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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
ChemTrak Incorporated
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
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LOGO
July 10, 1997
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
ChemTrak Incorporated which will be held at the Network Meeting Center at
Techmart, located at 5201 Great America Parkway, Santa Clara, California, 95054
on Thursday, August 14, 1997, at 1:00pm, Pacific Daylight Time. Your Board of
Directors and management look forward to greeting personally those stockholders
able to attend.
At the Annual Meeting, you will be asked to consider and vote on proposals
to elect two directors, ratify the appointment of auditors and approve
amendments to the Equity Incentive and Non-Employee Directors' Stock Option
Plans. These proposals are more fully discussed in the accompanying Proxy
Statement, which you are urged to read carefully. Your Board of Directors
recommends a vote FOR all the proposals.
It is important that your shares are represented and voted at the meeting
whether or not you plan to attend. Accordingly, you are requested to sign, date
and mail the enclosed proxy in the envelope provided at your earliest
convenience.
If you have any further questions concerning the Annual Meeting or any of
the proposals, please feel free to contact Don Fluken at ChemTrak at
1-408-773-8156 or speak with D. F. King & Co., Inc., our proxy solicitors at
1-800-848-3409.
On behalf of the Board of Directors, thank you for your cooperation and
continued support.
Sincerely,
LOGO
Prithipal Singh, Ph.D.
Chairman of the Board and
Chief Technical Officer
929 E. Arques Avenue, Sunnyvale, CA
94086-4520 408-773-8156 1-800-927-7776 FAX 408-773-1651
<PAGE> 3
CHEMTRAK INCORPORATED
929 EAST ARQUES AVENUE
SUNNYVALE, CALIFORNIA 94086
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON AUGUST 14, 1997
To the Stockholders of ChemTrak Incorporated:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of ChemTrak
Incorporated, a Delaware corporation (the "Company"), will be held on Thursday,
August 14, 1997, at 1:00 p.m. Pacific Daylight Time at the Network Meeting
Center at Techmart, 5201 Great America Parkway, Santa Clara, California 95054
for the following purposes:
1. To elect two directors to hold office until the 2000 Annual Meeting of
Stockholders.
2. To approve the Company's 1993 Equity Incentive Plan, as amended, to
increase the aggregate number of shares of Common Stock authorized for
issuance under such plan by 600,000 shares, to 1,050,000 shares.
3. To approve the Company's 1992 Non-Employee Directors' Stock Option Plan,
as amended, to increase the aggregate number of shares of Common Stock
authorized for issuance under such plan by 50,000 shares, to 100,000
shares.
4. To ratify the selection of Ernst & Young LLP as independent auditors of
the Company for its fiscal year ending December 31, 1997.
5. 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.
The Board of Directors has fixed the close of business on July 7, 1997, as
the record date for the determination of stockholders entitled to notice of and
to vote at this Annual Meeting and at any adjournment or postponement thereof.
By Order of the Board of Directors
MENDELSO
Alan C. Mendelson
Secretary
Sunnyvale, California
July 10, 1997
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN ORDER TO ENSURE YOUR
REPRESENTATION AT THE MEETING. A RETURN ENVELOPE (WHICH IS POSTAGE PREPAID IF
MAILED IN THE UNITED STATES) IS ENCLOSED FOR THAT PURPOSE. EVEN IF YOU HAVE
GIVEN YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE MEETING. PLEASE
NOTE, HOWEVER, THAT IF YOUR SHARES ARE HELD OF RECORD BY A BROKER, BANK OR OTHER
NOMINEE AND YOU WISH TO VOTE AT THE MEETING, YOU MUST OBTAIN FROM THE RECORD
HOLDER A PROXY ISSUED IN YOUR NAME.
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CHEMTRAK INCORPORATED
929 EAST ARQUES AVENUE
SUNNYVALE, CALIFORNIA 94086
PROXY STATEMENT
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors of
ChemTrak Incorporated, a Delaware corporation (the "Company"), for use at the
Annual Meeting of Stockholders to be held on Thursday, August 14, 1997, at 1:00
p.m. Pacific Daylight Time (the "Annual Meeting"), or at any adjournment or
postponement thereof, for the purposes set forth herein and in the accompanying
Notice of Annual Meeting. The Annual Meeting will be held at the Network Meeting
Center at Techmart, 5201 Great America Parkway, Santa Clara, California 95054.
The Company intends to mail this proxy statement and accompanying proxy card on
or about July 10, 1997, to all stockholders entitled to vote at the Annual
Meeting.
SOLICITATION
The Company will bear the entire cost of solicitation of proxies including
preparation, assembly, printing and mailing of this proxy statement, the proxy
and any additional information furnished to stockholders. Copies of solicitation
materials will be furnished to banks, brokerage houses, fiduciaries and
custodians holding in their names shares of Common Stock beneficially owned by
others to forward to such beneficial owners. The Company may reimburse persons
representing beneficial owners of Common Stock for their costs of forwarding
solicitation materials to such beneficial owners. Original solicitation of
proxies by mail may be supplemented by telephone, telegram or personal
solicitation by directors, officers or other regular employees of the Company
or, at the Company's request D.F. King & Co., Inc. No additional compensation
will be paid to directors, officers, or other regular employees for such
services, but D.F. King & Co., Inc. will be paid its customary fee, estimated to
be approximately $8,000, if it renders such services.
VOTING RIGHTS AND OUTSTANDING SHARES
Only holders of record of Common Stock at the close of business on July 7,
1997, will be entitled to notice of and to vote at the Annual Meeting. At the
close of business on July 7, 1997, the Company had outstanding and entitled to
vote 12,926,443 shares of Common Stock.
Each holder of record of Common Stock on such date will be entitled to one
vote for each share held on all matters to be voted upon at the Annual Meeting.
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. Broker non-votes are counted towards a
quorum, but are not counted for any purpose in determining whether a matter has
been approved.
REVOCABILITY OF PROXIES
Any person giving a proxy pursuant to this solicitation has the power to
revoke it at any time before it is voted. It may be revoked by filing with the
Secretary of the Company at the Company's principal executive office, 929 East
Arques Avenue, Sunnyvale, California 94086, a written notice of revocation or a
duly executed proxy bearing a later date, or it may be revoked by attending the
meeting and voting in person. Attendance at the meeting will not, by itself,
revoke a proxy.
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STOCKHOLDER PROPOSALS
Proposals of stockholders that are intended to be presented at the
Company's 1998 Annual Meeting of Stockholders must be received by the Company
not later than March 10, 1998 in order to be included in the proxy statement and
proxy relating to that Annual Meeting.
PROPOSAL 1
ELECTION OF DIRECTORS
The Company's Restated Certificate of Incorporation and By-Laws provide
that the Board of Directors shall be divided into three classes, each class
consisting, as nearly as possible, of one-third of the total number of
directors, with each class having a three-year term. Vacancies on the Board may
be filled only by persons elected (i) by the affirmative vote of the holders of
the then-outstanding shares of voting stock of the Company entitled to vote
generally in the election of directors voting together as a single class, or
(ii) by a majority of the remaining directors. A director elected by the Board
to fill a vacancy (including a vacancy created by an increase in the Board of
Directors) shall serve for the remainder of the full term of the class of
directors in which the vacancy occurred and until such director's successor is
elected and has qualified.
The Board of Directors is presently composed of six members. There are two
directors in the class whose term of office expires in 1997, each of whom is
currently a director of the Company. Mr. Malcolm Jozoff was previously elected
by the stockholders; Edward F. Covell was elected by the Board of Directors in
August 1996 following the resignation of Dr. Jerry Gin. If elected at the Annual
Meeting, such nominees would serve until the 2000 Annual Meeting and until their
successors are elected and have qualified, or until any such director's death,
resignation or removal.
Directors are elected by a plurality of the votes present in person or
represented by proxy and entitled to vote at the meeting. Shares represented by
executed proxies will be voted, if authority to do so is not withheld, for the
election of the two nominees named below. In the event that any nominee should
be unavailable for election as a result of an unexpected occurrence, such shares
will be voted for the election of such substitute nominee as management may
propose. Each person nominated for election has agreed to serve if elected, and
management has no reason to believe that any nominee will be unable to serve.
Set forth below is biographical information for each person nominated and
each person whose term will continue after the Annual Meeting.
NOMINEES FOR ELECTION FOR A THREE-YEAR TERM EXPIRING AT THE 2000 ANNUAL MEETING
(CLASS II DIRECTORS)
Edward F. Covell
Edward F. Covell, age 52, was appointed President and Chief Executive
Officer of ChemTrak in January 1997, after having served as President and Chief
Operating Officer since May 1996 when he joined the Company. He was elected a
Director of the Company in August 1996. Prior to joining ChemTrak, Mr. Covell
was a management consultant from 1994 to 1996, and from 1990 to 1992, focusing
on the OTC medical device market. From 1992 to 1994 he was President and Chief
Operating Officer of MedChem Products, Inc., a manufacturer of medical devices
serving customers worldwide. Mr. Covell held a series of increasingly
responsible positions with Tambrands Inc., a consumer healthcare products
company, from 1980 through 1990, including Corporate Vice President and General
Manager of the Diagnostics Division. Prior to joining Tambrands, Mr. Covell
served in domestic and international management and product development
positions with the Kendall Company, a diversified manufacturing company.
Malcolm Jozoff
Malcolm Jozoff, age 58, has served as a director of the Company since 1993.
He is currently Chairman, President and Chief Executive Officer of The Dial
Corporation, a consumer products company. From 1995 to 1997, he was a consultant
on marketing and strategic planning issues. From 1993 to 1995, he served as
Chairman and Chief Executive Officer of Lenox, Inc., a manufacturer of consumer
durables. From 1967 to
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1992, Mr. Jozoff was employed in various positions by The Proctor and Gamble
Company, Inc., most recently as President, Health Care Products and Corporate
Group Vice President. Mr. Jozoff is a director of The Columbia Gas System, Inc.
In 1993, in connection with a civil proceeding brought by the Securities and
Exchange Commission, Mr. Jozoff consented, without admitting or denying the
allegations, to the entry of an order enjoining him from violating section 10(b)
of the Securities Exchange Act of 1934.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF THE NAMED NOMINEES.
DIRECTORS CONTINUING IN OFFICE UNTIL THE 1998 ANNUAL MEETING (CLASS III
DIRECTORS)
Gordon Russell
Gordon Russell, age 63, has served as a director of the Company since 1990.
Since 1979, Mr. Russell has served as a general partner of Sequoia Capital, a
venture capital fund, and certain of its affiliates. Mr. Russell also serves as
a director of Sangstat Medical Corp., Fusion Medical Technologies, Inc. and
Aradigm Corp.
Prithipal Singh, Ph.D.
Prithipal Singh, age 58, is a founder of the Company and has served as a
director since 1985, Chairman of the Board since 1988, and Chief Technical
Officer since January 1997. Dr. Singh also served as President of the Company
from 1988 to 1993, and as Chief Executive Officer from 1988 to 1997. From 1985
to 1988, Dr. Singh was a Senior Vice President of Idetek, Inc., an animal health
care company. Prior to his joining Idetek, Dr. Singh was a Vice President of
Syva Corp., a diagnostics company. Dr. Singh is also a director of Abaxis, Inc.
DIRECTORS CONTINUING IN OFFICE UNTIL THE 1999 ANNUAL MEETING (CLASS I DIRECTORS)
Robert Kiley
Robert P. Kiley, age 62, has served as a director of the Company since
September 1996. Mr. Kiley has served since 1987 as President of Neal Ward
Realty, Inc., a residential sales and development company. From 1962 to 1987,
Mr. Kiley held a series of progressively responsible positions with Tambrands
Inc. a consumer healthcare products company, most recently as Executive Vice
President responsible for the company's international business. Mr. Kiley
currently serves as a director of Tambrands Inc.
David Rubinfien
David Rubinfien, age 75, has served as a director of the Company since
1988. Since 1991, Mr. Rubinfien has been a private investor. From 1989 to 1991,
Mr. Rubinfien held the positions of President, Chief Executive Officer and
Chairman of the Board of Systemix, Inc., a biotechnology company. Mr. Rubinfien
also serves as a director of Biocircuits Corporation, Matritech, Inc. and
Molecular Biosystems, Inc.
BOARD COMMITTEES AND MEETINGS
During the year ended December 31, 1996, the Board of Directors held seven
meetings. The Board has an Audit Committee, a Compensation Committee and a
Non-Officer Stock Option Committee.
The Audit Committee meets with the Company's independent auditors at least
annually to review the results of the annual audit and discuss the financial
statements; recommends to the Board the independent auditors to be retained; and
receives and considers the accountants' comments as to controls, adequacy of
staff and management performance and procedures in connection with audit and
financial controls. The Audit Committee is comprised of two non-employee
directors: Messrs. Jozoff and Russell. It met once during 1996.
The Compensation Committee makes recommendations concerning salaries and
incentive compensation, awards stock options to employees and consultants under
the Company's stock option plans, and otherwise determines compensation levels
and performs such other functions regarding compensation as the Board may
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delegate. The Compensation Committee is composed of two non-employee directors:
Messrs. Rubinfien and Russell. It met once during 1996 and acted by written
consent on one occasion.
The Non-Officer Stock Option Committee was established in May 1992 to
administer the Company's stock option plans only for non-officer employees and
to make stock option grants to such employees not in excess of 10,000 shares.
All option grants in excess of this limit and all option grants to officers must
be approved by the Compensation Committee. The Non-Officer Stock Option
Committee is composed of two employee directors: Dr. Singh and Mr. Covell. Mr.
Covell became a member of the Non-Officer Stock Option Committee in September
1996. Prior to this time, the Non-Officer Option Committee was composed of Dr.
Singh alone. The Non-Officer Stock Option Committee acted by written consent on
three occasions during 1996.
DURING THE YEAR ENDED DECEMBER 31, 1996, EACH BOARD MEMBER ATTENDED 75% OR
MORE OF THE AGGREGATE OF THE MEETINGS OF THE BOARD AND OF THE COMMITTEES ON
WHICH HE SERVED HELD DURING THE PERIOD FOR WHICH HE WAS A DIRECTOR OR COMMITTEE
MEMBER, RESPECTIVELY.
PROPOSAL 2
APPROVAL OF AMENDMENT TO
1993 EQUITY INCENTIVE PLAN
In September 1993, the Board of Directors adopted, and the stockholders
subsequently approved, the Company's 1993 Equity Incentive Plan (the "1993
Plan"). The 1993 Plan was amended and restated in March 1994.
In September 1996, the Board approved an amendment to the 1993 Plan,
subject to stockholder approval, to enhance the flexibility of the Board and the
Compensation Committee in granting stock options to the Company's employees. The
amendment increases the aggregate number of shares authorized for issuance under
the 1993 Plan from a total of 450,000 shares to 1,050,000 shares. The Board
adopted this amendment to ensure that the Company can continue to grant Stock
Awards to employees at levels determined appropriate by the Board and the
Compensation Committee.
As of June 2, 1997, Stock Awards (net of cancelled or expired awards)
covering an aggregate of 408,575 shares of the Company's Common Stock had been
granted and were outstanding under the 1993 Plan, and 614,523 shares (plus any
shares that might in the future be returned to the 1993 Plan as a result of
cancellations or expiration of awards) remained available for future grant under
the 1993 Plan.
During the last fiscal year, under the 1993 Plan, the Company granted to
all current executive officers as a group options to purchase 332,500 shares at
exercise prices of $1.53 to $4.63 per share and to all employees (excluding
executive officers) as a group options to purchase 119,750 shares at exercise
prices of $1.25 to $4.44 per share.
Stockholders are requested in this Proposal 2 to approve the 1993 Plan, as
amended. The affirmative vote of the holders of a majority of the shares present
in person or represented by proxy and entitled to vote at the meeting will be
required to approve the 1993 Plan, as amended.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 2.
The essential features of the 1993 Plan are outlined below:
GENERAL
The 1993 Plan provides for the grant of "Stock Awards" which may be either
(i) incentive stock options, (ii) nonstatutory stock options, (iii) stock
bonuses, (iv) rights to purchase restricted stock, or (v) stock appreciation
rights. Incentive stock options granted under the 1993 Plan are intended to
qualify as "incentive stock options" within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"). Nonstatutory stock
options granted under the 1993 Plan are not intended to qualify as incentive
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stock options under the Code. See "Federal Income Tax Information" for a
discussion of the tax treatment of incentive and nonstatutory stock options.
PURPOSE
The 1993 Plan was adopted to provide a means by which selected officers,
directors of, employees of and consultants to the Company and its affiliates
could be given an opportunity to purchase stock in the Company, to assist in
retaining the services of employees holding key positions, to secure and retain
the services of persons capable of filling such positions and to provide
incentives for such persons to exert maximum efforts on behalf of the Company.
Approximately 50 persons are eligible to participate in the 1993 Plan.
ADMINISTRATION
The 1993 Plan is administered by the Board of Directors. The Board has the
power to construe and interpret the 1993 Plan and, subject to the provisions of
the 1993 Plan, to determine the persons to whom and
the dates on which Stock Awards will be granted, whether a Stock Award will be
an incentive stock option, a nonstatutory stock option, a stock bonus, a right
to purchase stock, a stock appreciation right, or a combination of the
foregoing, the number of shares to be subject to each Stock Award, the time or
times when a person shall be permitted to purchase or receive stock subject to
each Stock Award, the exercise or purchase price, the type of consideration and
other terms of the Stock Award. The Board of Directors is authorized to delegate
administration of the 1993 Plan to a committee composed of not fewer than two
members of the Board. The Board has delegated administration of the 1993 Plan to
the Compensation Committee of the Board. As used herein with respect to the 1993
Plan, the "Board" refers to the Compensation Committee as well as to the Board
of Directors itself.
The Compensation Committee currently intends to limit the directors who may
serve as members of the Compensation Committee to those who are "outside
directors" as defined in Section 162(m) of the Code. This limitation excludes
from the Compensation Committee (i) current employees of the Company, (ii)
former employees of the Company receiving compensation for past services (other
than benefits under a tax-qualified pension plan), (iii) current and former
officers of the Company, and (iv) directors currently receiving direct or
indirect remuneration from the Company in any capacity (other than as a
director), unless any such person is otherwise considered an "outside director"
for purposes of Section 162(m).
ELIGIBILITY
Incentive stock options, nonstatutory stock options, stock bonuses, rights
to purchase restricted stock and stock appreciation rights may be granted under
the 1993 Plan only to selected key employees (including officers) of the Company
and its affiliates. Consultants and directors are eligible to receive Stock
Awards other than incentive stock options and stock appreciation rights
appurtenant thereto.
No incentive stock option may be granted under the 1993 Plan to any person
who, at the time of the grant, owns (or is deemed to own) stock possessing more
than 10% of the total combined voting power of the Company or any affiliate of
the Company, unless the option exercise price is at least 110% of the fair
market value of the stock subject to the option on the date of grant, and the
term of the option does not exceed five years from the date of grant. In
addition, the aggregate fair market value determined at the time of grant, of
the shares of Common Stock with respect to which incentive stock options are
exercisable for the first time by an optionee during any calendar year (under
the 1993 Plan and all such other plans of the Company and its affiliates) may
not exceed $100,000.
No employee shall be eligible to be granted options and stock appreciation
rights covering more than 2.5% of the outstanding stock (measured as of March
17, 1994) in any calendar year. The purpose of this limitation is generally to
permit the Company to continue to be able to deduct for tax purposes the
compensation attributable to the exercise of options granted under the 1993
Plan. To date, the Company has not granted to any employee in any calendar year
options to purchase a number of shares equal to or in excess of the limitation.
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STOCK SUBJECT TO THE 1993 PLAN
If Stock Awards granted under the 1993 Plan expire or otherwise terminate
without being exercised, the Common Stock not purchased pursuant to such awards
again becomes available for issuance under the 1993 Plan.
TERMS OF OPTIONS
The following is a description of the permissible terms of options under
the 1993 Plan. Individual option grants may be more restrictive as to any or all
of the permissible terms described below.
Exercise Price; Payment. The exercise price of incentive stock options
under the 1993 Plan may not be less than the fair market value of the Common
Stock subject to the option on the date of the option grant, and in some cases
(see "Eligibility" above), may not be less than 110% of such fair market value.
The exercise price of nonstatutory stock options under the 1993 Plan may not be
less than 85% of the fair market value of the Common Stock subject to the option
on the date of the option grant. However, if options were granted with exercise
prices below market value, deductions for compensation attributable to the
exercise of such options could be limited by Section 162(m). See "Federal Income
Tax Information." On July 1, 1997, the closing price of the Company's Common
Stock as reported on the Nasdaq National Market was $1.09 per share.
In the event of a decline in the value of the Company's Common Stock, the
Board has the authority to offer employees the opportunity to replace
outstanding higher priced options, whether incentive or nonstatutory, with new
lower priced options. To the extent required by Section 162(m), an option
repriced under the 1993 Plan is deemed to be cancelled and a new option granted.
Both the option deemed to be cancelled and the new option deemed to be granted
will be counted against the $100,000 share limitation (see "Eligibility" above).
The exercise price of options granted under the 1993 Plan must be paid
either: (a) in cash at the time the option is exercised; or (b) at the
discretion of the Board, (i) by delivery of other Common Stock of the Company,
(ii) pursuant to a deferred payment arrangement or (c) in any other form of
legal consideration acceptable to the Board.
Option Exercise. Options granted under the 1993 Plan may become exercisable
in cumulative increments ("vest") as determined by the Board. Shares covered by
currently outstanding options under the 1993 Plan typically vest at the rate of
25% after one year and 1/48 per month thereafter during the optionee's
employment or services as a consultant. Shares covered by options granted in the
future under the 1993 Plan may be subject to different vesting terms. The Board
has the power to accelerate the time during which an option may be exercised. In
addition, options granted under the 1993 Plan may permit exercise prior to
vesting, but in such event the optionee may be required to enter into an early
exercise stock purchase agreement that allows the Company to repurchase shares
not yet vested at their exercise price should the optionee leave the employ of
the Company before vesting. To the extent provided by the terms of an option, an
optionee may satisfy any federal, state or local tax withholding obligation
relating to the exercise of such option by a cash payment upon exercise, by
authorizing the Company to withhold a portion of the stock otherwise issuable to
the optionee, by delivering already-owned stock of the Company or by a
combination of these means.
Term. The maximum term of options under the 1993 Plan is 10 years, except
that in certain cases (see "Eligibility") the maximum term is five years.
Options under the 1993 Plan generally terminate 30 days after termination of the
optionee's employment or relationship as a consultant or director of the Company
or any affiliate of the Company, unless (a) such termination is due to such
person's permanent and total disability (as defined in the Code), in which case
the option may, but need not, provide that it may be exercised at any time
within one year of such termination; (b) the optionee dies while employed by or
serving as a consultant or director of the Company or any affiliate of the
Company, in which case the option may, but need not, provide that it may be
exercised (to the extent the option was exercisable at the time of the
optionee's death) within eighteen months of the optionee's death by the person
or persons to whom the rights to such option pass
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by will or by the laws of descent and distribution; or (c) the option by its
terms specifically provides otherwise. Individual options by their terms may
provide for exercise within a longer period of time following termination of
employment or the consulting relationship. The option term may also be extended
in the event that exercise of the option within these periods is prohibited for
specified reasons.
TERMS OF STOCK BONUSES AND PURCHASES OF RESTRICTED STOCK
Purchase Price; Payment. The purchase price under each stock purchase
agreement will be determined by the Board. The purchase price of stock pursuant
to a stock purchase agreement must be paid either: (i) in cash at the time of
purchase; (ii) at the discretion of the Board, according to a deferred payment
or other arrangement with the person to whom the Common Stock is sold; or (iii)
in any other form of legal consideration that may be acceptable to the Board in
its discretion. Eligible participants may be awarded stock pursuant to a stock
bonus agreement in consideration of past services actually rendered to the
Company or for its benefit.
Repurchase. Shares of Common Stock sold or awarded under the 1993 Plan may,
but need not, be subject to a repurchase option in favor of the Company in
accordance with a vesting schedule determined by the Board. In the event a
person ceases to be an employee of or ceases to serve as a director of or
consultant to the Company or an affiliate of the Company, the Company may
repurchase or otherwise reacquire any or all of the shares of Common Stock held
by that person that have not vested as of the date of termination under the
terms of the restricted stock purchase agreement between the Company and such
person.
STOCK APPRECIATION RIGHTS
The Board may grant Stock Appreciation Rights to employees or directors of,
or consultants to, the Company or its affiliates. The 1993 Plan authorizes three
types of Stock Appreciation Rights.
Tandem Stock Appreciation Rights. Tandem Stock Appreciation Rights are tied
to an underlying option and require the holder to elect whether to exercise the
underlying option or to surrender the option for an appreciation distribution
equal to the market price of the vested shares purchasable under the surrendered
option less the aggregate exercise price payable for such shares. Appreciation
distributions payable upon exercise of Tandem Stock Appreciation Rights must be
made in cash.
Concurrent Stock Appreciation Rights. Concurrent Stock Appreciation Rights
are tied to an underlying option and are exercised automatically at the same
time the underlying option is exercised. The holder receives an appreciation
distribution equal to the market price of the vested shares purchased under the
option less the aggregate exercise price payable for such shares. Appreciation
distributions payable upon exercise of Concurrent Stock Appreciation Rights must
be made in cash.
Independent Stock Appreciation Rights. Independent Stock Appreciation
Rights are granted independently of any option and entitle the holder to receive
upon exercise an appreciation distribution equal to the fair market value on the
date of exercise of a number of shares equal to the number of share equivalents
to which the holder is vested under the Independent Stock Appreciation Rights
less the fair market value of such number of shares of stock on the date of
grant. Appreciation distributions payable upon exercise of Independent Stock
Appreciation Rights may, at the Board's discretion, be made in cash, in shares
of Common Stock or a combination thereof.
ADJUSTMENT PROVISIONS
If there is any change in the stock subject to the 1993 Plan or subject to
any Stock Award granted under the 1993 Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or otherwise), the 1993 Plan and Stock
Awards outstanding thereunder will be appropriately adjusted as to the class and
the maximum number of shares subject to the 1993 Plan, the maximum number of
shares which may be granted to an employee during a calendar year, and the
class, number of shares and price per share of stock subject to such outstanding
Stock Awards.
7
<PAGE> 11
EFFECT OF CERTAIN CORPORATE EVENTS
The 1993 Plan provides that, in the event of a dissolution or liquidation
of the Company, specified type of merger or other corporate reorganization, at
the sole discretion of the Board and to the extent permitted by law: (i) any
surviving corporation will be required to either assume Stock Awards outstanding
under the 1993 Plan or substitute similar Stock Awards for those outstanding
under such plan, (ii) the time during which such Stock Awards become vested or
may be exercised will be accelerated and any outstanding unexercised rights
under any Stock Awards will be terminated if not exercised prior to such event,
or (iii) such outstanding Stock Awards will continue in full force and effect.
DURATION, AMENDMENT AND TERMINATION
The Board may suspend or terminate the 1993 Plan without stockholder
approval or ratification at any time or from time to time. Unless sooner
terminated, the 1993 Plan will terminate on September 13, 2003.
The Board may also amend the 1993 Plan at any time or from time to time.
However, no amendment will be effective unless approved by the stockholders of
the Company within twelve months before or after its adoption by the Board if
the amendment requires stockholder approval in order to comply with Rule 16b-3,
satisfy the requirements of Section 422 of the Code, and any Nasdaq or other
securities exchange requirements. The Board may submit any other amendment to
the 1993 Plan for stockholder approval, including, but not limited to,
amendments intended to satisfy the requirements of Section 162(m) of the Code
regarding the exclusion of performance-based compensation from the limitation on
the deductibility of compensation paid to certain employees.
RESTRICTIONS ON TRANSFER
Under the 1993 Plan, an option may not be transferred by the optionee
otherwise than by will or by the laws of descent and distribution and during the
lifetime of the optionee, may be exercised only by the optionee. No rights under
a stock bonus or restricted stock purchase agreement are transferable except
where required by law or expressly authorized by the terms of the applicable
stock bonus or restricted stock purchase agreement. In addition, shares subject
to repurchase by the Company under an early exercise stock purchase agreement
may be subject to restrictions on transfer which the Board deems appropriate.
FEDERAL INCOME TAX INFORMATION
Incentive Stock Options. Incentive stock options under the 1993 Plan are
intended to be eligible for the favorable federal income tax treatment accorded
"incentive stock options" under the Code.
There generally are no federal income tax consequences to the optionee or
the Company by reason of the grant or exercise of an incentive stock option.
However, the exercise of an incentive stock option may increase the optionee's
alternative minimum tax liability, if any.
If an optionee holds stock acquired through exercise of an incentive stock
option for at least two years from the date on which the option is granted and
at least one year from the date on which the shares are transferred to the
optionee upon exercise of the option, any gain or loss on a disposition of such
stock will be long-term capital gain or loss. Generally, if the optionee
disposes of the stock before the expiration of either of these holding periods
(a "disqualifying disposition"), at the time of disposition, the optionee will
realize taxable ordinary income equal to the lesser of (a) the excess of the
stock's fair market value on the date of exercise over the exercise price, or
(b) the optionee's actual gain, if any, on the purchase and sale. The optionee's
additional gain, or any loss, upon the disqualifying disposition will be a
capital gain or loss, which will be long-term or short-term depending on whether
the stock was held for more than one year. Long-term capital gains currently are
generally subject to lower tax rates than ordinary income. The maximum capital
gains rate for federal income tax purposes is currently 28% while the maximum
ordinary income rate is effectively 39.6% at the present time. Slightly
different rules may apply to optionees who acquire stock subject to certain
repurchase options or who are subject to Section 16(b) of the Exchange Act.
8
<PAGE> 12
To the extent the optionee recognizes ordinary income by reason of a
disqualifying disposition, the Company will generally be entitled (subject to
the requirement of reasonableness, the provisions of Section 162(m) of the Code
and the satisfaction of a tax reporting obligation) to a corresponding business
expense deduction in the tax year in which the disqualifying disposition occurs.
Nonstatutory Stock Options. Nonstatutory stock options granted under the
1993 Plan generally have the following federal income tax consequences:
There are no tax consequences to the optionee or the Company by reason of
the grant of a nonstatutory stock option. Upon exercise of a nonstatutory stock
option, the optionee normally will recognize taxable ordinary income equal to
the excess of the stock's fair market value on the date of exercise over the
option exercise price. Generally, with respect to employees, the Company is
required to withhold from regular wages or supplemental wage payments an amount
based on the ordinary income recognized. Subject to the requirement of
reasonableness, the provisions of Section 162(m) of the Code and the
satisfaction of a tax reporting obligation, the Company will generally be
entitled to a business expense deduction equal to the taxable ordinary income
realized by the optionee. Upon disposition of the stock, the optionee will
recognize a capital gain or loss equal to the difference between the selling
price and the sum of the amount paid for such stock plus any amount recognized
as ordinary income upon exercise of the option. Such gain or loss will be long
or short-term depending on whether the stock was held for more than one year.
Slightly different rules may apply to optionees who acquire stock subject to
certain repurchase options or who are subject to Section 16(b) of the Exchange
Act.
Restricted Stock and Stock Bonuses. Restricted stock and stock bonuses
granted under the 1993 Plan generally have the following federal income tax
consequences:
Upon acquisition of stock under a restricted stock or stock bonus award,
the recipient normally will recognize taxable ordinary income equal to the
excess of the stock's fair market value over the purchase price, if any.
However, to the extent the stock is subject to certain types of vesting
restrictions, the taxable event will be delayed until the vesting restrictions
lapse, unless the recipient elects pursuant to section 83 of the Code to be
taxed on receipt of the stock. Generally, with respect to employees, the Company
is required to withhold from regular wages or supplemental wage payments an
amount based on the ordinary income recognized. Subject to the requirement of
reasonableness, Section 162(m) and the satisfaction of any reporting obligation,
the Company will generally be entitled to a business expense deduction equal to
the taxable ordinary income realized by the recipient. Upon disposition of the
stock, the recipient will recognize a capital gain or loss equal to the
difference between the selling price and the sum of the amount paid for such
stock, if any, plus any amount recognized as ordinary income upon acquisition
(or vesting) of the stock. Such gain or loss will be long or short-term
depending on whether the stock was held for more than one year from the date
ordinary income is measured. Slightly different rules may apply to persons who
acquire stock subject to forfeiture under Section 16(b) of the Exchange Act.
Stock Appreciation Rights. No taxable income is realized upon the receipt
of a stock appreciation right, but upon exercise of the stock appreciation right
the fair market value of the shares (or cash in lieu of shares) received must be
treated as compensation taxable as ordinary income to the recipient in the year
of such exercise. Generally, with respect to employees, the Company is required
to withhold from the payment made on exercise of the stock appreciation right or
from regular wages or supplemental wage payments an amount based on the ordinary
income recognized. Subject to the requirement of reasonableness, Section 162(m)
and the satisfaction of any reporting obligation, the Company will be entitled
to a business expense deduction equal to the taxable ordinary income recognized
by the recipient.
Potential Limitation on Company Deductions. As part of the Omnibus Budget
Reconciliation Act of 1993, the U.S. Congress amended the Code to add Section
162(m), which denies a deduction to any publicly held corporation for
compensation paid to certain employees in a taxable year to the extent that
compensation exceeds $1,000,000 for a covered employee. It is possible that
compensation attributable to stock options and stock appreciation rights, when
combined with all other types of compensation received by a covered employee
from the Company, may cause this limitation to be exceeded in any particular
year.
9
<PAGE> 13
Certain kinds of compensation, including qualified "performance-based
compensation," are disregarded for purposes of the deduction limitation. In
accordance with Treasury regulations issued under Section 162(m), compensation
attributable to stock options and stock appreciation rights will qualify as
performance-based compensation, provided that the option is granted by a
compensation committee comprised solely of "outside directors" and either: (i)
the option plan contains a per-employee limitation on the number of shares for
which options may be granted during a specified period, the per-employee
limitation is approved by the stockholders and the exercise price of the option
is no less than the fair market value of the stock on the date of grant; or (ii)
the option is granted (or exercisable) only upon the achievement (as certified
in writing by the compensation committee) of an objective performance goal
established in writing by the compensation committee while the outcome is
substantially uncertain, and the option is approved by stockholders. For stock
bonuses and restricted stock to qualify as performance-based compensation, the
grant must be approved by "outside directors", must be granted pursuant to the
objective performance goal established in writing by the compensation committee
requirements of (ii) above and must be approved by the stockholders.
PROPOSAL 3
APPROVAL OF AMENDMENT TO THE 1992 NON-EMPLOYEE
DIRECTORS' STOCK OPTION PLAN
In September 1992, the Board of Directors adopted the 1992 Non-Employee
Directors' Stock Option Plan (the "Directors' Plan"). The Directors' Plan
provides for automatic, non-discretionary grants of options to purchase shares
of Common Stock of the Company.
In September 1996, the Board approved an amendment to the Directors' Plan,
subject to stockholder approval, to increase the number of shares authorized for
issuance under the Directors' Plan from a total of 50,000 shares to 100,000
shares. The Board adopted this amendment to ensure that the Company can continue
to grant stock options to non-employee directors at levels determined to be
appropriate by the Board.
At June 2, 1997, options (net of canceled or expired options) covering an
aggregate of 58,000 shares of the Company's Common Stock had been granted under
the Directors' Plan, and only 42,000 shares (plus any shares that might in the
future be returned to the Directors' Plan as a result of cancellations or
expiration of options) remained available for future grant under the Directors'
Plan.
Stockholders are requested in this Proposal 3 to approve the Directors'
Plan, as amended. The affirmative vote of the holders of a majority of the
shares present in person or represented by proxy and entitled to vote at the
meeting will be required to approve the Directors' Plan.
MANAGEMENT RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 3.
The essential features of the Directors' Plan are outlined below:
GENERAL
The Directors' Plan provides for non-discretionary grants of nonstatutory
stock options. Nonstatutory stock options granted under the Directors' Plan are
not intended to qualify as incentive stock options, as defined under Section 422
of the Code.
PURPOSE
The Directors' Plan was adopted to provide a means by which each
Non-Employee Director of the Company (as defined below) could be given an
opportunity to purchase stock of the Company and to advance the interests of the
Company through attracting and retaining the services of persons capable of
serving on the Board of Directors of the Company.
10
<PAGE> 14
ADMINISTRATION
The Directors' Plan is administered by the Board of Directors of the
Company. The Board of Directors has the final power to construe and interpret
the Directors' Plan and options granted under it, and to establish, amend and
revoke rules and regulations for its administration.
The Board of Directors is authorized to delegate administration of the
Directors' Plan to a committee of not less than two members of the Board. The
Board of Directors does not presently contemplate delegating administration of
the Directors' Plan to any committee of the Board of Directors.
ELIGIBILITY
Only Non-Employee Directors of the Company are eligible to receive options
under the Directors' Plan. A "Non-Employee Director" is defined in the
Directors' Plan as a director of the Company and its affiliates who is not
otherwise an employee of the Company or any affiliate. All but two of the
Company's six current Directors are eligible to participate in the Directors'
Plan.
TERMS OF OPTION
The following is a description of the terms of options under the Directors'
Plan.
Non-Discretionary Grants. Option grants under the Directors' Plan are
non-discretionary. On the date the Board approved the Directors' Plan, September
16, 1992, each Non-Employee Director received an option to purchase two thousand
(2,000) shares of Common Stock of the Company. Each person who becomes a
Non-Employee Director of the Company after the adoption of the Directors' Plan
shall, upon the date of initial election to be a Non-Employee Director, be
granted an option to purchase five thousand (5,000) shares of Common Stock of
the Company. On January 2 of each year (or the next business day should such
date be a Saturday, Sunday or a legal holiday), beginning with January 2, 1993,
each Non-Employee Director is granted an additional option to purchase two
thousand (2,000) shares of Common Stock of the Company.
Option Exercise. An option granted under the Directors' Plan becomes
exercisable in four equal installments beginning the first anniversary of the
grant of the option. Such vesting is conditioned upon continued service as a
director of the Company.
Exercise Price; Payment. The exercise price of options granted under the
Directors' Plan shall be equal to 100% of the fair market value of the Common
Stock subject to such options on the date such option is granted. The exercise
price of options granted under the Directors' Plan must be paid in cash at the
time the option is exercised. On July 1, 1997, the closing price of the
Company's Common Stock as reported on the Nasdaq National Market was $1.09 per
share.
Transferability; Term. Under the Directors' Plan, an option may not be
transferred by the optionee, except by will or the laws of descent and
distribution. During the lifetime of an optionee, an option may be exercised
only by the optionee or his or her guardian or legal representative.
No option granted under the Directors' Plan is exercisable by any person
after the expiration of 10 years from the date the option is granted.
Other Provisions. The option agreement may contain such other terms,
provisions and conditions not inconsistent with the Directors' Plan as may be
determined by the Board of Directors.
ADJUSTMENT PROVISIONS
If there is any change in the stock subject to the Directors' Plan or
subject to any option granted under the Directors' Plan (through merger,
consolidation, reorganization, recapitalization, stock dividend, dividend in
property other than cash, stock split, liquidating dividend, combination of
shares, exchange of shares, change in corporate structure or otherwise) the
Directors' Plan and options outstanding thereunder will be appropriately
adjusted as to the class and the maximum number of shares subject to the plan
and the class, the number of shares and price per share of stock subject to
outstanding options.
11
<PAGE> 15
In the event of a dissolution or liquidation of the Company or a specified
type of merger or other corporate reorganization, to the extent permitted by
law, the vesting of any outstanding options under the Directors' Plan shall
accelerate and immediately become fully vested and exercisable, and shall
thereafter terminate if unexercised upon the occurrence of such event.
DURATION, AMENDMENT AND TERMINATION
The Board of Directors may amend, suspend or terminate the Directors' Plan
at any time or from time to time. No amendment will be effective unless approved
by the stockholders of the Company within twelve months before or after its
adoption by the Board if the amendment requires stockholder approval in order
for the plan to meet the requirements of Rule 16b-3 or any Nasdaq or securities
exchange requirements. Unless sooner terminated, the Directors' Plan shall
terminate in June 2002.
FEDERAL INCOME TAX INFORMATION
See "Federal Income Tax Information -- Nonstatutory Stock Options" in
Proposal 2 above for a discussion of the tax treatment of nonstatutory stock
options. Please note that Section 162(m) of the Code does not apply to options
granted under the Directors' Plan, and that all directors of the Company are
subject to Section 16 of the Exchange Act.
The following table presents certain information with respect to options
granted under the Directors' Plan subject to the approval of the amendment of
the Directors' Plan by the stockholders to (i) each non-employee director, and
(ii) all non-employee directors as a group. No other individuals or groups are
eligible to receive options under the Directors' Plan.
NEW PLAN BENEFITS
<TABLE>
<CAPTION>
1992 NON-EMPLOYEE DIRECTOR'S STOCK OPTION PLAN
------------------------------------------------
NUMBER OF SHARES SUBJECT
NAME AND POSITION DOLLAR VALUE(1) TO OPTIONS GRANTED
------------------------------------ --------------- ------------------------
<S> <C> <C>
Malcolm Jozoff...................... $ 3,188 2,000
Robert Kiley........................ 3,188 2,000
David Rubinfien..................... 3,188 2,000
Gordon Russell...................... 3,188 2,000
-----
All Non-Employee Directors as a
Group............................. $12,752 8,000
=====
</TABLE>
- ---------------
(1) All options have an exercise price equal to the fair market value of
ChemTrak Common Stock on the date of grant.
PROPOSAL 4
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected Ernst & Young LLP as the Company's
independent auditors for the fiscal year ending December 31, 1997, and has
further directed that management submit the selection of independent auditors
for ratification by the stockholders at the Annual Meeting. Ernst & Young LLP
has audited the Company's financial statements since 1989. Representatives of
Ernst & Young LLP are expected to be present at the Annual Meeting, with the
opportunity to make a statement, if they so desire, and will be available to
respond to appropriate questions.
Stockholder ratification of the selection of Ernst & Young LLP as the
Company's independent auditors is not required by the Company's By-Laws or
otherwise. However, the Board is submitting the selection of Ernst & Young LLP
to the stockholders for ratification as a matter of good corporate practice. If
the stockholders fail to ratify the selection, the Audit Committee and the Board
will reconsider whether or not to retain that firm. Even if the selection is
ratified, the Audit Committee and the Board in their discretion may direct the
appointment of different independent auditors at any time during the year if
they determine that such a change would be in the best interests of the Company
and its stockholders.
12
<PAGE> 16
The affirmative vote of the holders of a majority of the shares present or
represented by proxy and entitled to vote at the Annual Meeting will be required
to ratify the selection of Ernst & Young LLP.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 4.
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the ownership
of the Company's Common Stock as of June 2, 1997 by: (i) each director and
nominee for director; (ii) each of the executive officers named in the Summary
Compensation Table; (iii) all executive officers and directors of the Company as
a group; and (iv) all those known by the Company to be beneficial owners of more
than 5% of its Common Stock.
<TABLE>
<CAPTION>
BENEFICIAL
OWNERSHIP(1)
---------------------
NUMBER PERCENT
BENEFICIAL OWNER OF SHARES OF TOTAL
---------------------------------------------------------- --------- ---------
<S> <C> <C>
Prithipal Singh, Ph.D. (2)................................ 485,039 3.70%
Gordon W. Russell(3)...................................... 178,569 1.38%
David Rubinfien(4)........................................ 169,134 1.31%
Edward F. Covell(5)....................................... 94,305 *
Malcolm Jozoff(6)......................................... 73,833 *
Alene A. Holzman(7)....................................... 28,182 *
Rodger J. Richeal(8)...................................... 18,333 *
Niquette Hunt(9).......................................... 6,250 *
Robert P. Kiley(10)....................................... 1,875 *
All directors and executive officers as a group (10
persons)(11)............................................ 1,065,605 8.00%
</TABLE>
- ---------------
* Represents beneficial ownership of less than 1% of the outstanding shares of
the Company's Common Stock.
(1) This table is based upon information supplied by officers, directors and
principal stockholders and Schedules 13D and 13G filed with the Securities
and Exchange Commission (the "SEC"). Beneficial ownership is determined in
accordance with the rules of the SEC and generally includes voting or
investment power with respect to securities. Beneficial ownership also
includes shares of stock subject to options and warrants currently
exercisable or convertible, or exercisable or convertible within 60 days of
the date of this table. Percentage of beneficial ownership is based on
12,908,110 shares of Common Stock outstanding as of June 2, 1997.
(2) Includes 223,084 shares held by Prithipal Singh and Rajinder K. Singh,
trustees, UTD dated April 17, 1986, and 211,955 shares issuable upon
exercise of stock options held by Dr. Singh exercisable within 60 days of
June 2, 1997.
(3) Includes 123,558 shares held of record by Sequoia Capital Growth Fund and
7,895 shares held of record by Sequoia Technology Partners III. Mr. Russell
is a general partner of Sequoia Capital, the general partner of these
funds. Mr. Russell disclaims beneficial ownership of these shares except to
the extent of his pro rata interest therein. Also includes 39,488 shares
beneficially owned by the Russell 1988 Revocable Trust and 7,000 shares
issuable upon exercise of stock options held by Mr. Russell exercisable
within 60 days of June 2, 1997.
(4) Includes 12,134 shares held of record by the Rubinfien Living Trust and
7,000 shares issuable upon exercise of stock options held by Mr. Rubinfien
exercisable within 60 days of June 2, 1997.
13
<PAGE> 17
(5) Includes 95,749 shares issuable upon exercise of stock options held by Mr.
Covell exercisable within 60 days of June 2, 1997.
(6) Includes 63,729 shares issuable upon exercise of stock options held by Mr.
Jozoff exercisable within 60 days of June 2, 1997.
(7) Ms. Holzman resigned from the Company effective March 1997.
(8) Includes 18,333 shares issuable upon exercise of stock options held by Mr.
Richeal exercisable within 60 days of June 2, 1997. Mr. Richeal resigned
from the Company effective March 1997.
(9) Represents shares issuable upon exercise of stock options held by Ms. Hunt
exercisable within 60 days of June 2, 1997.
(10) Represents shares issuable upon exercise of stock options held by Mr. Kiley
exercisable with in 60 days of May 1, 1997.
(11) Includes 417,025 shares issuable upon exercise of stock options held by all
officers and directors exercisable within 60 days of June 2, 1997. See
Notes (2) through (10) above.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 (the "1934 Act")
requires the Company's directors and executive officers, and persons who own
more than 10% of a registered class of the Company's equity securities, to file
with the SEC initial reports of ownership and reports of changes in ownership of
Common Stock and other equity securities of the Company. Officers, directors and
greater than 10% stockholders are required by SEC regulation to furnish the
Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended December 31, 1995, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than 10% beneficial owners were complied with, except that the
transaction report on the hiring of Niquette Hunt was inadvertently filed late.
EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS
Each Non-Employee Director of the Company receives a per-meeting fee of
$750. In the last fiscal year ended December 31, 1996, the total compensation
paid to non-employee directors was $26,000. The members of the Board of
Directors are also eligible for reimbursement for their expenses incurred in
connection with attendance at Board meetings in accordance with Company policy.
Each Non-Employee Director of the Company receives stock option grants under the
Directors' Plan. For a description of the Directors' Plan, see Proposal 3.
During the last fiscal year, options were granted under the Directors' Plan
covering 2,000 shares to each of Messrs. Gin, Jozoff, Rubinfien, Russell, and
Stroy at an exercise price per share of $1.44, the fair market value of such
Common Stock on the date of the grant, and 5,000 shares to Mr. Kiley, at an
exercise price per share of $2.47, the fair market value of such Common Stock on
the date of the grant. As of April 30, 1997, no option had been exercised under
the Directors' Plan. Directors are also eligible to receive certain stock
awards, such as stock bonuses, stock appreciation rights, and rights to purchase
restricted stock under the Company's 1993 Plan. For a description of the 1993
Plan, see Proposal 2. As of December 31, 1996, options to purchase 35,000 shares
of Common Stock had been granted to non-employee directors under the 1993 Plan.
In September 1996, Mr. Kiley entered into a consulting agreement with the
Company and was granted a non-qualified stock option under the 1993 Plan to
purchase 5,000 shares of Common Stock at the price of
14
<PAGE> 18
$2.47 per share, equal to the fair market value of the Common Stock of the date
of the grant. These options vest in eight equal quarterly installments beginning
three months from the date of grant.
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY OF COMPENSATION
The following table shows for the fiscal years ending December 31, 1996,
1995 and 1994, compensation awarded or paid to, or earned by, the Company's
Chief Executive Officer and the other three most highly compensated executive
officers of the Company at December 31, 1996 (the "Named Executive Officers"):
SUMMARY OF COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ---------------------
------------------------- SECURITIES UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY($)(1) BONUS($) OPTIONS(#)(2)
----------------------------------- ----- ------------ -------- ---------------------
<S> <C> <C> <C> <C>
Prithipal Singh, Ph.D.............. 1996 $206,000 -- --
Chairman of the Board and 1995 182,000 -- 77,500
Chief Technical Officer 1994 181,000 32,000 15,000
Edward F. Covell(3)................ 1996 107,000 20,000 230,000
President and Chief Executive
Officer
Rodger Richeal(4).................. 1996 129,000 -- 25,000
Senior Vice President 1995 17,000 -- 50,000
Alene A. Holzman(5)................ 1996 107,000 -- --
Vice President 1995 102,000 -- 30,000
1994 98,000 13,000 15,300
Niquette Hunt(6)................... 1996 4,000 18,000 50,000
Vice President
</TABLE>
- ---------------
(1) Includes amounts earned but deferred at the election of the Named Executive
Officer.
(2) The Company has not granted any SARs or restricted stock awards.
(3) Mr. Covell joined the Company as President in May 1996 and was named Chief
Executive Officer in January 1997.
(4) Mr. Richeal resigned from the Company effective March 1997. He is currently
a consultant to the Company.
(5) Ms. Holzman resigned from the Company effective March 1997.
(6) Ms. Hunt joined the Company as Vice President in December 1996.
STOCK OPTION GRANTS AND EXERCISES
The Company grants options to its executive officers under its 1988 Stock
Option Plan (the "1988 Plan"), and the 1993 Plan (together, the "Plans"). As of
June 2, 1997, options to purchase a total of 1,062,389 shares had been granted
and were outstanding under the Plans and options to purchase 615,090 shares
remained available for grant thereunder. The Company has not granted stock
appreciation rights ("SARs").
1988 Stock Option Plan. In July 1988, the Company adopted its 1988 Stock
Option Plan, under which approximately 1,325,000 shares of Common Stock were
reserved for issuance upon exercise of options granted to key employees,
directors, advisors and consultants of the Company. The 1988 Plan provides for
the grant of both incentive stock options, intended to qualify as such under
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), and
nonstatutory stock options. The ability of the Company to grant options under
the 1988 Plan will terminate on November 19, 2001, unless the Plan is sooner
terminated by the Board of Directors. The exercise price of incentive stock
options must equal at least the fair market value of the Common Stock on the
date of grant. The exercise price of nonstatutory stock options may be no less
than
15
<PAGE> 19
85% of the fair market value of the Common Stock on the date of grant. The
exercise price of options granted to any person who at the time of grant owns
stock possessing more than 10% of the total combined voting power of all classes
of stock must be at least 110% of the fair market value of such stock on the
date of grant and the term of these options cannot exceed five years.
As of June 2, 1997, the Company had outstanding options to purchase an
aggregate of 653,814 shares of Common Stock.
The following tables show for the fiscal year ended December 31, 1996,
certain information regarding options granted to each of the Named Executive
Officers:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
INDIVIDUAL GRANTS AT
------------------------------------------------------- ASSUMED ANNUAL RATES
NUMBER OF % OF TOTAL OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM(3)
OPTIONS EMPLOYEES IN PRICE EXPIRATION --------------------------
NAME GRANTED FISCAL YEAR(1) ($/SHARE)(2) DATE 0% 5% 10%
- --------------------------------------- ---------- -------------- ------------ ---------- ------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Prithipal Singh, Ph.D.................. -- -- -- -- -- -- --
Edward F. Covell....................... 70,000 15.3 3.93 05/27/06 48,559 256,093 564,313
80,000 17.5 4.63 05/27/06 -- 232,660 589,134
30,000 6.6 1.91 09/03/06 -- 35,952 91,105
50,000 11.0 1.53 11/14/06 -- 48,133 121,872
Rodger J. Richeal...................... 25,000 5.5 4.00 05/07/06 -- 62,868 159,307
Alene A. Holzman....................... -- -- -- -- -- -- --
Niquette Hunt.......................... 50,000 10.9 1.78 12/15/06 -- 55,993 141,886
</TABLE>
- ---------------
(1) Based on an aggregate of options to purchase 456,916 shares of the Company's
Common Stock granted to employees of the Company in fiscal 1996, including
the Named Executive Officers.
(2) The options in this table have exercise prices equal to the fair market
value of the Common Stock on the date of grant. Options vest 25% on the
first anniversary of the date of grant, and 2.0833% per month thereafter for
the next 36 months. In the event of a decline in value of the Company's
Common Stock, the Board has the authority to offer employees the opportunity
to replace outstanding higher priced options, whether incentive or
non-statutory, with new lower priced options.
(3) The potential realizable value is based on the term of the option at the
time of grant (10 years). The potential realizable value is calculated by
assuming the stock price on the date of grant appreciates at the individual
rate for the entire term of the option, and that the option is exercised and
sold on the last day of its term at the appreciated price. These amounts
represent certain assumed rates of appreciation, in accordance with the
rules of the SEC, and do not reflect the Company's estimate or projection of
future stock price performance. Actual gains, if any, are dependent on the
actual future performance of the Company's Common Stock and no gain to the
optionee is possible unless the stock price increases over the option term,
which will benefit all stockholders.
16
<PAGE> 20
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table sets forth, for each of the Named Executive Officers,
the fiscal year-end number and value of unexercised shares subject to options:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS IN-THE-MONEY OPTIONS AT
ACQUIRED ON VALUE AT FISCAL YEAR-END(#) FISCAL YEAR-END($)(1)
EXERCISE REALIZED ----------------------------- -----------------------------
NAME (#) $ EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------ ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Prithipal Singh,
Ph.D.................. -- -- 206,618 19,215 31,250 --
Edward F. Covell........ -- -- 48,750 181,250 -- --
Rodger Richeal.......... -- -- 20,833 54,167 13,020 18,229
Alene A. Holzman........ -- -- 68,284 17,966 -- --
Niquette Hunt........... -- -- -- 50,000 -- --
</TABLE>
- ---------------
(1) Based on the closing price of $1.375 of the Company's Common Stock as
reported on the Nasdaq National Market at December 31, 1996 minus the
exercise price of the options multiplied by the number of shares underlying
the option.
EMPLOYMENT AGREEMENTS
In February 1996, the Company and Dr. Singh entered into an employment
agreement providing that Dr. Singh's salary be set at $15,333 per month. The
agreement provides that if Dr. Singh's employment is terminated without cause,
he will receive up to 12 months salary continuation. In addition, in the event
of such termination, all of the Company's Common Stock held by Dr. Singh will be
free of any repurchase options in favor of the Company, and all of Dr. Singh's
options will become fully vested and exercisable. For a period of one year
following such termination, the Company has also agreed to reimburse Dr. Singh
for any medical or other employee insurance coverage that he elects to continue.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
ON EXECUTIVE COMPENSATION(1)
The Board of Directors of the Company, with input from the Company's
Compensation Committee, administers the Company's policies governing employee
compensation and the Company's employee benefit plans, including its stock
option plans and its 1991 Employee Stock Purchase Plan. The Board evaluates the
performance of management, sets compensation policies and levels, and determines
salaries and incentive compensation. Dr. Singh and Mr. Covell, officers of the
Company, do not take part in the deliberation of their compensation.
The Company's executive compensation program is designed to attract and
retain executives capable of leading the Company to meet its business objectives
and to motivate them to enhance long-term stockholder value. The key elements of
the program are competitive pay and equity incentives. Annual compensation for
the Company's executive officers consisted in 1996 of a cash salary and stock
option grants.
The Board of Directors makes a subjective assessment of a variety of
factors, both personal and corporate, in making salary and equity compensation
decisions regarding the Company's executive officers. These factors include the
midrange of compensation paid by comparable medical and pharmaceutical companies
in the San Francisco Bay Area to individuals in comparable positions, the
individual contributions of each officer to the
- ---------------
(1) The material in this report is not "soliciting material", is not deemed
filed with the SEC and is not to be incorporated by reference into any
filing of the Company under the Securities Act of 1933, as amended,
(the "1933 Act") or the 1934 Act, whether made before or after the date
hereof and irrespective of any general corporation language contained
in such filing.
17
<PAGE> 21
Company, and most important, the progress of the Company towards its objectives.
The companies examined for comparative purposes may, but need not, include those
comprising the Russell 2000 Index and the Hambrecht & Quist Healthcare
(Excluding Biotchnology) Index. At this point in the Company's evolution, the
measures the Board of Directors looks to in evaluating the Company's progress
when determining compensation for executive officers are product sales,
advancement of the Company's product candidates through development and clinical
testing, procurement of requisite regulatory approvals and the establishment of
relationships with appropriate marketing partners.
Stock options awarded to executives in 1996 were consistent with the
Company's option policy. In awarding stock options, the Committee considers the
number and value of an executive officer's outstanding options. All new
employees are granted incentive stock options in an amount based upon the
position's salary grade.
Dr. Singh's compensation and equity incentive package is based upon the
same factors as that of the other executive officers. In 1996, revenues
decreased significantly, but other factors were considered by the Board relative
to Dr. Singh's compensation. Performance factors considered in the 1996 package
included the receipt of FDA clearance for the H. pylori test kit for
professional use; the signing of a development and distribution agreement with
Selfcare, Inc. for the European sale of the Company's HIV home test product, and
the signing of a distribution agreement with Helena Laboratories for the
distribution of CholesTrak(R) in Canada.
The Board deemed it appropriate to increase Dr. Singh's salary by
approximately 13% in 1996, from $182,000 to $206,000. No options were granted to
Dr. Singh during 1996. In January 1997, Edward F. Covell became the Company's
President and Chief Executive Officer, permitting Dr. Singh to concentrate his
future energies on product development, his principal area of expertise.
Section 162(m) of the U.S. Internal Revenue Code limits the Company to a
deduction for federal income tax purposes of no more than $1 million of
compensation paid to certain named Executive Officers in a taxable year.
Compensation above $1 million may be deducted if it is "performance-based
compensation" within the meaning of the Code. The Board of Directors has
determined that stock options granted under the Company's 1993 Equity Incentive
Plan with an exercise price at least equal to the fair market value of the
Company's Common Stock on the date of the grant shall be treated as
"performance-based compensation".
Prithipal Singh, Ph.D.
Edward Covell
Malcolm Jozoff
Robert Kiley
David Rubinfien
Gordon Russell
18
<PAGE> 22
PERFORMANCE MEASUREMENT COMPARISON
The following chart shows the value of an investment of $100 on February
19, 1992, in cash of (i) of the Company's Common Stock, (ii) the Russell 2000
Index, and (iii) the Hambrecht & Quist Healthcare (Excluding Biotechnology)
Index. All values assume reinvestment of the full amount of all dividends and
are calculated as of December 31 of each year.(2)
COMPARISONS OF 5-YEAR CUMULATIVE TOTAL RETURN ON INVESTMENT
<TABLE>
<CAPTION>
H&Q HEALTHCARE -
MEASUREMENT PERIOD EXCLUDING
(FISCAL YEAR COVERED) CHEMTRAK INC. RUSSELL 2000 BIOTECHNOLOGY
<S> <C> <C> <C>
2/19/92 100 100 100
12/92 78 110 87
12/93 35 131 63
12/94 23 128 66
12/95 8 165 111
12/96 11 192 123
</TABLE>
(2) This section is not "soliciting material," is not deemed filed with the SEC
and is not to be incorporated by reference in any filing of the Company
under the 1933 or the 1934 Act whether made before or after the date hereof
and irrespective of any general incorporation language in any such filing.
CERTAIN TRANSACTIONS
The Company has entered into indemnity agreements with certain officers and
directors which provide, among other things, that the Company will indemnify
such officer or director, under the circumstances and to the extent provided for
therein, for expenses, damages, judgments, fines and settlements that may be
required to pay in actions or proceedings which the officer or director may be a
party by reason of their position as a director, officer or other agent of the
Company, and otherwise to the full extent permitted under General Corporation
Law of the State of Delaware and the Company's By-Laws. See also "Director
Compensation" and "Employment Agreements."
19
<PAGE> 23
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
ChemTrak's Annual Report on Form 10-K for the year ended December 31, 1996
(File No. 0-19789), is incorporated by reference herein. Form 10-K is included
in the Annual Report to Stockholders being mailed concurrently with this Proxy
Statement.
All documents filed by the Company pursuant to sections 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934, as amended, after the mailing date
of this proxy statement and prior to July 10, 1997, the date of the Annual
Meeting, shall be deemed to be incorporated by reference herein and to be a part
hereof from the date of filing of such documents. Any statement contained in
this proxy statement or in a document incorporated or deemed to be incorporated
by reference herein shall be deemed to be modified or superseded for purposes of
this Proxy Statement to the extent that a statement contained herein or in any
subsequently-filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, as modified or superseded, to
constitute a part of this Proxy Statement.
OTHER MATTERS
The Board of Directors knows of no other matters that will be presented for
consideration at the Annual Meeting. If any other matters are properly brought
before the meeting, it is the intention of the persons named in the accompanying
proxy to vote on such matters in accordance with their best judgment.
By Order of the Board of Directors
MENDELSO
Alan C. Mendelson
Secretary
July 10, 1997
20
<PAGE> 24
CHEMTRAK INCORPORATED
1993 EQUITY INCENTIVE PLAN
ADOPTED SEPTEMBER 14, 1993
AMENDED AND RESTATED MARCH 17, 1994
AMENDED SEPTEMBER, 1996
1. PURPOSES.
(a) The Board of Directors of ChemTrak Incorporated (the "Board") adopted
the 1993 Equity Incentive Plan (the "Initial Plan") on September 14, 1993. On
March 17, 1994, the Board has amended and restated the Initial Plan in the form
set forth herein. The purpose of the 1993 Equity Incentive Plan (the "Plan") is
to provide a means by which employees of and consultants to the Company, and its
Affiliates, may be given an opportunity to benefit from increases in value of
the stock of the Company through the granting of (i) Incentive Stock Options,
(ii) Nonstatutory Stock Options, (iii) stock bonuses, (iv) rights to purchase
restricted stock, and (v) Stock Appreciation Rights, all as defined below.
(b) The Company, by means of the Plan, seeks to retain the services of
persons who are now Employees or Directors of or Consultants to the Company, to
secure and retain the services of new Employees, Directors and Consultants, and
to provide incentives for such persons to exert maximum efforts for the success
of the Company.
(c) The Company intends that the Stock Awards issued under the Plan shall,
in the discretion of the Board or any Committee to which responsibility for
administration of the Plan has been delegated pursuant to subsection 3(c), be
either (i) Options granted pursuant to paragraph 6 hereof, including Incentive
Stock Options and Nonstatutory Stock Options, (ii) stock bonuses or rights to
purchase restricted stock granted pursuant to paragraph 7 hereof, or (iii) Stock
Appreciation Rights granted pursuant to paragraph 8 hereof. All Options shall be
separately designated Incentive Stock Options or Nonstatutory Stock Options at
the time of grant, and in such form as issued pursuant to section 6, and a
separate certificate or certificates will be issued for shares purchased on
exercise of each type of Option.
2. DEFINITIONS.
(a) "Affiliate" means any parent corporation or subsidiary corporation,
whether now or hereafter existing, as those terms are defined in Sections 424(e)
and (f) respectively, of the Code.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Committee" means a Committee appointed by the Board in accordance with
subsection 3(c) of the Plan.
(e) "Company" means ChemTrak Incorporated, a Delaware corporation.
(f) "Concurrent Stock Appreciation Right" or "Concurrent Right" means a
right granted pursuant to subsection 8(b)(ii) of the Plan.
(g) "Consultant" means any person, including an advisor, engaged by the
Company or an Affiliate to render consulting services and who is compensated for
such services, provided that the term "Consultant" shall not include Directors
who are paid only a director's fee by the Company or who are not compensated by
the Company for their services as Directors.
(h) "Continuous Status as an Employee, Director or Consultant" means the
employment or relationship as a Director or Consultant is not interrupted or
terminated by the Company or any Affiliate. The Board, in its sole discretion,
may determine whether Continuous Status as an Employee, Director or Consultant
shall be considered interrupted in the case of: (i) any leave of absence
approved by the Board, including sick leave, military leave, or any other
personal leave; provided, however, that for purposes of Incentive Stock Options
(1)
<PAGE> 25
and Stock Appreciation Rights appurtenant thereto, any such leave may not exceed
ninety (90) days, unless reemployment upon the expiration of such leave is
guaranteed by contract (including certain Company policies) or statute; or (ii)
transfers between locations of the Company or between the Company, Affiliates or
its successor.
(i) "Director" means a member of the Board.
(j) "Disability" means total and permanent disability as defined in Section
22(e)(3) of the Code.
(k) "Employee" means any person, including Officers and Directors, employed
by the Company or any Affiliate of the Company. Neither service as a Director
nor payment of a director's fee by the Company shall be sufficient to constitute
"employment" by the Company.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(m) "Fair Market Value" means, as of any date, the value of the common
stock of the Company as determined as follows:
(i) If the common stock is listed on any established stock exchange or
a national market system, including without limitation the National Market
System of the National Association of Securities Dealers, Inc. Automated
Quotation ("Nasdaq") System, the Fair Market Value of a share of common
stock shall be the closing sales price for such stock (or the closing bid,
if no sales were reported) as quoted on such system or exchange (or the
exchange with the greatest volume of trading in common stock) on the date
of grant, as reporting in the Wall Street Journal or such other source as
the Board deems reliable;
(ii) If the common stock is quoted on the Nasdaq System (but not on
the National Market System thereof) or is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market
Value of a share of common stock shall be the mean between the bid and
asked prices for the common stock on the last market trading day prior to
the day of determination, as reported in the Wall Street Journal or such
other source as the Board deems reliable;
(iii) In the absence of an established market for the common stock,
the Fair Market Value shall be determined in good faith by the Board.
(n) "Incentive Stock Option" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(o) "Independent Stock Appreciation Right" or "Independent Right" means a
right granted under subsection 8(b)(iii) of the Plan.
(p) "Nonstatutory Stock Option" means an Option not intended to qualify as
an Incentive Stock Option.
(q) "Non-Employee Director" means a Director who either (i) is not a
current Employee or Officer of the Company or its parent or subsidiary, does not
receive compensation (directly or indirectly) from the Company or its parent or
subsidiary for services rendered as a consultant or in any capacity other than
as a Director (except for an amount as to which disclosure would not be required
under Item 404(a) of Regulation S-K promulgated pursuant to the Securities Act
of 1933 ("Regulation S-K"), does not possess an interest in any other
transaction as to which disclosure would be required under Item 404(a) of
Regulation S-K, and is not engaged in a business relationship as to which
disclosure would be required under Item 404(b) of Regulation S-K; or (ii) is
otherwise considered a "non-employee director" for purposes of Rule 16b-3.
(r) "Officer" means a person who is an officer of the Company within the
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(s) "Option" means a stock option granted pursuant to the Plan.
(2)
<PAGE> 26
(t) "Option Agreement" means a written agreement between the Company and an
Optionee evidencing the terms and conditions of an individual Option grant. The
Option Agreement is subject to the terms and conditions of the Plan.
(u) "Optionee" means an Employee, Director or Consultant who holds an
outstanding Option.
(v) "Outside Director" means a Director who either (A) is not a current
employee of the Company or an affiliated corporation, is not a former employee
of the Company or an affiliated corporation receiving compensation for prior
services (other than benefits under a tax qualified pension plan), was not an
officer of the Company or an affiliated corporation at any time, and is not
currently receiving compensation for personal services in any capacity other
than as a Director, or (B) is otherwise considered an "outside director" for
purposes of Section 162(m) of the Code.
(w) "Plan" means this 1993 Equity Incentive Plan.
(x) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any successor to
Rule 16b-3, as in effect when discretion is being exercised with respect to the
Plan.
(y) "Securities Act" means the Securities Act of 1933, as amended.
(z) "Stock Appreciation Right" means any of the various types of rights
which may be granted under Section 8 of the Plan.
(aa) "Stock Award" means any right granted under the Plan, including any
Option, any stock bonus, any right to purchase restricted stock, and any Stock
Appreciation Right.
(ab) "Stock Award Agreement" means a written agreement between the Company
and a holder of a Stock Award evidencing the terms and conditions of an
individual Stock Award grant. The Stock Award Agreement is subject to the terms
and conditions of the Plan.
(ac) "Tandem Stock Appreciation Right" or "Tandem Right" means a right
granted under subsection 8(b)(i) of the Plan.
3. ADMINISTRATION.
(a) The Plan shall be administered by the Board unless and until the Board
delegates administration to a committee, including the Committee, as provided in
subsection 3(c).
(b) The Board shall have the power, subject to, and within the limitations
of, the express provisions of the Plan:
(1) To determine from time to time which of the persons eligible under
the Plan shall be granted Stock Awards; when and how Stock Awards shall be
granted; whether a Stock Award will be an Incentive Stock Option, a
Nonstatutory Stock Option, a stock bonus, a right to purchase restricted
stock, a Stock Appreciation Right, or a combination of the foregoing; the
provisions of each Stock Award granted (which need not be identical),
including the time or times when a person shall be permitted to receive
stock pursuant to a Stock Award; whether a person shall be permitted to
receive stock upon exercise of an Independent Stock Appreciation Right; and
the number of shares with respect to which Stock Awards shall be granted to
each such person.
(2) To construe and interpret the Plan and Stock Awards granted under
it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Stock Award
Agreement, in a manner and to the extent it shall deem necessary or
expedient to make the Plan fully effective.
(3) To amend the Plan as provided in Section 14.
(4) Generally, to exercise such powers and to perform such acts as the
Board deems necessary or expedient to promote the best interests of the
Company.
(3)
<PAGE> 27
(c) The Board may delegate administration of the Plan to a committee
composed of not fewer than two (2) members (the "Committee"). If required by the
provisions of subsection 3(d), all of the members of such Committee shall be
Non-Employee Directors and may also be Outside Directors. If administration is
delegated to a Committee, the Committee shall have, in connection with the
administration of the Plan, the powers theretofore possessed by the Board (and
references in this Plan to the Board shall thereafter be to the Committee),
subject, however, to such resolutions, not inconsistent with the provisions of
the Plan, as may be adopted from time to time by the Board. The Board may
abolish the Committee at any time and revest in the Board the administration of
the Plan. Notwithstanding anything in this Section 3 to the contrary, the Board
may delegate (i) to a committee of not fewer than two Outside Directors the
authority to grant options to the extent specified in such delegation; and (ii)
to a committee of one or more members of the Board the authority to grant
options to eligible persons who are not then subject to Section 16 of the
Exchange Act and to eligible persons with respect to whom the Company does not
wish to comply with Section 162(m) of the Code.
4. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of Section 13 relating to adjustments upon
changes in stock, the stock that may be issued pursuant to Stock Awards shall
not exceed in the aggregate one million fifty thousand (1,050,000) shares of the
Company's common stock (which includes the six hundred thousand (600,000) shares
reserved for issuance in September 1996). If any Stock Award shall for any
reason expire or otherwise terminate without having been exercised in full, the
stock not purchased under such Stock Award shall again become available for the
Plan. Shares subject to Stock Appreciation Rights exercised in accordance with
Section 8 of the Plan shall not be available for subsequent issuance under the
Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
5. ELIGIBILITY.
(a) Incentive Stock Options and Stock Appreciation Rights appurtenant
thereto may be granted only to Employees. Stock Awards other than Incentive
Stock Options and Stock Appreciation Rights appurtenant thereto may be granted
only to Employees, Directors or Consultants.
(b) No person shall be eligible for the grant of an Incentive Stock Option
if, at the time of grant, such person owns (or is deemed to own pursuant to
Section 424(d) of the Code) stock possessing more than ten percent (10%) of the
total combined voting power of all classes of stock of the Company or of any of
its Affiliates unless the exercise price of such Incentive Stock Option is at
least one hundred ten percent (110%) of the Fair Market Value of such stock at
the date of grant and the Incentive Stock Option is not exercisable after the
expiration of five (5) years from the date of grant.
(c) No employee shall be eligible to be granted Options and Stock
Appreciation Rights in any calendar year covering more than two and a half
percent (2.5%) of the Company's outstanding common stock as of March 17, 1994.
6. OPTION PROVISIONS.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. The provisions of separate
Options need not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option or otherwise) the
substance of each of the following provisions:
(a) Term. No Option shall be exercisable after the expiration of ten
(10) years from the date it was granted.
(b) Price. The exercise price of each Incentive Stock Option shall be
not less than one hundred percent (100%) of the Fair Market Value of the
stock subject to the Option on the date the Option is
(4)
<PAGE> 28
granted. The exercise price of each Nonstatutory Stock Option shall be not
less than eighty five percent (85%) of the Fair Market Value of the stock
subject to the Option on the date the Option is granted.
(c) Consideration. The purchase price of stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the option is exercised, or
(ii) at the discretion of the Board or the duly authorized committee,
either at the time of the grant or exercise of the Option, (A) by delivery
to the Company of other common stock of the Company, (B) according to a
deferred payment or other arrangement (which may include, without limiting
the generality of the foregoing, the use of other common stock of the
Company) with the person to whom the Option is granted or to whom the
Option is transferred pursuant to subsection 6(d), or (C) in any other form
of legal consideration that may be acceptable to the Board.
In the case of any deferred payment arrangement, interest shall be
payable at least annually and shall be charged at the minimum rate of
interest necessary to avoid the treatment as interest, under any applicable
provisions of the Code, of any amounts other than amounts stated to be
interest under the deferred payment arrangement.
(d) Transferability. An Incentive Stock Option shall not be
transferable except by will or by the laws of descent and distribution, and
shall be exercisable during the lifetime of the person to whom the
Incentive Stock Option is granted only by such person. A Nonstatutory Stock
Option may be transferred to the extent provided in the Option Agreement;
provided that if the Option Agreement does not expressly permit the
transfer of a Nonstatutory Stock Option, the Nonstatutory Stock Option
shall not be transferable except by will, by the laws of descent and
distribution or pursuant to a domestic relations order satisfying the
requirements of Rule 16b-3, and shall be exercisable during the lifetime of
the person to whom the Option is granted only by such person or any
transferee pursuant to a domestic relations order. Notwithstanding the
foregoing, the person to whom the Option is granted may, by delivering
written notice to the Company, in a form satisfactory to the Company,
designate a third party who, in the event of the death of the Optionee,
shall thereafter be entitled to exercise the Option.
(e) Vesting. The total number of shares of stock subject to an Option
may, but need not, be allotted in periodic installments (which may, but
need not, be equal). The Option Agreement may provide that from time to
time during each of such installment periods, the Option may become
exercisable ("vest") with respect to some or all of the shares allotted to
that period, and may be exercised with respect to some or all of the shares
allotted to such period and/or any prior period as to which the Option
became vested but was not fully exercised. The Option may be subject to
such other terms and conditions on the time or times when it may be
exercised (which may be based on performance criteria) as the Board may
deem appropriate. The provisions of this subsection 6(e) are subject to any
Option provisions governing the minimum number of shares as to which an
Option may be exercised.
(f) Securities Law Compliance. The Company may require any Optionee,
or any person to whom an Option is transferred under subsection 6(d), as a
condition of exercising any such Option, (1) to give written assurances
satisfactory to the Company as to the Optionee's knowledge and experience
in financial and business matters and/or to employ a purchaser
representative reasonably satisfactory to the Company who is knowledgeable
and experienced in financial and business matters, and that he or she is
capable of evaluating, alone or together with the purchaser representative,
the merits and risks of exercising the Option; and (2) to give written
assurances satisfactory to the Company stating that such person is
acquiring the stock subject to the Option for such person's own account and
not with any present intention of selling or otherwise distributing the
stock. These requirements, and any assurances given pursuant to such
requirements, shall be inoperative if (i) the issuance of the shares upon
the exercise of the Option has been registered under a then currently
effective registration statement under the Securities Act, or (ii) as to
any particular requirement, a determination is made by counsel for the
Company that such requirement need not be met in the circumstances under
the then applicable securities laws.
(g) Termination of Employment or Relationship as a Director or
Consultant. In the event an Optionee's Continuous Status as an Employee,
Director or Consultant terminates (other than upon the
(5)
<PAGE> 29
Optionee's death or Disability), the Optionee may exercise his or her
Option, but only within such period of time as is determined by the Board,
and only to the extent that the Optionee was entitled to exercise it at the
date of termination (but in no event later than the expiration of the term
of such Option as set forth in the Option Agreement). In the case of an
Incentive Stock Option, the Board shall determine such period of time (in
no event to exceed three (3) months from the date of termination) when the
Option is granted. If, at the date of termination, the Optionee is not
entitled to exercise his or her entire Option, the shares covered by the
unexercisable portion of the Option shall revert to the Plan. If, after
termination, the Optionee does not exercise his or her Option within the
time specified in the Option Agreement, the Option shall terminate, and the
shares covered by such Option shall revert to the Plan.
(h) Disability of Optionee. In the event an Optionee's Continuous
Status as an Employee, Director or Consultant terminates as a result of the
Optionee's Disability, the Optionee may exercise his or her Option, but
only within twelve (12) months from the date of such termination (or such
shorter period specified in the Option Agreement), and only to the extent
that the Optionee was entitled to exercise it at the date of such
termination (but in no event later than the expiration of the term of such
Option as set forth in the Option Agreement). If, at the date of
termination, the Optionee is not entitled to exercise his or her entire
Option, the shares covered by the unexercisable portion of the Option shall
revert to the Plan. If, after termination, the Optionee does not exercise
his or her Option within the time specified herein, the Option shall
terminate, and the shares covered by such Option shall revert to the Plan.
(i) Death of Optionee. In the event of the death of an Optionee, the
Option may be exercised, at any time within eighteen (18) months following
the date of death (or such shorter period specified in the Option
Agreement) (but in no event later than the expiration of the term of such
Option as set forth in the Option Agreement), by the Optionee's estate or
by a person who acquired the right to exercise the Option by bequest or
inheritance, but only to the extent the Optionee was entitled to exercise
the Option at the date of death. If, at the time of death, the Optionee was
not entitled to exercise his or her entire Option, the shares covered by
the unexercisable portion of the Option shall revert to the Plan. If, after
death, the Optionee's estate or a person who acquired the right to exercise
the Option by bequest or inheritance does not exercise the Option within
the time specified herein, the Option shall terminate, and the shares
covered by such Option shall revert to the Plan.
(j) Early Exercise. The Option may, but need not, include a provision
whereby the Optionee may elect at any time while an Employee, Director or
Consultant to exercise the Option as to any part or all of the shares
subject to the Option prior to the full vesting of the Option. Any unvested
shares so purchased may be subject to a repurchase right in favor of the
Company or to any other restriction the Board determines to be appropriate.
(k) Withholding. To the extent provided by the terms of an Option
Agreement, the Optionee may satisfy any federal, state or local tax
withholding obligation relating to the exercise of such Option by any of
the following means or by a combination of such means: (1) tendering a cash
payment; (2) authorizing the Company to withhold shares from the shares of
the common stock otherwise issuable to the participant as a result of the
exercise of the Option; or (3) delivering to the Company owned and
unencumbered shares of the common stock of the Company.
(l) Re-Load Options. Without in any way limiting the authority of the
Board or duly authorized committee to make or not to make grants of Options
hereunder, the Board or duly authorized committee shall have the authority
(but not an obligation) to include as part of any Option Agreement a
provision entitling the Optionee to a further Option (a "Re-Load Option")
in the event the Optionee exercises the Option evidenced by the Option
agreement, in whole or in part, by surrendering other shares of Common
Stock in accordance with this Plan and the terms and conditions of the
Option Agreement. Any such Re-Load Option (i) shall be for a number of
shares equal to the number of shares surrendered as part or all of the
exercise price of such Option; (ii) shall have an expiration date which is
the same as the expiration date of the Option the exercise of which gave
rise to such Re-Load Option; and (iii) shall have an exercise price which
is equal to one hundred percent (100%) of the Fair Market Value of the
Common Stock subject to the Re-Load Option on the date of exercise of the
original Option or, in the
(6)
<PAGE> 30
case of a Re-Load Option which is an Incentive Stock Option and which is
granted to a 10% stockholder (as described in subparagraph 5(b)), shall
have an exercise price which is equal to one hundred ten percent (110%) of
the Fair Market Value of the stock subject to the Re-Load Option on the
date of exercise of the original Option.
Any such Re-Load Option may be an Incentive Stock Option or a
Nonstatutory Stock Option, as the Board or duly authorized committee may
designate at the time of the grant of the original Option, provided,
however, that the designation of any Re-Load Option as an Incentive Stock
Option shall be subject to the one hundred thousand dollars ($100,000)
annual limitation on exercisability of Incentive Stock Options described in
subparagraph 12(d) of the Plan and in Section 422(d) of the Code. There
shall be no Re-Load Options on a Re-Load Option. Any such Re-Load Option
shall be subject to the availability of sufficient shares under
subparagraph 4(a) and shall be subject to such other terms and conditions
as the Board or duly authorized committee may determine.
7. TERMS OF STOCK BONUSES AND PURCHASES OF RESTRICTED STOCK.
Each stock bonus or restricted stock purchase agreement shall be in such
form and shall contain such terms and conditions as the Board or the duly
authorized committee shall deem appropriate. The terms and conditions of stock
bonus or restricted stock purchase agreements may change from time to time, and
the terms and conditions of separate agreements need not be identical, but each
stock bonus or restricted stock purchase agreement shall include (through
incorporation of provisions hereof by reference in the agreement or otherwise)
the substance of each of the following provisions as appropriate:
(a) Purchase Price. The purchase price under each stock purchase
agreement shall be such amount as the Board or committee shall determine
and designate in such agreement. Notwithstanding the foregoing, the Board
or the Committee may determine that eligible participants in the Plan may
be awarded stock pursuant to a stock bonus agreement in consideration for
past services actually rendered to the Company or for its benefit.
(b) Transferability. No rights under a stock bonus or restricted stock
purchase agreement shall be assignable by any participant under the Plan,
either voluntarily or by operation of law, except where such assignment is
required by law or expressly authorized by the terms of the applicable
stock bonus or restricted stock purchase agreement.
(c) Consideration. The purchase price of stock acquired pursuant to a
stock purchase agreement shall be paid either: (i) in cash at the time of
purchase; (ii) at the discretion of the Board or the committee, according
to a deferred payment or other arrangement with the person to whom the
stock is sold; or (iii) in any other form of legal consideration that may
be acceptable to the Board or the committee in their discretion.
Notwithstanding the foregoing, the Board or the committee to which
administration of the Plan has been delegated may award stock pursuant to a
stock bonus agreement in consideration for past services actually rendered
to the Company or for its benefit.
(d) Vesting. Shares of stock sold or awarded under the Plan may, but
need not, be subject to a repurchase option in favor of the Company in
accordance with a vesting schedule to be determined by the Board or the
committee.
(e) Termination of Employment or Relationship as a Director or
Consultant. In the event a Participant's Continuous Status as an Employee,
Director or Consultant terminates, the Company may repurchase or otherwise
reacquire any or all of the shares of stock held by that person which have
not vested as of the date of termination under the terms of the stock bonus
or restricted stock purchase agreement between the Company and such person.
8. STOCK APPRECIATION RIGHTS.
(a) The Board or committee shall have full power and authority, exercisable
in its sole discretion, to grant Stock Appreciation Rights to Employees or
Directors of or Consultants to, the Company or its Affiliates
(7)
<PAGE> 31
under the Plan. Each such right shall entitle the holder to a distribution based
on the appreciation in the fair market value per share of a designated amount of
stock.
(b) Three types of Stock Appreciation Rights shall be authorized for
issuance under the Plan:
(i) Tandem Stock Appreciation Rights. Tandem Rights will be granted
appurtenant to an Option and will require the holder to elect between the
exercise of the underlying Option for shares of stock and the surrender, in
whole or in part, of such Option for an appreciation distribution equal to
the excess of (A) the Fair Market Value (on the date of Option surrender)
of vested shares of stock purchasable under the surrendered Option over (B)
the aggregate exercise price payable for such shares.
(ii) Concurrent Stock Appreciation Rights. Concurrent Rights will be
granted appurtenant to an Option and may apply to all or any portion of the
shares of stock subject to the underlying Option and will be exercised
automatically at the same time the Option is exercised for those shares.
The appreciation distribution to which the holder of such concurrent right
shall be entitled upon exercise of the underlying Option shall be in an
amount equal to the excess of (A) the aggregate fair market value (at date
of exercise) of the vested shares purchased under the underlying Option
with such concurrent rights over (B) the aggregate exercise price paid for
those shares.
(iii) Independent Stock Appreciation Rights. Independent Rights may be
granted independently of any Option and will entitle the holder upon
exercise to an appreciation distribution equal in amount to the excess of
(A) the aggregate fair market value (at the date of exercise) of a number
of shares of stock equal to the number of vested share equivalents
exercised at such time (as described in subsection 7(c)(iii)(B)) over (B)
the aggregate fair market value of such number of shares of stock at the
date of grant.
(c) The terms and conditions applicable to each Tandem Right, Concurrent
Right and Independent Right shall be as follows:
(i) Tandem Rights.
(A) Tandem Rights may be tied to either Incentive Stock Options or
Nonstatutory Stock Options. Each such right shall, except as
specifically set forth below, be subject to the same terms and
conditions applicable to the particular Option to which it pertains. If
Tandem Rights are granted appurtenant to an Incentive Stock Option, they
shall satisfy any applicable Treasury Regulations so as not to
disqualify such Option as an Incentive Stock Option under the Code.
(B) The appreciation distribution payable on the exercised Tandem
Right shall be in cash in an amount equal to the excess of (I) the fair
market value (on the date of the Option surrender) of the number of
shares of stock covered by that portion of the surrendered Option in
which the optionee is vested over (II) the aggregate exercise price
payable for such vested shares.
(ii) Concurrent Rights.
(A) Concurrent Rights may be tied to any or all of the shares of
stock subject to any Incentive Stock Option or Nonstatutory Stock Option
grant made under the Plan. A Concurrent Right shall, except as
specifically set forth below, be subject to the same terms and
conditions applicable to the particular Option grant to which it
pertains.
(B) A Concurrent Right shall be automatically exercised at the same
time the underlying Option is exercised with respect to the particular
shares of stock to which the Concurrent Right pertains.
(C) The appreciation distribution payable on an exercised
Concurrent Right shall be in cash in an amount equal to such portion as
shall be determined by the Board or the committee at the time of the
grant of the excess of (I) the aggregate fair market value (on the
Exercise Date) of the vested shares of stock purchased under the
underlying Option which have Concurrent Rights appurtenant to them over
(II) the aggregate exercise price paid for such shares.
(8)
<PAGE> 32
(iii) Independent Rights.
(A) Independent Rights shall, except as specifically set forth
below, be subject to the same terms and conditions applicable to
Nonstatutory Stock Options as set forth in Section 6. They shall be
denominated in share equivalents.
(B) The appreciation distribution payable on the exercised
Independent Right shall be in an amount equal to the excess of (I) the
aggregate fair market value (on the date of the exercise of the
Independent Right) of a number of shares of Company stock equal to the
number of share equivalents in which the holder is vested under such
Independent Right, and with respect to which the holder is exercising
the Independent Right on such date, over (II) the aggregate fair market
value (on the date of the grant of the Independent Right) of such number
of shares of Company stock.
(C) The appreciation distribution payable on the exercised
Independent Right may be paid, in the discretion of the Board or the
Committee, in cash, in shares of stock or in a combination of cash and
stock. Any shares of stock so distributed shall be valued at fair market
value on the date the Independent Right is exercised.
(iv) Terms Applicable to Tandem Rights, Concurrent Rights and
Independent Rights.
(A) To exercise any outstanding Tandem, Concurrent or Independent
Right, the holder must provide written notice of exercise to the Company
in compliance with the provisions of the instrument evidencing such
right.
(B) If a Tandem, Concurrent, or Independent Right is granted to an
individual who is at the time subject to Section 16(b) of the Exchange
Act (a "Section 16(b) Insider"), then the instrument of grant shall
incorporate all the terms and conditions at the time necessary to assure
that the subsequent exercise of such right shall qualify for the
safe-harbor exemption from short-swing profit liability provided by Rule
16b-3 promulgated under the Exchange Act (or any successor rule or
regulation).
(C) No limitation shall exist on the aggregate amount of cash
payments the Company may make under the Plan in connection with the
exercise of Tandem, Concurrent or Independent Rights.
9. CANCELLATION AND RE-GRANT OF OPTIONS.
(a) The Board or the committee shall have the authority to effect, at any
time and from time to time, with the consent of the affected holders of Options
and/or Stock Appreciation Rights, (i) the repricing of any outstanding Options
and/or any Stock Appreciation Rights under the Plan and/or (ii) the cancellation
of any outstanding Options and/or any Stock Appreciation Rights under the Plan
and the grant in substitution therefor of new Options and/or Stock Appreciation
Rights under the Plan covering the same or different numbers of shares of stock,
but having an exercise price per share not less than eighty-five percent (85%)
of the Fair Market Value (one hundred percent (100%) of the Fair Market Value in
the case of an Incentive Stock Option or, in the case of a 10% stockholder (as
described in subparagraph 5(b)), not less than one hundred ten percent (110%) of
the Fair Market Value) per share of stock on the new grant date.
(b) An Option or Stock Appreciation Right canceled under this Section 9
shall continue to be counted against the maximum award of Options and Stock
Appreciation Rights permitted to an employee pursuant to subsection 5(c) of the
Plan. The repricing of an Option and/or Stock Appreciation Right under this
Section 9, resulting in a reduction of the exercise price, shall be deemed to be
a cancellation of the original Option and/or Stock Appreciation Right and the
grant of a substitute Option and/or Stock Appreciation Right; in the event of
such repricing, both the original and the substituted Options and/or Stock
Appreciation Rights shall be counted against the maximum award of Options and
Stock Appreciation Rights permitted to the employee pursuant to subsection 5(c)
of the Plan. The provisions of this subsection 9(b) shall be applicable only to
the extent required by Section 162(m) of the Code.
(9)
<PAGE> 33
10. COVENANTS OF THE COMPANY.
(a) During the terms of the Stock Awards, the Company shall keep available
at all times the number of shares of stock required to satisfy such Stock Awards
up to the number of shares of stock authorized under the Plan.
(b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock under the Stock Awards; provided, however, that
this undertaking shall not require the Company to register under the Securities
Act either the Plan, any Stock Award or any stock issued or issuable pursuant to
any such Stock Award. If, after reasonable efforts, the Company is unable to
obtain from any such regulatory commission or agency the authority which counsel
for the Company deems necessary for the lawful issuance and sale of stock under
the Plan, the Company shall be relieved from any liability for failure to issue
and sell stock under such Stock Awards unless and until such authority is
obtained.
11. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to Stock Awards shall constitute
general funds of the Company.
12. MISCELLANEOUS.
(a) The Board shall have the power to accelerate the time at which a Stock
Award may first be exercised or the time during which a Stock Award or any part
thereof will vest, notwithstanding the provisions in the Stock Award stating the
time at which it may first be exercised or the time during which it will vest.
(b) Neither an Optionee nor any person to whom an Option is transferred
under subsection 6(d) shall be deemed to be the holder of, or to have any of the
rights of a holder with respect to, any shares subject to such Option unless and
until such person has satisfied all requirements for exercise of the Option
pursuant to its terms.
(c) Nothing in the Plan or any instrument executed or Stock Award granted
pursuant thereto shall confer upon any Employee, Director, Consultant, Optionee,
or other holder of Stock Awards any right to continue in the employ of the
Company or any Affiliate (or to continue acting as a Director or Consultant) or
shall affect the right of the Company or any Affiliate to terminate the
employment or relationship as a Director or Consultant of any Employee,
Director, Consultant or Optionee with or without cause.
(d) To the extent that the aggregate Fair Market Value (determined at the
time of grant) of stock with respect to which Incentive Stock Options granted
after 1986 are exercisable for the first time by any Optionee during any
calendar year under all plans of the Company and its Affiliates exceeds one
hundred thousand dollars ($100,000), the Options or portions thereof which
exceed such limit (according to the order in which they were granted) shall be
treated as Nonstatutory Stock Options.
13. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or subject to
any Stock Award (through merger, consolidation, reorganization,
recapitalization, stock dividend, dividend in property other than cash, stock
split, liquidating dividend, combination of shares, exchange of shares, change
in corporate structure or otherwise), the Plan and outstanding Stock Awards will
be appropriately adjusted in the class(es) and maximum number of shares subject
to the Plan and the class(es) and number of shares and price per share of stock
subject to outstanding Stock Awards.
(b) In the event of: (1) a dissolution or liquidation or sale of all or
substantially all of the assets of the Company; (2) a merger or consolidation in
which the Company is not the surviving corporation; or (3) a reverse merger in
which the Company is the surviving corporation but the shares of the Company's
common stock outstanding immediately preceding the merger are converted by
virtue of the merger into other property, whether in the form of securities,
cash or otherwise, then, at the sole discretion of the Board and to the extent
permitted by applicable law: (i) any surviving corporation shall assume any
Stock Awards outstanding under
(10)
<PAGE> 34
the Plan or shall substitute similar Stock Awards for those outstanding under
the Plan, (ii) such Stock Awards shall continue in full force and effect, or
(iii) the time during which such Stock Awards become vested or may be exercised
shall be accelerated and any outstanding unexercised rights under any Stock
Awards terminated if not exercised prior to such event.
14. AMENDMENT OF THE PLAN.
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in Section 13 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the stockholders of
the Company to the extent stockholder approval is necessary for the Plan to
satisfy the requirements of Section 422 of the Code, Rule 16b-3 or any Nasdaq or
securities exchange listing requirements.
(b) The Board may in its sole discretion submit any other amendment to the
Plan for stockholder approval, including, but not limited to, amendments to the
Plan intended to satisfy the requirements of Section 162(m) of the Code and the
regulations promulgated thereunder regarding the exclusion of performance-based
compensation from the limit on corporate deductibility of compensation paid to
certain executive officers.
(c) It is expressly contemplated that the Board may amend the Plan in any
respect the Board deems necessary or advisable to provide Optionees with the
maximum benefits provided or to be provided under the provisions of the Code and
the regulations promulgated thereunder relating to Incentive Stock Options
and/or to bring the Plan and/or Incentive Stock Options granted under it into
compliance therewith.
(d) Rights and obligations under any Stock Award granted before amendment
of the Plan shall not be altered or impaired by any amendment of the Plan unless
(i) the Company requests the consent of the person to whom the Stock Award was
granted and (ii) such person consents in writing.
15. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board may suspend or terminate the Plan at any time. Unless sooner
terminated, the Plan shall terminate on September 13, 2003. No Stock Awards may
be granted under the Plan while the Plan is suspended or after it is terminated.
(b) Rights and obligations under any Stock Award granted while the Plan is
in effect shall not be altered or impaired by suspension or termination of the
Plan, except with the consent of the person to whom the Stock Award was granted.
16. EFFECTIVE DATE OF PLAN.
The Plan shall become effective as determined by the Board, but no Stock
Awards granted under the Plan shall be exercisable unless and until the Plan has
been approved by the stockholders of the Company.
(11)
<PAGE> 35
CHEMTRAK INCORPORATED
1992 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
ADOPTED SEPTEMBER 16, 1992
AMENDED SEPTEMBER, 1996
1. PURPOSE.
(a) The purpose of the 1992 Non-Employee Directors' Stock Option Plan (the
"Plan") is to provide a means by which each director of ChemTrak Incorporated, a
Delaware corporation (the "Company"), who is not otherwise an employee of the
Company or of any Affiliate of the Company (each such person being hereafter
referred to as a "Non-Employee Director") will be given an opportunity to
purchase stock of the Company.
(b) The word "Affiliate" as used in the Plan means any parent corporation
or subsidiary corporation of the Company as those terms are defined in Sections
424(e) and (f), respectively, of the Internal Revenue Code of 1986, as amended
(the "Code").
(c) The Company, by means of the Plan, seeks to retain the services of
persons now serving as Non-Employee Directors of the Company, to secure and
retain the services of persons capable of serving in such capacity, and to
provide incentives for such persons to exert maximum efforts for the success of
the Company.
(d) The Company intends that the options issued under the Plan not be
incentive stock options as that term is used in Section 422 of the Code.
2. ADMINISTRATION.
(a) The Plan shall be administered by the Board of Directors of the Company
(the "Board") unless and until the Board delegates administration to a
committee, as provided in subparagraph 2(c).
(b) The Board shall have the power, subject to, and within the limitations
of, the express provisions of the Plan:
(1) To construe and interpret the Plan and options granted under it,
and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any option agreement,
in a manner and to the extent it shall deem necessary or expedient to make
the Plan fully effective.
(2) To amend the Plan as provided in paragraph 11.
(3) Generally, to exercise such powers and to perform such acts as the
Board deems necessary or expedient to promote the best interests of the
Company.
(c) The Board may delegate administration of the Plan to a committee
composed of not fewer than two (2) members of the Board (the "Committee").
If administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore
possessed by the Board, subject, however, to such resolutions, not
inconsistent with the provisions of the Plan, as may be adopted from time
to time by the Board. The Board may abolish the Committee at any time and
revest in the Board the administration of the Plan.
3. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of paragraph 10 relating to adjustments upon
changes in stock, the stock that may be sold pursuant to options granted under
the Plan shall not exceed in the aggregate one hundred thousand (100,000) shares
of the Company's common stock, which includes the fifty thousand (50,000) shares
reserved for issuance in September 1996. If any option granted under the Plan
shall for any reason expire or otherwise terminate without having been exercised
in full, the stock not purchased under such option shall again become available
for the Plan.
<PAGE> 36
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
4. ELIGIBILITY.
Options shall be granted only to Non-Employee Directors of the Company.
5. NON-DISCRETIONARY GRANTS.
(a) Upon the date of the approval of the Plan by the Board (the "Adoption
Date"), each person who is then a Non-Employee Director shall be granted an
option to purchase two thousand (2,000) shares of common stock of the Company on
the terms and conditions set forth herein.
(b) Each person who is, after the Adoption Date, elected for the first time
to be a Non-Employee Director of the Company shall, upon the date of his initial
election to be a Non-Employee Director by the Board or stockholders of the
Company, be granted an option to purchase five thousand (5,000) shares of common
stock of the Company on the terms and conditions set forth herein.
(c) On January 2 of each year, commencing January 2, 1993, each person who
is then, and who has been for at least three (3) months, a Non-Employee Director
of the Company shall be granted an option to purchase two thousand (2,000)
shares of common stock of the Company on the terms and conditions set forth
herein. Should the date of grant set forth above be a legal holiday, such grant
shall be made on the next business day.
6. OPTION PROVISIONS.
Each option shall contain the following terms and conditions:
(a) No option shall be exercisable after the expiration of ten (10) years
from the date it was granted.
(b) The exercise price of each option shall be one hundred percent (100%)
of the fair market value of the stock subject to such option on the date such
option is granted.
(c) The exercise price may be paid, to the extent permitted by applicable
statutes and regulations, in cash or pursuant to Regulation T as promulgated by
the Federal Reserve Board.
(d) An option shall not be transferable except by will or by the laws of
descent and distribution, and shall be exercisable during the lifetime of the
person to whom the option is granted only by such person or by his guardian or
legal representative.
(e) An option shall vest with respect to each optionee in four (4) equal
annual installments commencing on the date one year after the date of grant of
the option, provided that the optionee has, during the entire period prior to
such vesting date, continuously served as a Non-Employee Director or as an
employee of or consultant to the Company or any Affiliate of the Company,
whereupon such option shall become fully exercisable in accordance with its
terms with respect to that portion of the shares represented by that
installment.
(f) The Company may require any optionee, or any person to whom an option
is transferred under subparagraph 6(d), as a condition of exercising any such
option: (1) to give written assurances satisfactory to the Company as to the
optionee's knowledge and experience in financial and business matters; and (2)
to give written assurances satisfactory to the Company stating that such person
is acquiring the stock subject to the option for such person's own account and
not with any present intention of selling or otherwise distributing the stock.
These requirements, and any assurances given pursuant to such requirements,
shall be inoperative if (i) the issuance of the shares upon the exercise of the
option has been registered under a then-currently-effective registration
statement under the Securities Act of 1933, as amended (the "Securities Act"),
or (ii) as to any particular requirement, a determination is made by counsel for
the Company that such requirement need not be met in the circumstances under the
then-applicable securities laws.
<PAGE> 37
(g) Notwithstanding anything to the contrary contained herein, an option
may not be exercised unless the shares issuable upon exercise of such option are
then registered under the Securities Act or, if such shares are not then so
registered, the Company has determined that such exercise and issuance would be
exempt from the registration requirements of the Securities Act.
7. COVENANTS OF THE COMPANY.
(a) During the terms of the options granted under the Plan, the Company
shall keep available at all times the number of shares of stock required to
satisfy such options.
(b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the options granted under the
Plan; provided, however, that this undertaking shall not require the Company to
register under the Securities Act either the Plan, any option granted under the
Plan, or any stock issued or issuable pursuant to any such option. If the
Company is unable to obtain from any such regulatory commission or agency the
authority which counsel for the Company deems necessary for the lawful issuance
and sale of stock under the Plan, the Company shall be relieved from any
liability for failure to issue and sell stock upon exercise of such options.
8. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to options granted under the Plan
shall constitute general funds of the Company.
9. MISCELLANEOUS.
(a) Neither an optionee nor any person to whom an option is transferred
under subparagraph 6(d) shall be deemed to be the holder of, or to have any of
the rights of a holder with respect to, any shares subject to such option unless
and until such person has satisfied all requirements for exercise of the option
pursuant to its terms.
(b) Nothing in the Plan or in any instrument executed pursuant thereto
shall confer upon any Non-Employee Director any right to continue in the service
of the Company or any Affiliate or shall affect any right of the Company, its
Board or stockholders or any Affiliate to terminate the service of any
Non-Employee Director with or without cause.
(c) No Non-Employee Director, individually or as a member of a group, and
no beneficiary or other person claiming under or through him, shall have any
right, title or interest in or to any option reserved for the purposes of the
Plan except as to such shares of common stock, if any, as shall have been
reserved for him pursuant to an option granted to him.
(d) In connection with each option made pursuant to the Plan, it shall be a
condition precedent to the Company's obligation to issue or transfer shares to a
Non-Employee Director, or an affiliate of such Non-Employee Director, or to
evidence the removal of any restrictions on transfer, that such Non-Employee
Director make arrangements satisfactory to the Company to insure that the amount
of any federal or other withholding tax required to be withheld with respect to
such sale or transfer, or such removal or lapse, is made available to the
Company for timely payment of such tax.
10. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or subject to
any option granted under the Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or otherwise), the Plan and outstanding
options will be appropriately adjusted in the class(es) and maximum number of
shares subject to the Plan and the class(es) and number of shares and price per
share of stock subject to outstanding options.
<PAGE> 38
(b) In the event of: (1) a dissolution or liquidation of the Company; (2) a
merger or consolidation in which the Company is not the surviving corporation;
(3) a reverse merger in which the Company is the surviving corporation but the
shares of the Company's common stock outstanding immediately preceding the
merger are converted by virtue of the merger into other property, whether in the
form of securities, cash or otherwise; or (4) any other capital reorganization
in which more than fifty percent (50%) of the shares of the Company entitled to
vote are exchanged, then, at the sole discretion of the Board and to the extent
permitted by applicable law, the time during which such options may be exercised
shall be accelerated and the options terminated if not exercised prior to such
event.
11. AMENDMENT OF THE PLAN.
(a) The Board at any time, and from time to time, may amend the Plan.
Except as provided in paragraph 10 relating to adjustments upon changes in
stock, no amendment shall be effective unless approved by the stockholders of
the Company within twelve (12) months before or after the adoption of the
amendment if such amendment requires stockholder approval in order for the Plan
to comply with the requirements of Rule 16b-3 promulgated under the Exchange Act
or any Nasdaq or securities exchange listing requirements.
(b) Rights and obligations under any option granted before any amendment of
the Plan shall not be altered or impaired by such amendment of the Plan unless
(i) the Company requests the consent of the person to whom the option was
granted and (ii) such person consents in writing.
12. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board may suspend or terminate the Plan at any time. Unless sooner
terminated, the Plan shall terminate on June 30, 2002. No options may be granted
under the Plan while the Plan is suspended or after it is terminated.
(b) Rights and obligations under any option granted while the Plan is in
effect shall not be altered or impaired by suspension or termination of the
Plan, except with the consent of the person to whom the option was granted.
13. EFFECTIVE DATE OF PLAN AND AMENDMENTS; CONDITIONS OF EXERCISE.
(a) The Plan and any amendments thereto shall become effective upon
adoption by the Board of Directors, subject to the condition subsequent that the
Plan and those amendments requiring stockholder approval are approved by the
stockholders of the Company.
(b) No option granted under the Plan shall be exercised or exercisable
unless and until the condition of subparagraph 13(a) above has been met.
<PAGE> 39
CHEMTRAK INCORPORATED
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON AUGUST 14, 1997
The undersigned hereby appoints PRITHIPAL SINGH, PH.D. and EDWARD F.
COVELL, and each of them, as attorneys and proxies of the undersigned, with
full power of substitution, to vote all of the shares of stock of ChemTrak
Incorporated which the undersigned may be entitled to vote at the Annual
Meeting of Stockholders of ChemTrak Incorporated to be held at the Network
Meeting Center at Techmart, 5201 Great America Parkway, Santa Clara, California,
on Thursday, August 14, 1997 at 1:00 p.m. local time, and at any and all
postponements, continuations, and adjournments thereof, with all powers that the
undersigned would possess if personally present, upon and in respect of the
following matters and in accordance with the following instructions, with
discretionary authority as to any and all other matters that may properly come
before the meeting.
UNLESS A CONTRARY DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED FOR
ALL NOMINEES LISTED IN PROPOSAL 1 AND FOR PROPOSALS 2, 3 AND 4, AS MORE
SPECIFICALLY DESCRIBED IN THE PROXY STATEMENT. IF SPECIFIC INSTRUCTIONS ARE
INDICATED, THIS PROXY WILL BE VOTED IN ACCORDANCE THEREWITH.
[SEE REVERSE SIDE]
<PAGE> 40
[X] PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE
<TABLE>
<S> <C> <C> <C>
FOR all nominees listed WITHHOLD AUTHORITY MANAGEMENT RECOMMENDS A VOTE
below (except as marked to vote for all FOR THE NOMINEES FOR DIRECTOR
to the contrary below. nominees listed below. LISTED BELOW.
1. To elect two directors
to hold office until the [ ] [ ] NOMINEES: Edward F. Covell, Malcolm Jozoff
2000 Annual Meeting
of Stockholders.
TO WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE(S)
WRITE SUCH NOMINEE(S)' NAME BELOW:
- ------------------------------------------------
MANAGEMENT RECOMMENDS A VOTE FOR
PROPOSALS 2, 3 AND 4.
For Against Abstain
2. To approve the Company's 1993 Equity Incentive [ ] [ ] [ ]
Plan, as amended, to increase the aggregate
number of shares of Common Stock authorized
for issuance under such plan by 600,000 shares,
to 1,050,000 shares.
3. To approve the Company's 1992 Non-Employee [ ] [ ] [ ]
Directors' Stock Option Plan, as amended, to
increase the aggregate number of shares of
Common Stock authorized for issuance under
such plan by 50,000 shares, to 100,000 shares.
4. To ratify the selection of Ernst & Young LLP as [ ] [ ] [ ]
independent auditors of the Company for its
fiscal year ending December 31, 1997.
PLEASE VOTE, DATE AND PROMPTLY RETURN THIS PROXY IN THE ENCLOSED RETURN ENVELOPE
WHICH IS POSTAGE PREPAID IF MAILED IN THE UNITED STATES.
SIGNATURE(S)__________________________________________________________________________________DATED JULY 10, 1997________________
Please sign exactly as your name appears hereon. If the stock is registered in the names of two or more persons, each should sign.
Executors, administrators, trustees, guardians and attorneys-in-fact should add their titles. If signer is a corporation, please
give full corporate name and have a duly authorized officer sign, stating title. If signer is a partnership, please sign
in partnership name by authorized person.
</TABLE>
