<PAGE> 1
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 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
Cholestech Corporation
- --------------------------------------------------------------------------------
(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)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
CHOLESTECH CORPORATION
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD AUGUST 19, 1999
------------------------
TO THE SHAREHOLDERS OF CHOLESTECH CORPORATION:
Notice is hereby given that the Annual Meeting of Shareholders of
CHOLESTECH CORPORATION, a corporation organized under the laws of the State of
California, will be held at the Fairmont Hotel Atop Nob Hill located at 950
Mason Street in San Francisco, California 94108, on Thursday, August 19, 1999,
at 10:00 a.m. Pacific Time, for the following purposes:
1. To elect six (6) directors to serve until the next Annual Meeting of
Shareholders or until their successors are elected and qualified.
2. To ratify the appointment of PricewaterhouseCoopers LLP as independent
public accountants of the Company for the fiscal year ending March 31, 2000.
3. To transact such other business as may properly come before the meeting
or any adjournments thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice. Only shareholders of record at the close of
business on June 25, 1999 are entitled to notice of, and to vote at, the Annual
Meeting and any adjournments thereof.
All shareholders are cordially invited to attend the Annual Meeting in
person. However, to ensure your representation at the meeting, you are urged to
mark, sign, date and return the enclosed proxy card as promptly as possible in
the postage prepaid envelope enclosed for that purpose. You may revoke your
proxy in the manner described in the accompanying Proxy Statement at any time
before it has been voted at the Annual Meeting. Any shareholder attending the
Annual Meeting may vote in person even if he or she has returned a proxy.
By Order of the Board of Directors,
Andrea J. Tiller
Chief Financial Officer
July 8, 1999
YOUR VOTE IS IMPORTANT
IN ORDER TO ASSURE YOUR REPRESENTATION AT THE MEETING, YOU ARE REQUESTED TO
COMPLETE, SIGN AND DATE THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE AND RETURN IT
IN THE ENCLOSED ENVELOPE.
<PAGE> 3
CHOLESTECH CORPORATION
------------------------
PROXY STATEMENT
------------------------
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
This Proxy Statement and the accompanying Notice of Annual Meeting of
Shareholders and Proxy Card are being furnished to the shareholders of
Cholestech Corporation ("Cholestech" or the "Company") in connection with the
solicitation of proxies by the Board of Directors of the Company for use at the
1999 Annual Meeting of Shareholders of the Company (the "Annual Meeting") to be
held at the Fairmont Hotel Atop Nob Hill located at 950 Mason Street in San
Francisco, California 94108, on Thursday, August 19, 1999 at 10:00 a.m. Pacific
Time. The Company's principle executive office is located at 3347 Investment
Boulevard, Hayward, California 94545, and its telephone number at that address
is (510) 732-7200.
These proxy solicitation materials and the Annual Report to Shareholders
for the fiscal year ended March 26, 1999, including financial statements, were
first mailed on or about July 21, 1999 to all shareholders entitled to vote at
the Annual Meeting.
RECORD DATE AND VOTING SECURITIES
Shareholders of record at the close of business on June 25, 1999 of the
Company's Common Stock, no par value ("Common Stock"), are entitled to notice of
and to vote at the Annual Meeting and any adjournment thereof. On that date,
11,517,412 shares of Common Stock were outstanding and entitled to vote and held
by approximately 256 shareholders of record. No shares of the Company's
Preferred Stock were outstanding.
REVOCABILITY OF PROXY
A proxy may be revoked by a shareholder prior to the voting at the Annual
Meeting by written notice to the Secretary of the Company, by submission of
another proxy bearing a later date or by voting in person at the Annual Meeting.
Such notice or later proxy will not affect a vote on any matter taken prior to
the receipt thereof by the Company. The mere presence at the Annual Meeting of
the shareholder who has appointed a proxy will not revoke the prior appointment.
VOTING AND SOLICITATION
Each shareholder is entitled to one vote for each share held. Each
shareholder voting in the election of directors (Proposal One) may cumulate such
shareholder's votes. This means a shareholder may give one candidate a number of
votes equal to the number of directors to be elected multiplied by the number of
shares held by such shareholder, or distribute such shareholder's votes on the
same principle among as many candidates as the shareholder may select, provided
that votes cannot be cast for more candidates than the number of directors to be
elected (six). However, no shareholder shall be entitled to cumulate votes
unless the candidate's name has been placed in nomination prior to the voting
and the shareholder, or any other shareholder, has given notice at the meeting,
prior to the voting, of the intention to cumulate the shareholder's votes. On
all other matters, each share has one vote. A quorum comprising the holders of
the majority of the outstanding shares of Common Stock on the record date must
be present or represented for the transaction of business at the Annual Meeting.
Abstentions and broker non-votes will be counted in establishing the quorum.
This solicitation of proxies is made by the Company. The cost of soliciting
votes will be borne by the Company. The Company may reimburse brokerage firms
and other persons representing beneficial owners for their expenses in
forwarding solicitation material to such beneficial owners. Proxies may also be
solicited by certain of the Company's directors, officers and regular employees,
without additional compensation, personally or by telephone or by facsimile.
<PAGE> 4
DEADLINE OF RECEIPT OF SHAREHOLDER PROPOSALS
Proposals of shareholders of the Company that are intended to be presented
by such shareholders at the Company's 2000 Annual Meeting of Shareholders must
be received by the Company no later than March 10, 2000 in order that they may
be considered for inclusion in the proxy statement and form of proxy relating to
the meeting.
The attached proxy card grants proxy holders discretionary authority to
vote on any matter properly raised at the Annual Meeting of Shareholders. If a
shareholder intends to submit a proposal at the Company's Year 2000 Annual
Meeting of Shareholders which is not eligible for inclusion in the proxy
statement and form of proxy relating to that meeting, the shareholder must give
the Company notice in accordance with the requirements set forth in the
Securities Exchange Act of 1934, as amended, no later than May 24, 2000. If such
shareholder fails to comply with the foregoing notice provision, the proxy
holders will be allowed to use their discretionary authority when and if the
proposal is raised at the Company's Annual Meeting of Shareholders in the year
2000.
PROPOSAL ONE
ELECTION OF DIRECTORS
GENERAL
A Board of six (6) members is to be elected at the Annual Meeting. Unless
otherwise instructed, the proxy holders will vote the proxies received by them
for management's six (6) nominees named below, all of who are presently
directors of the Company. In any event, the proxy holders cannot vote the
proxies for a greater number of persons than six (6). In the event that any
management nominee is unable or declines to serve as a director at the time of
the Annual Meeting, the proxies will be voted for a nominee who shall be
designated by the present Board of Directors to fill the vacancy. In the event
that additional persons are nominated for election as directors, the proxy
holders intend to vote all proxies received by them in such a manner (in
accordance with cumulative voting) as will assure the election of as many of the
nominees listed below as possible, and, in such event, the specific nominees to
be voted for will be determined by the proxy holders. The Company is not aware
of any nominee who will be unable or will decline to serve as a director. The
term of office for each person elected as a director will continue until the
next Annual Meeting of Shareholders or until such director's successor has been
duly elected and qualified.
VOTE REQUIRED AND BOARD RECOMMENDATION
If a quorum is present and voting, the six (6) nominees receiving the
highest number of affirmative votes of the shares entitled to be voted shall be
elected to the Board of Directors. Abstentions and "broker non-votes" are not
counted in the election of directors.
NOMINEES
The names of the nominees and certain information about them are set forth
below.
<TABLE>
<CAPTION>
NAME OF NOMINEE AGE POSITION WITH THE COMPANY DIRECTOR SINCE
--------------- --- ------------------------- --------------
<S> <C> <C> <C>
Harvey S. Sadow, 76 Chairman of the Board 1990
Ph.D.(1)(2)(3)(4).................
Warren E. Pinckert II(3)(4)......... 56 President, Chief Executive Officer 1993
and Director
Joseph Buchman M.D.(1).............. 69 Director 1994
John L. Castello(2)(3)(4)........... 63 Director 1993
John H. Landon(2)(4)................ 58 Director, Vice Chairman of the Board 1997
Larry Y. Wilson(1).................. 49 Director 1998
</TABLE>
- ---------------
(1) Member of the Audit Committee
(2) Member of the Compensation Committee
2
<PAGE> 5
(3) Member of the Governance Committee
(4) Member of the Nominating Committee
There is no family relationship between any director or executive officer
of the Company.
Harvey S. Sadow, Ph.D. has been a director of the Company since January
1990 and has served as Chairman of the Board since 1992. Dr. Sadow was President
and Chief Executive Officer of Boehringer Ingelheim Corporation, a health care
company, from 1971 to 1988, and of Boehringer Ingelheim Pharmaceuticals, Inc.,
an ethical specialty pharmaceutical company, from 1984 to 1988. In 1988, upon
his retirement, Dr. Sadow became Chairman of the Board of Directors of both
Boehringer Ingelheim Corporation and Boehringer Ingelheim Pharmaceuticals, Inc.
Dr. Sadow retired as Chairman of both companies in 1990 but remained on their
Boards of Directors until 1992. Dr. Sadow is a director of Anika Therapeutics,
Inc., a hyaluronic acid technology specialty company; a director of Trega
Biosciences, Inc., a drug discovery company and a director of several privately
held companies in the health care field. Dr. Sadow earned a B.S. from the
Virginia Military Institute, a M.S. from the University of Kansas and a Ph.D.
from the University of Connecticut.
Warren E. Pinckert II has served as President, Chief Executive Officer and
a director of the Company since June 1993. Mr. Pinckert served as Executive Vice
President of Operations of the Company from 1991 to June 1993 and as Chief
Financial Officer and Vice President of Business Development of the Company from
1989 to June 1993. Mr. Pinckert also served as Secretary of the Company from
1989 to January 1997. Prior to joining the Company, Mr. Pinckert was Chief
Financial Officer of Sunrise Medical Inc., an international durable medical
equipment manufacturer, from 1983 to 1989. Mr. Pinckert also serves on the Board
of Directors of PacifiCare Health Systems, Inc., a managed care organization.
Mr. Pinckert earned a B.S. in Accounting and a M.B.A. from the University of
Southern California and is a certified public accountant.
Joseph Buchman, M.D. has been a director of the Company since July 1994.
Dr. Buchman is a practicing physician with a private practice in Connecticut.
Dr. Buchman is a certified member of the American Board of Internal Medicine and
Cardiovascular Disease. Dr. Buchman is currently Director of the Preventive
Cardiology Program for Danbury Hospital Health Services, and has been a member
of the Cardiothoracic and Vascular Group, a professional corporation in
Connecticut, since 1992. Prior to 1992, Dr. Buchman maintained a private
practice. Dr. Buchman has published numerous articles on the subject of coronary
risk factors. Dr. Buchman earned a B.A. from Wesleyan University and a M.D. from
New York University, College of Medicine.
John L. Castello has been a director of the Company since August 1993. Mr.
Castello is the President, Chief Executive Officer, and Chairman of the Board of
XOMA Ltd. ("XOMA"), a biotechnology company. Mr. Castello joined XOMA in April
1992 as President and Chief Executive Officer after serving as President of the
Ares Serono Group, Inc., a Swiss ethical pharmaceutical company, from 1986 to
1991, and prior to that Mr. Castello was Chairman and Chief Executive Officer of
Ares Serono Inc. from August 1991 to April 1992. From 1977 to 1986, Mr. Castello
held senior management positions at Amersham International PLC and Abbott
Laboratories. Mr. Castello also serves on the Board of Directors of Metra
Biosystems. Mr. Castello earned a B.S. in Mechanical and Industrial Engineering
from Notre Dame University.
John H. Landon has been a director of the Company since December of 1997.
Mr. Landon served as Vice President and General Manager, Medical Products of
E.I. DuPont de Nemours & Company, Inc. ("DuPont") from 1992 to 1996. Prior to
that, Mr. Landon served in various capacities at DuPont, including Vice
President and General Manager, Diagnostics and Biotechnology from 1990 to 1992,
Director of Diagnostics from 1988 to 1990, Business Director of Diagnostic
Imaging from 1985 to 1988 and in various other professional and management
positions at DuPont from 1962 to 1985. Mr. Landon is also a director of Digene
Corporation and a director and member of the Executive Committee of Christiana
Care Corporation, a firm created by the merger of the Medical Center of
Delaware, Mid-Atlantic Health Systems, and several other healthcare entities.
Previously, Mr. Landon served as a director of The DuPont Merck Pharmaceutical
Company and the Health Industry Manufacturers Association. Mr. Landon earned a
B.S. in Chemical Engineering from the University of Arizona.
3
<PAGE> 6
Larry Y. Wilson has been a director of the Company since May 1998. Since
1987, Mr. Wilson has served as the Executive Vice President and Chief Operating
Officer of Catholic Healthcare West ("Catholic Healthcare"), a health care
system that operates 48 acute care facilities and eight medical groups in
Arizona, California and Nevada. Prior to that time, Mr. Wilson served as the
Executive Vice President and Chief Financial Officer of Mercy Health System, a
predecessor of Catholic Healthcare, from 1983 to 1986 and as a principal of the
Health and Medical Division of Booz Allen & Hamilton, a consulting company, from
1979 to 1983. Mr. Wilson also serves as a director of PriMed Medical Management,
Inc., the entity that operates the Hill Physicians Medical Group. Mr. Wilson
earned a A.B. in English from Harvard University and an M.B.A. from Stanford
University.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors held five (5) meetings in fiscal 1999 and all
directors attended at least 75 percent of the meetings of the Board and
Committees of which they were members at the time of such meetings. The Board of
Directors has an Audit Committee, a Compensation Committee, a Governance
Committee and a Nominating Committee. The Audit Committee is comprised of
Messrs. Wilson, Buchman and Sadow. The Compensation Committee is comprised of
Messrs. Castello, Sadow, and Landon. The Governance Committee is comprised of
Messrs. Sadow, Pinckert and Castello. The Nominating Committee is comprised of
Messrs. Sadow, Pinckert, Castello and Landon.
The Audit Committee held five (5) meetings during fiscal 1999. The
responsibilities of the Audit Committee include recommending to the Board the
selection of the independent accountants and reviewing the Company's internal
accounting controls. The Audit Committee is authorized to conduct such reviews
and examinations as it deems necessary or desirable with respect to the
practices and procedures of the independent accountants, the scope of the annual
audit, accounting controls, practices and policies, and the relationship between
the Company and its independent accountants, including the availability of
Company records, information and personnel.
The Compensation Committee of the Board of Directors held one (1) meeting
during fiscal 1999. The Compensation Committee focuses on executive
compensation, incentive and other forms of compensation for directors, officers
and other employees and the administration of the Company's various compensation
and benefit plans.
The Governance Committee of the Board of Directors was formed by the Board
in June 1998 and did not meet in fiscal 1999. The purpose of the Governance
Committee is to ensure that the Board is operating efficiently and effectively.
The Nominating Committee of the Board of Directors did not meet during
fiscal 1999. The Nominating Committee recommends to the Board of Directors
candidates for nomination to the Board of Directors. The Nominating Committee
will consider nominees recommended by shareholders. Shareholders making such
recommendations should follow the procedures outlined above under "Deadline of
Receipt of Shareholder Proposals."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee consists of directors Castello, Sadow, and
Landon. There are no interlocking relationships, as described by the Securities
and Exchange Commission, between the Compensation Committee members. Mr.
Pinckert, President, Chief Executive Officer and director of the Company,
participated in all discussions and decisions regarding salaries and incentive
compensation for all employees and consultants to the Company, except that Mr.
Pinckert was excluded from discussions regarding his own salary and incentive
compensation.
4
<PAGE> 7
RECORD DATE AND PRINCIPAL SHARE OWNERSHIP
The following table sets forth, as of June 25, 1999 information relating to
the beneficial ownership of the Company's Common Stock as to (i) each person
known to the Company to be the beneficial owner of more than five percent of the
outstanding shares of Common Stock, (ii) by each director, (iii) by each of the
executive officers named in the table under "Executive Compensation -- Summary
Compensation Table" and (iv) by all directors and executive officers as a group.
Except as otherwise noted, the shareholders named in the table have sole voting,
and investment power with respect to all shares of Common Stock shown as
beneficially owned by them, subject to applicable common property laws. In
addition, except as otherwise noted, the address for each owner is c/o
Cholestech Corporation, 3347 Investment Boulevard, Hayward, CA 94545-3808.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK PERCENT OF
BENEFICIALLY OWNED OUTSTANDING SHARES(1)
---------------------- ---------------------
<S> <C> <C>
Kopp Investments Advisors, Inc.(2)............ 1,648,050 14.3%
Warren E. Pinckert II(3)...................... 453,620 3.9%
Andrea J. Tiller(4)........................... 79,405 *
Harvey S. Sadow, Ph.D.(5)..................... 78,224 *
Steve L. Barbato(6)........................... 74,269 *
Robert J. Dominici(7)......................... 73,956 *
John L. Castello(8)........................... 47,500 *
Joseph Buchman(9)............................. 38,000 *
Gary E. Hewett(10)............................ 16,881 *
John H. Landon(11)............................ 15,000 *
Larry Y. Wilson(12)........................... 15,000 *
All current Directors and executive officers
as a group (10 persons)(13)................. 891,855 7.7%
</TABLE>
- ---------------
* Less than one percent.
(1) This table is based upon information supplied by officers, directors and
principal shareholders. Applicable percentage of ownership is based on
11,597,000 shares of Common Stock outstanding as of June 25, 1999 together
with applicable options for such shareholders. Beneficial ownership is
determined in accordance with the rules of the Securities and Exchange
Commission, and includes voting and investment power with respect to
shares. Shares of Common Stock subject to options or warrants currently
exercisable or exercisable within 60 days after June 25, 1999 are deemed
outstanding for computing the percentage ownership of the person holding
such options or warrants, but are not deemed outstanding for computing the
percentage of any other person.
(2) Reflects ownership as reported on Schedule 13G/A dated February 3, 1999
with the Commission by Kopp Investment Advisors, Inc. ("KIA"). Represents
shares beneficially owned by (i) KIA, a registered investment advisor, (ii)
Kopp Holding Company ("Holding") and (iii) LeRoy C. Kopp individually and
through his ownership of a controlling interest in KIA, his position as
sole stockholder of Holding and his individual interests. KIA has sole
voting power over 634,500 shares of the Company's Common Stock, sole
dispositive power over 445,000 and shared dispositive power over 1,063,050
shares of the Company's Common Stock. Holding has beneficial ownership over
1,508,500 shares. Mr. Kopp has sole voting and dispositive power over
140,000 shares of Common Stock and beneficial ownership over 1,648,050
shares of Common Stock.
(3) Includes 326,878 shares of Common Stock issuable pursuant to stock options
exercisable within 60 days after June 25, 1999.
(4) Includes 66,457 shares of Common Stock issuable pursuant to stock options
exercisable within 60 days after June 25, 1999.
(5) Includes 60,000 shares of Common Stock issuable pursuant to stock options
exercisable within 60 days after June 25, 1999.
5
<PAGE> 8
(6) Represents 74,269 shares of Common Stock issuable pursuant to stock options
exercisable within 60 days after June 25, 1999.
(7) Includes 68,956 shares of Common Stock issuable pursuant to stock options
exercisable within 60 days after June 25, 1999.
(8) Represents 47,500 shares of Common Stock issuable pursuant to stock options
exercisable within 60 days after June 25, 1999.
(9) Represents 38,000 shares of Common Stock issuable pursuant to stock options
exercisable within 60 days after June 25, 1999.
(10) Includes 1,875 shares of Common Stock issuable pursuant to stock options
exercisable within 60 days after June 25, 1999.
(11) Represents 15,000 shares of Common Stock issuable pursuant to stock options
exercisable within 60 days after June 25, 1999.
(12) Represents 15,000 shares of Common Stock issuable pursuant to stock options
exercisable within 60 days after June 25, 1999.
(13) Includes 713,935 shares of Common Stock issuable pursuant to stock options
exercisable within 60 days after June 25, 1999.
PROPOSAL TWO
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected PricewaterhouseCoopers LLP, independent
accountants, to audit the financial statements of the Company for the fiscal
year ending March 31, 2000, and recommends that shareholders vote for
ratification of such appointment. In the event of a negative vote on such
ratification, the Board of Directors will reconsider its selection.
PricewaterhouseCoopers LLP has been the Company's independent accountants
since 1990. A representative of PricewaterhouseCoopers LLP will be present at
the Annual Meeting and will have an opportunity to make a statement if he
desires to do so and will be available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR RATIFICATION
OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS THE COMPANY'S INDEPENDENT
ACCOUNTANTS.
6
<PAGE> 9
EXECUTIVE COMPENSATION AND OTHER MATTERS
EXECUTIVE COMPENSATION
The following table shows compensation paid by the Company for services
rendered during fiscal years 1999, 1998, and 1997 for the Chief Executive
Officer and the four other most highly compensated executive officers of the
Company (the "Named Executive Officers") whose compensation exceeded $100,000 in
fiscal 1999. Bonuses listed as paid in fiscal 1999, were earned during fiscal
1998 and accrued as part of fiscal 1998 expenses, although actual payments to
the Named Executive Officers occurred in the first fiscal quarter of 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------- ------------
OTHER ANNUAL SECURITIES ALL OTHER
SALARY BONUS COMPENSATION UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($)(1) OPTIONS(#) ($)(2)
--------------------------- ---- ------- ------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Warren E. Pinckert II(3)........... 1999 223,192 60,000 65,000 4,478
President and Chief Executive 1998 194,167 40,000 5,308
Officer 1997 167,461 8,000 115,000 4,378
Steven L. Barbato.................. 1999 142,267 32,216 25,000 5,841
Vice President of Operations 1998 130,833 25,000 7,512
1997 114,005 5,250 50,000 5,995
Robert J. Dominici(4).............. 1999 114,548 265,000 143
Executive Vice President of 1998
Marketing and Sales 1997
Gary E. Hewett(5).................. 1999 145,944 15,000 3,252 15,000 4,212
Vice President and 1998 144,646 6,661 25,000 4,375
Chief Scientific Officer 1997 137,150 6,500 2,225 17,500 3,394
Andrea J. Tiller(6)................ 1999 145,436 33,548 25,000 2,295
Vice President of Finance, 1998 130,833 25,000 2,656
Chief Financial Officer, 1997 42,147 80,000 868
Treasurer and Secretary
</TABLE>
- ---------------
(1) The amounts described hereunder were paid by the Company in connection with
the Company's Research and Development Incentive Program.
(2) The amounts described hereunder were paid by the Company for premiums on
group term life insurance, medical and dental insurance and long term
disability insurance
(3) In August, 1998, Mr. Pinckert took a voluntary 10% reduction in his Salary.
(4) Mr. Dominici joined the Company as its Executive Vice President of Marketing
and Sales in August, 1998.
(5) Mr. Hewett resigned from the Company as its Chief Scientific Officer
effective March 26, 1999. Mr. Hewett continues to be affiliated with the
Company on a consulting basis for a minimum of one year from his resignation
date.
(6) Ms. Tiller joined the Company as its Chief Financial Officer in December,
1996.
7
<PAGE> 10
STOCK OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information relating to stock options awarded
to each of the Named Executive Officers during the fiscal year ended March 26,
1999. All such options were awarded under the Company's 1997 Stock Incentive
Program.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL VALUE(1)
% OF EXERCISE PRICE EXPIRATION -------------------
NAME NUMBER(2) TOTAL(3) PER SHARE(4) DATE 5% 10%
---- --------- ------------- ----------------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Warren E. Pinckert II......... 40,000 4.07% $11.875 6/23/03 $131,234 $289,992
25,000 2.54% 2.000 3/25/04 13,814 30,526
Steven L. Barbato............. 15,000 1.53% 11.875 6/23/03 49,213 108,747
10,000 1.02% 2.000 3/25/04 5,526 12,210
Robert J. Dominici............ 250,000 25.45% 6.000 8/20/03 414,422 915,765
15,000 1.53% 2.000 3/25/04 49,213 108,747
Gary E. Hewett................ 15,000 1.53% 11.875 6/23/03 49,213 108,747
Andrea J. Tiller.............. 15,000 1.53% 11.875 6/23/03 49,213 108,747
10,000 1.02% 2.000 3/25/04 5,526 12,210
</TABLE>
- ---------------
(1) Potential realizable value is based on the assumption that the Common Stock
of the Company appreciates at the annual rate shown (compounded annually)
from the date of grant until the expiration of the five year option term and
are net of the exercise price but before taxes associated with the exercise.
These numbers are calculated based on the requirements promulgated by the
Securities and Exchange Commission and do not reflect the Company's estimate
of future stock price growth.
(2) Options were granted at an exercise price equal to the fair market value of
the Company's Common Stock, as determined by the Board of Directors on the
date of grant.
(3) Based on an aggregate of 982,386 options granted under the 1997 Stock
Incentive Program in the fiscal year ended March 26, 1999.
(4) Exercise price and tax withholding obligations related to exercise may be
paid in cash, check, promissory note, by delivery of already-owned shares of
the Company's Common Stock subject to certain conditions, or pursuant to a
cashless exercise procedure under which the optionee provides irrevocable
instructions to a brokerage firm to sell the purchased shares and to remit
to the Company, out of the sale proceeds, an amount equal to the exercise
price plus all applicable withholding taxes.
(5) The stock options granted in the fiscal year ended March 26, 1999 are
generally exercisable starting three months after the date of grant, with
6.25% of the shares covered thereby becoming exercisable at that time and
with an additional 6.25% of the option shares becoming exercisable at the
end of each three month period thereafter, with full vesting occurring on
the fourth anniversary of the date of grant. Under the 1988 Stock Incentive
Program, the Board retains the discretion to modify the terms, including the
price, of outstanding options.
8
<PAGE> 11
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth, for each of the Named Executive Officers,
the aggregated option exercises in the last fiscal year and the year end value
of unexercised options.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS OPTIONS(1)
SHARES ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Warren E. Pinckert II....... -- $-- 326,878 108,080 $ 0 $ 0
Steven L. Barbato........... -- -- 74,269 48,731 0 0
Robert J. Dominici.......... -- -- 68,956 196,044 0 0
Gary E. Hewett.............. -- -- 1,875 28,125 0 0
Andrea J. Tiller............ -- -- 66,457 63,543 0 0
</TABLE>
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(1) Market last sale price of the Common Stock on March 26, 1999 of $2.00 per
share minus the exercise price.
DIRECTORS' COMPENSATION
Non-employee directors receive a $1,000 monthly retainer and a $1,000
director's meeting fee for each Board meeting they attend with the exception of
the Chairman who receives a $2,000 monthly retainer and a $2,000 director's
meeting fee for each Board meeting he attends. Non-employee directors also
receive a $1,000 fee for each meeting of the Audit, Compensation, Governance or
Nominating Committees attended that is not on the same day as a regular board
meeting. In addition, the 1997 Stock Incentive Program provides that options to
purchase the Company's Common Stock may be granted to non-employee directors
pursuant to a non-discretionary, automatic grant mechanism, whereby each such
director is granted an option to purchase 10,000 shares on the date of each
Annual Meeting of Shareholders with the exception of the Chairman who is granted
an option to purchase 20,000 shares on the date of each Annual Meeting of
Shareholders, or an initial grant of 5,000 shares upon becoming a member of the
Board of Directors if the date such director joins the Board is within six
months of the most recent Annual Meeting of Shareholders. In August 1998,
pursuant to the provisions of the 1997 Stock Incentive Program, Dr. Buchman, Mr.
Castello, Mr. Landon and Mr. Wilson were each granted nonstatutory options to
purchase 10,000 shares of the Company's Common Stock at an exercise price of
$6.00 per share. Dr. Sadow was granted a nonstatutory option to purchase 20,000
shares of the Company's Common Stock at the same exercise price of $6.00 per
share.
EMPLOYMENT AGREEMENTS AND CHANGE IN CONTROL ARRANGEMENTS
The Board of Directors has approved a twelve-month wage and benefits
continuation package, including but not limited to twelve months acceleration of
Incentive Stock Option vesting and medical and dental coverage, for Mr.
Pinckert. In the event he is terminated by the Company, for any or no reason,
Mr. Pinckert will be paid, in a lump-sum, within thirty days of the date of such
termination, an amount equal to one years' salary, at the rate of salary in
effect immediately prior to such termination (minus applicable withholding).
The Board of Directors has approved a six-month wage and benefits
continuation package, including but not limited to six months acceleration of
Incentive Stock Option vesting and medical and dental coverage, for Mr. Barbato,
Mr. Dominici and Ms. Tiller. In the event they are terminated by the Company,
for any or no reason, he or she will be paid, in a lump-sum, within thirty days
of the date of such termination, an amount equal to six months salary, at the
rate of his or her salary in effect immediately prior to such termination (minus
applicable withholding).
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
The Compensation Committee (the "Committee") of the Board of Directors
reviews and approves the Company's executive compensation policies. The
Committee administers the Company's various incentive
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<PAGE> 12
plans, including the 1997 Stock Incentive Program, sets compensation policies
applicable to the Company's executive officers and evaluates the performance of
the Company's executive officers. The compensation levels of the Company's
executive officers for the fiscal year ended March 26, 1999, including base
salary levels, potential bonuses and stock option grants were determined by the
committee at the beginning of the fiscal year. The following is a report of the
Committee describing the compensation policies and rationale applicable with
respect to the compensation paid to the Company's executive officers for the
fiscal year ended March 26, 1999.
Compensation Philosophy
The Company's philosophy in setting its compensation policies for executive
officers is to maximize shareholder value over time. The primary goal of the
Company's executive compensation program is therefore to closely align the
interests of the executive officers with those of the Company's shareholders. To
achieve this goal the Company attempts to (i) offer compensation opportunities
that attract and retain executives whose abilities are critical to the long-term
success of the Company, motivate individuals to perform at their highest level
and reward outstanding achievement, (ii) maintain a portion of the executive's
total compensation at risk, tied to achievement of financial, organizational and
management performance goals, and (iii) encourage executives to manage from the
perspective of owners with an equity stake in the Company. The Compensation
Committee currently uses base salary, annual cash incentives and stock options
to meet these goals.
Base Salary
Base salary is primarily used by the Company as a device to attract,
motivate, reward and retain highly skilled executives. The Committee reviewed
and approved fiscal 1999 base salaries for the Chief Executive Officer and other
executive officers at the beginning of the fiscal year. Base salaries were
established by the Committee based upon an executive officer's job
responsibilities, level of experience, individual performance, contribution to
the business, the Company's financial performance for the past year, and
recommendations from management. The Committee also takes into account the
salaries for similar positions at comparable companies, based on each individual
Committee member's industry experience. In reviewing base salaries, the
Committee focused significantly on each executives officer's prior performance
with the Company and expected contribution to the Company's future success. In
making base salary decisions, the Committee exercised its discretion and
judgment based upon these factors. No specific formula was applied to determine
the weight of each factor. In fiscal 1999, as part of annual executive salary
review, the Board approved a salary adjustment to increase Mr. Pinckert's salary
to $240,000 awarded on the basis of the Company's performance and his execution
of established duties during fiscal 1998. Adoption of such increase was approved
solely by members of the Board of Directors who are not employees of the
Company. During the course of fiscal 1999, however, Mr. Pinckert took a
voluntary 10% reduction in his salary to $216,000 as part of the Company's cost-
cutting measures.
Annual Cash Incentives
Each Named Executive Officer's bonus is based on qualitative and
quantitative factors and is intended to motivate and reward such Named
Executives Officers by directly linking the amount of any cash bonus to specific
Company-based performance targets and specific individual-based performance
targets. Annual incentive bonuses for Named Executive Officers are intended to
reflect the Committee's belief that a portion of the compensation of each Named
Executive Officer should be contingent upon the performance of the Company, as
well as the individual contribution of each Named Executive Officer. To carry
out this philosophy, the Board of Directors review and approves the financial
budget for the fiscal year. The Compensation Committee then establishes target
bonuses for each Named Executive Officer as a percentage of the officer's base
salary. The Named Executive Officers, including Mr. Pinckert, must successfully
achieve these performance targets which are submitted by management to the
Compensation Committee for its evaluation and approval at the beginning of the
fiscal year. The Company-based performance goals are tied to different
indicators of the Company's performance, such as the operating results of the
Company. The
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<PAGE> 13
individual performance goals are tied to different indicators of such Named
Executive Officer's performance, such as the financial performance of the
Company, new product development and increase in the customer base. The
Compensation Committee evaluates the completion of the Company-based performance
targets and specific individual-based performance targets and approves a
performance rating relative to the goals so completed. This scoring is
influenced by the Compensation Committee's perception of the importance of the
various corporate and individual goals. The Compensation Committee believes that
the bonus arrangement provides an excellent link between the Company's earnings
performance and the incentives paid to the Named Executive Officers. In fiscal
1999, Mr. Pinckert received $60,000 on the basis of the Company's performance
and his execution of established duties during fiscal 1998.
Stock Options
The Compensation Committee provides the Company's Named Executive Officers
with long-term incentive compensation through grants of stock options under the
Company's 1997 Stock Incentive Program. The Compensation Committee believes that
stock options provide the Company's Named Executive Officers with the
opportunity to purchase and maintain an equity interest in the Company and to
share in the appreciation of the value of the Company's Common Stock. The
Compensation Committee believes that stock options directly motivate an
executive to maximize long-term shareholder value. Such options also utilize
vesting periods that encourage key executives to continue in the employ of the
Company. All options granted to Named Executives Officers to date have been
granted at the fair market value of the Company's Common Stock on the date of
grant. The Compensation Committee considers the grant of each option
subjectively, considering factors such as the Named Executive Officer's relative
position and responsibilities with the Company, the individual performance of
the Named Executive Officer over the previous fiscal year, and the anticipated
contribution of the Named Executive Officer to the attainment of the Company's
long-term strategic performance goals. Stock options granted in prior years are
also taken into consideration. The Compensation Committee views stock option
grants as an important component of its long-term, performance-based
compensation philosophy. In fiscal 1999, the Compensation Committee recommended
and the Board of Directors granted options to purchase 65,000 shares at fair
market value on the date of grant to Mr. Pinckert on the basis of the Company's
performance and his execution of established duties during fiscal 1998.
Section 162(m)
The Compensation Committee has considered the potential future effects of
Section 162(m) of the Internal Revenue Code on the compensation paid to the
Company's Named Executive Officers. Section 162(m) disallows a tax deduction for
any publicly held corporation for individual compensation exceeding $1.0 million
in any taxable year for any of the Named Executive Officers. Certain
performance-based compensation, however, is specifically exempt from the
deduction limit. The Company has adopted a policy that, where reasonably
practicable, the Company will take the necessary steps to conform its
compensation, including compensation derived from the exercise of stock options,
to comply with the deductibility limitations of Section 162(m).
Respectfully submitted by
Members of the Compensation Committee:
John L. Castello
Harvey S. Sadow, Ph.D.
John H. Landon
11
<PAGE> 14
PERFORMANCE GRAPH
The following is a line graph comparing the cumulative total return to
shareholders of the Company's Common Stock at March 26, 1999 since March 31,
1994 to the cumulative total return over such period of (i) the Nasdaq Stock
Market United States Index and (ii) a Peer Group Index, which includes all
companies in the Standard Industrial Classification Code 3826 -- Measuring and
Controlling Devices, of which the Company is a member.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN(1)
AMONG CHOLESTECH CORPORATION, THE NASDAQ STOCK MARKET UNITED STATES
LOGO INDEX AND A PEER GROUP(2)(3)
- ---------------
(1) Assumes that $100.00 was invested on March 31, 1994 in the Company's Common
Stock or index, and that all dividends were reinvested. No dividends have
been declared on the Company's Common Stock. Shareholder returns over the
indicated period should not be considered indicative of future shareholder
returns.
(2) Peer Group is SIC Code 3826 -- Measuring and Controlling Devices.
(3) The Company operates on a 52/53 week fiscal year, which ends on the last
Friday in March. Accordingly, the last trading day of its fiscal year may
vary. For consistent presentation and comparison to the indices shown
herein, the Company has calculated its stock performance graph assuming a
March 31 year-end.
The information contained above under the captions "Report of the
Compensation Committee of the Board of Directors" and "Performance Graph" shall
not be deemed to be "soliciting material" or to be "filed" with the SEC, nor
shall such information be incorporated by reference into any future filing under
the Securities Act or the Exchange Act, except to the extent that the Company
specifically incorporates it by reference into such filing.
CERTAIN TRANSACTIONS.
None.
12
<PAGE> 15
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act and regulations of the Securities and
Exchange Commission (the "Commission") thereunder require the Company's
executive officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of initial
ownership and changes in ownership with the Commission. Based solely on its
review of copies of such forms received by the Company, or on written
representations from certain reporting persons that no other reports were
required for such persons, the Company believes that all of the Section 16(a)
filing requirements applicable to its executive officers, directors and ten
percent shareholders were complied with during or with respect to the period
from March 28, 1998 to March 26, 1999.
OTHER MATTERS
The Company is not aware of any other business to be presented at the
Annual Meeting. If matters other than those described herein should properly
arise at the meeting, the proxies will vote on such matters in accordance with
their best judgment.
By Order of the Board of Directors
Dated: July 8, 1999
13
<PAGE> 16
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
CHOLESTECH CORPORATION
PROXY FOR THE 1999 ANNUAL MEETING OF STOCKHOLDERS
AUGUST 19, 1999
The undersigned shareholder of Cholestech Corporation, a California corporation,
hereby acknowledges receipt of the Notice of Annual Meeting of Shareholders and
Proxy Statement, each dated July 8, 1999, and hereby appoints John L. Castello
and Warren E. Pinckert II and each of them, proxies and attorneys-in-fact, with
full power to each of substitution, on behalf and in the name of the
undersigned, to represent the undersigned at the 1999 Annual Meeting of
Shareholders of Cholestech Corporation to be held on August 19, 1999 at 10:00
a.m., Pacific Time, at the Fairmont Hotel Atop Nob Hill located at 950 Mason
Street in San Francisco, California 94108, and at any adjournment or
adjournments thereof, and to vote all shares of Common Stock which the
undersigned would be entitled to vote if then and there personally present, on
the matters set forth below:
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)
- FOLD AND DETACH HERE -
<PAGE> 17
Please mark
your votes as
indicated in
this example. /X/
FOR WITHHOLD
all nominees (except as
listed below indicated)
1. ELECTION OF DIRECTORS:
If you wish to withhold authority to vote / / / /
for any individual nominee, strike a line
through that nominee's name in the list
below:
John L. Castello Harvey S. Sadow, Ph.D.
John H. Landon Larry Y. Wilson
Warren E. Pinckert II Joseph Buchman, M.D.
FOR AGAINST ABSTAIN
2. PROPOSAL TO RATIFY THE APPOINTMENT OF / / / / / /
PRICEWATERHOUSECOOPERS LLP AS THE INDEPENDENT
PUBLIC ACCOUNTANTS OF THE COMPANY FOR
FISCAL 2000:
and, in their discretion, upon such other matter or matters which may properly
come before the meeting or any adjournment or adjournments thereof.
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS INDICATED,
WILL BE VOTED FOR THE ELECTION OF DIRECTORS AND FOR THE RATIFICATION OF THE
APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT PUBLIC ACCOUNTANTS AND
AS SAID PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE
THE MEETING.
Signature(s) Dated , 1999
(This Proxy should be marked, dated and signed by the shareholder(s) exactly as
his or her name appears hereon, and returned promptly in the enclosed envelope.
Persons signing in a fiduciary capacity should so indicate. If shares are held
by joint tenants or as community property, both should sign.)
- FOLD AND DETACH HERE -
