<PAGE>
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use by 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
HEAVENLYDOOR.COM, 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:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
HEAVENLYDOOR.COM, INC.
840 MEMORIAL DRIVE, CAMBRIDGE, MASSACHUSETTS 02139
(617) 491-1100
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The annual meeting of the stockholders of HeavenlyDoor.com, Inc.,
formerly known as Procept, Inc., a Delaware corporation ("HVDC"), will be held
at the offices of Paramount Capital, Inc. at 787 Seventh Avenue, New York,
New York at 1:00 p.m. on Monday, June 19, 2000, for the following purposes:
1. To elect ten directors of HVDC.
2. To approve an amendment to HVDC's 1998 Equity Incentive Plan (the
"Equity Plan") to increase the aggregate number of shares of common
stock reserved for issuance under the Equity Plan to 10,800,000 from
4,800,000.
3. To approve the transfer of all of HVDC's biotechnology assets to its
wholly-owned subsidiary, Procept, Inc. (formerly known as Pacific
Pharmaceuticals, Inc.)
4. To approve an amendment and restatement of HVDC's Restated Certificate
of Incorporation, as amended, to increase the number of authorized
shares of common stock to 75,000,000 from 50,000,000.
5. To transact such other business as may properly come before the
meeting.
Only stockholders of record at the close of business on May 4, 2000
will be entitled to vote at the meeting.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING.
THEREFORE, WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE YOUR
PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF
MAILED IN THE UNITED STATES. IF YOU ATTEND THE MEETING AND WISH TO VOTE IN
PERSON, YOUR PROXY WILL NOT BE USED.
By order of the Board of Directors,
Lynnette C. Fallon
SECRETARY
[MAY 9, 2000]
<PAGE>
HEAVENLYDOOR.COM, INC.
840 Memorial Drive, Cambridge, Massachusetts 02139
(617) 491-1100
---------------
Proxy Statement
---------------
GENERAL INFORMATION
The enclosed proxy is solicited on behalf of the Board of Directors of
HeavenlyDoor.com, Inc., referred to in this proxy statement as HVDC, for use at
the annual meeting of stockholders to be held at the offices of Paramount
Capital, Inc. at 787 Seventh Avenue, New York, New York at 1:00 p.m. on
Monday, June 19, 2000, and at any adjournments thereof.
The authority granted by an executed proxy may be revoked, at any time
before its exercise, by filing with the Secretary of HVDC a written revocation
or a duly executed proxy bearing a later date or by voting in person at the
meeting. SHARES REPRESENTED BY VALID PROXIES WILL BE VOTED IN ACCORDANCE WITH
THE SPECIFICATIONS IN THE PROXIES. IF NO SPECIFICATIONS ARE MADE, THE PROXIES
WILL BE VOTED AS RECOMMENDED BY THE BOARD OF DIRECTORS, AS DESCRIBED IN THIS
PROXY STATEMENT. HVDC will exercise discretionary authority to vote valid
proxies on any matter duly considered at the 2000 annual meeting; provided,
however, if HVDC had notice of a stockholder proposal prior to March 16, 2000,
and such proposal has not been included in this proxy, HVDC may not exercise
discretionary authority to vote proxies received hereunder either for or against
such proposal.
On May 4, 2000, HVDC had outstanding 32,568,100 shares of common
stock, $0.01 par value, which is its only outstanding class of voting stock.
Only stockholders of record at the close of business on May 4, 2000 will be
entitled to vote at the meeting. The holders of common stock are entitled to one
vote for each share registered in their names on the record date with respect to
all matters to be acted upon at the meeting. The presence at the meeting, in
person or by proxy, of a majority in interest of the common stock issued and
outstanding and entitled to vote at the meeting shall constitute a quorum for
the transaction of business. Abstentions and broker non-votes will be considered
present for purposes of determining the presence of a quorum.
The approximate date on which this proxy statement and accompanying
proxy are first being sent or given to stockholders is May 9, 2000.
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT AND FIVE PERCENT OWNERS
The following table and footnotes set forth certain information
regarding the beneficial ownership of HVDC's common stock as of April 1, 2000 by
(i) the only persons known by HVDC to be beneficial owners of more than 5% of
the common stock, (ii) the executive officers named in the Summary Compensation
Table, (iii) each director and nominee for election as a director, and (iv) all
current executive officers and directors as a group:
<TABLE>
<CAPTION>
Common Stock
BENEFICIALLY OWNED (1)
BENEFICIAL OWNER SHARES PERCENT
<S> <C> <C>
Paramount Capital Asset Management, Inc.
Aries Domestic Fund, L.P. .............................. 15,007,566 (2) 46.08
The Aries Trust
Aries Master Fund
Aries Domestic Fund II, L.P.
Paramount Capital Investments, LLC
Paramount Capital, Inc.
Dr. Lindsay A. Rosenwald
c/o Paramount Capital Asset Management, Inc.
787 Seventh Avenue
New York, New York 10019
John F. Dee............................................. 1,436,895 (3) 4.41
Michael Fitzgerald...................................... 357,564 (4) 1.10
Michael S. Weiss........................................ 770,159 (5) 2.36
Zola P. Horovitz, Ph.D.................................. 173,312 (6) *
Mark C. Rogers, M.D..................................... 12,543,083 (7) 38.51
Nigel J. Rulewski, M.D.................................. 961,538 (8) 2.95
Elliott H. Vernon....................................... 271,525 (9) *
Glenn L. Cooper......................................... 212,575(10) *
Richard J. Kurtz........................................ 1,665,198 5.11
Philip C. Pauze......................................... 36,159(11) *
Howard Weiser........................................... 2,563,996(12) 7.87
Lloyd J. Kagin.......................................... 3,000 *
All current executive officers and directors as
a group (12 persons).................................... 20,995,004(13) 64.47
</TABLE>
- ---------------
* Indicates less than 1%
(1) Unless otherwise indicated in these footnotes, each stockholder has sole
voting and investment power with respect to the shares of common stock
shown as beneficially owned by such stockholder, subject to community
property laws where applicable. Shares of common stock issuable upon the
exercise of options or warrants currently exercisable or exercisable within
60 days of April 1, 2000 are treated as outstanding solely for the purpose
of calculating the amount and percentage of shares beneficially owned by
the holder of such options or warrants.
<PAGE>
(2) Reported ownership consists of:
(A) the following holdings of The Aries Domestic Fund L.P.:
(1) 3,404,259 outstanding shares of common stock, (2) 258,136 shares
issuable on exercise of Class C Warrants, (3) 55,443 shares issuable
upon exercise of 1998 Unit Purchase Options, (4) 25,153 shares issuable
upon exercise of Class C Warrants issuable on exercise of 1998 Unit
Purchase Options, (5) 45,654 shares issuable upon exercise of 1997 Unit
Purchase Options originally issued by Pacific Pharmaceuticals, Inc.,
(6) 4,671 shares issuable upon exercise of Class A Warrants issuable on
exercise of 1997 Unit Purchase Options originally issued by Pacific,
(7) 2,716 shares issuable upon exercise of 1995 Unit Purchase Options
originally issued by Pacific, (8) 3,395 shares issuable upon exercise of
Class A Warrants issuable on exercise of 1995 Unit Purchase Options
originally issued by Pacific, (9) 73,871 shares issuable upon exercise
of Class A Warrants originally issued by Pacific, (10) 189,000 shares
issuable upon exercise of Class D Warrants, (11) 4,889 shares issuable
upon exercise of common stock Warrants originally issued by Pacific, and
(12) 1,754 shares issuable upon exercise of common stock Warrants
originally issued by HVDC;
(B) the following holdings of the Aries Trust: (1) 6,731,810 shares of
common stock, (2) 495,442 shares issuable on exercise of Class C Warrants,
(3) 112,564 shares issuable upon exercise of 1998 Unit Purchase Options,
(4) 51,067 shares issuable upon exercise of Class C Warrants issuable on
exercise of 1998 Unit Purchase Options, (5) 88,568 shares issuable upon
exercise of 1997 Unit Purchase Options originally issued by Pacific
Pharmaceuticals, Inc., (6) 9,061 shares issuable upon exercise of Class A
Warrants issuable on exercise of 1997 Unit Purchase Options originally
issued by Pacific, (7) 2,716 shares issuable upon exercise of 1995 Unit
Purchase Options originally issued by Pacific, (8) 3,395 shares issuable
upon exercise of Class A Warrants issuable on exercise of 1995 Unit
Purchase Options originally issued by Pacific, (9) 117,757 shares issuable
upon exercise of Class A Warrants originally issued by Pacific, (10)
441,000 shares issuable upon exercise of Class D Warrants, (11) 11,408
shares issuable upon exercise of Common stock Warrants originally issued by
Pacific, and (12) 4,092 shares issuable upon exercise of Common stock
Warrants originally issued by HVDC;
(C) the following holding of Aries Master Fund: 26,962 shares of common
stock;
(D) the following holding of Aries Domestic Fund II, L.P.: 634 shares of
common stock;
(E) the following holdings of Dr. Lindsay A. Rosenwald: (1) 276,258 shares
of common stock, (2) 936,954 shares issuable upon exercise of 1998 Unit
Purchase Options, (3) 425,069 shares issuable upon exercise of Class C
Warrants issuable on exercise of 1998 Unit Purchase Options, (4) 843,445
shares issuable upon exercise of 1997 Unit Purchase Options originally
issued by Pacific, (5) 86,292 shares issuable upon exercise of Class A
Warrants issuable on exercise of 1997 Unit Purchase Options originally
issued by Pacific, (6) 20,879 shares issuable upon exercise of 1995 Unit
Purchase Options originally issued by Pacific, and (7) 26,099 shares
issuable upon exercise of Class A Warrants issuable on exercise of 1995
Unit Purchase Options originally issued by Pacific;
(F) 10,865 shares of common stock held by Paramount Capital Investments
LLC; and
(G) 216,288 shares of common stock held by Paramount Capital, Inc.
(3) Includes 1,436,795 shares issuable to Mr. Dee upon the exercise of options
currently exercisable or exercisable within 60 days of April 1, 2000.
(4) Includes 352,564 shares issuable to Mr. Fitzgerald upon the exercise of
options currently exercisable or exercisable within 60 days of April 1,
2000.
(5) Consists of (1) 17,893 outstanding shares of common stock; (2) 168,019
shares issuable to Mr. Weiss upon the exercise of options currently
exercisable or exercisable within 60 days of April 1, 2000; (3) 45,022
shares issuable upon exercise of 1998 Unit Purchase Options, (4) 20,426
shares issuable upon exercise of Class C Warrants issuable on exercise of
1998 Unit Purchase Options, (5) 181,725 shares issuable upon exercise of
1997 Unit Purchase Options originally issued by Pacific Pharmaceuticals,
Inc., (6) 18,592 shares issuable upon exercise of Class A Warrants issuable
on exercise of 1997 Unit Purchase Options originally issued by Pacific, (7)
2,230 shares issuable upon exercise of 1995 Unit Purchase Options
originally issued by Pacific, (8) 2,787 shares issuable upon exercise of
Class A Warrants issuable on exercise of 1995 Unit Purchase Options
originally issued by Pacific and (9) options held by Hawkins Group, LLC to
purchase units consisting of an aggregate of 215,637 shares of common
stock, plus Class C Warrants to purchase 97,828
<PAGE>
shares of common stock. Mr. Weiss is a managing member of the Hawkins
Group, LLC and disclaims beneficial ownership of its shares except to the
extent of his pecuniary interest therein, if any.
(6) Consists solely of shares issuable to Dr. Horovitz upon the exercise of
options currently exercisable or exercisable within 60 days of April 1,
2000.
(7) Consists of (A) 10,390,818 shares and 2,001,752 shares issuable upon
exercise of options and warrants held by The Aries Trust, Aries Domestic
Fund, L.P., Aries Master Fund, Aries Domestic Fund II, L.P., Paramount
Capital Investments LLC and Paramount Capital Asset Management Inc. (the
"Paramount" Entities") and (B) 150,513 shares issuable to Dr. Rogers upon
the exercise of options currently exercisable or exercisable within 60 days
of April 1, 2000. Dr. Rogers is the President of Paramount Capital, Inc.,
an affiliate of the Paramount Entities. Dr. Rogers disclaims beneficial
ownership of the shares held by the Paramount Entities except to the extent
of his pecuniary interest therein, if any.
(8) Consists of shares issuable to Mr. Rulewski upon the exercise of options
currently exercisable or exercisable within 60 days of April 1, 2000.
(9) Includes 162,325 shares issuable to Mr. Vernon upon the exercise of options
currently exercisable or exercisable within 60 days of April 1, 2000.
(10) Consists of shares issuable to Dr. Cooper upon the exercise of options
currently exercisable or exercisable within 60 days of April 1, 2000.
(11) Includes 33,334 shares issuable to Mr. Pauze upon the exercise of options
currently exercisable or exercisable within 60 days of April 1, 2000.
(12) Includes 1,250,000 shares held by J.E. Holdings, Inc., a corporation of
which Mr. Weiser is an affiliate. Also includes 1,050,000 shares held by
Weistana Investments Co., of which Mr. Weiser is an affiliate.
(13) Includes 3,650,975 shares issuable to directors and executive officers upon
the exercise of options currently exercisable or exercisable within 60 days
of April 1, 2000.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
HVDC's executive officers and directors and persons who own
beneficially more than ten percent of HVDC's Common stock are required under
Section 16(a) of the Securities Exchange Act of 1934 to file reports of
ownership and changes in ownership of HVDC securities with the Securities and
Exchange Commission. Copies of these reports must also be furnished to HVDC.
Based solely on a review of the copies of reports furnished to HVDC and written
representations that no other reports were required, HVDC believes that during
1999 HVDC's executive officers, directors and 10% beneficial owners complied
with all applicable Section 16(a) filing requirements.
<PAGE>
PROPOSAL 1: ELECTION OF DIRECTORS
The Board of Directors has fixed the number of directors at ten for the
coming year. The ten persons named below have been nominated for election as
directors at the annual meeting of stockholders to be held on June 19, 2000, to
serve until the next annual meeting of stockholders and until their successors
are elected and qualified. Each of the ten nominees for director has consented
to being named a nominee in this proxy statement and to serve, if elected, as a
director. If any nominee is unable to serve, proxies will be voted for such
other candidates as may be nominated by the Board of Directors.
Pursuant to HVDC's by-laws, directors will be elected by a plurality of
the votes properly cast at the meeting. Abstentions and votes withheld will not
be treated as votes cast for this purpose and will not affect the outcome of the
election.
The following table contains certain information about the nominees for
directors.
<TABLE>
<CAPTION>
BUSINESS EXPERIENCE DURING PAST FIVE DIRECTOR
NAME AND AGE YEARS AND OTHER DIRECTORSHIPS SINCE
<S> <C> <C>
Glenn L. Cooper Glenn L. Cooper, M.D. has been a director of HVDC since June 1999. Dr. 1999
Age: 47 Cooper has served as President, Chief Executive Officer and a director
of Interneuron Pharmaceuticals, a public biotechnology company, since
May 1993 and was named Chairman of the Board in January 2000. He is
also a director of Genta Incorporated, a public biotechnology company
located in Lexington, Massachusetts. Dr. Cooper received his M.D. from
Tufts University School of Medicine, and his B.S. from Harvard
University. He performed his postdoctoral training at Massachusetts
General Hospital and New England Deaconess Hospital.
John F. Dee John F. Dee has been Vice Chairman of the Board of Directors since 1998
Age: 42 February 2000 and a director since February 1998. Mr. Dee served as
President and Chief Executive Officer of HVDC from February 1998 until
February 2000. From April 1997 to October 1997, Mr. Dee was Interim
Chief Executive Officer of Genta Incorporated. From 1994 to 1997 and
1988 to 1992, Mr. Dee was a Senior Management Consultant with McKinsey
& Company, Inc. and from 1992 to 1994 served as Chief Operating
Officer, Chief Financial Officer, and Director of Walden Laboratories,
Inc. (now AVAX Technologies, Inc.). Mr. Dee holds a M.S. in
Engineering from Stanford University and a M.B.A. from Harvard
University.
<PAGE>
BUSINESS EXPERIENCE DURING PAST FIVE DIRECTOR
NAME AND AGE YEARS AND OTHER DIRECTORSHIPS SINCE
Zola P. Horovitz, Ph.D. Zola P. Horovitz, Ph.D. has been a director of HVDC since 1992. Dr. 1992
Age: 65 Horovitz, currently a consultant to pharmaceutical companies, served as
Vice President - Business Development and Planning at
Bristol-Myers Squibb Pharmaceutical Group, from August
1991 to April 1994, and as Vice President - Licensing,
from 1989 to August 1991. Prior to 1989, Dr. Horovitz
spent 30 years as a member of the Squibb Institute for
Medical Research, most recently as Vice President -
Research Planning. He is also a director of seven other
publicly traded biotechnology and pharmaceutical
companies: Avigen, Inc., BioCryst, Inc., Clinicor,
Inc., Diacrin, Inc., Magainin Pharmaceuticals, Inc.,
Shire Pharmaceuticals, Inc., and Synaptic
Pharmaceuticals, Inc. Dr. Horovitz received his Ph.D.
from the University of Pittsburgh.
Lloyd J. Kagin Lloyd J. Kagin has served as President, Chief Executive Officer, and a 2000
Age: 43 member of the Board of Directors of HVDC since joining the company in
February 2000. Mr. Kagin was employed by Josephthal & Co., Inc. from
November 1995 to February 2000; during that time, Mr. Kagin served as
Senior V.P. and Branch Manager from November 1995 to July 1997, he
served as Senior Managing Director/Director of Consumer Markets
Division from July 1997 to July 1999, and he served as Senior Managing
Director and Director of Sales and Marketing from July 1999 until
February 2000. From 1994 to 1995, Mr. Kagin was a consultant with GKN
Securities Corporation. From 1991 to 1994, he was employed by Reich &
Co., Inc. most recently as Senior Vice President. From 1990 to 1991,
Mr. Kagin served as Vice President and Branch Manager for First Albany
Corporation. From 1983 to 1989, Mr. Kagin was employed by Paine Webber
Inc., most recently as Vice President. Mr. Kagin holds a B.A. in
Neurophysiology from New York University.
Richard J. Kurtz Richard J. Kurtz, has been a director of HVDC since we acquired 2000
Age: 59 Heaven's Door Corporation in January 2000. Mr. Kurtz has been the
Chairman of the Board of Directors of Urecoats
Industries, Inc., a publicly-traded corporation in the
sealant and coating business, since February 1999. He
has been the President and Chief Executive Officer of
the Kamson Corporation, a privately-held corporation,
for over twenty years. Kamson Corporation owns and
operates real estate investment properties in the
northeastern United States. Mr. Kurtz received his B.A.
from the University of Miami in 1962.
<PAGE>
BUSINESS EXPERIENCE DURING PAST FIVE DIRECTOR
NAME AND AGE YEARS AND OTHER DIRECTORSHIPS SINCE
Philip C. Pauze Philip C. Pauze has been a director of HVDC since we acquired Heaven's 2000
Age: 58 Door Corporation in January 2000. Since 1993, Mr. Pauze has been the
President of Pauze Swanson Capital Management Co.(TM), which provides
investment advice and management services. Mr. Pauze also has been
President and Trustee since 1993 of the Pauze Funds(TM), a mutual fund
company registered under the Investment Company Act of 1940. Since
1999, Mr. Pauze has been President of Champion Fund Services(TM), an
accounting, administration, and transfer agency firm serving the mutual
fund industry. In 2000, Mr. Pauze formed and is President of Senior
Family Care, Inc.(TM), a firm providing pre-need funeral services via the
internet. Mr. Pauze received his B.A. from Auburn University in 1963.
Mark C. Rogers, M.D. Mark C. Rogers, M.D. has been a director of HVDC since December 1997. 1997
Age: 57 Dr. Rogers is presently the President of Paramount Capital, Inc. From
1996 until 1998, Dr. Rogers was Senior Vice President,
Corporate Development and Chief Technology Officer of
The Perkin-Elmer Corporation, a developer, manufacturer
and marketer of life science and analytical instrument
systems. From 1992 to 1996, Dr. Rogers was Vice
Chancellor for Health Affairs at Duke University
Medical Center and Chief Executive Officer at Duke
Hospital and Health Network. Prior to his employment at
Duke, Dr. Rogers was on the faculty of Johns Hopkins
University for 15 years where he served as a
Distinguished Faculty Professor and Chairman of the
Department of Anesthesiology and Critical Care
Medicine, Associate Dean for Clinical Affairs, Director
of the Pediatric Intensive Care Unit and Professor of
Pediatrics. Dr. Rogers currently serves on the board of
three publicly traded companies: Discovery
Laboratories, Inc., a development-stage pharmaceutical
company, Galileo Corporation, a fiberoptics and
electro-optics technology company, and HCIA, Inc., a
health care information content company. Dr. Rogers
received his M.D. from Upstate Medical Center, State
University of New York, and his M.B.A. from The Wharton
School. He received his B.A. from Columbia University
and held a Fulbright Scholarship.
<PAGE>
Business Experience During Past Five Director
NAME AND AGE YEARS AND OTHER DIRECTORSHIPS SINCE
Elliott H. Vernon Elliott H. Vernon has been a director of HVDC since December 1997. Mr. 1997
Age: 57 Vernon has been the Chairman of the Board, President and Chief
Executive Officer of Healthcare Imaging Services, Inc.,
a publicly held operator of fixed-site magnetic
resonance imaging centers in the northeast, since its
inception in 1991. For the past ten years, Mr. Vernon
has also been the managing partner of MR General
Associates, a New Jersey general partnership which is
the general partner of DMR Associates, L.P., a Delaware
limited partnership. Mr. Vernon was also one of the
founders of Transworld Nurses, Inc., the predecessor of
Transworld HealthCare, Inc., a publicly held regional
supplier of a broad range of alternate site healthcare
services and products. Mr. Vernon is also a principal
of Healthcare Financial Corp., LLC, a healthcare
financial consulting company engaged primarily in FDA
matters. From January 1990 to December 1994, Mr. Vernon
was a director, Executive Vice President and General
Counsel of Aegis Holdings Corporation, an international
provider of financial services through its investment
management and capital markets consulting subsidiaries.
Michael S. Weiss Michael S. Weiss has been a director of HVDC, and the Chairman of its 1997
Age: 34 Board of Directors, since July 1997. Mr. Weiss is presently President
and Chief Executive Officer of cancereducation.com. Prior to joining
cancereducation.com, from 1993 to 1999, Mr. Weiss was a Senior Managing
Director of Paramount Capital, Inc. Prior to joining Paramount, Mr.
Weiss was an attorney with Cravath, Swaine & Moore. Mr. Weiss is
currently Vice-Chairman of the Board of Directors of Genta Incorporated
and a director of each of AVAX Technologies, Inc. and Palatin
Technologies, Inc., and the Secretary of Atlantic Pharmaceuticals,
Inc., each of which is a publicly traded biopharmaceutical company.
Additionally, Mr. Weiss is currently a member of the boards of
directors of several privately held biopharmaceutical companies. Mr.
Weiss received his J.D. from Columbia University School of Law and a
B.S. in Finance from The State University of New York at Albany.
Howard Weiser Howard Weiser has been a director of HVDC since we acquired Heaven's 2000
Age: 60 Door Corporation in January 2000. Prior to becoming a director of
HVDC, Mr. Weiser was a director of Heaven's Door
Corporation from its inception in May 1999 until its
acquisition by HVDC in January 2000. From 1994 to 1999,
Mr. Weiser was Chairman, President, Chief Executive
Officer, and Secretary of Urecoats Industries Inc., a
publicly traded sealant and coating business, and its
predecessors.
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE DIRECTOR
NOMINEES LISTED ABOVE.
BOARD AND COMMITTEE MEETINGS
<PAGE>
The Board of Directors held 8 meetings during 1999. Each of the
directors then in office attended at least 75% of the aggregate of all meetings
of the Board and all meetings of the committees of the Board on which such
director then served, except Mr. Weiss who attended 72%, Nigel Rulewski (who
resigned from the Board in January 2000), who attended 71% of the meetings held
after he was elected a director in January of 1999, and Dr. Cooper, who attended
60% of the meetings held after he was elected a director in June of 1999.
HVDC has standing Audit and Compensation Committees of the Board of
Directors but does not have a Nominating Committee. The Audit Committee,
which during 1999 consisted of Dr. Vernon and Max Link (who resigned from the
Board in January 2000), held one meeting in 1999. In March, 2000, Mr. Pauze
and Dr. Cooper joined Dr. Vernon on the audit committee. The primary function
of the Audit Committee is to assist the Board of Directors in the discharge
of its duties and responsibilities by providing the Board with an independent
review of the financial health of HVDC and of the reliability of HVDC's
financial controls and financial reporting systems. The Audit Committee
reviews the general scope of HVDC's annual audit, the fee charged by HVDC's
independent accountants and other matters relating to internal control
systems. For information about the Compensation Committee, see the
"Compensation Committee Report on Executive Compensation" below.
DIRECTOR COMPENSATION
HVDC has entered into one-year renewable consulting agreements with
each of the members of the Board of Directors who are not employed by HVDC.
Pursuant to such agreements, each such board member is entitled to receive (i)
an annual retainer fee and (ii) a per diem consulting fee. The annual retainer
fee is payable in quarterly installments in either of the following forms as
selected by each such director: (i) $10,000 cash, or (ii) options to purchase
shares of common stock under the 1998 Equity Incentive Plan having an aggregate
exercise price of $20,000. The consulting fee is payable in either of the
following forms as selected by each such director for each day that such
director provides consulting services to HVDC: (i) $1,000 in cash, or (ii)
options to purchase shares of common stock under the 1998 Equity Incentive Plan
having an aggregate purchase price of $1,350. Members of the Board of Directors
of HVDC receive no additional compensation for attending Board meetings or
meetings of Board committees on which they serve.
In lieu of options granted originally in June 1998, on January 22,
1999, each director who was not an employee of HVDC was granted non-qualified
options to purchase 35,000 shares of common stock under the 1998 Equity
Incentive Plan with an exercise price of $5.00. The options were granted the
same antidilution and pricing reset contractual rights as those granted to
investors in HVDC's 1998 private placement. Pursuant to such rights the exercise
price has been reduced to $1.56, and there are 112,179 shares of common stock
underlying each such grant. These terms became fixed on January 28, 2000. The
options became fully exercisable on January 28, 2000, in connection with HVDC's
acquisition of Heaven's Door Corporation.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
PARAMOUNT AFFILIATES. Various entities affiliated with Paramount
Capital Asset Management, Inc. (named in the table headed "Security Ownership of
Management and Five Percent Owners" set forth above) are significant
stockholders of HVDC. During 1999, HVDC had certain relationships and
transactions with these stockholders and their affiliates, known as "Paramount
Affiliates."
o During 1999, two members of the HVDC Board of Directors had relationships
with the Paramount Affiliates. During part of 1999, Mr. Weiss was a Senior
Managing Director of Paramount Capital, Inc. In addition, Dr. Rogers was
the President of Paramount Capital, Inc. during all of 1999 to date.
o Certain Paramount Affiliates have a contractual right to designate a
majority of the members of HVDC's Board of Directors, as long as these
Paramount Affiliates hold at least 5% of the voting stock of HVDC. In
addition, during that period, HVDC must obtain the consent of these
Paramount Affiliates prior to (1) making any payments in excess of $50,000,
(2) incurring any indebtedness, (3) engaging in transactions with other
affiliates or (4) increasing executive compensation or bonuses, except for
bonuses guaranteed in an employment contract.
<PAGE>
o During 1999, HVDC paid Paramount Affiliates (1) an aggregate of $44,000 in
monthly advisory fees for financial advisory services, (2) $50,000 in cash
and 160,160 shares of HVDC Common Stock as payment for a 6% brokerage fee
incurred by Pacific in connection with the merger, (3) 546,000 shares of
HVDC common stock as a fee for services that Paramount provided in
structuring and negotiating the merger, (5) 27,615 shares of Common Stock
in exchange for the cancellation of indebtedness originally incurred by
Pacific.
o In addition, HVDC is obligated to pay Paramount a commission of 5% upon the
exercise of any Class C Warrants.
PACIFIC PHARMACEUTICALS. Mr. Weiss and Dr. Vernon, HVDC Board members,
were serving on the Board of Directors of Pacific Pharmaceuticals, Inc. during
the negotiation, execution and consummation of HVDC's acquisition of Pacific.
The HVDC Board of Directors formed a Special Committee to consider and approve
any terms of the transaction with Pacific. Mr. Weiss and Dr. Vernon were not
members of the HVDC Special Committee.
HOWARD WEISER. Howard Weiser, an HVDC Board member, borrowed $25,000
from Heaven's Door Corporation in November, 1999. HVDC acquired Heaven's Door
Corporation in January, 2000, and Heaven's Door Corporation is now a
wholly-owned subsidiary of HVDC. Mr. Weiser executed a note in favor of
Heaven's Door Corporation, which provides that Mr. Weiser must pay the full
amount of the loan on demand, with interest at a rate of nine and one-half
percent per annum. As of April 1, 2000, the principal amount of this loan and
accrued interest totaled approximately $25,963.
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE. The table below set forth certain
compensation information for the following executive officers of HVDC: Mr. Lloyd
Kagin, current President and Chief Executive Officer, Mr. John F. Dee, President
and Chief Executive Officer during fiscal year 1999, Nigel Rulewski, Chief
Medical Officer, and Michael Fitzgerald, Chief Financial Officer. Mr. Dee
resigned as an executive officer of HVDC as of February 25, 2000 and Mr. Kagin
was hired to fill his position. Mr. Fitzgerald became an executive officer of
HVDC in March of 1999. Dr. Rulewski resigned as Chief Medical Officer effective
February 29, 2000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION
COMPENSATION AWARDS
SECURITIES
NAME AND UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) OPTIONS (#) COMPENSATION ($)
<S> <C> <C> <C> <C> <C> <C>
Lloyd J. Kagin (1) 1999 0 0 0 0
President, Chief Executive Officer
John F. Dee (2) 1999 200,000 0 106,667 (3) 0
President, Chief Executive Officer 1998 181,667 0 1,330,128 (4) 0
Michael E. Fitzgerald (5)
Chief Financial Officer 1999 150,000 9,075 (6) 352,564(7) 0
Nigel J. Rulewski, M.D. (8) 1999 200,000 0 0 0
Chief Medical Officer 1998 16,669 55,000 (9) 961,538(10) 0
</TABLE>
- ----------------
(1) Mr. Kagin joined HVDC as President and Chief Executive Officer effective as
of February 25, 2000. His compensation arrangements are discussed under
"Executive Employment Contracts and Termination Agreements" below.
(2) Mr. Dee joined HVDC as President and Chief Executive Officer in February
1998 and resigned his office effective February 25, 2000. Mr. Dee is
currently serving as HVDC's Vice Chairman.
(3) In lieu of the annual cash bonus Mr. Dee is entitled to under his
employment agreement, he received an option to purchase 106,667 shares of
HVDC common stock for his services in 1998.
(4) This option was granted in January 1999, but was approved in principle in
1998 in connection with Mr. Dee's offer of employment. This option was
initially exercisable for 415,000 shares at $5.00 per share, but the number
of shares and the exercise price have been adjusted in accordance with
provisions that paralleled antidilution and reset rights held by investors
in HVDC's 1998 private placement, thereby keeping the executive's interests
in line with those of the investors.
(5) Mr. Fitzgerald joined HVDC as Vice President and Chief Financial Officer in
March of 1999.
(6) In lieu of a cash bonus, Mr. Fitzgerald received 5,000 shares of HVDC
common stock.
<PAGE>
(7) This option was initially exercisable for 110,000 shares at $5.00 per
share, but the number of shares and the exercise price have been adjusted
in accordance with provisions that paralleled antidilution and reset rights
held by investors in HVDC's 1998 private placement, thereby keeping the
executive's interests in line with those of the investors.
(8) Dr. Rulewski joined HVDC as Chief Medical Officer in December 1998 and
resigned from this office effective February 29, 2000.
(9) In lieu of a cash bonus, Dr. Rulewski received 10,000 shares of HVDC's
common stock.
(10) This option initially was exercisable for 300,000 shares at $5.00 per
share, but the number of shares and the exercise price have been adjusted
in accordance with provisions that paralleled antidilution and reset rights
held by investors in HVDC's 1998 private placement, thereby keeping the
executive's interests in line with those of the investors.
OPTION GRANT TABLE. The following table provides information concerning
the grant of stock options under HVDC's 1998 Equity Incentive Plan to the named
executive officers during the last fiscal year. In addition, the table shows
hypothetical gains that could be achieved for the respective options if
exercised at the end of the option term. These gains are based on assumed rates
of stock price appreciation of 5% and 10%, compounded annually, from the date
the options were granted to their expiration date. This table does not take into
account any change in the price of HVDC common stock to date, nor does HVDC make
any representation regarding the rate of its appreciation.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
NUMBER OF PERCENT OF ASSUMED ANNUAL RATES OF
SECURITIES TOTAL OPTIONS STOCK PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM ($) (1)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION
NAME GRANTED (#) FISCAL YEAR ($/SHARE) DATE 5% 10%
---- ----------- ------------ --------- ---- -- ---
(%)(2)
------
<S> <C> <C> <C> <C> <C> <C>
Lloyd J. Kagin 0 n/a n/a n/a n/a n/a
John F. Dee 106,667(3) 18.75 $1.125(3) 9/13/2009 $75,468 $197,250
Michael E. Fitzgerald 352,564(4) 61.99 $1.56(4) 3/8/2009 $345,892 $876,558
Nigel J. Rulewski, M.D. 0 n/a n/a n/a n/a n/a
</TABLE>
- -----------------
(1) The dollar amounts under these columns include the results at the 5% and
10% rates set by the Securities and Exchange Commission and, therefore, are
not intended to forecast possible future appreciation, if any, in the price
of the underlying common stock. No gain to the optionees is possible
without an increase in price of the common stock, which will benefit all
stockholders proportionately.
(2) Based on a total of 568,771 shares subject to options granted during 1999,
as adjusted through January 28, 2000. This total does not include an option
issued to John Dee in January 1999 to purchase an adjusted total of
1,330,128 shares, because this option was approved in principle in 1998 in
connection with Mr. Dee's employment agreement.
(3) The exercise price and number of shares subject to this option reflect
adjustments pursuant to the original terms thereof through January 28, 2000
when the terms became fixed. The adjustment provisions were designed to
keep Mr. Dee's interests in line with the interests of investors.
<PAGE>
(4) The exercise price and number of shares subject to this option reflect
adjustments pursuant to the original terms thereof through January 28, 2000
when the terms became fixed. The adjustment provisions were designed to
keep Mr. Fitzgerald's interests in line with the interests of investors.
<PAGE>
FISCAL YEAR-END OPTION VALUES. The following table provides information
regarding exerciseable and unexerciseable stock options held by the named
executive officers as of December 31, 1999:
<TABLE>
<CAPTION>
FISCAL YEAR-END OPTION VALUES
VALUE OF UNEXERCISED
NUMBER OF SECURITIES IN-THE-MONEY
UNDERLYING UNEXERCISED OPTIONS AT
SHARES OPTIONS AT FISCAL YEAR-END ($)
ACQUIRED ON VALUE FISCAL YEAR-END (#) EXERCISABLE/
NAME EXERCISE REALIZED ($)(1) EXERCISABLE/ UNEXERCISABLE (1)(2)
(#)(1) UNEXERCISABLE (1)
<S> <C> <C> <C> <C>
Lloyd J. Kagin 0 0 0/0 0/0
John F. Dee 0 0 1,436,795/0 3,103,181/0
Michael E. Fitzgerald 0 0 352,564/0 750,080/0
Nigel J. Rulewski, M.D. 0 0 961,538/0 2,045,672/0
</TABLE>
- -----------------
(1) These numbers reflect acceleration of vesting and adjustment of option
terms that occurred on January 28, 2000.
(2) Based on the difference between the option exercise price and the closing
price of the underlying common stock on December 31, 1999, which closing
price was $3.6875.
EXECUTIVE EMPLOYMENT CONTRACTS AND TERMINATION AGREEMENTS
Provided below is information concerning the employment and termination
arrangements that the company has entered into with its executive officers named
in the compensation table above. Mr. Fitzgerald has not entered into an
employment agreement with the company regarding his service as Chief Financial
Officer.
LLOYD J. KAGIN. On February 25, 2000, HVDC and Mr. Kagin entered into
an employment agreement providing for Mr. Kagin to serve as president and chief
executive officer on the company until March 25, 2004. Mr. Kagin's employment
agreement entitles him to a minimum annual base salary of $250,000 and an annual
bonus of between $25,000 and $100,000. The amount of Mr. Kagin's bonus is
determined annually by the compensation committee in light of his and the
company's performance over the prior year. Mr. Kagin received a signing bonus of
$75,000 and options to purchase an aggregate of 2.4 million shares of the
company's common stock at a price of $4.438 per share. Half of these options
become exercisable in quarterly installments over a four-year period, and the
other half all become exercisable at the end of the four-year period, subject to
acceleration if certain performance goals are met. If the company terminates Mr.
Kagin's employment without cause, or if Mr. Kagin terminates his employment
because the company has breached its obligations to him or there has been a
change of control of the company, then Mr. Kagin is entitled to receive (i)
severance payments in a lump sum equal to his cash compensation from HVDC for
the twelve month period preceding the termination date and (ii) immediate
acceleration of the exercisability of any unvested options then held by Mr.
Kagin, except that the exercisability of his options to purchase 1.2 million
shares will not accelerate unless the company has attained a certain market
capitalization.
JOHN F. DEE. HVDC and Mr. Dee entered into an employment agreement
effective in February of 1998 providing for Mr. Dee to serve as the company's
President and Chief Executive Officer until such time as his employment is
terminated. Mr. Dee's employment agreement entitles him to a minimum annual base
salary of $200,000 and an annual bonus of a minimum of $25,000 and a maximum
$200,000. The amount of Mr. Dee's bonus is determined annually by the
compensation committee in light of his and the company's performance over the
prior year. As of the date of this proxy, the compensation committee had not yet
considered whether Mr. Dee will receive more than the minimum bonus for 1999.
Mr. Dee was also granted an option to purchase shares of the company's common
stock under the employment agreement. As adjusted through January 28, 2000, this
option
<PAGE>
entitles Mr. Dee to purchase 1,330,128 shares of common stock at $1.56 per
share. This option became exercisable in full in connection with the adjustment
on January 28, 2000. Mr. Dee's employment may be terminated by mutual agreement
of the parties, by Mr. Dee if the company breaches it's obligations to him, or
by HVDC if Mr. Dee breaches his obligations to the company. Although Mr. Dee
ceased to serve as President and Chief Executive Officer of HVDC in February
2000, he has continued to serve HVDC through the date of this proxy statement as
Vice Chairman of the Board of Directors, and his annual compensation remains the
same as before.
NIGEL J. RULEWSKI. On September 3, 1998, HVDC and Dr. Rulewski entered
into an employment agreement whereby Dr. Rulewski agreed to serve as the
company's Chief Medical Officer. Dr. Rulewski's employment agreement entitled
him to a minimum annual base salary of $200,000 and a performance bonus of up to
$225,000 each year. The amount of Dr. Rulewski's bonus is determined by the
compensation committee based upon the recommendation of the company's President
and is subject to his achievement of agreed upon milestones set at the beginning
of each year. As of the date of this proxy, the compensation committee had not
yet considered Dr. Rulewski's bonus award for 1999. Dr. Rulewski was also
granted an option to purchase 961,538 shares of the company's common stock at a
price of 1.56 per share, as adjusted through January 28, 2000. Dr. Rulewski
resigned as Chief Medical Officer effective February 29, 2000.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
During 1999, the Compensation Committee of the Board of Directors
consisted of Dr. Zola P. Horovitz, Dr. Max Link, and Michael S. Weiss from
January until June, at which time Dr. Mark C. Rogers replaced Dr. Max Link on
the Committee. The Committee's responsibilities include: (i) reviewing the
performance of the Chief Executive Officer and the other executive officers of
HVDC and making determinations as to their cash and equity-based compensation
and benefits, and (ii) administration of employee stock option grants and stock
awards. The Committee met three times during 1999. The Committee submits this
report on compensation policies and actions during 1999 with respect to Mr. Dee,
in his capacity as President and Chief Executive Officer of the company, and Dr.
Nigel Rulewski and Michael Fitzgerald, the only other HVDC executive officers
whose combined salary and bonus for 1999 exceeded $100,000. Lloyd J. Kagin, who
is also named in the compensation tables, joined HVDC in February 2000. These
four executive officers are named in the compensation tables contained in this
proxy statement.
COMPENSATION PHILOSOPHY.
HVDC's executive compensation policy is comprised of three principal
elements: base salary, cash or stock bonuses based on performance and stock
option grants, and is designed to attract, retain and reward executive officers
who contribute to the long term success of HVDC. Through its compensation
policy, HVDC strives to provide total compensation that is competitive with
other companies in comparable lines of business. The compensation program
includes both motivational and retention-related compensation components.
Individual performance that meets and exceeds the company's plans and objectives
is encouraged through bonus awards, and stock options are granted to connect the
performance of the company's stock with the compensation of its executives.
HVDC endeavors to reward each executive's achievement of goals related
to the company's annual and long-term performances and individual fulfillment of
responsibilities. While compensation survey data provide useful guides for
comparative purposes, the Committee believes that an effective compensation
program also requires the application of judgment and subjective determinations
of individual performance. Accordingly, the Committee members apply their
judgment to reconcile the program's objectives with the realities of retaining
valued employees.
CHIEF EXECUTIVE OFFICER COMPENSATION
John Dee served as the Chief Executive Officer from February 1998
through February 2000. Pursuant to his employment agreement, Mr. Dee's base
salary for his first year of service was fixed at $200,000 and is subject to
upward adjustment in the discretion of the committee for each consecutive year
of employment. Mr. Dee is also entitled to a performance bonus of up to
$200,000, subject to the achievement of agreed upon milestones, with a
<PAGE>
minimum bonus of $25,000. As of the date of this proxy statement, the
Compensation Committee has not yet considered whether Mr. Dee will receive more
than the minimum base salary and bonus for 1999.
The Committee approved an option grant to Mr. Dee as part of his offer
of employment, which option was initially exercisable for 415,000 shares at
$5.00. The exercise price of Mr. Dee's option was set at the price per share
paid by the investors in HVDC's 1998 private placement, which price exceeded the
fair market value of the common stock on the date of grant. Mr. Dee's option
grant included provisions to adjust the number of shares and the exercise price
which paralleled antidilution and reset rights held by investors in HVDC's 1998
private placement, thereby keeping Mr. Dee's interests parallel with those of
the investors. As of January 28, 2000, Mr. Dee's option was adjusted to cover
1,330,128 shares at an exercise price of $1.56 per share, at which time its
terms became fixed. At that same time, the exercisability schedule of the option
was accelerated, and it became exercisable in full. In addition, Mr. Dee was
granted an option in 1999 that entitles him to purchase 106,667 shares of common
stock at $1.125 per share, after giving effect to adjustments through January
28, 2000. This option also has been accelerated and is exercisable in full.
Mr. Dee has resigned, effective as of February 25, 2000, as the
company's President and Chief Executive Officer and has been replaced by Mr.
Kagin. Mr. Dee continues to serve the company as Vice Chairman.
COMPENSATION OF OTHER EXECUTIVE OFFICERS
BASE SALARY. Dr. Rulewski had an employment agreement with HVDC that
set his minimum annual base salary. (see "Executive Employment Contracts and
Termination Agreements"). The compensation committee set Mr. Fitzgerald's annual
base salary at $150,000 when HVDC hired him in 1999. HVDC sets the annual base
salary for its executives based on each executive's salary history, the salaries
of other HVDC executives, and the compensation of executives at comparable
companies. The Compensation Committee periodically reviews the base salaries
paid to executive officers. In addition, executive officers may receive bonuses
in the discretion of the compensation committee. No bonuses have been awarded
with regard to services performed during 1999.
STOCK OPTIONS. Executive officer compensation also includes long-term
incentives afforded by options to purchase shares of common stock. Information
pertaining to option grants to executive officers in 1999 is provided in the
table entitled "Option Grants in Last Fiscal Year.".
STOCK OPTIONS
Stock options generally are granted to HVDC's executive officers at the
time of their hire and at such other times as the Committee may deem
appropriate, such as a promotion and upon nearing full vesting of prior options.
In determining option grants, the Committee considers the same industry survey
data as used in its analysis of base salaries and bonuses, and strives to make
awards that are in line with its competitors. In general, the number of shares
of common stock underlying the stock options granted to each executive reflects
the significance of that executive's current and anticipated contributions to
HVDC.
In addition, the stock option grants made by the Committee are designed
to align the interest of management with those of the shareholders. In order to
maintain the incentive and retention aspects of these grants, the Committee has
determined that a significant percentage of any officer's stock options should
be unvested option shares.
The value that may be realized from exercisable options depends on
whether the price of the company's common stock at any particular point in time
accurately reflects the company's performance. However, each individual
optionholder, and not the Committee, makes the determination as to whether to
exercise options that have vested in any particular year.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(m)
Section 162(m) of the Internal Revenue Code generally disallows a tax
deduction to a public company for compensation over $1 million paid to its Chief
Executive Officer and its four other most highly compensated
<PAGE>
executive officers. However, if certain performance-based requirements are met,
qualifying compensation will not be subject to this deduction limit.
By the Compensation Committee,
Zola P. Horovitz, Ph.D.
Mark C. Rogers, M.D.
Michael S. Weiss
<PAGE>
STOCK PERFORMANCE GRAPHS
The following graph shows a comparison of the cumulative total
shareholder returns HVDC common stock over the five year period from December
31, 1994 to December 31, 1999, as compared with that of the S&P 500 Composite
Index and the Hambrecht & Quist Biotechnology Index. The graph assumes $100
invested on December 31, 1994 in HVDC common stock, the S&P 500 Index and the
Hambrecht and Quist Biotechnology Index, with all dividends, if any, being
reinvested.
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998 1999
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
HeavenlyDoor.com, Inc. $100.00 $121.95 $41.46 $5.57 $1.39 $2.06
----------------------------------------------------------------------------------------------------
S&P 500 Index $100.00 $137.58 $169.17 $225.61 $290.09 $351.13
----------------------------------------------------------------------------------------------------
Hambrecht & Quist
Biotechnology Index $100.00 $170.11 $156.95 $158.87 $241.93 $517.14
----------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
PROPOSAL 2: AMENDMENT TO THE 1998 EQUITY INCENTIVE PLAN
OVERVIEW
The purpose of the 1998 Equity Incentive Plan is to attract and retain
key employees and consultants of the HVDC, to provide incentives for them to
achieve long-range performance goals and to enable them to participate in the
long-term growth of HVDC. The Equity Plan provides for the grant of stock
options (incentive and nonstatutory), stock appreciation rights, performance
shares, restricted stock and stock units ("Awards") to employees and consultants
of the HVDC and its affiliates ("Eligible Persons").
Currently, Awards may be made under the Equity Plan for up to a total
of 4,800,000 shares of Common stock, subject to adjustment for stock splits and
similar capital changes. Options may be granted under the Equity Plan through
the assumption or substitution of outstanding grants from an acquired company
without reducing the number of shares available for award under the Equity Plan.
In connection with the acquisition of Pacific, HVDC assumed Pacific's
outstanding option grants representing 242,181 shares of HVDC common stock. The
assumption of such options did not decrease the number of options available for
grant under the Equity Plan.
PROPOSED AMENDMENT TO THE 1998 EQUITY INCENTIVE PLAN
The Board of Directors has voted, subject to approval of the
stockholders, to increase the number of shares of common stock that may be
subject to Awards under the Equity Plan by 6,000,000 shares to an aggregate of
10,800,000 shares, subject to adjustment for stock splits and similar capital
changes. This proposed amendment is intended to ensure that a sufficient number
of shares of common stock are available to be issued to Eligible Persons in the
future.
As of March 31, 2000, 20 employees were eligible to participate in the
Equity Plan and options to purchase an aggregate of 5,238,784 shares of common
stock had been granted, excluding the assumed options. Of these options, options
to purchase 165,875 shares had been cancelled, options to purchase an aggregate
of 5,315,073 shares remained outstanding, and an aggregate of 15,000 shares of
restricted stock have been issued under the Equity Plan, leaving 5,469,927
shares available for new Awards under the Equity Plan, including 6,000,000
shares added by the amendment for which stockholder approval is sought. No stock
appreciation rights, performance shares, stock units or other stock-based awards
have been granted under the Equity Plan. The closing price of HVDC's common
stock on March 31, 2000, as reported by the Nasdaq SmallCap Market, was $3.38.
ADMINISTRATION AND ELIGIBILITY
Awards are made by the Compensation Committee, which has been
designated by the Board of Directors to administer the Equity Plan. The
Compensation Committee may delegate to one or more officers the power to make
awards under the Equity Plan to persons other than officers of HVDC who are
subject to the reporting requirements of Section 16 of the Securities Exchange
Act of 1934, as amended, referred to as the Exchange Act.
Awards under the Equity Plan are granted at the discretion of the
Compensation Committee, which determines the recipients and establishes the
terms and conditions of each award, including the exercise price, the form of
payment of the exercise price, the number of shares subject to options or other
equity rights and the time at which such options become exercisable. However,
the exercise price of any stock option granted under the Equity Plan may not be
less than the fair market value of the common stock on the date of grant.
FEDERAL INCOME TAX CONSEQUENCES RELATING TO STOCK OPTIONS
INCENTIVE STOCK OPTIONS. An optionee does not realize taxable income
upon the grant or exercise of an incentive stock option, or ISO, under the
Equity Plan.
If no disposition of shares issued to an optionee pursuant to the
exercise of an ISO is made by the optionee both within two years from the date
of grant and within one year from the date of exercise, then (a) upon sale of
such shares, any amount realized in excess of the option price (the amount paid
for the shares) is taxed to the
<PAGE>
optionee as long-term capital gain and any loss sustained will be a long-term
capital loss and (b) no deduction is allowed to HVDC for Federal income tax
purposes. The exercise of ISOs gives rise to an adjustment in computing
alternative minimum taxable income that may result in alternative minimum tax
liability for the optionee in the year of exercise.
If shares of common stock acquired upon the exercise of an ISO are
disposed of prior to the expiration of either the two-year or the one-year
holding periods described above, the disposition is referred to as a
disqualifying disposition, and (a) the optionee realizes ordinary income in the
year of disposition in an amount equal to the excess (if any) of the fair market
value of the shares at exercise (or, if less, the amount realized on a sale of
the shares) over the option price thereof and (b) HVDC is entitled to deduct
such amount. Any further gain realized is taxed as a short-term or long-term
capital gain and does not result in any deduction to HVDC. A disqualifying
disposition in the year of exercise will generally avoid the alternative minimum
tax consequences of the exercise of an ISO.
NONSTATUTORY STOCK OPTIONS. The optionee does not realize income at
the time a nonstatutory option is granted. Upon exercise of the option, (a) the
optionee realizes ordinary income in an amount equal to the difference between
the option price and the fair market value of the shares on the date of exercise
and (b) HVDC receives a tax deduction for the same amount. Upon disposition of
the shares, appreciation or depreciation after the date of exercise is treated
as a short-term or long-term capital gain or loss and will not result in any
deduction by HVDC.
VOTE REQUIRED
The affirmative vote by the holders of a majority of the shares
present, or represented by proxy, and entitled to vote at the meeting is
required to approve the amendment to the Equity Plan. Broker non-votes will not
be counted as present or represented for this purpose. Abstentions will be
counted as present and entitled to vote and, accordingly, will have the effect
of a negative vote.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
<PAGE>
PROPOSAL 3: TRANSFER OF HVDC'S BIOTECHNOLOGY ASSETS TO PROCEPT
GENERAL
On January 28, 2000, HVDC completed its acquisition of Heaven's Door
Corporation, referred to as HDC, through the merger of a wholly-owned subsidiary
with and into HDC. At the time of the acquisition, HVDC (formerly known as
Procept, Inc.) changed its name to HeavenlyDoor.com, Inc. HVDC currently has two
wholly-owned subsidiaries: HDC, which is an Internet company focusing on the
funeral services industry, and Procept, Inc., formerly known as Pacific
Pharmaceuticals, Inc., which is engaged primarily in the development of
biotechnological products. As part of its new business strategy, HVDC will focus
on growing its Internet business while maximizing the value of its biotechnology
assets. In furtherance of this strategy, HVDC would like to consolidate all of
its biotechnology assets into one company and accordingly, is seeking
stockholder approval to transfer the biotechnology assets currently held by HVDC
to its wholly-owned subsidiary, Procept. In order to maximize stockholder value,
HVDC intends to license or otherwise dispose of its biotechnology assets.
TERMS OF THE TRANSFER
If you approve the transfer, HVDC will enter into an agreement with
Procept providing for the transfer of all HVDC's biotechnology assets and
certain of its liabilities to Procept in exchange for 100 shares of Procept
common stock, $0.01 per value. Procept will remain a wholly-owned subsidiary of
HVDC after the transfer.
VOTE REQUIRED
The affirmative vote by the holders of a majority of shares of common
stock outstanding and entitled to vote at the meeting is required to approve the
proposal to transfer HVDC's biotechnology assets to Procept.
Abstentions and broker non-votes will have the effect of a negative vote.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
PROPOSAL 4: AMENDMENT TO OUR RESTATED CERTIFICATE OF INCORPORATION
Our board of directors has adopted, subject to stockholder approval,
an amendment to our Restated Certificate of Incorporation to increase the
number of shares of common stock we are authorized to issue from 50,000,000
to 75,000,000 shares. The board of directors believes that increasing the
number of authorized shares is essential to ensure that we continue to have
an adequate number of shares of common stock available for future issuance.
As of May 4, 2000 we had 32,568,100 shares of common stock outstanding, and
an additional 11,157,060 shares were issuable as of that date upon exercise
of outstanding warrants, unit purchase options, and options not issued under
our Equity Plan. Our Equity Plan current covers a reserve of 4,800,000
shares, all of which are subject to outstanding options or have been issued
on exercise of options. As part of this proxy statement, we are asking the
stockholders to approve an increase of 6,000,000 shares reserved for issuance
under the Equity Plan. Assuming our stockholders approve the increase in
shares reserved under the Equity Plan, and after allocating reserved shares,
we will have an insufficient number of shares reserved to cover all
outstanding warrants and options plus future option issuances contemplated
under the Equity Plan. Furthermore, no shares will be available for other
future uses without increasing the number of authorized shares.
If the stockholders approve this increase in the number of shares we
are authorized to issue, we would be able to issue stock for any valid corporate
purpose that the board may deem advisable, including stock splits and stock
dividends, financings, funding employee benefit plans and acquisitions. The
availability of additional shares of common stock for issuance will provide us
with greater flexibility in taking any of these actions without the delay
<PAGE>
or expense of obtaining stockholder approval, except to the extent required by
state law or Nasdaq requirements for the particular transaction.
Although our board of directors will authorize the issuance of
additional common stock based on its judgment as to our best interests and that
of our stockholders, future issuance of common stock could have a dilutive
effect on existing stockholders. Common stockholders are not now, and will not
be entitled to preemptive rights to purchase shares of any authorized capital
stock if additional shares are issued later. In addition, the issuance of
additional shares of common stock could have the effect of making it more
difficult for a third party to acquire a majority of our outstanding voting
stock.
VOTE REQUIRED
The affirmative vote of holders of a majority of the shares of common
stock outstanding and entitled to vote at the meeting is required to approve the
proposed amendment to our charter. Abstentions and broker non-votes will be
treated as a vote against the proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
STOCKHOLDER PROPOSALS
A stockholder who wishes to bring business before or propose director
nominations at the 2001 annual meeting must give written notice to the Secretary
of HVDC by March 25, 2001. The notice must contain specified information about
the proposed business or nominee and the stockholder making the proposal or
nomination.
In order for a stockholder proposal to be considered for inclusion in
HVDC's proxy materials for the 2001 Annual Meeting of Stockholders, written
notice of the proposal must be received by HVDC at 840 Memorial Drive,
Cambridge, Massachusetts 02139, Attention: John F. Dee, President, no later than
January 9, 2001.
EXPENSES OF SOLICITATION
HVDC will bear the cost of the solicitation of proxies, including the
charges and expenses of brokerage firms and others of forwarding solicitation
material to beneficial owners of stock. In addition to the use of mails, proxies
may be solicited by officers and any regular employees of HVDC in person or by
telephone. HVDC expects that the costs incurred in the solicitation of proxies
will be nominal.
OTHER MATTERS
The Board of Directors does not know of any business to come before the
meeting other than the matters described in the notice. If other business is
properly presented for consideration at the meeting, the enclosed proxy
authorizes the persons named therein to vote the shares in their discretion.
ANNUAL REPORT
HVDC's annual report for the year ended December 31, 1999 is being
mailed to stockholders along with this notice and proxy statement on or about
May 9, 2000. The annual report includes the Annual Report on Form 10-K for
that fiscal year as filed with the Securities and Exchange Commission. HVDC will
furnish you with a copy of the exhibits to the Annual Report on Form 10-K upon
receiving your written request and payment of an appropriate processing fee. If
you would like to receive these materials, please send your written request to
the Chief Financial Officer, HeavenlyDoor.com, Inc., 840 Memorial Drive,
Cambridge, Massachusetts 02139. Please make any request prior to June 1, 2000 so
that the company will have time to send you the written materials prior to the
annual meeting.
<PAGE>
(FRONT OF PROXY CARD)
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS JUNE 19, 2000
HEAVENLYDOOR.COM, INC.
The undersigned stockholder of HeavenlyDoor.com, Inc. (the
"Company") hereby appoints Lloyd J. Kagin, John F. Dee, Michael E.
Fitzgerald, and Lynnette C. Fallon, and each of them acting singly, the
attorneys and proxies of the undersigned, with full power of substitution, to
vote on behalf of the undersigned all of the shares of capital stock of the
Company that the undersigned is entitled to vote at the Annual Meeting of
Stockholders of the Company to be held on June 19, 2000, and at all
adjournments thereof, hereby revoking any proxy heretofore given with respect
to such shares.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER
DIRECTED BY THE UNDERSIGNED STOCKHOLDER(S). IF NO SPECIFICATION IS MADE, THIS
PROXY WILL BE VOTED FOR ALL PROPOSALS. IN THEIR DISCRETION, THE PROXIES ARE
ALSO AUTHORIZED TO VOTE UPON SUCH MATTERS AS MAY PROPERLY COME BEFORE THE
MEETING.
PLEASE SIGN AND MAIL THIS PROXY TODAY Mark Here For
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE.) Address Change [ ]
and Note On
Reverse
<PAGE>
(REVERSE OF PROXY CARD)
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF STOCKHOLDERS
HEAVENLYDOOR.COM, INC.
June 19, 2000
<TABLE>
<CAPTION>
A [X] Please mark your votes as in this example
FOR WITHHELD
All nominees For all nominees
<S> <C> <C> <C>
1. Proposal to elect [ ] [ ] Nominees: Glenn L. Cooper
directors John F. Dee
Zola P. Horovitz
Lloyd J. Kagin
Richard J. Kurtz
Philip C. Pauze
Mark C. Rogers
Elliott H. Vernon
Michael S. Weiss
Howard Weiser
</TABLE>
(INSTRUCTIONS: To withhold authority to vote for any person, strike a line
through the nominee's name.)
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C> <C>
2. Proposal to increase the aggregate number of shares reserved
for issuance under the Company's 1998 Equity Incentive Plan [ ] [ ] [ ]
FOR AGAINST ABSTAIN
3. Proposal to approve the transfer of all the Company's
biotechnology assets to its wholly-owned subsidiary, Procept, Inc. [ ] [ ] [ ]
FOR AGAINST ABSTAIN
4. Proposal to amend the Company's Restated Certificate of Incorporation
to increase the number of authorized shares of common stock [ ] [ ] [ ]
</TABLE>
__________________________________ ________________
SIGNATURE DATE
__________________________________ ________________
SIGNATURE (IF HELD JOINTLY) DATE
NOTE: Please sign exactly as name appears on stock certificate. When shares
are held by joint tenants, both should sign. When signing as attorney,
executor, administrator, trustee, or guardian, please give full title as
such. If a corporation, please sign in full corporate name by President or
other authorized officer. If a partnership, please sign in partnership name
by authorized person.
<PAGE>
APPENDIX A
HEAVENLYDOOR.COM, INC.
1998 EQUITY INCENTIVE PLAN
(AS PROPOSED TO BE AMENDED AT THE JUNE 19, 2000, MEETING OF SHAREHOLDERS)
Section 1. PURPOSE
The purpose of the HeavenlyDoor.com, Inc. 1998 Equity Incentive Plan
(the "Plan") is to attract and retain key employees and directors and
consultants of the Company and its Affiliates, to provide an incentive for them
to achieve long-range performance goals, and to enable them to participate in
the long-term growth of the Company by granting Awards with respect to the
Company's Common Stock.
Section 2. DEFINITIONS
"Affiliate" means any business entity in which the Company owns
directly or indirectly 50% or more of the total combined voting power or has a
significant financial interest as determined by the Committee.
"Award" means any Option, Stock Appreciation Right, Performance Share,
Restricted Stock, Stock Unit or Other Stock-Based Award awarded under the Plan.
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, and any successor to such Code.
"Committee" means a committee comprised of not less than two members of
the Board appointed by the Board to administer the Plan or a specified portion
thereof. If the Committee is authorized to grant Awards to a Reporting Person or
a Covered Employee, each member shall be a "Non-Employee Director" or the
equivalent within the meaning of Rule 16b-3 under the Securities Exchange Act of
1934 or any successor provision, as applicable to the Company at the time ("Rule
16b-3"), or an "outside director" or the equivalent within the meaning of
Section 162(m) of the Code, respectively. In the event no such Committee is
appointed, then "Committee" means the Board.
"Common Stock" or "Stock" means the Common Stock, $0.01 par value, of
the Company.
"Company" means HeavenlyDoor.com, Inc.
"Covered Employee" means a person whose income is subject to Section
162(m) of the Code.
<PAGE>
"Designated Beneficiary" means the beneficiary designated by a
Participant, in a manner determined by the Committee, to receive amounts due or
exercise rights of the Participant in the event of the Participant's death. In
the absence of an effective designation by a Participant, "Designated
Beneficiary" shall mean the Participant's estate.
"Effective Date" means November 16, 1998.
"Fair Market Value" means, with respect to Common Stock or any other
property, the fair market value of such property as determined by the Committee
in good faith or in the manner established by the Committee from time to time.
"Incentive Stock Option" means an option to purchase shares of Common
Stock awarded to a Participant under Section 6 that is intended to meet the
requirements of Section 422 of the Code or any successor provision.
"Nonstatutory Stock Option" means an option to purchase shares of
Common Stock awarded to a Participant under Section 6 that is not intended to be
an Incentive Stock Option.
"Option" means an Incentive Stock Option or a Nonstatutory Stock
Option.
"Other Stock-Based Award" means an Award, other than an Option, Stock
Appreciation Right, Performance Share, Restricted Stock or Stock Unit, having a
Common Stock element and awarded to a Participant under Section 11.
"Participant" means a person selected by the Committee to receive an
Award under the Plan.
"Performance Cycle" or "Cycle" means the period of time selected by the
Committee during which performance is measured for the purpose of determining
the extent to which an award of Performance Shares has been earned.
"Performance Shares" mean shares of Common Stock, which may be earned
by the achievement of performance goals, awarded to a Participant under Section
8.
"Reporting Person" means a person subject to Section 16 of the
Securities Exchange Act of 1934 or any successor provision.
"Restricted Period" means the period of time during which an Award may
be forfeited to the Company pursuant to the terms and conditions of such Award.
"Restricted Stock" means shares of Common Stock subject to forfeiture
awarded to a Participant under Section 9.
"Stock Appreciation Right" or "SAR" means a right to receive any excess
in value of shares of Common Stock over the exercise price awarded to a
Participant under Section 7.
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<PAGE>
"Stock Unit" means an award of Common Stock or units that are valued in
whole or in part by reference to, or otherwise based on, the value of Common
Stock, awarded to a Participant under Section 10.
Section 3. ADMINISTRATION
The Plan shall be administered by the Committee, provided that the
Board may in any instance perform any of the functions delegated to the
Committee hereunder. The Committee shall select the Participants to receive
Awards and shall determine the terms and conditions of the Awards. The Committee
shall have authority to adopt, alter and repeal such administrative rules,
guidelines and practices governing the operation of the Plan as it shall from
time to time consider advisable, and to interpret the provisions of the Plan.
The Committee's decisions shall be final and binding. To the extent permitted by
applicable law, the Committee may delegate to one or more executive officers of
the Company the power to make Awards to Participants who are not Reporting
Persons and all determinations under the Plan with respect thereto, provided
that the Committee shall fix the maximum amount of such Awards for all such
Participants and a maximum for any one Participant.
Section 4. ELIGIBILITY
All employees and, in the case of Awards other than Incentive Stock
Options, directors and consultants of the Company or any Affiliate, capable of
contributing significantly to the successful performance of the Company, other
than a person who has irrevocably elected not to be eligible, are eligible to be
Participants in the Plan. Incentive Stock Options may be awarded only to persons
eligible to receive such Options under the Code.
Section 5. STOCK AVAILABLE FOR AWARDS
(a) Subject to adjustment under subsection (b), Awards may be made
under the Plan for up to 10,800,000 shares of Common Stock. If any Award in
respect of shares of Common Stock expires or is terminated unexercised or is
forfeited, the shares subject to such Award, to the extent of such expiration,
termination or forfeiture, shall again be available for award under the Plan.
Common Stock issued through the assumption or substitution of outstanding grants
from an acquired company shall not reduce the shares available for Awards under
the Plan. Shares issued under the Plan may consist in whole or in part of
authorized but unissued shares or treasury shares.
(b) In the event that the Committee determines that any stock dividend,
extraordinary cash dividend, creation of a class of equity securities,
recapitalization, reorganization, merger, consolidation, split-up, spin-off,
combination, exchange of shares, warrants or rights offering to purchase Common
Stock at a price substantially below fair market value, or other similar
transaction affects the Common Stock such that an adjustment is required in
order to preserve the benefits or potential benefits intended to be made
available under the Plan, then the Committee (subject, in the case of Incentive
Stock Options, to any limitation required under the Code) shall equitably adjust
any or all of (i) the number and kind of shares in respect of which Awards may
be made under the Plan, (ii) the number and kind of shares subject to
outstanding Awards, and (iii) the award, exercise or conversion price with
respect to any of the foregoing, and if
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<PAGE>
considered appropriate, the Committee may make provision for a cash payment with
respect to an outstanding Award, provided that the number of shares subject to
any Award shall always be a whole number.
Section 6. STOCK OPTIONS
(a) Subject to the provisions of the Plan, the Committee may award
Incentive Stock Options and Nonstatutory Stock Options and determine the number
of shares to be covered by each Option, the option price therefor and the
conditions and limitations applicable to the exercise of the Option. The
Committee may impose such conditions with respect to the exercise of Options,
including conditions relating to applicable federal and state securities laws,
as it considers necessary or advisable. The terms and conditions of Incentive
Stock Options shall be subject to and comply with Section 422 of the Code or any
successor provision and any regulations thereunder, and no Incentive Stock
Option may be granted hereunder more than ten years after the Effective Date.
(b) The Committee shall establish the option price at the time each
Option is awarded, which price shall not be less than 100% of the Fair Market
Value of the Common Stock on the date of award with respect to Incentive Stock
Options. Nonstatutory Stock Options may be granted at such prices as the
Committee may determine.
(c) Each Option shall be exercisable at such times and subject to such
additional terms and conditions as the Committee may specify in the applicable
Award or thereafter. The Committee may impose such conditions with respect to
the exercise of Options, including conditions relating to applicable federal or
state securities laws, as it considers necessary or advisable.
(d) No shares shall be delivered pursuant to any exercise of an Option
until payment in full of the option price therefor is received by the Company.
Such payment may be made in whole or in part in cash or, to the extent permitted
by the Committee at or after the award of the Option, by delivery of a note or
shares of Common Stock owned by the optionee, including Restricted Stock, or by
retaining shares otherwise issuable pursuant to the Option, in each case valued
at their Fair Market Value on the date of delivery or retention, or such other
lawful consideration as the Committee may determine.
(e) The Committee may provide that, subject to such conditions as it
considers appropriate, upon the delivery or retention of shares to the Company
in payment of an Option, the Participant automatically be awarded an Option for
up to the number of shares so delivered.
Section 7. STOCK APPRECIATION RIGHTS
(a) Subject to the provisions of the Plan, the Committee may award SARs
in tandem with an Option (at or after the award of the Option), or alone and
unrelated to an Option. SARs in tandem with an Option shall terminate to the
extent that the related Option is exercised, and the related Option shall
terminate to the extent that the tandem SARs are exercised. The Committee shall
determine at the time of grant or thereafter whether SARs are settled in cash,
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<PAGE>
Common Stock or other securities of the Company, Awards or other property, and
may define the manner of determining the excess in value of the shares of Common
Stock.
(b) The Committee shall fix the exercise price of each SAR or specify
the manner in which the price shall be determined. SARs granted in tandem with
Options shall have an exercise price not less than the exercise price of the
related Option. SARs granted alone and unrelated to an Option may not have an
exercise price less than 100% of the Fair Market Value of the Common Stock on
the date of grant, provided that such a SAR granted to a new employee or
consultant within 90 days of the date of employment may have a lower exercise
price so long as it is not less than 100% of the Fair Market Value on the date
of employment.
(c) An SAR related to an Option, which SAR can only be exercised upon
or during limited periods following a change in control of the Company, may
entitle the Participant to receive an amount based upon the highest price paid
or offered for Common Stock in any transaction relating to the change in control
or paid during the thirty-day period immediately preceding the occurrence of the
change in control in any transaction reported in the stock market in which the
Common Stock is normally traded.
Section 8. PERFORMANCE SHARES
(a) Subject to the provisions of the Plan, the Committee may award
Performance Shares and determine the number of such shares for each Performance
Cycle and the duration of each Performance Cycle. There may be more than one
Performance Cycle in existence at any one time, and the duration of Performance
Cycles may differ from each other. The payment value of Performance Shares shall
be equal to the Fair Market Value of the Common Stock on the date the
Performance Shares are earned or, in the discretion of the Committee, on the
date the Committee determines that the Performance Shares have been earned.
(b) The committee shall establish performance goals for each Cycle, for
the purpose of determining the extent to which Performance Shares awarded for
such Cycle are earned, on the basis of such criteria and to accomplish such
objectives as the Committee may from time to time select. During any Cycle, the
Committee may adjust the performance goals for such Cycle as it deems equitable
in recognition of unusual or non-recurring events affecting the Company, changes
in applicable tax laws or accounting principles, or such other factors as the
Committee may determine.
(c) As soon as practicable after the end of a Performance Cycle, the
Committee shall determine the number of Performance Shares that have been earned
on the basis of performance in relation to the established performance goals.
The payment values of earned Performance Shares shall be distributed to the
Participant or, if the Participant has died, to the Participant's Designated
Beneficiary, as soon as practicable thereafter. The Committee shall determine,
at or after the time of award, whether payment values will be settled in whole
or in part in cash or other property, including Common Stock or Awards.
Section 9. RESTRICTED STOCK
(a) Subject to the provisions of the Plan, the Committee may award
shares of Restricted Stock and determine the duration of the Restricted Period
during which, and the
5
<PAGE>
conditions under which, the shares may be forfeited to the Company and the other
terms and conditions of such Awards. Shares of Restricted Stock may be issued
for no cash consideration or such minimum consideration as may be required by
applicable law.
(b) Shares of Restricted Stock may not be sold, assigned, transferred,
pledged or otherwise encumbered, except as permitted by the Committee, during
the Restricted Period. Notwithstanding the foregoing, in the Committee's
discretion, Awards in the form of Restricted Stock may be made transferable to a
limited liability company controlled solely by the Participant. Shares of
Restricted Stock shall be evidenced in such manner as the Committee may
determine. Any certificates issued in respect of shares of Restricted Stock
shall be registered in the name of the Participant and unless otherwise
determined by the Committee, deposited by the Participant, together with a stock
power endorsed in blank, with the Company. At the expiration of the Restricted
Period, the Company shall deliver such certificates to the Participant or if the
Participant has died, to the Participant's Designated Beneficiary.
Section 10. STOCK UNITS
(a) Subject to the provisions of the Plan, the Committee may award
Stock Units subject to such terms, restrictions, conditions, performance
criteria, vesting requirements and payment rules as the Committee shall
determine.
(b) Shares of Common Stock awarded in connection with a Stock Unit
Award shall be issued for no cash consideration or such minimum consideration as
may be required by applicable law.
Section 11. OTHER STOCK-BASED AWARDS
(a) Subject to the provisions of the Plan, the Committee may make other
awards of Common Stock and other awards that are valued in whole or in part by
reference to, or are otherwise based on, Common Stock, including without
limitation convertible preferred stock, convertible debentures, exchangeable
securities and Common Stock awards or options. Other Stock-Based Awards may be
granted either alone or in tandem with other Awards granted under the Plan
and/or cash awards made outside of the Plan.
(b) The Committee may establish performance goals, which may be based
on performance goals related to book value, subsidiary performance or such other
criteria as the Committee may determine, Restricted Periods, Performance Cycles,
conversion prices, maturities and security, if any, for any Other Stock-Based
Award. Other Stock-Based Awards may be sold to Participants at the face value
thereof or any discount therefrom or awarded for no consideration or such
minimum consideration as may be required by applicable law.
6
<PAGE>
Section 12. GENERAL PROVISIONS APPLICABLE TO AWARDS
(a) LIMITATIONS ON GRANTS OF OPTIONS AND SARS. Subject to adjustment
under Section 5(b), the number of shares subject to Options and SARs granted to
any one individual during any fiscal year may not exceed 1,000,000 shares.
(b) REPORTING PERSON LIMITATIONS. Notwithstanding any other provision
of the Plan, to the extent required to qualify for the exemption provided by
Rule 16b-3, Awards made to a Reporting Person shall not be transferable by such
person other than by will or the laws of descent and distribution or, if then
permitted by Rule 16b-3, pursuant to a qualified domestic relations order as
defined in the Code or Title I of the Employee Retirement Income Security Act or
the rules thereunder, and are exercisable during such person's lifetime only by
such person or by such person's guardian or legal representative.
(c) DOCUMENTATION. Each Award under the Plan shall be evidenced by a
writing delivered to the Participant specifying the terms and conditions thereof
and containing such other terms and conditions not inconsistent with the
provisions of the Plan as the Committee considers necessary or advisable to
achieve the purposes of the Plan or to comply with applicable tax and regulatory
laws and accounting principles.
(d) COMMITTEE DISCRETION. Each type of Award may be made alone, in
addition to or in relation to any other type of Award. The terms of each type of
Award need not be identical, and the Committee need not treat Participants
uniformly. Except as otherwise provided by the Plan or a particular Award, any
determination with respect to an Award may be made by the Committee at the time
of award or at any time thereafter.
(e) SETTLEMENT. The Committee shall determine whether Awards are
settled in whole or in part in cash, Common Stock, other securities of the
Company, Awards or other property. The Committee may permit a Participant to
defer all or any portion of a payment under the Plan, including the crediting of
interest on deferred amounts denominated in cash and dividend equivalents on
amounts denominated in Common Stock.
(f) DIVIDENDS AND CASH AWARDS. In the discretion of the Committee, any
Award under the Plan may provide the Participant with (i) dividends or dividend
equivalents payable currently or deferred with or without interest, and (ii)
cash payments in lieu of or in addition to an Award.
(g) TERMINATION OF EMPLOYMENT. The Committee shall determine the effect
on an Award of the disability, death, retirement or other termination of
employment of a Participant and the extent to which, and the period during
which, the Participant's legal representative, guardian or Designated
Beneficiary may receive payment of an Award or exercise rights thereunder.
(h) CHANGE IN CONTROL. In order to preserve a Participant's rights
under an Award in the event of a change in control of the Company, the Committee
in its discretion may, at the time an Award is made or at any time thereafter,
take one or more of the following actions: (i) provide for the acceleration of
any time period relating to the exercise or realization of the Award, (ii) upon
written notice to the Participants holding options, provide that all options
must be
7
<PAGE>
exercised, to the extent exercisable, within a specified number of days
of such notice, at the end of which period the options shall terminate, (iii)
provide for the purchase of the Award for an amount of cash or other property
equal to the excess of the fair market value of the Award, (iv) adjust the terms
of the Award in a manner determined by the Committee to reflect the change in
control, (v) cause the Award to be assumed, or new rights substituted therefor,
by another entity, or (vi) make such other provision as the Committee may
consider equitable and in the best interests of the Company.
(i) LOANS. The Committee may authorize the making of loans or cash
payments to Participants in connection with any Award under the Plan, which
loans may be secured by any security, including Common Stock, underlying or
related to such Award (provided that such Loan shall not exceed the Fair Market
Value of the security subject to such Award), and which may be forgiven upon
such terms and conditions as the Committee may establish at the time of such
loan or at any time thereafter.
(j) WITHHOLDING TAXES. The Participant shall pay to the Company, or
make provision satisfactory to the Committee for payment of, any taxes required
by law to be withheld in respect of Awards under the Plan no later than the date
of the event creating the tax liability. In the Committee's discretion, such tax
obligations may be paid in whole or in part in shares of Common Stock, including
shares retained from the Award creating the tax obligation, valued at their Fair
Market Value on the date of delivery. The Company and its Affiliates may, to the
extent required by law, deduct any such tax obligations from any payment of any
kind otherwise due to the Participant.
(k) FOREIGN NATIONALS. Awards may be made to Participants who are
foreign nationals or employed outside the United States on such terms and
conditions different from those specified in the Plan as the Committee considers
necessary or advisable to achieve the purposes of the Plan or to comply with
applicable laws.
(l) AMENDMENT OF AWARD. The Committee may amend, modify or terminate
any outstanding Award, including substituting therefor another Award of the same
or a different type, changing the date of exercise or realization and converting
an Incentive Stock Option to a Nonstatutory Stock Option, provided that the
Participant's consent to such action shall be required unless the Committee
determines that the action, taking into account any related action, would not
materially and adversely affect the Participant.
Section 13. MISCELLANEOUS
(a) NO RIGHT TO EMPLOYMENT. No person shall have any claim or right to
be granted an Award, and the grant of an Award shall not be construed as giving
a Participant the right to continued employment. The Company expressly reserves
the right at any time to dismiss a Participant free from any liability or claim
under the Plan, except as expressly provided in the applicable Award.
(b) NO RIGHTS AS STOCKHOLDER. Subject to the provisions of the
applicable Award, no Participant or Designated Beneficiary shall have any rights
as a stockholder with respect to any shares of Common Stock to be distributed
under the Plan until he or she becomes the holder
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<PAGE>
thereof. A Participant to whom Common Stock is awarded shall be considered the
holder of the Stock at the time of the Award except as otherwise provided in the
applicable Award.
(c) EFFECTIVE DATE. Subject to the approval of the stockholders of the
Company, this 1998 Equity Incentive Plan will become effective on November 16,
1998. Prior to such approval, Awards may be made under the Plan expressly
subject to such approval.
(d) AMENDMENT OF PLAN. The Board may amend, suspend or terminate the
Plan or any portion thereof at any time, subject to any stockholder approval
that the Board determines to be necessary or advisable.
(e) GOVERNING LAW. The provisions of the Plan shall be governed by and
interpreted in accordance with the laws of Delaware.
- -----------------------------------------
9
