<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. 1)
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 Section240.14a-11(c) or
Section240.14a-12
METRA BIOSYSTEMS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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<PAGE>
METRA BIOSYSTEMS, INC.
------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD DECEMBER 8, 1997
---------------------
The Annual Meeting of Shareholders (the "Annual Meeting") of Metra
Biosystems, Inc., a California corporation (the "Company"), will be held at the
principal executive offices of the Company, located at 265 North Whisman Road,
Mountain View, California, 94043 on Monday, December 8, 1997, at 10:00 a.m.,
local time, for the following purposes:
1. To elect five (5) directors of the Company to serve until the 1998
Annual Meeting of Shareholders or until their respective successors are
elected and qualified;
2. To approve an amendment to the 1995 Stock Option Plan to increase the
number of shares of Common Stock reserved for issuance thereunder by
300,000 shares;
3. To ratify the appointment of Ernst & Young LLP as the independent
auditors of the Company for the year ending June 30, 1998; and
4. To transact such other business as may properly come before the Annual
Meeting and any adjournment or postponement thereof.
The foregoing items of business, including the nominees for directors, are
more fully described in the Proxy Statement which is attached and made a part of
this Notice.
The Board of Directors has fixed the close of business on October 27, 1997
as the record date for determining the shareholders entitled to notice of and to
vote at the Annual Meeting and any adjournment or postponement thereof.
All shareholders are cordially invited to attend the Annual Meeting in
person. However, whether or not you expect to attend the Annual Meeting in
person, you are urged to mark, date, sign and return the enclosed proxy card as
promptly as possible in the postage-prepaid envelope provided to ensure your
representation and the presence of a quorum at the Annual Meeting. If you send
in your proxy card and then decide to attend the Annual Meeting to vote your
shares in person, you may still do so. Your proxy is revocable in accordance
with the procedures set forth in the Proxy Statement.
By Order of the Board of Directors,
[SIGNATURE]
Mark B. Weeks
ASSISTANT SECRETARY
Mountain View, California
November 10, 1997
IMPORTANT
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE SIGN AND RETURN THE
ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE IN THE ENCLOSED POSTAGE-PREPAID
ENVELOPE. IF A QUORUM IS NOT PRESENT AT THE MEETING, THE COMPANY WILL HAVE THE
ADDED EXPENSE OF RE-ISSUING THESE PROXY MATERIALS. IF YOU ATTEND THE MEETING
AND SO DESIRE, YOU MAY WITHDRAW YOUR PROXY AND VOTE IN PERSON.
THANK YOU FOR ACTING PROMPTLY.
<PAGE>
METRA BIOSYSTEMS
265 NORTH WHISMAN ROAD
MOUNTAIN VIEW, CALIFORNIA 94043
------------------------
PROXY STATEMENT
---------------------
GENERAL
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors (the "Board") of Metra Biosystems, Inc., a California
corporation (the "Company"), of proxies in the enclosed form for use in voting
at the Annual Meeting of Shareholders (the "Annual Meeting") to be held at the
principal executive offices of the Company, located at 265 North Whisman Road,
Mountain View, California, 94043 on Monday, December 8, 1997, at 10:00 a.m.,
local time, and any adjournment or postponement thereof.
This Proxy Statement, the enclosed proxy card and the Company's Annual
Report to Shareholders for the year ended June 30, 1997, including financial
statements, were first mailed to shareholders entitled to vote at the meeting on
or about November 10, 1997.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Company (Attention:
Kurt E. Amundson) a written notice of revocation or a duly executed proxy
bearing a later date, or by attending the Annual Meeting and voting in person.
RECORD DATE; VOTING SECURITIES
The close of business on October 27, 1997 has been fixed as the record date
(the "Record Date") for determining the holders of shares of Common Stock of the
Company entitled to notice of and to vote at the Annual Meeting. At the close of
business on the Record Date, the Company had approximately 12,634,145 shares of
Common Stock outstanding and held of record by approximately 141 shareholders.
VOTING AND SOLICITATION
Each outstanding share of Common Stock on the Record Date is entitled to one
vote on all matters and is entitled to cumulate votes for the election of
directors, subject to the conditions described below.
Votes cast by proxy or in person at the Annual Meeting will be tabulated by
the Company's transfer agent, which will act as Inspector of Elections. The
Inspector of Elections will also determine whether or not a quorum is present.
Except with respect to the election of directors and except in certain other
specific circumstances, the affirmative vote of a majority of shares represented
and voting at a duly held meeting at which a quorum is present (which shares
voting affirmatively also constitute at least a majority of the required quorum)
is required under California law for approval of proposals presented to
shareholders. In general, California law also provides that a quorum consists of
a majority of the shares entitled to vote, represented either in person or by
proxy. The Inspector of Elections will treat abstentions as shares that are
present and entitled to vote for purposes of determining the presence of a
quorum but as not voting for purposes of determining the approval of any matter
submitted to the shareholders for a vote. Thus, an abstention will have the same
effect as a vote against a particular proposal.
The shares represented by the proxies received, properly marked, dated,
signed and not revoked, will be voted at the Annual Meeting. Where such proxies
specify a choice with respect to any matter to be acted upon, the shares will be
voted in accordance with the specifications made. Any proxy in the enclosed form
which is returned but is not marked will be voted FOR the election of directors,
FOR amendment of the Company's 1995 Stock Option Plan, FOR ratification of the
appointment of the designated independent auditors and as the proxy holders deem
advisable on other matters that may come before the meeting, as the case may be
with respect to the item not marked. If a broker indicates on the enclosed proxy
or its
<PAGE>
substitute that it does not have discretionary authority as to certain shares to
vote on a particular matter ("broker non-votes"), those shares will be
considered as represented for purposes of determining a quorum, but will not be
considered as voting, with respect to that matter. While there is no definitive
specific statutory or case law authority in California concerning the proper
treatment of abstentions and broker non-votes, the Company believes that the
tabulation procedures to be followed by the Inspector of Elections are
consistent with the general statutory requirements in California concerning
voting of shares and determination of a quorum.
The solicitation of proxies will be conducted by mail and the Company will
bear all attendant costs. These costs will include the expense of preparing and
mailing proxy solicitation materials for the Annual Meeting and reimbursements
paid to brokerage firms and others for their expenses incurred in forwarding
solicitation materials regarding the Annual Meeting to beneficial owners of the
Company's Common Stock. The Company may conduct further solicitation personally,
telephonically or by facsimile through its officers, directors and employees,
none of whom will receive additional compensation for assisting with the
solicitation.
SHAREHOLDER PROPOSALS
Proposals of shareholders intended to be presented at the Company's 1998
Annual Meeting of Shareholders must be received by Kurt E. Amundson, Metra
Biosystems, Inc., 265 North Whisman Road, Mountain View, California 94043, no
later than July 16, 1998.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors,
executive officers and persons who own more than 10% of the Company's Common
Stock (collectively, "Reporting Persons") to file with the Securities and
Exchange Commission ("SEC") initial reports of ownership and changes in
ownership of the Company's Common Stock. Reporting Persons are required by SEC
regulations to furnish the Company with copies of all Section 16(a) reports they
file. To the Company's knowledge, based solely on its review of the copies of
such reports received or written representations from certain Reporting Persons
that no other reports were required, the Company believes that during its fiscal
year ended June 30, 1997 all Reporting Persons complied with all applicable
filing requirements, except as follows: (1) George W. Dunbar failed to file two
Reports on Form 4 with respect to his gifts of an aggregate of 10,600 shares of
Common Stock to various of his children during the period from November 1995
through January 1997, resulting in four transactions not being reported on a
timely basis, and (2) Ronald T. Steckel failed to file two Reports on Form 4
with respect to his gifts of an aggregate of 4,000 shares of Common Stock to
various of his children during the period from November 1995 through February
1996, resulting in four transactions not being reported on a timely basis. In
February 1997 Messrs. Dunbar and Steckel filed Forms 4 with respect to all of
such gifts.
2
<PAGE>
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information that has been provided to the
Company with respect to beneficial ownership of shares of the Company's Common
Stock as of September 30, 1997 for (i) each person who is known by the Company
to own beneficially more than 5% of the outstanding shares of Common Stock, (ii)
the Company's Chief Executive Officer and the Company's other four most highly
paid executive officers who earned in excess of $100,000 during the fiscal year
ended June 30, 1997 (collectively, the "Named Executive Officers"), (iii) each
director of the Company and (iv) all directors and executive officers of the
Company as a group.
<TABLE>
<CAPTION>
SHARES PERCENT OF SHARES
BENEFICIALLY BENEFICIALLY
NAME OWNED(1) OWNED(1)(2)
- --------------------------------------------------------------- ----------- -----------------
<S> <C> <C>
Asset Management Associates 1989, L.P(3)....................... 586,428 4.64
Craig C. Taylor(3)............................................. 586,428 4.64
Samuel Urcis(4)................................................ 84,948 *
Costa G. Sevastopoulos(5)...................................... 113,452 *
Leonard D. Schaeffer(6)........................................ 15,833 *
Smith Barney Holdings Inc.(7).................................. 2,264,717 17.93
Wisconsin Investment Board..................................... 1,170,000 9.26
Weiss, Peck & Greer, L.L.C..................................... 1,812,415 14.35
George W. Dunbar, Jr.(8)....................................... 177,212 1.40
Kurt E. Amundson(9)............................................ 35,345 *
Ronald T. Steckel(10).......................................... 48,977 *
Colette Z. Andrea(11).......................................... 19,000 *
John F. Coombes(12)............................................ 27,437 *
Claude D. Arnaud, M.D.(13)..................................... 52,046 *
John L. Castello(14)........................................... 15,833 *
Mary Lake Polan, M.D., Ph.D.(15)............................... 20,794 *
All directors and executive officers as a group (13
persons)(3)-(6)(8)-(15)...................................... 1,197,305 9.33%
</TABLE>
- ------------------------
* Less than 1%.
(1) The persons named in this table have sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by them,
subject to community property laws where applicable and except as indicated
in the other footnotes to this table.
(2) Calculations of percentage of beneficial ownership assume the exercise by
only the respective named shareholder of all options for the purchase of
Common Stock held by such shareholder which are exercisable within 60 days
of September 30, 1997.
(3) Includes 5,000 shares issuable upon exercise of options exercisable within
60 days of September 30, 1997 and 581,428 shares held by Asset Management
Associates 1989, L.P. Because Mr. Taylor is a general partner of AMC
Partners 89, L.P., the general partner of Asset Management Associates 1989,
L.P., he may be deemed to be a beneficial owner of such shares. Mr. Taylor
disclaims beneficial ownership of such shares except to the extent of his
interest in such shares arising from his interest in AMC Partners 89, L.P.
3
<PAGE>
(4) Includes 5,000 shares issuable upon exercise of options exercisable within
60 days of September 30, 1997 and 79,948 shares held by Alpha Venture
Partners III. Because Mr. Urcis is a general partner of Alpha Management
Partners, the general partner of Alpha Venture Partners III, he may be
deemed to be a beneficial owner of such shares. Mr. Urcis disclaims
beneficial ownership of such shares except to the extent of his interest in
such shares arising from his interest in Alpha Management Partners.
(5) Includes 5,000 shares issuable upon exercise of options exercisable within
60 days of September 30, 1997, 25,899 shares held by Delphi Ventures, L.P.,
84 shares held by Delphi BioInvestments, L.P., 285 shares held by Delphi
BioInvestments II, L.P., and 55,678 shares held by Delphi Ventures II, L.P.
Because Dr. Sevastopoulos is a limited partner of Delphi's Management
Partners and Delphi Management Partners II, which are general partners of
the above limited partnerships, he may be deemed to be a beneficial owner
of such shares. Dr. Sevastopoulos disclaims beneficial ownership of such
shares except to the extent of his interest in such shares arising from his
interest in Delphi Management Partners and Delphi Management Partners II.
(6) Includes 9,965 shares issuable upon exercise of options exercisable within
60 days of September 30, 1997.
(7) Smith Barney Holdings Inc. shares with Travelers Group Inc. voting and
investment power with respect to all shares of Common Stock shown as
beneficially owned by Smith Barney Holdings Inc.
(8) Includes 8,600 shares held by his children and 45,306 shares issuable upon
exercise of options exercisable within 60 days of September 30, 1997.
(9) Includes 31,246 shares issuable upon exercise of options exercisable within
60 days of September 30, 1997.
(10) Includes 4,000 shares held by his children and 27,338 shares issuable upon
exercise of options exercisable within 60 days of September 30, 1997.
(11) Ms. Andrea left the Company in September 1996.
(12) Includes 24,013 shares issuable upon exercise of options exercisable
within 60 days of September 30, 1997.
(13) Includes 10,380 shares issuable upon exercise of options exercisable
within 60 days of September 30, 1997.
(14) Includes 15,833 shares issuable upon exercise of options exercisable
within 60 days of September 30, 1997.
(15) Includes 1,665 shares held by her children and 19,129 shares issuable upon
exercise of options exercisable within 60 days of September 30, 1997.
4
<PAGE>
EXECUTIVE COMPENSATION
The following table shows the compensation received in the fiscal year ended
June 30, 1997 by the Company's Chief Executive Officer and the Named Executive
Officers, and the compensation received by certain of such individuals for the
Company's prior three fiscal years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
--------------------------------
AWARDS
-------------- PAYOUTS
ANNUAL COMPENSATION SECURITIES ----------------
FISCAL --------------------- UNDERLYING ALL OTHER
NAME & PRINCIPAL POSITION YEAR SALARY BONUS(1) OPTIONS/SARS* COMPENSATION(2)
- ------------------------------------------------ ----------- ---------- --------- -------------- ----------------
<S> <C> <C> <C> <C> <C>
George W. Dunbar, Jr. .......................... 1997 $ 225,000 -- 145,000 $ 735
President and Chief Executive Officer 1996 $ 200,081 $ 40,000 170,000 $ 1,894
1995 $ 179,583 -- -- $ 30,170
Kurt E. Amundson ............................... 1997 $ 171,200 -- 100,000 $ 720
Vice President and Chief Financial Officer 1996 $ 71,913 $ 20,000 75,000 $ 245
Ronald T. Steckel .............................. 1997 $ 195,000 -- 87,500 $ 735
Senior Vice President 1996 $ 165,081 $ 10,000 62,500 $ 15,121
1995 $ 149,011 -- -- $ 27,743
Colette Z. Andrea .............................. 1997 $ 132,465 -- -- $ 37,987
Vice President, Marketing and Sales(3) 1996 $ 180,081 $ 10,000 62,500 $ 18,018
1995 $ 145,833 -- -- $ 60,144
John F. Coombes ................................ 1997 $ 145,868 -- 89,000 $ 12,828
Vice President, International 1996 $ 112,212 -- 9,000 $ 14,829
1995 $ 93,228 -- 8,333 $ 10,776
</TABLE>
- ------------------------
* Includes options canceled as a result of repricing. See "Option/SAR Grants in
Last Fiscal Year," and "Ten Year Option/SAR Repricings."
(1) These bonuses were paid based upon the individual's performance in the prior
fiscal year or as a signing bonus paid upon the commencement of employment.
(2) Amounts reported consist of: (i) forgiveness of amounts due under loans from
the Company to assist in the purchase of homes in connection with
relocations (Mr. Dunbar, Mr. Steckel and Ms. Andrea, only) (ii) premiums
paid on life and accidental death and dismemberment insurance policies for
the officer's benefit, and (iii) car allowance.
(3) Ms. Andrea left the Company in September 1996.
Mr. Dunbar has entered into an agreement with the Company dated May 24, 1991
which provides that in the event his employment with the Company is terminated
by the Company without cause, he will be entitled to receive his monthly base
salary and benefits for each month he is unable to find suitable employment
while seeking such employment in good faith, but in no event will such payments
continue for less than three months nor more than twelve months.
Mr. Amundson has entered into an agreement with the Company dated January 2,
1996 which provides that in the event that his employment with the Company is
terminated by the Company without cause, he will be entitled to receive his
monthly base salary and benefits for each month he is unable to find suitable
employment while seeking such employment in good faith, but in no event will
such payments continue for more than six months.
5
<PAGE>
Mr. Steckel has entered into an agreement with the Company dated February 1,
1992 which provides that in the event that his employment with the Company is
terminated by the Company without cause, he will be entitled to receive his
monthly base salary and benefits for each month he is unable to find suitable
employment while seeking such employment in good faith, but in no event will
such payments continue for more than six months.
Mr. Coombes has entered into an agreement with the Company dated November 8,
1993 which provides that in the event that his employment with the Company is
terminated by the Company without cause, he will be entitled to receive his
monthly base salary and benefits for six months.
During the last fiscal year the Company entered into Change of Control
Agreements with each of Messrs. Dunbar, Amundson, Steckel and Coombes (the
"Change of Control Agreements"). The Change of Control Agreements provide that,
in the event of (1) a merger or consolidation that results in more than 50% of
the voting stock of the Company or its successor changing ownership (whether or
not approved by the Board) and in a change in the composition of the Board of
Directors as a result of which fewer than a majority of the incumbent directors
remain directors after the event; (2) the sale of all or substantially all of
the Company's assets; or (3) approval of a plan of complete liquidation of the
Company (a "Change of Control"), all restricted stock and stock options
outstanding on the date of the Change of Control (the "Shares") will immediately
vest to the extent of 50% of the Shares that have not otherwise vested as of the
date of the Change of Control and be freely transferable or exercisable at the
completion of the transaction, whether or not the officer's employment is
terminated by the Company or a successor corporation. Assuming that an officer
remains employed by the Company (or a successor corporation) after the Change of
Control, the remaining 50% of the Shares will vest as follows: (1) 25% of the
Shares 12 months after the date of the Change of Control and (2) 25% of the
Shares 18 months after the date of the Change of Control. If an officer is
involuntarily terminated by the Company following a Change of Control and prior
to the second anniversary of the Change of Control, such officer will receive
salary continuation and continuation of health and life insurance benefits for a
period of 12 months, pro-rated payment of such officer's target bonus for the
year and immediate and complete acceleration of vesting of the Shares.
6
<PAGE>
The following table provides certain information with respect to stock
options granted to the Named Executive Officers in the last fiscal year. In
addition, as required by Securities and Exchange Commission rules, the table
sets forth the hypothetical gains that would exist for the options based on
assumed rates of annual compound stock price appreciation during the option
term.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1) POTENTIAL REALIZABLE
---------------------------------------------------------- VALUE AT ASSUMED
PERCENT OF TOTAL ANNUAL RATES OF
NUMBER OF OPTIONS/SARS EXERCISE STOCK PRICE
SECURITIES GRANTED TO OR BASE APPRECIATION FOR
UNDERLYING EMPLOYEES IN PRICE OPTION TERM(2)
OPTIONS/SARS (%) PER SHARE EXPIRATION --------------------
NAME GRANTED(#) FISCAL YEAR ($/SH) DATE 5%($) 10%($)
- --------------------------------- ------------- ----------------- ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
George W. Dunbar, Jr............. 95,000(3) 8.79 $ 5.00 08/2006 298,725 757,028
50,000 4.63 $ 5.00 08/2006 157,224 398,436
Ronald T. Steckel................ 37,500(3) 3.47 $ 5.00 08/2006 117,918 298,827
50,000 4.63 $ 5.00 08/2006 157,224 398,436
Kurt E. Amundson................. 75,000(3) 6.94 $ 5.00 08/2006 235,835 597,653
25,000 2.31 $ 5.00 08/2006 78,612 199,218
Colette Z. Andrea................ -- -- -- -- -- --
John F. Coombes.................. 9,000(3) 0.83 $ 5.00 08/2006 28,300 71,718
20,000 1.85 $ 5.00 08/2006 62,889 159,374
60,000 5.55 $ 4.50 05/2007 169,802 430,310
</TABLE>
- ------------------------
(1) Options vest ratably on an annual basis over four years. The options have a
ten-year term, but are subject to earlier termination in connection with
termination of employment.
(2) The potential realizable value portion of the foregoing table illustrates
value that might be realized upon exercise of the options immediately prior
to the expiration of their terms, assuming the specified compounded rates of
appreciation of the market price per share from the date of grant to the end
of the option term. Actual gains, if any, on stock option exercise are
dependent upon a number of factors, including the future performance of the
Common Stock and the timing of option exercises, as well as the optionee's
continued employment through the vesting period. There can be no assurance
that the amounts reflected in this table will be achieved.
(3) Options issued in replacement of options canceled in connection with the
Company's August 1996 repricing. See "Ten-Year Option/SAR Repricing."
7
<PAGE>
The following table sets forth certain information with respect to stock
options exercised by the Named Executive Officers during the last fiscal year.
In addition, the table sets forth the number of shares covered by stock options
as of June 30, 1997, and the value of "in-the-money" stock options, which
represents the positive spread between the exercise price of a stock option and
the market price of the shares subject to such option on June 30, 1997.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
UNEXERCISED UNEXERCISED
OPTIONS/SARS AT IN-THE-MONEY
SHARES FISCAL YEAR END OPTIONS/SARS AT
ACQUIRED ON VALUE (#) EXERCISABLE/ FISCAL YEAR END ($)
NAME EXERCISE (#) REALIZED($) UNEXERCISABLE EXERCISABLE/UNEXERCISABLE(1)
- ----------------------------------------- --------------- --------------- ---------------- --------------------------
<S> <C> <C> <C> <C>
George W. Dunbar, Jr..................... -- -- 30,206/114,794 -- / --
Kurt E. Amundson......................... -- -- 20,832/79,168 -- / --
Ronald T. Steckel........................ -- -- 18,228/69,272 -- / --
Colette Z. Andrea........................ -- -- -- / -- -- / --
John F. Coombes.......................... -- -- 15,858/86,085 38,408/30,418
</TABLE>
- ------------------------
(1) Based on the $4.8125 per share closing price of the Company's Common Stock
on The Nasdaq National Market on June 30, 1997, less the exercise prices.
8
<PAGE>
The following table sets forth certain information as of September 30, 1997
with respect to the repricing of certain stock options held by the Company's
executive officers.
TEN-YEAR OPTION/SAR REPRICINGS
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES MARKET LENGTH OF
UNDERLYING PRICE OF EXERCISE ORIGINAL
OPTIONS/ STOCK AT PRICE AT OPTION TERM
SARS TIME OF TIME OF NEW REMAINING AT
REPRICED OR REPRICING OR REPRICING OR EXERCISE DATE OF
AMENDED AMENDMENT AMENDMENT PRICE REPRICING OR
NAME DATE (#) ($) ($) ($) AMENDMENT
- --------------------------------------------------- --------- ----------- ------------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
George W. Dunbar, Jr.(1)(2) ....................... 1/31/96 75,000 15.25 17.25 15.25 47 mos.
President and CEO 8/21/96 20,000 5.00 14.50 5.00 35 mos.
8/21/96 75,000 5.00 15.25 5.00 41 mos.
Kurt E. Amundson(2) ............................... 8/21/96 75,000 5.00 14.75 5.00 41 mos.
Vice President and CFO
Ronald T. Steckel(1)(2) ........................... 1/31/96 25,000 15.25 17.25 15.25 47 mos.
Senior Vice President 8/21/96 12,500 5.00 14.50 5.00 35 mos.
8/21/96 25,000 5.00 15.25 5.00 41 mos.
Colette Z. Andrea(1) .............................. 1/31/96 25,000 15.25 17.25 15.25 47 mos.
Vice President, Marketing and Sales
John F. Coombes(1)(2) ............................. 8/21/96 5,000 5.00 14.50 5.00 35 mos.
Vice President, International 8/21/96 4,000 5.00 14.75 5.00 41 mos.
</TABLE>
- ------------------------
(1) In order to reincentivize certain of its employees, in January 1996 the
Board of Directors approved an option exchange for all employees holding
options with an exercise price in excess of $15.25 entitling each such
employee to cancel their outstanding options in exchange for new options
with an exercise price of $15.25 per share, the fair market value of the
Company's stock on the date of Board approval. The new options were subject
to a new four-year vesting schedule.
(2) In order to reincentivize its employees, in August 1996 the Board of
Directors approved an option exchange for all options granted during the
fiscal year entitling each employee holding such an option to cancel such
option in exchange for new options with an exercise price of $5.00 per
share, the fair market value of the Company's stock on the date of Board
approval. The new options are subject to a new four-year vesting schedule.
The exchange was effective August 21, 1996.
9
<PAGE>
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN ANY OF THE COMPANY'S
FILINGS UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES EXCHANGE ACT OF 1934
THAT MIGHT INCORPORATE FUTURE FILINGS, INCLUDING THIS PROXY STATEMENT, IN WHOLE
OR IN PART, THE FOLLOWING REPORT AND THE STOCK PERFORMANCE GRAPH WHICH FOLLOWS
SHALL NOT BE DEEMED TO BE INCORPORATED BY REFERENCE INTO ANY SUCH FILINGS.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The following is a report of the Compensation Committee of the Board of
Directors (the "Committee") describing the compensation policies applicable to
the Company's executive officers during the fiscal year ended June 30, 1997. The
Committee is responsible for establishing and monitoring the general
compensation policies and compensation plans of the Company, as well as the
specific compensation levels for executive officers. It also makes
recommendations to the Board of Directors concerning the granting of options
under the Company's 1990 Incentive Stock Plan and 1995 Stock Option Plan.
Executive officers who are also directors have not participated in deliberations
or decisions involving their own compensation.
GENERAL POLICIES
The Company's compensation policies are designed to link the executive
officers' compensation to the annual and long-term performance of the Company
and to provide compensation that is competitive with the compensation paid to
other executives in the industry and that will attract and retain superior
talent and reward performance. The compensation mix reflects a balance of annual
cash payments, consisting of annual base salary payments and incentive bonus
payments, and long-term stock-based incentives in the form of stock options. The
emphasis in incentive compensation is placed on the more strategic stock-based
options which more closely align the financial interests of the Company's
employees with those of its shareholders.
BASE SALARIES
The salary component of executive compensation is based on the executive's
level of responsibility for meeting Company objectives and performance, and
comparable to similar positions in the Company and to comparable companies. Base
salaries for executives are reviewed and adjusted annually based on information
regarding competitive salaries, the results of industry compensation surveys,
individual experience and performance.
CASH BONUSES
The Company's incentive program for executive officers provides direct
financial incentives in the form of cash bonuses. Specific individual
performance was taken into account in determining bonuses, including meeting
Company goals and individual performance objectives.
STOCK OPTIONS
The Company's 1995 Stock Option Plan provides for the issuance of stock
options to officers and employees of the Company to purchase shares of the
Company's Common Stock at an exercise price equal to the fair market value of
such stock on the date of grant. The Company's stock options typically vest over
a 48-month period in increments of 12.5% after the initial six months and
approximately 2% per month thereafter.
The Company's compensation policies recognize the importance of stock
ownership by senior executives and stock options are an integral part of each
executive's compensation. The Committee believes that the opportunity for stock
appreciation through stock options which vest over time promotes the
relationship between long-term interests of executive officers and shareholders.
The size of specific
10
<PAGE>
grants takes into account the executive officer's salary, number of options
previously granted, as well as contributions to the Company's success.
In order to reincentivize Metra employees, and as more fully detailed in the
Ten-Year Option/SAR Repricings table set forth above, in August 1996 all
employees receiving options during fiscal 1996 were given an opportunity to
cancel such options in exchange for new options with an exercise price of $5.00
per share, the fair market value of the Company's stock on the date of Board
approval. The new options are subject to a new four-year vesting schedule. The
exchange was effective August 21, 1996.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
George W. Dunbar has served as the Company's President and Chief Executive
Officer since July 1991. His base salary for fiscal 1997 was $225,000. The
Company and Mr. Dunbar entered into a Change in Control Agreement in March 1997
(see "Executive Compensation" above).
The factors discussed above in "Base Salaries," "Cash Bonuses," and "Stock
Options" were also applied in establishing the amount of Mr. Dunbar's salary and
stock option grant. Significant factors in establishing Mr. Dunbar's
compensation were the Company's product sales growth rate and the successful
establishment of certain business development relationships.
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
The Committee has considered the impact of Section 162(m) of the Internal
Revenue Code adopted under the Omnibus Budget Reconciliation Act of 1993, which
section disallows a deduction for any publicly held corporation for individual
compensation exceeding $1 million in any taxable year for the CEO and four other
most highly compensated executive officers, unless such compensation meets the
requirements for the "performance-based" exception to the general rule. Since
the cash compensation paid by the Company to each of its executive officers is
expected to be well below $1 million and the Committee believes that options
granted under the Company's 1995 Stock Option Plan will meet the requirements
for qualifying as performance-based, the Committee believes that this section
will not affect the tax deductions available to the Company. It will be the
Committee's policy to qualify, to the extent reasonable, the executive officers'
compensation for deductibility under applicable tax law.
Compensation Committee
Costa G. Sevastopoulos, Ph.D.
Craig C. Taylor
Samuel Urcis
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors currently consists of
directors Sevastopoulos, Taylor and Urcis. No member of the Compensation
Committee or executive officer of the Company has a relationship that would
constitute an interlocking relationship with executive officers or directors of
another entity. Effective at the Annual Meeting of Shareholders, the
Compensation Committee will be comprised of Mr. Taylor only, because neither Dr.
Sevastopoulos nor Mr. Urcis will be standing for re-election to the Board of
Directors. The Company believes that the Board of Directors will appoint at
least one additional non-employee director to serve on the Compensation
Committee following the Annual Meeting.
11
<PAGE>
TRANSACTIONS WITH MANAGEMENT
On December 30, 1994, the Company issued and sold an aggregate of 33,333
shares of Common Stock to George W. Dunbar with a purchase price of $1.20 per
share pursuant to a Stock Purchase Agreement under the Company's 1995 Stock
Option Plan. In connection with this purchase, on December 30, 1994, Mr. Dunbar
executed a promissory note in favor of the Company in the amount of $40,000.
This note accrues interest at a rate of 7.6% per annum and is due on the earlier
of December 30, 1998 or the date of termination of the Mr. Dunbar's employment
relationship with the Company.
Ms. Andrea entered into an agreement with the Company dated September 2,
1994 which provides that in the event her employment with the Company is
terminated by the Company without cause, she will be entitled to receive her
monthly base salary and benefits for each month she is unable to find suitable
employment while seeking such employment in good faith, but in no event will
such payments continue for more than six months. In September 1996, Ms. Andrea
entered into a new agreement with the Company pursuant to which, in exchange for
and contingent upon Ms. Andrea's providing continuing consulting services to the
Company, the Company agreed to grant Ms. Andrea salary continuation and to
permit the Company's repurchase right with respect to 41,666 shares of Company
Common Stock purchased by Ms. Andrea in December 1994 to continue to lapse.
The Company loaned to John F. Coombes $75,000 in August 1996 pursuant to a
6.15% Secured Promissory Note as a short-term personal loan. This loan is due
and payable on demand any time after February 28, 1997 or upon termination of
Mr. Coombes' employment with the Company for any reason.
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<PAGE>
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total shareholder return for the
Company's stock at October 21, 1997 since June 30, 1995 (the date on which the
Company's stock was first registered under Section 12 of the Securities Exchange
Act of 1934) to the cumulative return over such period of (i) the Total Return
Index for The Nasdaq National Market Composite Index, (ii) the BioCentury 100
Index and (iii) the Hambrecht & Quist Life Sciences Index. The graph assumes
that $100 was invested on June 30, 1995, the date on which the Company completed
its Initial Public Offering of Common Stock, in the Common Stock of the Company
and in each of the comparative indices. The graph further assumes that such
amount was initially invested in the Common Stock of the Company at a per share
price of $10.00, the price to which such stock was first offered to the public
by the Company on that date of its Initial Public Offering. The stock price
performance on the following graph is not necessarily indicative of future stock
price performance.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
BIOCENTURY H&Q LIFE NASDAQ NATIONAL METRA
100 INDEX SCIENCES MARKET COMPOSITE BIOSYSTEMS
<S> <C> <C> <C> <C>
6/30/95 $100.00 $100.00 $100.00 $100.00
9/29/95 145.4806 121.9801 111.7939 164.5833
12/29/95 172.5971 145.3889 112.7141 143.75
3/29/1996 195.9589 140.6534 117.9924 118.75
6/28/96 215.4441 129.7737 126.9506 45.83333
9/30/96 208.9608 138.5721 131.4393 50.00
12/31/96 210.4943 134.8744 138.3074 39.58333
3/31/97 194.6134 133.7266 130.88 35.41667
6/30/97 197.5743 137.0214 154.4882 40.10417
9/30/97 249.5306 145.9146 180.5871 29.16667
10/21/1997 263.7364 147.255 183.4635 30.72917
</TABLE>
PROPOSAL NO. 1
ELECTION OF DIRECTORS
NOMINEES
At the Annual Meeting, the shareholders will elect five directors to serve
until the 1998 Annual Meeting of Shareholders or until their respective
successors are elected and qualified. In the event any nominee is unable or
unwilling to serve as a director at the time of the Annual Meeting, the proxies
may be voted for the balance of those nominees named and for any substitute
nominee designated by the present Board or the proxy holders to fill such
vacancy, or for the balance of the nominees named without nomination of a
substitute, or the Board may be reduced in accordance with the Bylaws of the
Company. The Board has no reason to believe that any of the persons named below
will be unable or unwilling to serve as a nominee or as a director if elected.
All nominees are currently directors of the Company. Directors Sevastopoulos,
Schaeffer and Urcis are not standing for re-election. The Bylaws of the Company
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<PAGE>
provide that vacancies on the Board of Directors may be filled by the vote of a
majority of the members of the Board still in office.
In voting for directors, each shareholder is entitled to cast that number of
votes equal to the number of directors to be elected multiplied by the number of
shares of Common Stock held by such shareholder. Such votes may be cast for one
candidate or distributed in any manner among the nominees for directors.
However, the right to cumulate votes in favor of one or more candidates may not
be exercised unless the candidate or candidates have been nominated prior to the
voting, and a shareholder has given notice at the Annual Meeting, prior to the
voting, of the shareholder's intention to cumulate such shareholder's votes. If
any one shareholder gives such notice, all shareholders may cumulate their votes
for candidates in nomination. The persons authorized to vote shares represented
by proxies in the enclosed form will (if authority to vote for the election of
directors is not withheld) have full discretion and authority to vote
cumulatively and to allocate votes among any or all of the nominees as they may
determine or, if authority to vote for a specified candidate or candidates has
been withheld, among those candidates for whom authority to vote has not been
withheld.
Assuming a quorum is present, the five nominees receiving the highest number
of affirmative votes of shares entitled to be voted for them will be elected as
directors of the Company for the ensuing year. Unless marked otherwise, proxies
received will be voted FOR the election of each of the five nominees named
below. In the event that additional persons are nominated for election as
directors, the proxy holders intend to vote all proxies received by them in such
a manner in accordance with cumulative voting as will ensure the election of as
many of the nominees listed below as possible, and, in such event, the specific
nominees to be voted for will be determined by the proxy holders.
The names of the nominees, their ages as of June 30, 1997, and certain other
information about them are set forth below:
<TABLE>
<CAPTION>
NAME OF NOMINEE AGE PRINCIPAL OCCUPATION DIRECTOR SINCE
- ----------------------------------- --- ------------------------- --------------
<S> <C> <C> <C>
George W. Dunbar, Jr............... 50 President, Chief 1991
Executive Officer and
Director
Claude D. Arnaud, M.D.............. 67 Director 1990
John L. Castello................... 61 Director 1993
Mary Lake Polan, M.D., Ph.D........ 53 Director 1992
Craig C. Taylor.................... 47 Director 1991
</TABLE>
There are no family relationships among any of the directors or executive
officers of the Company.
MR. DUNBAR joined the Company as President, Chief Executive Officer and
Director in July 1991. Prior to joining the Company, he was the Vice President
of Licensing and Business Development of The Ares-Serono Group ("Ares-Serono"),
a Swiss health care company that markets pharmaceutical, diagnostic and
veterinary products worldwide, from 1988 until 1991, where he established a
licensing and acquisition group for its health care divisions. From 1974 until
1987, he held various senior management positions with Amersham International
("Amersham"), a health care and life sciences company, where he most recently
served as Vice President for its Life Sciences business in North America. Mr.
Dunbar also served as Amersham's General Manager of Pacific Rim markets and
Eastern Regional operations and, prior to that, he managed the international
marketing of Amersham's medical and industrial radioisotopes. Mr. Dunbar also
serves as a director of DepoTech Corporation, a biotechnology company, LJL
Biosystems, a life sciences systems company and Metra Biosystems (U.K.) Ltd.,
the Company's wholly owned subsidiary. Mr. Dunbar holds a B.S. in electrical
engineering and an M.B.A. from Auburn University, and sits on the Auburn School
of Business M.B.A. Advisory Committee.
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<PAGE>
DR. ARNAUD is a co-founder of the Company and a member of its Scientific
Advisory Board and joined the Company's Board of Directors in July 1990. Since
1981, Dr. Arnaud has been affiliated with the University of California at San
Francisco ("UCSF") and is currently Professor of Medicine and Physiology,
Director of Programs in Osteoporosis and Bone Biology and Director of the Center
for Osteoporosis and Metabolic Bone Disease at UCSF. Dr. Arnaud has served on
several editorial advisory boards, including the Journal of Bone and Mineral
Research, Calcified Tissue International, Bone, and Osteoporosis International.
He is a founder and former president of the American Society of Bone and Mineral
Research and is a recipient of that society's William F. Newman Award for
excellence in research and teaching. Dr. Arnaud received his B.A. in medicine
from Columbia College, his M.D. from New York Medical College, and completed
postdoctoral work at the University of Wisconsin.
MR. CASTELLO joined the Company's Board of Directors in July 1993. He is the
Chairman, President and Chief Executive Officer of XOMA Corporation ("XOMA"), a
human therapeutics and biotechnology company. Prior to joining XOMA in 1992, Mr.
Castello was with Ares-Serono where he served as President and Chief Operating
Officer from 1988 to 1992. Mr. Castello is also a director of Cholestech
Corporation, a medical diagnostics company. Mr. Castello holds a B.S. in
mechanical and industrial engineering from the University of Notre Dame.
DR. POLAN has served as a member of the Company's Board of Directors since
August 1992. She is Chairman of the Department of Gynecology and Obstetrics at
Stanford University School of Medicine, which she joined in 1990. From 1985 to
1990, Dr. Polan was an Associate Professor in the Department of Obstetrics and
Gynecology at Yale University. In 1991, Dr. Polan served as Co-chair of the Task
Force of Opportunities for Women's Health of the National Institutes of Health.
She has been a member of the Board of Health Sciences Policy of the Institute of
Medicine, a unit of the National Academy of Sciences, since 1992. Dr. Polan is
also a director of Quidel Corporation, a human diagnostics company, Gynecare,
Inc., a medical device company, and American Home Products, a pharmaceutical and
consumer products company. Dr. Polan received her B.A. in chemistry from
Connecticut College and is also a graduate of Yale University, where she
received a doctorate degrees in biophysics, biochemistry and medicine.
MR. TAYLOR joined the Company's Board of Directors in August 1991. He joined
Asset Management Company in 1977 and is a general partner of Asset Management
Associates and associated private venture capital partnerships, one of which is
a shareholder of the Company. He also serves as a director of Lynx Therapeutics,
Inc., and Pharmacyclics, Inc., which are human therapeutics companies. Mr.
Taylor received a B.S. and M.S. in physics from Brown University and his M.B.A.
from Stanford University.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During the period from July 1, 1996 through June 30, 1997 (the "last fiscal
year"), the Board met twelve times and no director nominee attended fewer than
75% of the aggregate number of meetings of the Board and meetings of the
committees of the Board on which he or she serves. The Board has an Audit
Committee and a Compensation Committee. The Board does not have a nominating
committee or a committee performing the functions of a nominating committee.
Although there are no formal procedures for shareholders to nominate persons to
serve as directors, the Board will consider nominations from shareholders, which
should be addressed to Kurt E. Amundson at the Company's address set forth
above.
The Audit Committee, which currently consists of directors Sevastopoulos,
Taylor and Urcis, three of the Company's non-employee directors, held two
meetings during the last fiscal year. The Audit Committee recommends the
engagement of the firm of certified public accountants to audit the financial
statements of the Company and monitors the effectiveness of the audit effort,
the Company's financial and accounting organization and its system of internal
accounting controls. Effective at the Annual Meeting of Shareholders, the Audit
Committee will be comprised of Mr. Taylor only, because neither Dr.
Sevastopoulos nor Mr. Urcis will be standing for re-election to the Board of
Directors. The Company
15
<PAGE>
believes that the Board of Directors will appoint at least one additional
non-employee director to serve on the Audit Committee following the Annual
Meeting.
The Compensation Committee also currently consists of directors
Sevastopoulos, Taylor and Urcis, and held eight meetings during the last fiscal
year. Its functions are to establish and administer the Company's policies
regarding annual executive salaries and cash incentives and long-term equity
incentives. The Compensation Committee administers the Company's 1995 Stock
Option Plan, 1995 Directors' Stock Option Plan, 1995 Employee Stock Purchase
Plan and 1990 Incentive Stock Plan. Effective at the Annual Meeting of
Shareholders, the Compensation Committee will be comprised of Mr. Taylor only,
because neither Dr. Sevastopoulos nor Mr. Urcis will be standing for re-election
to the Board of Directors. The Company believes that the Board of Directors will
appoint at least one additional non-employee director to serve on the
Compensation Committee following the Annual Meeting.
COMPENSATION OF DIRECTORS
Effective March 3, 1997, non-employee directors receive cash compensation
for meeting attendance as follows: $1,000 for each meeting of the Board of
Directors attended; $500 for attending committee meetings held on days upon
which the full Board of Directors does not meet; and $500 for telephonic
meetings more than one-half hour in duration. Additionally, directors are
reimbursed for out-of-pocket expenses incurred in connection with their
attendance at meetings of the Board. The Company's 1995 Directors' Stock Option
Plan (the "Directors' Plan") provides that each person who becomes a nonemployee
director of the Company will be granted a nonstatutory stock option to purchase
10,000 shares of Common Stock on the date on which the optionee first becomes a
nonemployee director of the Company. Thereafter, on the date of each annual
meeting of the Company's shareholders at which such director is elected, each
such nonemployee director shall be granted an additional option to purchase
5,000 shares of Common Stock if, on such date, he or she shall have served on
the Company's Board of Directors for at least six months. Each of the nominees
for director will have served for more than six months at the time of the Annual
Meeting, and so will receive options to purchase 5,000 shares of the Company's
Common Stock under the Directors' Plan if they are reelected to the Board at the
Annual Meeting.
RECOMMENDATION OF THE BOARD
THE BOARD RECOMMENDS A VOTE FOR
THE ELECTION OF ALL NOMINEES NAMED ABOVE.
PROPOSAL NO. 2
AMENDMENT TO THE 1995 STOCK OPTION PLAN
At the Annual Meeting, the Company's shareholders are being asked to approve
an amendment to the 1995 Stock Option Plan (the "1995 Option Plan") that would
increase the shares of Common Stock reserved for issuance thereunder by 300,000
shares, to an aggregate of 1,800,000 shares that have been reserved from time to
time under the 1995 Option Plan.
GENERAL
The Company's 1995 Stock Option Plan (the "1995 Option Plan") was adopted by
the Board of Directors in July 1995 and was approved by the Company's
shareholders in June 1995. Currently, an aggregate of 1,500,000 shares of the
Company's Common Stock are reserved for issuance under the 1995 Option Plan. The
1995 Option Plan provides for (i) the granting to employees (including officers
and employee directors) of "incentive stock options" within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code") and
(ii) the granting to employees and consultants (including nonemployee directors)
of nonstatutory stock options.
16
<PAGE>
The 1995 Option Plan is not a qualified deferred compensation plan under
Section 401(a) of the Code, and is not subject to the provisions of the Employee
Retirement Income Security Act of 1974, as amended.
As of September 30, 1997 options for 1,277,719 shares were outstanding under
the 1995 Option Plan and 213,622 shares remained available for future grants.
Shares not purchased under an option prior to its expiration will be available
for future option grants under the 1995 Option Plan. As of September 30, 1997,
the aggregate fair market value of shares subject to outstanding options under
the 1995 Option Plan was $4,472,017, based upon the closing price of the Common
Stock on The Nasdaq National Market as of such date. The actual benefits, if
any, to the holders of stock options issued under the 1995 Option Plan are not
determinable prior to exercise as the value, if any, of such stock options to
their holders is represented by the difference between the market price of a
share of the Company's Common Stock on the date of exercise and the exercise
price of a holder's stock option, as set forth below. As of June 30, 1997, the
Named Executive Officers of the Company received grants under the 1995 Option
Plan of options to purchase Common Stock of the Company as set forth under the
heading "Option/SAR Grants in Last Fiscal Year" below.
PURPOSE
The purposes of the 1995 Option Plan are to attract and retain the best
available personnel for positions of substantial responsibility, to provide
additional incentive to employees and consultants of the Company and to promote
the success of the Company's business.
ADMINISTRATION
The 1995 Option Plan may be administered by the Board of Directors or by a
committee of the Board of Directors (the "Administrator"). The 1995 Option Plan
is currently being administered by the Board of Directors and the Compensation
Committee of the Board of Directors. Members of the Board of Directors receive
no additional compensation for their services in connection with the
administration of the 1995 Option Plan. All questions of interpretation of the
1995 Option Plan are determined by the Administrator and its decisions are final
and binding upon all participants.
ELIGIBILITY
The 1995 Option Plan provides that incentive stock options as defined under
Section 422 of the Code may be granted to employees (including officers and
directors who are also employees) of the Company or any of its subsidiaries. In
addition, the 1995 Option Plan provides that nonstatutory options may be granted
to employees and consultants of the Company or any of its subsidiaries. The
Administrator selects the optionees and determines the number of shares to be
subject to each option. In making such determination, certain factors are taken
into account, including the duties and responsibilities of the optionee, the
value of the optionee's services, the optionee's present and potential
contribution to the success of the Company, and other relevant factors.
The 1995 Option Plan provides that the maximum number of shares of Common
Stock which may be granted under options to any one employee during any fiscal
year shall be 1,000,000, subject to adjustment as provided in the 1995 Option
Plan. There is also a limit on the aggregate market value of shares subject to
all incentive stock options that may be granted to an optionee during any
calendar year.
TERMS OF OPTIONS
Each option is evidenced by a stock option agreement between the Company and
the optionee. Each option is subject to the following additional terms and
conditions:
17
<PAGE>
(a) EXERCISE OF THE OPTION. The Administrator determines when options may
be exercised. An option is exercised by giving written notice of exercise to the
Company specifying the number of full shares of Common Stock to be purchased and
by tendering payment of the purchase price. The purchase price of the shares
purchased upon exercise of an option shall be paid in consideration of such form
as is determined by the Administrator and specified in the option agreement, and
such form of consideration may vary for each option.
(b) EXERCISE PRICE. The exercise price under the 1995 Option Plan is
determined by the Administrator and may not be less than 100 percent of the fair
market value of the Common Stock on the date the option is granted, or in the
case of nonstatutory options granted to optionees who are "covered employees"
under Code Section 162(m), 85 percent of such fair market value. The fair market
value per share is equal to the closing price on The Nasdaq National Market on
the date of grant. In the case of an option granted to an optionee who owns more
than ten percent of the voting power of all classes of stock of the Company or
any of its subsidiaries, the exercise price must not be less than 110 percent of
the fair market value on the date of grant.
(c) TERMINATION OF EMPLOYMENT. If the optionee's employment or consulting
relationship terminates for any reason other than disability or death, options
under the 1995 Option Plan may be exercised not later than thirty days (or such
other period of time not exceeding three months in the case of an incentive
stock option or six months in the case of a nonstatutory stock option as is
determined by the Administrator at the time of grant) after such termination and
may be exercised only to the extent the option was exercisable on the date of
termination. In no event may an option be exercised by any person after the
expiration of its term.
(d) DISABILITY. If an optionee is unable to continue his or her employment
or consulting relationship with the Company as a result of his total and
permanent disability, options may be exercised within six months (or such other
period of time not exceeding twelve months as is determined by the Administrator
at the time of grant) of termination and may be exercised only to the extent the
option was exercisable on the date of termination, but in no event may the
option be exercised after the expiration of its term.
(e) DEATH. Under the 1995 Option Plan, if an optionee should die while
employed or retained by the Company or during the thirty day period (or such
other period of time not exceeding three months as determined by the
Administrator at the time of grant) following termination of the optionee's
employment or consulting relationship, options may be exercised within six
months after the date of death to the extent the options would have been
exercisable (i) had the optionee continued living and remained an employee or
consultant for three (3) months (or such other period of time as is determined
by the Administrator after the date of death, in the case of an optionee who
dies while employed or retained by the Company), or (ii) on the date of
termination of employment or consulting relationship, in the case of an optionee
who dies within thirty days after termination of employment or consulting
relationship, but in no event may an option be exercised after the expiration of
its term.
(f) TERMINATION OF OPTIONS. The 1995 Option Plan provides that options
granted under the 1995 Option Plan have the term provided in the option
agreement. In general, these agreements currently provide for a term of ten
years. Incentive stock options granted to an optionee who, immediately before
the grant of such option, owned more than ten percent of the total combined
voting power of all classes of stock of the Company or any of its subsidiaries,
may not in any case have a term of more than five years. No option may be
exercised by any person after its expiration.
(g) OPTION NOT TRANSFERABLE. An option is nontransferable by the optionee
other than by will or the laws of descent and distribution, and is exercisable
only by the optionee during his or her lifetime or, in the event of the
optionee's death, by a person who acquires the right to exercise the option by
bequest or inheritance or by reason of the death.
18
<PAGE>
(h) CORPORATE TRANSACTIONS. In the event of a proposed sale of all or
substantially all of the assets of the Company, or the merger of the Company,
the Board of Directors is obligated to either accomplish a substitution or
assumption of options or give thirty days' notice of the optionee's right to
exercise his or her outstanding options as to some or all of the optioned stock
at any time within fifteen days of such notice.
(i) OTHER PROVISIONS. The option agreement may contain such other terms,
provisions and conditions not inconsistent with the 1995 Option Plan as may be
determined by the Administrator.
ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
In the event any change, such as a stock split or dividend, is made in the
Company's capitalization that results in an increase or decrease in the number
of outstanding shares of Common Stock without receipt of consideration by the
Company, appropriate adjustment shall be made in the exercise price of each
outstanding option, the number of shares subject to each option, the annual
limitation on grants to employees, as well as the number of shares available for
issuance under the 1995 Option Plan. In the event of the proposed dissolution or
liquidation of the Company, each option will terminate unless otherwise provided
by the Administrator.
AMENDMENT AND TERMINATION
The Board of Directors may amend the 1995 Option Plan at any time or from
time to time or may terminate it without approval of the shareholders; provided,
however, that shareholder approval is required for any amendment to the 1995
Option Plan that increases the number of shares that may be issued under the
1995 Option Plan, modifies the standards of eligibility, modifies the limitation
on grants to employees described in the 1995 Option Plan or results in other
changes which would require shareholder approval to qualify options granted
under the 1995 Option Plan as performance-based compensation under Section
162(m) of the Code, or, so long as the Company has a class of equity securities
registered under Section 12 of the Exchange Act, materially increases the
benefits to participants that may accrue under the 1995 Option Plan. However, no
action by the Board of Directors or shareholders may alter or impair any option
previously granted under the 1995 Option Plan. The 1995 Option Plan shall
terminate in July 2005, provided that any options then outstanding under the
1995 Option Plan shall remain outstanding until they expire by their terms.
FEDERAL INCOME TAX ASPECTS OF THE 1995 OPTION PLAN
The following is a brief summary of the United States federal income tax
consequences of transactions under the 1995 Option Plan based on federal
securities and income tax laws in effect as of the date of this Prospectus
(which laws could change at any time hereafter). This summary is not intended to
be exhaustive and does not discuss the tax consequences of a participant's death
or provisions of the income tax laws of any municipality, state or other country
in which an optionee may reside. This summary does not purport to be complete.
The Company advises all optionees to consult their own tax advisors concerning
tax implications of option grants and exercises, and the disposition of shares
acquired upon such exercise, under the 1995 Option Plan.
Options granted under the 1995 Option Plan may be either "incentive stock
options," as defined in Section 422 of the Code or nonstatutory options. If an
option granted under the 1995 Option Plan is an incentive stock option, the
optionee will recognize no income upon grant of the incentive stock option and
incur no regular tax liability upon its exercise, although the exercise of an
incentive stock option may give rise to alternative minimum tax (see below). The
Company will not be allowed a deduction for federal income tax purposes as
result of the exercise of an incentive stock option regardless of the
applicability of the alternative minimum tax. Upon the sale or exchange of the
shares more than two years after grant of the option and more than one year
after receipt of the shares by the optionee, any gain will be treated as
long-term capital gain. If both of these holding periods are not satisfied (a
"disqualifying disposition"), the
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optionee will recognize ordinary income equal to the difference between the
exercise price and the lower of the fair market value of the stock at the date
of the option exercise or the sale price of the stock. A different rule for
measuring ordinary income upon such a disqualifying disposition may apply if the
optionee is an officer, director, or 10% stockholder of the Company. The Company
will be entitled to a deduction in the same amount as the ordinary income
recognized by the optionee. Any gain recognized on such a disqualifying
disposition of the shares in excess of the amount treated as ordinary income
will be characterized as long-term capital gain if the sale occurs more than one
year after exercise of the option or as short-term capital gain if the sale is
made earlier. The tax rate on long-term capital gains for regular income and
alternative minimum tax purposes under current federal income tax laws is capped
at 28% for shares held up to 18 months and at 20% for shares held more than 18
months. Capital losses are allowed in full against capital gains plus $3,000 of
other income.
All stock options which do not qualify as incentive stock options are
referred to as nonstatutory options. An optionee will not recognize any taxable
income at the time he or she is granted a nonstatutory stock option. However,
upon its exercise, the optionee will recognize ordinary income for tax purposes
measured by the excess of the then fair market value of the shares over the
exercise price. In certain circumstances, where the shares are subject to a
substantial risk of forfeiture when acquired or where the optionee is an
officer, director or 10% stockholder of the Company, the date of taxation may be
deferred unless the optionee files an election with the Internal Revenue Service
under Section 83(b) of the Code. The income recognized by an optionee who is
also an employee of the Company will be subject to income and employment tax
withholding by the Company by payment in cash or out of the current earnings
paid to the optionee. Upon sale of such shares by the optionee, any difference
between the sales price and the exercise price, to the extent not recognized as
ordinary income as provided above, will be treated as capital gain or loss, and
will qualify for long-term capital gain or loss treatment if the shares have
been held for more than one year.
ALTERNATIVE MINIMUM TAX
As noted above, the exercise of an incentive stock option may subject the
optionee to the alternative minimum tax ("AMT") under Section 55 of the Code.
The AMT is calculated for federal tax purposes by applying a tax rate of 26% to
alternative minimum taxable income up to $175,000 ($87,500 for married taxpayers
filing separately) and 28% to alternative minimum income above such amount.
Alternative minimum taxable income for federal tax purposes is equal to (i)
taxable income adjusted for certain items, plus (ii) items of tax preference
less (iii) an exclusion of $45,000 for joint returns and $33,750 for individual
returns (with the exclusion amount phased out for upper-income taxpayers).
In computing alternative minimum taxable income, shares purchased upon
exercise of an incentive stock option are treated as if they had been acquired
by the optionee pursuant to a nonstatutory option, as described above. Because
the AMT rules are complex and their effects depend upon the personal
circumstances of each taxpayer, an optionee should consult his or her own tax
advisor prior to exercising an incentive stock option. If an optionee pays AMT,
the amount of such AMT may be carried forward as a credit against any subsequent
year's regular tax in excess of the AMT.
RECOMMENDATION OF THE BOARD
THE BOARD RECOMMENDS A VOTE FOR THE AMENDMENT
OF THE 1995 OPTION PLAN AS DESCRIBED ABOVE
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PROPOSAL NO. 3
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
Ernst & Young LLP has served as the Company's independent auditors since May
1997 and has been appointed by the Board to continue as the Company's
independent auditors for the year ending June 30, 1998. In the event that
ratification of this selection of auditors is not approved by a majority of the
shares of Common Stock voting at the Annual Meeting in person or by proxy, the
Board will reconsider its selection of auditors.
A representative of Ernst & Young LLP is expected to be present at the
Annual Meeting. This representative will have an opportunity to make a statement
and will be available to respond to appropriate questions.
Effective May 2, 1997, the Board of Directors of the Company engaged the
accounting firm of Ernst & Young LLP as its independent public accountants. The
Company's former independent public accountants, KPMG Peat Marwick LLP, were
dismissed effective May 2, 1997. The Company's audit committee recommended, and
the Company's Board of Directors approved, these actions. During the two most
recent fiscal years and subsequent interim periods prior to May 2, 1997, there
were no disagreements with KPMG Peat Marwick LLP on any matter of accounting
principles or practices, financial statement disclosure, auditing scope or
procedure, or any reportable events, which disagreements, if not resolved to the
satisfaction of KPMG Peat Marwick LLP, would have caused it to make reference to
the subject matter of such disagreements in connection with its reports. The
reports of KPMG Peat Marwick LLP on the financial statements of the Company for
the past two years contained no adverse opinion or disclaimer of opinion, and
were not qualified or modified as to uncertainty, audit scope or accounting
principles. The Company did not consult with Ernst & Young LLP during the two
years prior to their appointment as independent accountants of the Company
regarding either (i) the application of accounting principles to a specified
transaction or transactions, either completed or proposed, or (ii) the type of
audit opinion Ernst & Young LLP might render on the Company's financial
statements.
The Company requested that KPMG Peat Marwick LLP furnish a letter addressed
to the Securities and Exchange Commission stating whether they agree with the
above statements. A copy of the KPMG Peat Marwick LLP letter to the Securities
and Exchange Commission, dated May 8, 1997, is filed as an exhibit to the
Company's Report on Form 8-K dated May 2, 1997.
RECOMMENDATION OF THE BOARD
THE BOARD RECOMMENDS A VOTE FOR RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG
LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR THE YEAR ENDING JUNE 30, 1998
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OTHER MATTERS
The Board of Directors knows of no other business which will be presented to
the Annual Meeting. If any other business is properly brought before the Annual
Meeting, proxies in the enclosed form will be voted in respect thereof as the
proxy holders deem advisable.
It is important that the proxies be returned promptly and that your shares
be represented. Shareholders are urged to mark, date, execute and promptly
return the accompanying proxy card in the enclosed envelope.
By Order of the Board of Directors,
[SIGNATURE]
Mark B. Weeks
ASSISTANT SECRETARY
November 10, 1997
Mountain View, California
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APPENDIX A
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
METRA BIOSYSTEMS, INC.
1997 ANNUAL MEETING OF SHAREHOLDERS
The undersigned shareholder of Metra Biosystems, Inc., a California
corporation, hereby acknowledges receipt of the Notice of Annual Meeting
of Stockholders and Proxy Statement, each dated November 5, 1997, and
hereby appoints George W. Dunbar, Jr. and Kurt E. Amundson, or either of
them, as proxies and attorneys-in-fact with full power to each of
substitution, on behalf and in the name of the undersigned, to represent
P the undersigned at the 1997 Annual Meeting of Shareholders of Metra
Biosystems, Inc. to be held on December 8, 1997, at 10:00 a.m., at 265
R N. Whisman Road, Mountain View, California 94043, and at any
adjournment(s) or postponement(s) thereof, and to vote all shares of
O Common Stock that the undersigned would be entitled to vote if then and
there personally present, on the matters set forth on the reverse side,
X and in their discretion, upon such other matter or matters that may
properly come before the meeting and any adjournment(s) thereof.
Y
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION
IS INDICATED, WILL BE VOTED AS FOLLOWS: (1) FOR THE ELECTION OF
DIRECTORS; (2) FOR THE AMENDMENT OF THE 1995 STOCK OPTION PLAN; (3) FOR
RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT
AUDITORS, AND AS SAID PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS AS
MAY COME BEFORE THE MEETING.
- ----- PLEASE MARK
X VOTES AS IN
- ----- THIS EXAMPLE
1. Election of Directors
Nominees: George W. Dunbar, Jr., Claude D. Arnaud, M.D., John L. Castello,
Mary Lake Polan, M.D., Ph.D., Craig C. Taylor, Samuel Urcis
FOR WITHHELD
/ / / /
/ / ______________________________________
For all nominees except as noted above
2. To approve and ratify an amendment to the Metra Biosystems, Inc. 1995
Stock Option Plan to increase the number of shares of Common Stock
issuable thereunder from 1,500,000 to 1,800,000.
FOR AGAINST ABSTAIN
/ / / / / /
3. To ratify the appointment of Ernst & Young LLP as the Company's
independent auditors for the fiscal year ending June 30, 1998.
FOR AGAINST ABSTAIN
/ / / / / /
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT / /
NOTE: This Proxy should be marked, dated, signed by the shareholder(s)
exactly as his or her name appears hereon, and returned in the enclosed
envelope. Persons signing in a fiduciary capacity should so indicate. If
shares are held by joint tenants or as community property, both should sign.
Signature:______________ Date:_______ Signature:______________ Date:________
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METRA BIOSYSTEMS, INC.
1995 STOCK OPTION PLAN
1. PURPOSES OF THE PLAN. The purposes of this Stock Option Plan are to
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to the Employees and
Consultants of the Company and to promote the success of the Company's
business.
Options granted hereunder may be either Incentive Stock Options (as
defined under Section 422 of the Code) or Nonstatutory Stock Options, at the
discretion of the Board and as reflected in the terms of the written option
agreement.
2. DEFINITIONS. As used herein, the following definitions shall apply:
(a) "ADMINISTRATOR" shall mean the Board or any of its Committees
appointed pursuant to Section 4 of the Plan.
(b) "AFFILIATE" shall mean an entity in which the Company owns an
equity interest.
(c) "APPLICABLE LAWS" shall have the meaning set forth in Section
4(a) below.
(d) "BOARD" shall mean the Board of Directors of the Company.
(e) "CODE" shall mean the Internal Revenue Code of 1986, as amended.
(f) "COMMITTEE" shall mean the Committee appointed by the Board of
Directors in accordance with Section 4(a) of the Plan, if one is appointed.
(g) "COMMON STOCK" shall mean the Common Stock of the Company.
(h) "COMPANY" shall mean Metra Biosystems, Inc., a California
corporation.
(i) "CONSULTANT" shall mean any person who is engaged by the
Company or any Parent, Subsidiary or Affiliate to render consulting services
and is compensated for such consulting services, and any director of the
Company whether compensated for such services or not; provided that if and in
the event the Company registers any class of any equity security pursuant to
Section 12 of the Exchange Act, the term Consultant shall thereafter not
include directors who are not compensated for their services or are paid only
a director's fee by the Company.
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(j) "CONTINUOUS STATUS AS AN EMPLOYEE OR CONSULTANT" shall mean the
absence of any interruption or termination of service as an Employee or
Consultant. Continuous Status as an Employee or Consultant shall not be
considered interrupted in the case of sick leave, military leave, or any
other leave of absence approved by the Administrator; provided that such
leave is for a period of not more than 90 days or reemployment upon the
expiration of such leave is guaranteed by contract or statute. For purposes
of this Plan, a change in status from an Employee to a Consultant or from a
Consultant to an Employee will not constitute a termination of employment.
(k) "DIRECTOR" shall mean a member of the Board.
(l) "EMPLOYEE" shall mean any person, including Named Executives,
Officers and Directors employed by the Company or any Parent, Subsidiary or
Affiliate of the Company. The payment by the Company of a director's fee to
a Director shall not be sufficient to constitute "employment" of such
Director by the Company.
(m) "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934,
as amended.
(n) "FAIR MARKET VALUE" means, as of any date, the value of Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system including without limitation the
National Market of the National Association of Securities Dealers, Inc.
Automated Quotation ("Nasdaq") System, its Fair Market Value shall be the
closing sales price for such stock as quoted on such system on the date of
determination (if for a given day no sales were reported, the closing bid on
that day shall be used), as such price is reported in THE WALL STREET JOURNAL
or such other source as the Administrator deems reliable;
(ii) If the Common Stock is quoted on the Nasdaq System (but
not on the National Market thereof) or regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean between the bid and asked prices for the Common Stock or;
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Administrator.
(o) "INCENTIVE STOCK OPTION" shall mean an Option intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code, as designated in the applicable written option agreement.
(p) "NAMED EXECUTIVE" shall mean any individual who, on the last
day of the Company's fiscal year, is the chief executive officer of the
Company (or is acting in such capacity) or among the four highest compensated
officers of the Company (other than the chief
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executive officer). Such officer status shall be determined pursuant to the
executive compensation disclosure rules under the Exchange Act.
(q) "NONSTATUTORY STOCK OPTION" shall mean an Option not intended
to qualify as an Incentive Stock Option, as designated in the applicable
written option agreement.
(r) "OFFICER" shall mean a person who is an officer of the Company
within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
(s) "OPTION" shall mean a stock option granted pursuant to the Plan.
(t) "OPTIONED STOCK" shall mean the Common Stock subject to an
Option.
(u) "OPTIONEE" shall mean an Employee or Consultant who receives an
Option.
(v) "PARENT" shall mean a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(w) "PLAN" shall mean this 1995 Stock Option Plan.
(x) "RULE 16b-3" shall mean Rule 16b-3 promulgated under the
Exchange Act as the same may be amended from time to time, or any successor
provision.
(y) "SHARE" shall mean a share of the Common Stock, as adjusted in
accordance with Section 14 of the Plan.
(z) "SUBSIDIARY" shall mean a "subsidiary corporation," whether now
or hereafter existing, as defined in Section 424(f) of the Code.
3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 14
of the Plan, the maximum aggregate number of shares that may be optioned and
sold under the Plan is 1,500,000 shares of Common Stock. The Shares may be
authorized, but unissued, or reacquired Common Stock.
If an Option should expire or become unexercisable for any reason
without having been exercised in full, the unpurchased Shares that were
subject thereto shall, unless the Plan shall have been terminated, become
available for future grant under the Plan. Notwithstanding any other
provision of the Plan, shares issued under the Plan and later repurchased by
the Company shall not become available for future grant under the Plan.
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<PAGE>
4. ADMINISTRATION OF THE PLAN.
(a) COMPOSITION OF ADMINISTRATOR.
(i) MULTIPLE ADMINISTRATIVE BODIES. If permitted by Rule
16b-3, and by the legal requirements relating to the administration of
incentive stock option plans, if any, of applicable securities laws and the
Code (collectively, the "Applicable Laws"), the Plan may (but need not) be
administered by different administrative bodies with respect to Directors,
Officers who are not directors and Employees who are neither Directors nor
Officers.
(ii) ADMINISTRATION WITH RESPECT TO DIRECTORS AND OFFICERS.
With respect to grants of Options to Employees or Consultants who are also
Officers or Directors of the Company, the Plan shall be administered by (A)
the Board, if the Board may administer the Plan in compliance with Rule 16b-3
as it applies to a plan intended to qualify thereunder as a discretionary
plan and Section 162(m) of the Code as it applies so as to qualify grants of
Options to Named Executives as performance-based compensation, or (B) a
Committee designated by the Board to administer the Plan, which Committee
shall be constituted in such a manner as to permit the Plan to comply with
Rule 16b-3 as it applies to a plan intended to qualify thereunder as a
discretionary plan, to qualify grants of Options to Named Executives as
performance-based compensation under Section 162(m) of the Code and otherwise
so as to satisfy the Applicable Laws.
(iii) ADMINISTRATION WITH RESPECT TO OTHER PERSONS. With
respect to grants of Options to Employees or Consultants who are neither
Directors nor Officers of the Company, the Plan shall be administered by (A)
the Board or (B) a Committee designated by the Board, which Committee shall
be constituted in such a manner as to satisfy the Applicable Laws.
(iv) GENERAL. If a Committee has been appointed pursuant to
subsection (ii) or (iii) of this Section 4(a), such Committee shall continue
to serve in its designated capacity until otherwise directed by the Board.
From time to time the Board may increase the size of any Committee and
appoint additional members thereof, remove members (with or without cause)
and appoint new members in substitution therefor, fill vacancies (however
caused) and remove all members of a Committee and thereafter directly
administer the Plan, all to the extent permitted by the Applicable Laws and,
in the case of a Committee appointed under subsection (ii), to the extent
permitted by Rule 16b-3 as it applies to a plan intended to qualify
thereunder as a discretionary plan, and to the extent required under Section
162(m) of the Code to qualify grants of Options to Named Executives as
performance-based compensation.
(b) POWERS OF THE ADMINISTRATOR. Subject to the provisions of the
Plan and in the case of a Committee, the specific duties delegated by the
Board to such Committee, the Administrator shall have the authority, in its
discretion:
(i) to determine the Fair Market Value of the Common Stock, in
accordance with Section 2(m) of the Plan;
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<PAGE>
(ii) to select the Employees and Consultants to whom Options
may from time to time be granted hereunder;
(iii) to determine whether and to what extent Options are
granted hereunder;
(iv) to determine the number of shares of Common Stock to be
covered by each such award granted hereunder;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any award granted hereunder (including, but
not limited to, the share price and any restriction or limitation, or any
vesting acceleration or waiver of forfeiture restrictions regarding any
Option and/or the shares of Common Stock relating thereto, based in each case
on such factors as the Administrator shall determine, in its sole discretion);
(vii) to determine whether, to what extent and under what
circumstances Common Stock and other amounts payable with respect to an award
under this Plan shall be deferred either automatically or at the election of
the participant (including providing for and determining the amount, if any,
of any deemed earnings on any deferred amount during any deferral period); and
(viii) to reduce the exercise price of any Option to the then
current Fair Market Value if the Fair Market Value of the Common Stock
covered by such Option shall have declined since the date the Option was
granted;
(c) EFFECT OF ADMINISTRATOR'S DECISION. All decisions,
determinations and interpretations of the Administrator shall be final and
binding on all Optionees and any other holders of any Options.
5. ELIGIBILITY.
(a) RECIPIENTS OF GRANTS. Nonstatutory Stock Options may be
granted to Employees and Consultants. Incentive Stock Options may be granted
only to Employees, provided, however, that Employees of an Affiliate shall
not be eligible to receive Incentive Stock Options. An Employee or
Consultant who has been granted an Option may, if he or she is otherwise
eligible, be granted an additional Option or Options.
(b) TYPE OF OPTION. Each Option shall be designated in the written
option agreement as either an Incentive Stock Option or a Nonstatutory Stock
Option. However, notwithstanding such designations, to the extent that the
aggregate Fair Market Value of Shares with respect to which Incentive Stock
Options are exercisable for the first time by an Optionee during any calendar
year (under all plans of the Company or any Parent or Subsidiary) exceeds
$100,000, such excess Options shall be treated as Nonstatutory Stock Options.
For purposes of
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this Section 5(b), Incentive Stock Options shall be taken into account in the
order in which they were granted, and the Fair Market Value of the Shares
shall be determined as of the time the Option with respect to such Shares is
granted.
(c) NO EMPLOYMENT RIGHTS. The Plan shall not confer upon any
Optionee any right with respect to continuation of employment or consulting
relationship with the Company, nor shall it interfere in any way with his or
her right or the Company's right to terminate his or her employment or
consulting relationship at any time, with or without cause.
6. TERM OF PLAN. The Plan shall become effective upon the earlier to
occur of its adoption by the Board or its approval by the shareholders of the
Company as described in Section 20 of the Plan. It shall continue in effect
for a term of ten (10) years unless sooner terminated under Section 16 of the
Plan.
7. TERM OF OPTION. The term of each Option shall be the term stated in
the Option Agreement; provided, however, that in the case of an Incentive
Stock Option, the term shall be no more than ten (10) years from the date of
grant thereof or such shorter term as may be provided in the Option
Agreement. However, in the case of an Option granted to an Optionee who, at
the time the Option is granted, owns stock representing more than ten percent
(10%) of the voting power of all classes of stock of the Company or any
Parent or Subsidiary, the term of the Option shall be five (5) years from the
date of grant thereof or such shorter term as may be provided in the Option
Agreement.
8. LIMITATION ON GRANTS TO EMPLOYEES. Subject to adjustment as
provided in this Plan, the maximum number of Shares which may be subject to
options granted to any one Employee under this Plan for any fiscal year of
the Company shall be 1,000,000.
9. OPTION EXERCISE PRICE AND CONSIDERATION.
(a) EXERCISE PRICE. The per Share exercise price for the Shares to
be issued pursuant to exercise of an Option shall be such price as is
determined by the Administrator, but shall be subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time of the grant
of such Incentive Stock Option, owns stock representing more than ten percent
(10%) of the voting power of all classes of stock of the Company or any
Parent or Subsidiary, the per Share exercise price shall be no less than 110%
of the Fair Market Value per Share on the date of grant;
(B) granted to any other Employee, the per Share exercise
price shall be no less than 100% of the Fair Market Value per Share on the
date of grant.
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(ii) In the case of a Nonstatutory Stock Option
(A) granted to a person who, at the time of the grant of
such Option, owns stock representing more than ten percent (10%) of the
voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be no less than 110% of the
Fair Market Value per Share on the date of the grant;
(B) granted to a person who, at the time of the grant of
such Option, is a Named Executive of the Company, the per share Exercise
Price shall be no less than 100% of the Fair Market Value on the date of
grant;
(C) granted to any person other than a Named Executive,
the per Share exercise price shall be no less than 85% of the Fair Market
Value per Share on the date of grant.
(iii) In the case of an Option granted on or after the
effective date of registration of any class of equity security of the Company
pursuant to Section 12 of the Exchange Act and prior to six months after the
termination of such registration, the per Share exercise price shall be no
less than 100% of the Fair Market Value per Share on the date of grant.
(b) PERMISSIBLE CONSIDERATION. The consideration to be paid for
the Shares to be issued upon exercise of an Option, including the method of
payment, shall be determined by the Administrator (and, in the case of an
Incentive Stock Option, shall be determined at the time of grant) and may
consist entirely of (1) cash, (2) check, (3) promissory note, (4) other
Shares that (x) in the case of Shares acquired upon exercise of an Option
either have been owned by the Optionee for more than six months on the date
of surrender or were not acquired, directly or indirectly, from the Company,
and (y) have a Fair Market Value on the date of surrender equal to the
aggregate exercise price of the Shares as to which said Option shall be
exercised, (5) authorization from the Company to retain from the total number
of Shares as to which the Option is exercised that number of Shares having a
Fair Market Value on the date of exercise equal to the exercise price for the
total number of Shares as to which the Option is exercised, (6) delivery of a
properly executed exercise notice together with irrevocable instructions to a
broker to deliver promptly to the Company the amount of sale or loan proceeds
required to pay the exercise price, (7) delivery of an irrevocable
subscription agreement for the Shares that irrevocably obligates the option
holder to take and pay for the Shares not more than twelve months after the
date of delivery of the subscription agreement, (8) any combination of the
foregoing methods of payment, or (9) such other consideration and method of
payment for the issuance of Shares to the extent permitted under Applicable
Laws. In making its determination as to the type of consideration to accept,
the Administrator shall consider if acceptance of such consideration may be
reasonably expected to benefit the Company.
10. EXERCISE OF OPTION.
(a) PROCEDURE FOR EXERCISE; RIGHTS AS A SHAREHOLDER. Any Option
granted hereunder shall be exercisable at such times and under such
conditions as determined by the Admin-
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istrator, including performance criteria with respect to the Company and/or
the Optionee, and as shall be permissible under the terms of the Plan.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of
such exercise has been given to the Company in accordance with the terms of
the Option by the person entitled to exercise the Option and full payment for
the Shares with respect to which the Option is exercised has been received by
the Company. Full payment may, as authorized by the Administrator, consist of
any consideration and method of payment allowable under Section 9(b) of the
Plan. Until the issuance (as evidenced by the appropriate entry on the books
of the Company or of a duly authorized transfer agent of the Company) of the
stock certificate evidencing such Shares, no right to vote or receive
dividends or any other rights as a shareholder shall exist with respect to
the Optioned Stock, notwithstanding the exercise of the Option. The Company
shall issue (or cause to be issued) such stock certificate promptly upon
exercise of the Option. No adjustment will be made for a dividend or other
right for which the record date is prior to the date the stock certificate is
issued, except as provided in Section 14 of the Plan.
Exercise of an Option in any manner shall result in a decrease in
the number of Shares which thereafter may be available, both for purposes of
the Plan and for sale under the Option, by the number of Shares as to which
the Option is exercised.
(b) TERMINATION OF STATUS AS AN EMPLOYEE OR CONSULTANT. In the
event of termination of an Optionee's Continuous Status as an Employee or
Consultant, such Optionee may, but only within thirty (30) days (or such
other period of time, not exceeding three (3) months in the case of an
Incentive Stock Option or six (6) months in the case of a Nonstatutory Stock
Option, as is determined by the Administrator, with such determination in the
case of an Incentive Stock Option being made at the time of grant of the
Option) after the date of such termination (but in no event later than the
date of expiration of the term of such Option as set forth in the Option
Agreement), exercise his or her Option to the extent that he or she was
entitled to exercise it at the date of such termination. To the extent that
the Optionee was not entitled to exercise the Option at the date of such
termination, or if the optionee does not exercise such Option (which he or
she was entitled to exercise) within the time specified herein, the Option
shall terminate.
(c) DISABILITY OF OPTIONEE. Notwithstanding Section 10(b) above,
in the event of termination of an Optionee's Continuous Status as an Employee
or Consultant as a result of his or her total and permanent disability (as
defined in Section 22(e)(3) of the Code), he or she may, but only within six
(6) months (or such other period of time not exceeding twelve (12) months as
is determined by the Administrator, with such determination in the case of an
Incentive Stock Option being made at the time of grant of the Option) from
the date of such termination (but in no event later than the date of
expiration of the term of such Option as set forth in the Option Agreement),
exercise his or her Option to the extent he or she was entitled to exercise
it at the date of such termination. To the extent that he or she was not
entitled to exercise the Option at
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the date of termination, or if he does not exercise such Option (which he was
entitled to exercise) within the time specified herein, the Option shall
terminate.
(d) DEATH OF OPTIONEE. In the event of the death of an Optionee:
(i) during the term of the Option who is at the time of his
death an Employee or Consultant of the Company and who shall have been in
Continuous Status as an Employee or Consultant since the date of grant of the
Option, the Option may be exercised, at any time within six (6) months (or
such other period of time, not exceeding six (6) months, as is determined by
the Administrator, with such determination in the case of an Incentive Stock
Option being made at the time of grant of the Option) following the date of
death (but in no event later than the date of expiration of the term of such
Option as set forth in the Option Agreement), by the Optionee's estate or by
a person who acquired the right to exercise the Option by bequest or
inheritance but only to the extent of the right to exercise that would have
accrued had the Optionee continued living and remained in Continuous Status
as an Employee or Consultant three (3) months (or such other period of time
as is determined by the Administrator as provided above) after the date of
death, subject to the limitation set forth in Section 5(b); or
(ii) within thirty (30) days (or such other period of time not
exceeding three (3) months as is determined by the Administrator, with such
determination in the case of an Incentive Stock Option being made at the time
of grant of the Option) after the termination of Continuous Status as an
Employee or Consultant, the Option may be exercised, at any time within six
(6) months following the date of death (but in no event later than the date
of expiration of the term of such Option as set forth in the Option
Agreement), by the Optionee's estate or by a person who acquired the right to
exercise the Option by bequest or inheritance, but only to the extent of the
right to exercise that had accrued at the date of termination.
(e) RULE 16b-3. Options granted to persons subject to Section
16(b) of the Exchange Act must comply with Rule 16b-3 and shall contain such
additional conditions or restrictions as may be required thereunder to
qualify for the maximum exemption from Section 16 of the Exchange Act with
respect to Plan transactions.
11. WITHHOLDING TAXES. As a condition to the exercise of Options
granted hereunder, the Optionee shall make such arrangements as the
Administrator may require for the satisfaction of any federal, state, local
or foreign withholding tax obligations that may arise in connection with the
exercise, receipt or vesting of such Option. The Company shall not be
required to issue any Shares under the Plan until such obligations are
satisfied.
12. STOCK WITHHOLDING TO SATISFY WITHHOLDING TAX OBLIGATIONS. At the
discretion of the Administrator, Optionees may satisfy withholding
obligations as provided in this paragraph. When an Optionee incurs tax
liability in connection with an Option which tax liability is subject to tax
withholding under applicable tax laws, and the Optionee is obligated to pay
the Company an amount required to be withheld under applicable tax laws, the
Optionee may satisfy the withholding tax obligation by one or some
combination of the following methods: (a) by cash payment, or (b) out of
Optionee's current compensation, (c) if permitted by the Administrator, in
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its discretion, by surrendering to the Company Shares that (i) in the case of
Shares previously acquired from the Company, have been owned by the Optionee
for more than six months on the date of surrender, and (ii) have a fair
market value on the date of surrender equal to or less than Optionee's
marginal tax rate times the ordinary income recognized, or (d) by electing to
have the Company withhold from the Shares to be issued upon exercise of the
Option that number of Shares having a fair market value equal to the amount
required to be withheld. For this purpose, the fair market value of the
Shares to be withheld shall be determined on the date that the amount of tax
to be withheld is to be determined (the "Tax Date").
Any surrender by an Officer or Director of previously owned Shares
to satisfy tax withholding obligations arising upon exercise of this Option
must comply with the applicable provisions of Rule 16b-3 and shall be subject
to such additional conditions or restrictions as may be required thereunder
to qualify for the maximum exemption from Section 16 of the Exchange Act with
respect to Plan transactions.
All elections by an Optionee to have Shares withheld to satisfy tax
withholding obligations shall be made in writing in a form acceptable to the
Administrator and shall be subject to the following restrictions:
(a) the election must be made on or prior to the applicable
Tax Date;
(b) once made, the election shall be irrevocable as to the
particular Shares of the Option as to which the election is made;
(c) all elections shall be subject to the consent or
disapproval of the Administrator;
(d) if the Optionee is an Officer or Director, the election
must comply with the applicable provisions of Rule 16b-3 and shall be subject
to such additional conditions or restrictions as may be required thereunder
to qualify for the maximum exemption from Section 16 of the Exchange Act with
respect to Plan transactions.
In the event the election to have Shares withheld is made by an
Optionee and the Tax Date is deferred under Section 83 of the Code because no
election is filed under Section 83(b) of the Code, the Optionee shall receive
the full number of Shares with respect to which the Option is exercised but
such Optionee shall be unconditionally obligated to tender back to the
Company the proper number of Shares on the Tax Date.
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13. NON-TRANSFERABILITY OF OPTIONS. The Option may not be sold,
pledged, assigned, hypothecated, transferred, or disposed of in any manner
other than by will or by the laws of descent or distribution. The
designation of a beneficiary by an Optionee will not constitute a transfer.
An Option may be exercised, during the lifetime of the Optionee, only by the
Optionee or a transferee permitted by this Section 13.
14. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION; CORPORATE TRANSACTIONS.
(a) ADJUSTMENT. Subject to any required action by the shareholders
of the Company, the number of shares of Common Stock covered by each
outstanding Option, the number of shares of Common Stock that have been
authorized for issuance under the Plan but as to which no Options have yet
been granted or which have been returned to the Plan upon cancellation or
expiration of an Option, the maximum number of shares of Common Stock for
which Options may be granted to any employee under Section 8 of the Plan, and
the price per share of Common Stock covered by each such outstanding Option,
shall be proportionately adjusted for any increase or decrease in the number
of issued shares of Common Stock resulting from a stock split, reverse stock
split, stock dividend, combination or reclassification of the Common Stock,
or any other increase or decrease in the number of issued shares of Common
Stock effected without receipt of consideration by the Company; provided,
however, that conversion of any convertible securities of the Company shall
not be deemed to have been "effected without receipt of consideration." Such
adjustment shall be made by the Administrator, whose determination in that
respect shall be final, binding and conclusive. Except as expressly provided
herein, no issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and
no adjustment by reason thereof shall be made with respect to, the number or
price of shares of Common Stock subject to an Option.
(b) CORPORATE TRANSACTIONS. In the event of the proposed
dissolution or liquidation of the Company, the Option will terminate
immediately prior to the consummation of such proposed action, unless
otherwise provided by the Administrator. The Administrator may, in the
exercise of its sole discretion in such instances, declare that any Option
shall terminate as of a date fixed by the Administrator and give each
Optionee the right to exercise his or her Option as to all or any part of the
Optioned Stock, including Shares as to which the Option would not otherwise
be exercisable. In the event of a proposed sale of all or substantially all
of the assets of the Company, or the merger of the Company with or into
another corporation, the Option shall be assumed or an equivalent option
shall be substituted by such successor corporation or a parent or subsidiary
of such successor corporation, unless the Administrator determines, in the
exercise of its sole discretion and in lieu of such assumption or
substitution, that the Optionee shall have the right to exercise the Option
as to some or all of the Optioned Stock, including Shares as to which the
Option would not otherwise be exercisable. If the Administrator makes an
Option exercisable in lieu of assumption or substitution in the event of a
merger or sale of assets, the Administrator shall notify the Optionee that
the Option shall be exercisable for a period of fifteen (15) days from the
date of such notice, and the Option will terminate upon the expiration of
such period.
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15. TIME OF GRANTING OPTIONS. The date of grant of an Option shall, for
all purposes, be the date on which the Administrator makes the determination
granting such Option or such other date as is determined by the
Administrator. Notice of the determination shall be given to each Employee
or Consultant to whom an Option is so granted within a reasonable time after
the date of such grant.
16. AMENDMENT AND TERMINATION OF THE PLAN.
(a) AMENDMENT AND TERMINATION. The Board may amend or terminate
the Plan from time to time in such respects as the Board may deem advisable;
provided that, the following revisions or amendments shall require approval
of the shareholders of the Company in the manner described in Section 20 of
the Plan:
(i) any increase in the number of Shares subject to the Plan,
other than an adjustment under Section 14 of the Plan;
(ii) any change in the designation of the class of persons
eligible to be granted Options;
(iii) any change in the limitation on grants to employees as
described in Section 8 of the Plan or other changes which would
require shareholder approval to qualify options granted hereunder
as performance-based compensation under Section 162(m) of the Code;
or
(iv) any revision or amendment requiring shareholder approval
in order to preserve the qualification of the Plan under Rule 16b-3.
(b) SHAREHOLDER APPROVAL. If any amendment requiring shareholder
approval under Section 13(a) of the Plan is made subsequent to the first
registration of any class of equity securities by the Company under Section
12 of the Exchange Act, such shareholder approval shall be solicited as
described in Section 20 of the Plan.
(c) EFFECT OF AMENDMENT OR TERMINATION. Any such amendment or
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee
and the Board, which agreement must be in writing and signed by the Optionee
and the Company.
17. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and
the issuance and delivery of such Shares pursuant thereto shall comply with
all relevant provisions of law, including, without limitation, the Securities
Act of 1933, as amended, the Exchange Act, the rules and regulations
promulgated thereunder, and the requirements of any stock exchange upon which
the Shares may then be listed, and shall be further subject to the approval
of counsel for the Company with respect to such compliance.
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As a condition to the exercise of an Option, the Company may require
the person exercising such Option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by any
of the aforementioned relevant provisions of law.
18. RESERVATION OF SHARES. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall
be sufficient to satisfy the requirements of the Plan. The inability of the
Company to obtain authority from any regulatory body having jurisdiction,
which authority is deemed by the Company's counsel to be necessary to the
lawful issuance and sale of any Shares hereunder, shall relieve the Company
of any liability in respect of the failure to issue or sell such Shares as
to which such requisite authority shall not have been obtained.
19. OPTION AGREEMENT. Options shall be evidenced by written option
agreements in such form as the Board shall approve.
20. SHAREHOLDER APPROVAL.
(a) Continuance of the Plan shall be subject to approval by the
shareholders of the Company within twelve (12) months before or after the
date the Plan is adopted. Such shareholder approval shall be obtained in the
manner and to the degree required under applicable federal and state law and
the rules of any stock exchange upon which the Shares are listed.
(b) In the event that the Company registers any class of equity
securities pursuant to Section 12 of the Exchange Act, any required approval
of the shareholders of the Company obtained after such registration shall be
solicited substantially in accordance with Section 14(a) of the Exchange Act
and the rules and regulations promulgated thereunder.
(c) If any required approval by the shareholders of the Plan itself
or of any amendment thereto is solicited at any time otherwise than in the
manner described in Section 20(b) hereof, then the Company shall, at or prior
to the first annual meeting of shareholders held subsequent to the later of
(1) the first registration of any class of equity securities of the Company
under Section 12 of the Exchange Act or (2) the granting of an Option
hereunder to an officer or director after such registration, do the following:
(i) furnish in writing to the holders entitled to vote for the
Plan substantially the same information that would be required (if proxies to
be voted with respect to approval or disapproval of the Plan or amendment
were then being solicited) by the rules and regulations in effect under
Section 14(a) of the Exchange Act at the time such information is furnished;
and
(ii) file with, or mail for filing to, the Securities and
Exchange Commission four copies of the written information referred to in
subsection (i) hereof not later than the date on which such information is
first sent or given to shareholders.
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21. INFORMATION TO OPTIONEES. The Company shall provide to each
Optionee, during the period for which such Optionee has one or more Options
outstanding, copies of all annual reports and other information which are
provided to all shareholders of the Company.
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