<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] 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 ss.240.14a-11(c) or ss.240.14a-12
ABAXIS, INC.
(Name of Registrant as Specified In Its Charter)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(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 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
[LOGO] 1320 Chesapeake Terrace, Sunnyvale, CA 94089
Phone 408-734-0200 Fax 408-734-2874
September 17, 1998
Dear Shareholder:
This year's annual meeting of shareholders of Abaxis, Inc. (the "Company")
will be held on October 26, 1998, at 10:00 a.m. local time, at the Company's
principal offices, located at 1320 Chesapeake Terrace, Sunnyvale, California.
You are cordially invited to attend.
The Notice of Annual Meeting of Shareholders and a Proxy Statement, which
describe the formal business to be conducted at the meeting, follow this letter.
After reading the Proxy Statement, please promptly complete, sign, date and
return the enclosed proxy card in the prepaid envelope to assure that your
shares will be represented. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING,
PLEASE COMPLETE, SIGN, DATE AND RETURN THE ACCOMPANYING PROXY PROMPTLY IN THE
ENCLOSED POSTAGE PAID ENVELOPE. Regardless of the number of shares you own, your
careful consideration of, and vote on, the matters before our shareholders is
important.
A copy of the Company's Annual Report to Shareholders also is enclosed for
your information. At the annual meeting we will review the activities of the
Company over the past year and our plans for the future. We look forward to
seeing you at the annual meeting.
Very truly yours,
/s/ Clinton H. Severson
-------------------------------
CLINTON H. SEVERSON
Chairman of the Board, President and Chief
Executive Officer
<PAGE> 3
ABAXIS, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held October 26, 1998
TO THE SHAREHOLDERS:
Please take notice that the annual meeting of the shareholders of Abaxis,
Inc., a California corporation (the "Company"), will be held on October 26,
1998, at 10:00 a.m. at the offices of the Company, located at 1320 Chesapeake
Terrace, Sunnyvale, California, for the following purposes:
1. To elect five directors to hold office for the ensuing year;
2. To consider and vote upon a proposal to amend and restate the Abaxis,
Inc. 1989 Stock Option Plan as the Abaxis, Inc. 1998 Stock Option Plan
(the "Option Plan") to, among other things, (i) increase the maximum
aggregate number of shares of the Company's Common Stock issuable
under the Option Plan by 1,000,000 shares and (ii) extend the term of
the Option Plan;
3. To consider and vote upon a proposal to ratify the appointment of
Deloitte & Touche LLP as the Company's independent public accountants
for the fiscal year ending March 31, 1999; and
4. To transact such other business as may properly come before the
meeting.
Shareholders of record at the close of business on September 7, 1998, are
entitled to notice of, and to vote at, this meeting and any adjournment or
postponement. For ten days prior to the meeting, a complete list of shareholders
entitled to vote at the meeting will be available for examination by any
shareholder, for any purpose relating to the meeting, during ordinary business
hours at the Company's principal offices located at 1320 Chesapeake Terrace,
Sunnyvale, California.
By order of the Board of Directors
/s/ Donald J. Stewart
----------------------------------
Donald J. Stewart, Secretary
Sunnyvale, California
September 17, 1998
- --------------------------------------------------------------------------------
Please complete, date, sign and promptly mail the enclosed proxy card in the
accompanying post-paid envelope to assure that your shares are represented at
the meeting. If you attend the meeting, you may choose to vote in person even if
you have previously sent in your proxy card. IMPORTANT: Please complete, date,
sign and promptly mail the enclosed proxy card in the accompanying post-paid
envelope to assure that your shares are represented at the meeting. If you
attend the meeting, you may choose to vote in person even if you have previously
sent in your proxy card.
- --------------------------------------------------------------------------------
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS...................................................1
GENERAL INFORMATION..................................................................................1
INFORMATION ABOUT ABAXIS.............................................................................2
Stock Ownership of Certain Beneficial Owners and Management.......................................2
Director Nominees.................................................................................4
EXECUTIVE COMPENSATION AND OTHER MATTERS.............................................................6
Executive Compensation............................................................................6
Stock Options Granted in Fiscal 1998..............................................................7
Option Exercises And Fiscal 1998 Year-End Values..................................................8
Compensation of Directors.........................................................................8
Employment Contracts and Termination of Employment and Change-in-Control
Arrangements......................................................................................8
Section 16(A) Beneficial Ownership Reporting Compliance...........................................9
Changes to Benefit Plans..........................................................................9
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION......................................10
COMPARISON OF SHAREHOLDER RETURN....................................................................12
PROPOSAL NUMBER ONE.................................................................................13
Election of Directors............................................................................13
PROPOSAL NUMBER TWO.................................................................................13
Approval of Amendment and Restatement of the Abaxis, Inc. 1989 Stock Option Plan.................13
PROPOSAL NUMBER THREE...............................................................................19
Ratification of Appointment of Independent Public Accountants....................................19
SHAREHOLDER PROPOSALS TO BE PRESENTED AT NEXT ANNUAL MEETING........................................19
TRANSACTION OF OTHER BUSINESS.......................................................................19
</TABLE>
<PAGE> 5
PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS
The accompanying proxy is solicited by the Board of Directors of Abaxis,
Inc., a California corporation ("Abaxis" or the "Company"), for use at its
annual meeting of shareholders to be held on October 26, 1998 (the "Annual
Meeting"), or any adjournment or postponement thereof, for the purposes set
forth in the accompanying Notice of Annual Meeting of Shareholders. The date of
this Proxy Statement is September 17, 1998, the approximate date on which this
Proxy Statement and the accompanying form of proxy were first sent or given to
shareholders.
GENERAL INFORMATION
Solicitation of Proxies. The cost of soliciting proxies will be borne by
the Company. In addition to soliciting shareholders by mail through its regular
employees, the Company will request banks and brokers, and other custodians,
nominees and fiduciaries, to solicit their customers who have stock of the
Company registered in the names of such persons and will reimburse them for
their reasonable, out-of-pocket costs. The Company may use the services of its
officers, directors and others to solicit proxies, personally or by telephone,
without additional compensation.
Voting Securities. On September 7, 1998, the Company had outstanding
13,882,980 shares of its Common Stock ("Common Stock") held by 254 shareholders
of record, all of which are entitled to vote with respect to all matters to be
acted upon at the Annual Meeting. The Company's Bylaws provide that a majority
of all of the shares of the stock entitled to vote, whether present in person or
represented by proxy, shall constitute a quorum for the transaction of business
at the Annual Meeting. Each share of Common Stock is entitled to one vote,
except that in the election of directors each shareholder has cumulative voting
rights and may be entitled to as many votes as is equal to the number of shares
held multiplied by the number of directors to be elected (five), which votes may
be cast for a single candidate or distributed among any or all of the
candidates. No shareholder is entitled to cumulate votes with respect to a
candidate unless the candidate's name has been placed in nomination prior to the
voting and the shareholder or any other shareholder has given notice, at the
meeting and prior to the voting, of his or her intention to cumulate his or her
votes.
Voting of Proxies. The persons authorized to vote shares represented by
executed proxies (if authority to vote for the election of directors is not
withheld) will have full discretion and authority to vote cumulatively and to
allocate votes among any and all nominees as they may determine or, if authority
to vote for a specified candidate or candidates has been withheld, among those
candidates for whom authority to vote has not been withheld. If an executed
proxy is submitted without any instruction for the voting of such proxy, the
proxy will be voted in favor of the proposals described, but votes may be
cumulated for less than all of the nominees for director.
All valid proxies received before the meeting will be exercised. A
shareholder giving a proxy has the power to revoke his or her proxy at any time
before the time it is exercised by delivering to the Secretary of the Company a
written instrument revoking the proxy or a duly executed proxy with a later
date, or by attending the Annual Meeting and voting in person.
1
<PAGE> 6
INFORMATION ABOUT ABAXIS
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of August 31, 1998, certain information
with respect to the beneficial ownership of Common Stock by (i) all persons
known by the Company to be the beneficial owners of more than 5% of the
outstanding Common Stock, (ii) each director and director-nominee of the
Company, (iii) the persons named in the Summary Compensation Table, and (iv) all
executive officers and directors of the Company as a group.
<TABLE>
<CAPTION>
PERCENT OF ABAXIS
NUMBER OF COMMON STOCK
NAME OF BENEFICIAL OWNER(1) SHARES OUTSTANDING(2)
- --------------------------------------------------------------------------- --------- -----------------
<S> <C> <C>
Clinton H. Severson(3)................................................... 235,833 1.68%
Vladimir E. Ostoich, Ph.D.(4)............................................ 225,286 1.61%
Daniel Wong, Ph.D.(5).................................................... 74,181 *
Ting W. Lu............................................................... 4,000 *
Ernest S. Tucker, III, M.D.(6)........................................... 40,900 *
Prithipal Singh, Ph.D.(7)................................................ 33,477 *
Richard Bastiani, Ph.D.(8)............................................... 17,897 *
Lawrence Reynolds(9)..................................................... 16,667 *
Brenton G. A. Hanlon(10)................................................. 13,667 *
Robert Milder............................................................ 24,200 *
All current executive officers and directors as a group (13 persons)(11). 726,133 5.07%
</TABLE>
- ------------
* Less than 1%
(1) Except as indicated in the footnotes to this table, to the Company's
knowledge, the persons named in the table above have sole voting and
investment power with respect to all shares of Common Stock shown as
beneficially owned by them, subject to community property laws where
applicable. Unless otherwise indicated, the business address of each of the
beneficial owners listed above is Abaxis, Inc., 1320 Chesapeake Terrace,
Sunnyvale, CA 94089.
(2) The percentages shown in this column are calculated based on 13,882,980
shares of Common Stock actually outstanding as of August 31, 1998 in
addition to options held by the beneficial owner that will be exercisable
within 60 days of August 31, 1998 which are deemed outstanding in
accordance with the rules of the Securities and Exchange Commission (the
"SEC").
(3) Includes 183,333 shares subject to options exercisable by Mr. Severson
within sixty days of August 31, 1998.
(4) Includes an aggregate of 29,500 shares held by Dr. Ostoich's IRA, 27,500
shares held by Mrs. Ostoich's IRA and 74,328 shares held of record by the
Vladimir Ostoich and Liliana Ostoich Trust Fund, for the benefit of Dr.
Ostoich and his wife. Also includes 93,958 shares subject to stock options
exercisable by Dr. Ostoich within sixty days of August 31, 1998. Does not
include shares that are held by his adult children as to which Dr. Ostoich
disclaims beneficial ownership.
(5) Includes 1,000 shares of stock held by Dr. Wong's spouse, as to which Dr.
Wong disclaims beneficial ownership. Also includes 73,181 shares subject to
options exercisable by Dr. Wong within sixty days of August 31, 1998.
(6) Includes 34,355 shares subject to options exercisable by Dr. Tucker within
sixty days of August 31, 1998.
2
<PAGE> 7
(7) Includes 23,477 shares subject to options exercisable by Dr. Singh within
sixty days of August 31, 1998.
(8) Includes 15,897 shares subject to options exercisable by Dr. Bastiani
within sixty days of August 31, 1998.
(9) Includes 16,667 shares subject to options exercisable by Mr. Reynolds
within sixty days of August 31, 1998.
(10) Includes 13,667 shares subject to options exercisable by Mr. Hanlon within
sixty days of August 31, 1998.
(11) See Notes 3 through 11 above. Includes 469,560 shares subject to options
exercisable within sixty days of August 31, 1998.
3
<PAGE> 8
DIRECTOR NOMINEES
The section sets forth the ages and backgrounds of the individuals
nominated to be elected to serve as directors of the Company at the Annual
Meeting.
<TABLE>
<CAPTION>
DIRECTOR
NAME POSITION WITH THE COMPANY AGE SINCE
- -------------------------------------- --------------------------------------- --- --------
<S> <C> <C> <C>
Clinton H. Severson................... Chairman of the Board of Directors, 50 1996
President, Chief Executive Officer and
Director
Richard Bastiani, Ph.D.(1)............ Director 55 1995
Brenton G. A. Hanlon(1)............... Director 52 1996
Prithipal Singh, Ph.D.(2)............. Director 59 1992
Ernest S. Tucker, III, M.D.(2)....... Director 65 1995
</TABLE>
- ------------
(1) Member of the Compensation Committee
(2) Member of the Audit Committee
There are no family relationships among any directors or executive officers
of the Company.
Mr. Severson has served as President, Chief Executive Officer and Director
of the Company since June 1996. He was appointed Chairman of the Board in May
1998. From February 1989 to May 1996, Mr. Severson served as President and Chief
Executive Officer of MAST Immunosystems, Inc., a medical diagnostic company.
From March 1984 to February 1989, Mr. Severson was employed by 3M Diagnostic
Systems, an in-vitro allergy test system manufacturer, last serving as General
Manager. From 1978 to 1984, Mr. Severson was employed by Syva Corporation, a
medical diagnostic testing company ("Syva"), in various sales and marketing
management positions.
Dr. Bastiani joined the Company's Board of Directors in September 1995.
Since September 1995, Dr. Bastiani has been President of Dendreon, a
biotechnology company. Dr. Bastiani served as President of Syva from January
1991 until June 1995. From 1971 to January 1991, Dr. Bastiani held various
positions with Syva including Vice President of Marketing and Sales from 1984
until January 1991.
Mr. Hanlon joined the Company's Board of Directors in November 1996. Mr.
Hanlon serves as the President and Chief Operating Officer of Tri-Continent
Scientific, a subsidiary of Hitachi Chemical, and a manufacturer of
instrumentation for diagnostic applications. Mr. Hanlon served as Vice President
and General Manager of Tri-Continent Scientific from 1989 to 1996. From 1984 to
1989, Mr. Hanlon was President of Corus Medical, a medical products company.
From 1980 to 1984 he held various marketing positions with Syva Corporation.
Dr. Prithipal Singh joined the Company's Board of Directors in June 1992.
Dr. Singh is a founder of ChemTrak, Inc., a manufacturer of medical diagnostic
equipment, and served in various executive capacities with ChemTrak from August
1988 until March 1998. From 1985 to 1988, Dr. Singh served as a Senior Vice
President of Idetek, Inc., an animal health care company. From 1970 to 1985, Dr.
Singh held a number of positions with Syva.
Dr. Tucker joined the Company's Board of Directors in September 1995. Dr.
Tucker has served as Corporate Compliance Officer at Scripps Health since April
1998. From July 1992 to March 1998 Dr. Tucker served as Chairman of Pathology at
Scripps Clinic and Research Foundation since 1992. From 1989 to
4
<PAGE> 9
1992, Dr. Tucker was Chairman of Pathology at California Pacific Medical Center.
From 1977 to 1988, Dr. Tucker served as the Director of Immunology Reference Lab
of the Research Institute of Scripps Clinic.
Meetings of the Board of Directors. During the fiscal year ended March 31,
1998, the Board of Directors of the Company held eight meetings, the Audit
Committee of the Board of Directors held one meeting and the Compensation
Committee of the Board of Directors held one meeting. No director attended fewer
than 75% of the total number of meetings of the Board of Directors and meetings
of the Committees of the Board of Directors on which such director served during
fiscal 1998.
Audit Committee. The members of the Audit Committee during fiscal 1998 were
Dr. Tucker and Mr. Hanlon until September 9, 1997, when Dr. Singh replaced Mr.
Hanlon. The functions of the Audit Committee include making recommendations to
the Board of Directors regarding the retention of independent public
accountants, reviewing and approving the planned scope of the annual audit,
proposed fee arrangements and the results of the annual audit, reviewing the
adequacy of accounting and financial controls and reviewing the independence of
the Company's independent public accountants.
Compensation Committee; Interlocks and Insider Participation. The members
of the Company's Compensation Committee during fiscal 1998 were Dr. Singh and
Dr. Bastiani until September 9, 1997, when Mr. Hanlon replaced Dr. Singh. The
Compensation Committee reviews and determines compensation criteria for
executive officers. No interlocking relationship exists between the Company's
Board of Directors or Compensation Committee and the board of directors or
compensation committee of any other company. For additional information about
the Compensation Committee, see "EXECUTIVE COMPENSATION AND OTHER MATTERS" and
"REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION" below.
5
<PAGE> 10
EXECUTIVE COMPENSATION AND OTHER MATTERS
EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation
during the fiscal years ended March 31, 1998, March 31, 1997 and March 31, 1996
of the Chief Executive Officer of the Company during fiscal 1998 and the four
other most highly compensated executive officers of the Company whose total
salary and bonus for fiscal 1998 exceeded $100,000, for services in all
capacities to the Company, during fiscal 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
NAME AND PRINCIPAL POSITION FISCAL YEAR ANNUAL COMPENSATION ($) AWARDS
- ---------------------------------------- ----------- ---------------------- ----------------
OPTIONS
SALARY BONUS(1) (SHARES)
---------- -------- ----------------
<S> <C> <C> <C> <C>
Clinton H. Severson..................... 1998 $193,254 $73,950 50,000
Chairman of the Board of Directors, 1997 146,535 -0- 250,000
President and Chief Executive Officer 1996 -- -- --
Ting W. Lu(2)........................... 1998 116,283 60,550 -0-
Former Vice President of Finance and 1997 120,104 21,700 25,000
Administration, Chief Financial 1996 116,738 -0- 15,000
Officer and Secretary
Vladimir E. Ostoich..................... 1998 139,173 60,550 -0-
Vice President, Engineering 1997 145,287 21,700 25,000
1996 142,248 -0- 15,000
Larry Reynolds.......................... 1998 86,798 57,980 40,000
Vice President, International Sales 1997 -- -- --
and Marketing 1996 -- -- --
Daniel Wong............................. 1998 129,808 60,505 -0-
Vice President of Development 1997 135,296 22,825 25,000
1996 129,815 -0- 15,000
</TABLE>
- ------------
(1) Bonuses were based on Company performance. See "REPORT OF THE COMPENSATION
COMMITTEE ON EXECUTIVE COMPENSATION".
(2) Ting W. Lu resigned as an officer of the Company in May 1998.
6
<PAGE> 11
STOCK OPTIONS GRANTED IN FISCAL 1998
The following table provides the specified information concerning grants of
options to purchase Common Stock made during the fiscal year ended March 31,
1998 to the persons named in the Summary Compensation Table.
OPTION GRANTS IN FISCAL 1998
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
PERCENT OF POTENTIAL REALIZABLE
TOTAL OPTIONS VALUE AT ASSUMED
OPTIONS GRANTED TO EXERCISE ANNUAL RATES OF STOCK
GRANTED EMPLOYEES IN PRICE EXPIRATION PRICE APPRECIATION FOR
NAME (#)(1) FISCAL YEAR ($/SH)(2) DATE OPTION TERM(3)
- ---------------------------- ------- ------------- --------- ---------- ----------------------
5%($) 10%($)
--------- --------
<S> <C> <C> <C> <C> <C> <C>
Clinton H. Severson......... 50,000 15.48 $3.13 4/22/07 $98,265 $249,022
Larry Reynolds.............. 40,000 12.38 3.13 4/22/07 78,612 199,218
</TABLE>
- ------------
(1) All options granted in fiscal 1998 were granted pursuant to the Company's
1989 Stock Option Plan (the "1989 Plan"). These options vest and become
exercisable at the rate of one-fourth on the first anniversary of the date
of grant and 1/48 per month thereafter for each full month of the
optionee's continuous employment by the Company. Under the 1989 Plan, the
Board retains discretion to modify the terms, including the price, of
outstanding options. For additional information regarding options, see
"Employment Contracts and Termination of Employment and Change-in-Control
Arrangements."
(2) All options in this table have exercise prices equal to the fair market
value on the date of grant.
(3) Potential gains are net of exercise price, but before taxes associated with
exercise. These amounts represent certain assumed rates of appreciation
only, based on the Securities and Exchange Commission rules. Actual gains,
if any, on stock option exercises are dependent on the future performance
of the Common Stock, overall market conditions and the option holder's
continued employment through the vesting period. The amounts reflected in
this table may not necessarily be achieved.
7
<PAGE> 12
OPTION EXERCISES AND FISCAL 1998 YEAR-END VALUES
The following table provides the specified information concerning exercises
of options to purchase Common Stock in the fiscal year ended March 31, 1998, and
unexercised options held as of March 31, 1998, by the persons named in the
Summary Compensation Table.
OPTION EXERCISES AND FISCAL 1998 YEAR-END VALUES
<TABLE>
<CAPTION>
VALUE NUMBER OF UNEXERCISED
SHARES REALIZED OPTIONS VALUE OF UNEXERCISED IN-THE-
ACQUIRED AT 3/31/98 MONEY OPTIONS AT 3/31/98 ($)(2)
ON ------------------------------- -------------------------------
SHARES EXERCISE ($) EXERCISABLE(1) UNEXERCISABLE EXERCISABLE(1) UNEXERCISABLE
- -------------- -------- -------- -------------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Clinton H.
Severson...... -0- -0- 128,125 171,875 $ -0- $ -0-
Ting W. Lu.... -0- -0- 65,350 15,900 -0- -0-
Vladimir E.
Ostoich....... -0- -0- 90,092 15,533 22,140 -0-
Larry
Reynolds...... -0- -0- 10,833 29,167 -0- -0-
Daniel Wong -0- -0- 69,178 15,822 -0- -0-
</TABLE>
- ------------
(1) Company stock options generally vest one-fourth on the first anniversary of
the date of grant and 1/48 per month thereafter for each full month of the
optionee's continuous employment by the Company. All options are
exercisable only to the extent vested.
(2) The value of the unexercised in-the-money options is based on the closing
price of the Common Stock ($1.938 per share as reported on the Nasdaq
National Market on March 31, 1998) and is net of the exercise price of such
options.
COMPENSATION OF DIRECTORS
All non-employee directors of the Company receive compensation in the
amount of $750 per meeting of the Board of Directors they attend plus
reimbursement of reasonable travel expenses incurred. In addition, Dr. Tucker
serves as a consultant to the Company and receives monthly compensation of
$1,000 plus reimbursement of expenses for attending meetings at or on behalf of
the Company. Each of the Company's non-employee directors also receives an
automatic annual grant of options to purchase 4,000 shares of Common Stock under
the Company's Outside Directors Stock Option Plan. In addition, Dr. Tucker
receives an additional annual grant of options to purchase 5,000 shares for
serving as a consultant. Clinton H. Severson, a director of the Company who is
also an employee of the Company, does not receive any compensation for his
services as a member of the Board of Directors of the Company.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
In March 1997, the Company entered into an employment agreement with
Clinton H. Severson, pursuant to which Mr. Severson is entitled to six months of
continued salary and benefits if his employment with the Company is terminated
without cause. In April 1998, the Company entered into an amendment to Mr.
Severson's employment agreement which provides (i) severance payments consisting
of salary and benefits for one year in the event of termination of employment
without cause and (ii) severance payments consisting of salary and benefits for
two years in the event of termination of employment following a change of
control transaction.
8
<PAGE> 13
The 1989 Plan and the Outside Directors Stock Option Plan (the "Option
Plans") provide that, in the event of a transfer of control of the Company
("Transfer of Control"), the surviving, continuing, successor or purchasing
corporation or a parent corporation thereof, as the case may be (the "Acquiring
Corporation"), shall either assume the Company's rights and obligations under
stock option agreements outstanding under the Option Plans (the "Options") or
substitute options for the Acquiring Corporation's stock for such Options. In
the event the Acquiring Corporation elects not to assume or substitute for such
outstanding Options in connection with a merger constituting a Transfer of
Control, the Company's Board of Directors shall provide that any unexercisable
and/or unvested portion of the Options shall be immediately exercisable and
vested as of a date prior to the Transfer of Control, as the Company's Board of
Directors so determines. Any Options which are neither assumed by the Acquiring
Corporation, nor exercised as of the date of the Transfer of Control, shall
terminate effective as of the date of the Transfer of Control. Options which are
assumed by the Acquiring Corporation shall become exercisable and vested as
provided under the relevant stock option agreements under the Option Plans. If
the option holder's service is terminated after the Transfer of Control by the
Company (other than for cause) or the option holder resigns for "good reason"
following the Transfer of Control, the holder's Options shall become immediately
exercisable and vested as of the date of termination.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's executive officers, directors and persons who beneficially own
more than 10% of the Common Stock to file initial reports of ownership and
reports of changes in ownership with the "SEC". Such persons are required by SEC
regulations to furnish the Company with copies of all Section 16(a) forms filed
by such persons.
Based solely on the Company's review of such forms furnished to the Company
and written representations from certain reporting persons, the Company believes
that all filing requirements applicable to the Company's executive officers,
directors and persons who beneficially own more than 10% of the Common Stock
were complied with during the fiscal year ended March 31, 1998, with the
following exceptions: Ernest S. Tucker III, M.D., a director of the Company,
filed an Amended Form 3 in December 1997, reporting a transaction which should
have been reported in September 1995. Dr. Tucker also filed a late Form 4 in
December 1997, reporting a transaction which should have been reported in
October 1997. Richard Bastiani, Ph.D., a director of the Company, filed an
Amended Form 3 in December 1997, reporting a transaction which should have been
reported in September 1995. Dr. Bastiani also filed a late Form 4 in December
1997, reporting a transaction which should have been reported in October 1997.
Prithipal Singh, Ph.D., a director of the Company, filed a late Form 4 in
December 1997, reporting a transaction which should have been reported in
October 1997.
CHANGES TO BENEFIT PLANS
Option Plan. The Company has proposed the approval of an amendment and
restatement of the Company's 1989 Stock Option Plan as the 1998 Stock Option
Plan, to increase the maximum aggregate number of shares of Common Stock
issuable thereunder by 1,000,000 shares from 1,886,000 shares to 2,886,000
shares and to revise certain other provisions as described below under the
caption, "APPROVAL OF AMENDMENT AND RESTATEMENT OF 1989 STOCK OPTION PLAN."
9
<PAGE> 14
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors is comprised of Dr.
Richard Bastiani and Brenton G.A. Hanlon. Dr. Prithipal Singh served as a member
of the Compensation Committee until Mr. Hanlon became a member on September 9,
1998. Each of these individuals is a non-employee member of the Company's Board
of Directors. The Compensation Committee is responsible for approving all
compensation recommended by the President for the Company's executive officers
and provides recommendations to the Board of Directors for approval of all
compensation for the President and Chief Executive Officer of the Company. The
goal of the Company's compensation policy for the executive officers is to
attract, retain and reward executive officers who contribute to the Company's
success and to motivate these executives to achieve the Company's business
objectives. The Company uses salary, stock option grants and bonus compensation
to meet these goals.
Compensation Policies. Salaries initially are set for each executive
officer according to a range of salaries for similar positions in comparable
companies in the Company's industry and geographic area, as reported in
compensation survey information obtained by the Company from Radford &
Associates, a compensation consulting firm. Salaries are generally set near the
median of the applicable range for each position, and adjusted for historical
and expected contributions of each officer to the Company. Salaries are reviewed
annually based on individual past performance, financial results of the Company
and survey information from compensation consulting firms. Adjustments are made
if necessary to maintain competitiveness within the industry. In April 1998,
during the company-wide annual salary review, the salaries of the executives of
the Company were determined to be within the proper ranges and hence no salary
adjustments were made.
Compensation Components. The Compensation Committee strongly believes that
executive compensation should be based in part on the Company's performance and
has used stock option grants and bonus compensation to accomplish this goal. In
April 1997, the Compensation Committee approved an executive bonus plan with
target bonus levels set at 20% to 60% of annual salaries for accomplishing
certain Company objectives in fiscal 1998. The Company paid approximately 47% of
these targeted bonuses with quarterly payments made in April, July and October
1997 and January 1998. In April 1998, the Compensation Committee approved an
executive bonus plan with target bonus levels set at 20% to 60% of annual
salaries for accomplishing certain Company objectives associated with financial
performance in fiscal 1999. At the same time, the Board of Directors approved a
bonus plan for the Company's President and Chief Executive Officer of 40% of his
annual salary for accomplishing certain Company objectives associated with
financial performance in fiscal 1999.
The Company strongly believes that equity ownership by executive officers
provides incentives to build shareholder value and aligns the interests of
executive officers with those of the shareholders. The size of an initial option
grant to an executive officer generally has been determined with reference to
comparable companies in the Company's industry and geographical area, the
responsibilities and future contributions of the executive officer, as well as
recruitment and retention considerations. Additional option grants to an
executive officer are generally based on Company performance and individual
performance. In fiscal 1998, the Compensation Committee approved stock option
grants to certain of the executive officers. See "OPTION GRANTS IN FISCAL 1998."
Chief Executive Officer Compensation. The Compensation Committee annually
reviews the performance and compensation of Clinton H. Severson, the President
and Chief Executive Officer of the Company. During fiscal 1998, Mr. Severson's
compensation consisted of salary, an incentive stock option grant and
performance-based bonus compensation. During the annual review, the Compensation
Committee found Mr. Severson's salary to be appropriate as compared with
comparable companies within the Company's industry and geographic area, based on
the compensation survey information obtained by the Company from Radford &
Associates. During fiscal 1998, Mr. Severson's compensation consisted of a base
salary of $193,254, bonus compensation of $73,950 and the grant of an option to
purchase 50,000 shares of Common Stock.
In April 1998, Mr. Severson's employment agreement with the Company was
amended to provide (i) severance payments consisting of salary and benefits for
one year in the event of termination of employment without cause and (ii)
severance payments consisting of salary and benefits for two years in the event
of termination
10
<PAGE> 15
of employment following a change of control transaction. Such agreement was
entered into following arms-length negotiations and approval by the Board of
Directors.
Deductibility of Executive Compensation. The Company has considered the
provisions of Section 162(m) of the Internal Revenue Code and related Treasury
Department regulations which restrict deductibility of executive compensation
paid to the Company's Chief Executive Officer and each of the four other most
highly compensated executive officers holding office at the end of any year to
the extent such compensation exceeds $1,000,000 for any of such officers in any
year and does not qualify for an exception under the statute or regulations.
Income from options granted under the 1989 Plan should qualify for an exemption
from these restrictions. The Compensation Committee does not believe that in
general other components of the Company's compensation will be likely to exceed
$1,000,000 for any executive officer in the foreseeable future and therefore
concluded that no further action with respect to qualifying such compensation
for deductibility was necessary at this time. In the future, the Compensation
Committee will continue to evaluate the advisability of qualifying its executive
compensation for deductibility under applicable tax laws as applicable.
COMPENSATION COMMITTEE
Richard Bastiani, Ph.D.
Brenton G. A. Hanlon
<PAGE> 16
COMPARISON OF SHAREHOLDER RETURN
Set forth below is a line graph comparing the annual percentage change
in the cumulative total return on the Common Stock with the cumulative total
return of the Russell 2000 Index ("Russell 2000") and the Hambrecht & Quist
Health Care (Excluding Biotech) Index ("H&Q Index") for the period commencing on
March 31, 1993 and ending on March 31, 1998.(1)
COMPARISON OF CUMULATIVE TOTAL RETURN FROM
MARCH 31, 1993 THROUGH MARCH 31, 1998:(2)
[OBJECT OMITTED]
<TABLE>
<CAPTION>
- ------------------------------------ ---------- ----------- ----------- ---------- ---------- ---------
3/31/93 3/31/94 3/31/95 3/31/96 3/31/97 3/31/98
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------ ---------- ----------- ----------- ---------- ---------- ---------
Abaxis 100 148 107 112 62 38
- ------------------------------------ ---------- ----------- ----------- ---------- ---------- ---------
Russell 2000 100 110 114 144 149 210
- ------------------------------------ ---------- ----------- ----------- ---------- ---------- ---------
H&Q Index 100 94 121 187 181 251
- ------------------------------------ ---------- ----------- ----------- ---------- ---------- ---------
</TABLE>
(1) The Company's 1998 fiscal year ended on March 31, 1998.
(2) Assumes that $100.00 was invested on March 31, 1993 in the Common Stock, at
the closing sales price, and in each index and that all dividends were
reinvested. No cash dividends have been declared on the Common Stock.
Shareholder returns over the indicated period should not be considered
indicative of future shareholder returns.
12
<PAGE> 17
PROPOSAL NUMBER ONE
ELECTION OF DIRECTORS
The charter documents of the Company authorize a Board of Directors
consisting of six (6) directors. Five (5) directors of the Company are to be
elected for the ensuing year and until their successors are elected and
qualified. Proxies cannot be voted for a greater number of persons than the
number of nominees named. Please see "INFORMATION ABOUT ABAXIS--Director
Nominees" above for information concerning the nominees. Following the Annual
Meeting, there will be one vacancy on the Board of Directors.
If elected, each nominee will hold office until the next annual meeting of
shareholders or until his successor is elected and qualified unless he shall
resign or his office becomes vacant by death, removal, or other cause in
accordance with the Bylaws of the Company.
The persons named in the accompanying form of proxy will vote the shares
represented thereby for the following nominees, but may cumulate the votes for
less than all of the nominees, as permitted by the laws of the State of
California, unless otherwise instructed. Management knows of no reason why any
of these nominees should be unable or unwilling to serve. However, if any
nominee(s) should for any reason be unable or unwilling to serve, the proxies
will be voted for the election of such other person(s) for the office of
director as the Board of Directors may recommend in the place of such
nominee(s).
The nominees for election to the Board of Directors at the Annual Meeting
are Clinton H. Severson, Richard Bastiani, Ph.D., Brenton G.A. Hanlon, Prithipal
Singh, Ph.D. and Ernest S. Tucker, III, M.D. If elected, the nominees will serve
as directors until the Company's Annual Meeting of Shareholders in 1999, and
until their successors are elected and qualified. If a quorum is present and
voting, the five (5) nominees receiving the highest number of votes will be
elected. Abstentions will have no effect on the vote. If the nominees decline to
serve or become unavailable for any reason, or if a vacancy occurs before the
election (although management knows of no reason to anticipate that this will
occur), the proxies may be voted for substitute nominees as the Board of
Directors may designate. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE
"FOR" THE NOMINEES NAMED ABOVE.
PROPOSAL NUMBER TWO
APPROVAL OF AMENDMENT AND RESTATEMENT OF 1989 STOCK OPTION PLAN
The Company's 1989 Stock Option Plan (the "1989 Plan") was adopted by the
Board of Directors in May 1989 and was approved by the shareholders of the
Company in 1990. The Board of Directors and shareholders have approved from time
to time increases in the number of shares issuable under the 1989 Plan, which
currently is 1,886,000 shares. As of August 31, 1998, 305,434 shares remained
available for future option grants under the 1989 Plan. On July 21, 1998, the
Board of Directors amended the 1989 Plan, subject to shareholder approval, to
increase by 1,000,000 shares to 2,886,000 the maximum aggregate number of shares
of Common Stock issuable under the plan. In addition, the Board of Directors
approved the amendment and restatement of the 1989 Plan as the 1998 Stock Option
Plan (the "Option Plan"), subject to shareholder approval.
The shareholders are now being asked to approve the amendment and
restatement of the 1989 Plan in the form of the Option Plan described below,
including an increase from 1,886,000 to 2,886,000 in the maximum aggregate
number of shares of Common Stock issuable under the plan and an extension of the
term of the plan. The Board of Directors believes that the availability of an
adequate stock option program is an important factor in attracting and retaining
qualified officers, employees, directors and consultants essential to the
success of the Company and in aligning their long-term interests with those of
the shareholders.
SUMMARY OF THE OPTION PLAN
The following summary of the Option Plan is qualified in its entirety by
the specific language of the Option Plan, a copy of which is available to any
shareholder upon request.
13
<PAGE> 18
General. The purpose of the Option Plan is to advance the interests of the
Company and its shareholders by providing an incentive to attract, retain and
reward the Company's employees, directors and consultants and by motivating such
persons to contribute to the Company's growth and profitability. The Option Plan
provides for the grant to employees of incentive stock options within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code") and the grant to employees, directors and consultants of nonstatutory
stock options.
Shares Subject to Plan. The shareholders have previously authorized the
reservation of an aggregate of 1,886,000 shares of the Company's authorized but
unissued shares of Common Stock for issuance upon the exercise of options
granted under the 1989 Plan. On July 21, 1998, the Board of Directors amended
the 1989 Plan to increase this share reserve by 1,000,000 shares to an aggregate
of 2,886,000 shares. As restated, the Option Plan permits the issuance of
reacquired shares as well as previously unissued shares. The Option Plan imposes
a grant limit under which no person may receive in any fiscal year options to
purchase in excess of 50,000 shares (the "Grant Limit"); provided, however, that
the Grant Limit is 250,000 shares with respect to options granted to a person
during his first year of employment. Appropriate adjustments will be made to the
shares subject to the Option Plan, to the Grant Limit, and to outstanding
options upon any stock dividend, stock split, reverse stock split,
recapitalization, combination, reclassification, or similar change in the
capital structure of the Company. To the extent that any outstanding option
under the Option Plan expires or terminates prior to exercise in full or if
shares issued upon exercise of an option are repurchased by the Company, the
shares of Common Stock for which such option is not exercised or the repurchased
shares are returned to the Option Plan and become available for future grant.
Administration. The Option Plan will be administered by the Board of
Directors or a duly appointed committee of the Board, which, in the case of
options intended to qualify for the performance-based compensation exemption
under Section 162(m) of the Code, must be comprised solely of two or more
"outside directors" within the meaning of Section 162(m) (hereinafter referred
to collectively as the "Board"). Subject to the provisions of the Option Plan,
the Board determines the persons to whom options are to be granted, the number
of shares to be covered by each option, whether an option is to be an incentive
stock option or a nonstatutory stock option, the timing and terms of
exercisability and vesting of each option, the purchase price and the type of
consideration to be paid to the Company upon the exercise of each option, the
time of expiration of each option, and all other terms and conditions of the
options. The Board may amend, modify, extend, cancel, renew, or grant a new
option in substitution for, any option, waive any restrictions or conditions
applicable to any option, and accelerate, continue, extend or defer the
exercisability or vesting of any option, including with respect to the period
following an optionee's termination of service with the Company. As restated,
the Option Plan provides, subject to certain limitations, for indemnification by
the Company of any director, officer or employee against all reasonable
expenses, including attorneys' fees, incurred in connection with any legal
action arising from such person's action or failure to act in administering the
plan. The Board will interpret the Option Plan and options granted thereunder,
and all determinations of the Board will be final and binding on all persons
having an interest in the Option Plan or any option.
Eligibility. Options may be granted under the 1989 Plan to employees and
consultants of the Company or of any present or future parent or subsidiary
corporations of the Company. However, the 1989 Plan provides that nonemployee
directors may not be granted options thereunder. As restated, the Option Plan
permits options to be granted to nonemployee directors as well as to prospective
employees and consultants in connection with written offers of employment or
engagement, provided that such options may not become exercisable prior to the
individual's commencement of service. While any person eligible under the Option
Plan may be granted a nonstatutory option, only employees may be granted
incentive stock options. As of August 31, 1998, the Company had approximately 94
employees, including 7 executive officers, 4 directors and 2 consultants who
would be eligible to receive a grant under the Option Plan.
Terms and Conditions of Options. Each option granted under the Option Plan
is evidenced by a written agreement between the Company and the optionee
specifying the number of shares subject to the option and the other terms and
conditions of the option, consistent with the requirements of the plan. The
exercise price of each incentive stock option may not be less than the fair
market value of a share of the Common Stock on the date of grant and the
exercise price of a nonstatutory stock option may not be less than 85% of such
fair market value.
14
<PAGE> 19
While the 1989 Plan provides that any option granted to a person who at the time
of grant owns stock possessing more than 10% of the total combined voting power
(or combined value) of all classes of stock of the Company or any parent or
subsidiary corporation of the Company (a "Ten Percent Shareholder") must have an
exercise price equal to at least 110% of the fair market value of a share of
Common Stock on the date of grant, the restated Option Plan imposes this
requirement only on the grant of incentive stock options and provides that a Ten
Percent Shareholder will be determined based solely on the percentage of
combined voting power, as required under Section 422 of the Code. As of August
31, 1998, the closing price of the Company's Common Stock, as reported on the
Nasdaq National Market, was $2.3125 per share.
Under the 1989 Plan, the option exercise price may be paid in cash, by
check, or in cash equivalent, by tender of shares of Common Stock owned by the
optionee having a fair market value not less than the exercise price, by the
assignment of the proceeds of a sale with respect to some or all of the shares
of Common Stock being acquired upon the exercise of the option, or by any
combination of these. As restated, the Option Plan permits, in addition to the
foregoing, payment by means of an assignment of the proceeds of a loan with
respect to some or all of the shares acquired upon the exercise of the option,
payment with a promissory note, and payment of the exercise price with any other
lawful consideration approved by the Board. Nevertheless, the Board may restrict
the forms of payment permitted in connection with any option grant. No option
may be exercised until the optionee has made adequate provision for federal,
state, local and foreign taxes, if any, relating to the exercise of the option.
Options will become vested and exercisable at such times or upon such
events and subject to such terms, conditions, performance criteria or
restrictions as specified by the Board. Generally, options granted under the
Option Plan become exercisable in installments over a period of time specified
by the Board at the time of grant, subject to the optionee's continued service
with the Company. Currently, the maximum term of an option granted under the
1989 Plan is ten years, provided that any option granted to a Ten Percent
Shareholder may not have a term longer than five years. As restated, the Option
Plan provides that the maximum term of an incentive stock option is ten years
unless granted to a Ten Percent Shareholder, in which case the maximum term is
five years. Consistent with the Code, the restated Option Plan does not limit
the term of a nonstatutory stock option. An option generally will remain
exercisable for three months following the optionee's termination of service,
provided that if termination results from the optionee's death or disability,
the option generally will remain exercisable for 12 months following the
optionee's termination of service. In any event the option must be exercised no
later than its expiration date. The Board, in its discretion, may provide for
longer or shorter post-service exercise periods in particular instances.
Options are nontransferable by the optionee other than by will or by the
laws of descent and distribution, and are exercisable during the optionee's
lifetime only by the optionee. However, under the restated Option Plan, a
nonstatutory stock option may be assignable or transferable to the extent
permitted by the Board and set forth in the option agreement.
Change in Control. The Option Plan provides that in the event of a "Change
in Control" (as defined below), the surviving, continuing, successor or
purchasing corporation or parent corporation thereof (the "Acquiring
Corporation") may either assume the Company's rights and obligations under the
outstanding options or substitute substantially equivalent options for such
corporation's stock. If the Acquiring Corporation elects not to assume or
substitute for options outstanding under the Option Plan, any unvested or
unexercisable portion of the outstanding options will become immediately
exercisable and vested in full prior to such Change in Control. To the extent
that the outstanding options are not assumed, replaced or exercised prior to the
Change in Control, they will terminate. In addition, if the Acquiring
Corporation assumes or substitutes for outstanding options, an option will
become fully exercisable and vested if the optionee's service is terminated
after the Change in Control by the Company (other than for cause) or the
optionee resigns for "good reason" following the Change in Control.
For purposes of the Option Plan, a "Change in Control" means (i) a sale or
exchange by the shareholders in a single or series of related transactions of
more than 50% of the Company's voting stock, (ii) a merger or consolidation in
which the Company is a party, (iii) the sale, exchange or transfer of all or
substantially all of the assets of the Company, or (iv) a liquidation or
dissolution of the Company wherein, upon any such event, the shareholders of the
Company immediately before such event do not retain immediately after such event
direct or
15
<PAGE> 20
indirect beneficial ownership of more than 50% of the total combined voting
power of the voting stock of the Company, its successor, or the corporation to
which the assets of the Company were transferred.
Termination or Amendment. No options may be granted under the 1989 Plan
after May, 1999. As restated, subject to shareholder approval, the Option Plan
would continue in effect until the earlier of its termination by the Board or
the date on which all shares available for issuance under the Option Plan have
been issued and all restrictions on such shares under the terms of the Plan and
the option agreements have lapsed, provided that all incentive stock options
must be granted within ten years of July 21, 1998, the date on which the Board
approved the restatement of the Option Plan. The Board may terminate or amend
the Option Plan at any time. However, without shareholder approval, the Board
may not amend the Option Plan to increase the total number of shares of Common
Stock issuable thereunder, change the class of persons eligible to receive
incentive stock options, or effect any other change that would require
shareholder approval under any applicable law, regulation or rule. No
termination or amendment may adversely affect an outstanding option without the
consent of the optionee, unless the amendment is required to preserve an
option's status as an incentive stock option or is necessary to comply with any
applicable law, regulation or rule.
SUMMARY OF UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following summary is intended only as a general guide as to the United
States federal income tax consequences under current law of participation in the
Option Plan and does not attempt to describe all possible federal or other tax
consequences of such participation or tax consequences based on particular
circumstances.
Incentive Stock Options. An optionee recognizes no taxable income for
regular income tax purposes as the result of the grant or exercise of an
incentive stock option qualifying under Section 422 of the Code. Optionees who
do not dispose of their shares for two years following the date the option was
granted nor within one year following the exercise of the option will normally
recognize a long-term capital gain or loss equal to the difference, if any,
between the sale price and the purchase price of the shares. If an optionee
satisfies such holding periods upon a sale of the shares, the Company will not
be entitled to any deduction for federal income tax purposes. If an optionee
disposes of shares within two years after the date of grant or within one year
from the date of exercise (a "disqualifying disposition"), the difference
between the fair market value of the shares on the exercise date and the option
exercise price (not to exceed the gain realized on the sale if the disposition
is a transaction with respect to which a loss, if sustained, would be
recognized) will be taxed as ordinary income at the time of disposition. Any
gain in excess of that amount will be a capital gain. If a loss is recognized,
there will be no ordinary income, and such loss will be a capital loss. A
capital gain or loss will be long-term if the optionee's holding period is more
than 12 months. Any ordinary income recognized by the optionee upon the
disqualifying disposition of the shares generally should be deductible by the
Company for federal income tax purposes, except to the extent such deduction is
limited by applicable provisions of the Code or the regulations thereunder.
The difference between the option exercise price and the fair market value
of the shares on the exercise date of an incentive stock option is an adjustment
in computing the optionee's alternative minimum taxable income and may be
subject to an alternative minimum tax which is paid if such tax exceeds the
regular tax for the year. Special rules may apply with respect to certain
subsequent sales of the shares in a disqualifying disposition, certain basis
adjustments for purposes of computing the alternative minimum taxable income on
a subsequent sale of the shares and certain tax credits which may arise with
respect to optionees subject to the alternative minimum tax.
Nonstatutory Stock Options. Options not designated or qualifying as
incentive stock options will be nonstatutory stock options. Nonstatutory stock
options have no special tax status. An optionee generally recognizes no taxable
income as the result of the grant of such an option. Upon exercise of a
nonstatutory stock option, the optionee normally recognizes ordinary income in
the amount of the difference between the option exercise price and the fair
market value of the shares on the exercise date. If the optionee is an employee,
such ordinary income generally is subject to withholding of income and
employment taxes. Upon the sale of stock acquired by the exercise of a
nonstatutory stock option, any gain or loss, based on the difference between the
sale price and the fair market value on the exercise date, will be taxed as
capital gain or loss. A capital gain or loss will be long-term if the optionee's
holding period is more than 12 months. No tax deduction is available to the
Company with respect to the
16
<PAGE> 21
grant of a nonstatutory stock option or the sale of the stock acquired pursuant
to such grant. The Company generally should be entitled to a deduction equal to
the amount of ordinary income recognized by the optionee as a result of the
exercise of a nonstatutory stock option, except to the extent such deduction is
limited by applicable provisions of the Code or the regulations thereunder.
VOTE REQUIRED AND BOARD OF DIRECTORS RECOMMENDATION
The affirmative vote of a majority of the votes present or represented by
proxy and entitled to vote at the Annual Meeting of Shareholders, at which a
quorum representing a majority of all outstanding shares of Common Stock of the
Company is present, either in person or by proxy, is required for approval of
this proposal. Abstentions and broker non-votes will each be counted as present
for purposes of determining the presence of a quorum, but will have no effect on
the outcome of this vote.
The Board of Directors believes that the amendment and restatement of the
1989 Plan is in the best interests of the Company and the shareholders for the
reasons stated above. THEREFORE, THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A
VOTE "FOR" THE PROPOSAL TO AMEND AND RESTATE THE 1989 STOCK OPTION PLAN.
17
<PAGE> 22
NEW PLAN BENEFITS
As of August 31, 1998, no grant of options conditioned on shareholder
approval of an increase in the share reserve under the Option Plan had been made
to any employee. Currently, non-employee directors of the Company are not
eligible to participate in the Option Plan, although the Option Plan, as
amended, will allow non-employee directors to receive grants under the Option
Plan. The future grant of options under the Option Plan will be made at the
discretion of the Board, and, accordingly, are not yet determinable. In
addition, benefits under the Option Plan will depend on a number of factors,
including the fair market value of Common Stock on future dates and the exercise
decisions made by the optionees. Consequently, it is not possible to determine
the benefits that might be received by optionees receiving discretionary grants
under the Option Plan.
The following table sets forth grants of stock options under the 1989 Plan
during the fiscal year ended March 31, 1998, to (i) each person listed on the
Summary Compensation Table, (ii) all current executive officers as a group,
(iii) all current directors who are not executive officers as a group and (iv)
all employees, including all current officers, who are not executive officers as
a group.
NEW PLAN BENEFITS
<TABLE>
<CAPTION>
1989 PLAN
-----------------------------------
NAME AND POSITION EXERCISE PRICE NO. OF SHARES
- --------------------------------------------------------------------------- -------------- -------------
<S> <C> <C>
Clinton H. Severson...................................................... $3.125 50,000
Chairman of the Board of Directors, President and Chief Executive
Officer
Ting W. Lu(1)............................................................ -- -0-
Former Vice President of Finance and Administration, Chief Financial
Officer and Secretary
Vladimir E. Ostoich, Ph.D................................................ -- -0-
Vice President, Engineering
Lawrence Reynolds........................................................ 3.125 40,000
Vice President, International Sales and Marketing
Daniel Wong, Ph.D........................................................ -- -0-
Vice President of Development
Executive Group (5 persons).............................................. 3.125 90,000
Non-Executive Director Group (4 persons)................................. 3.4880 26,000
Non-Executive Officer Employee Group (56 persons)........................ 2.7088 207,000
</TABLE>
- ------------
(1) Ting W. Lu resigned as an officer of the Company in May 1998.
18
<PAGE> 23
PROPOSAL NUMBER THREE
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors of the Company has selected Deloitte & Touche LLP
("Deloitte & Touche") as independent public accountants to audit the financial
statements of the Company for the fiscal year ending March 31, 1999. A
representative of Deloitte & Touche is expected to be present at the Annual
Meeting with the opportunity to make a statement if the representative desires
to do so, and is expected to be available to respond to appropriate questions.
The affirmative vote of a majority of the votes cast at the Annual Meeting
at which a quorum representing a majority of all outstanding shares of Common
Stock is present and voting, either in person or by proxy, is required for
approval of this proposal. Votes against, abstentions and "broker non-votes"
will each be counted as present for purposes of determining the presence of a
quorum. Neither abstentions nor "broker non-votes" will be counted as having
been cast affirmatively or negatively on the proposal. THE BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE APPOINTMENT OF DELOITTE & TOUCHE AS THE
COMPANY'S INDEPENDENT PUBLIC ACCOUNTANTS FOR THE FISCAL YEAR ENDING MARCH 31,
1998.
SHAREHOLDER PROPOSALS TO BE PRESENTED AT NEXT ANNUAL MEETING
Proposals of shareholders intended to be presented at the next annual
meeting of the shareholders of the Company must be received by the Company at
its offices at 1320 Chesapeake Terrace, Sunnyvale, California 94089, no later
than May 23, 1999, and satisfy the conditions established by the SEC for
shareholder proposals to be included in the Company's proxy statement for that
meeting.
TRANSACTION OF OTHER BUSINESS
At the date of this Proxy Statement, the Board of Directors knows of no
other business that will be conducted at the Annual Meeting other than as
described in this Proxy Statement. If any other matter or matters are properly
brought before the Annual Meeting, or any adjournment or postponement thereof,
it is the intention of the persons named in the accompanying form of proxy to
vote the proxy on such matters in accordance with their best judgment.
By order of the Board of Directors
/s/ Donald J. Stewart
-----------------------------------
Donald J. Stewart, Secretary
19
<PAGE> 24
September 17, 1998
ABAXIS, INC. PROXY FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON
OCTOBER 26, 1998 SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints Clinton H. Severson and Donald J. Stewart,
and each of them, with full power of substitution, to represent the undersigned
and to vote all of the shares of stock in Abaxis, Inc., a California corporation
(the "Company"), which the undersigned is entitled to vote at the Annual Meeting
of Shareholders of the Company to be held on October 26, 1998 at 10:00 a.m.,
local time, at the offices of the Company, located at 1320 Chesapeake Terrace,
Sunnyvale, California, and at any adjournment or postponement thereof (i) as
hereinafter specified upon the proposals listed on the reverse side and as more
particularly described in the Proxy Statement of the Company dated September 17,
1998 (the "Proxy Statement"), receipt of which is hereby acknowledged, and (ii)
in their discretion upon such other matters as may properly come before the
meeting. The undersigned hereby acknowledges receipt of the Company's 1998
Annual Report to Shareholders.
THE SHARES REPRESENTED HEREBY SHALL BE VOTED AS SPECIFIED. IF NO SPECIFICATION
IS MADE, SUCH SHARES SHALL BE VOTED FOR PROPOSALS 1, 2 AND 3.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
1
<PAGE> 25
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, YOU ARE URGED
TO SIGN AND PROMPTLY MAIL THIS PROXY IN THE RETURN ENVELOPE SO THAT
YOUR SHARES MAY BE REPRESENTED AT THE MEETING.
[x] Please mark votes as in this example.
A vote FOR the following proposals is recommended by the Board of Directors:
1. To elect the following five (5) persons as directors to hold office for a
one-year term and until their respective successors are elected and
qualified:
NOMINEES: Clinton H. Severson, Richard Bastiani, Ph.D., Brenton G.A.
Hanlon, Prithipal Singh, Ph.D., Ernest S. Tucker, III, M.D.
FOR WITHHELD
[ ] [ ]
[ ]
-----------------------------------------
For all nominees except as noted above
2. To consider and vote upon a proposal to amend and restate the Abaxis, Inc.
1989 Stock Option Plan as the Abaxis, Inc. 1998 Stock Option Plan (the
"Option Plan") to, among other things, (i) increase the maximum aggregate
number of shares of the Company's Common Stock issuable under the Option
Plan by 1,000,000 shares and (ii) extend the term of the Option Plan.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. To consider, approve and ratify the appointment of Deloitte & Touche LLP as
independent public accountants for the Company for the fiscal year ending
March 31, 1999.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
MARK HERE IF YOU PLAN TO ATTEND THE MEETING [ ]
MARK HERE FOR ADDRESS CHANGE AND NOTE BELOW [ ]
Signature: Date:
--------------------- ----------------
Signature: Date:
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PLEASE SIGN HERE. Sign exactly as your name(s) appears on your stock
certificate. If shares of stock are held of record in the names of two or more
persons or in the name of husband and wife, whether as joint tenants or
otherwise, both or all of such persons should sign the Proxy. If shares of stock
are held of record by a corporation, the Proxy should be executed by the
President or Vice President and the Secretary or Assistant Secretary. Executors
or administrators or other fiduciaries who execute the Proxy for a deceased
shareholder should give their full title. Please date the Proxy.
2
