<PAGE>
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 Rule 14a-11(c) or Rule 14a-12
Matritech, Inc.
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if
other than the Registrant)
Payment of Filing Fee (check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
not applicable
________________________________________________________________________
(2) Aggregate number of securities to which transaction applies:
not applicable
________________________________________________________________________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
not applicable
________________________________________________________________________
(4) Proposed maximum aggregate value of transaction:
not applicable
________________________________________________________________________
(5) Total fee paid:
not applicable
________________________________________________________________________
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
not applicable
________________________________________________________________________
(2) Form, Schedule or Registration Statement No.:
not applicable
________________________________________________________________________
(3) Filing Party:
not applicable
________________________________________________________________________
(4) Date Filed:
not applicable
________________________________________________________________________
<PAGE>
MATRITECH, INC.
330 NEVADA STREET
NEWTON, MASSACHUSETTS 02160
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 13, 1997
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
Matritech, Inc., a Delaware corporation (the "Company"), will be held on Friday,
June 13, 1997, at 10:00 a.m. local time, at the offices of the Company, 330
Nevada Street, Newton, Massachusetts 02160, for the following purposes:
I. To elect a Board of Directors for the ensuing year.
II. To approve an amendment to the Company's 1992 Stock Plan (the
"1992 Plan") to (i) increase the number of shares of Common Stock authorized
for issuance pursuant to the 1992 Plan from 1,000,000 shares to 1,500,000
shares and (ii) increase the limitation on the maximum aggregate number of
shares that may be issued to any one person under the 1992 Plan from 300,000
to 500,000 shares.
III. To ratify the selection of the firm of Arthur Andersen LLP as
auditors for the fiscal year ending December 31, 1997.
IV. To transact such other business as may properly come before the
meeting and any adjournments thereof.
Only stockholders of record at the close of business on April 18, 1997
are entitled to notice of and to vote at the meeting and any adjournment
thereof.
By Order of the Board of Directors
Leslie R. Teso, Secretary
Newton, Massachusetts
April 28, 1997
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE
AND SIGN THE ENCLOSED PROXY CARD AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE
IN ORDER TO ASSURE REPRESENTATION OF YOUR SHARES.
<PAGE>
-1-
MATRITECH, INC.
330 NEVADA STREET
NEWTON, MASSACHUSETTS 02160
_______________________________
PROXY STATEMENT
_______________________________
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON
JUNE 13, 1997
Proxies in the form enclosed with this proxy statement are solicited
by the Board of Directors of Matritech, Inc. (the "Company" or "Matritech") for
use at the Annual Meeting of Stockholders (the "Annual Meeting") to be held on
Friday, June 13, 1997 at 10:00 a.m. local time, at the offices of the Company,
330 Nevada Street, Newton, Massachusetts 02160.
Only stockholders of record as of April 18, 1997 (the "Record Date")
will be entitled to vote at the Annual Meeting and any adjournments thereof. As
of April 2, 1997, there were 16,041,318 shares of Common Stock, par value $.01
per share, of the Company issued and outstanding. Each share of Common Stock
outstanding as of the Record Date will be entitled to one vote and stockholders
may vote in person or by proxy. Execution of a proxy will not in any way affect
a stockholder's right to attend the Annual Meeting and vote in person. Any
stockholder giving a proxy has the right to revoke it by written notice to the
Secretary of the Company at any time before it is exercised.
The persons named as attorneys in the proxies are directors and/or
officers of the Company. All properly executed proxies returned in time to be
counted at the Annual Meeting will be voted as stated below under "Voting
Procedures." Any stockholder giving a proxy has the right to withhold authority
to vote for any individual nominee to the Board of Directors by writing that
nominee's name in the space provided on the proxy.
In addition to the election of directors, the stockholders will
consider a proposal to approve an amendment to the Company's 1992 Stock Plan
(the "1992 Plan") and a proposal to ratify the selection of auditors, as further
described in this proxy statement. Where a choice has been specified on the
proxy with respect to a matter, the shares represented by the proxy will be
voted in accordance with the specifications and will be voted FOR if no
specification is indicated.
The Board of Directors of the Company knows of no other matters to be
presented at the Annual Meeting. If any other matter should be presented at the
Annual Meeting upon which a vote may be properly taken, shares represented by
all proxies received by the Board of Directors will be voted with respect
thereto in accordance with the judgment of the persons named as attorneys in the
proxies.
An Annual Report, containing financial statements for the fiscal year
ended December 31, 1996, is being mailed together with this proxy statement to
all stockholders entitled to vote. This proxy statement and the form of proxy
were first mailed to stockholders on or about April 28, 1997.
<PAGE>
-2-
PROPOSAL I
ELECTION OF DIRECTORS
The directors of the Company are elected annually and hold office
until the next annual meeting of stockholders and until their successors have
been elected and qualified. Shares represented by all proxies received by the
Board of Directors and not so marked as to withhold authority to vote for any
individual nominee or for all nominees will be voted (unless one or more
nominees are unable to serve) FOR the election of the nominees named below. The
Board of Directors knows of no reason why any such nominee should be unable or
unwilling to serve, but if such should be the case, proxies will be voted for
the election of some other person or for fixing the number of directors at a
lesser number.
Nominated for election to the Company's Board of Directors are:
Stephen D. Chubb; David L. Corbet; J. Robert Buchanan; Thomas R. Morse; David
Rubinfien; T. Stephen Thompson and C. William Zadel. Each of the nominees
currently serves as a director of the Company. A plurality of the votes cast by
the stockholders present or represented by proxy and entitled to vote at the
meeting is required for the election of directors. See "Voting Procedures."
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
The Board of Directors met six times and acted by unanimous written
consent once during the fiscal year ended December 31, 1996. The Audit
Committee of the Board of Directors, of which Messrs. Thompson and Zadel are
members, oversees the accounting and tax functions of the Company, including
matters relating to the appointment and activities of the Company's independent
auditors. The Audit Committee met once during the fiscal year ended December
31, 1996. The Compensation Committee of the Board of Directors, of which
Messrs. Morse, Rubinfien and Thompson are members, reviews and makes
recommendations concerning executive compensation, and administers the 1992 Plan
and the Company's 1992 Employee Stock Purchase Plan. The Compensation Committee
met five times and acted by unanimous written consent once during the year ended
December 31, 1996. The Board of Directors does not currently have a standing
nominating committee. Each of the directors attended at least 75% of the
aggregate of the total number of meetings of the Board of Directors and of all
Committees on which he served.
<PAGE>
-3-
OCCUPATIONS OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the nominees to be elected at the
Annual Meeting, and the executive officers of the Company, their ages as of
April 25, 1997, and the positions currently held by each such person with the
Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- ---- --------
<S> <C> <C>
Stephen D. Chubb (1).................... 53 Chairman, Director and Chief Executive Officer
David L. Corbet (1)..................... 43 Director, President and Chief Operating Officer
Leslie R. Teso (1)...................... 38 Vice President, Finance, Treasurer and Secretary
Ying-Jye Wu, Ph.D. (1).................. 48 Vice President, Product Development
J. Robert Buchanan...................... 69 Director
Thomas R. Morse (2)..................... 45 Director
David Rubinfien (2)..................... 75 Director
T. Stephen Thompson (2)(3).............. 49 Director
C. William Zadel (3).................... 53 Director
- -------------------------
</TABLE>
(1) Officers of the Company are elected annually by the Board of Directors and
serve until the next Annual Meeting of the Board of Directors and until
their respective successors are elected and qualified, or until their
earlier resignation or removal.
(2) Member of Compensation Committee
(3) Member of Audit Committee
Mr. Chubb, a founder of Matritech, has been Chairman since October
1993 and a director and Matritech's Chief Executive Officer since the Company's
inception in 1987. Mr. Chubb was the Company's President until October 1993 and
was also Treasurer of the Company until March 1992. From 1984 to 1986, Mr.
Chubb served as President and Chief Executive Officer of T Cell Sciences, Inc.,
a publicly traded biotechnology company. Prior to 1984, Mr. Chubb was President
and Chief Executive Officer of Cytogen Company, also a publicly traded
biotechnology company. He currently serves as a director of Charles River
Laboratories, a Division of Bausch and Lomb, a publicly traded medical products
company, and as a director of several private companies.
Mr. Corbet has been Matritech's President, Chief Operating Officer,
and a director since October 1993, and joined the Company in April 1993 as
Executive Vice President. Prior to joining Matritech and since 1991, Mr.
Corbet had served as President and Chief Operating Officer of T Cell
Diagnostics, Inc., a subsidiary of T Cell Sciences, Inc. which is a publicly
traded biotechnology company, and served in various other executive and
managerial offices there since 1985.
Ms. Teso has been Matritech's Vice President, Finance, Treasurer and
Secretary since March 1992. From January 1989 to March 1992, Ms. Teso was the
Company's Controller. From 1985 to 1989, Ms. Teso was Controller of Thackray
USA Inc., a subsidiary of a U.K.-based medical device manufacturer of orthopedic
implants and surgical instruments.
<PAGE>
-4-
Dr. Wu has been Matritech's Vice President, Product Development since
February 1997. From March 1995 to February 1997 he was Matritech's Vice
President, Research and Development and from December 1992 to March 1995 he was
Matritech's Vice President, Research. From June 1990 to December 1992, Dr. Wu
was Director of Cell Biology at CytoMed, Inc., a biotechnology company. From
1987 to 1990, Dr. Wu was a manager of research and development at Pharmacia ENI
Diagnostics, Inc., a biotechnology company.
Dr. Buchanan has served as a director of Matritech since June 1996.
From 1994 to 1996, Dr. Buchanan was Chairman of Worldcare, Limited, a
telemedicine company. From 1982 until his retirement in 1994, Dr. Buchanan
served as General Director of Massachusetts General Hospital and from 1977 to
1982 served as President of the Michael Reese Medical Center and Associate Dean
of the Pritzker School of Medicine at the University of Chicago. Dr. Buchanan
currently serves as a director of Hybridon, Inc., a publicly traded
biotechnology company; i-STAT Corporation, a publicly traded medical equipment
company; Charles River Laboratories, a Division of Bausch and Lomb, a publicly
traded medical products company; and Strategic Management Information, Inc., a
privately held software company.
Mr. Morse has served as a director of Matritech since March 1988.
Since 1983, Mr. Morse has served as a Managing Director of Philadelphia Ventures
Management, Inc., a venture capital company and an investor in the Company. He
currently serves as a director of Philadelphia Ventures Liberty Fund, L.P., a
publicly traded business development company, and several private companies.
Mr. Rubinfien has served as a director of Matritech since May 1988.
Mr. Rubinfien was Chairman and President of Systemix Inc., a biotechnology
company, from 1989 through 1991 and President and Chief Executive Officer of
Microgenics Company, a medical diagnostics company, from 1985 through 1987. Mr.
Rubinfien currently serves as a director of Molecular Biosystems, Inc., a
publicly traded biomedical company, ChemTrak, Inc., a publicly traded
biochemical company, Biocircuits, Inc., a publicly traded biomedical company,
and several private companies.
Mr. Thompson has served as a director of Matritech since May 1994.
Mr. Thompson is President, Chief Executive Officer and a director of Immtech
International, Inc., a privately held biotechnology company, which positions he
has held since 1992. From 1986 to 1992, Mr. Thompson held a number of
management positions, most recently as President and Chief Executive Officer, at
Amersham Corporation, a subsidiary of Amersham International plc. which is a
publicly traded life science and health care company.
Mr. Zadel has served as a director of Matritech since December, 1995.
Mr. Zadel is Chairman, President, Chief Executive Officer and a director of
Millipore Corporation, a publicly traded equipment company, which positions he
has held since April 1996. From 1985 through 1995, Mr. Zadel served as
President and Chief Executive Officer of Ciba Corning Diagnostics Corporation, a
biotechnology company. Mr. Zadel currently serves, and has served since 1989,
as a director of Kulicke & Soffa Industries, Inc., a publicly traded
semiconductor assembly equipment company. In addition, since February 1996, Mr.
Zadel has served as a director of Zoll Medical Corporation, a publicly traded
medical instruments and supplies company.
<PAGE>
-5-
SECURITIES OWNERSHIP OF
MANAGEMENT AND PRINCIPAL STOCKHOLDERS
The following table sets forth, as of April 18, 1997 certain
information regarding the ownership of shares of the Company's Common Stock by:
(i) each person who, to the knowledge of the Company, owned beneficially more
than 5% of the shares of Common Stock of the Company outstanding at such date,
(ii) each director and nominee of the Company, (iii) each Named Officer (as
defined below) and (iv) all current directors and executive officers as a group:
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT
NAME OWNERSHIP(1) OF CLASS (2)
---- ------------ ------------
<S> <C> <C>
Stephen D. Chubb (3).................... 375,042 2.3%
David L. Corbet (4)..................... 96,229 *
Ying-Jye Wu (5)......................... 50,008 *
Leslie R. Teso (6)...................... 18,384 *
J. Robert Buchanan (7).................. 12,500 *
Thomas Morse (8)........................ 695,440 4.3%
David Rubinfien (9)..................... 37,849 *
T. Stephen Thompson (10)................ 29,899 *
C. William Zadel (11)................... 15,550 *
Forstmann-Leff Associates, Inc. (12).... 1,785,300 11.1%
55 East 52nd Street
New York, NY 10055
All executive officers and directors as a group
(9 persons)(13)......................... 1,330,901 8.1%
- -----------------------------
</TABLE>
* Indicates less than 1%
(1) Except as indicated in footnotes to this table, the persons named in this
table have sole voting and investment power with respect to all shares of
Common Stock owned based upon information provided to the Company by the
directors, officers and principal stockholders.
<PAGE>
-6-
(2) The number of shares of Common Stock deemed outstanding for this
calculation includes (i) 16,041,318 shares of Common Stock outstanding on
April 2, 1997 and (ii) all Common Stock underlying options or warrants
which are currently exercisable or will become exercisable within 60 days
of April 18, 1997 by the person or group in question.
(3) Mr. Chubb's beneficial ownership includes currently exercisable bridge loan
warrants to purchase 4,688 shares of the Company's Common Stock and 1,240
shares issuable upon exercise of outstanding stock options which are
exercisable on April 18, 1997 or within 60 days thereafter.
(4) Mr. Corbet's beneficial ownership includes 93,163 shares issuable upon
exercise of outstanding stock options exercisable on April 18, 1997 or
within 60 days thereafter. Mr. Corbet holds all of his issued shares
jointly with his wife.
(5) Dr. Wu's beneficial ownership includes 43,708 shares issuable upon exercise
of outstanding stock options exercisable on April 18, 1997 or within 60
days thereafter.
(6) Ms. Teso's beneficial ownership includes 11,559 shares issuable upon
exercise of outstanding stock options exercisable on April 18, 1997 or
within 60 days thereafter. Ms. Teso holds all of her issued shares jointly
with her husband.
(7) Dr. Buchanan's beneficial ownership includes 12,500 shares issuable upon
exercise of outstanding stock options exercisable on April 18, 1997 or
within 60 days thereafter.
(8) Mr. Morse's beneficial ownership includes 629,497 shares of Common Stock
held by Century IV Partners and Commonwealth Venture Partners I, L.P., and
currently exercisable warrants to purchase 36,626 shares Common Stock held
by Century IV Partners, Commonwealth Venture Partners I, L.P., Pennsylvania
Venture Partners, L.P. and Philadelphia Ventures - Japan I, L.P.
(collectively, the "Philadelphia Venture Funds"). In addition, Mr.
Morse's beneficial ownership includes 18,649 shares issuable to Mr. Morse
upon exercise of outstanding stock options exercisable on April 18, 1997 or
within 60 days thereafter. Mr. Morse is an officer and stockholder of
Philadelphia Ventures, Inc., which serves as a general partner or
investment manager to each of the Philadelphia Venture Funds, and may be
deemed to share voting and investment power with respect to such shares of
Common Stock. Mr. Chubb, Chairman, CEO, and a director of the Company is a
limited partner of Pennsylvania Venture Partners, L.P. and an advisor to
the Philadelphia Venture Funds. Mr. Morse disclaims beneficial ownership
of the shares beneficially owned by the Philadelphia Venture Funds.
(9) Mr. Rubinfien's beneficial ownership includes 37,849 shares issuable upon
exercise of outstanding stock options exercisable on April 18, 1997 or
within 60 days thereafter.
(10) Mr. Thompson's beneficial ownership includes 19,399 shares issuable upon
exercise of outstanding stock options exercisable on April 18, 1997 or
within 60 days thereafter.
(11) Mr. Zadel's beneficial ownership includes 14,550 shares issuable upon
exercise of outstanding stock options exercisable on April 18, 1997 or
within 60 days thereafter.
(12) As of December 31, 1996, Forstmann-Leff Associates, Inc. ("FLA"), a New
York corporation and a registered investment adviser under Section 203 of
the Investment Advisers Act of 1940
<PAGE>
-7-
(the "Act"), beneficially owned 1,785,300 shares of the Company's Common
Stock, of which 1,750,400 shares were held in various customer accounts
with respect to which it had sole investment and voting discretion. FLA
also shares investment and voting discretion with respect to 34,900 shares
of the Company's Common Stock held by FLA Asset Management, Inc. ("FLAM"),
a wholly owned subsidiary of FLA and a registered investment adviser under
the Act. As of December 31, 1996, FLAM beneficially owned 34,900 shares of
the Company's Common Stock, which shares were held in various customer
accounts with respect to which FLAM had shared investment and voting
discretion. By virtue of its ownership of all of the stock of FLAM, FLA may
be deemed to be the beneficial owner of these 34,900 shares. FLA's and
FLAM's voting power with respect to shares held in various customer
accounts is pursuant to specific authority granted by clients, which
authority may be withdrawn by such clients. In the event of the termination
of an investment advisory agreement with a client, FLA's and FLAM's
investment and/or voting power with respect to certain shares held for the
account of such client may terminate. All statements contained herein with
respect to FLAM and FLA are based solely upon information provided to the
Company by FLAM and FLA.
(13) Includes 252,617 shares issuable upon exercise of outstanding stock options
and 41,314 shares issuable pursuant to warrants exercisable on April 18,
1997 or within 60 days thereafter.
<PAGE>
-8-
COMPENSATION AND OTHER INFORMATION
CONCERNING DIRECTORS AND OFFICERS
EXECUTIVE COMPENSATION
The following table summarizes the compensation paid or accrued by the
Company for services rendered for its fiscal year ended December 31, 1996 to Mr.
Chubb, the Company's Chairman and Chief Executive Officer, Mr. Corbet, Dr. Wu
and Ms. Teso, the next three most highly compensated executive officers of the
Company as of December 31, 1996 (the "Named Officers"). No other executive
officers earned total salary and bonus exceeding $100,000 during 1996. The
Company did not grant any restricted stock awards or stock appreciation rights
("SARs") and did not make any long-term incentive plan payouts during 1996:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------- ----------
AWARDS
------
ALL
SECURITIES OTHER
NAME AND SALARY BONUS UNDERLYING COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) OPTIONS(#) ($)(1)
- ----------------------------- ---- --------- -------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Stephen D. Chubb 1996 $176,000 $37,488 209,721 $ 236
Chairman, Director and 1995 162,000 19,845 -- 252
Chief Executive Officer 1994 150,000 -- -- 174
David L. Corbet 1996 $165,000 $29,288 158,374 $226,336
Director, President and 1995 152,000 33,620 9,000 252
Chief Operating Officer 1994 140,000 10,000 -- 174
Ying-Jye Wu 1996 $118,800 $17,321 55,034 $ 234
Vice President, Product 1995 108,000 11,340 4,000 252
Development 1994 100,000 -- -- 174
Leslie R. Teso 1996 $ 90,500 $15,204 44,227 $ 208
Vice President, Finance, 1995 79,000 9,184 3,500 199
Treasurer and Secretary 1994 72,000 -- -- 125
- --------------------
</TABLE>
(1) Such compensation represents insurance premiums paid by the Company with
respect to term life insurance for such individual. With respect to Mr.
Corbet, the 1996 figure also includes an additional $226,100 of ordinary
income recognized upon the exercise of the option to purchase, and
subsequent "disqualifying disposition," as defined in Section 422(c)(2) of
the Internal Revenue Code of 1986, as amended, of 30,000 shares of the
Company's Common Stock.
<PAGE>
-9-
OPTIONS
The following table sets forth information concerning options granted
during the fiscal year ended December 31, 1996 under the Company's 1992 Plan to
the Named Officers:
OPTION GRANTS IN LAST FISCAL YEAR(1)
<TABLE>
<CAPTION>
Potential Realizable Value
Individual Grants(2) at Assumed Annual Rates of
- ------------------------------------------------------------------------------------------------------ Stock Price Appreciation
for Option Term (3)
----------------------------
Number of Percent of Total
Securitiess Options Granted
Underlying to Employees in
Options Granted Fiscal Exercise or Base Price Expiration
Name (#) Year(%)(4) ($/Share) Date 5%($) 10%($)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Stephen D. Chubb 4,961 0.9% $ 4.00 1-2-06 $ 12,480 $ 31,626
204,760 36.9 7.875 12-17-06 1,014,083 2,569,886
David L. Corbet 4,655 0.8 4.00 1-2-06 11,710 29,675
153,719 27.7 7.875 12-17-06 761,300 1,929,284
Ying-Jye Wu 2,835 0.5 4.00 1-2-06 7,132 18,073
52,199 9.4 7.875 12-17-06 258,518 655,135
Leslie R. Teso 2,296 0.4 4.00 1-2-06 5,776 14,637
41,931 7.6 7.875 12-17-06 207,665 526,264
- -------------------------
</TABLE>
(1) The Company did not grant any SARs in 1996.
(2) Stock options were granted under the Company's 1992 Plan at an exercise
price equal to the fair market value of the Company's Common Stock on the
date of grant. The options have a term of ten years from the date of grant
and become exercisable as to 25% of the shares covered on each of the first
four anniversaries of the date of grant.
(3) Amounts reported in these columns represent amounts that may be realized
upon exercise of the options immediately prior to the expiration of their
term assuming the specified compounded rates of appreciation (5% and 10%)
on the Company's Common Stock over the term of the options. These numbers
are calculated based on rules promulgated by the Securities and Exchange
Commission and do not reflect the Company's estimate of future stock price
growth. Actual gains, if any, on stock option exercises and Common Stock
holdings are dependent on the timing of such exercise and the future
performance of the Company's Common Stock. There can be no assurance that
the rates of appreciation assumed in this table can be achieved or that the
amounts reflected will be received by the individuals.
(4) A total of 554,349 options were granted to employees in 1996 under the
Company's 1992 Plan. Percentages do not take into account 4,300 options
granted to directors in 1996 under the 1992 Plan and 6,000 options granted
to consultants in 1996 under the 1992 Plan.
<PAGE>
-10-
The following table sets forth certain information concerning options
held by the Named Officers on December 31, 1996.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES (1)
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options at In-the-Money Options at
December 31, 1996 (#) December 31, 1996 ($)(2)
Shares Acquired on Value Exercisable/ Exercisable/
Name Exercise (#) Realized ($) Unexercisable Unexercisable
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Stephen D. Chubb........... -- $ -- 0/209,721 $ 0/$150,300
David L. Corbet............ 30,000 239,850 62,250/195,124 414,122/363,887
Ying-Jye Wu................ -- -- 42,000/60,034 260,358/75,684
Leslie R. Teso............. 6,825 100,191 10,110/47,352 67,085/56,654
- ---------------
</TABLE>
(1) The Company has never granted any SARs.
(2) Value is based on the difference between the option exercise price and
$8.50, the fair market value of the Company's Common Stock on December 31,
1996, the last trading day for fiscal year ended 1996, multiplied by the
number of shares of Common Stock underlying the options.
COMPENSATION OF DIRECTORS
Currently, non-employee directors do not receive cash compensation for
attendance at meetings of the Board of Directors and of its committees, but
receive compensation in the form of options to purchase Common Stock of the
Company pursuant to the Company's 1992 Non-employee Director Stock Option Plan
(the "Director Plan"). The Director Plan includes two types of option grants:
(a) each non-employee director who first became or becomes a member of the Board
of Directors on or after June 7, 1996 is automatically granted on the date of
such election without further action by the Board, an option to purchase 10,000
shares of the Company's Common Stock ("Initial Option") which vests over a four
year period and (b) annually, each non-employee director is automatically
granted as of the date of the Annual Meeting of Stockholders in such year an
option, which vests over a one year period, to purchase 10,000 shares of Common
Stock ("Annual Option"). Any non-employee who becomes a director after the
Annual Meeting of Stockholders in any year shall be entitled to receive, in
addition to the Initial Option, a fraction of the Annual Option equal to (x)
divided by twelve (12), where (x) equals the number of complete months remaining
until the first anniversary of the preceding Annual Meeting of Stockholders.
All options pursuant to the Director Plan are granted at 100% of the fair market
value of the Common Stock as of the date of grant and expire ten years after the
date of the option. Directors are also reimbursed for their expenses incurred
in attending meetings of the Board of Directors and committees thereof.
Directors who are employees of the Company receive no additional
compensation for service on the Board of Directors or its committees.
<PAGE>
-11-
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board of Directors (the "Committee") is
composed of Thomas R. Morse, David Rubinfien and T. Stephen Thompson, none of
whom are currently officers or employees of the Company. The functions of the
Committee are to establish salaries and incentive compensation for the Company's
executive officers and to administer the 1992 Plan and the 1992 Employee Stock
Purchase Plan.
The Company's executive compensation programs are designed (i) to attract
and retain experienced and well qualified executives capable of leading the
Company to meet its business objectives, and (ii) to motivate them to enhance
long-term stockholder value. In setting the compensation level for executive
officers, the Committee is guided by the following considerations:
. Compensation levels should be competitive with compensation generally being
paid to executives in the biotechnology industries to ensure the Company's
ability to attract and retain superior executives;
. Each individual executive officer's compensation should reflect the
performance of the Company as a whole, the performance of the officer's
business unit, if applicable, and the performance of the executive officer;
and
. A significant portion of executive officer compensation should be paid in
the form of equity-based incentives to link closely stockholder and
executive interests and to encourage stock ownership by executive officers.
An executive's total compensation package includes a cash salary and bonus
determined by the Committee, long-term incentive compensation in the form of
stock options, and various benefits, including a 401(k) retirement plan and
medical insurance plans that are available to all employees of the Company.
Salaries of the Company's Chief Executive Officer and the next three most highly
compensated executives during fiscal 1996 are listed in the "Summary
Compensation Table" found on page 8. The Committee reviews executive salaries
at least once per year and, while it is not required to do so, it may in its
discretion increase these salaries. The Committee attempts to keep the
Company's compensation programs competitive by comparing them with those of
other local and national companies in the industry. The Committee also attempts
to balance the compensation level for an individual executive against his or her
specific job requirements, including the individual's influence on obtaining
corporate objectives.
Cash Compensation. The Committee sets the annual salaries for individual
executives by reviewing the salaries historically paid at the Company, the
salaries paid by the Company's competitors to persons holding comparable
positions and compensation studies prepared by independent third parties. The
Committee determines any increases in annual salaries and bonuses based on a
comparison of the executive's actual performance against his or her performance
objectives, as well as on various subjective factors. The performance
objectives for each executive depend on his or her area of responsibility and
may include achievement of the performance objectives in the areas of product
commercialization, clinical trials, corporate partnering, and financings, as
well as financial objectives. Among the subjective factors considered by the
Committee are the executive's ability to provide leadership, to develop the
Company's business, to promote the Company's image with its customers and
stockholders and to manage the Company's continuing growth. The Committee also
solicits and
<PAGE>
-12-
considers performance reviews and recommendations from senior management in
establishing compensation levels for all but the Chief Executive Officer.
Equity Compensation. The Company's equity compensation program is
designed to (i) provide long-term incentives to executive officers, (ii) tie
compensation to creating long-term shareholder value, (iii) encourage executive
officers to remain with the Company and promote the Company's business, and (iv)
provide executives with the opportunity to obtain significant, long-term stock
ownership in the Company's Common Stock.
The Committee has granted options to executive officers as the long-term
incentive component of the executive officers' total compensation package. The
Committee generally grants options that become exercisable over a four-year
period as a means of encouraging executives to remain with the Company and to
promote its success. In fiscal 1996, the Committee only awarded the Company's
executives stock options with exercise prices equal to the market price of the
Common Stock on the date of grant. As a result, executives will benefit from
these stock option grants only to the extent that the price of the Company's
Common Stock increases and the Company's stockholders have also benefited.
In deciding whether to grant options and in determining the number of shares
to be subject to such options, the Committee generally reviews the option
holdings of each of the executive officers, including the number of unvested
options and the then-current value of such unvested options. The number of
options granted to certain of the most highly compensated executive officers of
the Company in fiscal 1996 is set forth in the table captioned "Option Grants in
Last Fiscal Year" found on page 9. The total options held by each of these
executives at December 31, 1996 is set forth in the table captioned "Aggregated
Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values" found on
page 10.
CEO Compensation. With respect to the compensation of the Company's Chief
Executive Officer, Mr. Chubb's 1996 salary was increased to $176,000 from
$162,000 in 1995. In addition, Mr. Chubb was granted a cash bonus in the amount
of $37,488 for 1996. On January 2, 1996 he received options under the Company's
1992 Plan to purchase up to 4,961 shares of the Company's Common Stock at an
exercise price of $4.00 per share, and on December 17, 1996 he received options
under the 1992 Plan to purchase up to 204,760 shares of the Company's Common
Stock at an exercise price of $7.875 per share. All options granted to Mr.
Chubb during 1996 are subject to a four year vesting schedule and have exercise
prices equal to 100% of the fair market value of the Company's Common Stock as
of the date of grant. In arriving at the level of compensation for Mr. Chubb,
the Committee attempted to measure Mr. Chubb's contribution to the progress made
by the Company during 1996 toward the achievement of the Company's principle
objectives but the Committee does not find it practicable to quantify or assign
relative weight to the factors on which the Chief Executive Officer's
compensation is based. The Committee concluded that the Company had made
significant progress during 1996 towards achieving its objectives, including (i)
obtaining approval from the U.S. Food and Drug Administration ("FDA") to sell
the NMP22(R) Test Kit in the United States, (ii) continued product sales in
Europe, and (iii) entering into clinical trials for the Company's colon cancer
assay for submission to the FDA for approval.
Tax Matters. Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code"), generally prevents publicly held corporations from
deducting, for federal income tax purposes, compensation in excess of $1 million
paid to certain executives, with certain exceptions. The Compensation Committee
has considered these requirements and exceptions and it is the Compensation
<PAGE>
-13-
Committee's present intention that, so long as it is consistent with its overall
compensation objectives, substantially all executive compensation will be
deductible for federal income tax purposes.
Respectfully submitted,
Thomas R. Morse
David Rubinfien
T. Stephen Thompson
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee are Thomas R. Morse, David
Rubinfien and T. Stephen Thompson. No member of the Committee is currently, or
has ever been, an officer or employee of the Company or any of its subsidiaries,
or had any relationship with the Company during the last fiscal year that would
require disclosure herein.
During the 1996 fiscal year no executive officer of the Company served as a
member of a compensation committee (or other board committee performing
equivalent functions or, in the absence of any such committee, the entire board
of directors), nor served as a director, of another entity, one of whose
executive officers serves as a director of the Company or serves on the
Company's Compensation Committee.
<PAGE>
-14-
STOCK PERFORMANCE GRAPH
The Stock Performance Graph set forth below compares the cumulative total
stockholder return on the Company's Common Stock from July 9, 1992, the initial
trading date of the Company's initial public offering, to December 31, 1996,
with the cumulative total return of the Nasdaq Market Index and the Company's
four digit SIC Code Index over the same period. The comparison assumes $100 was
invested on July 9, 1992 in the Company's Common Stock, in the Nasdaq Market
Index and in the four digit SIC Code Index and assumes reinvestment of
dividends, if any.
COMPARISON OF CUMULATIVE TOTAL RETURN (l)(2)
[LINE GRAPH]
<TABLE>
<CAPTION>
7/9/92 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96
<S> <C> <C> <C> <C> <C> <C>
Matritech, Inc. 100.00 100.00 67.50 37.50 81.25 170.00
SIC Code 2835 100.00 105.47 104.55 98.32 166.79 152.97
Nasdaq Market Index 100.00 109.37 131.19 137.74 178.66 222.01
</TABLE>
(1) Prior to July 9, 1992, the Company's Common Stock was not publicly traded.
Comparative data is provided only for the period since that date. This
graph is not "soliciting material," is not deemed filed with the Securities
and Exchange Commission and is not to be incorporated by reference in any
filing of the Company under the Securities Act of 1933 or the Securities
Exchange Act of 1934 whether made before or after the date hereof and
irrespective of any general incorporation language in any such filing.
(2) The stock price performance shown on the graph is not necessarily indicative
of future price performance. Information used on the graph was obtained
from Media General Financial Services, a source believed to be reliable, but
the Company is not responsible for any errors or omissions in such
information.
<PAGE>
-15-
PROPOSAL II
PROPOSAL TO AMEND THE 1992 PLAN
The 1992 Plan was adopted by the Company's Board of Directors and approved
by the Company's stockholders in March 1992. The 1992 Plan has subsequently
been amended twice: in March of 1994 the 1992 Plan was amended by the Board of
Directors and such amendment was approved by the Company's stockholders in May
1994; and in February of 1996 the 1992 Plan was amended by the Board of
Directors and such amendment was approved by the Company's stockholders in June
1996. A maximum of 1,000,000 shares of Common Stock are currently reserved for
issuance under the 1992 Plan upon the exercise of options or in connection with
awards of stock of the Company ("Awards") or the opportunity to make direct
stock purchases of shares of the Company ("Purchases"). The Board of Directors
has approved and recommended to the stockholders that they approve an amendment
to (i) increase the number of shares authorized for issuance pursuant to the
1992 Plan to 1,500,000 shares, and (ii) increase the limitation on the maximum
aggregate number of shares that may be issued to any one person under the 1992
Plan from 300,000 to 500,000 shares.
The Company's management relies on stock options as essential parts of the
compensation packages necessary for the Company to attract and retain
experienced officers and employees. The Board of Directors of the Company
believes that the proposed amendments to (i) increase the number of shares
available under the 1992 Plan and (ii) increase the limitation on the maximum
number of shares permitted to be issued to any one person are essential to
permit its Compensation Committee and the Company's management to continue to
provide meaningful long-term, equity-based incentives to present and future key
employees.
As of April 3, 1997, approximately 865,463 shares remained authorized for
issuance under the 1992 Plan of which approximately 767,824 were already
reserved for outstanding options, such that only approximately 97,639 were
available for new grants of options, Awards or Purchases. If the proposed
amendments to the 1992 Plan are not approved, the Company may be unable to
continue to provide meaningful long-term equity based incentives to present and
future employees. If the proposed amendment to the 1992 Plan to increase the
number of shares of Common Stock issuable under the 1992 Plan from 1,000,000 to
1,500,000 shares is not approved by the stockholders, the Company will not grant
options, Awards, or opportunities to purchase shares under the 1992 Plan in
excess of that number of shares of Common Stock remaining available under the
existing 1992 Plan. The Company has not at the present time determined who will
receive the shares of Common Stock that will be authorized for issuance under
the 1992 Plan if the proposed amendment to the 1992 Plan is approved.
DESCRIPTION OF THE 1992 PLAN
The purpose of the 1992 Plan is to provide incentives to officers and other
employees of the Company by providing them with opportunities to purchase stock
of the Company.
Under the 1992 Plan, officers and other employees of the Company may be
awarded incentive stock options ("ISO" or "ISOs"), as defined in Section 422(b)
of the Code, and directors, officers, employees and consultants of the Company
may be granted (i) options which do not qualify as ISOs ("Non-Qualified Option"
or "Non-Qualified Options"), (ii) Awards of stock of the Company and (iii)
Purchases. ISOs, Non-Qualified Options, Awards and Purchases are sometimes
collectively referred to as "Stock Rights" and ISOs and Non-Qualified Options
are sometimes collectively referred to as "Options."
<PAGE>
-16-
The 1992 Plan is administered by the Compensation Committee (the
"Committee") of the Board of Directors. Subject to the terms of the 1992 Plan,
the Committee has authority to determine the persons to whom Stock Rights are
granted, the number of shares covered by each Stock Right, the exercise price
per share and other terms and provisions governing the Stock Rights, including
restrictions, if any, applicable to the shares of Common Stock issuable upon
exercise of Stock Rights. As of April 1, 1997 approximately 51 persons were
eligible to participate in the 1992 Plan.
Stock Rights may be granted under the 1992 Plan at any time prior to March
2, 2002. The exercise price per share of Non-Qualified Options granted under
the 1992 Plan cannot be less than the minimum legal consideration required under
applicable state law. The exercise price per share of ISOs cannot be less than
the fair market value of the Common Stock on the date of grant (or, in the case
of ISOs granted to employees holding more than 10% of the voting stock of the
Company, 110% of the fair market value of the Common Stock on the date of
grant). The 1992 Plan provides that each Option shall expire on the date
specified by the Committee, but not more than ten years from its date of grant
in the case of ISOs, ten years and one day in the case of Non-Qualified Options,
and five years in the case of ISOs granted to an employee or officer holding
more than ten percent of the voting stock of the Company.
Each Option granted under the 1992 Plan may either be fully exercisable at
the time of grant or may become exercisable in such installments as the
Committee may specify. Each Option may be exercised from time to time, in whole
or in part, up to the total number of shares with respect to which it is then
exercisable. The Committee has the right to accelerate the date of exercise of
any installment of any Option (subject to the $100,000 per year limitation on
the fair market value of stock subject to ISOs granted to any employee which
become exercisable in any calendar year).
Payment of the exercise price of an Option granted under the 1992 Plan may
be made, in whole or in part, in United States dollars, by check or by tendering
Common Stock of the Company if authorized by the Committee, which authorization
in the case of ISOs, shall be evidenced in writing at the time of the grant.
The 1992 Plan contains terms providing for the exercise of Options by or on
behalf of former and deceased employees, respectively, as described below.
Only the optionee may exercise an Option; no assignment or transfers are
permitted except by will or by the laws of descent and distribution.
If an ISO optionee ceases to be employed by the Company other than by reason
of death or disability, no further installments of his or her ISOs will become
exercisable, and the ISOs shall terminate after the passage of 90 days from the
date of termination of employment (but no later than their specified expiration
dates), except to the extent that such ISOs shall have been converted into Non-
Qualified Options. If an optionee is disabled or dies, any ISO held by the
optionee may be exercised, to the extent exercisable on the date of disability
or death, by the optionee or the optionee's estate, personal representative or
beneficiary, at any time within 180 days from the date of the optionee's
disability or death (but not later than the specified expiration date of the
ISO). Non-Qualified Options are subject to such termination and cancellation
provisions as may be determined by the Committee.
Option holders are protected against dilution in the event of a stock
dividend, recapitalization, stock split, merger or similar transaction. The
Board of Directors may from time to time adopt amendments to the 1992 Plan,
certain of which are subject to stockholder approval, and may terminate the 1992
Plan, at any time (although such action shall not affect Options previously
granted). Any shares
<PAGE>
-17-
subject to an Option granted under the 1992 Plan, which for any reason expire or
terminate unexercised, may again be available for future Option grants. Unless
terminated sooner, the 1992 Plan will terminate on March 2, 2002.
On April 14, 1997, the market price, as reported on the Nasdaq SmallCap
Market, of the Common Stock, the class of stock underlying all Stock Rights
under the 1992 Plan, was $5.25 per share.
FEDERAL TAX CONSIDERATIONS
THE FOLLOWING DISCUSSION OF UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF
THE ISSUANCE AND EXERCISE OF STOCK RIGHTS GRANTED UNDER THE 1992 PLAN IS BASED
UPON THE PROVISIONS OF THE CODE AS IN EFFECT ON THE DATE OF THIS PROXY
STATEMENT, CURRENT REGULATIONS, AND EXISTING ADMINISTRATIVE RULINGS OF THE
INTERNAL REVENUE SERVICE. IT IS NOT INTENDED TO BE A COMPLETE DISCUSSION OF ALL
OF THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE 1992 PLAN OR OF THE
REQUIREMENTS THAT MUST BE MET IN ORDER TO QUALIFY FOR THE DESCRIBED TAX
TREATMENT. IN ADDITION, THERE MAY BE FOREIGN, STATE OR LOCAL TAX CONSEQUENCES
THAT ARE NOT DISCUSSED HEREIN.
A. ISOs. The following general rules are applicable under current United
States federal income tax law to ISOs granted under the 1992 Plan:
1. In general, an optionee will not recognize any income upon the
grant of an ISO or upon the issuance of shares to him or her upon the exercise
of an ISO, and the Company will not be entitled to a federal income tax
deduction upon either the grant or the exercise of an ISO.
2. If shares acquired upon exercise of an ISO are not disposed of
within (i) two years from the date the ISO was granted or (ii) one year after
the date the shares are issued to the optionee pursuant to the ISO exercise (the
"Holding Periods"), the difference between the amount realized on any subsequent
disposition of the shares and the exercise price will generally be treated as
capital gain or loss to the optionee.
3. If shares acquired upon exercise of an ISO are disposed of and the
optionee does not satisfy the Holding Periods (a "Disqualifying Disposition"),
then in most cases the lesser of (i) any excess of the fair market value of the
shares at the time of exercise of the ISO over the exercise price or (ii) the
actual gain on disposition, will be taxed to the optionee as ordinary income in
the year of such disposition.
4. In any year that an optionee recognizes ordinary income on a
Disqualifying Disposition of shares acquired upon exercise of an ISO, the
Company generally will be entitled to a corresponding federal income tax
deduction.
5. The difference between the amount realized by an optionee as the
result of a Disqualifying Disposition and the sum of (i) the exercise price and
(ii) the amount of ordinary income recognized under the above rules generally
will be treated as capital gain or loss.
6. Capital gain or loss recognized by an optionee on a disposition of
shares will be long-term capital gain or loss if the optionee's holding period
for the shares exceeds one year.
<PAGE>
-18-
7. An optionee may be entitled to exercise an ISO by delivering shares
of the Company's Common Stock to the Company in payment of the exercise price,
if the optionee's ISO agreement so provides. If an optionee exercises an ISO in
such fashion, special rules apply.
8. In addition to the tax consequences described above, the exercise
of an ISO may result in an "alternative minimum tax." The alternative minimum
tax rate (the maximum rate is 28%) will be applied against a taxable base which
is equal to "alternative minimum taxable income," reduced by a statutory
exemption. In general, the amount by which the value of the shares received upon
exercise of the ISO exceeds the exercise price is included in the optionee's
alternative minimum taxable income. A taxpayer is required to pay the higher of
his regular tax liability or the alternative minimum tax. A taxpayer who pays
alternative minimum tax attributable to the exercise of an ISO may be entitled
to a tax credit against his or her regular tax liability in later years.
9. Special rules apply if the shares acquired upon the exercise of an
ISO are subject to vesting, or are subject to certain restrictions on resale
under federal securities laws applicable to directors, officers or 10%
stockholders.
B. Non-Qualified Options. The following general rules are applicable under
current United States federal income tax law to Non-Qualified Options granted
under the 1992 Plan:
1. In general, an optionee will not recognize any income upon the
grant of a Non-Qualified Option, and the Company will not be entitled to a
federal income tax deduction upon such grant.
2. An optionee generally will recognize ordinary income at the time of
exercise of the Non-Qualified Option in an amount equal to the excess, if any,
of the fair market value of the shares on the date of exercise over the exercise
price. The Company may be required to withhold income tax on this amount.
3. When an optionee sells the shares acquired upon the exercise of a
Non-Qualified Option, he or she generally will recognize capital gain or loss in
an amount equal to the difference between the amount realized upon the sale of
the shares and the optionee's basis in the shares (generally, the exercise price
plus the amount taxed to the optionee as ordinary income). If the optionee's
holding period for the shares exceeds one year, such gain or loss will be long-
term capital gain or loss.
4. When an optionee recognizes ordinary income attributable to a Non-
Qualified Option, the Company generally will be entitled to a corresponding
federal income tax deduction.
5. An optionee may be entitled to exercise a Non-Qualified Option by
delivering shares of the Company's Common Stock to the Company in payment of the
exercise price. If an optionee exercises a Non-Qualified Option in such fashion,
special rules apply.
6. Special rules apply if the shares acquired upon the exercise of a
Non-Qualified Option are subject to vesting, or are subject to certain
restrictions on resale under federal securities laws applicable to directors,
officers or 10% stockholders.
<PAGE>
-19-
C. Awards and Purchases. The following general rules are applicable under
current federal income tax law to Awards and Purchases under the 1992 Plan:
Under current federal income tax law, persons receiving shares pursuant to
an Award or Purchase of Restricted Stock under the 1992 Plan generally will
recognize ordinary income equal to the fair market value of the shares received
reduced by any purchase price paid. The Company generally will be entitled to a
corresponding federal income tax deduction. When such shares are sold, the
grantee generally will recognize capital gain or loss. Special rules apply if
the shares acquired are subject to vesting, or are subject to certain
restrictions on resale under federal securities laws applicable to directors,
officers or 10% stockholders.
<PAGE>
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STOCK OPTIONS GRANTED UNDER THE 1992 PLAN SINCE ITS INCEPTION
The following table sets forth as of April 1, 1997 all options granted under
the 1992 Plan since its inception to (i) the Named Officers, (ii) each nominee
for election as a director, (iii) all current executive officers as a group,
(iv) all current directors who are not executive officers as a group, and (v)
all employees, excluding executive officers, as a group.
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITION NUMBER OF OPTIONS
- --------------------------- -----------------
<S> <C>
Stephen D. Chubb (1) 209,721
Chairman, Director and
Chief Executive Officer
David L. Corbet (1) 287,374
Director, President and
Chief Operating Officer
Ying-Jye Wu (1) 102,034
Vice President, Product
Development
Leslie R. Teso(1) 49,727
Vice President, Finance,
Treasurer and Secretary
J. Robert Buchanan --
Thomas R. Morse --
David Rubinfien --
T. Stephen Thompson --
C. William Zadel 4,300
All Current Executive Officers 648,856
as a Group (4 Persons)
All Current Directors who are not 4,300
Executive Officers as a Group
(5 Persons)
All Employees who are not 201,543
Executive Officers as a Group
- --------------------
</TABLE>
(1) Persons who have received five percent or greater of the options granted
under the 1992 Plan.
VOTES REQUIRED FOR APPROVAL
The proposed amendment to the 1992 Plan requires approval by an
affirmative vote of the holders of a majority of the Company's stock present, in
person or by proxy, and voting on the matter. See "Voting Procedures."
<PAGE>
-21-
The Board of Directors recommends a vote FOR Proposal II to amend the
Company's 1992 Plan to (i) increase to 1,500,000 the number of shares authorized
for issuance thereunder and (ii) increase the limitation on the maximum
aggregate number of shares that may be issued to any one person to 500,000
shares.
PROPOSAL III
RATIFICATION OF SELECTION OF AUDITORS
The Board of Directors has selected the firm of Arthur Andersen LLP,
independent certified public accountants, to serve as auditors for the fiscal
year ending December 31, 1997. Arthur Andersen LLP has served as the Company's
auditors since fiscal 1987. It is expected that a member of the firm will be
present at the Annual Meeting with the opportunity to make a statement if so
desired and will be available to respond to appropriate questions. Stockholder
ratification of the Company's independent public accountants is not required
under Delaware law or under the Company's Amended and Restated Certificate of
Incorporation or its Amended and Restated By-Laws. If the stockholders do not
ratify the selection of Arthur Andersen LLP as the Company's independent public
accountants for the fiscal year ended December 31, 1997, the Company's Board of
Directors will evaluate what would be in the best interests of the Company and
its stockholders and consider whether to select new independent public
accountants for the current fiscal year or whether to wait until the completion
of the audit for the current fiscal year before changing independent public
accountants. The Board of Directors recommends a vote FOR the ratification of
this selection.
<PAGE>
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VOTING PROCEDURES
The presence, in person or by proxy, of at least a majority of the
outstanding shares of Common Stock entitled to vote at the Annual Meeting is
necessary to establish a quorum for the transaction of business. Shares
represented by proxies pursuant to which votes have been withheld from any
nominee for director, or which contain one or more abstentions or broker "non-
votes," are counted as present for purposes of determining the presence or
absence of a quorum for the Annual Meeting. A "non-vote" occurs when a broker
or other nominee holding shares for a beneficial owner votes on one proposal,
but does not vote on another proposal because the broker does not have
discretionary voting power and has not received instructions from the beneficial
owner.
Proposal I. Directors are elected by a plurality of the votes cast,
in person or by proxy, at the Annual Meeting. The seven nominees receiving the
highest number of affirmative votes of the shares present or represented and
voting on the election of directors at the Annual Meeting will be elected as
directors. Shares represented by all proxies received by the Board of Directors
and not so marked as to withhold authority to vote for any individual nominee or
for all nominees will be voted (unless one or more nominees are unable to serve)
for the election of the nominees. Where the stockholder properly withheld
authority to vote for a particular nominee or nominees, such stockholder's
shares will not be counted toward such nominee or nominees' achievement of a
plurality.
Other Matters. For all other proposals described in this proxy
statement and submitted to the stockholders at the Annual Meeting, the
affirmative vote of the majority of shares present, in person or represented by
proxy, and voting on that proposal is required for approval. Abstentions, as
well as broker "non-votes" are not considered to have been voted for such
proposal and have the practical effect of reducing the number of affirmative
votes required to achieve a majority for such proposal by reducing the total
number of shares from which the majority is calculated. If any other matter not
discussed in this Proxy Statement should be presented at the Annual Meeting upon
which a vote may be properly taken, shares represented by all proxies received
by the Board of Directors will be voted with respect thereto in accordance with
the judgment of the persons named as attorneys in the proxies.
<PAGE>
-23-
STOCKHOLDER PROPOSALS
Proposals of stockholders intended for inclusion in the proxy
statement to be furnished to all stockholders entitled to vote at the next
annual meeting of stockholders of the Company pursuant to SEC Rule 14a-8 must be
received at the Company's principal executive offices not later than December
26, 1997. In order to curtail controversy as to the date on which a proposal
was received by the Company, it is suggested that proponents submit their
proposals by Certified Mail, Return Receipt Requested. The Amended and Restated
By-Laws of the Company provide that in order for a stockholder to bring business
before, or propose director nominations at, an annual meeting, the stockholder
must give written notice to the Secretary of the Company not less than 30 days
prior to the first anniversary of the preceding year's notice of annual meeting;
provided, however, that such notice shall not be required to be given more than
60 days prior to the annual meeting of stockholders. The notice must contain
specified information about the proposed business or each nominee and the
stockholder making the proposal or nomination.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's directors, executive officers and holders of more than
10% of the Company's Common Stock (collectively, "Reporting Persons") to file
with the SEC initial reports of ownership and reports of changes in ownership of
Common Stock of the Company. Such persons are required by regulations of the
SEC to furnish the Company with copies of all such filings. Based on its review
of the copies of such filings received by it with respect to the fiscal year
ended December 31, 1996 and written representations from certain Reporting
Persons, the Company believes that all Reporting Persons complied with all
Section 16(a) filing requirements in the fiscal year ended December 31, 1996,
with the following exceptions: Mr. Chubb, the Company's Chairman and Chief
Executive Officer, had one late report covering one transaction that was not
reported in a timely manner; Mr. Zadel, a director of the Company, had one late
report covering one transaction that was not reported in a timely manner; and
Mr. Morse, a director of the Company, had one late report covering two
transactions that were not reported in a timely manner.
EXPENSES AND SOLICITATION
The cost of solicitation of proxies will be borne by the Company.
Proxies will be solicited principally through the mails. Further solicitation
of proxies from some stockholders may be made by directors, officers and regular
employees of the Company personally, by telephone, telegraph or special letter.
No additional compensation, except for reimbursement of reasonable out-of-pocket
expenses will be paid for any such further solicitation. In addition, the
Company may request banks, brokers and other custodians, nominees and
fiduciaries to solicit their customers who have stock of the Company registered
in the name of a nominee. The Company will reimburse such persons for their
reasonable out-of-pocket costs.
<PAGE>
-1-
Appendix A
----------
MATRITECH, INC.
ANNUAL MEETING OF STOCKHOLDERS OF MATRITECH, INC.
TO BE HELD ON JUNE 13, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF MATRITECH, INC.
The undersigned, revoking all prior proxies, hereby appoints Stephen
D. Chubb and Leslie R. Teso, and each of them, with full power of substitution,
as proxies to represent and vote as designated herein, all shares of Common
Stock of Matritech, Inc. (the "Company") which the undersigned would be entitled
to vote if personally present at the Annual Meeting of Stockholders of the
Company to be held at the offices of the Company at 330 Nevada Street, Newton,
Massachusetts 02160 on Friday, June 13, 1997, at 10:00 a.m. local time, and at
all adjournments thereof, upon matters set forth in the Notice of Annual Meeting
of Stockholders and Proxy Statement dated April 28, 1997, a copy of which has
been received by the undersigned.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER(S). IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE
VOTED FOR THE ELECTION OF THE NOMINEES AND FOR THE PROPOSALS IN ITEMS 2 AND 3.
THE PROXIES ARE AUTHORIZED, IN THEIR DISCRETION, TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENTS THEREOF.
PLEASE VOTE, DATE AND SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY IN THE
ENCLOSED ENVELOPE.
Please sign this proxy exactly as your name(s) appear(s) on the books of the
Company. Joint owners should each sign personally. Trustees and other
fiduciaries should indicate the capacity in which they sign, and where more than
one name appears, a majority must sign. If a corporation, the signature should
be that of an authorized officer who should state his or her title.
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
- ---------------------------------- ----------------------------------
- ---------------------------------- ----------------------------------
- ---------------------------------- ----------------------------------
<PAGE>
-2-
[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE
MATRITECH, INC.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1.) Election of Directors - To elect For All Withhold From For All
seven members to the Board of Nominees All Nominees Except
Directors to serve until the next [ ] [ ] [ ]
Annual Meeting of Stockholders and
until their successors have been
elected and qualified.
NOMINEES: STEPHEN D. CHUBB, DAVID
L. CORBET, J. ROBERT BUCHANAN,
THOMAS R. MORSE, DAVID RUBINFIEN,
T. STEPHEN THOMPSON AND C. WILLIAM
ZADEL.
____________________________________
Instruction: To withhold authority
to vote for one or more of the
nominees listed above, mark the
"For All Except" box and write the
nominee(s) name(s) in the space
provided above.
2.) To approve an amendment to the For Against Abstain
Company's 1992 Stock Plan (the [ ] [ ] [ ]
"1992 Plan") to (i) increase the
number of shares of Common Stock
authorized for issuance pursuant to
the 1992 Plan from 1,000,000 shares
to 1,500,000 shares, and (ii)
increase the limitation on the
maximum aggregate number of shares
that may be issued to any one
person under the 1992 Plan from
300,000 shares to 500,000 shares.
3.) To ratify the selection of the For Against Abstain
firm of Arthur Andersen LLP as [ ] [ ] [ ]
auditors for the fiscal year ending
December 31, 1997.
4.) To transact such other business
as may properly come before the
meeting and any adjournments
thereof.
Mark box at right if you plan to
attend the Annual Meeting. [ ]
Mark box at right if an address [ ]
change or comment has been noted on
the reverse side of this card.
</TABLE>
RECORD DATE SHARES:
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOREGOING PROPOSALS.
Please be sure to sign and date this Proxy. Date:
-----------------------
- ------------------------------------------ ----------------------------
Stockholder sign here Co-owner sign here
<PAGE>
-3-
MATRITECH, INC.
Dear Stockholder:
Please take note of the important information enclosed with this Proxy Ballot.
There are a number of issues related to the management and operation of
Matritech that require your immediate attention and approval. These are
discussed in detail in the enclosed proxy materials.
Your vote counts, and you are strongly encouraged to exercise your right to vote
your shares.
Please mark the boxes on this proxy card to indicate how your shares will be
voted. Then sign the card, detach it and return your proxy vote in the enclosed
postage-paid envelope.
Your vote must be received prior to the Annual Meeting of Stockholders, June 13,
1997.
Thank you in advance for your prompt consideration of these matters.
Sincerely,
MATRITECH, INC.
<PAGE>
-1-
Appendix B
----------
MATRITECH, INC.
1992 STOCK PLAN
---------------
(As Amended)
1. Purpose. This Amended and Restated 1992 Stock Plan (the "Plan") is
--------
intended to provide incentives: (a) to the officers and other employees of
Matritech, Inc. (the "Company"), its parent (if any) and any present or future
subsidiaries of the Company (collectively, "Related Corporations") by providing
them with opportunities to purchase stock in the Company pursuant to options
granted hereunder which qualify as "incentive stock options" under Section
422(b) of the Internal Revenue Code of 1986, as amended (the "Code") ("ISO" or
"ISOs"); (b) to directors, officers, employees and consultants of the Company
and Related Corporations by providing them with opportunities to purchase stock
in the Company pursuant to options granted hereunder which do not qualify as
ISOs ("Non-Qualified Option" or "Non-Qualified Options"); (c) to directors,
officers, employees and consultants of the Company and Related Corporations by
providing them with awards of stock in the Company ("Awards"); and (d) to
directors, officers, employees and consultants of the Company and Related
Corporations by providing them with opportunities to make direct purchases of
stock in the Company ("Purchases"). Both ISOs and Non-Qualified Options are
referred to hereafter individually as an "Option" and collectively as "Options".
Options, Awards and authorizations to make Purchases are referred to hereafter
collectively as "Stock Rights". As used herein, the terms "parent" and
"subsidiary" mean "parent corporation" and "subsidiary corporation",
respectively, as those terms are defined in Section 424 of the Code.
2. Administration of the Plan.
---------------------------
A. Board or Committee Administration. The Plan shall be administered by
----------------------------------
the Board of Directors of the Company (the "Board") or by a committee
appointed by the Board (the "Committee"), comprised of, to the extent
required by applicable regulations under Section 162(m) of the Code, two or
more outside directors as defined in applicable regulations thereunder and to
the extent required by Rule 16b-3 promulgated under the Securities Exchange
Act of 1934 or any successor provision ("Rule 16b-3"), disinterested
administrators. Hereinafter, all references in this Plan to the "Committee"
shall mean the Board if no Committee has been appointed. Subject to
ratification of the grant or authorization of each Stock Right by the Board
(if so required by applicable state law), and subject to the terms of the
Plan, the Committee shall have the authority to (i) determine the employees
of the Company and Related Corporations (from among the class of employees
eligible under paragraph 3 to receive ISOs) to whom ISOs may be granted, and
to determine (from among the class of individuals and entities eligible under
paragraph 3 to receive Non-Qualified Options and Awards and to make
Purchases) to whom Non-Qualified Options, Awards and authorizations to make
Purchases may be granted; (ii) determine the time or times at which Options
or Awards may be granted or Purchases made; (iii) determine the option price
of shares subject to each Option, which price shall not be less than the
minimum price specified in paragraph 6, and the purchase price of shares
subject to each Purchase; (iv) determine whether each Option granted shall be
an ISO or a Non-Qualified Option; (v) determine (subject to paragraph 7) the
time or times when each Option shall become exercisable and the duration of
the exercise period; (vi) determine whether restrictions such as repurchase
options are to be imposed on shares subject to Options, Awards and Purchases
and the nature of such restrictions, if any, and (vii) interpret the Plan and
prescribe and rescind rules and regulations relating to it. If the
<PAGE>
-2-
Committee determines to issue a Non-Qualified Option, it shall take whatever
actions it deems necessary, under Section 422 of the Code and the regulations
promulgated thereunder, to ensure that such Option is not treated as an ISO.
The interpretation and construction by the Committee of any provisions of the
Plan or of any Stock Right granted under it shall be final unless otherwise
determined by the Board. The Committee may from time to time adopt such
rules and regulations for carrying out the Plan as it may deem best. No
member of the Board or the Committee shall be liable for any action or
determination made in good faith with respect to the Plan or any Stock Right
granted under it.
B. Committee Actions. The Committee may select one of its members as its
------------------
chairman, and shall hold meetings at such times and places as it may
determine. Acts by a majority of the Committee, or acts reduced to or
approved in writing by a majority of the members of the Committee (if
consistent with applicable state law), shall be the valid acts of the
Committee. From time to time the Board may increase the size of the
Committee and appoint additional members thereof, remove members (with or
without cause) and appoint new members in substitution therefor, fill
vacancies however caused, or remove all members of the Committee and
thereafter directly administer the Plan.
C. Grant of Stock Rights to Board Members. Stock Rights may be granted
---------------------------------------
to members of the Board consistent with the provisions of the first sentence
of paragraph 2(A) above, if applicable. All grants of Stock Rights to members
of the Board shall in all other respects be made in accordance with the
provisions of this Plan applicable to other eligible persons. Consistent with
the provisions of the first sentence of paragraph 2(A) above, members of the
Board who are either (i) eligible for Stock Rights pursuant to the Plan or
(ii) have been granted Stock Rights may vote on any matters affecting the
administration of the Plan or the grant of any Stock Rights pursuant to the
Plan, except that no such member shall act upon the granting to himself of
Stock Rights, but any such member may be counted in determining the existence
of a quorum at any meeting of the Board during which action is taken with
respect to the granting to him of Stock Rights.
3. Eligible Employees and Others. ISOs may be granted to any employee of
------------------------------
the Company or any Related Corporation. Those officers and directors of the
Company who are not employees may not be granted ISOs under the plan. Non-
Qualified Options, Awards and authorizations to make purchases may be granted to
any employee, officer or director (whether or not also an employee) or
consultant of the Company or any Related Corporation. The Committee may take
into consideration a recipient's individual circumstances in determining whether
to grant an ISO, a Non-Qualified Option, an Award or an authorization to make a
Purchase. Granting of any Stock Right to any individual or entity shall neither
entitle that individual or entity to, nor disqualify him from, participation in
any other grant of Stock Rights.
4. Stock. The stock subject to Options, Awards and Purchases shall be
------
authorized but unissued shares of Common Stock of the Company, par value $.01
per share (the "Common Stock"), or shares of Common Stock reacquired by the
Company in any manner. The aggregate number of shares which may be issued
pursuant to the Plan is 1,500,000, subject to adjustment as provided
in paragraph 13; provided, however, that such number of shares shall not be
-------- -------
subject to adjustment by reason of the 9.1 for one stock split in the form of a
stock dividend declared by the Board of Directors of the Company at a meeting on
March 2, 1992. Any such shares may be issued as ISOs, Non-Qualified Options or
Awards, or to persons or entities making Purchases, so long as the number of
shares so issued does not exceed such number, as adjusted. If any Stock Right
granted under the Plan shall expire or terminate for any reason without
<PAGE>
-3-
having been exercised in full or shall cease for any reason to be exercisable in
whole or in part, the unissued shares subject to such Stock Options shall again
be available for grants of Stock Rights under the Plan. For the purposes of the
foregoing sentence, shares withheld from the Stock Right exercise to pay the
exercise price and/or tax consequences of the exercise shall be deemed to have
been issued.
No employee, officer, director or consultant of the Company or any Related
Corporation may be issued, in the aggregate, more than 500,000 shares of Common
Stock under the Plan. If any Option granted under the Plan shall expire or
terminate for any reason without having been exercised in full or shall cease
for any reason to be exercisable in whole or in part, the unpurchased shares
subject to such Option shall be included in the determination of the aggregate
number of shares of Common Stock deemed to have been granted to such employee
under the Plan.
5. Granting of Stock Rights. Stock Rights may be granted under the Plan at
------------------------
any time after the effective date of the Company's initial public offering, and
prior to March 2, 2002. The date of grant of a Stock Right under the Plan will
be the date specified by the Committee at the time it grants the Stock Right;
provided, however, that such date shall not be prior to the date on which the
Committee acts to approve the grant. The Committee shall have the right, with
the consent of the optionee, to convert an ISO granted under the Plan to a Non-
Qualified Option pursuant to paragraph 16.
6. Minimum Option Price; ISO Limitations.
-------------------------------------
A. Price for Non-Qualified Options, Awards and Purchases. The exercise
------------------------------------------------------
price per share specified in the agreement relating to each Non-Qualified
Option granted, and the purchase price per share of stock granted in any
Award or authorized as a Purchase, under the Plan shall in no event be less
than the minimum legal consideration required therefor under the laws of
Delaware or the laws of any jurisdiction in which the Company or its
successors in interest may be organized.
B. Price for ISOs. The exercise price per share specified in the
--------------
agreement relating to each ISO granted under the Plan shall not be less than
the fair market value per share of Common Stock on the date of such grant.
In the case of an ISO to be granted to an employee owning stock possessing
more than ten percent (10%) of the total combined voting power of all classes
of stock of the Company or any Related Corporation, the price per share
specified in the agreement relating to such ISO shall not be less than one
hundred ten percent (110%) of the fair market value per share of Common Stock
on the date of grant.
C. $100,000 Annual Limitation on ISOs. Each eligible employee may be
----------------------------------
granted ISOs only to the extent that, in the aggregate under this Plan and
all incentive stock option plans of the Company and any Related Corporation,
such ISOs do not become exercisable for the first time by such employee
during any calendar year in a manner which would entitle the employee to
purchase more than $100,000 in fair market value (determined at the time the
ISOs were granted) of Common Stock in that year. Any options granted to an
employee in excess of such amount will be granted as Non-Qualified Options.
D. Determination of Fair Market Value. If, at the time an Option is
----------------------------------
granted under the Plan, the Company's Common Stock is publicly traded, "fair
market value" shall be determined as of the last business day for which the
prices or quotes discussed in this sentence are available prior to the date
such Option is granted and shall mean (i) the average (on that date) of the
high and low prices of the Common Stock on the principal national securities
exchange on which the Common Stock is traded, if the Common Stock is then
traded on a national securities exchange; or (ii) the
<PAGE>
-4-
last reported sale price (on that date) of the Common Stock on the NASDAQ
National Market List, if the Common Stock is not then traded on a national
securities exchange; or (iii) the closing bid price (or average of bid
prices) last quoted (on that date) by an established quotation service for
over-the-counter securities, if the Common Stock is not reported on the
NASDAQ National Market List. However, if the Common Stock is not publicly
traded at the time an Option is granted under the Plan, "fair market value"
shall be deemed to be the fair value of the Common Stock as determined by the
Committee after taking into consideration all factors which it deems
appropriate, including, without limitation, recent sale and offer prices of
the Common Stock in private transactions negotiated at arm's length.
7. Option Duration. Subject to earlier termination as provided in
----------------
paragraphs 9 and 10, each Option shall expire on the date specified by the
Committee, but not more than (i) ten years and one day from the date of grant in
the case of Non-Qualified Options, (ii) ten years from the date of grant in the
case of ISOs generally, and (iii) five years from the date of grant in the case
of ISOs granted to an employee owning stock possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of the Company
or any Related Corporation. Subject to earlier termination as provided in
paragraphs 9 and 10, the term of each ISO shall be the term set forth in the
original instrument granting such ISO, except with respect to any part of such
ISO that is converted into a Non-Qualified Option pursuant to paragraph 16.
8. Exercise of Option. Subject to the provisions of paragraphs 9 through
-------------------
12, each Option granted under the Plan shall be exercisable as follows:
A. Vesting. The Option shall either be fully exercisable on the date of
--------
grant or shall become exercisable thereafter in such installments as the
Committee may specify.
B. Full Vesting of Installments. Once an installment becomes exercisable
-----------------------------
it shall remain exercisable until expiration or termination of the Option,
unless otherwise specified by the Committee.
C. Partial Exercise. Each Option or installment may be exercised at any
-----------------
time or from time to time, in whole or in part, for up to the total number of
shares with respect to which it is then exercisable.
D. Acceleration of Vesting. The Committee shall have the right to
------------------------
accelerate the date of exercise of any installment of any Option; provided
that the Committee shall not, without the consent of an optionee, accelerate
the exercise date of any installment of any Option granted to any employee as
an ISO (and not previously converted into a Non-Qualified Option pursuant to
paragraph 16) if such acceleration would violate the annual vesting
limitation contained in Section 422(D) of the Code, as described in paragraph
6(C).
9. Termination of Employment. If an ISO optionee ceases to be employed by
--------------------------
the Company and all Related Corporations other than by reason of death or
disability as defined in paragraph 10, no further installments of his ISOs shall
become exercisable, and his ISOs shall terminate after the passage of ninety
(90) days from the date of termination of his employment, but in no event later
than on their specified expiration dates, except to the extent that such ISOs
(or unexercised installments thereof) have been converted into Non-Qualified
Options pursuant to paragraph 16. Employment shall be considered as continuing
uninterrupted during any bona fide leave of absence (such as those attributable
to illness, military obligations or governmental service) provided that the
period of such leave does not exceed
<PAGE>
-5-
90 days or, if longer, any period during which such optionee's right to
reemployment is guaranteed by statute. A bona fide leave of absence with the
written approval of the Committee shall not be considered an interruption of
employment under the Plan, provided that such written approval contractually
obligates the Company or any Related Corporation to continue the employment of
the optionee after the approved period of absence. ISOs granted under the Plan
shall not be affected by any change of employment within or among the Company
and Related Corporations, so long as the optionee continues to be an employee of
the Company or any Related Corporation. Nothing in the Plan shall be deemed to
give any grantee of any Stock Right the right to be retained in employment or
other service by the Company or any Related Corporation for any period of time.
10. Death; Disability.
--------------------
A. Death. If an ISO optionee ceases to be employed by the Company and
------
all Related Corporations by reason of his death, any ISO of his may be
exercised, to the extent of the number of shares with respect to which he
could have exercised it on the date of his death, by his estate, personal
representative or beneficiary who has acquired the ISO by will or by the laws
of descent and distribution, at any time prior to the earlier of the
specified expiration date of the ISO or 180 days from the date of the
optionee's death.
B. Disability. If an ISO optionee ceases to be employed by the Company
-----------
and all Related Corporations by reason of his disability, he shall have the
right to exercise any ISO held by him on the date of termination of
employment, to the extent of the number of shares with respect to which he
could have exercised it on that date, at any time prior to the earlier of the
specified expiration date of the ISO or 180 days from the date of the
termination of the optionee's employment. For the purposes of the Plan, the
term "disability" shall mean "permanent and total disability" as defined in
section 22(e)(3) of the Code or successor statute.
11. Assignability. No Option shall be assignable or transferable by the
--------------
optionee except by will or by the laws of descent and distribution. During the
lifetime of the optionee each Option shall be exercisable only by him.
12. Terms and Conditions of Options. Options shall be evidenced by
--------------------------------
instruments (which need not be identical) in such forms as the Committee may
from time to time approve. Such instruments shall conform to the terms and
conditions set forth in paragraphs 6 through 11 hereof and may contain such
other provisions as the Committee deems advisable which are not inconsistent
with the Plan, including restrictions applicable to shares of Common Stock
issuable upon exercise of Options. In granting any Non-Qualified Option, the
Committee may specify that such Non-Qualified Option shall be subject to the
restrictions set forth herein with respect to ISOs, or to such other termination
and cancellation provisions as the Committee may determine. The Committee may
from time to time confer authority and responsibility on one or more of its own
members and/or one or more officers of the Company to execute and deliver such
instruments. The proper officers of the Company are authorized and directed to
take any and all action necessary or advisable from time to time to carry out
the terms of such instruments.
13. Adjustments. Upon the occurrence of any of the following events, an
------------
optionee's rights with respect to Options granted to him hereunder shall be
adjusted as hereinafter provided, unless otherwise specifically provided in the
written agreement between the optionee and the Company relating to such Option:
<PAGE>
-6-
A. Stock Dividends and Stock Splits. If the shares of Common Stock shall
---------------------------------
be subdivided or combined into a greater or smaller number of shares or if
the Company shall issue any shares of Common Stock as a stock dividend on its
outstanding Common Stock, the number of shares of Common Stock deliverable
upon the exercise of Options shall be appropriately increased or decreased
proportionately, and appropriate adjustments shall be made in the purchase
price per share to reflect such subdivision, combination or stock dividend.
B. Consolidations or Mergers. If the Company is to be consolidated with
--------------------------
or acquired by another entity in a merger, sale of all or substantially all
of the Company's assets or otherwise (an "Acquisition"), the Committee or the
board of directors of any entity assuming the obligations of the Company
hereunder (the "Successor Board"), shall, as to outstanding Options, either
(i) make appropriate provision for the continuation of such Options by
substituting on an equitable basis for the shares then subject to such
Options the consideration payable with respect to the outstanding shares of
Common Stock in connection with the Acquisition; or (ii) upon written notice
to the optionees, provide that all Options must be exercised, to the extent
then exercisable, within a specified number of days of the date of such
notice, at the end of which period the Options shall terminate; or (iii)
terminate all Options in exchange for a cash payment equal to the excess of
the fair market value of the shares subject to such Options (to the extent
then exercisable) over the exercise price thereof.
C. Recapitalization or Reorganization. In the event of a
-----------------------------------
recapitalization or reorganization of the Company (other than a transaction
described in subparagraph B above) pursuant to which securities of the
Company or of another corporation are issued with respect to the outstanding
shares of Common Stock, an optionee upon exercising an Option shall be
entitled to receive for the purchase price paid upon such exercise the
securities he would have received if he had exercised his Option prior to
such recapitalization or reorganization.
D. Modification of ISOs. Notwithstanding the foregoing, any adjustments
---------------------
made pursuant to subparagraphs A, B or C with respect to ISOs shall be made
only after the Committee, after consulting with counsel for the Company,
determines whether such adjustments would constitute a "modification" of such
ISOs (as that term is defined in Section 424 of the Code) or would cause any
adverse tax consequences for the holders of such ISOs. If the Committee
determines that such adjustments made with respect to ISOs would constitute a
modification of such ISOs, it may refrain from making such adjustments.
E. Dissolution or Liquidation. In the event of the proposed dissolution
---------------------------
or liquidation of the Company, each Option will terminate immediately prior
to the consummation of such proposed action or at such other time and subject
to such other conditions as shall be determined by the Committee.
F. Issuances of Securities. Except as expressly provided herein, no
------------------------
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or
price of shares subject to Options. No adjustments shall be made for
dividends paid in cash or in property other than securities of the Company.
G. Fractional Shares. No fractional shares shall be issued under the
------------------
Plan and the optionee shall receive from the Company cash in lieu of such
fractional shares.
<PAGE>
-7-
H. Adjustments. Upon the happening of any of the events described in
------------
subparagraphs A, B or C above, the class and aggregate number of shares set
forth in paragraph 4 hereof that are subject to Stock Rights which previously
have been or subsequently may be granted under the Plan shall also be
appropriately adjusted to reflect the events described in such subparagraphs.
The Committee or the Successor Board shall determine the specific adjustments
to be made under this paragraph 13 and, subject to paragraph 2, its
determination shall be conclusive.
If any person or entity owning restricted Common Stock obtained by exercise
of a Stock Right made hereunder receives shares or securities or cash in
connection with a corporate transaction described in subparagraphs A, B or C
above as a result of owning such restricted Common Stock, such shares or
securities or cash shall be subject to all of the conditions and restrictions
applicable to the restricted Common Stock with respect to which such shares or
securities or cash were issued, unless otherwise determined by the Committee or
the Successor Board.
14. Means of Exercising Stock Rights. A Stock Right (or any part or
---------------------------------
installment thereof) shall be exercised by giving written notice to the Company
at its principal office address. Such notice shall identify the Stock Right
being exercised and specify the number of shares as to which such Stock Right is
being exercised, accompanied by full payment of the purchase price therefor (a)
in United States dollars in cash or by check, (b) at the discretion of the
Committee, through delivery or withholding from the Stock Right exercise of
shares of Common Stock having a fair market value equal as of the date of the
exercise to the cash exercise price of the Stock Right, (c) at the discretion of
the Committee, by delivery of the grantee's personal recourse note bearing
interest payable not less than annually at no less than 100% of the lowest
applicable Federal rate, as defined in Section 1274(d) of the Code, (d) at the
discretion of the Committee and consistent with applicable law, through the
delivery of an assignment to the Company of a sufficient amount of the proceeds
from the sale of the Common Stock acquired upon exercise of the Stock Right and
an authorization to the broker or selling agent to pay that amount to the
Company, which sale shall be at the participant's direction at the time of
exercise, or (e) at the discretion of the Committee, by any combination of (a),
(b), (c) and (d) above. If the Committee exercises its discretion to permit
payment of the exercise price of an ISO by means of the methods set forth in
clauses (b), (c), (d) or (e) of the preceding sentence, such discretion shall be
exercised in writing at the time of the grant of the ISO in question. The holder
of a Stock Right shall not have the rights of a shareholder with respect to the
shares covered by his Stock Right until the date of issuance of a stock
certificate to him for such shares. Except as expressly provided above in
paragraph 13 with respect to changes in capitalization and stock dividends, no
adjustment shall be made for dividends or similar rights for which the record
date is before the date such stock certificate is issued.
15. Term and Amendment of Plan. This Plan was adopted by the Board of
---------------------------
Directors and Stockholders of the Company on March 2, 1992. The Plan shall
expire at the end of the day on March 2, 2002 (except as to Options outstanding
on that date). The Board may terminate or amend the Plan in any respect at any
time, except that, without the approval of the stockholders obtained within 12
months before or after the Board adopts a resolution authorizing any of the
following actions: (a) the total number of shares that may be issued under the
Plan may not be increased materially (except by adjustment pursuant to paragraph
13); (b) the benefits accruing to participants under the Plan may not be
materially increased; (c) the requirements as to eligiblity for participation in
the Plan may not be materially modified; (d) the provisions of paragraph 3
regarding eligibility for grants of ISOs may not be modified; (e) the provisions
of paragraph 6(B) regarding the exercise price at which shares may be offered
pursuant to ISOs may not be modified (except by adjustment pursuant to paragraph
13); (f) the expiration date of the Plan may not be extended; and (g) the Board
may not take any action which would cause the Plan to fail to comply with rule
16b-3. Except as otherwise provided in this paragraph 15, in
<PAGE>
-8-
no event may action of the Board or stockholders alter or impair the rights of a
grantee, without his consent, under any Stock Right previously granted to him.
16. Conversion of ISOs into Non-Qualified Options; Termination of ISOs.
--------------------------------------------------------------------
The Committee, at the written request of any optionee, may in its discretion
take such actions as may be necessary to convert such optionee's ISOs (or any
installments or portions of installments thereof) that have not been exercised
on the date of conversion into Non-Qualified Options at any time prior to the
expiration of such ISOs, regardless of whether the optionee is an employee of
the Company or a Related Corporation at the time of such conversion. Such
actions may include, but not be limited to, extending the exercise period or
reducing the exercise price of the appropriate installments of such ISOs. At the
time of such conversion, the Committee (with the consent of the optionee) may
impose such conditions on the exercise of the resulting Non-Qualified Options as
the Committee in its discretion may determine, provided that such conditions
shall not be inconsistent with this Plan. Nothing in the Plan shall be deemed to
give any optionee the right to have such optionee's ISOs converted into Non-
Qualified Options, and no such conversion shall occur until and unless the
Committee takes appropriate action. The Committee, with the consent of the
optionee, may also terminate any portion of any ISO that has not been exercised
at the time of such termination.
17. Application Of Funds. The proceeds received by the Company from the
---------------------
sale of shares pursuant to Options granted and Purchases authorized under the
Plan shall be used for general corporate purposes.
18. Governmental Regulation. The Company's obligation to sell and deliver
------------------------
shares of the Common Stock under this Plan is subject to the approval of any
governmental authority required in connection with the authorization, issuance
or sale of such shares.
19. Withholding of Additional Income Taxes. Upon the exercise of a Non-
---------------------------------------
Qualified Option, the grant of an Award, the making of a Purchase of Common
Stock for less than its fair market value, the making of a Disqualifying
Disposition (as defined in paragraph 20) or the vesting of restricted Common
Stock acquired on the exercise of a Stock Right hereunder, the Company, in
accordance with Section 3402(a) of the Code, may require the optionee, Award
recipient or purchaser to pay additional withholding taxes in respect of the
amount that is considered compensation includible in such person's gross income.
The Committee in its discretion may condition (i) the exercise of an Option,
(ii) the grant of an Award, (iii) the making of a Purchase of Common Stock for
less than its fair market value, or (iv) the vesting of restricted Common Stock
acquired by exercising a Stock Right, on the grantee's payment of such
additional withholding taxes. Payment of such additional withholding taxes shall
be in United States dollars in cash or by check and/or at the discretion of the
Committee, through the delivery of previously held shares of common stock or
withholding from the Stock Right exercise of shares of Common Stock having a
fair market value equal as of the date of exercise to the amount of such
withholding taxes.
20. Notice to Company of Disqualifying Disposition. Each employee who
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receives an ISO must agree to notify the Company in writing immediately after
the employee makes a Disqualifying Disposition of any Common Stock acquired
pursuant to the exercise of an ISO. A Disqualifying Disposition is any
disposition (including any sale) of such Common Stock before the later of (a)
two years after the date the employee was granted the ISO, or (b) one year after
the date the employee acquired Common Stock by exercising the ISO. If the
employee has died before such stock is sold, these holding period requirements
do not apply and no Disqualifying Disposition can occur thereafter.
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21. Governing Law; Construction. The validity and construction of the Plan
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and the instruments evidencing Stock Rights shall be governed by the laws of the
State of Delaware, or the laws of any jurisdiction in which the Company or its
successors in interest may be organized. In construing this Plan, the singular
shall include the plural and the masculine gender shall include the feminine and
neuter, unless the context otherwise requires.
