<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
Filed by the Registrant [ x ]
Filed by a party other than the Registrant [ ] Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted
(by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12)
AccuMed International, Inc.
------------------------------------------------
(Name of Registrant as Specified in its Charter)
Not applicable
(Name of Person 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:
Not applicable
--------------------------------
(2) Aggregate number of securities to which transactions applies:
Not applicable
--------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
Not applicable
(4) Proposed maximum aggregate value of transaction:
Not applicable
--------------------------------
(5) Total Fee paid: Not applicable .
----------------------
[ ] Fee paid previously with preliminary material: Not applicable .
-----------------
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount previously paid: Not applicable.
-----------------
(2) Form, Schedule or Registration Statement No.:
Not applicable
--------------------------------
(3) Filing party: Not applicable
-----------------------------
(4) Date filed: Not applicable
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ACCUMED INTERNATIONAL, INC.
900 North Franklin Street, Suite 401
Chicago, Illinois 60610
Dear Stockholder:
On behalf of the Board of Directors, you are cordially invited to attend
the combined Annual and Special Meeting of Stockholders (the "Meeting") of
AccuMed International, Inc. (the "Company") to be held at 10:00 a.m. (Chicago
time) on May 19, 1998 at the offices of the Company located at 900 North
Franklin Street, Suite 401, Chicago, Illinois.
At the Meeting, you will be asked to consider and vote upon the
following proposals:
1. To approve an amendment to the Company's Certificate of Incorporation
to increase the total number of authorized shares of the Company's common stock,
par value $0.01 per share (the "Common Stock"), from 50,000,000 shares to
100,000,000.
2. To approve an amendment to the Company's Certificate of Incorporation
to effect a one-for-six reverse stock split on the Common Stock. (If both this
proposal and proposal no. 1 are approved, only one of the amendments will be
filed, as determined by the Board of Directors to be in the best interests of
the Company.)
3. To approve and adopt the Company's 1997 Stock Option Plan as set
forth in Appendix C to the accompanying Proxy Statement, which provides for the
grant to employees, directors and consultants of the Company of options to
purchase up to 1,350,000 shares of Common Stock.
4. To elect seven directors to serve on the Board of Directors until the
next annual meeting of stockholders.
5. To transact such other business and to consider and take action upon
any and all other matters that may properly come before the Meeting or any
adjournment or adjournments thereof.
You are urged to carefully consider all the material in the Proxy
Statement and mark, sign, date and return the enclosed proxy as soon as
possible, regardless of whether you expect to attend the Meeting. Giving a proxy
will not prevent you from voting in person at the Meeting.
Very truly yours,
PAUL F. LAVALLEE
Chairman of the Board, President
and Chief Executive Officer
Dated: April 22, 1998
<PAGE> 3
ACCUMED INTERNATIONAL, INC
900 North Franklin Street, Suite 401
Chicago, Illinois 60610
----------------------
NOTICE OF COMBINED ANNUAL AND SPECIAL MEETING OF STOCKHOLDERS
To be Held on May 19, 1998
----------------------
Dear Stockholders:
NOTICE IS HEREBY GIVEN THAT THE COMBINED ANNUAL AND SPECIAL MEETING (the
"Meeting") OF STOCKHOLDERS OF ACCUMED INTERNATIONAL, INC., a Delaware
corporation (the "Company"), will be held at the Company's offices located at
900 North Franklin Street, Suite 401, Chicago, Illinois, on Tuesday, May 19,
1998 at 10:00 a.m. (Chicago time), to consider and act upon the following
matters.
1. To approve an amendment to the Company's Certificate of Incorporation
to increase the total number of authorized shares of the Company's common stock,
par value $0.01 per share (the "Common Stock"), from 50,000,000 shares to
100,000,000.
2. To approve an amendment to the Company's Certificate of Incorporation
to effect a one-for-six reverse stock split on the Common Stock. (If both this
proposal and proposal no. 1 are approved, only one of the amendments will be
filed, as determined by the Board of Directors to be in the best interests of
the Company.)
3. To approve and adopt the Company's 1997 Stock Option Plan as set
forth in Appendix C to the accompanying Proxy Statement, which provides for the
grant to employees, directors and consultants of the Company of options to
purchase up to 1,350,000 shares of Common Stock.
4. To elect seven directors to serve on the Board of Directors until the
next annual meeting of stockholders.
5. To transact such other business and to consider and take action upon
any and all other matters that may properly come before the Meeting or any
adjournment or adjournments thereof.
The Board of Directors knows of no matters, other than those set forth
in paragraphs (1) through (4) above (discussed in greater detail in the
accompanying Proxy Statement), that will be presented for consideration at the
Meeting.
The Board of Directors has fixed the close of business on March 23, 1998
as the record date for the determination of stockholders entitled to vote at the
Meeting.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING IN PERSON, PLEASE DATE,
SIGN AND MAIL THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED AS PROMPTLY AS
POSSIBLE. THE PROXY IS REVOCABLE AND WILL NOT AFFECT YOUR RIGHT TO VOTE IN
PERSON IF YOU ATTEND THE MEETING.
<PAGE> 4
By Order of the Board of Directors
Chicago, Illinois JOYCE L. WALLACH
April 22, 1998 General Counsel and Secretary
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PROXY STATEMENT
OF
ACCUMED INTERNATIONAL, INC.
900 NORTH FRANKLIN STREET, SUITE 401
CHICAGO, ILLINOIS 60610
-----------------------
COMBINED ANNUAL AND SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 19, 1998
-----------------------
INTRODUCTION
GENERAL
This Proxy Statement is being furnished to holders of common stock, par
value $0.01 per share (the "Common Stock"), of AccuMed International, Inc., a
Delaware corporation (the "Company"), in connection with the solicitation of
proxies by the Company's Board of Directors for use at the Combined Annual and
Special Meeting of Stockholders scheduled to be held at the Company's principal
offices located at 900 North Franklin Street, Suite 401, Chicago, Illinois on
May 19, 1998 and at any and all adjournments or postponements thereof (the
"Meeting").
It is anticipated that this Proxy Statement and the accompanying form of
proxy will first be sent to stockholders on or about April 24, 1998. Only
stockholders of record at the close of business on March 23, 1998 are entitled
to vote at the Meeting.
At the Meeting, stockholders will consider and vote upon proposals (i)
to approve an amendment to the Company's Certificate of Incorporation to
increase the authorized shares of Common Stock from 50,000,000 shares to
100,000,000 ("Charter Amendment No. 1"), (ii) to approve an amendment to the
Company's Certificate of Incorporation to effect a one-for-six reverse stock
split on the Common Stock ("Charter Amendment No. 2"), (iii) to approve the
Company's 1997 Stock Option Plan (the "1997 Option Plan") which provides for the
grant to employees, directors and consultants of the Company of options to
purchase up to 1,350,000 shares of Common Stock, (iv) to elect seven directors
to serve on the Board of Directors until the 1999 Annual Meeting of
Stockholders, and (v) to consider such other business as may properly come
before the Meeting.
REVOCABILITY OF PROXIES
A proxy for use at the Meeting is enclosed. Any stockholder who executes
and delivers such proxy may revoke it at any time prior to its use by: (i)
filing with the Secretary of the Company a notice of revocation of proxy or a
valid proxy bearing a later date, or (ii) by attending the Meeting and voting in
person.
SOLICITATION OF PROXIES
This proxy solicitation is being made by the Board of Directors of the
Company. The expense
<PAGE> 6
of the solicitation will be paid by the Company. The Company has retained
Corporate Investor Communications, Inc. ("CIC") to conduct a broker search,
distribute the proxy materials and act as proxy solicitor in connection with the
Meeting. For such services, the Company will pay CIC a fee of $4,500 and
reimburse CIC for certain out-of-pocket expenses, estimated not to exceed $800.
To the extent necessary to assure sufficient representation at the Meeting,
proxies may be solicited by any appropriate means by CIC and, in addition, by
directors, officers, regular employees of the Company and the stock transfer
agent for the Common Stock, who will not receive any additional compensation
therefor. CIC will request that banks, brokers and other fiduciaries distribute
proxy materials to their customers who own beneficially the Common Stock listed
of record in names of nominees and, although there is no formal arrangement to
do so, the Company will reimburse such persons the reasonable expenses of such
distribution.
OUTSTANDING SECURITIES
The Board of Directors has fixed March 23, 1998, as the record date (the
"Record Date") for the determination of stockholders entitled to notice of, and
to vote at, the Meeting. At the close of business on the Record Date, there were
outstanding and entitled to vote 31,724,374 shares of Common Stock.
VOTE REQUIRED AND VOTING PROCEDURES
Each holder of Common Stock will be entitled to one vote, in person or
by proxy, for each share standing in its name on the books of the Company as of
the Record Date on each of the matters duly presented for a vote at the Meeting.
In connection with the solicitation by the Board of Directors of proxies
for use at the Meeting, the Board of Directors has designated Paul F. Lavallee,
Chairman of the Board, Chief Executive Officer and President, and Leonard R.
Prange, Chief Operating Officer and Chief Financial Officer, as proxies. Shares
represented by all properly executed proxies will be voted at the Meeting in
accordance with the instructions specified thereon. If no instructions are
specified, the shares represented by any properly executed proxy will be voted
FOR the proposals: (i) to approve Charter Amendment No. 1, (ii) to approve
Charter Amendment No. 2, (iii) to approve the 1997 Option Plan, and (iv) to
elect each of the seven nominees named below under the caption "Proposal No. 4
Election of Directors."
The Board of Directors is not aware of any matters that will come before
the Meeting other than as described above. However, if such matters are
presented, the named proxies will, in the absence of instructions to the
contrary, vote such proxies in accordance with the judgment of such named
proxies with respect to any such other matter properly coming before the
Meeting.
A majority of the outstanding shares of Common Stock must be represented
in person or by proxy at the Meeting in order to constitute a quorum for the
transaction of business. The affirmative vote of holders of a majority of the
outstanding shares of Common Stock is required for the approval of each of
Charter Amendment No. 1 and Charter Amendment No. 2. The affirmative vote of a
majority of the shares of Common Stock represented and voting (in person or by
proxy) at the Meeting (provided such affirmative votes constitute a majority of
the required quorum, which quorum is a majority of the shares outstanding on the
Record Date) is required for approval of the 1997 Option Plan. The
validly-nominated nominees for election as directors who rank first through
seventh in the number of votes received from holders of Common Stock represented
(in person or by proxy) and voting at the
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Meeting will be elected as directors, even if some or all of such nominees
receive less than a majority of the total votes cast (assuming presence of a
quorum).
With regard to the election of directors, votes may be cast in favor or
withheld; votes that are withheld will be excluded from the vote and will have
no effect. With regard to other proposals, votes cast against a proposal will be
counted for purposes of determining (i) the presence or absence of a quorum and
(ii) the total number of votes cast with respect to such proposal.
With regard to proposals other than the election of directors,
abstentions will be counted for purposes of determining both (i) the presence or
absence of a quorum for the transaction of business and (ii) the total number of
votes cast with respect to such proposal. Accordingly, abstentions as to the
approval of Charter Amendment No. 1, Charter Amendment No. 2 and the 1997 Option
Plan will have the same effect as a vote against such proposals.
A proxy submitted by a stockholder may indicate that all or a portion of
the shares of Common Stock represented by such proxy are not being voted by such
stockholder with respect to a particular matter. This could occur, for example,
when a broker is not permitted to vote stock held in street name on certain
matters in the absence of instructions from the beneficial owner of the stock.
The shares subject to any such proxy which are not being voted with respect to a
particular matter will be counted for purposes of determining both (i) the
presence or absence of a quorum for the transaction of business and (ii) the
total number of votes cast with respect to such proposal. Accordingly, such
non-votes as to the approval of Charter Amendment No. 1, Charter Amendment No. 2
and the 1997 Option Plan will have the same effect as a vote against such
proposals.
INSPECTOR OF ELECTIONS
The Board of Directors has appointed Joyce L. Wallach, General Counsel
and Secretary of the Company, as the Inspector of Elections for the Meeting. The
Inspector of Elections will determine the number of shares of Common Stock
represented in person or by proxy at the Meeting, whether a quorum exists, the
authenticity, and validity and effect of proxies, and will receive and count the
votes.
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PROPOSAL NO. 1
TO AMEND THE CERTIFICATE OF INCORPORATION
TO INCREASE THE AUTHORIZED COMMON STOCK
On March 3, 1998, the Board of Directors unanimously approved a
resolution to amend the Company's Certificate of Incorporation, subject to
stockholder approval at the Meeting, to increase the authorized shares of Common
Stock from 50,000,000 to 100,000,000 shares ("Charter Amendment No. 1", a copy
of which is set forth as Appendix A hereto). The Company's Certificate of
Incorporation, as amended, currently authorizes the Company to issue up to
50,000,000 shares of Common Stock and 5,000,000 shares of Preferred Stock. As of
April 7, 1998, the Company had issued and outstanding 31,724,474 shares of
Common Stock and has reserved for issuance an additional 17,538,297 shares of
Common Stock upon exercise of outstanding options and warrants and conversion of
outstanding 12% Convertible Promissory Notes (the "Convertible Notes") and
outstanding shares of Series A Convertible Preferred Stock (the "Series A
Preferred"). As of April 7, 1998, the Company had issued and outstanding
1,245,340 shares of Preferred Stock, all of which are designated as Series A
Preferred.
Since the Company has only 737,329 remaining authorized, non-reserved
shares of Common Stock available for issuance in the future, much of the
Company's flexibility with respect to possible future equity financings, stock
splits, stock-for-stock acquisitions, stock dividends, grants of stock options
to employees and directors, or other transactions that involve the issuance of
Common Stock (collectively, "Future Actions") has been lost. In addition, since
there were not enough authorized, non-reserved shares of Common Stock available
to be reserved for issuance upon exercise of certain warrants pursuant to the
terms of a recently completed private placement of securities of the Company,
the Company issued such warrants (i) pursuant to an agreement between the
Company and the placement agent for such private placement pursuant to which the
Company agreed to submit this proposal to approve Charter Amendment No. 1 at the
Meeting, and (ii) subject to certain penalties if Charter Amendment No. 1 is not
so approved, all as more fully described below.
COMMITMENTS TO RESERVE SHARES FOR CERTAIN PURPOSES IF CHARTER AMENDMENT NO. 1 IS
APPROVED
RECENT PRIVATE PLACEMENT
On March 19 and 23, 1998, the Company consummated a private placement
(the "Private Placement") of 8,686,667 shares of Common Stock and warrants to
purchase 8,686,667 shares of Common Stock. Such securities were issued and sold
in units (the "Units"), each Unit consisting of 133,333 shares of Common Stock
(determined by dividing (x) $100,000 by (y) $0.75 (the average closing bid price
per share of Common Stock on the three trading days immediately preceding the
closing date plus $0.03125), and seven-year warrants (expiring on March 23,
2005) to purchase 133,333 shares of Common Stock (the "Unit Warrants"), at an
exercise price of $0.75 per share (the "Unit Warrant Exercise Price"). The
Company received net proceeds of approximately $5,900,000 from the Private
Placement after deducting commissions, finders' fees and related expenses. Of
the net proceeds, $1,020,000 was used to repay a short-term loan made by a
director and principal stockholder of the Company (see "Proposal No. 4 Election
of Directors --Certain Relationships and Related Transactions"). The balance of
the net proceeds will be used for working capital and general corporate
purposes.
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Commonwealth Associates ("Commonwealth") acted as placement agent in the
Private Placement for which it received from the Company (i) 133,333 shares of
Common Stock in lieu of a cash retainer, (ii) $251,750 in cash commissions,
(iii) and seven-year warrants to purchase 670,534 shares of Common Stock at an
exercise price of $0.75 per share, and (iv) an accountable expense reimbursement
of $97,500 in cash. In addition, the 350,000 Common Stock purchase warrants
issued to Commonwealth or its designees, as compensation for its services in
connection with the exchange of certain Convertible Notes for shares of Series A
Preferred in February 1998, at an exercise price of $1.125 will be replaced with
warrants having identical terms except that the exercise price will be reduced
to $0.75 per share. See "Proposal No. 4 Election of Directors --Certain
Relationships and Related Transactions."
Harold S. Blue and Lincoln Enterprises served as finders in the Private
Placement for which each received $124,875 in cash and seven-year warrants to
purchase an aggregate of 333,333 shares of Common Stock at an exercise price of
$0.75 per share. See "Proposal No. 4 Election of Directors --Certain
Relationships and Related Transactions."
The Company had insufficient authorized and unissued shares of Common
Stock to reserve for issuance upon exercise of all of the Unit Warrants issued
in the Private Placement. Therefore, of the Unit Warrants issued, 3,456,424 were
immediately exercisable and 5,230,243 will become exercisable if and when the
Company has available a sufficient number of authorized and unissued shares of
Common Stock to reserve for issuance upon exercise thereof. If the Company does
not have such sufficient shares of Common Stock so reserved on or prior to July
15, 1998, each original holder of Unit Warrants will be entitled to receive, at
its option, in exchange for its Unit Warrants, shares of Series C Convertible
Preferred Stock, par value $0.01 per share of the Company (the "Series C
Preferred") having a stated value of $0.01 per share (the "Series C Stated
Value"), convertible into the number of shares of Common Stock issuable upon
exercise other the Unit Warrants, upon payment in cash in the amount of the Unit
Warrant Exercise Price in effect at the time of such exchange (the "Series C
Conversion Price"), subject to adjustment.
The Company, at its option, may redeem the Unit Warrants for $0.25 per
Unit Warrant upon a minimum of 20 days' notice if (i) the Common Stock has
traded at or above $4.50 per share during 20 consecutive trading days prior to
sending the redemption notice, and (ii) resale of shares of Common Stock
underlying the Unit Warrants is then covered by an effective registration
statement under the Securities Act.
TERMS OF SERIES C PREFERRED
Holders of Series C Preferred, if issued, will receive a cash dividend
of $0.16 per annum per share of Common Stock issuable upon conversion of its
shares of Series C Preferred, payable quarterly in arrears, until such time, if
any, as there is a sufficient number of authorized and unissued shares of Common
Stock reserved for issuance upon conversion in full of all shares of Series C
Preferred issued in exchange for the Unit Warrants.
DIVIDEND PENALTY FOR FAILURE TO REGISTER SHARES. If a registration
statement under the Securities Act of 1933, as amended (the "Securities Act"),
has not been declared effective with respect to the resale of all of the shares
of Common Stock issuable upon conversion of the Series C Preferred within 120
days following the date on which the Series C Preferred is issued, if any, a
cash dividend of $0.16 per annum per share issuable upon conversion of the
Series C Preferred, payable quarterly in
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arrears, shall be paid on the Series C Preferred until such time as such
registration statement is declared effective under the Securities Act.
VOTING RIGHTS. The Series C Preferred, if issued, will be entitled to
the following voting rights in addition to any voting rights which may be
required under Delaware Corporate Law. The Company may not take any of the
following actions without the affirmative vote of a majority of the shares of
Series C Preferred (i) issue any series of preferred stock senior as to
liquidation and/or dividend, (ii) alter or change the rights of the Series C
Preferred as to adversely affect the Series A Preferred, and (iii) incur certain
indebtedness.
On any matters on which the Series C Preferred may be entitled to vote
together with the Common Stock and other shares of convertible Preferred Stock,
the holders thereof shall be entitled to one vote per share of Common Stock into
which its shares of Series C Preferred are then convertible. As to matters upon
which the Series C Preferred is entitled to vote as a separate class, each share
of Series C Preferred shall be entitled to one vote per share.
LIQUIDATION PREFERENCE. Upon a liquidation of the Company, each holder
of Series C Preferred, if issued, shall be entitled to receive, before and in
preference to any distribution or payment to holders of Common Stock or other
security junior to the Series C Preferred, an amount in cash equal to the Series
C Stated Value of such holder's shares of Series C Preferred then outstanding
plus an amount equal to the accrued and unpaid dividends on such Series C
Preferred, if any. If, upon such liquidation, the assets of the Company
available for distribution to holders of Series C Convertible Preferred and any
other series of Preferred Stock then outstanding ranking on parity with the
Series C Convertible Preferred upon liquidation shall be insufficient to permit
payment in full to the holders of the Series C Convertible preferred and such
parity stock, then the entire assets and funds of the Company legally available
for distribution to such holders and the holders of such parity stock then
outstanding shall be distributed ratably among such holders.
REDEMPTION. The Company, at its option, may redeem the Series C
Preferred for $0.01 per share upon a minimum of 30 days' notice if (i) the
Common Stock has traded at or above $4.50 per share during 20 consecutive
trading days prior to sending the redemption notice, and (ii) resale of shares
of Common Stock underlying the Series C Preferred is then covered by an
effective registration statement under the Securities Act.
POSSIBLE EXCHANGE OF UNITS FOR ALTERNATE UNITS
If the Common Stock is delisted from The Nasdaq Stock Market at any time
on or prior to December 31, 1998, original purchasers of Units will be entitled
to receive, at their option, in exchange for the Units, units (the "Alternate
Units"), each Alternate Unit consisting of (i) shares of Series B Convertible
Preferred Stock, par value $0.01 per share of the Company (the "Series B
Preferred") having an aggregate stated value of $100,000 (the "Series B Stated
Value"), convertible into shares of Common Stock at an initial conversion price
(the "Series B Conversion Price") of $0.75_ per share, subject to reset as
described below, and (ii) warrants (the "Alternate Warrants") exercisable to
purchase the number of shares of Common Stock issuable upon exercise of the Unit
Warrants at the same initial Unit Warrant Exercise Price, subject to reset as
described below.
TERMS OF SERIES B PREFERRED
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The Series B Preferred, if issued, will be immediately convertible at
the option of the holder into shares of Common Stock at the Series B Conversion
Price. If, on or prior to December 31, 1998, the average closing bid price per
share of Common Stock for five consecutive trading days is less than $0.50 and
the then current Series B Conversion Price is higher than $0.50, then the Series
B Conversion Price will be reduced to $0.50. However, the Company may not have
sufficient authorized and unissued shares of Common Stock available to reserve
for issuance upon conversion of all of shares of Series B Preferred, if the
Series B Conversion Price is reset. In which case, holders of Series B Preferred
would only be able to convert such shares into its pro rata percentage of shares
available for issuance upon conversion of Series B Preferred. If the Company
does not have such sufficient shares of Common Stock reserved for issuance of
all shares of Common Stock into which the Series B Convertible Preferred are
then convertible on or prior to July 15, 1998, each holder of Series B Preferred
will be entitled to receive a cash dividend of 16% per annum on the Series B
Stated Value, payable quarterly in arrears, until such time, if any, as there
are sufficient authorized and unissued shares reserved for issuance upon
exercise in full of the Series B Preferred issued in the Alternate Units.
AUTOMATIC CONVERSION. If during the six-year period beginning on March
19, 1998, (i) the Common Stock has traded at or above $4.50 per share during 20
consecutive trading days, and (ii) resale of shares of Common Stock underlying
the Series B Preferred is then covered by an effective registration statement
under the Securities Act, the Series B Preferred, at the option of the Company
and without action of the holders, may be converted into Common Stock at the
then effective Series B Conversion Price.
DIVIDEND PENALTY FOR FAILURE TO REGISTER SHARES. If a registration
statement under the Securities Act has not been declared effective with respect
to the resale of all of the shares of Common Stock issuable upon conversion of
the Series B Preferred on or prior to July 15, 1998, a cash dividend of 16% per
annum per on the Series B Stated Value, payable quarterly in arrears, shall be
paid on the Series B Preferred until such time as such registration statement is
declared effective under the Securities Act.
VOTING RIGHTS. The Series B Preferred, if issued, will be entitled to
the following voting rights in addition to any voting rights which may be
required under Delaware Corporate Law. The Company may not take any of the
following actions without the affirmative vote of a majority of the shares of
Series B Preferred (i) issue any series of preferred stock senior as to
liquidation and/or dividend, (ii) alter or change the rights of the Series B
Preferred as to adversely affect the Series B Preferred, and (iii) incur certain
indebtedness.
On any matters on which the Series B Preferred may be entitled to vote
together with the Common Stock and other shares of convertible Preferred Stock,
the holders thereof shall be entitled to one vote per share of Common Stock into
which its shares of Series B Preferred are then convertible. As to matters upon
which the Series B Preferred is entitled to vote as a separate class, each share
of Series B Preferred shall be entitled to one vote per share.
LIQUIDATION PREFERENCE. Upon a liquidation of the Company, each holder
of Series B Preferred shall be entitled to receive, before and in preference to
any distribution or payment to holders of Common Stock or other security junior
to the Series B Preferred, an amount in cash equal to the Series B Stated Value
of such holder's shares of Series B Preferred then outstanding plus an amount
equal to the accrued and unpaid dividends on such Series B Preferred, if any.
If, upon such liquidation, the assets of the Company available for distribution
to holders of Series B Preferred and any other series
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of Preferred Stock then outstanding ranking on parity with the Series B
Preferred (including the Series A Preferred) upon liquidation shall be
insufficient to permit payment in full to the holders of the Series B Preferred
and such parity stock, then the entire assets and funds of the Company legally
available for distribution to such holders and the holders of such parity stock
then outstanding shall be distributed ratably among such holders.
RESERVATION OF SHARES ISSUABLE UPON EXERCISE OF OPTIONS SUBJECT TO
LOCK-UP AGREEMENTS
Because the Company would not otherwise have had sufficient authorized,
non-reserved shares available to reserve for issuance upon exercise of the
3,456,424 Unit Warrants issued in the Private Placement which are currently
exercisable, certain executive officers of the Company agreed, pursuant to
lock-up agreements (the "Lock-up Agreements"), not to exercise stock options
granted to them unless and until such options become exercisable upon the
availability of sufficient shares of Common Stock to reserve for issuance upon
the exercise thereof as follows: (i) Paul F. Lavallee, Chairman of the Board,
President and Chief Executive Officer, 1,500,000 shares exercisable at $0.75 per
share expiring on January 30, 2005, (ii) Leonard R. Prange, Chief Operating
Officer and Chief Financial Officer, 200,000 shares exercisable at $3.94 per
share expiring May 23, 2007, and (iii) Norman J. Pressman, Chief Scientific
Officer and Senior Vice President Research, 200,000 shares exercisable at $3.94
per share expiring May 23, 2007 (collectively, the "Locked-up Options). The
1,900,000 shares that had been reserved for issuance upon exercise of such
options were reserved for issuance upon exercise of Unit Warrants issued in the
Private Placement. The Lock-up Agreements provide that, if stockholders approve
Charter Amendment No. 1 or Charter Amendment No. 2, the Company will reserve for
issuance 1,900,000 shares for issuance upon exercise of the Locked-up Options.
At present, there are no specific understandings, arrangements or
agreements with respect to any future issuances of the additional shares of
Common Stock to be authorized by upon approval of Charter Amendment No. 1,
except as described above in connection with the Private Placement and Locked-up
Options.
The Company continues to evaluate ways to increase value for its
stockholders, and the Board of Directors believes that it is prudent to have
additional shares of Common Stock available for Future Actions. The Board of
Directors will determine whether, when and on what terms to issue shares of
Common Stock in connection with any Future Actions. The Board of Directors
believes that the proposed increase in the number of authorized shares of Common
Stock will give the Company greater flexibility in responding to business needs
and opportunities by allowing shares of Common Stock to be issued.
If Charter Amendment No. 1 is approved by the stockholders, such
Amendment will become effective on the date on which a Certificate of Amendment
to the Company's Certificate of Incorporation, in the form of Appendix A to this
Proxy Statement, is filed with the Secretary of State of Delaware. However, in
accordance with the Delaware General Corporation Law, the Board of Directors is
authorized to abandon Charter Amendment No. 1, notwithstanding stockholder
approval thereof, at any time prior to filing with Secretary of State of
Delaware.
POSSIBLE REVERSE STOCK SPLIT. Stockholders are also being asked to
approve Proposal No. 2 to approve Charter Amendment No. 2 to effect a
one-for-six reverse stock split on the Common Stock. If stockholders approve
both Proposal No. 1 and Proposal No. 2, (i) the Company will file only one of
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<PAGE> 13
the Charter Amendments as determined by the Board of Directors to be in the best
interests of the Company, and (ii) the Board of Directors will abandon the other
Charter Amendment. See "Proposal No. 2 to Amend the Certificate of Incorporation
to Effect a Reverse Stock Split."
Each of the purchasers of Units in the Private Placement, holding an
aggregate of 8,686,667 shares of Common Stock, has agreed to vote its respective
shares in favor of Charter Amendment No. 1 (which shares in the aggregate
represent approximately 27% of the outstanding voting power of the Company).
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS THAT
STOCKHOLDERS VOTE FOR THE APPROVAL AND ADOPTION OF CHARTER AMENDMENT NO. 1.
APPROVAL OF CHARTER AMENDMENT No. 1 REQUIRES THE AFFIRMATIVE VOTE OF A MAJORITY
OF THE OUTSTANDING SHARES OF COMMON STOCK ENTITLED TO VOTE AT THE MEETING.
PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE VOTED "FOR" THE CHARTER
AMENDMENT No. 1, UNLESS OTHERWISE INSTRUCTED.
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<PAGE> 14
PROPOSAL NO. 2
TO AMEND THE CERTIFICATE OF INCORPORATION
TO EFFECT A REVERSE STOCK SPLIT
GENERAL
The Board of Directors of the Company has adopted, subject to
stockholder approval, a resolution proposing that the Company amend its
Certificate of Incorporation to reduce the outstanding number of shares of
Common Stock and effect a reverse stock split (the "Reverse Stock Split")
pursuant to which each six shares of Common Stock ("Old Common Stock") will
become one share of the Company's then outstanding common stock ("New Common
Stock").
The Certificate of Incorporation presently authorizes 50,000,000
shares of Common Stock, of which 31,724,374 shares were issued and outstanding
on the Record Date. In addition, as of the Record Date, 24,668,540 shares of
Common Stock were subject to issuance upon exercise of outstanding warrants,
options and other convertible securities.
PURPOSES OF THE REVERSE STOCK SPLIT
From October 1996 until February 19, 1998, the Common Stock traded on
the Nasdaq National Market. On November 14, 1997, Nasdaq notified the Company
that Nasdaq was reviewing the eligibility of the Common Stock for continued
inclusion on the Nasdaq National Market because at September 30, 1997 the
Company's net tangible assets and equity were below the $4,000,000 million
threshold for continued listing. On December 5, 1997, the Company provided
Nasdaq with the Company's proposals for achieving compliance. On December 18,
1997, Nasdaq notified the Company that the Company's request for continued
listing on the Nasdaq National Market had been denied. The decision was
reviewed before an oral hearing panel of Nasdaq on January 29, 1998.
The Nasdaq hearing panel ordered that the trading of the Common Stock
be moved to the Nasdaq SmallCap Market on February 19, 1998, pursuant to a
temporary exemption from the initial listing requirements. On February 17,
1998, Nasdaq notified the Company that in order to continue listing of the
Common Stock on the Nasdaq SmallCap Market the Company must (i) file an
application for listing the Common Stock on the Nasdaq SmallCap Market by
February 28, 1998, and (ii) file with the Securities and Exchange Commission
(the "Commission"), on or prior to March 20, 1998, a pro forma balance sheet
dated February 28, 1998 showing net tangible assets of a minimum of $7,000,000
and compliance with all criteria for continued listing on the Nasdaq SmallCap
Market. The Company filed the required listing application within the
prescribed period. On March 20, 1998, the Company filed with the Commission a
Current Report on Form 8-K evidencing compliance with the $7,000,000 minimum net
tangible assets requirement and all criteria for continued listing, except that,
from February 19, 1998 through March 23, 1998 and then again on April 2, 1998,
the bid price for the Common Stock dropped below the $1.00 minimum bid price for
continued listing.
On March 17, 1998, Nasdaq granted the Company's request for an
extension of the deadline for achieving compliance with the minimum $1.00 price
per share of Common Stock for continued listing. The Board of Directors has
approved the Reverse Stock Split as a means to increase the bid price of the
Common Stock by reducing the total number of outstanding shares. If the Reverse
Stock Split is effected, Nasdaq has required that the bid price remain over
$1.00 per share during the ten consecutive trading days following the
effectiveness of the Reverse Stock Split.
The closing bid price per share of the Common Stock as reported on
the Nasdaq SmallCap Market on April 21, 1998, the last trading day prior to the
date of this Proxy Statement, was $1.03. The Board of Directors believes that if
the bid price of the Common Stock remains above $1.00, the Common Stock will be
eligible for continued listing on Nasdaq SmallCap Market. However, there can be
no assurance that, even if the Reverse Stock Split is effected, the Common Stock
will continue to remain eligible for listing on the Nasdaq SmallCap Market.
If the Common Stock is not listed on Nasdaq, trading, if any, in the
Common Stock would thereafter be conducted in the non-Nasdaq over-the-counter
market in the so-called "pink sheets" or the NASD's "Electronic Bulletin Board."
Consequently, the liquidity of the Company's securities could be impaired, not
only in the number of shares of Common Stock that would be bought and sold, but
also through delays in the timing of transactions, reduction in security analyst
coverage of the Company and lower prices for the Common Stock than might
otherwise be attained. Consequently, investors could find it more difficult to
dispose of, or to obtain accurate quotations as to the market value of the
Company's Common Stock. In addition, delisting could result, in certain
circumstances, in the Common Stock becoming characterized as a low-priced or
"penny" stock. In such event, the market liquidity for the Company's securities
could be severely affected as the Common Stock would be subject to compliance
with The Securities Enforcement and Penny Stock Reform Act of 1990. The
regulations governing low-priced, so-called "penny" stocks could limit the
ability of broker-dealers to sell the Company's Common Stock and, in turn, the
ability of stockholders to sell their Common Stock.
In March 1998, the Company consummated a private placement of
8,686,667 shares of Common Stock and warrants to purchase 8,686,667 shares of
Common Stock, sold in units (the "Units"), each Unit consisting of 133,333
shares of Common Stock, and seven-year warrants to purchase 133,333 shares of
Common Stock (the "Unit Warrants"), at an exercise price of $0.75 per share (the
"Unit Warrant Exercise Price"). If the Common Stock is delisted from the Nasdaq
Stock Market at any time on or prior to December 31, 1998, original purchasers
of Units will be entitled to receive, at their option, in exchange for the
Units, units (the "Alternate Units"), each Alternate Unit consisting of (i)
shares of Series B Convertible Preferred Stock, par value $0.01 per share of the
Company (the "Series B Preferred") having an aggregate stated value of $100,000
(the "Series B Stated Value"), convertible into shares of Common Stock at an
initial conversion price (the "Series B Conversion Price") of $0.75 per share,
subject to reset and (ii) warrants (the "Alternate Warrants") exercisable to
purchase the number of shares of Common Stock issuable upon exercise of the Unit
Warrants at the same initial Unit Warrant Exercise Price. See "Proposal No. 1 to
Amend the Certificate of Incorporation to Increase the Authorized Common Stock
- --Possible Exchange of Units for Alternate Units" for a description of terms of
the Alternate Units.
The Board of Directors also believes that the current low per share
price of the Common Stock has had a negative effect on the price and
marketability of existing shares, the amount and percentage (relative to share
price) of transaction costs paid by individual stockholders and the potential
ability of the Company to raise capital by issuing additional shares. Reasons
for these effects include internal policies of certain institutional investors
which prevent the purchase of low-priced stocks, the fact that many brokerage
houses do not permit low-priced stocks to be used as collateral for margin
accounts or
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<PAGE> 15
to be purchased on margin and a variety of brokerage house policies and
practices which tend to discourage individual brokers within those firms from
dealing in low-priced stocks.
In addition, since brokers' commissions on the low-priced stocks
generally represent a higher percentage of the stock price than commissions on
higher priced stocks, the current share price of the Common Stock can result in
individual stookholder, paying transaction costs which are a higher percentage
of the share price than would be the case if the share price were substantially
higher. The Board of Directors also believes that this factor limits the
willingness of certain institutional investors to purchase the Common Stock. The
Board of Directors believes that the proposed Reverse Stock Split will enhance
the Company's flexibility in the future for financing and capitalization needs.
There can, however, be no assurance that any of the foregoing effects will
occur. THERE CAN BE NO ASSURANCE THAT THE TOTAL MARKET CAPITALIZATION OF THE
COMMON STOCK AFTER THE PROPOSED REVERSE STOCK SPLIT WILL BE EQUAL TO THE TOTAL
MARKET CAPITALIZATION BEFORE THE PROPOSED REVERSE STOCK SPLIT OR THAT THE MARKET
PRICE FOLLOWING THE REVERSE STOCK SPLIT WILL EITHER EXCEED OR REMAIN IN EXCESS
OF THE CURRENT MARKET PRICE.
EFFECTIVENESS OF THE REVERSE STOCK SPLIT
If Proposal No. 2 is approved by the stockholders, the Reverse Stock
Split would become effective at such time as the Company files the Certificate
of Amendment ("Charter Amendment No. 2") with the Secretary of State of Delaware
(the "Effective Date"). Even if the Reverse Stock Split is approved by the
stockholders, it is within the discretion of the Board of Directors to not carry
out the Reverse Stock Split. Upon the filing of the Charter Amendment No. 2, all
of the Old Common Stock will be converted into New Common Stock as set forth in
the Certificate of Amendment. The number of shares of New Common Stock will be
rounded up to the nearest whole share as fractional shares will not be issued.
From and after the Effective Date, certificates representing shares of Old
Common Stock shall be deemed to represent only the right to receive shares of
New Common Stock to which an individual stockholder is entitled.
CERTIFICATES AND FRACTIONAL SHARES
As soon as practicable after the Effective Date, the Company will
request all stockholders to return their stock certificates representing issued
shares of Old Common Stock outstanding on the Effective Date ("Old
Certificates") in exchange for certificates representing the number of whole
shares of New Common Stock into which the shares of Common Stock have been
converted ("New Certificates") as a result of the Reverse Stock Split Each
stockholder will receive a letter of transmittal from the Company's transfer
agent, First Chicago Trust Company of New York (the "Transfer Agent"),
containing instructions on how to exchange certificates. STOCKHOLDERS SHOULD NOT
SUBMIT THEIR OLD CERTIFICATES TO THE TRANSFER AGENT UNTIL THEY RECEIVE THESE
INSTRUCTIONS. In order to receive New Certificates, stockholders must surrender
their Old Certificates pursuant to the Transfer Agent's instructions, together
with the properly executed and completed letter of transmittal and such evidence
of ownership of such shares as the Company may require.
Beginning with the Effective Date, each Old Certificate until
surrendered and exchanged as described above, will be deemed for all corporate
purposes to
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<PAGE> 16
evidence ownership of the whole number of shares of the Common Stock into which
the shares evidenced by such Old Certificates have been amended.
No fractional shares of New Common Stock will be issued as a result of
the Reverse Stock Split. In lieu of receiving fractional shares, stockholders
who hold a number of shares not evenly divisible immediately prior to the
Reverse Stock Split will be entitled to receive a whole share of New Common
Stock for any fractional share at no additional cost. The number of shares of
New Common Stock to be issued in connection with rounding up such fractional
interests is not expected by management of the Company to be material.
CERTAIN EFFECTS OF THE REVERSE STOCK SPLIT
The principal effect of the Reserve Stock Split will be to decrease the
number of shares of Common Stock outstanding from 31,724,374 to approximately
5,287,396, before giving effect to the rounding up of fractional shares referred
to above. In addition, the Board of Directors will take appropriate action to
proportionately adjust the number of Common Shares issuable upon exercise of
outstanding warrants, options and other convertible securities, and to adjust
the related exercise price, to reflect the Reverse Stock Split. As a result,
following the Effective Date, the number of Common Shares issuable upon the
exercise of outstanding warrants, options and other convertible securities will
be reduced from 24,668,540 to 4,111,424 shares. The authorized number of shares
of Common Stock will remain at 50,000,000 shares.
The shares of New Common Stock will be fully paid and nonassessable.
The relative voting and other rights of holders of the New Common Stock will not
be altered by the Reverse Stock Split. The Company does not anticipate that the
Reverse Stock Split will result in any material reduction in the number of
holders of Common Stock. Certain stockholders' Post-reverse Stock Split holdings
may include an "odd lot" number of shares. In general, it is somewhat more
difficult to purchase or sell an oddlot number of shares, and transactions in
odd lots are subject to higher commissions and other transaction costs
applicable to so-called round lots.
The Reverse Stock Split will not change the par value of shares of
Common Stock. However, under applicable Delaware law, the total capital of the
Company will not be reduced as a result of the Reverse Stock Split, even though
the aggregate par value of all issued and outstanding shares will be reduced to
one-sixth of the aggregate par value prior to the Reverse Stock Split.
Accordingly, the Reverse Stock Split will not change surplus available for
dividends.
The Board considered reducing the number of shares of authorized Common
Stock in connection with the Reverse Stock Split but determined that the
availability of additional shares may be beneficial to the Company in the
future. The availability of additional authorized shares will allow the Board to
issue shares for corporate purposes, if appropriate opportunities should arise,
without further action by stockholders or the time delay involved in obtaining
stockholder approval (unless required by law or regulation). Such purposes could
include effecting future acquisitions of other businesses or meeting
requirements for working capital or capital expenditures through the issuance of
shares. To the extent that any additional shares (or securities convertible into
common stock) may be issued on other than a pro rata basis to current
stockholders, the present ownership position of current stockholders may be
diluted. The Common Stock has no preemptive rights. In addition, if another
party should seek to
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<PAGE> 17
acquire or take over control of the Company, and the Board does not believe such
transaction is in the best interest of the Company and its stockholders, some or
all of the authorized shares could be issued to another party to try to block
such transaction.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following description of certain federal income tax consequences is
based on the Internal Revenue Code of 1986, as amended (the "Code"), the
applicable Treasury Regulations promulgated thereunder, judicial authority and
current administrative rulings and practices as in effect on the date of this
Proxy Statement. This discussion is for general information only and does not
discuss consequences which may apply to special classes of taxpayers (e.g.,
nonresident aliens, brokerdealers, or insurance companies). Stockholders are
urged to consult their own tax advisors to determine the particular tax
consequences to them.
The Company has not sought and will not seek a ruling from the Internal
Revenue Service or an opinion of counsel regarding the federal income tax
Consequences of the Reverse Stock Split. However, the Company believes that
because the Reverse Stock Split is not part of a plan to periodically increase a
stockholders proportionate interest in the assets or earnings and profits of the
Company, the Reverse Stock Split will have the following effects:
The amendment of shares of Old Common Stock to become shares of New
Common Stock should not result in recognition of gain or loss (except in the
case of the portion of a whole share of New Common Stock attributable to the
rounding up to the nearest whole number of shares of New Common Stock in lieu of
fractional shares as described above). The holding period for the shares and
portions of shares of New Common Stock will include the stockholder's holding
period for its shares of Old Common Stock, provided that the shares of Old
Common Stock were held as a capital asset. The portion of the shares of New
Common Stock attributable to rounding up for fractional shares will have a
holding period commencing on the Effective Date. The adjusted basis of the
shares of New Common Stock will be the same as the adjusted basis of the shares
of Old Common Stock, increased by the income or gain attributable to the
rounding up to a whole number of shares as described herein. Shares of New
Common Stock attributable to the rounding up to the nearest whole number of
shares will be treated for tax purposes as if the fractional shares constitute a
disproportionate dividend distribution. Such stockholders should generally
recognize ordinary income to the extent of earnings and profits of the Company
allocated to the portion of each share of New Common Stock attributable to the
rounding up process, and the remainder of the gain, if any, shall be treated as
received from the exchange of property.
MISCELLANEOUS
The Board of Directors may abandon the proposed Reverse Stock Split at
any time before or after the Meeting and prior to the filing of the Charter
Amendment No. 2 related thereto if for any reason the Board of Directors deems
it advisable to do so. In addition, the Board of Directors may make any and all
changes to Charter Amendment No. 2 that it deems necessary to file Charter
Amendment No. 2 with the Delaware Secretary of State and give effect to the
Reverse Stock Split.
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<PAGE> 18
POSSIBLE INCREASE IN AUTHORIZED COMMON STOCK
Stockholders are also being asked to approve Proposal No. 1 to approve
Charter Amendment No. 1 to increase the authorized Common Stock from 50,000,000
shares to 100,000,000 shares. If stockholders approve both Proposal No. 1 and
Proposal No. 2, (i) the Company will file only one of the Charter Amendments as
determined by the Board of Directors to be in the best interests of the Company,
and (ii) the Board of Directors will abandon the other Charter Amendment. One
factor the Board will consider in making this determination will be the price of
the Common Stock at the Meeting date. If the Common Stock is trading
sufficiently above the $1.00 minimum bid price requirement for continued listing
on the Nasdaq SCMS to avoid delisting without effecting the Reverse Stock Split,
the Board would likely abandon the Reverse Stock Split and effect only the
increase in authorized Common Stock pursuant to Charter Amendment No. 1. See
"Proposal No. 1 to Amend the Certificate of Incorporation to Increase the
Authorized Common Stock."
RECOMMENDATION AND VOTE
Assuming the presence of a quorum, the proposal to amend the Company's
Certificate of Incorporation to effect the Reverse Stock Split requires the
approval by the holders of a majority of the outstanding shares of Common Stock.
Proxies will be voted for or against such approval in accordance with
specifications marked thereon and, if no specification is made, will be voted
FOR such approval.
The Board of Directors recommends a vote FOR the approval of the
proposal to amend the Company's Certificate of Incorporation to effect the
Reverse Stock Split (Proposal No.2).
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<PAGE> 19
PROPOSAL NO. 3
APPROVAL OF 1997 STOCK OPTION
GENERAL
The Board of Directors is proposing for stockholder approval the AccuMed
International, Inc. 1997 Stock Option Plan, as amended by Amendment No. 1 (the
"1997 Option Plan"). The Board of Directors approved the 1997 Option Plan in May
1997, subject to stockholder approval at this Meeting. The purposes of the 1997
Option Plan are (i) to align the interests of the Company's stockholders and
recipients of options under the 1997 Option Plan by increasing the proprietary
interest of such recipients in the Company's growth and success, and (ii) to
advance the interests of the Company by attracting and retaining officers, other
key employees and well-qualified non-employee directors. Under the 1997 Option
Plan, the Company may grant incentive stock options (within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), and
nonqualified stock options to purchase an aggregate of up to 1,350,000 shares of
Common Stock. Reference is made to Appendix C to this Proxy Statement for the
complete text of the 1997 Option Plan, which is summarized below.
DESCRIPTION OF THE 1997 OPTION PLAN
SHARES AND OPTIONS SUBJECT TO PLAN. The 1997 Option Plan provides for
the grant of options to purchase an aggregate of 1,350,000 shares of Common
Stock (subject to adjustment). Options may be either incentive stock options
intended to meet the requirements of Section 422 of the Code or nonqualified
stock options. The 1997 Option Plan includes provisions for adjustment of the
number of shares of Common Stock available for grant thereunder and in the
number of shares of Common Stock underlying outstanding options in the event of
any stock splits, stock dividends or other relevant changes in the
capitalization of the Company. No option may be granted after May 23, 2007.
ELIGIBILITY. Under the 1997 Option Plan, employees, including officers,
are eligible to receive grants of either incentive stock options structured to
qualify under Section 422 of the Code, or nonqualified stock options which are
not intended to meet the requirements of Code Section 422. Consultants and
non-employee directors are eligible to be granted only nonqualified options. Six
non-employee directors, and approximately 158 officers and other employees of
the Company and its subsidiaries are eligible to participate in the 1997 Option
Plan. No consultants of the Company or its subsidiaries are currently eligible
to participate in the 1997 Option Plan.
ADMINISTRATION. Administration of the 1997 Option Plan has been
delegated to the Compensation Committee of the Board of Directors, consisting
entirely of "disinterested" directors within the meaning of Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and an "outside director" within the meaning of Section 162(m) of the
Code. The Compensation Committee, within the parameters of the 1997 Option Plan,
has authority to determine to whom options are granted, the number of options
granted, and the terms of such options. All questions of interpretation or
application of the 1997 Option Plan are determined by Compensation Committee
whose decisions are final and binding upon all participants.
TERMS OF OPTIONS. Each option granted will be evidenced by a stock
option agreement.
15
<PAGE> 20
Consideration for the options granted pursuant to the 1997 Option Plan
will be provided by the recipient's past, present and expected future
contribution to the Company; no monetary consideration is provided.
TERMINATION. Unless terminated earlier due to termination of the
optionee's status as an employee or consultant of the Company, options granted
under the 1997 Option Plan will terminate on the tenth anniversary of the date
of grant; except that an incentive stock option granted to an employee who at
the date of grant owned more than 10% of the combined voting power of all
classes of stock of the Company and its subsidiaries will terminate on the fifth
anniversary of the date of grant. Options granted to non-employee directors
expire on the fifth anniversary of the grant date.
Nonqualified Options. An optionee whose employment relationship
has terminated, other than by death, disability or retirement on or after the
age of 55 after a minimum of four years of employment with the Company, may
exercise his or her outstanding nonqualified stock options to the extent
exercisable on the termination date until the earlier of expiration of the
option and one year (or such other period as set forth in the option agreement)
following the termination date. If employment terminates for any other reason,
the optionee may exercise his or her outstanding nonqualified stock options to
the extent exercisable on the termination date until the earlier of expiration
of the option and 30 days following the termination date.
Non-employee Director Options. Options granted to non-employee
directors expire on the fifth anniversary of the grant date and are not subject
to earlier termination.
Incentive Stock Options. Unless otherwise specified in the option
agreement, an incentive stock option may be exercised by the optionee or his or
her legal representative following termination of employment due to death or
Permanent and Total Disability (as defined in Section 22(e)(3) of the Code),
until the earlier of expiration of the option and one year (or such shorter
period specified in the option agreement) following the date of termination. An
optionee whose employment is terminated for any other reason may exercise his or
her incentive stock options for a period of 30 days from the date of such
termination. In each case, options are exercisable only to the extent they were
exercisable on the termination date.
NON-EMPLOYEE DIRECTOR OPTIONS. Non-employee directors are entitled to
receive nonqualified stock options to purchase 20,000 shares of Common Stock
upon initial election and each annual reelection to the Board of Directors. Such
options are immediately exercisable at the closing price of the Common Stock on
the grant date and expire on the fifth anniversary of the grant date.
TRANSFER RESTRICTIONS. No option is transferable by the optionee
otherwise than by will or the laws of descent and distribution.
EXERCISE PRICE. The option exercise price per share of Common Stock to
be issued upon exercise of all options under the 1997 Option Plan must be at
least 100% of the fair market value per share of the Company's Common Stock on
the date of grant of the option. Incentive stock options granted to an employee
who on the grant date owns more than 10% of the combined voting power of all
classes of stock of the Company and its subsidiaries (a "10% Holder") are
required to have an exercise price of at least 110% of fair market value. The
fair market value is determined to be the closing sales price of a share of
Common Stock on the date of grant.
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<PAGE> 21
EXERCISE. The options may be immediately exercisable on the date of
grant or the right to acquire shares underlying the options may become vested as
determined by the Compensation Committee and specified in the option agreement;
provided, however, that options are exercisable beyond the 10th anniversary of
the grant date, and incentive stock options granted to a 10% Holder are not
exercisable beyond the fifth anniversary of the grant date. Payment of the
exercise price is to be made in cash, by the delivery to the Company of shares
of Common Stock, by instructing the Company to withhold shares of Common Stock
issuable upon exercise having a fair market value equal to the exercise price,
and by a so-called "cashless exercise" involving a securities broker-dealer or
by any combination of the same. Common Stock surrendered in payment of the
exercise price will be valued at its fair market value as of the exercise date.
Upon termination of employment, options are exercisable only to the extent
vested as of the termination date.
EFFECTIVE DATE; TERMINATION. If approved by stockholders, the 1997
Option Plan will become effective retroactively as of May 23, 1997, the date of
Board approval thereof. If the 1997 Option Plan is not approved by May 23, 1998,
it will terminate on such date and all options previously granted thereunder
(none of which are exercisable and all of which are subject to stockholder
approval of the 1997 Option Plan) will become null and void. If the 1997 Option
Plan is approved by stockholders, it will terminate May 23, 2007.
AMENDMENTS. The Board of Directors may amend the 1997 Option Plan,
provided that an optionee's consent is required to any amendment which would
impair any option or deprive the optionee of any of his or her rights under the
1997 Option Plan; and shareholder approval is required of any amendment that
would (i) increase the maximum number of shares for which options may be granted
(except as subject to adjustment under the 1997 Option Plan), and (ii) effect
any change inconsistent with Section 422 of the Code.
AWARDS UNDER THE PLAN AND PLAN BENEFITS TABLE
The Compensation Committee has granted stock options (which are
described in the table below) to purchase an aggregate of 1,322,642 shares of
Common Stock. Such options were granted in connection with (i) recruitment of
certain officers and other employees pursuant to the terms of their employment
agreements, (ii) automatic grants to non-employee directors as compensation for
their services, and (iii) rewards for exceptional performance. All such options
were granted, and their exercisability remain, subject to obtaining stockholder
approval of the 1997 Option Plan on or prior to May 23, 1998. Any such approval
may also be deemed a ratification by the stockholders of each such award under
relevant rules of the Securities and Exchange Commission. If such stockholder
approval is not obtained, the 1997 Option Plan will expire on such date an all
previously granted options will become null and void. For a description of the
employment agreements pursuant to which options were granted to the executive
officers, see "Proposal No. 4 Election of Directors --Executive Compensation
- --Employment Agreements; Separation Agreements."
The following table sets forth the number and value of shares of Common
Stock underlying stock options granted to (i) the executive officers named in
the table pursuant to their employment agreements, (ii) all current executive
officers as a group, (iii) non-executive officer employees as a group, (iv) and
the non-employee directors as a group.
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<PAGE> 22
NEW PLAN BENEFITS TABLE
- --------------------------------------------------------------------------------
1997 STOCK OPTION PLAN
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
-----------------------------
COMMON SHARES
UNDERLYING OPTIONS
NAME AND POSITION NUMBER VALUE (4)
- -------------------------------------------------------- ------- ----------
<S> <C> <C>
Peter P. Gombrich, former Chairman, President and
Chief Executive Officer (1) 0 $ --
Michael D. Burke, former Group President (2) 0 $ --
Paul F. Lavallee, Chairman, President and
Chief Executive Officer (3) 20,000 $ 51,200
Leonard R. Prange, Chief Operating Officer and
Chief Financial Officer 200,000 $ 512,000
Norman J. Pressman, Ph.D, Chief Scientific Officer
and Senior Vice President 200,000 $ 512,000
Joyce L. Wallach, Esq., General Counsel
and Secretary 55,000 $ 140,800
Current Executive Officers (4 persons) 475,000 $1,216,000
Non-Executive/Employee Director Group (6 persons) 100,000 $ 256,000
Non-Executive Officer and Employee Group 747,642 $1,913,964
- --------------------------------------------------------
</TABLE>
(1) Mr. Gombrich resigned as Chairman, President and Chief Executive
Officer effective January 30, 1998.
(2) Mr. Burke resigned as Group President effective December 31, 1997.
(3) At the option grant date, Mr. Lavallee was a non-employee director
who received the options pursuant to the Compensation Plan for all
non-employee directors.
(4) The Company utilizes the Black-Scholes pricing model to determine
the fair value of options granted. The following assumptions were
incorporated into the model: risk free rate 6%, expected volatility
20%, dividend yield 0%, and time of exercise 10 years. No
adjustments were made for risk of non-transferability or risk of
forfeiture. The per share value of each option using this
calculation is $2.56.
18
<PAGE> 23
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
An optionee will not recognize any income upon the grant of an option.
An optionee will recognize compensation taxable as ordinary income (and subject
to income tax withholding) upon exercise of a nonqualified stock options equal
to the excess of the fair market value of the shares purchased over their
exercise price, and the Company will be entitled to a corresponding deduction. A
participant will not recognized income (except for purposes of the alternative
minimum tax) upon exercise of an incentive stock option. If the shares acquired
by exercise of an incentive stock option are held for the longer of two years
from the date the option is granted and one year from the date it is exercised,
any gain or loss arising from subsequent disposition of such shares will be
taxed as long-term capital gain or loss, and the Company will not be entitled to
any deduction. If, however, such shares are disposed of within the
above-described period, then in the year of such disposition the optionee will
recognized compensation taxable as ordinary income equal to the excess of the
lesser of (i) the amount realized upon such disposition, and (ii) the fair
market value of such shares on the date of exercise over the exercise price, and
the Company will be entitled to a corresponding deduction.
VOTE REQUIRED AND BOARD OF DIRECTORS RECOMMENDATION
Assuming the presence of a quorum, the affirmative vote of the holders
of a majority of the shares of Common Stock represented in person or by proxy
and entitled to vote is required to approve the adoption of the 1997 Option
Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THIS
PROPOSAL. EACH PROXY RETURNED TO THE PROXY HOLDERS WILL BE VOTED "FOR" APPROVAL
OF THE 1997 OPTION PLAN, UNLESS OTHERWISE INSTRUCTED.
19
<PAGE> 24
PROPOSAL NO. 4
ELECTION OF DIRECTORS
From December 1995 until April 1, 1998, the Company's Bylaws provided
that the Board of Directors be comprised of seven directors. On March 23, 1998,
the Board of Directors (i) approved an amendment to the Company's Bylaws to
provide that the Board of Directors shall be comprised of a minimum of seven and
a maximum of nine members, as determined from time to time by resolution of the
Board of Directors, (ii) adopted a resolution that (x) effective April 1, 1998
until the Meeting date, the Board of Directors shall consist of nine directors,
and (y) as of the Meeting date, the Board shall be comprised of seven directors,
to serve until the 1999 annual meeting of stockholders and until their
successors are duly elected and qualified, and (iii) appointed Harold S. Blue
and Mark Bannister to fill the two newly created directorships effective April
1, 1998, to serve until the Meeting date, and until their successors are duly
elected and qualified.
Each of the seven nominees named below has consented to be named in this
Proxy Statement and has consented to serve as a director, if so elected. The
Company has no reason to believe that any of the nominees will not be available
to serve; if, however, any nominee should for any reason become unable or
unwilling to serve, the shares represented by proxies received by the Company
(unless otherwise directed) will be voted for the election of such other person
as the Board of Directors may recommend, in place of the unavailable nominee.
In the election of directors, the seven candidates receiving the highest
number of votes will be elected directors of the Company. Votes cast against
directors and votes withheld shall have no effect. Elections for directors shall
not be made by ballot, unless a stockholder shall demand election by ballot at
the Meeting before the voting begins.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF THE
NOMINEES NAMED TO SERVE UNTIL THE NEXT ANNUAL MEETING OF STOCKHOLDERS. PROXIES
RETURNED TO THE COMPANY WILL BE VOTED "FOR" THE NOMINEES NAMED UNLESS OTHERWISE
INSTRUCTED.
EXECUTIVE OFFICERS AND DIRECTOR NOMINEES
The executive officers and director nominees of the Company and their
ages are as follows:
<TABLE>
<CAPTION>
NAME Age Position
---- --- --------
<S> <C> <C>
Paul F. Lavallee.................... 58 Chairman of the Board, Chief Executive
Officer and President
Leonard R. Prange,.................. 52 Chief Operating Officer and Chief Financial
Officer
Norman J. Pressman, Ph.D............ 49 Chief Scientific Officer and Senior Vice
President Research
Joyce L. Wallach, Esq............... 37 General Counsel and Secretary
Mark Bannister...................... 34 Director
Harold S. Blue...................... 36 Director
J. Donald Gaines.................... 62 Director
Jack H. Halperin, Esq............... 51 Director
</TABLE>
20
<PAGE> 25
<TABLE>
<S> <C> <C>
Robert L. Priddy.................... 51 Director
Leonard M. Schiller, Esq............ 56 Director
</TABLE>
Set forth below is certain information regarding the business experience of
the director nominees, executive officers and a key employee of the Company.
DIRECTOR NOMINEES
PAUL F. LAVALLEE. Mr. Lavallee has been a member of the Board since December
1995 and has been Chairman of the Board, Chief Executive Officer and President
of the Company since January 30, 1998. Since 1995, he has been Chairman of the
Board of Biorthex, Inc., a venture capital backed start-up firm specializing in
surgical and non-surgical orthopedics located in Montreal. From January 1996
until January 1997, Mr. Lavallee served as a consultant to Sigmedics, Inc., a
biomedical company. From 1989 until December 1995, Mr. Lavallee served as
Chairman, President and Chief Executive Officer of Sigmedics, Inc. Mr. Lavallee
has a Bachelor of Science degree in Biology from Bates College and a Masters in
Business Administration from the University of Chicago.
MARK BANISTER. Mr. Banister has been a director of the Company since April 1,
1998. Mr. Bannister has been an independent management consultant and investment
advisor specializing in identifying investment opportunities in the smaller and
medium company sector and assisting such companies with their development since
January 1993. Since 1993, he has been a director of Verex Laboratories Inc., a
pharmaceutical development company based in Denver. Mr Banister previously held
senior positions at Bisgood Bishop Ltd. and Morgan Stanley International in
London, England.
HAROLD S. BLUE. Mr. Blue served as a director of the Company from July 1996
through May 23, 1997 and rejoined the Board on April 1, 1998. Since February
1993, Mr Blue has served as Chairman of the Board and Chief Executive Officer of
ProxyMed, Inc., a healthcare information technology company. From July 1992
until February 1995, Mr. Blue served as Chairman of the Board and Chief
Executive Officer of Health Services of Miami Lakes, Inc., Health Services of
Pembroke Lakes, Inc. and Health Services of North Miami, Inc., each a physician
practice management group. From June 1979 to February 1992, Mr. Blue was
President and Chief Executive Officer of Budget Drugs, Inc., a retail discount
pharmacy chain. From September 1984 to August 1988, Mr. Blue was Executive Vice
President of Best Generics Incorporated, a national generic distribution
company, which he co-founded.
J. DONALD GAINES. Mr. Gaines has been a director of the Company since May
1997. From February 1991 until his retirement in December 1994, Mr. Gaines
served as the President of the Storz Division of American Cyanamid Company. From
June 1977 until February 1991, Mr. Gaines served as President and Chief
Executive Officer of Storz Instrument Company. Mr. Gaines has a B.A. degree in
Business Administration from Memphis State University.
JACK H. HALPERIN, ESQ. Mr. Halperin has been a director of the Company since
June 1991 and served as Chairman of the Board of Directors from April 1995
through December 29, 1995. He also served as Secretary of the Company from
August until December 1996. Mr. Halperin is a corporate attorney with expertise
in venture capital financing and has been practicing law independently since
1987. Mr. Halperin has a B.A. degree in english from Columbia University and a
law degree from New York University School of Law. Mr. Halperin is also a member
of the boards of directors of I-Flow Corporation, Memry Corporation, Pacific
Pharmaceuticals, Inc., and Nocopi Technologies, Inc.
21
<PAGE> 26
ROBERT L. PRIDDY. Mr. Priddy has been a director of the Company since May
1997. Mr. Priddy has been Chairman of the Board and Chief Executive Officer of
ValuJet, Inc., since its inception in October 1995. He was one of the founding
partners of ValuJet Airlines, a wholly-owned subsidiary of ValuJet, Inc., and
served as Chairman of its Board and its Chief Executive Officer from July 1992
until November 1996. From July 1991 until January 1993, Mr Priddy served as
President of Florida Gulf Airlines. From January 1988 to November 1991, he
served as President and Chief Executive Officer of Air Midwest, Inc., for which
he also served as a director from November 1987 to November 1991. From 1979 to
1987, Mr. Priddy served as Vice President and Chief Financial Officer of
Atlantic Southeast Airlines, Inc., which he also served as a director from 1981
to 1987. Mr. Priddy has a B.A. degree in economics from Tulane University. Mr.
Priddy is also a member of the Board of Directors of Lukens Medical Corporation
and AirTran Holdings, Inc.
LEONARD M. SCHILLER, ESQ. Mr. Schiller has been a director of the Company
since April 1995. Mr. Schiller has been a practicing attorney for over 25 years
and is a partner in the law firm of Schiller, Klein & McElroy, P.C. in Illinois.
Since 1980, he has also been President of The Dearborn Group, a residential
property management and real estate company and is involved in the ownership of
residential properties throughout the Midwest. Mr. Schiller has a B.A. degree in
liberal arts from the University of Iowa and a law degree from the ITT Kent
College Law School. Mr. Schiller serves on the boards of directors of Milestone
Scientific, Inc., which develops dental equipment and disposable products for
use by health care providers, and Imall, Inc., an internet shopping mall
provider.
DIRECTORS RECOMMENDED BY BELLINGHAM
Bellingham Capital Industries ("Bellingham") purchased $3,000,000 of Units in
the Private Placement pursuant to which Bellingham received 4,000,000 shares of
Common Stock and 4,000,000 Unit Warrants in March 1998. In connection with the
Bellingham Investment, effective April 1, 1998, the Company's Board of Directors
expanded the Board from seven to nine members and appointed two individuals
recommended by Bellingham, Harold S. Blue and Mark Banister, to fill the newly
created directorships.
EXECUTIVE OFFICERS
LEONARD R. PRANGE. Mr. Prange has been Chief Financial Officer of the Company
since September 1996, and has been Chief Operating Officer since March 1997.
From September 1996 until March 1997, he served as Corporate Vice President of
the Company. Mr. Prange also serves as a consultant to Richardson Electronics,
Ltd., a global distributor and manufacturer of electronic components. From July
1995 until September 1996, Mr. Prange served as a managing director of Lovett
International, Inc., an international trading and consulting firm. Mr. Prange
served Richardson Electronics, Ltd. as Group Vice President from June 1994 until
July 1995, as Chief Financial Officer and Vice President from December 1984
until July 1995 and as Treasurer from December 1981 to December 1984. From March
1976 until December 1981, Mr. Prange served as Treasurer of Cetron Electronic
Corporation, a manufacturer of electronic components, and as Controller from
March 1972 until March 1976. Mr. Prange has a B.S. degree in accounting from
DePaul University and is a Certified Public Accountant.
NORMAN J. PRESSMAN, PH.D. Dr. Pressman has been Senior Vice President,
Research and Chief Scientific Officer since May 1997. From July 1996 through May
1997, he served as a Senior Vice President of the Company and President of the
Cytopathology Division. From July 1993 until joining the Company, Dr. Pressman
was Manager for Biotechnology Development, Strategic Business
22
<PAGE> 27
Development Group of Olympus America, the exclusive distributor of certain of
the Company's cytopathology products in the Western Hemisphere. Between July and
September 1989, Dr. Pressman was engaged in the formation of Cell Systems
International, Inc., a consulting firm in biomedical specimen collection,
processing and analysis, of which he served as President from September 1989
until July 1993. Dr. Pressman was the lead research scientist in the Cytometry
and Histometry program of the Central Research and Development Department at
E.I. du Pont de Nemours & Company from December 1986 until July 1989. From
September 1976 until December 1986, he was an Assistant Professor (Pathology and
Engineering) at The Johns Hopkins University School of Medicine and Head of the
Quantitative Cytopathology Laboratories at The Johns Hopkins Medical
Institutions. Dr. Pressman has a B.S. degree in electrical engineering from
Columbia University, a M.S. degree in systems engineering and a Ph.D. in
biomedical engineering from the University of Pennsylvania.
JOYCE L. WALLACH, ESQ. Ms. Wallach has been General Counsel and Secretary of
the Company since December 1996. From February 1994 until joining the Company,
she was an associate in the Corporate Group of the Sacramento, California office
of Graham & James LLP. From December 1989 until January 1994, Ms. Wallach was an
associate in the Corporate Securities Group in the Los Angeles office of Sidley
& Austin. Ms. Wallach has an A.B. degree in history from the University of
California, Berkeley and a law degree from Boalt Hall School of Law, University
of California, Berkeley.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Company's Board of Directors held 11 meetings during the 1997 fiscal
year. Each director attended a minimum of 75% of the aggregate of (x) such
meetings and (y) the meetings held by each committee, if any, of the Board of
Directors on which such director served during the last fiscal year, except that
each of John Abeles and Harold S. Blue, each of whom served as a director during
January through May of 1997, attended three of the six meetings (50%) of the
Board which were held while they were directors.
The Company has an Executive Committee, an Audit Committee and a Compensation
Committee. Each of these committees is responsible to the full Board of
Directors, and its activities are therefore subject to approval of the Board of
Directors. The Board of Directors does not have an nominating or similar
committee. The functions performed by the Audit Committee and the Compensation
Committee and their membership are summarized below.
The Audit Committee is responsible for reviewing the Company's internal
accounting controls, meeting and conferring with the Company's certified public
accountants, and reviewing the results of the accountants' auditing engagement.
During fiscal year 1997, the Audit Committee held one meeting. From January
through May 1997, Messrs. Halperin and Schiller and Joseph W. Plandowski served
on the Audit Committee. Since May 1997, Mr. Halperin, Chairman, and Messrs.
Gaines and Plandowski served on the Audit Committee.
The Compensation Committee of the Board of Directors is comprised entirely of
"disinterested" directors (within the meaning of Rule 16b-3 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")). The Compensation
Committee determines base compensation and discretionary cash bonuses for the
Company's senior executives, if not determined by the full Board of Directors.
These determinations are subject to the approval or ratification of the full
Board of Directors. The Compensation Committee also determines the number and
terms of stock options to be granted to employees, directors (other than
pursuant to the Board of Directors Compensation Plan described
23
<PAGE> 28
below), and consultants of the Company under the Company' stock option plans,
unless previously determined by the full Board of Directors. During fiscal year
1997, the Compensation Committee held nine meetings. From January through May
1997, Messrs. Halperin and Schiller and Joseph W. Plandowski served on the
Compensation Committee. Since May 1997, Messrs. Priddy and Schiller have served
on the Compensation Committee. From May 1997 until becoming Chief Executive
Officer on January 30, 1998, Mr. Lavallee served as Chairman of the Compensation
Committee. Since March 1998, Mr. Gaines has served as Chairman of the
Compensation Committee.
DIRECTOR COMPENSATION
Pursuant to the Board of Directors Compensation Plan as amended, each
non-employee director is entitled to the following compensation for services as
a director: (i) an immediately exercisable, five-year, nonqualified stock option
to purchase 20,000 shares of Common Stock to be granted upon election to the
Board of Directors, and (ii) an immediately exercisable, nonqualified stock
option to purchase 20,000 shares of Common Stock to be granted upon reelection
of a non-employee director to serve an additional year on the Board of
Directors. Such options are to be granted under the Company's stock option
plans. The exercise price per share shall be the fair market value of a share of
Common Stock on the date of grant. Directors are reimbursed for reasonable
expenses incurred in attending meetings of the Board of Directors and committees
thereof.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based upon a review of the Company's records, the Company believes that each
report disclosing beneficial ownership of securities of the Company pursuant to
Section 16(a) of the Securities Exchange Act of 1934, as amended, required to be
filed by the executive officers and directors of the Company during the fiscal
year ended December 31, 1997 were timely filed.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
From January through May 1997, Messrs. Halperin and Schiller and Joseph W.
Plandowski served on the Compensation Committee. From May 1997 through the end
of fiscal 1997, Messrs. Lavallee (chairman), Priddy and Schiller served on the
Compensation Committee. At the time of service each member was a non-employee
director. No member of the Compensation Committee of the Company serves as a
member of the board of directors or compensation committee of any entity that
has one or more executive officers serving as a member of the Company's Board of
Directors or Compensation Committee. Information regarding transactions between
the Company and Mr. Priddy required to be disclosed under the caption "--Certain
Relationships and Related Transactions" is also described below.
Mr. Priddy is a director and principal stockholder of the Company, and is the
beneficial owner of 9.9% of the common stock of Commonwealth. Mr. Priddy loaned
the Company $3,000,000 pursuant to a loan (the "Bridge Loan") in the aggregate
principal amount of $6,000,000 made pursuant to a Loan Agreement dated as of
February 19, 1997 among the Company and Mr. Priddy and Edmund H. Shea, Jr.
(collectively, the "Lender"), evidenced by a Convertible Promissory Note dated
as of February 19, 1997 made by the Company in favor of the Lender. Interest on
the indebtedness under the Bridge Loan accrued at a rate of 12% per annum
payable at maturity. All amounts owed to the Lender by the Company pursuant to
the Bridge Loan, including an aggregate of $130,000 representing the loan
origination fee, interest and the prepayment premium were paid in full as of
March 14, 1997 with a
24
<PAGE> 29
portion of the proceeds of a private placement.
On August 18, 1997, Mr. Priddy loaned the Company $500,000 in cash (the
"1997 Priddy Loan") pursuant to a Promissory Note (the "Promissory Note") and
Security Agreement each of even date therewith. The 1997 Priddy Loan, which was
secured by a junior lien on royalty payments to which the Company may be
entitled under a License Agreement with Becton Dickenson & Company, bore
interest at a rate of 12% per annum. Principal and interest under the Promissory
Note were due and payable on the earlier of (x) October 15, 1997, and (y) the
closing of a senior debt financing with a financial institution (other than
Heller Financial, Inc.). However, if the principal and interest were repaid
prior to October 15, 1997, the Company was required to pay a prepayment premium
equal to the difference between $10,000 and the amount of accrued and unpaid
interest under the Promissory Note. On September 30, 1997, the Company repaid in
full the principal, interest and prepayment premium due under the 1997 Priddy
Loan.
On February 3, 1998, Mr. Priddy loaned the Company $1,000,000 in cash (the
"1998 Priddy Loan") pursuant to a Promissory Note (the "1998 Promissory Note")
and Security Agreement each of even date therewith. The 1998 Priddy Loan, was
secured by a junior lien on royalty payments to which the Company may be
entitled under a License Agreement with Becton Dickenson & Company, and bore
interest at a rate of 12% per annum. Principal and interest under the 1998
Promissory Note were due and payable on the earlier of (x) April 2, 1998 and (y)
upon closing of a securities offering in which the Company received gross
proceeds of at least $3,000,000. However, if the principal and interest were
repaid prior to April 2, 1998, the Company was required to pay a prepayment
premium equal to the difference between $20,000 and the amount of accrued and
unpaid interest under the 1998 Promissory Note. The Company repaid the principal
amount in full on March 19, 1998, and paid the interest and prepayment premium
on April 2, 1998.
25
<PAGE> 30
EXECUTIVE COMPENSATION
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE: The Compensation Committee of the Board of Directors
is composed entirely of outside directors. The Committee is responsible for
setting and adjusting the base salaries of all corporate officers, establishing
cash incentive programs for officers, and the awarding of stock option grants to
officers and all other employees. The Committee is also responsible for the
review and approval of any employment related contracts.
COMPENSATION PHILOSOPHY: It is the goal of the Company to attract and retain
a strong executive management team. The Committee believes that there should be
a link between the performance of the Company, from both financial and
shareholder value standpoints, and executive compensation. Accordingly, base
salaries are set to conformity with compensation market requirements for
comparable sized companies, taking into account levels of responsibility and
office location. However, short-term cash incentive compensation and long-term
stock option incentive awards, are primarily related to the achievement of the
Company's financial performance goals and to the enhancement of shareholder
value. Internal and personal performance objectives play a lesser role in the
executive incentive package.
1997 EXECUTIVE COMPENSATION CHANGES: Effective April 1, 1997 the base salary
of Mr. Gombrich, then Chairman and Chief Executive Officer of the Company, was
increased from $175,000 to $225,000 per annum. The Committee approved the
increase on the basis of Mr. Gombrich's successful efforts in growing the
Company and the related increase in responsibilities brought on by that growth.
During 1997, Mr. Gombrich was entitled to a cash incentive of $63,500, of which
$52,500 was paid in 1997, in accordance with the terms of his employment
contract under which he is guaranteed a minimum annual cash incentive equal to
30% of his base compensation. Mr. Gombrich resigned his positions as Chairman
and CEO on January 30, 1998. Mr. Gombrich is continuing to receive his base
compensation while serving as a consultant to the Company.
Effective January 1, 1997 the Committee approved an increase in the base
salary of Mr. Burke from $125,000 to $140,000 per year. At the time of the
increase Mr. Burke was serving as President, Microbiology Division. The
Committee believed the increase was warranted due to the increase in the level
of management responsibility arising from the internal and acquisition related
growth of the Division. Effective June 1, 1997 Mr. Burke's base salary was
increased from $140,000 to $175,000 per year. The second increase was
commensurate with negotiations of an employment contract with Mr. Burke and his
appointment as Group President, with responsibility for sales, marketing, and
client services functions for the entire Company. The increase in base salary
was approved by the Committee primarily to cover the cost of living differences
caused by the requirement that Mr. Burke relocated from the Cleveland, Ohio
area, the base of the Microbiology Division, to the Chicago, Illinois Corporate
Headquarters. At the same time, the Committee also awarded Mr. Burke options to
purchase 100,000 shares of Common Stock, at an exercise price of $3.94 as a
long-term performance incentive. Mr. Burke received a cash incentive payment of
$17,325 in 1997 representing the achievement of 1996 divisional performance
objectives. No incentive payments were made to Mr. Burke under performance
objectives established for 1997. Mr. Burke resigned his position with the
Company, effective December 31, 1997. Mr. Burke will be paid through September
1998 at the rate of $175,000 per annum, and is entitled to certain other
transition payments in accordance with the terms of a separation agreement
negotiated by the Committee. Stock options granted to Mr. Burke expired on March
31, 1998
26
<PAGE> 31
Effective April 1, 1997 the Committee approved an increase in the base salary
of Mr. Prange from $125,000 to $160,000 per annum. Mr. Prange, the Chief
Financial Officer of the Company, was appointed to the additional position of
Chief Operating Officer, with responsibility for all manufacturing, operational,
and administrative activities of the Company. The Committee reviewed the current
compensation market and felt the increase was appropriate considering the
additional position, and its related responsibilities. The Committee also
awarded Mr. Prange options to purchase 50,000 shares of Common Stock at an
exercise price of $3.94 as a long-term performance incentive related to the new
position. Mr. Prange received a cash incentive payment of $7,812 in 1997
representing the achievement of certain personal performance goals for 1996.
During 1997 the Committee approved reductions in the number of shares
reserved for the 1990, 1992, and 1995 stock option plans and the establishment
of the 1997 stock option plan, subject to future stockholder approval. The
Committee believes that stock options are a significant long-term feature of
employee incentive plans and in attracting highly talented managers and staff to
join an organization the size of the Company. Accordingly, the Committee
approved employee option grants to purchase approximately 1,300,000 shares of
Common Stock. These grants include grants to recruit new employees, especially
those associated with the acquisition of the ESP business, those awarded for
superior achievement, and those related to Replacement Option Agreements. In
March of 1997, two executives surrendered their original options to purchase a
total of 400,000 shares of Common Stock. The Committee negotiated the
Replacement Option Agreements in order to make the shares underlying these
options available to complete the financing transaction related to the
acquisition of the ESP business. The Committee believes that the benefits to the
Company arising from the completion of the ESP acquisition were adequate
consideration for the benefit to the executives of receiving replacement option
with lower exercise prices.
The Committee is confident that the compensation and incentive policies and
practices followed by the Company are appropriate for the industry and the
compensation market in which the Company competes.
Submitted by the Compensation Committee of the Board of Directors:
Committee January 1, 1997 through May 22, 1997
Jack H. Halperin, Joseph W. Plandowski and Leonard M. Schiller
Committee from May 23, 1997 through December 31, 1997
Paul F. Lavallee, Robert L. Priddy, and Leonard M. Schiller
27
<PAGE> 32
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation
----------------------
Securities
Restricted Underlying All Other
Name and Principal Position Year Salary Bonus Stock Options Compensation
--------------------------- --------- --------- --------- --------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Peter P. Gombrich(1)(2) 1997 $212,500 $ 52,500 -- -- $ 6,000
Chairman and Chief 1996 175,000 87,154 -- -- --
Executive 1995(3) 103,125 -- -- -- --
Officer 1995 65,625 200,000
Michael D. Burke(4) 1997 169,226 17,325 -- 100,000 --
Group President 1996 125,734 24,000 10,000
Norman J. Pressman, Ph.D.(5) 1997 157,500 -- -- 200,000 $ 6,000
Senior Vice President, 1996 74,289 18,000 $156,250 51,593
Research and Chief Scientific
Officer
Leonard R. Prange(6) 1997 151,250 7,812 -- 200,000 --
Chief Financial Officer and 1996 31,204 -- -- -- --
Chief Operating Officer
Joyce L. Wallach, Esq. 1997 105,000 -- -- 55,000 --
General Counsel(7) 1996 6,394 -- -- -- --
--------------------
</TABLE>
(1) Mr. Gombrich became Acting Chief Executive Officer of the Company on April
21, 1995. He served as Chairman of the Board of Directors, Chief Executive
Officer and President from December 29, 1995 until January 30, 1998.
(2) Amounts shown as bonus represent $52,600 paid or accrued for 1996 in
accordance with Mr. Gombrich's Employment Agreement. The balance of
$34,654 represents amount paid in 1995 for prior periods.
28
<PAGE> 33
(3) On December 29, 1995, the Company changed its fiscal year end from
September 30 to December 31. The amount shown as salary represents the
twelve calendar months ended December 31, 1995.
(4) Mr. Burke joined the Company on December 29, 1995 and ceased to be an
employee of the Company on December 31, 1997.
(5) Dr. Pressman joined the Company in July 1996. Amounts shown as Other
Compensation represent relocation costs and related taxes reimbursed to
Dr. Pressman under the terms of his Employment Agreement.
(6) Mr. Prange joined the Company in September 1996.
(7) Ms. Wallach joined the Company in December 1996.
29
<PAGE> 34
OPTION GRANTS DURING THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
Number of % of Total Shares
Shares Underlying Options
Underlying Granted to Exercise Grant Date
Options Employees in Price Expiration Present
Name Granted Year(1) ($/Share) Date Value(2)
- ------------------------ ----------- ------------------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Peter P. Gombrich -- 0.0% -- -- --
Michael D. Burke 100,000 7.7% $ 3.94 5/23/07 $ 2.56
Norman J. Pressman, Ph.D 200,000 15.5% 3.94 5/23/07 2.56
Leonard R. Prance 200,000 15.5% 3.94 5/23/07 2.56
Joyce L. Wallach, Esq 55,000 4.2% 3.94 5/23/07 2.56
</TABLE>
- -----------------
(1) During the 1997 fiscal year, the Company granted to employees options to
purchase an aggregate of 1,736,398 shares of Common Stock. Each such option was
granted under the Company's 1997 Option Plan at an exercise price equal to the
last reported sale price of the Common Stock on the Nasdaq National Market on
the date of the grant. All such options are subject to stockholder approval of
the 1997 Option Plan on or prior to May 23, 1998. None of such options have been
exercisable since their grant. Such options will only become exercisable if the
1997 Option Plan is so approved. If the 1997 Option Plan is not approved by May
23, 1998, all options granted thereunder will become null and void. See
"Proposal No. 3 Approval of 1997 Stock Option Plan."
(2) the Company utilizes the Black-Scholes pricing model to determine the fair
value of options granted. The following assumptions were incorporated into
the model: risk-free rate - 6%, expected volatility - 20%, dividend yield -
0%, and time of exercise - 10 years. No adjustments were made for
non-tranferability of risk or risk of forfeiture.
AGGREGATE OPTION EXERCISES DURING THE YEAR ENDED DECEMBER 31, 1997
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
Number of Shares Underlying Value of Unexercised in-the-Money
Unexercised Options Options at December 31, 1997
at December 31, 1997 ---------------------------------
---------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Peter P. Gombrich 12,500 -- $ 2,250 --
Michael D. Burke 84,000 100,000 13,320 --
Norman J. Pressman, Ph.D.(1) -- 200,000 -- --
Leonard R. Prange -- 200,000 -- --
Joyce L. Wallach, Esq -- 55,000 -- --
</TABLE>
30
<PAGE> 35
10-YEAR OPTION/SAR REPRICINGS
<TABLE>
<CAPTION>
NUMBER OF LENGTH OF
SECURITIES ORIGINAL OPTION
UNDERLYING MARKET PRICE TERM
OPTIONS/ OF STOCK AT EXERCISE PRICE REMAINING AT
SARS TIME OF AT TIME OF NEW DATE OF
REPRICED OR REPRICING OR REPRICING OR EXERCISE REPRICING OR
NAME DATE AMENDED(#) AMENDMENT($) AMENDMENT($) PRICE($) AMENDMENT
---- ---- ----------- ------------- ------------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Leonard R. Prange 5/23/97 200,000 $ 3.94 $ 5.38 $ 3.94 9.3 years
Norman J. Pressman 5/23/97 200,000 3.94 6.25 3.94 9.1 years
Kenneth Miller 3/24/95 142,000 1.39 7.00 1.39 2.2 years
Mark L. Santor 3/24/95 28,961 1.39 7.00 1.39 1.8 years
</TABLE>
31
<PAGE> 36
EMPLOYMENT AGREEMENTS; SEPARATION AGREEMENTS
LAVALLEE COMPENSATION ARRANGEMENTS; PROFESSIONAL SERVICES AGREEMENT.
Effective January 30, 1998, the Board of Directors appointed Mr. Lavallee
Chairman of the Board, Chief Executive Officer and President of the Company,
approved his compensation arrangements for such services, and directed
management to memorialize such compensation arrangements in a professional
services agreement to be effective retroactive to January 30, 1998. The Company
and Mr. Lavallee are negotiating a professional services agreement to be entered
into between the Company and Gypsy Hill LLC, a professional services entity
through which Mr. Lavallee's services will be provided to the Company, which
will be effective retroactive to January 30, 1998. The agreement will include
the following provisions. Mr. Lavallee's compensation is $225,000 annually, and
he is eligible for an annual bonus of up to 30% thereof. The services can be
terminated by the Company upon 12 months' written notice, or by Mr. Lavallee
upon 30 days' written notice. Mr. Lavallee has been granted a non-qualified
stock option to purchase 1,500,000 shares of Common Stock at an initial exercise
price of $1.5625 (the "Initial Exercise Price") (the closing sales price per
share of Common Stock on the grant date, January 30, 1998). If in the Company's
first equity offering subsequent to the grant date, it sells Common Stock, or
securities convertible or exercisable for Common Stock, at a price per share
lower than the Initial Exercise Price, then the Initial Exercise Price shall be
reduced to equal such lower price per share. (In March 1998, the Company
completed such equity offering for shares of Common Stock and warrants
exercisable to purchase Common Stock at $0.75 per share, accordingly the Initial
Exercise Price has been reset to $0.75.) The option is exercisable as follows
(i) one-third of the underlying shares were immediately exercisable (subject to
a subsequent lock-up described below), and (ii) an additional one-third and the
final one-third of the underlying shares, respectively, will become exercisable
on the second and third anniversaries of the grant date. In order to make an
additional 1,500,000 shares of Common Stock available for sale in a private
placement by the Company in March 1998, Mr. Lavallee agreed not to exercise the
option until such time, if ever, as sufficient additional authorized but
unissued shares of Common Stock are available to reserve for issuance upon
exercise of the option. Mr. Lavallee will be reimbursed for reasonable traveling
expenses from South Dakota to Chicago and living expenses while in Chicago.
GOMBRICH EMPLOYMENT AND SEVERANCE AGREEMENT. Pursuant to an Employment
Agreement dated August 1, 1994 between Peter P. Gombrich and AccuMed, Inc. which
was assumed by the Company as a result of the merger of AccuMed, Inc. into the
Company (the "Gombrich Employment Agreement"), Mr. Gombrich served as Chairman
of the Board of Directors, Chief Executive Officer and President of the Company
from December 29, 1995 until he resigned on January 30, 1998. Pursuant to the
Gombrich Employment Agreement, Mr. Gombrich is entitled to receive (i) initial
annual compensation of $175,000 (in March 1997, the Compensation Committee
increased Mr. Gombrich's annual base salary to $225,000) and (ii) a minimum
annual cash bonus equal to 30% of base salary for the relevant year, and
additional bonuses as determined by the Board of Directors, at its discretion.
If the Company terminates Mr. Gombrich's employment without cause or Mr.
Gombrich terminates his employment for good reason or at any time after 180 days
following the date on which a Change of Control (as defined below) occurs, Mr.
Gombrich would be entitled to a lump-sum severance payment equal to three times
his annual salary. In addition, upon the occurrence of a Change of Control, any
stock options held by Mr. Gombrich would immediately vest and be fully
exercisable. For purposes of the Gombrich Employment Agreement, a Change of
Control shall be deemed to occur if: (i) any third party directly or indirectly
acquires 20% or more of the outstanding Common Stock, (ii) the Company engages
in a merger, consolidation or reorganization that results in holders of Common
Stock immediately prior to
32
<PAGE> 37
such transaction holding less than a majority of the voting power of the
resulting entity, (iii) the Company sells all or substantially all of its assets
or (iv) Mr. Gombrich's employment is terminated by the Company on a date within
90 days prior to the date on which a Change of Control occurs. The employment
term was to continue until August 1, 1999. Thereafter, the term would have been
automatically extended for additional one-year periods unless either party
delivers notice of election not to extend the employment at least 60 days prior
to the end of the then current term.
The Company is currently negotiating a separation agreement with Mr.
Gombrich. While negotiations are pending, Mr. Gombrich is serving as a
consultant to the Company for which he is receiving the same salary he was
entitled to under the Gombrich Employment Agreement, however, he is not
receiving benefits and is not entitled to a bonus.
PRESSMAN EMPLOYMENT AGREEMENT. Pursuant to the Employment Agreement dated
June 13, 1996 as amended July 16, 1996, between the Company and Dr. Pressman
(the "Pressman Employment Agreement"), Dr. Pressman will serve as President of
the Cytopathology Division and Senior Vice President of the Company for five
years beginning July 5, 1996. Dr. Pressman's annual salary is $157,500 and he is
eligible to receive annually (i) cash bonuses of up to 30% of such annual
salary, and (ii) incentive stock options to purchase up to 50,000 shares of
Common Stock based on the achievement of mutually agreed upon goals and
objectives. On July 8, 1996, Dr. Pressman was granted an option to purchase an
aggregate of 250,000 shares of Common Stock at an exercise price of $6.25 per
share (the last reported sale price of the Common Stock on the Nasdaq SmallCap
Market on the date on which Dr. Pressman's employment commenced) which was
immediately exercisable with respect to 50,000 shares and was to become
exercisable with respect to 50,000 additional shares on each of the first
through fourth anniversaries of the grant date. (Dr. Pressman surrendered such
options in February 1997 in order that the shares reserved for issuance upon
exercise thereof could be reserved for issuance in a private placement of the
Company's securities completed in March 1997.) Dr. Pressman was granted 25,000
shares of Common Stock on the date on which Dr. Pressman's employment commenced.
Such shares may not be transferred during the 18-month period following the date
of issuance and would be forfeited to the Company if Dr. Pressman terminates the
Pressman Employment Agreement during such period, other than due to a breach by
the Company. Dr. Pressman is entitled to borrow up to $85,200 from the Company
for the purpose of paying taxes due in connection with the grant of such shares.
Such loan shall be repaid without interest in installments to be mutually agreed
upon by Dr. Pressman and the Company. The Company may terminate Dr. Pressman's
employment for cause at any time upon written notice. The Company may terminate
his employment without cause upon six months' written notice, in which case Mr.
Pressman would be entitled to an amount equal to 12 months' salary as severance,
paid over 12 months. Dr. Pressman may terminate the Pressman Employment
Agreement for any reason upon six months' written notice.
Dr. Pressman was entitled to receive replacement options to purchase 250,000
shares of Common Stock in May 1997. However, he waived his right to receive
50,000 of such options and was granted options to purchase 200,000 shares of
Common Stock at such time.
BURKE EMPLOYMENT TERMS. Pursuant to an Employment Agreement dated as of May
23, 1997 (the "Burke Employment Agreement"), Mr. Burke served as Group President
and Corporate Vice President from May 23, 1997 through December 31, 1997
pursuant to the following compensation terms. (The Burke Employment Agreement
superseded the Burke Employment Letter (described below) pursuant to which Mr.
Burke served as a Senior Vice President of the Company and President of the
Microbiology Division from December 29, 1995 until May 23, 1997.) Mr. Burke's
annual salary was
33
<PAGE> 38
$175,000 and was eligible for a bonus of up to 25% of his annual salary. He
received stock options to purchase 100,000 shares of Common Stock, subject to
approval of the 1997 Option Plan, at an exercise price of $3.94 per share (which
were subject to stockholder approval of the 1997 Option Pan and expired
unexercisable on March_31, 1998).
Pursuant to the Employment Letter dated as of April 21, 1995 between Mr.
Burke and AccuMed, Inc. which was assumed by the Company pursuant to the merger
of AccuMed, Inc with and into the Company, Mr. Burke served as Senior Vice
President of the Company and President of the Microbiology Division from
December 29, 1995 until May 23, 1997. His initial annual base salary was
$120,000, and he was initially eligible to receive (i) quarterly bonuses of
$7,500 based on achievement of mutually agreed goals and (ii) certain sales
incentive bonuses. Upon consummation of the merger, Mr. Burke received 25,000
shares of Common Stock and nonqualified stock options to purchase an aggregate
of 75,000 shares at an exercise price of $1.13 per share (the exercise price
established in the agreement providing for the merger). On March 23, 1997, the
Compensation Committee modified the terms of Mr. Burke's Employment Letter to
(i) increase his annual base salary to $140,000 (retroactive to January 1,
1997), (ii) provide that Mr. Burke was eligible to receive annual cash bonuses
of up to 25% of his annual base salary based upon achievement of mutually agreed
goals (in lieu of the fixed bonus and sales incentives), and (iii) provide that,
if his employment is terminated without cause, he shall be entitled to receive
severance pay equal to 12 months' salary.
BURKE SEPARATION AGREEMENT. Pursuant to a Separation Agreement and General
Release between Mr. Burke and the Company entered into as of December 31, 1998,
effective on such date, Mr. Burke ceased to be an employee of the Company and
became a consultant to the Company. Mr. Burke will serve as a consultant through
September 30, 1998 and will receive the same salary and benefits to which he was
entitled under the Burke Employment Agreement. Mr. Burke will also receive four
weeks' of vacation pay and relocation benefits not to exceed $25,000.
PRANGE EMPLOYMENT AGREEMENT. Pursuant to the Employment Agreement dated as of
September 9, 1996 between the Company and Mr. Prange (the "Prange Employment
Agreement"), Mr. Prange serves as Chief Financial Officer and Corporate Vice
President of the Company at an initial annual salary of $125,000. In March 1997,
Mr. Prange was appointed Chief Operating Officer and the Compensation Committee
increased his annual base salary to $160,000. He is eligible to receive annual
cash bonuses of up to 25% of such annual salary. Upon joining the Company, Mr.
Prange was granted options to purchase an aggregate of 150,000 shares of Common
Stock at an exercise price of $5.38 per share (the fair market value of the
Common Stock on the grant date), which were immediately exercisable with respect
to 25,000, shares and were to become exercisable with respect to 25,000
additional shares on each of the first through fifth anniversaries of the grant
date. (Mr. Prange surrendered such options in February 1997 in order that the
shares reserved for issuance upon exercise thereof could be reserved for
issuance in a private placement of the Company's securities completed in March
1997.) In the event of a change of control of the Company or if Peter P.
Gombrich ceased to be Chairman of the Board and Chief Executive Officer, the
options were to become fully vested and immediately exercisable. The Company may
terminate Mr. Prange's employment for Cause (as defined in the Prange Employment
Agreement) at any time upon written notice. The Company may terminate his
employment without Cause upon written notice, in which case Mr. Prange would be
entitled to an amount of cash equal to 12 months' salary as severance, paid
semi-monthly over 12 months, and his options shall become fully vested and
immediately exercisable. Mr. Prange's employment shall be extended for
additional one year terms unless either party delivers written notice of
termination at least 60 days prior to the end of the then current period.
34
<PAGE> 39
WALLACH EMPLOYMENT LETTER. Pursuant to an Employment Letter dated as of
November 25, 1996, Ms. Wallach serves as General Counsel and Secretary of the
Company. Her annual salary is $105,000, and she is eligible for a bonus of up to
20% of her the current annual salary, based upon mutually agreed goals and
objectives. Ms. Wallach was to receive options to purchase 30,000 shares of
Common Stock upon acceptance of employment, subject to review and approval of
the Board of Directors. (Insufficient authorized but unissued shares of Common
Stock were available upon acceptance of employment, therefor, Ms. Wallach was
granted 30,000 stock options under the 1997 Option Plan, subject to approval of
such Plan by the stockholders at the Meeting, on May 23, 1997 (the date of
approval of the 1997 Option Plan by the Board of Directors) at an exercise price
of $3.94 per share (the fair market value under such Plan on the grant date).
PERFORMANCE GRAPH
The following graph depicts the cumulative total return on the Company's
Common Stock compared to the cumulative total return for the Nasdaq Composite
Index and the Nasdaq Biotechnology index. The graph assumes an investment of
$100 on March 23, 1993, when the Company's stock was first traded in a public
market. The Nasdaq Biotechnology Index is included as of October 29,1993, the
date the index was created. Reinvestment of dividends is assumed in all cases.
<TABLE>
<CAPTION>
(Fiscal Year Covered) 3/23/93 10/29/93 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
- --------------------- ------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
AccuMed International, Inc. 100 75 49 23 51 101 53
NASDAQ Composite 100 108 115 97 135 166 202
NASDAQ Biotechnology Index -- 75 74 82 154 153 153
</TABLE>
35
<PAGE> 40
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
COMMON STOCK
The table below sets forth certain information as of April 7, 1998
(the "Reference Date") with respect to the beneficial ownership of Common Stock
by (i) each person known by the Company to be the beneficial owner of more than
5% of the outstanding shares of Common Stock; (ii) each director and nominee;
(iii) the Named Executive Officers (as hereinafter defined) and (iv) executive
officers and directors as a group. On the Reference Date, there were 31,724,374
shares of Common Stock outstanding.
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER OF SHARES PERCENT OF SHARES
OF BENEFICIAL OWNER(1) BENEFICIALLY OWNED(2) BENEFICIALLY OWNED(2)
----------------------- --------------------- ---------------------
<S> <C> <C>
Bellingham Capital Industries 8,000,000 (3) 22.4%
P.O. Box 323
St. Helier Jersey, Chan. Islands
Robert L. Priddy 5,486,893 (4) 15.6%
Michael Falk 3,677,452 (5) 10.7%
c/o Commonwealth Associates
830 Third Avenue
New York, NY 10022
Commonwealth Associates 2,526,634 (6) 7.5%
830 third Avenue
New York, NY 10022
Peter P. Gombrich 2,478,927 (7) 7.8%
Edmund Shea . . . . . . . . . . . . . . . . . . . . . . . 1,845,334 (8) 5.6%
Harold S. Blue 353,333 (9) 1.1%
Leonard M. Schiller 312,159 (10) *
Jack H. Halperin . . . . . . . . . . . . . . . . . . . . . 80,388 (11) *
Leonard R. Prange 43,795 *
Michael D. Burke 29,729 *
Paul F. Lavallee 26,000 (12) *
Norman J. Pressman 25,000 *
Joseph W. Plandowski 25,000 (13) *
Joyce L. Wallach, Esq . . . . . . . . . . . . . . . . . 1,510 *
J. Donald Gaines -0- -0-
Mark Banister -0- -0-
All directors and executive officers as a group
(12 persons) 8,833,005 (14) 24.8%
</TABLE>
- ---------------------
36
<PAGE> 41
* Represents less than 1%.
(1) Except as otherwise noted, the address for each person is c/o AccuMed
International, Inc., 900 North Franklin Street, Suite 401, Chicago,
Illinois 60610.
(2) Unless otherwise noted, the Company believes that all persons named in the
table have sole voting and investment power with respect to all shares of
Common Stock listed as beneficially owned by them. A person is deemed to be
the beneficial holder of securities that can be acquired by such person
within 60 days from the Reference Date upon the exercise of warrants or
options or the conversion of convertible preferred stock. Each beneficial
owner's percentage ownership is determined by including shares, underlying
options or warrants which are exercisable or preferred stock which is
convertible by such person currently, or within 60 days following the
Reference Date, and excluding shares underlying options, warrants and
convertible preferred stock held by any other person.
(3) Includes 4,000,000 shares underlying warrants held by Bellingham Capital
Industries which are exercisable currently or within 60 days following the
Reference Date.
(4) Includes 1,937,378 shares underlying warrants and 1,416,183 shares
underlying Series A Convertible Preferred Stock held by Mr. Priddy that are
exercisable or convertible currently or within 60 days following the
Reference Date.
(5) Mr. Falk directly owns 435,555 shares of Common Stock and warrants to
purchase up to 715,263 shares of Common Stock. The number shown includes an
additional 1,801,079 shares, and 2,383,009 shares underlying warrants that
are exercisable currently or within 60 days following the Reference Date,
held by Commonwealth Associates (excluding securities held in Commonwealth
Associates' trading account). Mr. Falk is a control person of the corporate
general partner of Commonwealth Associates and may be deemed to be
beneficial owner of securities held by Commonwealth Associates. Mr. Falk
disclaims beneficial ownership of the securities held by Commonwealth
Associates except to the extent of his percentage ownership interests in
Commonwealth Associates. Certain shares and warrants held directly by Mr.
Falk were transferred to him by Commonwealth Associates.
(6) Includes 1,801,079 shares underlying warrants held by Commonwealth
Associates that are exercisable currently or within 60 days following the
Reference Date. Excludes securities held in Commonwealth Associates'
trading accounts.
(7) Includes 12,500 shares underlying stock options held by Mr. Gombrich that
are exercisable currently or within 60 days following the Reference Date.
Includes 312,461 shares held of record by Gwenda Gombrich, Mr. Gombrich's
wife, directly or as custodian for a minor child, as to which Mr. Gombrich
disclaims beneficial ownership.
(8) Includes 512,000 shares underlying convertible debt and 666,667 shares
underlying warrants held by Mr. Shea which are currently exercisable or
within 60 days following the Reference Date.
(9) Includes 20,000 shares underlying stock options and 333,333 shares
underlying warrants held by Mr. Blue that are exercisable currently or
within 60 days following the Reference Date.
(10) Includes 100,000 shares underlying stock options and warrants held by Mr.
Schiller that are exercisable currently or within 60 days following the
Reference Date.
(11) Includes 33,300 shares underlying stock options held by Mr. Halperin that
are exercisable currently or within 60 days following the Reference Date.
(12) Includes 25,000 shares underlying stock options held by Mr. Lavallee that
are exercisable currently or within 60 days following the Reference Date.
(13) Includes 25,000 shares underlying stock options or warrants held by Mr.
Plandowski that are exercisable currently or within 60 days following the
Reference Date.
(14) Includes 1,416,183 shares underlying Series A Convertible Preferred Stock
and 2,486,511 shares underlying warrants or options held by executive
officers and directors that are exercisable currently or within 60 days of
the Reference Date.
- -------------------------------------------------------------------------------
PREFERRED STOCK
The table below sets forth certain information as of April 22, 1998 (the
"Reference Date"), with respect to the beneficial ownership of the Series A
Convertible Preferred Stock by (i) each person known by the Company to be the
beneficial owner of more than 5% of the outstanding shares of Series A
Convertible Preferred Stock, (ii) the only director, nominee or Named Executive
Officer who owns any such stock, and (iii) executive officers and directors as a
group. On the Reference Date, there were 1,245,340 shares of Series A
Convertible Preferred stock outstanding.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF BENEFICIAL OWNER(1) AMOUNT AND NATURE OF BENEFICIAL
OWNERSHIP(2) PERCENT OF CLASS
- ---------------------------------------------------- ------------------------------- ----------------
<S> <C> <C>
Robert L. Priddy 354,046 28.4%
</TABLE>
37
<PAGE> 42
<TABLE>
<S> <C> <C>
Conzett Europa - Inv Limited 117,023 14.2%
William Hobe, 20 Reid Street
Hamilton, Bermuda hm11
Patrick H. & Lee M. Miller 118,015 9.5%
1266 W. Paces Ferry Road, NW
Atlanta, GA 30327
Theodore Stern Money Purchase Plan 94,412 7.6%
Legg Mason Wood Walker, Inc.
Gainsville, FL 32606
All executive officers and directors as a group (12 persons) 354,046 28.4%
</TABLE>
(1) Except as otherwise noted, the address for each person is c/o AccuMed
International, Inc., 900 North Franklin Street, Suite 401, Chicago, Illinois
60610
(2) Unless otherwise noted, the Company believes that all persons named in the
table have sole voting and investment power with respect to all shares of
Series A Convertible Preferred Stock listed as beneficially owned by them.
38
<PAGE> 43
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
COMMONWEALTH ASSOCIATES
Commonwealth Associates ("Commonwealth") is a principal stockholder of
the Company. On March 14, 1997, the Company consummated the private placement of
an aggregate of $8,500,000 in initial principal amount of 12% Convertible
Promissory Notes (the "Convertible Notes") and Warrants to purchase an aggregate
of 850,000 shares of Common Stock at $3.125 per share. Commonwealth acted as
placement agent in the private placement for which it received from the Company
(i) cash commissions of $595,000, (ii) five-year warrants to purchase 200,000
shares of Common Stock (issuable to Commonwealth and/or its designees at an
exercise price of $3.125 per share, and (iii) an accountable expense
reimbursement of $56,500 in cash.
On February 23, 1998, the Company consummated the exchange (the "Note
Exchange") of $5,275,000 in principal amount of the Convertible Notes together
with the right to receive an aggregate of $329,030 in accrued and unpaid
interest thereon for (i) 1,245,340 shares of Series A Convertible Preferred
Stock, and (ii) five-year warrants to purchase an aggregate of 1,245,340 shares
of Common Stock at an exercise price of $1.125 per share. Commonwealth served as
placement agent in the Note Exchange for which it received from the Company, (i)
50,000 shares of Common Stock in lieu of a cash retainer, (ii) $175,000 in cash,
and (iii) seven-year warrants to purchase an aggregate of 350,000 shares of
Common Stock (issuable to Commonwealth and/or its designees), at an exercise
price of $1.125 per share. In addition, the warrants to purchase 200,000 shares
of Common Stock issued to Commonwealth and its designees as compensation for the
original placement of the Convertible Notes, with an exercise price of $3.125
have been replaced with warrants having identical terms except that the exercise
price was reduced to $1.125 per share.
On March 19 and 23, 1998, the Company consummated a private placement
(the "March 1998 Placement") of 8,686,667 shares of Common Stock and seven-year
warrants to purchase an aggregate of 8,686,667 shares of Common Stock at an
exercise price of $0.75 per share. Commonwealth acted as placement agent in the
March 1998 Placement for which it received from the Company, (i) 133,333 shares
of Common Stock in lieu of a cash retainer, (ii) $251,750 in cash, (iii) and
seven-year warrants to purchase 670,534 shares of Common Stock at an exercise
price of $0.75 per share, and (iv) an accountable expense reimbursement $97,500
in cash. In addition, the warrants to purchase an aggregate of 350,000 shares of
Common Stock issued to Commonwealth and its designees as compensation for its
services in connection with the Note Exchange, at an exercise price of $1.125,
have been replaced with warrants having identical terms except that the exercise
price was reduced to $0.75 per share.
HAROLD S. BLUE
Mr. Blue, a director of the Company, served as a finder in the March
1998 Placement for which he received $124,875 in cash and seven-year warrants to
purchase an aggregate of 333,333 shares of Common Stock at an exercise price of
$0.75 per share.
ROBERT L. PRIDDY
39
<PAGE> 44
Mr. Priddy is a director and principal stockholder of the Company, and
is the beneficial owner of 9.9% of the common stock of Commonwealth. Mr. Priddy
loaned the Company $3,000,000 pursuant to a loan (the "Bridge Loan") in the
aggregate principal amount of $6,000,000 made pursuant to a Loan Agreement dated
as of February 19, 1997 among the Company and Mr. Priddy and Edmund H. Shea, Jr.
(collectively, the "Lender"), evidenced by a Convertible Promissory Note dated
as of February 19, 1997 made by the Company in favor of the Lender. Interest on
the indebtedness under the Bridge Loan accrued at a rate of 12% per annum
payable at maturity. All amounts owed to the Lender by the Company pursuant to
the Bridge Loan, including an aggregate of $130,000 representing the loan
origination fee, interest and the prepayment premium were paid in full as of
March 14, 1997 with a portion of the proceeds of a private placement.
On August 18, 1997, Mr. Priddy loaned the Company $500,000 in cash (the
"1997 Priddy Loan") pursuant to a Promissory Note (the "Promissory Note") and
Security Agreement each of even date therewith. The 1997 Priddy Loan, which was
secured by a junior lien on royalty payments to which the Company may be
entitled under a License Agreement with Becton Dickenson & Company, bore
interest at a rate of 12% per annum. Principal and interest under the Promissory
Note were due and payable on the earlier of (x) October 15, 1997, and (y) the
closing of a senior debt financing with a financial institution (other than
Heller Financial, Inc.). However, if the principal and interest were repaid
prior to October 15, 1997, the Company was required to pay a prepayment premium
equal to the difference between $10,000 and the amount of accrued and unpaid
interest under the Promissory Note. On September 30, 1997, the Company repaid in
full the principal, interest and prepayment premium due under the 1997 Priddy
Loan.
On February 3, 1998, Mr. Priddy loaned the Company $1,000,000 in cash
(the "1998 Priddy Loan") pursuant to a Promissory Note (the "1998 Promissory
Note") and Security Agreement each of even date therewith. The 1998 Priddy Loan,
was secured by a junior lien on royalty payments to which the Company may be
entitled under a License Agreement with Becton Dickenson & Company, and bore
interest at a rate of 12% per annum. Principal and interest under the 1998
Promissory Note were due and payable on the earlier of (x) April 2, 1998 and (y)
upon closing of a securities offering in which the Company received gross
proceeds of at least $3,000,000. However, if the principal and interest were
repaid prior to April 2, 1998, the Company was required to pay a prepayment
premium equal to the difference between $20,000 and the amount of accrued and
unpaid interest under the 1998 Promissory Note. The Company repaid the principal
amount in full on March 19, 1998, and paid the interest and prepayment premium
on April 2, 1998.
NORMAN J. PRESSMAN, PH.D
The Company loaned to Dr. Pressman, Senior Vice President, Research and
Chief Scientific Officer of the Company, an aggregate of $164,409.20 pursuant to
a Promissory Note in the original principal amount of $100,000 dated as of
October 25, 1996, and a Promissory Note in the original principal amount of
$64,409.20 dated as of December 30, 1996, respectively (collectively, the
"Pressman Notes"). Such loan was made in accordance with the provisions of the
Pressman Employment Agreement to cover relocation expenses and taxes in
connection with shares of Common Stock issued to Dr. Pressman upon commencement
of employment. The Pressman Notes bear no interest. Repayment of principal under
the Pressman Notes shall be made by withholding 50% of any bonus payments due to
Dr. Pressman under the terms of the Pressman Employment Agreement. Payments
shall continue until the principal is repaid in full, but in no event shall the
term of the Pressman Notes extend beyond five years from the respective dates on
which they were made, at which
40
<PAGE> 45
dates any amounts outstanding shall become immediately due and payable. Dr.
Pressman has pledged to the Company 25,000 shares of Common Stock to secure
$100,000 of such indebtedness, pursuant to a Stock Pledge Agreement dated as of
October 27, 1996. At April 1, 1998, the outstanding balance due under the
Pressman Notes was $113,410. See "Proposal No. 4 Election of
Directors--Executive Compensation--Employment Agreements; Separation
Agreements--Pressman Employment Agreement."
On May 13, 1997, Dr. Pressman loaned the Company $250,000 in cash (the
"Pressman Loan") pursuant to a Promissory Note and a Security and Pledge
Agreement, each of even date therewith. The Pressman Loan bore interest at the
rate of 10% per annum and principal and accrued and unpaid interest were due and
payable on the earlier of (i) November 13, 1997 and (ii) the closing of a senior
debt financing with a financial institution in which the Company received at
least $4,000,000 in gross loan proceeds. The Pressman Loan was secured by the
Pressman Notes and the Company's right to payment thereunder. On September 30,
1997, the Company repaid in full the principal and interest due under the
Pressman Loan.
INDEPENDENT ACCOUNTS FOR 1997;
CHANGE IN INDEPENDENT ACCOUNTANTS
KPMG Peat Marwick LLP ("KPMG") have been the Company's principal
accounts for the fiscal years ended December 31, 1996 and 1997 and have been
selected by the Board of Directors to serve as the principal accountants for the
1998 fiscal year. Representatives of KPMG are expected to be present at the
Meeting, will have the opportunity to make a statement if they so desire, and
are expected to be available to respond to appropriate questions.
Prior to January 15, 1996, Coopers & Lybrand LLP ("C&L") were the
principal accountants for the Company. On such date, C&L's appointment as
principal accountants was terminated and the Company engaged KPMG as the
Company's principal accountants. The Company's Board of Directors approved the
decision to change accountants. The opinions of C&L on the balance sheet of
AccuMed, Inc. as of December 31, 1994, and the statement of operations,
stockholders' deficit, and cash flows for the period from February 7, 1994
(inception) through December 31, 1994, the balance sheets of Alamar Biosciences,
Inc. as of September 30, 1995 and 1994, and the statements of operations,
stockholders' equity, and cash flows for each of the three years in the period
ended September 30, 1995, and the balance sheet of Sensititre/Alamar, the
Microbiology Division of AccuMed, Inc., as of December 31, 1994 and the
statements of net sales, cost of sales, and selling expenses for the eight
months ended December 31, 1994 and for each of the two years in the period ended
April 30, 1994 did not contain any adverse opinions or disclaimers of opinions,
or modifications as to uncertainty, audit scope or accounting principles, except
that for the opinions related to AccuMed, Inc. and Alamar Biosciences, Inc., C&L
modified its reports to include an uncertainty explanatory paragraph which
expressed substantial doubt as to AccuMed, Inc.'s and Alamar Biosciences, Inc.'s
ability to continue as a going concern. There were no disagreements between the
Company and C&L on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedures, which disagreements, if
not resolved to the satisfaction of C&L, would have caused it to make reference
to the subject matter of the disagreements in connection with its report.
OTHER MATTERS
The Company does not know of any matter other than those discussed in
the foregoing materials
41
<PAGE> 46
contemplated for action at the Meeting. Should any other matter be properly
brought before the Meeting, the holders of the proxies herein solicited will
vote thereon in their discretion.
ANNUAL REPORT
An Annual Report to Stockholders including audited financial statements
for the fiscal year ended December 31, 1997 is enclosed with this Proxy
Statement.
SUBMISSION OF STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
In accordance with Rule 14a-8 of the proxy rules of the Securities and
Exchange Commission, stockholders are advised that any proposal which a
stockholder wishes to have presented at the 1999 Annual Meeting of Stockholders
and included in the Company's proxy statement and form of proxy for such meeting
must be received by the Company, at its principal executive office, 900 North
Franklin Street, Suite 401, Chicago, Illinois 60610, Attn: General Counsel and
Secretary, no later than January 1, 1999.
By Order of the Board of Directors
JOYCE L. WALLACH,
General Counsel and Secretary
42
<PAGE> 47
APPENDIX A
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
OF
ACCUMED INTERNATIONAL, INC.
The undersigned, the President and Secretary of AccuMed International,
Inc., a Delaware corporation (the "Corporation"), do hereby certify as follows:
1. The Board of Directors of AccuMed International, Inc. duly adopted a
resolution, in accordance with Section 242 of the General Corporation Law of the
State of Delaware, to amend the Certificate of Incorporation of AccuMed
International, Inc. to increase the authorized shares of Common Stock from
50,000,000 shares to 100,000,000 shares, and declaring the advisability thereof.
2. At the Combined Annual and Special Meeting of Stockholders held on
May 19, 1998, dully called and held in accordance with the provisions of Section
222 of the General Corporation Law of the State of Delaware, a majority of the
shares of the outstanding stock entitled to vote thereon, and a majority of the
outstanding stock of each class entitled to vote thereon as a class, were voted
in favor of such amendment in accordance with Section 242 of the General
Corporation Law of the State of Delaware.
3. Article FOURTH of the Certificate of Incorporation of the Corporation
is hereby amended to read in its entirety as follows:
FOURTH. The total number of shares of all classes of capital
stock which the Corporation shall have authority to issue is
105,000,000 shares, divided into two classes as follows:
5,000,000 shares of Preferred Stock of the par value of $0.01
per share ("Preferred Stock"); and
1
<PAGE> 48
100,000,000 shares of Common Stock of the par value of $0.01
per share ("Common Stock").
The designations, powers, preferences and rights, and the
qualifications, limitations or restrictions of the above classes of stock are as
follows:
DIVISION I
PREFERRED STOCK
1. The board of directors is expressly authorized at any time, and from
time to time, to issue shares of Preferred Stock in one or more series, and for
such consideration as the board of directors may determine, with such voting
powers, full or limited but not to exceed one vote per share, or without voting
powers, and with such designations, preferences and relative, participating,
optional or other special rights, and qualifications, limitations or
restrictions thereof, as shall be stated in the resolution or resolutions
providing for the issue thereof, and as are not stated in this Certificate of
Incorporation, or any amendment thereto. All shares of any one series shall be
of equal rank and identical in all respects.
2. No dividend shall be paid or declared on any particular series of
Preferred Stock unless dividends shall be paid or declared pro rata on all
shares of Preferred Stock at the time outstanding of each other series which
ranks equally as to dividends with such particular series.
3. Unless and except to the extent otherwise required by law or
provided in the resolution or resolutions of the board of directors creating any
series of Preferred Stock pursuant to this Division I, the holders of the
Preferred Stock shall have no voting power with respect to any matter
whatsoever. In no event shall the Preferred Stock be entitled to more than one
vote in respect of each share of stock. Subject to the protective conditions or
restrictions of any outstanding series of Preferred Stock, any amendment to this
Certificate of Incorporation which shall increase or decrease the authorized
capital stock of any class or classes may be adopted by the affirmative vote of
the holders of a majority of the outstanding shares of the voting stock of the
Corporation.
4. Shares of Preferred Stock redeemed, converted, exchanged, purchased,
retired or surrendered to the Corporation, or which have been issued and
reacquired in any manner, shall, upon compliance with any applicable provisions
of the GCL, have
2
<PAGE> 49
the status of authorized and unissued shares of Preferred Stock and may be
reissued by the board of directors as part of the series of which they were
originally a part or may be reclassified into and reissued as part of a new
series or as a part of any other series, all subject to the protective
conditions or restrictions of any outstanding series of Preferred Stock.
DIVISION II
COMMON STOCK
1. DIVIDENDS. Subject to the preferential dividend rights, if any,
applicable to shares of the Preferred Stock and subject to applicable
requirements, if any, with respect to the setting aside of sums for
purchase, retirement or sinking funds for the Preferred Stock, the
holders of the Common Stock shall be entitled to receive to the extent
permitted by law, such dividends as may be declared from time to time
by the board of directors.
2. LIQUIDATION. In the event of the voluntary or involuntary
liquidation, dissolution, distribution of assets or winding up of the
Corporation, after distribution in full of the preferential amounts, if
any, to be distributed to the holders of shares of the Preferred Stock,
holders of the Common Stock shall be entitled to receive all the
remaining assets of the Corporation of whatever kind available for
distribution to stockholders ratably in proportion to the number of
shares of Common Stock held by them respectively.
3. VOTING RIGHTS. Except as may be otherwise required by law or this
Certificate of Incorporation, each holder of the Common Stock shall
have one vote in respect of each share of stock held by him or her of
record on the books of the Corporation on all matters voted upon by the
stockholders.
DIVISION III
ELIMINATION OF PREEMPTIVE
RIGHTS
No holder of stock of any class of the Corporation shall be entitled as
a matter of right to purchase or subscribe for any part of any unissued stock of
any class, or of any additional stock of any class or capital stock of the
Corporation, or of any bonds, certificates of indebtedness, debentures, or other
securities convertible into stock of the
3
<PAGE> 50
Corporation, now or hereafter authorized, but any such stock or other securities
convertible into stock may be issued and disposed of pursuant to resolution by
the board of directors to such persons, firms, corporations or associations and
upon such terms and for such consideration (not less than the par value or
stated value thereof) as the board of directors in the exercise of its
discretion may determine and as may be permitted by law without action by the
stockholders.
IN WITNESS WHEREOF, we have signed this Certificate as of May ___, 1998.
ACCUMED INTERNATIONAL, INC.
By:___________________________________________
Paul F. Lavallee, Chairman, President, and
Chief Executive Officer
ATTEST:
_____________________________
Joyce L. Wallach
General Counsel and Secretary
4
<PAGE> 51
APPENDIX B
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
OF
ACCUMED INTERNATIONAL, INC.
The undersigned, the President and Secretary of AccuMed International,
Inc., a Delaware corporation (the "Corporation"), do hereby certify as follows:
1. The Board of Directors of AccuMed International, Inc. duly adopted a
resolution, in accordance with Section 242 of the General Corporation Law of the
State of Delaware, to amend the Certificate of Incorporation of AccuMed
International, Inc. to effect a one-for-six reverse stock split on the Common
Stock and declaring the advisability thereof.
2. At the Combined Annual and Special Meeting of Stockholders held on
May 19, 1998, dully called and held in accordance with the provisions of Section
222 of the General Corporation Law of the State of Delaware, a majority of the
shares of the outstanding stock entitled to vote thereon, and a majority of the
outstanding stock of each class entitled to vote thereon as a class, were voted
in favor of such amendment in accordance with Section 242 of the General
Corporation Law of the State of Delaware.
3. Article FOURTH of the Certificate of Incorporation of the Corporation
is hereby amended to read in its entirety as follows:
FOURTH. The total number of shares of all classes of capital
stock which the Corporation shall have authority to issue is
55,000,000 shares, divided into two classes as follows:
5,000,000 shares of Preferred Stock of the par value of $0.01
per share ("Preferred Stock"); and
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<PAGE> 52
50,000,000 shares of Common Stock of the par value of $0.01
per share ("Common Stock").
The designations, powers, preferences and rights, and the
qualifications, limitations or restrictions of the above classes of stock are as
follows:
DIVISION I
PREFERRED STOCK
1. The board of directors is expressly authorized at any time, and from
time to time, to issue shares of Preferred Stock in one or more series, and for
such consideration as the board of directors may determine, with such voting
powers, full or limited but not to exceed one vote per share, or without voting
powers, and with such designations, preferences and relative, participating,
optional or other special rights, and qualifications, limitations or
restrictions thereof, as shall be stated in the resolution or resolutions
providing for the issue thereof, and as are not stated in this Certificate of
Incorporation, or any amendment thereto. All shares of any one series shall be
of equal rank and identical in all respects.
2. No dividend shall be paid or declared on any particular series of
Preferred Stock unless dividends shall be paid or declared pro rata on all
shares of Preferred Stock at the time outstanding of each other series which
ranks equally as to dividends with such particular series.
3. Unless and except to the extent otherwise required by law or
provided in the resolution or resolutions of the board of directors creating any
series of Preferred Stock pursuant to this Division I, the holders of the
Preferred Stock shall have no voting power with respect to any matter
whatsoever. In no event shall the Preferred Stock be entitled to more than one
vote in respect of each share of stock. Subject to the protective conditions or
restrictions of any outstanding series of Preferred Stock, any amendment to this
Certificate of Incorporation which shall increase or decrease the authorized
capital stock of any class or classes may be adopted by the affirmative vote of
the holders of a majority of the outstanding shares of the voting stock of the
Corporation.
4. Shares of Preferred Stock redeemed, converted, exchanged, purchased,
retired or surrendered to the Corporation, or which have been issued and
reacquired in any manner, shall, upon compliance with any applicable provisions
of the GCL, have
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<PAGE> 53
the status of authorized and unissued shares of Preferred Stock and may be
reissued by the board of directors as part of the series of which they were
originally a part or may be reclassified into and reissued as part of a new
series or as a part of any other series, all subject to the protective
conditions or restrictions of any outstanding series of Preferred Stock.
DIVISION II
COMMON STOCK
1. DIVIDENDS. Subject to the preferential dividend rights, if any,
applicable to shares of the Preferred Stock and subject to applicable
requirements, if any, with respect to the setting aside of sums for
purchase, retirement or sinking funds for the Preferred Stock, the
holders of the Common Stock shall be entitled to receive to the extent
permitted by law, such dividends as may be declared from time to time
by the board of directors.
2. LIQUIDATION. In the event of the voluntary or involuntary
liquidation, dissolution, distribution of assets or winding up of the
Corporation, after distribution in full of the preferential amounts, if
any, to be distributed to the holders of shares of the Preferred Stock,
holders of the Common Stock shall be entitled to receive all the
remaining assets of the Corporation of whatever kind available for
distribution to stockholders ratably in proportion to the number of
shares of Common Stock held by them respectively.
3. VOTING RIGHTS. Except as may be otherwise required by law or this
Certificate of Incorporation, each holder of the Common Stock shall
have one vote in respect of each share of stock held by him or her of
record on the books of the Corporation on all matters voted upon by the
stockholders.
4. REVERSE STOCK SPLIT. Simultaneously with the effective date of this
amendment (the "Effective Date"), each share of the Company's Common
Stock, par value $0.01 per share, issued and outstanding immediately
prior to the Effective Date (the "Old Common Stock") shall
automatically and without any action on the part of the holder thereof
be reclassified as and changed, pursuant to a reverse stock split, into
one-sixth of a share of the Company's outstanding Common Stock, par
value $0.01 per share (the "New Common Stock"), subject to the
treatment of fractional share interests as described below. Each holder
of a certificate or certificates which immediately prior to the
Effective Date represented outstanding shares of Old Common Stock (the
"Old Certificates," whether one or more) shall be entitled to receive
upon surrender of such Old Certificates to the Company's Transfer Agent
for cancellation, a certificate or certificates (the "New
Certificates," whether one or more) representing the number of whole
shares of the New Common Stock into which and for which the shares of
the Old Common Stock formerly represented by such Old Certificates so
surrendered, are reclassified under the terms hereof. From and after
the Effective Date, Old Certificates shall represent only the right to
receive New Certificates pursuant to the provisions hereof. No
certificates or scrip representing fractional share interests in New
Common Stock will be issued, and no such fractional share interest will
entitle the holder thereof to vote, or to any rights of a shareholder
of the Company. Any fraction of a share of New Common Stock to which
the holder would otherwise be entitled will be adjusted upward to the
nearest whole share. If more than one Old Certificate shall be
surrendered at one time for the account of the same stockholder, the
number of full shares of New Common Stock for which New Certificates
shall be issued shall be computed on the basis of the aggregate number
of shares represented by the Old Certificate so surrendered. In the
event that the Company's Transfer Agent determines that a holder of Old
Certificates has not tendered all his certificates for exchange, the
Transfer Agent shall carry forward any fractional share until all
certificates of that holder have been presented for exchange such that
payment for fractional shares to any one person shall not exceed the
value of one share. If any New Certificate is to be issued in a name
other than that in which the Old Certificates surrendered for exchange
are issued, the Old Certificates so surrendered shall be properly
endorsed and otherwise in proper form for transfer, and the person or
persons requesting such exchange shall affix any requisite stock
transfer tax stamps to the Old Certificates surrendered, or provide
funds for their purchase, or establish to the satisfaction of the
Transfer Agent that such taxes are not payable. From and after the
Effective Date the amount of capital represented by the shares of the
New Common Stock into which and for which the shares of the Old Common
Stock are reclassified under the terms hereof shall be the same as the
amount of capital represented by the shares of Old Common Stock so
reclassified, until thereafter reduced or increased in accordance with
applicable law.
DIVISION III
ELIMINATION OF PREEMPTIVE
RIGHTS
No holder of stock of any class of the Corporation shall be entitled as
a matter of right to purchase or subscribe for any part of any unissued stock of
any class, or of any additional stock of any class or capital stock of the
Corporation, or of any bonds, certificates of indebtedness, debentures, or other
securities convertible into stock of the
3
<PAGE> 54
Corporation, now or hereafter authorized, but any such stock or other securities
convertible into stock may be issued and disposed of pursuant to resolution by
the board of directors to such persons, firms, corporations or associations and
upon such terms and for such consideration (not less than the par value or
stated value thereof) as the board of directors in the exercise of its
discretion may determine and as may be permitted by law without action by the
stockholders.
IN WITNESS WHEREOF, we have signed this Certificate as of May ___, 1998.
ACCUMED INTERNATIONAL, INC.
By:_____________________________________
Paul F. Lavallee, Chairman,
President and Chief Executive
Officer
ATTEST:
_____________________________
Joyce L. Wallach
General Counsel and Secretary
4
<PAGE> 55
APPENDIX C
ACCUMED INTERNATIONAL, INC.
1997 STOCK OPTION PLAN
I. INTRODUCTION
1.1 PURPOSES. The purposes of the 1997 Stock Option Plan (the "Plan") of Accumed
International, Inc. (the "Company") are (i) to align the interests of the
Company's stockholders and the recipients of options under this Plan by
increasing the proprietary interest of such recipients in the Company's growth
and success, (ii) to advance the interests of the Company by attracting and
retaining officers, other key employees and consultants, and well-qualified
persons who are not officers or employees of the Company ("Non-Employee
Directors") for service as directors of the Company and (iii) to motivate such
persons to act in the long-term best interests of the Company's stockholders.
1.2 ADMINISTRATION. This Plan shall be administered by a committee (the
"Committee") designated by the Board of Directors of the Company (the "Board")
consisting of two or more members of the Board. Each member of the Committee
shall be a "Non-Employee Director" within the meaning of Rule 16b-3 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and an
"outside director" within the meaning of Section 162(m) of the Internal Revenue
Code of 1986, as amended (the "Code").
The Committee shall, subject to the terms of this Plan, select eligible
persons for participation in this Plan and shall determine the number of shares
of Common Stock subject to each option granted hereunder, the exercise price of
such option, the time and conditions of exercise of such option and all other
terms and conditions of such option, including, without limitation, the form of
the option agreement. The Committee shall, subject to the terms of this Plan,
interpret this Plan and the application thereof, establish rules and regulations
it deems necessary or desirable for the administration of this Plan and may
impose, incidental to the grant of an option, conditions with respect to the
grant, such as limiting competitive employment or other activities. All such
interpretations, rules, regulations and conditions shall be final, binding and
conclusive. The Committee may, in its sole discretion and for any reason at any
time take action such that any or all outstanding options shall become
exercisable in part or in full. Each option shall be evidenced by a written
agreement (an "Agreement") between the Company and the optionee setting forth
the terms and conditions of such option.
<PAGE> 56
The Committee may delegate some or all of its power and authority
hereunder to the Chief Executive Officer or other executive officer of the
Company as the Committee deems appropriate; provided, however, that the
Committee may not delegate its power and authority with regard to the selection
for participation in this Plan of an officer or other person subject to Section
16 of the Exchange Act or decisions concerning the timing, pricing or amount of
an option grant to such an officer or other person.
No member of the Board of Directors or Committee, and neither the Chief
Executive Officer nor other executive officer to whom the Committee delegates
any of its power and authority hereunder, shall be liable for any act, omission,
interpretation, construction or determination made in connection with this Plan
in good faith, and the members of the Board of Directors and the Committee and
the Chief Executive Officer or other executive officer shall be entitled to
indemnification and reimbursement by the Company in respect of any claim, loss,
damage or expense (including attorneys' fees) arising therefrom to the full
extent permitted by law and under any directors' and officers' liability
insurance that may be in effect from time to time.
A majority of the Committee shall constitute a quorum. The acts of the
Committee shall be either (i) acts of a majority of the members of the Committee
present at any meeting at which a quorum is present or (ii) acts approved in
writing by all of the members of the Committee without a meeting.
1.3 ELIGIBILITY. Participants in this Plan shall consist of such officers and
other employees or persons expected to become employees of the Company or its
subsidiaries and consultants who are providing bona fide services unrelated to
the offer or sale of securities in a capital raising transaction to the Company
or a Subsidiary from time to time (individually a "Subsidiary" and collectively
the "Subsidiaries") as the Committee in its sole discretion may select from time
to time. For purposes of this Plan, references to employment by the Company
shall also mean employment by a Subsidiary and engagement as a consultant to the
Company or a Subsidiary. The Committee's selection of a person to participate in
this Plan at any time shall not require the Committee to select such person to
participate in this Plan at any other time. Non-employee directors of the
Company shall be eligible to participate in this Plan in accordance with Section
III.
1.4 SHARES AVAILABLE. Subject to adjustment as provided in Section 4.7,
3,200,000 shares of the common stock, $0.01 par value, of the Company (the
"Common Stock"), shall be available for grants of options under this Plan,
reduced by the sum of the
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<PAGE> 57
aggregate number of shares of Common Stock which become subject to outstanding
options. To the extent that shares of Common Stock subject to an outstanding
option are not issued or delivered by reason of the expiration, termination,
cancellation or forfeiture of such option or by reason of the delivery or
withholding of shares of Common Stock to pay all or a portion of the exercise
price of such option, or to satisfy all or a portion of the tax withholding
obligations relating to such option, then such shares of Common Stock shall
again be available under this Plan.
Shares of Common Stock shall be made available from authorized and
unissued shares of Common Stock, or authorized and issued shares of Common Stock
reacquired and held as treasury shares or otherwise or a combination thereof.
To the extent required by Section 162(m) of the Code and the rules and
regulations thereunder, the maximum number of shares of Common Stock with
respect to which options may be granted during any calendar year to any person
shall be 150,000, subject to adjustment as provided in Section 4.7.
II. STOCK OPTIONS
2.1 GRANTS OF STOCK OPTIONS. The Committee may, in its discretion, grant options
to purchase shares of Common Stock to such eligible persons as may be selected
by the Committee. Each option, or portion thereof, that is not an incentive
stock option, shall be a non-qualified stock option. An incentive stock option
may not be granted to any person who is not an employee of the Company or any
subsidiary (as defined in Section 424 of the Code). An incentive stock option
shall mean an option to purchase shares of Common Stock that meets the
requirements of Section 422 of the Code, or any successor provision, which is
intended by the Committee to constitute an incentive stock option. Each
incentive stock option shall be granted within ten years of the effective date
of this Plan. To the extent that the aggregate Fair Market Value (determined as
of the date of grant) of shares of Common Stock with respect to which options
designated as incentive stock options are exercisable for the first time by a
participant during any calendar year (under this Plan or any other plan of the
Company, or any parent or subsidiary as defined in Section 424 of the Code)
exceeds the amount (currently $100,000) established by the Code, such options
shall constitute non-qualified stock options. "Fair Market Value" shall mean the
last reported sale price of a share of
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Common Stock on Nasdaq, or on such principal stock exchange on which the Common
Stock may then be listed, on the date as of which such value is being determined
or, if there shall be no reported sale price for such date, on the next
preceding date for which a sale was reported, in each case as such price is
officially reported by Nasdaq or such exchange, or if the Common Stock is not
then listed on an exchange or quoted on a system that reports last sale price,
then the average of the last reported bid and asked prices for the Common Stock
for such date as furnished by Nasdaq or a similar organization if Nasdaq is not
then reporting such information; provided, that if Fair Market Value for a
specified date cannot be determined as provided in the preceding clause, Fair
Market Value shall be determined by the Committee by whatever means or method as
the Committee, in the good faith exercise of its discretion, shall at such time
deem appropriate.
2.2 TERMS OF STOCK OPTIONS. Options shall be subject to the following terms and
conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of this Plan, as the Committee shall deem advisable:
(a) Number of Shares and Purchase Price. The number of shares of Common
Stock subject to an option and the purchase price per share of Common Stock
purchasable upon exercise of the option shall be determined by the Committee;
provided, however, that the purchase price per share of Common Stock purchasable
upon exercise of a non-qualified stock option shall not be less than the Fair
Market Value of a share of Common Stock on the date of grant of such option and
the purchase price per share of Common Stock purchasable upon exercise of an
incentive stock option shall not be less than 100% of the Fair Market Value of a
share of Common Stock on the date of grant of such option; provided further,
that if an incentive stock option shall be granted to any person who, at the
time such option is granted, owns capital stock possessing more than 10% of the
total combined voting power of all classes of capital stock of the Company (or
of any parent or subsidiary as defined in Section 424 of the Code) (a "Ten
Percent Holder"), the purchase price per share of Common Stock shall be the
price (currently 110% of Fair Market Value) required by the Code in order to
constitute an incentive stock option.
(b) Option Period and Exercisability. The period during which an option
may be exercised shall be determined by the Committee; provided, however, that
no incentive stock option shall be exercised later than ten years after its date
of grant;
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provided further, that if an incentive stock option shall be granted to a Ten
Percent Holder, such option shall not be exercised later than five years after
its date of grant. The Committee may, in its discretion, establish performance
measures or other criteria which shall be satisfied or met as a condition to the
grant of an option or to the exercisability of all or a portion of an option.
The Committee shall determine whether an option shall become exercisable in
cumulative or non-cumulative installments and in part or in full at any time. An
exercisable option, or portion thereof, may be exercised only with respect to
whole shares of Common Stock.
(c) Method of Exercise. An option may be exercised (i) by giving written
notice to the Company specifying the number of whole shares of Common Stock to
be purchased and accompanied by payment therefor in full (or arrangement made
for such payment to the Company's satisfaction) either (A) in cash, (B) by
delivery (either actual delivery or by attestation procedures established by the
Company) of previously owned whole shares of Common Stock (which the optionee
has held for at least six months prior to the delivery of such shares or which
the optionee purchased on the open market and in each case for which the
optionee has good title, free and clear of all liens and encumbrances) having an
aggregate Fair Market Value, determined as of the date of exercise, equal to the
aggregate purchase price payable by reason of such exercise, (C) by authorizing
the Company to withhold whole shares of Common Stock which would otherwise be
delivered upon exercise of the option having an aggregate Fair Market Value,
determined as of the date of exercise, equal to the aggregate purchase price
payable by reason of such exercise, (D) in cash by a broker-dealer acceptable to
the Company to whom the optionee has submitted an irrevocable notice of exercise
or (E) a combination of (A), (B) and (C), in each case to the extent set forth
in the Agreement relating to the option and (ii) by executing such documents as
the Company may reasonably request. The Company shall have sole discretion to
disapprove of an election pursuant to any of clauses (B)-(E). Any fraction of a
share of Common Stock which would be required to pay such purchase price shall
be disregarded and the remaining amount due shall be paid in cash by the
optionee. No certificate representing Common Stock shall be delivered until the
full purchase price therefor has been paid (or arrangement made for such payment
to the Company's satisfaction).
2.3 TERMINATION OF EMPLOYMENT.
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(a) Disability, Retirement and Death. Subject to paragraph (d) below and
unless otherwise specified in the Agreement relating to an option, if an
optionee's employment with the Company terminates by reason of Disability,
retirement on or after age 55 after a minimum of four years of employment with
the Company or death each option held by such optionee shall be exercisable only
to the extent that such option is exercisable on the effective date of such
optionee's termination of employment or date of death, as applicable, and may
thereafter be exercised by such optionee (or such optionee's executor,
administrator, legal representative, beneficiary or similar person) until and
including the earliest to occur of (i) the date which is one year (or such other
period as set forth in the Agreement relating to such option) after the
effective date of such optionee's termination of employment or date of death, as
applicable, and (ii) the expiration date of the term of such option. For
purposes of this Plan, "Disability" shall mean the inability of an optionee
substantially to perform such optionee's duties and responsibilities for a
continuous period of at least six months.
(b) Other Termination. Subject to paragraph (d) below and unless
otherwise specified in the Agreement relating to an option if an optionee's
employment with the Company terminates for any reason other than Disability,
retirement on or after age 55 after a minimum of four years of employment with
the Company or death, each option held by such optionee shall be exercisable
only to the extent that such option is exercisable on the effective date of such
optionee's termination of employment and may thereafter be exercised by such
optionee (or such optionee's legal representative or similar person) until and
including the earliest to occur of (i) the date which is 30 days after the
effective date of such optionee's termination of employment and (ii) the
expiration date of the term of such option.
(c) Death Following Termination of Employment. Subject to paragraph (d)
below and unless otherwise specified in the Agreement relating to an option, if
an optionee dies during the period set forth in Section 2.3(a) following
termination of employment by reason of Disability or retirement on or after age
55 after a minimum of four years of employment with the Company, or if an
optionee dies during the period set forth in Section 2.3(b) following
termination of employment for any other reason other than Disability or
retirement on or after age 55 after a minimum of four years of employment with
the Company (or such other period as set forth in the Agreement relating to an
option), each option held by such optionee shall be exercisable only to the
extent that such option is exercisable on the date of
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such optionee's death and may thereafter be exercised by such optionee's
executor, administrator, legal representative, beneficiary or similar person
until and including the earliest to occur of (i) the date which is one year (or
such other period as set forth in the Agreement relating to such option) after
the date of death and (ii) the expiration date of the term of such option.
(d) Termination of Employment - Incentive Stock Options.
(i) Unless otherwise specified in the Agreement relating to the
option, if the employment with the Company of a holder of an incentive stock
option terminates by reason of Permanent and Total Disability (as defined in
Section 22(e)(3) of the Code) or death, each incentive stock option held by such
optionee shall be exercisable only to the extent that such option is exercisable
on the effective date of such optionee's termination of employment by reason of
Permanent and Total Disability or date of death, as applicable, and may
thereafter be exercised by such optionee (or such optionee's executor,
administrator, legal representative, beneficiary or similar person) until and
including the earliest to occur of (1) the date which is one year (or such
shorter period as set forth in the Agreement relating to such option) after the
effective date of such optionee's termination of employment by reason of
Permanent and Total Disability or date of death, as applicable, and (2) the
expiration date of the term of such option.
(ii) If the employment with the Company of a holder of an
incentive stock option terminates for any reason other than Permanent and Total
Disability or death, each incentive stock option held by such optionee shall be
exercisable only to the extent such option is exercisable on the effective date
of such optionee's termination of employment, and may thereafter be exercised by
such holder (or such holder's legal representative or similar person) until and
including the earliest to occur of (1) the date which is 30 days after the
effective date of such optionee's termination of employment and (2) the
expiration date of the term of such option.
(iii) If the holder of an incentive stock option dies during the
period set forth in Section 2.3(d)(i) following termination of employment by
reason of Permanent and Total Disability (or such shorter period as set forth in
the Agreement relating to such option), or if the holder of an incentive stock
option dies during the period set forth in Section 2.3(d)(ii) following
termination of employment for any reason other than
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Permanent and Total Disability or death, each incentive stock option held by
such optionee shall be exercisable only to the extent such option is exercisable
on the date of the optionee's death and may thereafter be exercised by the
optionee's executor, administrator, legal representative, beneficiary or similar
person until and including the earliest to occur of (1) the date which is one
year (or such shorter period as set forth in the Agreement relating to such
option) after the date of death and (2) the expiration date of the term of such
option.
III. PROVISIONS RELATING TO NON-EMPLOYEE DIRECTORS
3.1 ELIGIBILITY. Each member of the Board of Directors of the Company who is not
an employee, either full-time or part-time, of the Company or a Subsidiary (a
"non-employee director") shall be granted options to purchase shares of Common
Stock in accordance with this Section III. All options granted under this
Section III shall constitute non-qualified stock options.
3.2 GRANTS OF STOCK OPTIONS. Each non-employee director shall be granted
non-qualified stock options annually as follows: on the date of each annual
meeting of stockholders of the Company, each person who is elected a
non-employee director at such meeting of stockholders shall be granted an option
to purchase 20,000 shares of Common Stock.
3.3 EXERCISE PRICE. Each option granted under this Section III shall have an
exercise price equal to the Fair Market Value per share of Common Stock on the
date of grant.
3.4 OPTION PERIOD AND EXERCISABILITY. Each option granted under this Section III
shall be fully exercisable on and after the sixth month anniversary of its date
of grant. Each option granted under this Section III shall expire five years
after its date of grant. An exercisable option, or portion thereof, may be
exercised in whole or in part only with respect to whole shares of Common Stock.
Options granted under this Section III shall be exercisable in accordance with
Section 2.2(c).
3.5 TERMINATION OF DIRECTORSHIP. Upon the termination of an optionee's service
as a non-employee director for any reason, all options granted to such
non-employee director under this Section III shall remain fully exercisable to
the extent exercisable on the date of such termination and thereafter may be
exercised by such holder (or such holder's executor, administrator, legal
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representative, beneficiary or similar person) during the remainder of the
respective terms of such options.
IV. GENERAL
4.1 EFFECTIVE DATE AND TERM OF PLAN. This Plan shall be submitted to the
stockholders of the Company for approval and, if approved by the stockholders,
shall become effective as of the date of approval by the Board. No option may be
exercised prior to the date of such stockholder approval. This Plan shall
terminate when shares of Common Stock are no longer available for the grant of
options, unless terminated earlier by the Board. Termination of this Plan shall
not affect the terms or conditions of any option granted prior to termination.
If this Plan is not approved by the stockholders of the Company,
this Plan and any options granted hereunder shall be null and void.
4.2 AMENDMENTS. The Board may amend this Plan as it shall deem advisable,
subject to any requirement of stockholder approval required by applicable law,
rule or regulation, including Section 162(m) of the Code; provided, however,
that no amendment shall be made without stockholder approval if such amendment
would (i) increase the maximum number of shares of Common Stock available under
this Plan (subject to Section 4.7) or (ii) effect any change inconsistent with
Section 422 of the Code. No amendment may impair the rights of a holder of an
outstanding option without the consent of such holder.
4.3 AGREEMENT. No option shall be valid until an Agreement is executed by the
Company and the optionee and, upon execution by the Company and the optionee and
delivery of the Agreement to the Company, such option shall be effective as of
the effective date set forth in the Agreement.
4.4 NON-TRANSFERABILITY. Unless otherwise specified in the Agreement relating to
an Option, no option hereunder shall be transferable other than by will or the
laws of descent and distribution or pursuant to beneficiary designation
procedures approved by the Company. Except to the extent permitted by the
foregoing sentence, each option may be exercised during the optionee's lifetime
only by the optionee or the optionee's legal representative or similar person.
Except as permitted by the second preceding sentence, no option hereunder shall
be sold, transferred, assigned, pledged, hypothecated, encumbered or
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otherwise disposed of (whether by operation of law or otherwise) or be subject
to execution, attachment or similar process. Upon any attempt to so sell,
transfer, assign, pledge, hypothecate, encumber or otherwise dispose of any
option hereunder, such option and all rights thereunder shall immediately become
null and void.
4.5 TAX WITHHOLDING. The Company shall have the right to require, prior to the
issuance or delivery of any shares of Common Stock, payment by the optionee of
any Federal, state, local or other taxes which may be required to be withheld or
paid in connection with an option hereunder. An Agreement may provide that (i)
the Company shall withhold whole shares of Common Stock which would otherwise be
delivered upon exercise of the option having an aggregate Fair Market Value
determined as of the date the obligation to withhold or pay taxes arises in
connection with the option (the "Tax Date") in the amount necessary to satisfy
any such obligation or (ii) the optionee may satisfy any such obligation by any
of the following means: (A) a cash payment to the Company, (B) delivery (either
actual delivery or by attestation procedures established by the Company) to the
Company of previously owned whole shares of Common Stock (which the optionee has
held for at least six months prior to the delivery of such shares or which the
optionee purchased on the open market and in each case for which the optionee
has good title, free and clear of all liens and encumbrances) having an
aggregate Fair Market Value determined as of the Tax Date, equal to the amount
necessary to satisfy any such obligation, (C) authorizing the Company to
withhold whole shares of Common Stock which would otherwise be delivered upon
exercise of the option having an aggregate Fair Market Value determined as of
the Tax Date, equal to the amount necessary to satisfy any such obligation, (D)
a cash payment by a broker-dealer acceptable to the Company to whom the optionee
has submitted an irrevocable notice of exercise or (E) any combination of (A),
(B) and (C), in each case to the extent set forth in the Agreement relating to
the option; provided, however, that the Company shall have sole discretion to
disapprove of an election pursuant to any of clauses (B)-(E). Any fraction of a
share of Common Stock which would be required to satisfy such an obligation
shall be disregarded and the remaining amount due shall be paid in cash by the
optionee.
4.6 RESTRICTIONS ON SHARES. Each option hereunder shall be subject to the
requirement that if at any time the Company determines that the listing,
registration or qualification of the shares of Common Stock subject to such
option upon any securities exchange or under any law, or the consent or approval
of any
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<PAGE> 65
governmental body, or the taking of any other action is necessary or desirable
as a condition of, or in connection with, the exercise of such option or the
delivery of shares thereunder, such option shall not be exercised and such
shares shall not be delivered unless such listing, registration, qualification,
consent, approval or other action shall have been effected or obtained, free of
any conditions not acceptable to the Company. The Company may require that
certificates evidencing shares of Common Stock delivered pursuant to any option
hereunder bear a legend indicating that the sale, transfer or other disposition
thereof by the holder is prohibited except in compliance with the Securities Act
of 1933, as amended, and the rules and regulations thereunder.
4.7 ADJUSTMENT. In the event of any stock split, stock dividend,
recapitalization, reorganization, merger, consolidation, combination, exchange
of shares, liquidation, spin-off or other similar change in capitalization or
event, or any distribution to holders of Common Stock other than a regular cash
dividend, the number and class of securities available under this Plan, the
number and class of securities subject to each outstanding option, the purchase
price per security, and the number and class of securities subject to each
option to be granted to non-employee directors pursuant to Article III shall be
appropriately adjusted by the Committee, such adjustments to be made in the case
of outstanding options without an increase in the aggregate purchase price. The
decision of the Committee regarding any such adjustment shall be final, binding
and conclusive. If any adjustment would result in a fractional security being
(a) available under this Plan, such fractional security shall be disregarded, or
(b) subject to an option under this Plan, the Company shall pay the optionee, in
connection with the first exercise of the option in whole or in part occurring
after such adjustment, an amount in cash determined by multiplying (A) the
fraction of such security (rounded to the nearest hundredth) by (B) the excess,
if any, of (x) the Fair Market Value on the exercise date over (y) the exercise
price of the option.
4.8 CHANGE IN CONTROL. Upon the dissolution or liquidation of the Company, or
upon a reorganization, merger or consolidation of the Company with one or more
corporations, or upon the sale of substantially all the assets or more than 50%
or the then outstanding shares of stock of the Company to another person or
entity, the Committee may provide in writing in connection with such transaction
for any or all of the following alternatives (separately or in combinations);
(i) for outstanding options to
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<PAGE> 66
become immediately exercisable and/or for other acceleration of the
exercisability of options outstanding under this Plan, and may in either case
provide that such options shall terminate unless exercised within a specified
time period; (ii) for the assumption of the options theretofore granted under
this Plan or the substitution for such options outstanding under this Plan of
new options to purchase shares of capital stock of a successor corporation, or a
parent or subsidiary thereof, with appropriate adjustments as to the number and
kind of shares and exercise prices; or (iii) for the continuance of this Plan by
a successor corporation in which event this Plan and the options theretofore
granted under this Plan shall continue in the manner and under the terms so
provided.
4.9 NO RIGHT OF PARTICIPATION OR EMPLOYMENT. No person shall have any right to
participate in this Plan. Neither this Plan nor any option granted hereunder
shall confer upon any person any right to continued employment by the Company,
any Subsidiary or any affiliate of the Company or affect in any manner the right
of the Company, any Subsidiary or any affiliate of the Company to terminate the
employment of any person at any time without liability hereunder.
4.10 RIGHTS AS STOCKHOLDER. No person shall have any rights as a stockholder of
the Company with respect to any shares of Common Stock which are subject to an
option hereunder until such person becomes a stockholder of record with respect
to such shares of Common Stock.
4.11 DESIGNATION OF BENEFICIARY. If permitted by the Company, an optionee may
file with the Committee a written designation of one or more persons as such
optionee's beneficiary or beneficiaries (both primary and contingent) in the
event of the optionee's death. To the extent an outstanding option granted
hereunder is exercisable, such beneficiary or beneficiaries shall be entitled to
exercise such option.
Each beneficiary designation shall become effective only when filed in writing
with the Committee during the optionee's lifetime on a form prescribed by the
Committee. The spouse of a married optionee domiciled in a community property
jurisdiction shall join in any designation of a beneficiary other than such
spouse. The filing with the Committee of a new beneficiary designation shall
cancel all previously filed beneficiary designations.
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<PAGE> 67
If an optionee fails to designate a beneficiary, or if all designated
beneficiaries of an optionee predecease the optionee, then each outstanding
option hereunder held by such optionee, to the extent exercisable, may be
exercised by such optionee's executor, administrator, legal representative or
similar person.
4.12 GOVERNING LAW. This Plan, each option hereunder and the
related Agreement, and all determinations made and actions taken
pursuant thereto, to the extent not otherwise governed by the Code or the laws
of the United States, shall be governed by the laws of the State of Delaware and
construed in accordance therewith without giving effect to principles of
conflicts of laws.
4.13 FOREIGN EMPLOYEES. Without amending this Plan, the Committee may grant
options to eligible persons who are foreign nationals on such terms and
conditions different from those specified in this Plan as may in the judgment of
the Committee be necessary or desirable to foster and promote achievement of the
purposes of this Plan and, in furtherance of such purposes the Committee may
make such modifications, amendments, procedures, subplans and the like as may be
necessary or advisable to comply with provisions of laws in other countries or
jurisdictions in which the Company or its Subsidiaries operates or has
employees.
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<PAGE> 68
AMENDMENT NO. 1 TO ACCUMED INTERNATIONAL, INC.
1997 STOCK OPTION PLAN
AMENDMENT NO. 1 dated March 16, 1998 (this "Amendment") to
the AccuMed International, Inc. (the "Company") 1997 Stock Option
Plan (the "Plan").
WHEREAS, the Plan currently provides for the grant of options to
purchase up to an aggregate of 3,200,000 shares of the Company's common stock,
par value of $.01 per share (the "Common Stock");
WHEREAS, on March 16, 1998, the Board of Directors adopted resolutions
amending the Plan to decrease the number of shares available under the Plan by
1,850,000 shares; thereby providing for the grant of options to purchase an
aggregate of 1,350,000 shares of the Common Stock;
NOW, THEREFORE, in accordance with Section 4.2 of the Plan, the Plan is
hereby amended as follows:
1. Section 4.1 of the Plan is hereby deleted in its entirety and the
following is inserted in lieu thereof:
1.4 SHARES AVAILABLE. Subject to adjustment as provided in
Section 4.7, 1,350,000 shares of the common stock, $0.01 par
value, of the Company (the "Common Stock"), shall be available
for grants of options under this Plan, reduced by the sum of the
aggregate number of shares of Common Stock which become subject
to outstanding options. To the extent that shares of Common Stock
subject to an outstanding option are not issued or delivered by
reason of the expiration, termination, cancellation or forfeiture
of such option or by reason of the delivery or withholding of
shares of Common Stock to pay all or a portion of the exercise
price of such option, or to satisfy all or a portion of the tax
withholding obligations relating to such option, then such shares
of Common Stock shall again be available under this Plan.
Shares of Common Stock shall be made available from
authorized and unissued shares of Common Stock, or authorized and
issued shares of Common Stock reacquired
<PAGE> 69
and held as treasury shares or otherwise or a combination
thereof.
To the extent required by Section 162(m) of the
Code and the rules and regulations thereunder, the
maximum number of shares of Common Stock with respect to which
options may be granted during any calendar year to any person
shall be 150,000, subject to adjustment as provided in Section
4.7.
All other provisions of the Plan shall remain in full force and effect.
<PAGE> 70
Accumed International, Inc.
900 North Franklin Street, Suite 401
Chicago, Illinois 60610
For the Combined Annual and Special Meeting
of Stockholder to be held May 19, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Paul F. Lavallec and Leonard R. Prange and each
of them, Proxies, each with full power of submission to vote all of the stock of
the undersigned at the Combined Annual and Special Meeting of Stockholders of
AccuMed International, Inc. (the "Company") to be held on Tuesday, May 19, 1998
at 10:00 a.m. (Chicago time) at the Company's offices located at 900 North
Franklin Street, Suite 401, Chicago, Illinois, and at any adjournment thereof,
in the manner indicated and in their discretion on any other business which may
properly come before said meeting, all in accordance with and as more fully
described in the Notice and accompanying Proxy Statement for said meeting,
receipt of which is hereby acknowledged. THE SHARES REPRESENTED BY THIS PROXY
SHALL BE VOTED AS SPECIFIED BELOW. IF NO SPECIFICATION IS MADE, THIS PROXY WILL
BE VOTED FOR APPROVAL EACH OF THE PROPOSALS LISTED ON THE REVERSE SIDE,
INCLUDING FOR THE ELECTION OF DIRECTOR NOMINEES.
4. Election of Mark Banister, Harold S. Blue, J. Donald Gaines, Jack H.
Halperin, Paul F. Lavallee, Robert L. Priddy and Leonard M. Schiller as
directors to serve until the next annual meeting of stockholders and until
their successors are duly elected and qualified.
-----------
SEE REVERSE
SIDE
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<PAGE> 71
1. Approval and adoption of an amendment to the Company's Certificate of
Incorporation to increase the number of authorized shares of Common
Stock from 50,000,000 shares to 100,000,000 shares.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
2. Approval and adoption of an amendment to the Company's Certificate of
Incorporation to effect a one-for-six reverse stock split of the
Common Stock.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. Approval and adoption of the 1997 Stock Option Plan.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
4. [ ] FOR THE ELECTION AS DIRECTORS OF ALL NOMINEES LISTED ON THE
REVERSE SIDE (except as to nominee(s), if any, listed in the
space provided below. To withhold authority for any individual
nominee(s), write the nominee's name in the spaces provided
below.
----------------------------------------------------------------
[ ] WITHHOLD AUTHORITY (as to all nominees).
5. In their discretion, the proxy holders are authorized to vote upon
such other business as may properly come before the meeting or any
adjournments thereof, if such business was not known to the Board of
Directors prior to the solicitation of this Proxy.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED IN FAVOR OF THE PROPOSALS
DESCRIBED ABOVE.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND MAY BE REVOKED
PRIOR TO ITS EXERCISE.
Dated: __________________________, 1998
Signature(s) _________________________________
Please sign exactly as your name appears hereon. Please date, sign and return
the Proxy promptly in the enclosed envelope. When signing as attorney, executor,
administrator, trustee or guardian, please give full title. If the signature is
for a corporation, please sign full corporate name by authorized officer. If the
shares are registered in more than one name, all holders must sign.
