<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement / / 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 section 240.14a-11(c) or section
240.14a-12
CellPro, Incorporated
- - -------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- - -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
---------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
---------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
---------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
---------------------------------------------------------------------
(5) Total fee paid:
---------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
---------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
---------------------------------------------------------------------
(3) Filing Party:
---------------------------------------------------------------------
(4) Date Filed:
---------------------------------------------------------------------
<PAGE> 2
CELLPRO, INCORPORATED
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
AUGUST 1, 1996
TO THE STOCKHOLDERS OF CELLPRO, INCORPORATED:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
CellPro, Incorporated (the "Company"), a Delaware corporation, will be held on
Thursday, August 1, 1996, at 9:30 a.m. local time, at the Company's corporate
headquarters located at 22215 26th Avenue S.E., Bothell, Washington 98021, for
the following purposes:
1. To elect directors to serve for the ensuing year or until their
successors are duly elected and qualified.
2. To approve an amendment to the Company's Restated 1989 Stock Option
Plan which will increase the number of shares of the Company's Common Stock
reserved for issuance thereunder by 500,000 shares.
3. To ratify the appointment of Coopers & Lybrand L.L.P. as independent
accountants of the Company for the fiscal year ending March 31, 1997.
4. To transact such other business as may properly come before the
meeting or any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only stockholders of record at the close of business on July 2, 1996
are entitled to notice of and to vote at the annual meeting.
All stockholders are cordially invited to attend the meeting in person.
However, to ensure your representation at the meeting, you are urged to sign and
return the enclosed Proxy as promptly as possible in the envelope enclosed for
that purpose.
Any stockholder attending the meeting may vote in person even if he or
she has returned a Proxy.
Sincerely,
Richard D. Murdock,
President and Chief Executive Officer
July 8, 1996
YOUR VOTE IS VERY IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES YOU OWN. PLEASE
READ THE ATTACHED PROXY STATEMENT CAREFULLY, AND COMPLETE, SIGN AND DATE THE
ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE AND RETURN IT IN THE ENCLOSED
ENVELOPE
<PAGE> 3
CELLPRO, INCORPORATED
22215 26TH AVENUE, S.E.
BOTHELL, WASHINGTON 98021
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON AUGUST 1, 1996
GENERAL
The enclosed proxy ("Proxy") is solicited on behalf of the Board of
Directors of CellPro, Incorporated, a Delaware corporation (the "Company"), for
use at the Company's Annual Meeting of Stockholders to be held on August 1, 1996
(the "Annual Meeting"). The Annual Meeting will be held at 9:30 a.m. at the
Company's corporate headquarters located at 22215 26th Avenue, S.E., Bothell,
Washington 98021.
These proxy solicitation materials were mailed on or about July 8, 1996
to all stockholders entitled to vote at the Annual Meeting.
REVOCABILITY OF PROXIES
Any person giving a Proxy has the power to revoke it at any time before
its exercise. It may be revoked by filing with the Chief Operating Officer of
the Company at the Company's principal corporate offices, CellPro, Incorporated,
22215 26th Avenue, S.E., Bothell, Washington 98021, a notice of revocation or
another signed Proxy with a later date. You may also revoke your Proxy by
attending the Annual Meeting and voting in person.
SOLICITATION
The Company will bear the entire cost of solicitation, including the
preparation, assembly, printing and mailing of this Proxy Statement, the Proxy
and any additional soliciting materials furnished to stockholders. Copies of
solicitation materials will be furnished to brokerage houses, fiduciaries, and
custodians holding shares in their names that are beneficially owned by others
so that they may forward this solicitation material to such beneficial owners.
In addition, the Company may reimburse such persons for their costs in
forwarding the solicitation materials to such beneficial owners. The original
solicitation of proxies by mail may be supplemented by solicitation by
telephone, telegram, or other means by Directors, officers, employees or agents
of the Company. No compensation will be paid to these individuals for any such
services. The Company also reserves the right to have an outside solicitor
conduct the solicitation of proxies and to pay such solicitor for its services.
Except as described above, the Company does not presently intend to solicit
proxies other than by mail.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Proposals of stockholders of the Company that are intended to be
presented by such stockholders at the Company's 1997 Annual Meeting must be
received by the Company no later than February 21, 1997 to be included in the
Company's proxy statement and form of proxy relating to that meeting.
1.
<PAGE> 4
RECORD DATE, VOTING AND SHARE OWNERSHIP
Stockholders of record on July 2, 1996 are entitled to notice of and to
vote at the Annual Meeting. At such record date, 14,387,671 shares of the
Company's Common Stock, $.001 par value, were issued and outstanding. No shares
of the Company's preferred stock were outstanding. All votes will be tabulated
by the inspector of election appointed for the meeting, who will separately
tabulate affirmative and negative votes, abstentions and broker non-votes.
Abstentions will be counted towards the tabulation of votes cast on proposals
presented to the stockholders and will have the same effect as negative votes,
whereas broker non-votes will not be counted for purposes of determining whether
a proposal has been approved or not. Each stockholder is entitled to one vote
for each share of Common Stock held by such stockholder.
The following table sets forth information known to the Company
regarding the ownership of the Company's Common Stock as of May 15, 1996, for
(i) each Director and nominee, (ii) all persons or entities who were known by
the Company to be beneficial owners of five percent (5%) or more of the
Company's Common Stock, (iii) each executive officer named in the Summary
Compensation Table on page 7, (iv) all executive officers and Directors of the
Company as a group. Unless otherwise indicated, each of the following
stockholders has sole voting and investment power with respect to the shares
beneficially owned, subject to community property laws where applicable.
<TABLE>
<CAPTION>
Number of Percent of Total
Name and Address Shares Shares Outstanding
---------------- ------ ------------------
<S> <C> <C>
Corange International Limited (1)............ 2,160,362 15.03%
c/o Boehringer Mannheim
420 Lexington Avenue
New York, NY 10170
Richard D. Murdock (2)....................... 235,332 *
Larry G. Culver (3).......................... 94,292 *
Joseph S. Lacob (4).......................... 87,147 *
S. Joseph Tarnowski, Ph.D. (5)............... 86,706 *
Billy W. Minshall (6)........................ 70,204 *
Thomas M. Keenan (7)......................... 27,832 *
Charles P. Waite, Jr. (8).................... 11,615 *
Joshua L. Green (9).......................... 5,841 *
Kenneth W. Anstey ........................... 0 0
All directors and executive
officers as a group (10 people) (10)......... 631,553 4.39%
</TABLE>
- - -----------------------------
* Less than 1.0%
(1) Based on the Company's knowledge after investigation but without
verification from Corange International Limited.
(2) Represents options to purchase 235,332 shares granted under the Restated
1989 Stock Option Plan (the "Stock Option Plan") that may be exercised
within 60 days of May 15, 1996.
(3) Represents options to purchase 94,292 shares granted under the Stock
Option Plan that may be exercised within 60 days of May 15, 1996.
2.
<PAGE> 5
(4) Includes options to purchase 70,000 shares granted under the Stock Option
Plan that may be exercised within 60 days of May 15, 1996.
(5) Includes options to purchase 86,606 shares granted under the Stock Option
Plan that may be exercised within 60 days of May 15, 1996.
(6) Represents options to purchase 70,204 shares granted under the Stock
Option Plan that may be exercised within 60 days of May 15, 1996.
(7) Represents options to purchase 27,832 shares granted under the Stock
Option Plan that may be exercised within 60 days of May 15, 1996.
(8) Includes options to purchase 10,000 shares granted under the Stock Option
Plan that may be exercised within 60 days of May 15, 1996.
(9) Includes options to purchase 5,000 shares granted under the Stock Option
Plan that may be exercised within 60 days of May 15, 1996 and also
includes 841 shares held by a revocable trust of which Mr. Green is a
trustee, as to which shares Mr. Green has shared voting and investment
power with his spouse as co-trustee.
(10) Includes options to purchase an aggregate of 599,266 shares granted under
the Stock Option Plan held by directors and executive officers that may be
exercised within 60 days of May 15, 1996.
MATTERS TO BE CONSIDERED AT THE ANNUAL MEETING
PROPOSAL ONE -- ELECTION OF DIRECTORS
The Bylaws of the Company provide that the Board of Directors shall be
comprised of not less than five nor more than nine Directors, with the exact
number to be fixed by the Board. The currently authorized number of Directors is
six. At the Annual Meeting, six Directors are to be elected to serve until the
Company's next Annual Meeting or until their successors are duly elected and
qualified. The Board of Directors has selected six nominees, all of whom are
current Directors of the Company. Each person nominated for election has agreed
to serve if elected and management is not aware of any nominee who is unable to
serve. UNLESS OTHERWISE INSTRUCTED, THE PROXY HOLDERS WILL VOTE THE PROXIES
RECEIVED BY THEM FOR THE NOMINEES NAMED BELOW. The six candidates receiving the
highest number of affirmative votes in person or by proxy at the Annual Meeting
will be elected Directors of the Company.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
ELECTION OF EACH OF THE FOLLOWING NOMINEES TO SERVE AS DIRECTORS OF THE COMPANY
UNTIL THE NEXT ANNUAL MEETING OR UNTIL THEIR SUCCESSORS HAVE BEEN ELECTED AND
QUALIFIED.
NOMINEES
Set forth below is information regarding the nominees, including
information furnished by them as to principal occupations, certain other
directorships held by them, any arrangements pursuant to which they were
selected as directors or nominees and their ages as of June 15, 1996.
<TABLE>
<CAPTION>
Year First
Name Age Elected Director
---- --- ----------------
<S> <C> <C>
Kenneth W. Anstey................ 50 1996
Larry G. Culver.................. 46 1995
Joshua L. Green.................. 40 1995
Joseph S. Lacob.................. 40 1989
Richard D. Murdock............... 49 1992
Charles P. Waite, Jr............. 41 1989
</TABLE>
3.
<PAGE> 6
BACKGROUND OF DIRECTORS
MR. ANSTEY has served as a Director of the Company since February 1996.
He has served as President and Chief Executive Officer of Biofield Corporation,
an early stage medical device company which is developing breast cancer
detection technologies, since December 1995. From 1991 until he joined Biofield
in December 1995, Mr. Anstey was President and CEO of Mitek Surgical Products,
Inc., a suture anchoring device company. Mr. Anstey also served as President of
ConvaTec, a Division of E.R. Squibb & Sons, Inc., a marketer of ostomy, wound
management and infection control products from 1989 to 1991. In addition to his
membership on the Board of Directors of the Company, Mr. Anstey serves as a
Director for the following public companies: Vision-Sciences, Inc., which
develops and markets an innovative sheath for various endoscopes; Instent Corp.,
which develops and manufactures self expandable and balloon stents; and
SpineTech Corp., which develops and manufactures spinal implants and instruments
for surgical treatment of spinal conditions. Mr. Anstey received an M.B.A. in
1970 from Michigan State University.
MR. CULVER has served as a Director of the Company since May 1995. He
joined the Company as Vice President of Finance and Administration and Chief
Financial Officer in March 1991, became Senior Vice President in August 1993 and
Executive Vice President and Chief Operating Officer in February 1996. He was
named Assistant Secretary in August 1991. Mr. Culver has also served in the
following capacities for the following subsidiaries of the Company: as a
Director of CellPro Europe N.V./S.A. since April 1992, of CellPro France
S.A.R.L. since April 1993, of CellPro Italia s.r.l. since December 1994, of
CellPro Biotech Iberica S.L. since May 1995, of CellPro Deutschland GmbH since
January 1994 and as Senior Vice President, Chief Financial Officer and Assistant
Secretary of CellPro II, Inc. since October 1993. From 1985 until he joined the
Company in March 1991, he was the Chief Financial Officer of Summation, Inc. an
automated test and measurement equipment manufacturer. Mr. Culver received an
M.B.A. in 1977 from the University of Wisconsin.
MR. GREEN has served as a Director of the Company since June 1995. He
has been a director with the law firm Venture Law Group since August 1995. From
1986 until he joined Venture Law Group, Mr. Green had been a partner with the
law firm of Brobeck, Phleger & Harrison. He had been with the firm since 1980.
Mr. Green has served as Secretary of the Company since 1989. Mr. Green received
a J.D. in 1980 from the University of California at Los Angeles.
MR. LACOB, a co-founder of the Company, has been Chairman of the Board
since 1990. He has served as a Director of the Company since March 1989 and
served as its Acting President from March 1989 to November 1989. Mr. Lacob has
been a general partner of Kleiner Perkins Caufield & Byers, a venture capital
firm, since May 1992, and was a venture partner from 1987 to May 1992. Mr.
Lacob serves as a Director for the following public companies: Heartport, Inc.,
which develops systems and procedures for minimally invasive cardiac surgery;
Microcide Pharmaceuticals, Inc., which develops antibiotics for treatment of
serious bacterial infections; and Pharmacyclics, Inc., which develops
macrocyclic chemistry for treatment of diseases such as cancer and
atherosclerosis, and for diagnostic imaging procedures. Mr. Lacob holds an
M.P.H. from the University of California, Los Angeles and received an M.B.A. in
1983 from Stanford University.
MR. MURDOCK has served as President of the Company since December 1991
and Chief Executive Officer and a Director of the Company since June 1992. From
August 1991 to December 1991, he served as Vice President of Marketing and
Corporate Development. Mr. Murdock has also served in the following capacities
for the following subsidiaries of the Company: as a Director of CellPro Europe
N.V./S.A. since April 1992, of CellPro France S.A.R.L. since April 1994, of
CellPro Deutschland GmbH since January 1994, of CellPro Italia s.r.l. since
December 1994, of CellPro Biotech Iberica S.L. since May 1995 and as a Director,
President and Chief Executive Officer of CellPro II, Inc. since October 1993.
From 1989 to 1991, he was European Vice President of the Fenwal Division of
Baxter Health Care Corp. which specializes in high technology automated
blood-processing equipment. Mr. Murdock is also a member of the Board of
Directors of SangStat Medical Corporation, which is developing medical products
related to organ transplantation, and Matrix Pharmaceutical, Inc., which is
developing drug delivery systems. Mr. Murdock received a B.S. in Zoology in 1969
from the University of California at Berkeley.
4.
<PAGE> 7
MR. WAITE has served as a Director of the Company since March 1989. Mr.
Waite joined Olympic Venture Partners II, a venture capital firm, as a general
partner in 1987, having previously been a general partner at Hambrecht and Quist
Venture Partners from 1984 to 1987. Mr. Waite is also a member of the Board of
Directors for Verity, Inc, which develops and markets tools for locating
information on the Internet and other databases. He received an M.B.A. in 1983
from Harvard University.
There are no family relationships among executive officers or directors
of the Company.
BOARD COMMITTEES AND MEETINGS
During the fiscal year ended March 31, 1996 ("Fiscal 1996"), the Board
of Directors held nine meetings and acted by unanimous written consent on one
occasion. The Board of Directors has an Audit Committee, a Compensation
Committee and a Stock Option Committee, and does not have a Nominating
Committee.
The Audit Committee consists of two directors, Mr. Green and Mr. Waite,
and is primarily responsible for approving the services performed by the
Company's independent accountants and reviewing their reports regarding the
Company's accounting practices and systems of internal accounting controls. The
Audit Committee held two meetings during Fiscal 1996.
The Compensation Committee consists of two directors, Mr. Lacob and Mr.
Waite. During Fiscal 1996, the Compensation Committee held two meetings and
acted by unanimous written consent on four occasions. It reviews and approves
the Company's general compensation policies, sets compensation levels for the
Company's executive officers and administers the Company's Restated 1989 Stock
Option Plan.
The Stock Option Committee consists of one director, Mr. Murdock, and
has authority to grant options under the Discretionary Option Grant Program of
the Company's Restated 1989 Stock Option Plan to optionees other than officers
and director-level employees of the Company. During Fiscal 1996, the Stock
Option Committee acted by unanimous written consent on 75 occasions.
No director serving for the full fiscal year attended fewer than 75% of
the aggregate number of meetings of the Board of Directors and meetings of the
Committees of the Board on which he serves.
DIRECTORS' COMPENSATION
Outside Directors receive cash compensation in the amount of $15,000
per year for service on the Board. This fee is conditioned upon attendance at
75% of all Board meetings held during each year of Board service, measured from
the date of the Annual Meeting at which the Director is elected by the
stockholders, and is pro-rated for any year in which such Director serves for
less than one full year. In addition, outside Board members receive options on
shares of the Company's Common Stock pursuant to the automatic grant program of
the Company's Restated 1989 Stock Option Plan. Board members are reimbursed for
their expenses for each meeting attended. In accordance with the automatic
option grant program, on July 28, 1995, each of Messrs. Lacob and Waite received
an automatic option grant to purchase 10,000 shares of Common Stock at the
exercise price of $11.56 per share. Each option will become exercisable for all
of the option shares one year after the grant date, provided that the individual
continues as a member of the Board and participates in 75% of all Board meetings
held during such one-year period. Also in accordance with the automatic option
grant program, on February 1, 1996, Mr. Anstey received an automatic option
grant to purchase 20,000 shares of Common Stock at the exercise price of $17.38
per share. The option becomes exercisable in four equal annual installments
measured from the grant date, assuming participation in at least 75% of all
Board meetings held during each such year. Each option has a maximum term of 10
years measured from the grant date, subject to earlier termination upon the
individual's cessation of Board service. However, the option will become
exercisable earlier for all of the option shares upon an acquisition of the
Company, whether by merger or asset sale. Directors who are employees of the
Company will not receive any automatic option grants but are eligible to receive
options or stock appreciation rights under the Company's Restated 1989 Stock
Option Plan at the discretion of the Compensation Committee.
5.
<PAGE> 8
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table provides certain summary information concerning
compensation earned, for services rendered in all capacities to the Company and
its subsidiaries for each of the last three fiscal years, by the Company's Chief
Executive Officer and each of the four highest-paid executive officers of the
Company who earned more than $100,000 in salary and bonus (hereafter referred to
as the "named executive officers") for the fiscal year ended March 31, 1996:
<TABLE>
<CAPTION>
Long-term
Compensation
-----------------------------------------
Annual Compensation Awards
-----------------------------------------
Securities
Name and Year Underlying All Other
Principal Ended Options Compensation
Position(1) March 31, Salary($)(2) Bonus($) (#) ($)(3)
----------- --------- ------------ -------- --- ------
<S> <C> <C> <C> <C> <C>
Richard D. Murdock 1996 $236,250 $56,288 174,500(4) --
President and Chief 1995 $225,000 $18,000 0 --
Executive Officer 1994 $185,000 $46,250 100,000 $23,201
Larry G. Culver 1996 $179,000 $41,888 140,000(4) --
Executive Vice President, 1995 $165,000 $13,200 0 --
Chief Operating Officer, 1994 $140,000 $35,000 60,000 --
Chief Financial Officer
and Assistant Secretary
S. Joseph Tarnowski, Ph.D. 1996 $157,500 $35,438 50,000 --
Vice President of 1995 $150,000 $12,000 0 --
Research and Development 1994 $141,750 $22,680 0 --
Thomas M. Keenan 1996 $140,000 $27,160 100,000(4) --
Vice President of Sales 1995 $137,000 $10,460 0 --
and Marketing 1994 $76,282 $10,000 100,000 $46,860
Billy W. Minshall
Vice President of 1996 $125,000 $25,750 50,000 --
Operations and Engineering 1995 $113,300 $9,064 0 --
1994 $110,000 $17,600 0 --
===================================================================================================
</TABLE>
(1) The Company has one executive officer in addition to the named executive
officers, Cindy A. Jacobs, M.D., Ph.D. who was named Vice President of
Clinical Research effective April 1, 1996.
(2) Salary includes amounts deferred under the Company's Employees' Retirement
Plan.
(3) Represents the reimbursement by the Company of moving and relocation
expenses.
(4) Includes certain options which were granted prior to the fiscal year ended
March 31, 1996, then subsequently canceled and partially replaced with
lower priced options during such fiscal year. See Option Repricings table
on page 9 and Compensation Committee report on Repriced Options on page
11.
STOCK OPTIONS
The following table contains information concerning the grant of stock
options under the Company's Restated 1989 Stock Option Plan to the named
executive officers:
6.
<PAGE> 9
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants Potential Realizable Value at
Assumed Annual Rates of Stock
Price Appreciation for Option
Term (5)
- - --------------------------------------------------------------------------------------------------------------------
% of Total
Options Options
Granted in Granted to
Last Employees
Fiscal Year in Fiscal Exercise Expiration
Name (#)(1) Year Price($)(3) Date(4) 0%($) 5%($) 10%($)
---- ----------- ---------- ----------- ---------- ----- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Richard D. Murdock 74,500(2) 8.26 10.50 6/13/05 -- 491,953 1,246,705
President and Chief 100,000(2) 11.09 10.50 6/13/05 660,339 1,673,430
Executive Officer
Larry G. Culver 50,000 5.54 14.50 2/15/06 -- 455,949 1,155,463
Executive Vice President, 30,000(2) 3.32 10.50 6/13/05 198,102 502,029
Chief Operating Officer, 60,000(2) 6.65 10.50 6/13/05 396,204 1,004,058
Chief Financial Officer
and Assistant Secretary
Thomas M. Keenan 100,000(2) 11.09 10.50 6/13/05 -- 660,274 1,673,226
Vice President of Sales
and Marketing
S. Joseph Tarnowski, Ph.D. 50,000 5.55 13.50 9/29/05 -- 424,504 1,075,776
Vice President of Research
and Development
Billy W. Minshall 50,000 5.55 13.50 9/29/05 -- 424,504 1,075,776
Vice President of
Operations and Engineering
</TABLE>
- - ---------------------------
(1) Each option granted to an employee of the Company becomes exercisable 25%
one year after the employee's hire date ("Anniversary Date") with the balance
becoming exercisable in a series of 36 equal monthly installments thereafter.
Options granted after the Anniversary Date become exercisable in a series of 48
equal monthly installments measuring from the grant date. Each option granted is
an incentive stock option (ISO) to the extent it does not exceed applicable
limits set by the tax laws. For each option that exceeds such limits, the number
of shares underlying the option grant is allocated between two options, the
first an incentive stock option up to the applicable limits and the second a
non-statutory option for the balance of the shares. In each case, vesting
continues only so long as employment with the Company or one of its subsidiaries
continues. To the extent not already exercisable, the options generally become
exercisable upon a sale, transfer or other disposition of all of the assets of
the Company or a merger or consolidation pursuant to which either (i) the
Company does not survive or (ii) ownership of more than 50% of the voting power
of the Company's stock is transferred to different holders, unless the option is
assumed or replaced with a comparable option by the surviving entity or the
option is replaced with a comparable cash incentive program of the successor
corporation based on the value of the option. In addition, the Compensation
Committee of the Board of Directors may accelerate the vesting, upon such
conditions as it may impose, in the event of (i) the acquisition by one or more
related parties of more than 50% of the voting power of the Company's stock
pursuant to a tender or exchange offer not recommended by the Board of Directors
or (ii) a change in the composition of the Board of Directors over a period of
not less than two years pursuant to which persons who were directors at the
beginning of the period (or nominated by a majority of the continuing directors)
cease to represent a majority of the Board of Directors. Options granted to
outside Directors are described on page 19.
(2) Represents options which were granted prior to the fiscal year ended March
31, 1996, then subsequently canceled and replaced with lower priced options
during such fiscal year. See Compensation Committee report on Repriced Options
on page 11.
(3) The exercise price may be paid in cash or pursuant to a cashless exercise
procedure under which the optionee provides irrevocable instructions to a
brokerage firm to sell the purchased shares and to remit to the Company, out of
7.
<PAGE> 10
the sale proceeds, an amount equal to the exercise price plus all applicable
withholding taxes. The Compensation Committee may also assist an optionee in the
exercise of an option by (i) authorizing a loan from the Company in a principal
amount not exceeding the aggregate exercise price plus any tax liability
incurred in connection with the exercise or (ii) permitting the optionee to pay
the option price in installments over a period of years upon terms established
by the Compensation Committee.
(4) The options are also subject to "limited stock appreciation rights" pursuant
to which the options, to the extent exercisable and outstanding for at least six
months at the time of a "Hostile Takeover" in which more than 50% of the shares
acquired are acquired from parties other than directors and executive officers
of the Company, will automatically be canceled in return for cash payment to the
optionee equal to the difference between the then market price of the stock
subject to the option (or, if higher, the highest price paid per share for stock
by the acquirer in the Hostile Takeover) and the exercise price.
(5) There is no assurance provided to any executive officer or any other holder
of the Company's securities that the actual stock price appreciation over the
10-year option term will be at the assumed 5% and 10% levels or at any other
defined level. Unless the market price of the Common Stock does in fact
appreciate over the option term, no value will be realized from the option
grants made to the executive officers.
8.
<PAGE> 11
The following table provides information, with respect to the named
executive officers, concerning the exercise of options during the last fiscal
year and unexercised options held as of the end of the last fiscal year:
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN 1996 FISCAL YEAR AND 1996 FISCAL YEAR END OPTION VALUES
- - ------------------------------------------------------------------------------------------------------------------
Value
Realized Number of Unexercised Options
Shares (Market at Fiscal Year-End (#) Value of Unexercised
Name acquired price at in-the-Money Options at
on exercise FY-End (Market price of
exercise less shares at FY-end ($15.75)
(#) exercise less exercise price)
price)($)
($)
------------------------------------------------------------
Exercisable Unexercisable Exercisable Unexercisable
- - ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Richard D. Murdock 20,000 250,000 182,415 117,085 1,358,721 613,655
President and Chief
Executive Officer
- - ------------------------------------------------------------------------------------------------------------------
Larry G. Culver 21,500 347,430 66,792 113,958 646,640 402,448
Executive Vice
President, Chief
Operating Officer, Chief
Financial Officer and
Assistant Secretary
- - ------------------------------------------------------------------------------------------------------------------
S. Joseph Tarnowski, Ph.D. 15,000 97,666 76,615 49,385 364,196 128,304
Vice President of
Research and Development
- - ------------------------------------------------------------------------------------------------------------------
Billy W. Minshall 5,000 17,500 58,746 56,254 158,429 132,822
Vice President of
Operations and
Engineering
- - ------------------------------------------------------------------------------------------------------------------
Thomas M. Keenan 18,000 134,140 749 81,251 3,932 426,568
Vice President of Sales
and Marketing
==================================================================================================================
</TABLE>
The following table provides information regarding the repricing of
certain options held by the Company's executive officers during the last fiscal
year:
<TABLE>
<CAPTION>
OPTION REPRICINGS
- - ------------------------------------------------------------------------------------------------------------------
Number of
Securities Market Exercise Length of
Underlying Price of Price at New Original Option
Options Stock at Time of Exercise Term Remaining
Name Repriced or Time of Repricing Price at Date of
Date Amended Repricing or ($) Repricing or
(#) or Amendment Amendment
Amendment ($)
($)
- - ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Richard D. Murdock 6/14/95 74,500 10.50 12.50 10.50 6 years 183 days
President and Chief 6/14/95 100,000 10.50 18.75 10.50 8 years 72 days
Executive Officer
- - ------------------------------------------------------------------------------------------------------------------
Larry G. Culver 6/14/95 30,000 10.50 13.50 10.50 7 years 60 days
Executive Vice President, 6/14/95 60,000 10.50 18.75 10.50 8 years 72 days
Chief Operating Officer,
Chief Financial Officer
and Assistant Secretary
- - ------------------------------------------------------------------------------------------------------------------
Thomas M. Keenan 6/14/95 100,000 10.50 17.38 10.50 8 years 69 days
Vice President of Sales
and Marketing
==================================================================================================================
</TABLE>
9.
<PAGE> 12
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors sets the base
salary of the Company's executive officers, approves individual bonus programs
for executive officers, and administers the Company's Restated 1989 Stock Option
Plan under which grants may be made to executive officers and other key
employees. The following is a summary of policies of the Committee that affect
the compensation paid to executive officers, as reflected in the tables and text
set forth elsewhere in this Proxy Statement.
GENERAL COMPENSATION POLICY. The Committee's overall policy is to offer
the Company's executive officers competitive compensation opportunities based
upon their personal performance, the financial performance of the Company and
their contribution to that performance. One of the Committee's primary
objectives is to have a substantial portion of each officer's compensation
contingent upon the Company's performance as well as upon his or her own level
of performance. Each executive officer's compensation package is comprised of
three elements: (i) base salary that reflects individual performance and is
designed primarily to be competitive with salary levels in the industry, (ii)
annual variable performance awards payable in cash and tied to the achievement
of annual goals for each functional area established by the Committee, and (iii)
stock-based incentive awards designed to strengthen the mutuality of interests
between the executive officers and the Company's stockholders. Generally, as an
officer's level of responsibility increases, a greater portion of his or her
total compensation will be dependent upon Company performance and stock price
appreciation rather than base salary.
FACTORS. Several important factors considered in establishing the
components of each executive officer's compensation package for the 1996 fiscal
year are summarized below. Additional factors were taken into account to a
lesser degree. The Committee may in its discretion apply entirely different
factors, such as different measures of financial performance, for future fiscal
years. However, it is presently contemplated that all compensation decisions
will be designed to further the overall compensation policy described above.
* BASE SALARY. The base salary for each officer is set on the basis of
personal performance, the salary levels in effect for comparable positions in
similarly situated companies within the biotechnology industry, and internal
comparability considerations. The Committee believes that the Company's most
direct competitors for executive talent are not limited to the companies that
the Company would use in a comparison for shareholder returns. Therefore, the
compensation comparison group is not the same as the industry group index in the
Performance Graph on page 13.
* ANNUAL INCENTIVE COMPENSATION. Annual bonuses, set as a targeted
percentage of salary, are earned by each executive officer on the basis of the
Company's achievement of corporate performance targets established by the
Committee at the start of the fiscal year and on achievement of personal
performance objectives set for each officer. For fiscal year 1996, these
performance targets included a combination of factors including the achievement
of the Company's annual financial objectives plus key functional performance
objectives related to the development and commercialization of products. For all
executive officers, including the Chief Executive Officer, a bonus ranging from
19.4% to 23.8% was earned as a result of the Company's and each officer's
achievement of established targets. Bonuses were weighted 65% on achievement of
corporate objectives, and 35% on achievement of individual objectives.
* STOCK-BASED INCENTIVE COMPENSATION. The Committee approves periodic
grants of stock options to each of the Company's executive officers under the
Company's Restated 1989 Stock Option Plan. The grants are designed to align the
interests of each executive officer with those of the shareholders and provide
each individual with a significant incentive to manage the Company from the
perspective of an owner with an equity stake in the business. Each grant
generally allows the officer to acquire shares of the Company's Common Stock at
a fixed price per share (the market price on the grant date) over a specified
period of time (up to 10 years), thus providing a return to the executive
officer only if the market price of the shares appreciates over the option term.
The size of the option grant to each executive officer is set at a level that
the Committee deems appropriate in order to create a meaningful opportunity for
stock ownership based upon the individual's current position with the Company,
but also takes into account
10.
<PAGE> 13
comparable awards to individuals in similar positions in the industry as
reflected in external surveys, the individual's potential for future
responsibility and promotion over the option vesting period, and the
individual's personal performance in recent periods.
CEO COMPENSATION. In setting the compensation payable during fiscal
1996 to the Company's Chief Executive Officer, Richard D. Murdock, the Committee
used the same factors as described above for the executive officers. The
Committee established a combination compensation package for Mr. Murdock
including a base salary and a cash bonus of a maximum of 25% of base salary
based on the successful achievement of the Company's annual financial objectives
and key commercialization milestones.
COMPENSATION COMMITTEE REPORT ON REPRICED OPTIONS
In June 1995, the Compensation Committee determined that it was in the
best interests of the Company to offer to cancel and replace the then-existing
stock option grants to the officers and other full-time employees of the Company
with exercise prices in excess of the then-current fair market value of the
Company's Common Stock. This decision was made after the Company received and
disclosed a letter from the U.S. Food and Drug Administration (FDA) advising
that the Company's premarket approval application (PMA) for use of the
CEPRATE(R) Stem Cell Concentration System for autologous bone marrow
transplantation would require amendment before being considered for approval.
This led to (among other things) termination of certain development programs at
the Company, a layoff of 12% of the Company's U.S. workforce, and a decrease in
the price of the Company's Common Stock.
The objectives of the Company's Restated 1989 Stock Option Plan (the
"Stock Option Plan") are to promote the interests of the Company by providing
employees and certain consultants or independent contractors an incentive to
acquire a proprietary interest in the Company and to continue to render services
to the Company. It was the view of the Compensation Committee that stock options
with exercise prices substantially above the current market price of the
Company's Common Stock were viewed negatively by most employees of the Company,
and provided little, if any, equity incentive to such employees. The
Compensation Committee thus concluded that such option grants seriously
undermined the specific objectives of the Stock Option Plan and should properly
be canceled and replaced. In making this decision, the Compensation Committee
also considered the fairness of such a determination in relation to other
shareholders. In the opinion of the Committee, the shareholders' long-term best
interests were clearly served by the retention and motivation of the employees
and officers who remained at the Company following receipt of the FDA letter and
termination of certain development programs.
In this context, the Committee decided that effective June 14, 1995
(the "Grant Date") all Company employees holding stock options with exercise
prices in excess of the fair market value of the Company's Common Stock could
receive a one-for-one replacement of their then-existing unexercised stock
options with a new exercise price set at $10.50 per share, the fair market value
of the Company's Common Stock on the Grant Date. The new lower priced options
were subject to a delayed exercise schedule as follows: upon the Grant Date each
new lower priced option was exercisable with respect to the same number of
shares as the associated higher priced option, less 25%, but not less than zero
shares. The new option did not become exercisable for any additional shares
until one year after the Grant Date, at which time such 25% block became vested
and the balance of the option shares which were not then exercisable became
exercisable in monthly increments consistent with the associated higher priced
option.
All replacement options for the Company's executive officers were
subject to a six-month waiting period before any repriced options could be
exercised. None of the Company's consultants, independent contractors or
non-employee members of the Board of Directors received any repriced stock
options, and certain options granted to employees upon the filing of the PMA
with the FDA were not repriced. It is the opinion of the Compensation Committee
that this program succeeded in its objectives of building employee morale and
providing new incentives for the Company's employees and management.
11.
<PAGE> 14
Submitted by the Compensation Committee of the Company's Board of
Directors:
Joseph S. Lacob, Chairperson
Charles P. Waite, Member
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT ARRANGEMENTS
The Company presently has no employment contracts, plans or
arrangements in effect for executive officers in connection with their
resignation, retirement or termination of employment or following a change in
control or ownership of the Company.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee are Mr. Lacob and Mr. Waite.
Neither Mr. Lacob nor Mr. Waite was at any time during the year ended March 31,
1996, or any other time an officer or employee of the Company, except that Mr.
Lacob served as Acting President from March to November 1989.
12.
<PAGE> 15
PERFORMANCE GRAPH
The following graph shows a comparison of the cumulative total
stockholder returns for the Company, the Standard & Poor's SmallCap 600 Index
and the AMEX Biotechnology Index for the period from September 24, 1991, the day
on which the Company's Common Stock commenced trading on the NASDAQ National
Market, through March 31, 1996.
COMPARISON OF 54 MONTH CUMULATIVE TOTAL RETURN*
AMONG CELLPRO, INC., THE S & P SMALLCAP 600 INDEX
AND THE AMEX BIOTECHNOLOGY INDEX
<TABLE>
<CAPTION>
3/92 3/93 3/94 3/95 3/96
$ $ $ $ $
- - - - -
<S> <C> <C> <C> <C> <C>
CELLPRO, INC. 98 143 214 102 143
S & P SMALLCAP 600 116 136 147 155 204
AMEX BIOTECHNOLOGY 113 72 58 49 84
</TABLE>
* $100 invested on September 24, 1991, in CellPro Common Stock, or on August 31,
1991, in the Standard & Poor's SmallCap 600 Index and the AMEX Biotechnology
Index --assuming reinvestment of dividends. Fiscal year ending March 31.
Notwithstanding anything to the contrary set forth in any of the
Company's previous filings under the Securities Act of 1933, as amended, or the
Exchange Act that might incorporate future filings, including this Proxy
Statement, in whole or in part, the preceding Compensation Committee Report on
Executive Compensation and the preceding Performance Graph shall not be
incorporated by reference into any such filings, nor shall such Report or graph
be incorporated by reference into any future filings.
13.
<PAGE> 16
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the fiscal year ended March 31, 1996, the Company granted
options to purchase shares of its Common Stock to its outside directors pursuant
to the automatic grant program of its Restated 1989 Stock Option Plan.
Joshua L. Green, a member of the Board of Directors of the Company, is
a director in the law firm Venture Law Group, which acts as corporate counsel to
the Company.
The Company's Restated Certificate of Incorporation and Restated Bylaws
provide for indemnification of directors, officers and other agents of the
Company. Each of the current directors, and certain officers and agents of the
Company have entered into separate indemnification agreements with the Company.
PROPOSAL TWO -- AMENDMENT TO RESTATED 1989 STOCK OPTION PLAN
Stockholders are being asked to vote on a proposal to approve and
ratify an amendment to the Company's Restated 1989 Stock Option Plan (the "Stock
Option Plan"), in order to increase the number of shares of Common Stock
available for issuance thereunder by 500,000 shares to 3,155,000 shares in the
aggregate. The Board of Directors approved this amendment on February 1, 1996,
subject to stockholder approval.
The affirmative vote of a majority of the voting shares represented and
voting at the Annual Meeting is required for approval of the amendment to the
Stock Option Plan. The Board of Directors believes that the amendment to the
Stock Option Plan is necessary in order to continue to provide equity incentives
to attract and retain the services of key employees, consultants and
non-employee Board members. FOR THIS REASON, THE BOARD OF DIRECTORS RECOMMENDS
THAT THE STOCKHOLDERS VOTE FOR THIS PROPOSAL.
INTRODUCTION
The Stock Option Plan was originally adopted by the Board on May 4,
1989, and was approved by the Company's stockholders on June 5, 1989. The Board
of Directors has previously approved amendments increasing the number of shares
authorized for issuance under the Stock Option Plan by 200,000 shares, and
600,000 shares on May 18, 1990, and March 25, 1992, respectively, and the
stockholders approved such amendments on July 6, 1990, and August 21, 1992. A
restatement of the Stock Option Plan, which increased the number of shares
authorized for issuance by 355,000 shares and originally authorized the
Automatic Option Grant Program for non-employee directors, was adopted by the
Board on August 12, 1991, and approved by the stockholders on August 15, 1991.
An additional increase in the number of shares issuable under the Stock Option
Plan of 780,000 shares was approved by the Board on March 31, 1993, and by the
stockholders on August 27, 1993. The Board amended the Stock Option Plan on
August 26, 1993, to permit the establishment of a secondary committee to
administer the Stock Option Plan and on December 1, 1993, to modify the
eligibility provisions for non-employee directors. Amendments to the Stock
Option Plan to (i) increase the number of shares issuable under the Automatic
Option Grant Program to newly-elected directors from 10,000 to 20,000 shares of
Common Stock, subject to a four-year vesting schedule, (ii) increase the number
of shares issuable in certain subsequent years to re-elected non-employee
directors from 5,000 to 10,000 shares of Common Stock, (iii) limit the maximum
number of shares for which any one participant in the Stock Option Plan may be
granted stock options and stock appreciation rights over the remaining term of
the Stock Option Plan to 500,000 shares and (iv) extend the term of the Stock
Option Plan from May 3, 1999 to June 1, 2005 was approved by the Board on June
2, 1995, and by the stockholders on July 28, 1995.
14.
<PAGE> 17
STRUCTURE
The Stock Option Plan is divided into two separate components: the
Discretionary Option Grant Program and the Automatic Option Grant Program. Under
the Discretionary Option Grant Program, options may be issued to key employees
(including officers), consultants and independent contractors of the Company (or
its parent or subsidiary companies) who contribute to the management, growth and
financial success of the Company (or its parent or subsidiary companies). Under
the Automatic Option Grant Program, current and future non-employee Board
members receive an initial automatic option grant and subsequent annual
automatic option grants as long as they continue in service as non-employee
Board members.
The terms and provisions of the Stock Option Plan, as amended, are
described more fully below. The description, however, is not intended to be a
complete exposition of all the terms of the Stock Option Plan. A copy of the
Stock Option Plan will be furnished by the Company to any stockholder upon
written request to the Director of Investor Relations of the Company at the
corporate offices in Bothell, Washington.
As of May 15, 1996, approximately 175 employees (including six
officers) were eligible to participate in the Discretionary Option Grant
Program, and four non-employee Board members were eligible to participate in the
Automatic Option Grant Program.
ADMINISTRATION
The Stock Option Plan is administered by the Compensation Committee of
the Board of Directors, which is comprised of two non-employee Board members
(the "Committee"). No Board member is eligible to serve on the Committee if such
individual has, within the 12-month period immediately preceding the date he or
she is to be appointed thereto, received any option grant or stock appreciation
right under this Stock Option Plan or any other stock plan of the Company (or
any parent or subsidiary corporation), other than pursuant to the Automatic
Option Grant Program. Stock options may also be granted under the Discretionary
Option Grant Program to eligible employees who are not officers and consultants
by a secondary committee comprised of one or more Board members. Except where
otherwise noted, references to the Committee include the secondary committee.
The Committee has full authority to determine which eligible
individuals are to receive option grants, the number of shares to be covered by
each granted option, the date or dates on which the option is to become
exercisable and the maximum term for which the option is to be outstanding. The
Committee also has the discretion to determine whether the granted option is to
be an incentive stock option under the Federal tax laws, or a nonstatutory
option. In addition, the Committee has full authority to accelerate the
exercisability of outstanding options upon such terms and conditions as it deems
appropriate. All expenses incurred in administering the Stock Option Plan will
be paid by the Company.
Option grants under the Automatic Option Grant Program will be made in
strict compliance with the express provisions of that program, and the Committee
shall not have any discretionary authority with respect to such option grants.
PRICE AND EXERCISABILITY
The exercise price of shares issued under the Discretionary Option
Grant Program may not be less than 50% of the fair market value of the Common
Stock on the grant date and no option may be outstanding for more than a 10-year
term. If the granted option is intended to be an incentive stock option under
the Federal tax laws, the option price must not be less than 100% of the fair
market value per share of the Common Stock on the grant date. Options issued
under the Discretionary Option Grant Program may become exercisable in
installments over a period of months or years as determined by the Committee.
The aggregate fair market value (as of the date or respective dates of grant) of
shares of Common Stock for which options granted to any employee under the Stock
Option Plan may initially become
15.
<PAGE> 18
exercisable as incentive stock options under the Federal tax laws, may not
exceed $100,000 per optionee in a single year.
Upon exercise, the option price may be paid in cash, or in shares of
the Common Stock. Outstanding options may also be exercised through a cashless
exercise procedure pursuant to which a designated brokerage firm is to effect an
immediate sale of the shares purchased under the option and pay over to the
Company, out of the sales proceeds available on the settlement date, sufficient
funds to cover the option price for the purchased shares plus all applicable
withholding taxes. The Committee may also assist any optionee (including an
officer) in the exercise of outstanding options under the Discretionary Option
Grant Program by authorizing a loan from the Company or permitting the optionee
to pay the option price in installments over a period of years. The terms and
conditions of any such loan or installment payment will be established by the
Committee in its sole discretion, but in no event may the maximum credit
extended to the optionee exceed the aggregate option price payable for the
purchased shares (less the par value), plus any Federal and state income or
employment taxes incurred in connection with the purchase.
No optionee is to have any stockholder rights with respect to the
option shares until such optionee has exercised the option, paid the option
price for the purchased shares and such shares have been effectively transferred
by the Company's transfer agent. Options are not assignable or transferable
other than by will or the laws of inheritance and, during the optionee's
lifetime, the option may be exercised only by such optionee.
VALUATION
The fair market value per share of Common Stock on any relevant date
will be the closing selling price per share on such date as reported on the
Nasdaq National Market. As of June 10, 1996, the closing selling price of the
Common Stock was $18.75 per share.
SECURITIES SUBJECT TO PLAN
The total number of shares of the Common Stock issuable over the term
of the Stock Option Plan may not exceed 3,155,000 shares. Such shares will be
made available either from the Company's authorized but unissued Common Stock or
from Common Stock reacquired by the Company. Should an option be terminated or
canceled for any reason prior to exercise or surrender in full, the shares
subject to the portion of the option not so exercised or surrendered will be
available for subsequent grant. Shares subject to any option or portion thereof
canceled in accordance with the stock appreciation rights (as discussed below)
provisions or the Corporate Transaction (as defined below) provisions of the
Stock Option Plan shall not be available for subsequent grants.
As of June 10, 1996, approximately 908,242 shares of Common Stock have
been issued under the Option Plan, 1,579,346 shares of Common Stock were subject
to outstanding options, and 167,412 shares of Common Stock were available for
future option grants.
In no event may any one individual participating in the Stock Option
Plan be granted stock options, separately-exercisable stock appreciation rights
or direct stock issuances for more than 500,000 shares of Common Stock in the
aggregate over the term of the Stock Option Plan. For purposes of such
limitation, any options granted prior to January 1, 1995 will not be taken into
account.
CHANGES IN CAPITALIZATION
In the event any change is made to the Common Stock issuable under the
Stock Option Plan (by reason of any stock split, stock dividend, combination of
shares, exchange of shares or other similar change in the corporate structure of
the Company effected without receipt of consideration), then unless such change
results in the termination of all outstanding options pursuant to the Corporate
Transaction provisions of the Stock Option Plan (as discussed below),
appropriate adjustments will be made to (i) the aggregate number of shares
available for issuance under the Stock Option Plan, (ii) the number of shares
and price per share in effect under each outstanding option under the Stock
16.
<PAGE> 19
Option Plan and (iii) the number of shares per non-employee Board member for
which automatic option grants are subsequently to be made under the Automatic
Option Grant Program. The purpose of such adjustments to the outstanding options
is to preclude the enlargement or dilution of rights and benefits under such
options.
TERMINATION OF SERVICE
All options granted under the Discretionary Option Grant Program must
generally be exercised within three months after the optionee ceases to be in
the employ or service of the Company or its parent or subsidiary corporations,
subject to earlier expiration in the event the optionee's employment or service
is terminated for misconduct. Should the optionee's cessation of service occur
due to permanent disability or death, or should the optionee die within three
months after cessation of service, the optionee (or, in the case of the
optionee's death, the personal representative of the optionee's estate or the
person inheriting the option) has 36 months (or such shorter period as the
Committee may establish at the time of grant) from the date of such cessation of
service to exercise the option. The Committee will, however, have complete
discretion to extend the period of time for which any option is to remain
exercisable following the optionee's cessation of employment or service, but
under no circumstances may an option be exercised after the specified expiration
date of the option term.
Each option under the Discretionary Option Grant Program will be
exercisable only to the extent of the number of shares for which such option is
exercisable at the time of the optionee's cessation of employment or service,
unless the Committee determines at such time to accelerate the exercisability of
the option in whole or in part.
CORPORATE TRANSACTION
Each outstanding option under the Discretionary Option Grant Program
will become immediately exercisable for all of the shares of Common Stock
subject to such option in the event of a Corporate Transaction (as defined
below), unless (i) such option is assumed by the successor corporation (or its
parent corporation) or replaced with a comparable option to purchase shares of
stock of the successor corporation (or its parent corporation), (ii) such option
is to be replaced by a comparable cash incentive program of the successor
corporation based on the value of the option at the time of the Corporate
Transaction, or (iii) the acceleration of such option is precluded by other
limitations imposed by the Committee at the time of grant. A Corporate
Transaction includes certain mergers, reverse mergers or consolidations and the
sale, transfer or other disposition of all or substantially all of the assets of
the Company.
Upon the consummation of the Corporate Transaction, all outstanding
options will, to the extent not previously exercised by the optionees or assumed
by the successor corporation (or its parent company), terminate and cease to be
outstanding.
CHANGE IN CONTROL
In the event of a Change in Control, the Committee may, in its
discretion, provide that one or more outstanding options will become immediately
exercisable for all of the shares of Common Stock at the time subject to such
options. The Committee will also have the discretion to condition such
acceleration upon the subsequent termination of the optionee's service with the
Company. A Change in Control will be deemed to occur under the Stock Option Plan
in the event:
(a) any person or related group of persons (other than the Company or
any affiliate) acquires beneficial ownership of securities possessing more than
50% of the Company's outstanding Common Stock pursuant to a tender or exchange
offer which the Board does not recommend the Company's stockholders to accept;
or
(b) there is a change in the composition of the Board over a period of
24 consecutive months or less such that a majority of the Board members cease to
be comprised of individuals who are continuing Board members or were nominated
by continuing Board members.
17.
<PAGE> 20
STOCK APPRECIATION RIGHTS
At the discretion of the Committee, options with stock appreciation
rights may be granted under the Discretionary Option Grant Program. A stock
appreciation right grants the holder the right to surrender all or part of an
unexercised option in exchange for a distribution from the Company equal in
amount to the excess of (i) the fair market value (on the date of surrender) of
the shares of Common Stock in which the optionee is at the time vested under the
surrendered option over (ii) the aggregate option price payable for such shares.
The appreciation distribution may be made, at the discretion of the Committee,
either in shares of Common Stock valued at fair market value on the date of
surrender, in cash or in a combination of cash and Common Stock. No surrender of
an option will be effective unless it is approved by the Committee.
One or more officers of the Company subject to the short-swing profit
restrictions of the Federal securities laws may, in the Committee's discretion,
be granted limited stock appreciation rights in tandem with their outstanding
options. Any option with such a limited stock appreciation right in effect for
at least six months will automatically be canceled upon the occurrence of a
Hostile Takeover, and the optionee will in return be entitled to a cash
distribution from the Company in an amount based on the highest reported price
per share paid by the acquiring entity in effecting the Hostile Takeover.
For purposes of such option cancellation provisions, Hostile Takeover
means the acquisition by any person or related group of persons (other than the
Company or its affiliates) of securities possessing more than 50% of the
Company's outstanding Common Stock pursuant to a tender or exchange offer which
the Board does not recommend the Company's stockholders to accept, provided at
least 50% of the securities so acquired in such tender or exchange offer are
obtained from holders other than the officers and directors of the Company
participating in the Stock Option Plan.
The acceleration of options in the event of a Corporate Transaction or
Change in Control and the cash-out of options upon a Hostile Takeover may be
seen as anti-takeover provisions and may have the effect of discouraging a
merger proposal, takeover attempt or other effort to gain control of the
Company.
SPECIAL TAX WITHHOLDING ELECTION
The Committee may, in its discretion and upon such terms and conditions
as it may deem appropriate, provide one or more optionees with the election to
have the Company withhold, from the shares of Common Stock purchased under the
Stock Option Plan upon the exercise of nonstatutory options, that number of
shares with an aggregate fair market value equal to the designated percentage
(any multiple of 5% as specified by the optionee) of the Federal and State
income tax liability incurred by the optionee in connection with the acquisition
of such shares. Any election so made will be subject to the approval of the
Committee, and no shares will be accepted in satisfaction of such tax liability
except to the extent the Committee approves the election. One or more
participants may also be granted the alternative right, subject to Committee
approval, to deliver previously issued shares of Common Stock in satisfaction of
such tax liability. The withheld or delivered shares will be valued at fair
market value on the determination date for such tax liability.
CANCELLATION AND NEW GRANT OF OPTIONS
The Committee has the authority to effect, at any time and from time to
time, with the consent of the affected optionees, the cancellation of any or all
options outstanding under the Discretionary Option Grant Program and to grant in
substitution therefor new options covering the same or different numbers of
shares of Common Stock but having an exercise price per share not less than 85%
of the fair market value per share of the Common Stock on the new grant date (or
100% of fair market value if the new option is to be an incentive stock option).
It is anticipated that the exercise price in effect under the new grant will in
all instances be less than the exercise price in effect under the canceled
option.
18.
<PAGE> 21
AUTOMATIC OPTION GRANT PROGRAM
Under the Automatic Option Grant Program, option grants are made on a
periodic basis to the non-employee Board members. These special grants may be
summarized as follows:
(a) Each individual who first becomes a non-employee Board member,
whether through election at an Annual Stockholders' Meeting or through
appointment by the Board, on or after June 2, 1995, will be automatically
granted, on the date of initial election or appointment, a nonstatutory stock
option to purchase 20,000 shares of Common Stock.
(b) Each individual who was serving as a non-employee Board member on
August 12, 1991, was automatically granted on that date a nonstatutory stock
option to purchase 5,000 shares of Common Stock and each individual who first
became a non-employee Board member after August 12, 1991, and before June 2,
1995, was automatically granted on the date of initial election, or appointment,
a nonstatutory stock option to purchase 10,000 shares of Common Stock.
(c) Each individual who is re-elected as a non-employee Board member
will receive on the date of each Annual Stockholders' Meeting an additional
grant of a nonstatutory option to purchase 10,000 shares of Common Stock,
commencing with the 1995 Annual Stockholders' Meeting, provided such individual
has been a non-employee Board member for at least six months at the time of the
Annual Meeting.
Prior to the 1995 amendment, the Automatic Grant Program provided for a
second grant of a nonstatutory option to purchase 10,000 shares of Common Stock
at the first Annual Meeting occurring more than six months after grant of the
initial option and subsequent grants of a nonstatutory option to purchase 5,000
shares of Common Stock each year thereafter.
Each option grant under the Automatic Option Grant Program is subject
to the following terms and conditions:
(a) The option price per share will be equal to the fair market value
per share of Common Stock on the automatic grant date and each option is to have
a maximum term of 10 years measured from the grant date.
(b) The initial options granted under the Automatic Option Grant
Program on or after June 2, 1995, will become exercisable as to 25% of the
option shares in each of the four years measured from the grant date, provided
that the optionee participates in at least 75% of the regularly-scheduled Board
meetings held during each of such one-year periods. The annual 10,000-share
automatic options granted on and after the date of the 1995 Annual Meeting will
become exercisable for all of the option shares as of the last day of such year,
provided that the optionee participates in at least 75% of the
regularly-scheduled Board meetings held during such year. The annual 5,000 and
10,000-share automatic options granted under the Automatic Option Grant Program
prior to June 2, 1995, become exercisable for all of the option shares one year
after the grant date provided the optionee continues to serve as a Board member
throughout such one-year period.
(c) The option will remain exercisable for a six-month period following
the optionee's termination of service as a Board member for any reason other
than death. Should the optionee die while holding an automatic option grant,
then such option will remain exercisable for a 12-month period following such
optionee's death and may be exercised by the personal representatives of the
optionee's estate or the person to whom the grant is transferred by the
optionee's will or the laws of inheritance. In no event, however, may the option
be exercised after the expiration date of the option term. During the applicable
exercise period, the option may not be exercised for more than the number of
shares (if any) for which it is exercisable at the time of the optionee's
cessation of Board service.
(d) The option will become immediately exercisable for all of the
shares of Common Stock at the time subject to such option in the event of a
Corporate Transaction (see "Corporate Transaction").
19.
<PAGE> 22
(e) Upon the consummation of the Corporate Transaction, all automatic
option grants will terminate and cease to be outstanding, unless assumed by the
successor corporation. Options granted prior to June 2, 1995, terminate upon a
Corporate Transaction.
(f) Each automatic option in effect for at least six months will
automatically be canceled upon the occurrence of a Hostile Takeover (as defined
above), and the optionee will in return be entitled to a cash distribution from
the Company in an amount equal to the excess of (i) the Takeover Price of the
shares of Common Stock at the time subject to the canceled option (whether or
not the option is otherwise at the time exercisable for such shares) over (ii)
the aggregate exercise price payable for such shares.
The acceleration of options in the event of a Corporate Transaction
and the cash-out of options upon a Hostile Takeover may be seen as anti-takeover
provisions and may have the effect of discouraging a merger proposal, a takeover
attempt or other efforts to gain control of the Company.
(g) The remaining terms and conditions of the option will in general
conform to the terms described above for option grants made under the
Discretionary Option Grant Program and will be incorporated into the option
agreement evidencing the automatic grant.
EXCESS GRANTS
The Stock Option Plan permits the grant of options to purchase shares
of the Common Stock in excess of the number of shares then available for
issuance under the Stock Option Plan. Any option so granted cannot be exercised
prior to stockholder approval of an amendment increasing the number of shares
available for issuance under the Stock Option Plan.
AMENDMENT AND TERMINATION OF THE PLAN
The Company's Board may amend or modify the Stock Option Plan in any or
all respects whatsoever; provided, however, that (i) the rights of existing
optionees may not be adversely altered without their consent and (ii) any
amendments to the Automatic Option Grant Program (or any options outstanding
thereunder) may not occur at intervals more frequently than once every six
months, other than to the extent necessary to comply with applicable Federal tax
laws and regulations. Further, the Board may not amend the Stock Option Plan
without the approval of the stockholders of the Company if such amendment would
increase the maximum number of shares issuable under the Stock Option Plan
(other than in connection with certain changes in the Company's capital
structure), materially increase the benefits accruing to participants under the
Stock Option Plan, or materially modify the eligibility requirements for option
grants under the Stock Option Plan.
The Stock Option Plan will terminate upon the earlier of June 1, 2005,
or the date all shares available for issuance under the Stock Option Plan are
issued or canceled pursuant to the exercise or surrender of options granted
under the Stock Option Plan. Any options outstanding at the time of the
termination of the Stock Option Plan will remain in force in accordance with the
provisions of the instruments evidencing such grants.
20.
<PAGE> 23
OPTIONS GRANTED/NEW PLAN BENEFITS
The table below shows, as to each of the executive officers named in
the Summary Compensation Table above, each of the directors and nominees, and
the various indicated groups, the following information with respect to stock
option transactions effected during the period from inception of the Stock
Option Plan to May 15, 1996: (i) the number of shares of Common Stock subject to
options granted under the Stock Option Plan during that period and (ii) the
weighted average exercise price payable per share under such options.
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------
Name and Position Number of Weighted
Option Average
Shares Exercise Price
of Granted
Options
- - -----------------------------------------------------------------------------------------
<S> <C> <C>
Richard D. Murdock 350,000 8.68
President and Chief
Executive Officer and Director
- - -----------------------------------------------------------------------------------------
Larry G. Culver 225,000 8.39
Executive Vice President, Chief Operating Officer and
Chief Financial Officer and Director
- - -----------------------------------------------------------------------------------------
S. Joseph Tarnowski, Ph.D. 150,000 11.67
Vice President of Research and Development
- - -----------------------------------------------------------------------------------------
Billy W. Minshall 150,000 13.17
Vice President of Operations and Engineering
- - -----------------------------------------------------------------------------------------
Thomas M. Keenan 100,000 10.50
Vice President of Marketing and Sales
- - -----------------------------------------------------------------------------------------
Joseph S. Lacob 80,000 5.47
Director
- - -----------------------------------------------------------------------------------------
Charles P. Waite, Jr. 30,000 14.42
Director
- - -----------------------------------------------------------------------------------------
Joshua L. Green 20,000 11.56
Director
- - -----------------------------------------------------------------------------------------
Kenneth W. Anstey 20,000 17.38
- - -----------------------------------------------------------------------------------------
All current executive officers as a group (6 persons) 1,005,000 10.16
- - -----------------------------------------------------------------------------------------
All current directors (other than executive officers) as 150,000 9.66
a group (4 persons)
- - -----------------------------------------------------------------------------------------
All employees (other than current executive officers) as 1,598,086 9.07
a group (161 persons)
- - -----------------------------------------------------------------------------------------
</TABLE>
During fiscal years 1989 through 1996, 250,354 shares were issued
pursuant to the exercise of options granted under the Option Plan. In addition,
during such period, employees (other than executive officers) of the Company
were granted options under the Option Plan to purchase 630,355 shares at a
weighted average exercise price of $11.44 per share excluding shares for which
options were granted and subsequently canceled or terminated. As of June 10,
1996, options to purchase 1,579,346 shares at a weighted average exercise price
of $10.87 per share were outstanding under the Option Plan and 167,412 shares
remained available for future option grants under the Option Plan.
21.
<PAGE> 24
FEDERAL TAX CONSEQUENCES
Options granted under the Stock Option Plan may be either incentive
stock options, which satisfy the requirements of Section 422 of the Internal
Revenue Code, or nonstatutory options which are not intended to satisfy such
requirements. The Federal income tax treatment for the two types of options
differs as follows:
Incentive Options. No taxable income is recognized by the optionee at
the time of the option grant, and no taxable income is generally recognized at
the time the option is exercised, unless the optionee is subject to the
alternative minimum tax. Upon exercise, the difference between the fair market
value of the purchased shares and the exercise price is generally included in
alternative minimum taxable income for purposes of the alternative minimum tax.
The optionee will, however, recognize taxable income in the year in which the
purchased shares are sold, or otherwise made the subject of disposition.
For Federal tax purposes, dispositions are divided into two categories:
qualifying and disqualifying. The optionee will make a qualifying disposition of
the purchased shares if the sale or disposition is made more than two years
after the grant date of the option and more than one year after the exercise
date. If the optionee fails to satisfy either of these two holding periods prior
to sale or disposition, then a disqualifying disposition of the purchased shares
will result.
Upon a qualifying disposition, the optionee will recognize long-term
capital gain in an amount equal to the excess of (i) the amount realized upon
the sale or other disposition of the purchased shares over (ii) the option price
paid for the shares. If there is a disqualifying disposition of the shares, then
the excess of (i) the fair market value of those shares on the date of exercise
over (ii) the option price paid for the shares will be taxable as ordinary
income. Any additional gain recognized upon the disposition will be capital
gain.
If the optionee makes a disqualifying disposition of the purchased
shares, then the Company will be entitled to an income tax deduction, for the
taxable year in which such disposition occurs, equal to the excess of (i) the
fair market value of such shares on the date the option was exercised over (ii)
the option price paid for such shares. In no other instance will the Company be
allowed a deduction with respect to the optionee's disposition of the purchased
shares.
Nonstatutory Options. No taxable income is recognized by an optionee
upon the grant of a nonstatutory option. The optionee will in general recognize
ordinary income in the year in which the option is exercised equal to the excess
of the fair market value of the purchased shares at the date of exercise over
the exercise price, and the optionee will be required to satisfy the tax
withholding requirements applicable to such income.
Special provisions of the Internal Revenue Code apply to the
acquisition of shares under a nonstatutory option if the purchased shares are
subject to substantial risk of forfeiture, such as the Company's right to
repurchase unvested shares at the original option exercise price. These special
provisions may be summarized as follows:
(a) If the shares acquired upon exercise of the nonstatutory option are
subject to a substantial risk of forfeiture, the optionee will not recognize any
taxable income at the time of exercise but will have to report as ordinary
income, as and when the risk of forfeiture lapses, an amount equal to the
difference between the fair market value of the shares on the date the risk of
forfeiture lapses and the option price paid for the shares.
(b) The optionee may, however, elect under Section 83(b) of the
Internal Revenue Code to include as ordinary income in the year of exercise an
amount equal to the difference between the fair market value of the purchased
shares on the date of exercise (determined as if the shares were not subject to
the risk of forfeiture) and the option price paid for the shares. If the Section
83(b) election is made, the optionee will not recognize any additional income as
and when the risk of forfeiture lapses.
22.
<PAGE> 25
(c) The Company will be entitled to a business expense deduction equal
to the amount of ordinary income recognized by the optionee in connection with
the exercise of the nonstatutory option. The deduction will in general be
allowed for the taxable year of the employer corporation in which such ordinary
income is recognized by the optionee.
Stock Appreciation Rights. If an option granted under the Stock Option
Plan is surrendered or canceled for an appreciation distribution paid in cash,
or if a limited stock appreciation right is exercised for cash, the recipient
will generally realize ordinary income on the date of the surrender or exercise,
equal in amount to the cash received. The Company will be entitled to a
deduction equal to the amount of ordinary income realized by the recipient in
connection with the surrender of the option or exercise of the stock
appreciation right.
Parachute Payments. If the exercisability of an option or stock
appreciation right is accelerated as a result of a change in control, all or a
portion of the value of the option or stock appreciation right at that time may
be a parachute payment for purposes of the excess parachute provisions of the
Internal Revenue Code. Those provisions generally provide that if parachute
payments exceed three times an individual's average compensation for the five
tax years preceding the change of control, the Company loses its compensation
deduction and the recipient is subject to a 20% excise tax for the amount of the
parachute payments in excess of one times such average compensation.
ACCOUNTING TREATMENT
Under present accounting rules, neither the grant nor the exercise of
options issued at fair market value under the Stock Option Plan will result in
any charge to the Company's earnings. However, the grant of options with
exercise prices less than the fair market value of the option shares at the time
of grant will result in a compensation expense for the Company equal to the
discount at the time of the grant. The Company will have to report such expense
over the vesting period in effect for the option shares. Whether or not granted
at a discount, the number of outstanding options under the Stock Option Plan may
be a factor in determining earnings per share on a fully-diluted basis. Also,
options granted after December 15, 1995 to individuals other than employees or
directors of the Company will result in expense recognition in the year granted.
Should one or more optionees be granted stock appreciation rights which
have no conditions upon exercisability other than a service or employment
requirement, then such rights will result in a compensation expense to be
charged against the Company's earnings. Accordingly, at the end of each fiscal
quarter, the amount (if any) by which the fair market value of the shares of
Common Stock subject to the right has increased from prior quarter-end will be
accrued as compensation expense, to the extent such amount is in excess of the
aggregate exercise price payable for such shares. In the event the fair market
value of such shares declines from quarter to quarter, appropriate adjustments
to current compensation expense will be made.
All stock options granted after April 1, 1995 will be subject to
footnote disclosure in the Company's financial statements. The footnote must
reflect the reduction to the Company's reported earnings which would have arisen
had the value of the option been recorded as a compensation expense.
Should one or more optionees be granted limited stock appreciation
rights exercisable upon a Hostile Takeover, then such rights will generally not
result in a compensation expense to be charged against the Company's earnings
unless it is deemed more probable that the option will be surrendered rather
than be exercised.
23.
<PAGE> 26
PROPOSAL THREE -- RATIFICATION OF INDEPENDENT ACCOUNTANTS
The Board of Directors has appointed the firm of Coopers & Lybrand
L.L.P., independent accountants, to audit the financial statements of the
Company for the fiscal year ending March 31, 1997, and is asking the
stockholders to ratify this appointment.
In the event the stockholders fail to ratify the appointment, the Board
of Directors will reconsider its selection. Even if the selection is ratified,
the Board of Directors in its discretion may direct the appointment of a
different independent accounting firm at any time during the year if the Board
of Directors feels that such a change would be in the best interests of the
Company and its stockholders. The affirmative vote of the holders of a majority
of the Company's voting shares represented and voting at the Annual Meeting is
required to ratify the selection of Coopers & Lybrand L.L.P.
Coopers & Lybrand L.L.P. has audited the Company's financial statements
annually since 1989. A representative of Coopers & Lybrand L.L.P. is expected to
be present at the Annual Meeting, will have the opportunity to make a statement
if he desires to do so, and will be available to respond to appropriate
questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
RATIFICATION OF THE SELECTION OF COOPERS & LYBRAND L.L.P. TO SERVE AS THE
COMPANY'S INDEPENDENT ACCOUNTANTS FOR THE FISCAL YEAR ENDING MARCH 31, 1997.
ANNUAL REPORT
A copy of the Annual Report of the Company for the fiscal year ended
March 31, 1996, has been mailed concurrently with this Proxy Statement to all
stockholders entitled to notice of and to vote at the Annual Meeting. The Annual
Report is not incorporated into this Proxy Statement and is not considered proxy
soliciting material.
FORM 10-K
The Company files an Annual Report on Form 10-K with the Securities and
Exchange Commission. Stockholders may obtain a copy of this report, without
charge, by request to the Director of Investor Relations, at the Company.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than 10% of the
Company's Common Stock, to file reports of ownership and changes in ownership
with the Securities and Exchange Commission ("SEC"). Officers, directors and
greater-than-ten-percent shareholders are required by SEC regulations to furnish
the Company with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it,
or written representations from certain reporting persons that no Form 5s were
required for such persons, the Company believes that all filing requirements
applicable to its officers, directors, and greater-than-10% beneficial owners
during the period from April 1, 1995 to March 31, 1996 were complied with.
24.
<PAGE> 27
OTHER MATTERS
The Company knows of no matters that will be presented for
consideration at the Annual Meeting other than the matters set forth in this
Proxy Statement. If any other matters properly come before the Annual Meeting,
it is the intention of the persons named in the enclosed form of Proxy to vote
the shares they represent as the Board of Directors may recommend. Discretionary
authority with respect to such other matters is granted by the execution of the
enclosed Proxy.
THE BOARD OF DIRECTORS
DATED: JULY 8, 1996
25.
<PAGE> 28
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Item
- - ------------ ----
<S> <C>
99.1 Restated Stock Option Plan, Restated and Amended
effective February 1, 1996.
</TABLE>
<PAGE> 29
- - -----------
Please mark
X votes as in this
example
- - -----------
The Board of Directors recommends a vote FOR each of the directors listed below
and a vote FOR the other proposals. This Proxy, when properly executed, will be
voted as specified below. This Proxy will be voted FOR the election of the
directors listed below and FOR the other proposals if no specification is made.
1. To elect the following directors to serve until the next annual meeting of
stockholders and until their successors are elected and qualified:
NOMINEES: Kenneth W. Anstey, Larry G. Culver, Joshua L. Green, Joseph S.
Lacob, Charles P. Waite, Jr., Richard D. Murdock
FOR WITHHELD
/_/ /_/
/_/ For all nominees expect as noted above
2. To approve an amendment to the Company's Restated 1989 Stock Option Plan
which will increase the number of shares of the Company's Common Stock reserved
for issuance thereunder by 500,000 shares.
FOR AGAINST ABSTAIN
/_/ /_/ /_/
3. To ratify the Board of Director's selection of Coopers & Lybrand L.L.P. to
serve as the Company's independent accountants for the fiscal year ending March
31, 1997.
FOR AGAINST ABSTAIN
/_/ /_/ /_/
4. To transact such other business as may properly come before the Annual
Meeting or any adjournment or postponement thereof.
-------------------------------------------
MARK HERE FOR ADDRESS CHANGE /_/
AND PROVIDE NEW ADDRESS
-------------------------------------------
-------------------------------------------
Please sign your name:
Signature: Date:
---------------------------------- --------------------------
Signature: Date:
---------------------------------- --------------------------
<PAGE> 30
CELLPRO, INCORPORATED
Annual Meeting of Stockholders, August 1, 1996
This Proxy is Solicited on Behalf of the Board of Directors of
CellPro, Incorporated
PROXY
The undersigned revokes all previous proxies, acknowledges receipt of
the Notice of the Annual Meeting of Stockholders to be held August 1, 1996 and
the Proxy Statement and appoints Richard D. Murdock and Larry G. Culver and each
of them, the Proxy of the undersigned, with full power of substitution, to vote
all shares of Common Stock of CellPro, Incorporated (the "Company") which the
undersigned is entitled to vote, either on his or her own behalf or on behalf of
any entity or entities, at the Annual Meeting of Stockholders of the Company to
be held at the Company's offices at 22215 26th Avenue, S.E., Bothell, WA 98021,
on Thursday, August 1, 1996 at 9:30 a.m. (the "Annual Meeting"), and at any
adjournment or postponement thereof, with the same force and effect as the
undersigned might or could do if personally present thereat. The shares
represented by this Proxy shall be voted in the manner set forth on the reverse
side.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE , SEE REVERSE SIDE
<PAGE> 1
CELLPRO, INCORPORATED
RESTATED 1989 STOCK OPTION PLAN
RESTATED AND AMENDED EFFECTIVE FEBRUARY 1, 1996
ARTICLE ONE
GENERAL PROVISIONS
I. PURPOSES OF THE PLAN
This Restated 1989 Stock Option Plan (the "Plan") is intended
to promote the interests of CellPro, Incorporated, a Delaware corporation (the
"Company"), by providing a method whereby (i) key employees (including officers
and directors) of the Company (or its parent or subsidiary corporations) who are
responsible for the management, growth and financial success of the Company (or
its parent or subsidiary corporations), (ii) the non-employee members of the
Company's Board of Directors and (iii) consultants and independent contractors
who provide valuable services to the Company (or its parent or subsidiary
corporations) may be offered incentives and rewards which will encourage them to
acquire a proprietary interest, or otherwise increase their proprietary
interest, in the Company and continue to render services to the Company (or its
parent or subsidiary corporations).
For purposes of the Plan, the following provisions shall be
applicable in determining the parent and subsidiary corporations of the Company:
(i) Any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company shall be
considered to be a parent corporation of the Company, provided each
such corporation in the unbroken chain (other than the Company) owns,
at the time of the determination, stock possessing fifty percent (50%)
or more of the total combined voting power of all classes of stock in
one of the other corporations in such chain.
(ii) Each corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company shall be
considered to be a subsidiary of the Company, provided each such
corporation (other than the last corporation) in the unbroken chain
owns, at the time of the determination, stock possessing fifty percent
(50%) or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.
II. STRUCTURE OF THE PLAN
A. Stock Programs. The Plan shall be divided into two separate
components: the Discretionary Option Grant Program specified in Article Two and
the Automatic Option Grant Program specified in Article Three. Under the
Discretionary Option Grant Program, eligible individuals may, at the discretion
of the Plan Administrator, be granted options to purchase shares of Common Stock
in accordance with the provisions of Article Two. Under the Automatic Option
<PAGE> 2
Grant Program, eligible members of the Company's Board of Directors (the
"Board") will automatically receive periodic option grants to purchase shares of
Common Stock in accordance with the provisions of Article Three.
B. General Provisions. Unless the context clearly indicates
otherwise, the provisions of Articles One and Four of the Plan shall apply to
the Discretionary Option Grant Program and the Automatic Option Grant Program
and shall accordingly govern the interests of all individuals under the Plan.
III. ADMINISTRATION OF THE PLAN
A. The Discretionary Option Grant Program shall be
administered by one or more committees comprised of members of the Company's
Board of Directors (the "Board"). The primary committee (the "Primary
Committee") shall be comprised of two or more non-employee Board members and
shall have sole and exclusive authority to grant stock options and stock
appreciation rights under the Discretionary Option Grant Program to officers and
employee-directors of the Company subject to the short-swing profit restrictions
of the Federal securities laws. Stock options may be granted under the
Discretionary Option Grant Program to all other eligible employees and
consultants by either the Primary Committee or a second committee comprised of
one or more Board members (the "Secondary Committee"). No Board member shall be
eligible to serve on the Primary Committee if such individual has, within the
relevant period designated below, received an option grant or stock issuance
under this Plan (other than pursuant to the Automatic Option Grant Program in
effect under Article Three) or under any other stock plan of the Company (or any
parent or subsidiary corporation):
(i) for each of the initial members of the Primary
Committee, the period commencing with the Effective Date of the
Discretionary Option Grant Program and ending with the date of his or
her appointment to the Primary Committee, or
(ii) for any successor or substitute member, the twelve
(12)-month period immediately preceding the date of his or her
appointment to the Primary Committee or (if shorter) the period
commencing with the Effective Date of the Discretionary Option Grant
Program and ending with the date of his or her appointment to the
Primary Committee.
Members of the Primary Committee and the Secondary Committee
shall serve for such period of time as the Board may determine and shall be
subject to removal by the Board at any time.
B. Subject to the limited authority provided the Secondary
Committee to effect option grants in accordance with the provisions of Section
III.B of this Article One, the Primary Committee shall serve as the Plan
Administrator and shall have full power and authority (subject to the express
provisions of the Plan) to establish such rules and regulations as it may deem
appropriate for the proper administration of the Discretionary Option Grant
Program and to make such determinations under, and issue such interpretations
of, such program and any outstanding
-2-
<PAGE> 3
option thereunder as it may deem necessary or advisable. Decisions of the Plan
Administrator shall be final and binding on all parties who have an interest in
the Discretionary Option Grant Program or any outstanding option.
C. Service on the Primary or Secondary Committee shall
constitute service as a Board member, and members of either committee shall
accordingly be entitled to full indemnification and reimbursement as Board
members for their service on the committee. No member of either committee shall
be liable for any act or omission made in good faith with respect to the Plan or
any option granted under the Plan.
D. Administration of the Automatic Option Grant Program shall
be self-executing, and the Plan Administrator shall not exercise any
discretionary functions under such program.
IV. ELIGIBILITY FOR OPTION GRANTS
A. The persons eligible to participate in the Discretionary
Option Grant Program under Article Two of the Plan shall be limited to the
following:
(i) officers and other key employees of the Company (or
its parent or subsidiary corporations) who render services which
contribute to the success and growth of the Company (or its parent or
subsidiary corporations) or which may reasonably be anticipated to
contribute to the future success and growth of the Company (or its
parent or subsidiary corporations); and
(ii) those consultants or independent contractors who
provide valuable services to the Company (or its parent or subsidiary
corporations).
B. Non-employee members of the Board shall not be eligible to
participate in the Discretionary Option Grant Program or in any other stock
option, stock purchase, stock bonus or other stock plan of the Company (or its
parent or subsidiary corporations). However, non-employee members of the Board
shall be eligible to receive automatic option grants pursuant to the provisions
of Article Three.
C. The Plan Administrator shall have full authority to
determine which eligible individuals are to receive option grants under the
Discretionary Option Grant Program, the number of shares to be covered by each
such grant, whether the granted option is to be an incentive stock option
("Incentive Option") which satisfies the requirements of Section 422 of the
Internal Revenue Code or a non-statutory option not intended to meet such
requirements, the time or times at which each such option is to become
exercisable, and the maximum term for which the option is to be outstanding.
V. STOCK SUBJECT TO THE PLAN
-3-
<PAGE> 4
A. The stock issuable under the Plan shall be shares of the
Company's authorized but unissued or reacquired Common Stock. The aggregate
number of shares of Common Stock which may be issued over the term of the Plan
shall not exceed 3,155,000 shares. The total number of shares issuable under the
Plan shall be subject to adjustment from time to time in accordance with the
provisions of this Section V.
B. No one person participating in the Plan may receive
options, separately exercisable stock appreciation rights and direct stock
issuances for more than 500,000 shares of Common Stock in the aggregate over the
term of the Plan. The foregoing limitation shall not be applicable to options
granted on or before December 31, 1994.
C. Should an option expire or terminate for any reason prior
to exercise in full (including options cancelled in accordance with the
cancellation-regrant provisions of Section IV of Article Two of the Plan), the
shares subject to the portion of the option not so exercised shall be available
for subsequent option grants under the Plan. Shares subject to any option or
portion thereof cancelled in accordance with Section V of Article Two or Section
III of Article Three and shares repurchased by the Company pursuant to its
repurchase rights under the Plan shall not be available for subsequent option
grants under the Plan.
D. In the event any change is made to the Common Stock
issuable under the Plan by reason of any stock split, stock dividend,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without receipt of consideration, then
appropriate adjustments shall be made to (i) the aggregate number of shares
issuable under the Plan, (ii) the number of shares and price per share of the
Common Stock subject to each outstanding option under the Discretionary Option
Grant Program, (iii) the number of shares per non-employee Board member for
which automatic option grants are subsequently to be made under the Automatic
Option Grant Program, and (iv) the number of shares and price per share of the
Common Stock subject to each automatic grant outstanding under the Automatic
Option Grant Program. The purpose of such adjustments shall be to preclude the
enlargement or dilution of rights and benefits under the outstanding options.
-4-
<PAGE> 5
ARTICLE TWO
DISCRETIONARY OPTION GRANT PROGRAM
I. TERMS AND CONDITIONS OF OPTIONS
Options granted pursuant to this Article Two shall be
authorized by action of the Plan Administrator and may, at the Plan
Administrator's discretion, be either Incentive Options or non-statutory
options. Individuals who are not Employees may only be granted non-statutory
options under this Article Two. Each option granted shall be evidenced by one or
more instruments in the form approved by the Plan Administrator; provided,
however, that each such instrument shall comply with and incorporate the terms
and conditions specified below. Each instrument evidencing an Incentive Option
shall, in addition, be subject to the applicable provisions of Section II of
this Article Two.
A. Option Price.
1. The option price per share shall be fixed by the Plan
Administrator; provided, however, that in no event shall the option price per
share be less than fifty percent (50%) of the fair market value per share of
Common Stock on the date of the option grant.
2. The option price shall become immediately due upon exercise
of the option and shall, subject to the provisions of Section VI of this Article
Two and the instrument evidencing the grant, be payable in one of the
alternative forms specified below:
- full payment in cash or cash equivalents; or
- full payment in shares of Common Stock held by the optionee
for the requisite period necessary to avoid a charge to the Company's
earnings for financial reporting purposes and valued at fair market
value on the Exercise Date (as such term is defined below); or
- payment through a combination of shares of Common Stock held
by the optionee for the requisite period necessary to avoid a charge to
the Company's earnings for financial reporting purposes and valued at
fair market value on the Exercise Date and cash or cash equivalent; or
- payment effected through a broker-dealer sale and remittance
procedure pursuant to which the optionee (I) shall provide irrevocable
written instructions to a designated brokerage firm to effect the
immediate sale of the purchased shares and remit to the Company, out of
the sale proceeds available on the settlement date, sufficient funds to
cover the aggregate option price payable for the purchased shares plus
all applicable Federal and State income and employment taxes required
to be withheld by the Company by reason of such purchase and (II) shall
provide written directives to the Company to deliver the certificates
for the
-5-
<PAGE> 6
purchased shares directly to such brokerage firm in order to complete
the sale transaction.
For purposes of this subparagraph 2, the Exercise Date shall
be the date on which written notice of the exercise of the option is delivered
to the Company. Except to the extent the sale and remittance procedure is
utilized in connection with the exercise of the option, payment of the option
price for the purchased shares must accompany such notice.
3. The fair market value per share of Common Stock on any
relevant date under subparagraph 1 or 2 above (and for all other valuation
purposes under the Plan) shall be determined in accordance with the following
provisions:
(a) If the Common Stock is not at the time listed or
admitted to trading on any national stock exchange but is traded in the
over-the-counter market, the fair market value shall be the mean
between the highest bid and lowest asked prices (or, if such
information is available, the closing selling price) per share of
Common Stock on the date in question in the over-the-counter market, as
such prices are reported by the National Association of Securities
Dealers through its Nasdaq system or any successor system. If there are
no reported bid and asked prices (or closing selling price) for the
Common Stock on the date in question, then the mean between the highest
bid price and lowest asked price (or the closing selling price) on the
last preceding date for which such quotations exist shall be
determinative of fair market value.
(b) If the Common Stock is at the time listed or
admitted to trading on any national stock exchange, then the fair
market value shall be the closing selling price per share of Common
Stock on the date in question on the stock exchange determined by the
Plan Administrator to be the primary market for the Common Stock, as
such price is officially quoted in the composite tape of transactions
on such exchange. If there is no reported sale of Common Stock on such
exchange on the date in question, then the fair market value shall be
the closing selling price on the exchange on the last preceding date
for which such quotation exists.
B. Term and Exercise of Options.
Each option granted under this Article Two shall be
exercisable at such time or times, during such period, and for such number of
shares as shall be determined by the Plan Administrator and set forth in the
instrument evidencing such option. No such option, however, shall have a maximum
term in excess of ten (10) years from the grant date. During the lifetime of the
optionee, the option shall be exercisable only by the optionee and shall not be
assignable or transferable by the optionee otherwise than by will or by the laws
of descent and distribution following the optionee's death.
-6-
<PAGE> 7
C. Effect of Termination of Employment.
1. Should an optionee (i) cease to remain in the Service of
the Company while holding one or more outstanding options under this Article Two
or (ii) die within three (3) months after cessation of Service, then such option
or options shall not (except to the extent otherwise provided pursuant to
Section VII of this Article Two) remain exercisable for more than a thirty-six
(36) month period following the date of such cessation of Service, in the event
such Service terminates by reason of death or permanent disability, or remain
exercisable for more than a three (3) month period following the date of such
cessation of Service, in the event such Service terminates for any other reason.
Under no circumstances, however, shall any such option be exercisable after the
specified expiration date of the option term. Each such option shall, during
such limited exercise period, be exercisable only to the extent of the number of
shares (if any) for which the option is exercisable on the date of the
optionee's cessation of Service. Upon the expiration of such limited exercise
period or (if earlier) upon the expiration of the option term, the option shall
terminate and cease to be exercisable.
2. To the extent any option remains exercisable, in accordance
with subparagraph 1. above, for one or more option shares following the
optionee's death, such option may be exercised by the personal representative of
the optionee's estate or by the person or persons to whom the option is
transferred pursuant to the optionee's will or in accordance with the laws of
descent and distribution. Except to the extent otherwise provided pursuant to
Section VII of this Article Two, such exercise must occur prior to the earlier
of (i) thirty-six (36) months following the date of the optionee's death or (ii)
the specified expiration date of the option term. Upon the occurrence of the
earlier event, the option shall terminate and cease to be exercisable.
3. Should (i) the optionee's Service be terminated for
misconduct (including, but not limited to, any act of dishonesty, willful
misconduct, fraud or embezzlement) or (ii) the optionee make any unauthorized
use or disclosure of confidential information or trade secrets of the Company or
its parent or subsidiary corporations, then in any such event all outstanding
options granted the optionee under this Article Two shall terminate immediately
and cease to be exercisable.
4. Notwithstanding subparagraphs 1 and 2 above, the Plan
Administrator shall have complete discretion, exercisable either at the time the
option is granted or at the time the optionee ceases Service, to permit one or
more options granted under this Article Two to be exercised, during the limited
period of exercisability provided under subparagraph 1 or 2 above, not only with
respect to the number of shares for which each such option is exercisable at the
time of the optionee's cessation of Service but also with respect to one or more
subsequent installments of purchasable shares for which the option would
otherwise have become exercisable had such cessation of Service not occurred.
5. For purposes of the foregoing provisions of this Section
I.C (and for all other purposes under the Plan):
-7-
<PAGE> 8
a. The optionee shall be deemed to remain in the
Service of the Company for so long as such individual renders services
on a periodic basis to the Company (or any parent or subsidiary
corporation) in the capacity of an Employee, a non-employee member of
the Board or an independent consultant or advisor.
b. The optionee shall be considered to be an Employee
for so long as such individual remains in the employ of the Company or
one or more of its parent or subsidiary corporations, subject to the
control and direction of the employer entity not only as to the work to
be performed but also as to the manner and method of performance.
c. The term permanent disability shall have the
meaning assigned to such term in Section 22(e)(3) of the Internal
Revenue Code.
6. Stockholder Rights.
An optionee shall have none of the rights of a stockholder
with respect to any shares covered by the option until such individual shall
have exercised the option and paid the option price.
7. Repurchase Rights.
The shares of Common Stock acquired upon the exercise of
options granted under this Article Two may be subject to one or more repurchase
rights of the Company in accordance with the following provisions:
a. The Plan Administrator may in its discretion
subject one or more shares of Common Stock issued under this Article
Two Program to repurchase by the Company (or its assignees). Any such
repurchase right shall be exercisable by the Company, at the option
price paid per share, for any or all unvested shares of Common Stock
held by the optionee under this Article Two at the time of his or her
cessation of Service. The specific terms and conditions upon which such
repurchase right shall be so exercisable by the Company (or its
assignees), including the establishment of the appropriate vesting
schedule and other provision for the expiration of such right in one or
more installments over the optionee's period of Service, shall be
determined by the Plan Administrator and set forth in the instrument
evidencing such right.
b. The Plan Administrator may assign the Company's
repurchase rights to any person or entity selected by the Plan
Administrator, including one or more stockholders of the Company.
c. All of the Company's outstanding repurchase rights
shall automatically terminate, and all shares subject to such
terminated rights shall immediately vest in full, upon the occurrence
of any Corporate Transaction under
-8-
<PAGE> 9
Section III of this Article Two, except to the extent: (i) any such
repurchase right is to be assigned to the successor corporation (or
parent thereof) in connection with the Corporate Transaction or (ii)
such termination is precluded by other limitations imposed by the Plan
Administrator at the time the repurchase right is issued.
II. INCENTIVE OPTIONS
The terms and conditions specified below shall be applicable
to all Incentive Options granted under this Article Two. Incentive Options may
only be granted to individuals who are Employees of the Company. Options which
are specifically designated as "non-statutory" options when issued under the
Plan shall not be subject to such terms and conditions.
A. Option Price. The option price per share of the Common
Stock subject to an Incentive Option shall in no event be less than one
hundred percent (100%) of the fair market value of such Common Stock on
the grant date.
B. Dollar Limitation. The aggregate fair market value
(determined as of the respective date or dates of grant) of the Common
Stock for which one or more options granted to any Employee after
December 31, 1986 under this Plan (or any other option plan of the
Company or its parent or subsidiary corporations) may for the first
time become exercisable as incentive stock options under the Federal
tax laws during any one calendar year shall not exceed the sum of One
Hundred Thousand Dollars ($100,000). To the extent the Employee holds
two or more such options which become exercisable for the first time in
the same calendar year, the foregoing limitation on the exercisability
thereof as incentive stock options under the Federal tax laws shall be
applied on the basis of the order in which such options are granted.
C. 10% Stockholder. If any individual to whom an Incentive
Option is to be granted pursuant to the provisions of the Discretionary
Option Grant Program (including options granted pursuant to the
cancellation and regrant provisions of Section IV of this Article Two)
is on the date of grant the owner of stock (as determined under Section
425(d) of the Internal Revenue Code) possessing 10% or more of the
total combined voting power of all classes of stock of the Company or
any one of its parent or subsidiary corporations, then the option price
per share shall not be less than one hundred and ten percent (110%) of
the fair market value per share of Common Stock on the grant date, and
the option term shall not exceed five (5) years, measured from the
grant date.
Except as modified by the preceding provisions of this Section
II, the provisions of Articles One, Two and Four of the Plan shall apply to all
Incentive Options granted hereunder.
-9-
<PAGE> 10
III. CORPORATE TRANSACTIONS/CHANGES IN CONTROL
A. In the event of any of the following stockholder-approved
transactions (a "Corporate Transaction"):
(i) a merger or consolidation in which the Company is
not the surviving entity, except for a transaction the principal
purpose of which is to change the State of the Company's incorporation,
(ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Company, or
(iii) any reverse merger in which the Company is the
surviving entity but in which fifty percent (50%) or more of the
Company's outstanding voting stock is transferred to holders different
from those who held the stock immediately prior to such merger,
then the exercisability of each option outstanding under this
Article Two shall be automatically accelerated so that each such option shall,
immediately prior to the specified effective date for the Corporate Transaction,
become fully exercisable with respect to the total number of shares of Common
Stock purchasable under such option and may be exercised for all or any portion
of such shares. However, an outstanding option under this Article Two shall not
be so accelerated if and to the extent: (i) such option is, in connection with
the Corporate Transaction, either to be assumed by the successor corporation or
parent thereof or be replaced with a comparable option to purchase shares of the
capital stock of the successor corporation or parent thereof, (ii) such option
is to be replaced by a comparable cash incentive program of the successor
corporation based on the value of the option at the time of the Corporate
Transaction, or (iii) the acceleration of such option is subject to other
limitations imposed by the Plan Administrator at the time of grant. The
determination of comparability under clause (i) or (ii) above shall be made by
the Plan Administrator, and its determination shall be final, binding and
conclusive.
B. Upon the consummation of the Corporate Transaction, all
outstanding options under this Article Two shall, to the extent not previously
exercised or assumed by the successor corporation or its parent company,
terminate and cease to be outstanding.
C. Each outstanding option under this Article Two which is
assumed in connection with the Corporate Transaction or is otherwise to continue
in effect shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply and pertain to the number and class of securities which
would have been issuable, in consummation of such Corporate Transaction, to an
actual holder of the same number of shares of Common Stock as are subject to
such option immediately prior to such Corporate Transaction. Appropriate
adjustments shall also be made to the option price payable per share, provided
the aggregate option price payable for such securities shall remain the same. In
addition, the class and number of securities available for issuance under the
Plan following the consummation of the Corporate Transaction shall be
appropriately adjusted.
-10-
<PAGE> 11
D. The grant of options under this Article Two shall in no way
affect the right of the Company to adjust, reclassify, reorganize or otherwise
change its capital or business structure or to merge, consolidate, dissolve,
liquidate or sell or transfer all or any part of its business or assets.
E. The Plan Administrator shall have the discretionary
authority, exercisable in advance of any actually-anticipated Change in Control
or at the time of an actual Change in Control, to provide for the automatic
acceleration of one or more outstanding options under this Article Two (and the
termination of one or more of the Company's outstanding repurchase rights under
this Article Two) upon the occurrence of the Change in Control. The Plan
Administrator shall also have full power and authority to condition any such
option acceleration (and the termination of any outstanding repurchase rights)
upon the subsequent termination of the optionee's Service within a specified
period following the Change in Control.
F. For purposes of this Section III, a Change in Control shall
be deemed to occur upon:
(i) the acquisition by any person or related
group of persons (other than the Company or a person that directly or
indirectly controls, is controlled by, or is under common control with,
the Company) of ownership of more than 50% of the Company's outstanding
Common Stock (excluding the Common Stock holdings of officers and
directors of the Company who participate in this Plan) pursuant to a
tender or exchange offer which the Board does not recommend the
Company's stockholders to accept, or
(ii) a change in the composition of the Board
over a period of twenty-four (24) consecutive months or less such that
a majority of the Board members (rounded up to the next whole number)
cease to be comprised of individuals who either (A) have been Board
members continuously since the beginning of such period or (B) have
been elected or nominated for election as Board members during such
period by at least a majority of the Board members described in clause
(A) who were still in office at the time such election or nomination
was approved by the Board.
G. Any options accelerated in connection with the Change in
Control will remain fully exercisable until the expiration or sooner termination
of the option term.
H. The exercisability as incentive stock options under the
Federal tax laws of any options accelerated under this Section III in connection
with a Corporate Transaction or Change in Control shall remain subject to the
applicable dollar limitation of Section II.
-11-
<PAGE> 12
IV. CANCELLATION AND REGRANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at
any time and from time to time, with the consent of the affected optionees, the
cancellation of any or all outstanding options under this Article Two and to
grant in substitution new options under the Plan covering the same or different
numbers of shares of Common Stock but having an option price per share not less
than eighty-five percent (85%) of the fair market value of the Common Stock on
the new grant date (or one hundred percent (100%) of such fair market value in
the case of an Incentive Option).
V. SURRENDER OF OPTIONS FOR CASH OR STOCK
A. Provided and only if the Plan Administrator determines in
its discretion to implement the stock appreciation right provisions of this
Section V, one or more optionees may be granted the right, exercisable upon such
terms and conditions as the Plan Administrator may establish, to surrender all
or part of an unexercised option under this Article Two in exchange for a
distribution from the Company in an amount equal to the excess of (i) the fair
market value (at date of surrender) of the number of shares in which the
optionee is at the time vested under the surrendered option (or surrendered
portion thereof) over (ii) the aggregate option price payable for such vested
shares.
B. No surrender of an option shall be effective hereunder
unless it is approved by the Plan Administrator. If the surrender is so
approved, then the distribution to which the optionee shall accordingly become
entitled under this Section V may be made in shares of Common Stock valued at
fair market value at date of surrender, in cash, or partly in shares and partly
in cash, as the Plan Administrator shall in its sole discretion deem
appropriate.
C. If the surrender of an option is rejected by the Plan
Administrator, then the optionee shall retain whatever rights the optionee had
under the surrendered option (or surrendered portion thereof) on the date of
surrender and may exercise such rights at any time prior to the later of (i)
five (5) business days after the receipt of the rejection notice or (ii) the
last day on which the option is otherwise exercisable in accordance with the
terms of the instrument evidencing such option, but in no event may such rights
be exercised more than ten (10) years after the date of the option grant.
D. Notwithstanding the foregoing provisions of this Section V,
one or more officers of the Company subject to the short-swing profit
restrictions of the Federal securities laws may, in the Plan Administrator's
sole discretion, be granted limited stock appreciation rights in tandem with
their outstanding options under this Discretionary Option Grant Program. Any
option with such a limited stock appreciation right shall automatically be
cancelled upon the occurrence of a Hostile Take-Over, and the optionee shall in
return be entitled to a cash distribution from the Company in an amount equal to
the excess of (i) the Take-Over Price of the shares of Common Stock at the time
subject to the cancelled option (whether or not the option is otherwise at the
time exercisable for such shares) over (ii) the aggregate exercise price payable
for such shares. The cash distribution payable upon such cancellation shall be
made within five (5) days following the consummation of the Hostile Take-Over.
Neither the approval of the Plan Administrator nor the
-12-
<PAGE> 13
consent of the Board shall be required in connection with such option
cancellation and cash distribution.
E. For purposes of Section V.D, the following
definitions shall be in effect:
A Hostile Take-Over shall be deemed to occur upon the
acquisition by any person or related group of persons (other than the
Company or a person that directly or indirectly controls, is controlled
by, or is under common control with, the Company) of ownership of more
than 50% of the Company's outstanding Common Stock (excluding the
Common Stock holdings of officers and directors of the Company who
participate in this Plan) pursuant to a tender or exchange offer which
the Board does not recommend the Company's stockholders to accept.
The Take-Over Price per share shall be deemed to be
equal to the greater of (a) the fair market value per share on the date
of cancellation, as determined pursuant to the valuation provisions of
Section I.A.3 of Article Two, or (b) the highest reported price per
share paid in effecting such Hostile Take-Over. However, if the
cancelled option is an Incentive Option, the Take-Over Price shall not
exceed the clause (a) price per share.
F. The shares of Common Stock subject to any option
surrendered or cancelled for an appreciation distribution pursuant to this
Section V shall NOT be available for subsequent option grants under the Plan.
VI. LOANS OR GUARANTEE OF LOANS
The Plan Administrator may assist any optionee (including any
officer) in the exercise of one or more outstanding options under this Article
Two by (a) authorizing the extension of a loan to such optionee from the
Company, (b) permitting the optionee to pay the option price for the purchased
Common Stock in installments over a period of years or (c) authorizing a
guarantee by the Company of a third-party loan to the optionee. The terms of any
loan, installment method of payment or guarantee (including the interest rate
and terms of repayment) will be established by the Plan Administrator in its
sole discretion. Loans, installment payments and guarantees may be granted
without security or collateral (other than to optionees who are consultants or
independent contractors, in which event the loan must be adequately secured by
collateral other than the purchased shares), but the maximum credit available to
the optionee shall not exceed the sum of (i) the aggregate option price (less
par value) of the purchased shares plus (ii) any federal and state income and
employment tax liability incurred by the optionee in connection with the
exercise of the option.
VII. EXTENSION OF EXERCISE PERIOD
The Plan Administrator shall have full power and authority to
extend the period of time for which any option granted under this Article Two is
to remain exercisable following the optionee's cessation of Service or death
from the limited period set forth in the option agreement to
-13-
<PAGE> 14
such greater period of time as the Plan Administrator shall deem appropriate;
provided, however, that in no event shall such option be exercisable after the
specified expiration date of the option term.
-14-
<PAGE> 15
ARTICLE THREE
AUTOMATIC OPTION GRANT PROGRAM
I. TERMS AND CONDITIONS OF AUTOMATIC OPTION GRANTS
A. Grant Dates. Option grants shall be made on the dates
specified below:
1. Each Eligible Director who is first elected
or appointed as a non-employee Board member on or after June 2, 1995 shall
automatically be granted, on the date of such initial election or appointment
(as the case may be), a Non-Statutory Option to purchase 20,000 shares of Common
Stock.
2. On the date of each Annual Stockholders
Meeting, beginning with the 1995 Annual Meeting, each individual who is to
continue to serve as an Eligible Director after such meeting, shall
automatically be granted, whether or not such individual is standing for
re-election as a Board member at that Annual Meeting, a Non-Statutory Option to
purchase an additional 10,000 shares of Common Stock, provided such individual
has served as a non-employee Board member for at least six (6) months prior to
the date of such Annual Meeting. There shall be no limit on the number of such
10,000-share option grants any one Eligible Director may receive over his or her
period of Board Service.
3. For purposes of this Article Three, Eligible
Director shall mean a non- employee Board member eligible to participate in the
Automatic Option Grant Program, except that an individual who serves as the
designee of a corporation which has the contractual right to designate a Board
nominee shall not be an Eligible Director.
4. Except for the option grants to be made
pursuant to the provisions of this Automatic Option Grant Program, Eligible
Directors (and any other non-employee member of the Board) shall not be eligible
to receive any additional option grants under this Plan or any other stock plan
of the Company (or its subsidiary corporations). The Automatic Option Grant
Program under this Plan was amended on June 2, 1995. The provisions of this
Article Three apply to automatic options granted from and after June 2, 1995.
Automatic options granted prior to June 2, 1995 are governed by this Plan as in
effect prior to the 1995 Restatement.
5. The 20,000-share or 10,000-share limitation
per automatic option grant to each Eligible Director shall be subject to
periodic adjustment pursuant to the applicable provisions of Section V.D of
Article One.
B. Exercise Price. The exercise price per share shall be
equal to one hundred percent (100%) of the fair market value per share of Common
Stock on the automatic grant date.
-15-
<PAGE> 16
C. Payment.
The exercise price shall be shall be payable in one
of the alternative forms specified below:
(i) full payment in cash or check made payable to the
Company's order; or
(ii) full payment in shares of Common Stock held for the
requisite period necessary to avoid a charge to the Company's reported
earnings and valued at fair market value on the Exercise Date (as such
term is defined below); or
(iii) full payment in a combination of shares of Common
Stock held for the requisite period necessary to avoid a charge to the
Company's reported earnings and valued at fair market value on the
Exercise Date and cash or check payable to the Company's order, or
(iv) full payment through a sale and remittance
procedure pursuant to which the optionee (a) shall provide irrevocable
written instructions to a designated brokerage firm to effect the
immediate sale of the purchased shares and remit to the Company, out of
the sale proceeds available on the settlement date, sufficient funds to
cover the aggregate exercise price payable for the purchased shares and
(b) shall concurrently provide written directives to the Company to
deliver the certificates for the purchased shares directly to such
brokerage firm in order to complete the sale transaction.
For purposes of this subparagraph, the Exercise Date shall be
the date on which written notice of the exercise of the option is delivered to
the Company, and the fair market value per share of Common Stock on any relevant
date shall be determined in accordance with the provisions of Section I.A.3 of
Article Two. Except to the extent the sale and remittance procedure specified
above is utilized for the exercise of the option, payment of the exercise price
for the purchased shares must accompany such notice.
D. Option Term. Each automatic grant under this Article Three
shall have a maximum term of ten (10) years measured from the automatic grant
date.
E. Exercisability. The 20,000-share initial option grant shall
become exercisable for the Option Shares upon completion of five (5) years of
continuous Board Service, measured from the automatic grant date.
Notwithstanding the foregoing, for each year (measured from and after the
automatic grant date) in which optionee attends at least seventy-five percent
(75%) of the regularly scheduled Board meetings during such year, twenty-five
percent (25%) of the Option Shares shall accelerate and shall become exercisable
as of the last day of such year. The 10,000-share subsequent option grants shall
become exercisable for the Option Shares upon completion of one (1) year of
continuous Board Service, measured from the automatic grant date.
Notwithstanding the foregoing, if optionee attends at least seventy-five percent
(75%) of the
-16-
<PAGE> 17
regularly-scheduled Board meetings during such year (measured from
the automatic grant date), the Option Shares shall accelerate and shall become
exercisable as of the last day of such year.
F. Non-Transferability. During the lifetime of the optionee,
the option shall be exercisable only by the optionee and shall not be assignable
or transferable by the optionee otherwise than by will or by the laws of descent
and distribution following the optionee's death.
G. Effect of Termination of Board Membership.
1. Should the optionee cease to be a Board member for any
reason (other than death) while holding one or more automatic option grants
under this Automatic Option Grant Program, then such optionee shall have up to a
six (6) month period following the date of such cessation of Board membership in
which to exercise each such option for any or all of the shares of Common Stock
for which the option is exercisable at the time Board membership ceases.
2. Should the optionee die while holding one or more
outstanding automatic option grants under this Automatic Option Grant Program,
then each such option may subsequently be exercised, for any or all of the
shares of Common Stock for which the option is exercisable at the time of the
optionee's cessation of Board membership, by the personal representative of the
optionee's estate or by the person or persons to whom the option is transferred
pursuant to the optionee's will or in accordance with the laws of descent and
distribution. Any such exercise must, however, occur within twelve (12) months
after the date of the optionee's death.
3. In no event shall any automatic grant under this
Automatic Option Grant Program remain exercisable after the specified expiration
date of the ten (10)-year option term. Upon the expiration of the applicable
exercise period in accordance with subparagraphs 1 and 2 above or (if earlier)
upon the expiration of the ten (10)-year option term, the automatic grant shall
terminate and cease to be exercisable.
H. Stockholder Rights. The holder of an automatic option grant
under this Automatic Option Grant Program shall have none of the rights of a
stockholder with respect to any shares covered by such option until such
individual shall have exercised the option and paid the exercise price for the
purchased Shares.
I. Remaining Terms. The remaining terms and conditions of each
automatic option grant shall be as set forth in the prototype Non-Statutory
Stock Option Agreement attached as Exhibit A to the Plan.
II. CORPORATE TRANSACTION/HOSTILE TAKE-OVER
A. In the event of any of the following stockholder-approved
transactions (a "Corporate Transaction"):
-17-
<PAGE> 18
(i) a merger or consolidation in which the Company is
not the surviving entity, except for a transaction the principal
purpose of which is to change the State of the Company's incorporation,
(ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Company, or
(iii) any reverse merger in which the Company is the
surviving entity but in which fifty percent (50%) or more of the
Company's outstanding voting stock is transferred to holders different
from those who held the stock immediately prior to such merger,
then the exercisability of each automatic option grant
outstanding under this Article Three shall automatically be accelerated so that
each such option shall, immediately prior to the specified effective date for
the Corporate Transaction, become fully exercisable with respect to the total
number of shares of Common Stock purchasable under such option and may be
exercised for all or any portion of such shares. Upon the consummation of the
Corporate Transaction, all outstanding options under this Article Three shall,
to the extent not previously exercised or assumed by the successor corporation
or its parent company, terminate and cease to be outstanding.
B. Upon the occurrence of a Hostile Take-Over, each automatic
option grant which has been outstanding under this Automatic Option Grant
Program for a period of at least six (6) months shall automatically be cancelled
in return for a cash distribution from the Company in an amount equal to the
excess of (i) the Take-Over Price of the shares of Common Stock at the time
subject to the cancelled option (whether or not the option is otherwise at the
time exercisable for such shares) over (ii) the aggregate exercise price payable
for such shares. The cash distribution payable upon such cancellation shall be
made within five (5) days following the consummation of the Hostile Take-Over.
Neither the approval of the Plan Administrator nor the consent of the Board
shall be required in connection with such option cancellation and cash
distribution.
C. For purposes of this Section III, the following definitions
shall be in effect:
A Hostile Take-Over shall be deemed to occur upon the
acquisition by any person or related group of persons (other than the
Company or a person that directly or indirectly controls, is controlled
by, or is under common control with, the Company) of ownership of more
than 50% of the Company's outstanding Common Stock (excluding the
Common Stock holdings of officers and directors of the Company who
participate in this Plan) pursuant to a tender or exchange offer which
the Board does not recommend the Company's stockholders to accept.
The Take-Over Price per share shall be deemed to be
equal to the greater of (a) the fair market value per share on the date
of cancellation, as determined pursuant to the valuation provisions of
Section I.A.3 of Article Two, or (b) the highest reported price per
share paid in effecting such Hostile Take-Over.
-18-
<PAGE> 19
D. The shares of Common Stock subject to each option cancelled
in connection with the Hostile Take-Over shall NOT be available for subsequent
issuance under this Plan.
E. The automatic option grants outstanding under this
Automatic Option Grant Program shall in no way affect the right of the Company
to adjust, reclassify, reorganize or otherwise change its capital or business
structure or to merge, consolidate, dissolve, liquidate or sell or transfer all
or any part of its business or assets.
III. AMENDMENT OF THE AUTOMATIC GRANT PROVISIONS
A. Limited Amendments. The provisions of this Automatic Option
Grant Program, including any automatic option grants outstanding under this
Article Three, may not be amended at intervals more frequently than once every
six (6) months, other than to the extent necessary to comply with applicable
Federal income tax laws and regulations.
-19-
<PAGE> 20
ARTICLE FOUR
MISCELLANEOUS
I. AMENDMENT OF THE PLAN
The Board shall have complete and exclusive power and
authority to amend or modify the Plan in any or all respects whatsoever;
provided, however, that (i) no such amendment or modification shall, without the
consent of the holders, adversely affect rights and obligations with respect to
options at the time outstanding under the Plan and (ii) any amendment made to
the Automatic Option Grant Program (or any options outstanding thereunder) shall
be in compliance with the limitation of Section III of Article Three. In
addition, the Board shall not, without the approval of the Company's
stockholders, (i) increase the maximum number of shares issuable under the Plan,
except for permissible adjustments under Section V.D of Article One, (ii)
materially modify the eligibility requirements for the grant of options under
the Plan or (iii) otherwise materially increase the benefits accruing to
participants under the Plan.
II. TAX WITHHOLDING
A. The Company's obligation to deliver shares or cash upon the
exercise or surrender of stock options or stock appreciation rights granted
under the Discretionary Option Grant Program shall be subject to the
satisfaction of all applicable Federal, State and local income and employment
tax withholding requirements.
B. The Plan Administrator may, in its discretion and upon such
terms and conditions as it may deem appropriate (including the applicable
safe-harbor provisions of SEC Rule 16b-3 or any successor rule or regulation)
provide any or all holders of outstanding option grants under the Discretionary
Option Grant Program with the election to have the Company withhold, from the
shares of Common Stock purchased or issued pursuant to such options, one or more
of such shares with an aggregate fair market value equal to the designated
percentage (any multiple of 5% specified by the optionee) of the Federal and
State income taxes ("Taxes") incurred in connection with the acquisition of such
shares. In lieu of such direct withholding, one or more optionees may also be
granted the right to deliver shares of Common Stock to the Company in
satisfaction of such Taxes. The withheld or delivered shares shall be valued at
the Fair Market Value on the applicable determination date for such Taxes or
such other date required by the applicable safe-harbor provisions of SEC Rule
16b-3.
-20-
<PAGE> 21
III. EFFECTIVE DATE AND TERM OF PLAN
A. Unless sooner terminated in accordance with Section III of
Article Two and Section II of Article Three, the Plan shall terminate upon the
earlier of (i) June 1, 2005 or (ii) the date on which all shares available for
issuance under the Plan shall have been issued pursuant to the exercise,
surrender or cash-out of the options granted hereunder. If the date of
termination is determined under clause (i) above, then options outstanding on
such date shall thereafter continue to have force and effect in accordance with
the provisions of the instruments evidencing such options.
B. Options may be granted under this Plan to purchase shares
of Common Stock in excess of the number of shares then available for issuance
under the Plan, provided each option granted is not to become exercisable, in
whole or in part, at any time prior to stockholder approval of an amendment
authorizing a sufficient increase in the number of shares issuable under the
Plan.
C. On March 31, 1993, the Plan was amended to increase the
number of shares issuable under the Option Plan by 780,000 shares to an
aggregate of 2,655,000 shares. The amendment was approved by the Company's
stockholders on August 27, 1993. Article One, Section III of the Plan was
amended effective August 26, 1993 to permit the establishment of a secondary
committee to administer the Plan and Article Three, Section I.A was amended
effective December 1, 1993 to modify the eligibility provisions for non-employee
directors. The provisions of the December 1, 1993 restatement of the Plan shall
apply only to options granted under the Plan from and after the December 1, 1993
effective date of such restatement. On June 2, 1995, the Plan was amended and
restated in order to (1) extend the term of the Plan to June 1, 2005, (2)
increase the number of shares for which automatic option grants would be made to
eligible non-employee Board members and provide for vesting of initial grants
over a four-year period, and (3) comply with Section 162(m) ("1995
Restatement"). The 1995 Restatement was approved by the stockholders at the 1995
Annual Meeting of Stockholders. On February 1, 1996, the Plan was amended to
increase the number of shares issuable under the Option Plan by 500,000 shares
to an aggregate of 3,155,000 shares. This amendment will be submitted to the
stockholders for approval at the 1996 Annual Meeting of Stockholders. Options
may be granted under this Plan at any time before the date fixed herein for
termination of the Plan.
IV. USE OF PROCEEDS
Any cash proceeds received by the Company from the sale of
shares pursuant to options granted under the Plan shall be used for general
corporate purposes.
V. REGULATORY APPROVALS
The implementation of the Plan, the granting of any option
hereunder, and the issuance of stock upon the exercise or surrender of any such
option shall be subject to the
-21-
<PAGE> 22
procurement by the Company of all approvals and permits required by regulatory
authorities having jurisdiction over the Plan, the options granted under it and
the stock issued pursuant to it.
VI. NO EMPLOYMENT/SERVICE RIGHTS
Neither the action of the Company in establishing or restating
the Plan, nor any action taken by the Plan Administrator hereunder, nor any
provision of the restated Plan shall be construed so as to grant any individual
the right to remain in the employ or service of the Company (or any parent or
subsidiary corporation) for any period of specific duration, and the Company (or
any parent or subsidiary corporation retaining the services of such individual)
may terminate such individual's employment or service at any time and for any
reason, with or without cause.
-22-
