.
(e) Restricted Stock Awards. "Restricted Stock Awards" are grants of
Common Stock to a recipient subject to the restrictions described in the
following subsections.
(i) The Committee may award Restricted Stock alone or in conjunction
with Performance Shares as described in Paragraph (f) below. The Committee
shall further determine the number of shares of Restricted Stock to be
awarded.
(ii) Restricted Stock may not be sold, transferred or otherwise
disposed of, pledged, or otherwise encumbered.
(iii) In the event a recipient is an employee and there is a
termination of employment for any reason except death, Retirement or
Permanent Disability, Restricted Stock shall be returned to the Company
within thirty (30) days following such termination and then shall be deemed
void for all corporate purposes.
(iv) Restriction terms and conditions will be set by the Committee at
the time of award; in no event, however, may any restrictions lapse before
one (1) year after the date of award or later than ten (10) years from the
date of award.
(v) Existing restrictions against disposition of the shares, and the
obligation to return to the Company those shares with respect to which such
restrictions and obligation have not otherwise lapsed, shall lapse upon the
occurrence of the earlier of the death, Retirement and Permanent Disability
of the recipient of a Restricted Stock Award.
(vi) In addition to the terms provided in Paragraph (e)(v) above, the
Committee may, in its discretion, provide for accelerated lapse of
restrictions in the case of an acquisition or other change of ownership of
the Company.
(vii) Certificates issued in respect of Restricted Stock granted under
the Plan shall be registered in the name of the recipient but shall bear
the following legend:
"The transferability of this certificate and the shares of stock
represented hereby is restricted and the shares are subject to the
further terms and conditions contained in the 1991 Long-Term Incentive
Plan of Bio-Plexus, Inc. and in a certain agreement executed pursuant
thereto. Copies of said plan and agreement are on file in the office of
the Treasurer of the Company."
(viii) In order to enforce the restrictions, terms and conditions on
Restricted Stock, each recipient thereof shall, immediately upon receipt of
a certificate or certificates representing such shares, deposit such
certificates together with stock powers and other instructions of transfer
as the Committee may require, appropriately endorsed in blank, with the
Company as Escrow Agent under a letter agreement, in such form as shall be
determined by the Committee.
(f) Performance Shares. Performance Shares are rights to payment in cash
of an amount equal to the Fair Market Value of Company Common Stock on the date
the restrictions lapse on an accompanying Restricted Stock Award. The Committee
may grant Performance Shares to a recipient of Restricted Stock
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either at the time of the award of the Restricted Stock or subsequently by
amendment of such award. Any number of Performance Shares up to an amount equal
to the number of shares of the accompanying Restricted Stock Award may be
granted by the Committee. The Committee may impose such restrictions on the
surrender of Performance Shares as it shall deem necessary or desirable.
(g) Warrants. Warrants are rights to purchase shares of Common Stock of
the Company at a stated exercise price for a predetermined time.
(i) The Committee shall determine the number of shares of Common Stock
to be subject to each Warrant and shall issue Warrants at the exercise
price of not less than the Fair Market Value per share as of the date of
issuance of the Warrant.
(ii) The Committee will determine the terms and conditions of Warrant
exercise, but in no event may any Warrant be exercisable later than ten
(10) years from the date of grant.
(iii) The purchase price of share purchased pursuant to any Warrant
exercise shall be paid in cash.
(iv) The Committee will determine the conditions and terms upon which
Warrants may be forfeited, provided the Committee may in its discretion
issue Warrants without forfeiture conditions.
(v) A Warrant shall be treated as an option that does not qualify for
the tax treatment provided in Section 421 of the Code. The Committee as
part of the grant or issuance of Warrants may commit the Company to
reimburse the Participant/grantee for the federal and state income taxes
which may be imposed by virtue of the exercise of the Warrant.
(h) Special Rules for Awards to Covered Employees. Awards to Covered
Employees shall be made only in compliance with all of the following conditions:
(i) Only the Committee shall have authority to make awards to Covered
Employees; and
(ii) Covered Employees shall be eligible to receive only awards, the
economic benefits of which are a function of the increase in the value of
the underlying stock after the date of the grant.
SECTION V. MISCELLANEOUS PROVISIONS.
(a) Rights of Recipients of Awards. The holder of Stock Appreciation
Rights or any Option or Warrant granted under the Plan shall have no rights as a
stockholder of the Company with respect thereto unless and until certificates
for shares are issued. The holder of a Restricted Stock Award will be entitled
to receive any dividends on such shares in the same amount and at the same time
as declared on shares of Common Stock of the Company and shall be entitled to
vote such shares as a stockholder of record.
(b) Assignment of Options, Stock Appreciation Rights and Warrants. No
Option, Stock Appreciation Right, Warrant, or any rights or interests of the
recipient therein shall be assignable or transferable by such recipient except
by will or the laws of descent and distribution. During the lifetime of the
recipient, such Option, Warrant or Stock Appreciation Right shall be exercisable
only by, or payable only to, the recipient thereof.
(c) Further Agreements. All Options, Stock Appreciation Rights and
Warrants granted under this Plan shall be evidenced by agreements ("Award
Agreements") in such form and containing such terms and conditions (not
inconsistent with this Plan) as the Committee may require.
(d) Legal and Other Requirements. No shares of Common Stock shall be
issued or transferred upon exercise of any award under the Plan unless and until
all legal requirements applicable to the issuance or transfer of such shares and
such other requirements as are consistent with the Plan have been complied with
to the satisfaction of the Committee. The Committee may require that prior to
the issuance or transfer of Common Stock hereunder, the recipient thereof shall
enter into a written agreement to comply with any Restriction on subsequent
disposition that the Committee or the Company deem necessary or advisable under
any applicable law, regulation or official interpretation thereof. Certificates
of stock issued hereunder may be legended to reflect such restrictions.
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(e) Withholding of Taxes. Pursuant to applicable federal, state, local, or
foreign laws, the Company may be required to collect income or other taxes upon
the grant of certain awards, the exercise of an Option, Warrant, or Stock
Appreciation Rights. The Company may deduct from payments made under the Plan,
or require, as a condition to such award, or to the exercise of an Option,
Warrant or Stock Appreciation Right, that the recipient pay the Company, at such
time as the Committee or the Company determine, the amount of any taxes which
the Committee or the Company, in their discretion, determine are required to be
withheld.
(f) Right to Awards. No employee of the Company or other person shall have
any claim or right to be a Participant in this Plan or to be granted an award
hereunder. Neither this Plan nor any action taken hereunder shall be construed
as giving any Participant any right to be retained in the employ of the Company.
Nothing contained hereunder shall be construed as giving any Participant or any
other person any equity or interest of any kind in any assets of the Company or
creating a trust of any kind or a fiduciary relationship of any kind between the
Company and any such person. As to any claim for any unpaid amounts under the
Plan, any Participant or any other person having a claim for payments shall be
an unsecured creditor.
(g) Fair Market Value. "Fair Market Value" means, as of any given date,
the last reported sales price of the Company's Common Stock as reported in The
Wall Street Journal for such date or, if either no such sale is reported or the
Common Stock is not publicly traded on or as of such date, the fair market value
of the Common Stock as determined by the Committee in good faith based on the
available facts and circumstances at the time.
(h) Participants. "Participants" shall mean persons receiving awards
pursuant to the Plan who are, at the time of such award, officers, employees or
directors of, or consultants or advisors to (provided, in the case of Incentive
Stock Options, such directors or officers are then also employees of) the
Company.
(i) Permanent Disability. "Permanent Disability" shall mean a long-term
disability as determined under rules and procedures similar to those that apply
in the Company's long-term disability plan for employees then in effect.
(j) Retirement. "Retirement" shall mean any date on which an employee
terminates employment with the Company on or after attaining age sixty-five
(65).
(k) Outside Director. "Outside Director" shall mean a member of the
Company's Board of Directors who: (i) is not, and has not been, an officer or
employee of the Company; and (ii) is not remunerated by the Company in any
capacity other than as member of the Board of Directors and otherwise satisfies
the definition of "outside director" set forth in Treasury Regulations Section
1.162-27(e)(3).
(l) Covered Employee. "Covered Employee" shall mean any person who is a
"covered employee" for purposes of Section 162(m)(3) of the Code.
(m) Indemnity. Neither the Board of Directors nor the Committee, nor any
members of either, nor any employees of the Company, shall be liable for any
act, omission, interpretation, construction, or determination made in good faith
in connection with their responsibilities with respect to the Plan, and the
Company hereby agrees to indemnify the members of the Board of Directors, the
members of the Committee, and the employees of the Company in respect of any
claim, loss, damage, or expense (including counsel fees) arising from any such
act, omission, interpretation, construction, or determination to the full extent
permitted by law.
SECTION VI. AMENDMENT AND TERMINATION; ADJUSTMENTS UPON CHANGES IN
STOCK. The Board of Directors of the Company may at any time, and from time to
time, modify, amend or terminate this Plan in any respect, except to the extent
shareholder approval is required by law. The termination or any modification of
this Plan shall not, without the consent of the Participant, affect such
Participant's rights under any Award Agreement unless such Award Agreement so
specifies. With the consent of the Participant affected, the Board of Directors
may amend outstanding Award Agreements in a manner not inconsistent with this
Plan. The Board of Directors shall have the right to amend or modify the terms
and provisions of this Plan and of any outstanding Incentive Stock Options
granted under this Plan so that Options granted under the Plan and any such
existing Options may qualify for favorable Federal income tax treatment
(including deferral of taxation
A-5
<PAGE> 30
upon exercise) as may be afforded stock options under Section 422 of the Code.
If there shall be any change in the stock subject to the Plan or to any Option,
Stock Appreciation Right, Restricted Share Award, Performance Share Award or
Warrant granted under the Plan, through merger, consolidation, reorganization,
recapitalization, stock dividend, stock split or other change in the corporate
structure, appropriate adjustments may be made by the Board of Directors of the
Company (or if the Company is not the surviving corporation in any such
transaction, the Board of Directors of the surviving corporation) in the
aggregate number and kind of shares subject to the Plan, and the number and kind
of shares and the price per share subject to outstanding Options, Stock
Appreciation Rights or Warrants.
SECTION VII. SHARES OF STOCK AVAILABLE. The number of shares of stock
subject to an award under this Plan shall not exceed Two Million Five Hundred
Thousand (2,500,000) shares of the Company's Common Stock. This amount will be
reduced upon the exercise of an Option or Warrant by the number of shares
exercised and upon the exercise of a Stock Appreciation Right by an amount equal
to the number of shares covered by the Option cancelled due to the Stock
Appreciation Right exercised. Any shares subject to an Option or Warrant
hereunder that for any reason is cancelled (other than because of the exercise
of an attached Stock Appreciation Right) or expires will be available for
further awards. Shares of Common Stock to be delivered under the Plan may be
authorized, but unissued shares, treasury shares, or shares reacquired on the
open market.
SECTION VIII. EFFECTIVE DATE AND TERM OF THE PLAN. The effective date of
the Plan is May 23, 1992, and Awards under the Plan may be made for a period of
ten (10) years commencing on such date. The period during which an Option or
other Award may be exercised may extend beyond that time as provided herein.
A-6
<PAGE> 31
PROXY
BIO-PLEXUS, INC.
ANNUAL MEETING OF SHAREHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby severally appoints John S. Metz and Kimberley A.
Cady, the true and lawful proxies and attorneys in fact of the undersigned, each
with the power of substitution and resubstitution, and hereby authorizes each of
them to vote all shares of Common Stock of the undersigned at the Annual Meeting
of Shareholders of the Company to be held on Thursday, October 26, 2000 at
Rensselaer at Hartford, 275 Windsor Street, Hartford, Connecticut at 9:30 a.m.,
local time, and at any adjournments or postponements thereof.
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY WILL
BE VOTED "FOR" THE PROPOSALS SET FORTH ON THE REVERSE SIDE, AND UPON ALL OTHER
MATTERS THE PROXIES SHALL VOTE IN ACCORDANCE WITH THEIR BEST JUDGMENT.
SEE REVERSE SIDE SEE REVERSE SIDE
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
DETACH HERE
[X] Please mark
votes as in this
example.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ALL ITEMS.
1. Election of Directors duly nominated and listed below:
[ ] FOR ALL NOMINEES [ ] TO WITHOLD AUTHORITY [ ] EXCEPTION*
to vote for all nominees listed below
Nominees: Herman Gross, Richard L. Higgins, David Himick, John S. Metz,
Richard D. Ribakove, Carl R. Sahi, Scott M. Tepper
* INSTRUCTION: To withhold authority to vote for any nominee(s)
write the nominee's name on the space provided below and check
Exception.
------------------------------------------------------------------------------
2. Approval of an amendment to the Company's 1991 Long-Term Incentive Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Ratification of the appointment of Mahoney Sabol & Company, LLP as
independent accountants
<PAGE> 32
to audit the Company's 2000 financial statements.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. To transact such other business as may properly come before the meeting.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
MARK HERE IF YOU PLAN TO ATTEND THE MEETING [ ]
NOTE: Signature should agree with the name stenciled hereon. When signing as
executor, administrator, trustee, guardian or attorney, please give full title
as such. For joint accounts or co-fiduciaries, all joint owners or
co-fiduciaries should sign. For an account in the name of two or more persons,
each should sign or if one signs, he or she should attach evidence of authority
Signature: Date:
--------------------------------------------------------------
Title/Capacity:
--------------------------------------------------------------
Signature: Date:
--------------------------------------------------------------
Title/Capacity:
--------------------------------------------------------------
THE BOARD OF DIRECTORS URGES THAT YOU COMPLETE, SIGN, AND DATE THIS PROXY CARD
AND RETURN IT PROMPTLY BY MAIL IN THE ENCLOSED ENVELOPE.
