<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for the Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
</TABLE>
LIFEPOINT, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
LIFEPOINT, INC.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:1
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
<PAGE> 2
LIFEPOINT, INC.
10400 TRADEMARK STREET
RANCHO CUCAMONGA, CA 91730
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders of
LIFEPOINT, INC.
The Annual Meeting of Stockholders of LifePoint, Inc. (the "Company") will
be held at the Ontario Airport Hilton located at 700 North Haven Avenue,
Ontario, California 91764, on Thursday, August 13, 1998, at 10:00 a.m., Pacific
Daylight Time (the "Annual Meeting"), for the following purposes:
1. To elect four directors for a one-year term until the next Annual
Meeting of Stockholders and until their successors are duly elected and
qualify.
2. To ratify the appointment of Ernst & Young LLP as independent public
accountants of the Company for the fiscal year ending March 31, 1999.
3. To adopt and approve the LifePoint, Inc. 1997 Stock Option Plan and
ratify the prior grants of options thereunder.
4. To transact such other business as may come before the Annual Meeting
or any adjournment thereof.
Only stockholders of record at the close of business on Friday, July 24,
1998, are entitled to notice of, and to vote at, the Annual Meeting or any
adjournment thereof.
By Order of the Board of Directors
/s/ Robert W. Berend
Robert W. Berend
Secretary
July 28, 1998
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE DATE AND SIGN THE
ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE. THE PROXY MAY BE REVOKED
IN WRITING PRIOR TO THE MEETING OR, IF YOU ATTEND THE MEETING, YOU MAY REVOKE
THE PROXY AND VOTE YOUR SHARES IN PERSON.
<PAGE> 3
LIFEPOINT, INC.
10400 TRADEMARK STREET
RANCHO CUCAMONGA, CA 91730
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
AUGUST 13, 1998
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of LifePoint, Inc. (the "Company"), formerly named U.S.
Drug Testing, Inc., of proxies to be voted at the Company's Annual Meeting of
Stockholders (the "Meeting") to be held on Thursday, August 13, 1998, or at any
adjournment thereof. The purposes for which the Meeting is to be held are set
forth in the preceding Notice of Annual Meeting. This Proxy Statement and the
enclosed form of proxy are first being mailed on or about Tuesday, July 28,
1998, to holders of record of the Company's Common Stock, par value $.001 per
share (the "Common Stock"), as of the close of business on Friday, July 24, 1998
(the "Record Date"), which has been fixed as the record date for the
determination of the stockholders entitled to notice of, and to vote at, the
Meeting.
VOTING SECURITIES
On the Record Date, 11,797,206 shares of the Common Stock, which is only
class entitled to vote at the Meeting, were issued, outstanding and entitled to
vote. Each stockholder of record is entitled to cast, in person or by proxy, one
vote for each share of the Common Stock held by such stockholder as of the close
business on the Record Date. A plurality of the votes cast at the Meeting shall
be necessary to elect the four directors. The affirmative vote of the holders of
a majority of the shares represented and entitled to vote at the Meeting shall
be necessary to approve the selection of the independent auditors and to adopt
and approve the LifePoint, Inc. 1997 Stock Option Plan (the "Stock Option
Plan"), a copy of which is annexed hereto as Appendix A, and to ratify the grant
of stock options to purchase an aggregate of 1,100,000 shares of the Common
Stock heretofore granted thereunder.
A majority of the shares entitled to vote, present in person or represented
by proxy, constitutes a quorum at the Meeting. Abstensions and broker non-votes
are treated for the purpose of determining a quorum at the Meeting and are not
treated as a vote for or against a proposal.
Proxies will be voted as indicated in this Proxy Statement and the enclosed
proxy. Shares presented by properly executed proxies, if received in time, will
be voted in accordance with any specifications made therein. A proxy may be
revoked by delivering a written notice of revocation to the Company (Attention:
Robert W. Berend, Secretary) at its principal executive office or in person at
the Meeting, or by a subsequently dated proxy, at any time prior to the voting
thereof. The principal executive office of the Company is located at the above
address.
Rule 452 of the New York Stock Exchange, Inc. permits a member firm to vote
for the directors and/or for the proposal to ratify the selection of independent
auditors if the member firm holds the shares of the Common Stock for a
beneficial owner and receives no instructions to the contrary by the tenth day
before the Meeting. However, under the Rule the beneficial owner must give
specific instructions to the member firm for it to vote the stockholder's shares
on the proposal to adopt and approve the Stock Option Plan and to ratify the
stock options heretofore granted thereunder. The Company, accordingly, urges
each beneficial owner to instruct the member firm which holds of record the
stockholder's shares of the Common Stock to vote in favor of the three proposals
submitted to the stockholders for a vote.
As indicated under "Security Ownership of Certain Beneficial Holders and
Management," Meadow Lane Partners, LLC ("Meadow Lane"), of which limited
liability company Jonathan J. Pallin, the Chairman of the Board and a director
of the Company, and Herman Sandler are the sole members, own 5,575,306 shares of
the Common Stock, which constitutes 47.3% of the outstanding shares entitled to
vote at the Meeting, and Peter S. Gold and Paul Sandler, each a director of the
Company, own 700,000 and 200,000 shares,
<PAGE> 4
respectively. Each of Meadow Lane and Messrs. Gold and Sandler has advised the
Company that it or he intends to vote all of its or his shares in favor of the
Board's nominees for election as directors and in favor of the two other
proposals to be submitted to a vote at the Meeting. Accordingly, their 6,475,306
shares, or 54.9% of the outstanding shares entitled to vote at the Meeting, will
be sufficient to elect the Board's four nominees as directors and to approve the
two other proposals even if all of the other stockholders vote against or do not
vote at all. Nevertheless, the Board urges the other stockholders to vote at
this first Annual Meeting of Stockholders since September 24, 1994. For an
explanation as to the reason for no meetings in the intervening period, see
"Proposal One: Election of Directors -- Nominees for Election Directors."
A stockholder shall have no right to receive payment for his, her or its
shares as a result of stockholder approval of any proposal in the Notice of
Annual Meeting.
PROPOSAL ONE: ELECTION OF DIRECTORS
NOMINEES FOR ELECTION AS DIRECTORS
Four directors will be elected at the Meeting, each to serve for a one-year
term until the next Annual Meeting of Stockholders and until his or her
successor is duly elected and qualifies. On June 5, 1998, the Board of Directors
reduced, effective with the Meeting, the number of directors from five to four.
The vacancy has existed since March 20, 1998 when Joseph R. Shaya (who was
elected on December 5, 1997) resigned for personal reasons. The Board intends to
seek additional directors after this Meeting and, if appropriate candidates are
determined, to increase the number of authorized directors and to elect such
candidate or candidates as permitted by the By-Laws of the Corporation.
Proxies received in response to this solicitation, unless specified
otherwise, will be voted in favor of the four nominees named below, all of whom
are currently serving as directors of the Company. None of the current directors
was ever elected by the stockholders of the Company at a meeting of
stockholders. The last Annual Meeting of the Stockholders was held on September
22, 1994. Because, until October 29, 1997 (when all of its shares of the Common
Stock were sold to Meadow Lane -- see "Management -- Certain Transactions"),
Substance Abuse Technologies, Inc. ("SAT") owned between 67.0% and 76.4% of the
then outstanding shares of the Common Stock, thereby permitting SAT to elect all
directors of the Company, and in order to preserve the Company's limited funds
for use for product development and pending resolution of SAT's proposal (first
announced in February 1996) to take the Company private through a merger with
and into a wholly-owned subsidiary of SAT and an exchange offer of shares of
SAT's Common Stock, $.01 par value, for the shares of the Common Stock held by
the minority stockholders of the Company, the prior Board of Directors,
consisting of SAT officers and/or directors, did not call for an Annual Meeting
of Stockholders. If a nominee should not be available for election as
contemplated, the management proxy holders will vote for such lesser number of
directors as are available to serve or will vote for a substitute designated by
the current Board of Directors. In no event will proxies be voted for more than
four nominees.
The following table sets forth certain information, as of the Record Date,
concerning the nominees for election as directors of the Company. The
information has been furnished to the Company by the individual named. For
information as to the shares of the Common Stock held by each nominee, see the
section "Security Ownership of Certain Beneficial Holders and Management"
elsewhere in this Proxy Statement.
<TABLE>
<CAPTION>
YEAR FIRST
ELECTED
NAME OF NOMINEE AGE DIRECTOR POSITION AND OFFICES WITH THE COMPANY
- --------------- --- ---------- -------------------------------------
<S> <C> <C> <C>
Jonathan J. Pallin.................. 48 1997 Chairman of the Board and a Director
Linda H. Masterson.................. 47 1996 President, Chief Executive Officer
and a Director
Peter S. Gold....................... 73 1997 Director
Paul Sandler........................ 58 1997 Director
</TABLE>
2
<PAGE> 5
FAMILY RELATIONSHIPS OF NOMINEES AND EXECUTIVE OFFICERS
Jonathan J. Pallin and Paul Sandler are brother-in-laws. There are no other
family relationships among the nominees for election as directors and the
executive officers of the Company.
BUSINESS HISTORY OF NOMINEES
Jonathan J. Pallin was elected Chairman of the Board and a director of the
Company on October 31, 1997. He has over 22 years' experience in the financial
markets as an institutional fixed income broker and a financial consultant and
in an investment banking advisory role. Mr. Pallin served as Senior Vice
President, Retail Brokerage for PaineWebber Incorporated from January 1991 to
July 1993, as a Senior Vice President, Investments, Retail Brokerage for Baraban
Securities Incorporated from July 1993 to May 1996 and as a Vice President,
Retail Brokerage for Sutro & Co. Incorporated from May 1996 to October 1997. Mr.
Pallin has an MBA from Arizona State University with a major emphasis on
Accounting, and a BS from Long Island University (Southampton) in Business and
Psychology.
Linda H. Masterson has had substantial experience in marketing, sales and
business development in the medical diagnostics, healthcare and biotechnology
fields. She was elected a director of SAT on September 26, 1995. Effective May
13, 1996, she became the President and Chief Operating Officer of SAT. On May
31, 1996, she was elected a director of the Company and, on July 31, 1996, the
President and Chief Operating Officer of the Company. Effective November 19,
1996, she relinquished her duties as Chief Operating Officer of SAT in order to
devote more time to supervising the development program of the Company and the
operations of the Alcohol Products and BioTox Divisions of SAT. On May 23, 1997,
she resigned as the President of SAT in order to become the Chief Executive
Officer of the Company (formally designated as such on May 26, 1997). On
November 4, 1997, she resigned as a director of SAT, thereby terminating her
last position with the former parent of the Company. Until May 13, 1996 when she
became an employee of SAT, she was employed as the Executive Vice President of
Cholestech, Inc., a start-up diagnostic company, for which she developed and
restructured that company's business strategy. In November 1993, Ms. Masterson
founded Masterson & Associates, a company of which she was the President and
owner until she joined Cholestech, Inc. in May 1994, which was engaged in the
business of providing advice to start-up companies, including the preparation of
technology and market assessments and the preparation of strategic and five-year
business plans for biotech, medical device, pharmaceutical and software
applications companies. From April 1992 to November 1993, Ms. Masterson was
employed as the Vice President of Marketing and Sales of BioStar, Inc., a
start-up biotech company focused on the commercialization of a new detection
technology applicable to both immunoassay and hybridization based systems. From
1989 to 1992, she was employed as Senior Vice President of Marketing, Sales and
Business Development by Gen-Probe, Inc., a specialized genetic probe
biotechnology company focused on infectious diseases, cancer and therapeutics.
Prior to 1989, Ms. Masterson was employed for 12 years in various domestic and
international marketing and sales positions at Johnson & Johnson, Inc., Baxter
International Inc. and Warner Lambert Co. Ms. Masterson has a BS in Medical
Technology from the University of Rhode Island and an MS in
Microbiology/Biochemistry from the University of Maryland and attended the
Executive Advanced Management Program at the Wharton School of Business at the
University of Pennsylvania.
Peter S. Gold was elected as a director of the Company on December 5, 1997.
He retired in 1990 as Chairman and Chief Executive Officer of Price Pfister,
Inc., the largest manufacturer of faucets in the world. Mr. Gold did a leveraged
buyout and purchased such company in 1983; he subsequently took the company
public in 1987; and sold the company in 1988. Price Pfister is now owned by
Black & Decker. Mr. Gold is a Director Emeritus of The Home Depot, Inc. and has
major investments in commercial real estate in various parts of the United
States. Mr. Gold is Chairman of the Board of Trustees of Pitzer College
(Claremont College), Claremont, CA, and a member of the Board of Trustees of the
City of Hope. Mr. Gold received a Doctor of Humane Letters from Pitzer College,
Claremont, CA, and received a law degree at Southwestern University, Los
Angeles, CA.
Paul Sandler was elected as a director of the Company on December 5, 1997.
He is a Board Certified pediatric nephrologist at the Arizona Kidney Disease &
Hypertension Center in Phoenix. Additionally,
3
<PAGE> 6
Dr. Sandler is the Medical Director at Walter Boswell Memorial Hospital, the
Phoenix Artificial Kidney Center, the South Phoenix Dialysis Center, the South
Mountain Dialysis Services and Phoenix Memorial Hospital PPG. Dr. Sandler was a
fellow at Albert Einstein College of Medicine in New York City and received his
post-graduate training at Kings County Hospital, New York City. Dr. Sandler
received his MD at the State University of New York and his BA from Emory
University.
COMMITTEES AND BOARD MEETINGS
Because, as indicated in the section "Nominees for Election as Directors"
under this caption "Proposal One: Election of Directors," the Company was a
majority-owned subsidiary of SAT until October 29, 1997, and, as a result, all
major decisions were made by the parent company, there were no standing audit,
compensation or nominating committees prior thereto. On December 5, 1997, the
Board established standing audit and compensation committees and designated the
then independent directors to serve on such two committees. No nominating
committee has been designated.
Messrs. Gold and Sandler serve on the Audit Committee, with Mr. Gold
serving as Chairperson. The Audit Committee will recommend annually to the
stockholders the independent auditors to be retained by the Company, will review
the scope and procedures to be followed in the conduct of audits by the
independent auditors and, when employed, the internal auditors of the Company
and will review various reports and recommendations with respect to internal
controls and any significant changes in accounting.
Messrs. Gold and Sandler also serve on the Compensation Committee, with Dr.
Sandler serving as Chairperson. The Compensation Committee will approve the
remuneration of key officers of the Company and, if incorporated or acquired,
its subsidiaries, will review and recommend to the Board of Directors changes in
the Company's stock benefit and executive, managerial or employee compensatory
and benefit plans or programs and will administer stock option, restricted stock
or similar plans of the Company.
During the fiscal year ended March 31, 1998 ("fiscal 1998"), there were
twelve meetings of the Board. Each of the incumbent directors participated in
all meetings of the Board during the period in which he or she served as a
director. There were no meetings of the Audit Committee or the Compensation
Committee held during fiscal 1998. The Audit Committee intends to meet on August
13, 1998 with representatives of Ernst & Young LLP, the independent auditors for
the Company, to review the auditors' comments derived as a result of their audit
of the Company's financial statements for fiscal 1998.
4
<PAGE> 7
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table contains certain information relating to the directors
and executive officers of the Company as of the Record Date:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Jonathan J. Pallin.................... 48 Chairman of the Board and a Director
Linda H. Masterson.................... 47 President, Chief Executive Officer
and a Director
Thomas J. Foley....................... 58 Vice President, Research and
Development
William B. Benken..................... 50 Vice President, Operations
Peter S. Gold......................... 73 Director
Paul Sandler.......................... 58 Director
</TABLE>
Each director is elected to serve until the next Annual Meeting of
Stockholders or until his or her successor is elected and shall have qualified.
Of the directors named in the above table, none was elected by the stockholders
of the Company at a meeting of stockholders, all being elected by the Board to
fill a vacancy. All are the Board's nominees for election as directors at the
Meeting. See "Proposal One: Election of Directors." Each officer of the Company
is elected by the Board of Directors to serve at the discretion of the Board.
BUSINESS HISTORY
For information as to the business histories of Messrs. Pallin, Gold and
Sandler and Ms. Masterson, see "Proposal One: Election of Directors -- Business
History of Nominees."
Thomas J. Foley has over 25 years' experience in the medical diagnostic
industry. He was elected to his officership in the Company effective March 9,
1998. From November 1997 to March 1998, he was a consultant to various
companies. From November 1994 to November 1997, he served as the Executive Vice
President of Business and Product Development at HiChem/Elan Diagnostics
("HiChem"), where he managed research and development, regulatory affairs
(including FDA submissions), strategic and business planning, technology
assessment for acquisitions, and manufacturing operations. Prior to joining
HiChem in November 1994, Dr. Foley was Vice President of Research and
Development at Hycor Biomedical, Inc. ("Hycor"), where he was responsible for
research and development of all products, including drugs of abuse products,
over an eight-year period from May 1986 to November 1994. Prior to Hycor, Dr.
Foley was Vice President of Research and Development at Gilford Instruments from
1983 to 1986 and Worthington Diagnostics from 1981 to 1983. Prior to Worthington
Diagnostics, Dr. Foley worked at Beckman Instruments, Inc. ("Beckman") and was
the reagents product development manager for the Astra, one of Beckman's most
successful product lines. Dr. Foley has a Ph.D. in Biochemistry from Trinity
College, Dublin.
William B. Benken has over 25 years of management experience directing
teams in development, engineering and manufacturing operations in the
pharmaceutical, medical device, diagnostic, and related technology driven
industries. He was elected as a Vice President of the Company on May 26, 1997.
Mr. Benken specializes in transitioning new products through the development
phase and setting up manufacturing operations. Prior to joining the Company,
from November 1996 to May 1997, Mr. Benken was Director of Operations, Medical
Technology, for Chiralt Corp. From May 1992 to November 1996, he was Chemical
Manufacturing Manager, Diagnostic/Scientific Instruments for Beckman
Instruments, Inc., a Fortune 500 manufacturer of clinical analyzers, diagnostic
reagents, bio-consumables, and state of the art scientific instrumentation
supporting the Human Genome Project. From 1986 to 1989, Mr. Benken was Director
of Manufacturing Engineering and Manufacturing Operations at Medstone
International, Inc. ("Medstone"), a startup company in Irvine, CA. Medstone was
the first U.S. manufacturer to receive FDA PMA approval to manufacture and
market lithotriptors for non-invasive treatment of kidney stones. Prior to
joining Medstone, Mr. Benken was Engineering Manager at Brunswick Technetics,
the membrane division of
5
<PAGE> 8
Brunswick Corporation, where he directed development, scale-up and
commercialization of state of the art, asymmetric microporous permeable membrane
filtration products used for point of use sterilization for pharmaceuticals and
in other critical, high purity applications. Mr. Benken has a Masters in
Engineering from California State Polytechnic University, Pomona, and a BS in
Chemistry and Chemical Engineering from City College of CUNY.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Effective October 28, 1997, the Securities and Exchange Commission granted
the application by the Pacific Exchange, Inc. to delist and deregister the
Common Stock under Section 12(b) of the Securities Exchange Act 1934, as amended
(the "Exchange Act"), and, effective February 4, 1998, the Company registered
the Common Stock under Section 12(g) of the Exchange Act.
The Company has called to the attention of its directors and executive
officers their obligation to comply with Section 16(a) of the Exchange Act and,
at their request, has caused to be filed late for the following directors and
executive officers of LifePoint: (1) a Form 3 for each of (a) Peter S. Gold, a
director; (b) Paul Sandler, a director; (c) Joseph R. Shaya, a director from
December 5, 1997 to March 20, 1998; and (d) Thomas J. Foley, its Vice President,
Research and Development; and (2) a Form 5 for each of (a) Linda H. Masterson,
its President, its Chief Executive Officer and a director; (b) Jonathan J.
Pallin, its Chairman of the Board and a director; and (c) William B. Benken, its
Vice President, Operations. Based on a review with Messrs. Gold, Sandler, Shaya
and Foley, none of them would have been required to file a Form 4 in fiscal 1998
because each did not have an acquisition or disposition of securities of
LifePoint subsequent to February 4, 1998 (the date the Form 3 should have been
timely filed) and on or before March 31, 1998.
Because, prior to the filing of the Forms 3 and 5 to which reference is
made in the preceding paragraph, the Company did not receive any copies of Forms
3, 4 and 5 for the period prior to February 4, 1998, the Company asked each of
the named persons in the preceding paragraph to consider whether he or she had
an obligation to file pursuant to Section 16(a) of the Exchange Act prior
thereto. Each of Messrs. Gold, Sandler, Shaya and Foley advised the Company that
he had become a director or an executive officer subsequent to October 28, 1997
and, accordingly, had no obligation to file under Section 16(a) of the Exchange
Act until February 4, 1998. Each of Ms. Masterson and Messrs. Pallin and Benken
has requested the Company to cause the filing of a Form 5 for her or him.
The Company has implemented, with the cooperation of its directors, its
executive officers and its counsel, a program to attempt to ensure in the future
timely compliance with Section 16(a) of the Exchange Act.
Up until the sale of its majority position in the Company to Meadow Lane on
October 29, 1997 (see the section "Certain Transactions" under this caption
"Management"), SAT was the only beneficial owner of 10% or more of the Common
Stock and SAT has informed the Company that, except for the acquisition of
2,075,306 shares in exchange for cancellation of indebtedness due SAT and the
sale of its majority position through the bankruptcy court proceedings to Meadow
Lane, there were no other transactions by SAT relating to the Common Stock
during fiscal 1998. The Company is not aware of any Form 4 filed by SAT.
As of March 31, 1998, i.e., the end of fiscal 1998, Jonathan J. Pallin and
Herman S. Sandler, as the sole members of Meadow Lane, were the only beneficial
owners of 10% or more of the Common Stock, and they have informed the Company
that Meadow Lane has not engaged in transactions relating to the Common Stock
other than the original purchase of the shares in October 1997 from SAT and the
receipt of a Common Stock purchase warrant in January 1998 (see the section
"Certain Transactions" under this caption "Management"). As indicated above in
this section, Mr. Pallin has filed a Form 5 with respect to his transactions and
his election as a director on October 31, 1997. At Mr. Sandler's request,
LifePoint has filed a Form 3 for him.
6
<PAGE> 9
CERTAIN TRANSACTIONS
See "Executive Compensation -- Employment and Severance Agreements" for
information relating to the severance agreements with Linda H. Masterson, the
President, the Chief Executive Officer and a director of the Company, and
William B. Benken the Vice President, Operations of the Company.
Jonathan J. Pallin, the Chairman of the Board and a director of the
Company, received a finder's fee of $160,000 for the Company's private placement
conducted in October to December 1997, which fee was authorized prior to his
being elected to such positions. On April 28, 1998, the Board authorized the
following compensation arrangement for Mr. Pallin for his services on a daily
basis as Chairman of the Board of the Company: (1) a fee of $10,000 per month
for a one-year period commencing April 1, 1998 and (2) a bonus of $75,000 if the
Company obtains cash financing of $5,000,000 to $6,900,000; (b) $100,000 if the
Company obtains cash financing of $7,000,000 to $9,900,000; and (c) $125,000 if
the Company obtains cash financing of over 10,000,000, subject to certain
limitations.
In July 1993, the Company and SAT entered into an amended Management
Agreement, effective retroactively to April 1, 1993, pursuant to which the fee
for management and administrative services provided to the Company by SAT was a
fixed annual fee of $420,000, plus three percent of the Company's annual gross
sales. Because the Company has no sales to date, it had always paid the minimum
fee under the Management Agreement. The term of the amended agreement was five
years that commenced April 1, 1993. Given the related personnel and belief of
the management of the Company that the terms offered by SAT were fair and
reasonable, the Company did not investigate alternative management services
providers. The fee charged by SAT for its management services was determined
arbitrarily by its Board of Directors after taking into consideration the
anticipated SAT resources required to provide such services to the Company, both
in terms of employee time and allocated overhead costs. The arbitrary formula
used by SAT to determine the fees was 50% of the sum of SAT's executive,
accounting and clerical salaries, fringe benefits and related expenses. In March
of 1997, the Management Agreement was again amended to provide for a percentage
of time and services agreement whereby the costs of certain SAT employees and
facilities were allocated to the Company based on a percentage of usage. As the
activity of the Company had been increasing, there had been a tremendous
increase in time required by SAT employees and expanded use of leased space to
satisfy the Company's needs. The services provided to the Company by SAT
pursuant to the Management Agreement included management, administrative,
accounting and other financial services and advice, including, without
limitation, the services then performed by the Treasurer of the Company (who was
also the Treasurer of SAT); services relating to the Company's financial and
banking relationships; services relating to the preparation of financial
statements, budget, forecast, and cash flow projections; cash management advice;
and other miscellaneous services and advice. The management fee was discontinued
after June 30, 1997 because no services were being provided after that date. The
Company paid management fees of $410,000 to SAT in fiscal 1998 as compared to
$420,000 in the fiscal year ended March 31, 1997 ("fiscal 1997"), a decrease of
$10,000 or 2.4%.
On October 29, 1997, with the approval of its bankruptcy court, SAT sold an
aggregate of 5,575,306 shares of the Common Stock to Meadow Lane for $250,000.
Of such shares 3,500,000 were initially acquired by SAT from the Company,
effective January 1, 1993, in consideration of SAT sublicensing or transferring
to the Company certain rights or assets to develop drug testing products. During
1997 the Boards of Directors of both the Company and SAT authorized the issuance
to SAT of a share of the Common Stock for each $1.25 in advances made by SAT to
fund the Company's research and development program. Based on SAT's advice that
the amount of indebtedness owed by the Company to SAT was $2,594,133, all of
which SAT agreed to treat as a capital contribution, the Company authorized the
issuance to SAT of 2,075,306 shares of the Common Stock, which were issued as of
June 30, 1997 and prior to the sale of the Common Stock held by SAT to Meadow
Lane. Subsequently to the sale, SAT advised the Company that the amount of
indebtedness was $3,426,994. As such, the forgiveness of the remaining
indebtedness to SAT of $832,861 was reflected as additional paid in capital as
of September 30, 1997. Recognizing that had SAT correctly reported the Company's
indebtedness to SAT, an additional 666,289 shares of the Common Stock would have
been issued to SAT and then sold to Meadow Lane, the Company's Board, on January
8, 1998, authorized the issuance to Meadow Lane of a Common Stock purchase
warrant expiring January 7, 2003 (the "Meadow Lane
7
<PAGE> 10
Warrant") to purchase 666,289 shares of the Common Stock at $.50 per share. The
Board concluded that, as a result of structuring the transaction in this manner,
Meadow Lane would receive what it thought it was buying, i.e., all of SAT's
shares in the Company, and the Company, not SAT, would receive $383,144.50 if
the Meadow Lane Warrant was exercised.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table provides certain summary information concerning
compensation paid or accrued by the Company during fiscal 1998, 1997 and the
fiscal year ended March 31, 1996 ("fiscal 1996") to any person who served as
Chief Executive Officer of the Company during fiscal 1998 and to each other
executive officer whose total annual salary and bonus exceeded $100,000 during
any such year:
ANNUAL COMPENSATION
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
-----------------------------------------
OTHER SECURITIES
NAME AND ANNUAL UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS COMPENSATION
------------------ ---- -------- ----- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Robert M. Stutman........... 1998 $ 0(2) -- -- -- --
Chief Executive Officer 1997 $ 0(2) -- -- -- --
and Chairman(1) 1996 $ 0(2) -- -- -- --
Linda H. Masterson.......... 1998 $125,249(4) -- -- 700,000 --
Chief Executive Officer 1997 $ 0(5) -- -- -- --
and President(3) 1996 $ 0(5) -- -- -- --
Stephen J. Kline............ 1998 $ 0(7) -- -- 150,000(8) --
Vice President, Research 1997 $ 0(9) -- -- 50,000(8) --
and Development(6) 1996 $117,000 -- -- 10,000(8) --
</TABLE>
- ---------------
(1) Mr. Stutman served as Chief Executive Officer of the Company from May 31,
1996 until May 26, 1997 and as Chairman of the Board of the Company from May
31, 1996 to October 31, 1997.
(2) Mr. Stutman's salary was paid entirely by SAT and, to the extent his
services were on behalf of the Company, this was reflected in SAT's
management fee to the Company.
(3) Ms. Masterson was elected President of the Company effective August 1, 1996
and designated as its Chief Executive Officer on May 26, 1997.
(4) The amount shown in the table does not reflect $33,654 paid by SAT to Ms.
Masterson for the period April 1 to June 1, 1997 nor $19,384.62 in deferred
salary which will be paid only if the Company obtains long-term financing.
Effective August 11, 1997, the Company directly paid all compensation for
Ms. Masterson.
(5) Ms. Masterson became an employee of SAT on May 13, 1996 and all compensation
paid to her for fiscal 1997 was paid by SAT. To the extent any such services
were on behalf of LifePoint, this was reflected in SAT's management fee to
LifePoint.
(6) Mr. Kline resigned on September 12, 1997.
(7) The amount shown in the table does not reflect $50,000 paid by SAT to Mr.
Kline during fiscal 1998.
(8) These options were canceled upon his resignation. See Note (6) to this
table.
(9) The amount shown in the table does not reflect $130,000 paid by SAT to Mr.
Kline during fiscal 1997.
8
<PAGE> 11
OPTION/SAR GRANTS IN LAST FISCAL YEAR
On August 14, 1997, the Company's Board of Directors adopted, subject to
stockholders' approval, the Stock Option Plan providing for the granting of
options to purchase up to 1,000,000 shares of the Common Stock to employees
(including officers), directors and consultants of the Company. On June 5, 1998,
the Board increased the number of shares subject to the Stock Option Plan to
2,000,000, again subject to stockholders' approval. The options to be granted
may either be incentive stock options as defined in Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), to be granted to employees or
nonqualified stock options to be granted to employees, directors or consultants.
A copy of the Stock Option Plan is annexed hereto as Appendix A and is
incorporated herein by this reference. As of the Record Date, options to
purchase an aggregate of 1,100,000 shares of the Common Stock had been granted
to employees (including officers). Options granted to date under the Stock
Option Plan have all been incentive stock options (except for those granted on
June 30, 1998 -- see "Proposal Three: Adopt and Approve Stock Option Plan and
Ratify Grants of Options Pursuant Thereto -- Terms of Plan"), are all
exercisable at a price of $.50 per share and have generally become exercisable
as to one-quarter of the shares subject thereto on the first anniversary date of
the date of grant and as to 1/36th of the remaining shares on such calendar day
each month thereafter for a period of 36 months, although certain options will
become exercisable instead upon the achievement of certain goals. As of the
Record Date, none of the options had become exercisable. Stockholder approval,
as required by the Code for incentive stock options, will be sought at the
Meeting. See "Proposal Three: Adopt and Approve Stock Option Plan and Ratify
Grants of Options Pursuant Thereto." The Stock Option Plan, including all
outstanding options, will terminate if such approval is not obtained, which is
not deemed likely in view of the current stock ownership. See "Security
Ownership of Certain Beneficial Owners and Management."
The Company has never granted any stock appreciation rights.
The following table shows the number of shares made subject to a stock
option and a Common Stock purchase warrant granted during fiscal 1998 to Linda
H. Masterson, the sole executive officer of the Company (i.e., its Chief
Executive Officer) whose compensation exceeded $100,000 in that fiscal year. No
stock options or Common Stock purchase warrants were ever granted to Robert M.
Stutman who served as the Chief Executive Officer of the Company for part of
fiscal 1998 (see the section "Summary Compensation Table" under this caption
"Executive Compensation"). Options granted to Steven J. Kline as shown in the
Summary Compensation Table were canceled as indicated in Note (8) to that table.
He was never granted any Common Stock purchase warrants.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS TO LINDA H. MASTERSON
- ------------------------------------------------------ ALTERNATIVE
POTENTIAL REALIZABLE TO (F) AND (G):
PERCENT VALUE AT ASSUMED ANNUAL GRANT DATE
NUMBER OF OF TOTAL RATES OF STOCK PRICE VALUE
SECURITIES OPTIONS/SARS APPRECIATION FOR ---------------
UNDERLYING GRANTED TO EXERCISE OF OPTION TERM
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION ----------------------- GRANT DATE
GRANTED(#) FISCAL ($/SH) DATE 5%($) 10%($) PRESENT VALUE $
(B) (C) (D) (E) (F) (G) (H)
- ------------ ------------ ----------- ---------- ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
300,000 31.6% $.50(1) 8/13/07 $244,344 $389,061 $150,000(2)
400,000 42.1% $.50(1) 10/26/02 $255,256 $322,102 $200,000(2)
</TABLE>
- ---------------
(1) Reduced from $1.25 to $.50 per share on December 5, 1997. See the section
"Report on Repricing of Options/SAR" under this caption "Executive
Compensation."
(2) Because there were no market prices for the Common Stock reported on the
respective date of grant, the sales price per share (i.e., $.50) in the
October to December 1997 private placement of the Company was used for
valuation purposes.
AGGREGATE OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES
There were no stock options exercised during fiscal 1998 and, as indicated
in the preceding section, the Company has never granted any stock appreciation
rights.
9
<PAGE> 12
The following table shows the fiscal year-end option values for Linda H.
Masterson, the sole executive officer whose compensation for fiscal 1998
exceeded $100,000 as reported in the Summary Compensation Table under this
caption "Executive Compensation." The options reported for the other officer in
such table have been terminated and Robert M. Stutman, a former Chief Executive
Officer, received no options or Common Stock purchase warrants.
CEO'S FY-END OPTION VALUE
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED IN-THE-MONEY
UNEXERCISED OPTIONS AT FISCAL YEAR-END OPTIONS AT FISCAL YEAR END ($)
(#) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- -------------------------------------- ---------------------------------
<S> <C>
200,000/500,000 $100,000/$250,000(1)
</TABLE>
- ---------------
(1) Because there were no market prices for the Common Stock reported at March
31, 1998, i.e., the end of fiscal 1998, the sales price per share (i.e.,
$.50) in the October to December 1997 private placement was used for
valuation purposes.
REPORT ON REPRICING OF OPTIONS
On August 14, 1997, options to purchase an aggregate of 467,500 shares of
the Common Stock were granted to employees (including officers) of the Company
at an exercise price of $1.25, which reflected the value of the Common Stock
when trading was suspended on May 12, 1997 on the Pacific Exchange, Inc. A
private placement was initiated and completed during November and December 1997
and, on December 5, 1997, the Board of Directors re-priced the options to the
then current value of $.50 per share, which was the purchase price in the
private placement. On December 5, 1997, the Board also reduced the exercise
price of a Common Stock purchase warrant expiring October 26, 2002 to purchase
400,000 shares of the Common Stock granted to Linda H. Masterson on October 27,
1997 and formally ratified by the Board on October 31, 1997.
There were no other repricing of options since the Company's incorporation
in October 1992.
OTHER COMPENSATION
The Company currently has no pension plan in effect and has in effect no
restricted stock plan, no stock appreciation rights nor any other long-term
incentive plan under which grants or allocations may be made in the fiscal year
ending March 31, 1999 ("fiscal 1999") or thereafter other than the Stock Option
Plan.
DIRECTOR COMPENSATION
The Company currently does not compensate the Board of Directors for their
services as directors to the Company. See "Management -- Certain Transactions"
for information as to a compensation arrangement with Jonathan J. Pallin for his
services as the Chairman of the Board.
EMPLOYMENT AND SEVERANCE AGREEMENTS
There are no employment agreements currently in effect in the Company.
Pursuant to a Severance Agreement dated as of October 27, 1997 (the
"Masterson Severance Agreement") between the Company and Linda H. Masterson, the
Company has agreed to pay Ms. Masterson for her services as Chief Executive
Officer and President of the Company a base salary of $165,000; provided,
however, such amount shall be $120,000 from October 27, 1997 to the date at
least $5,000,000 in long term financing is obtained, at which time or upon her
termination the difference shall be paid to her. The Masterson Severance
Agreement also provides for the grant of (1) a stock option under the Stock
Option Plan to purchase 150,000 shares of the Common Stock at $.50 per share,
the option to become immediately exercisable as to all shares subject thereto in
the event she is terminated without cause, the Company is acquired or sold
without the Board's approval, the corporate headquarters are moved outside the
State of California, the positions of Chief Executive Officer or President are
eliminated or her duties are substantially
10
<PAGE> 13
changed; (2) stock options to purchase 150,000 shares of the Common Stock at
$.50 per share, an option to purchase 75,000 shares to be granted upon
completion of the working pilot plant and an option to purchase 75,000 shares to
be granted upon product release into the first targeted market; and (3) Common
Stock purchase warrants to purchase 400,000 shares of the LifePoint Stock at
$.50 per shares, a warrant to purchase 200,000 shares which was granted upon the
purchase of SAT's shares by Meadow Lane and a warrant to purchase 200,000 shares
to be granted at the completion of the long term financing of at least
$5,000,000. The options have all been granted under the Stock Option Plan, with
the stock option described in (1) being exercisable in accordance with the
standard timetable (see the section "Option/SAR Grants in Last Fiscal Year"
under this caption "Executive Compensation") except in the case of one of the
events set forth in the Masterson Severance Agreement as described in (1), and
with the stock options described in (2) not to become exercisable until the
happening of the events specified in (2). In the event that Ms. Masterson is
terminated without cause (as defined in the Masterson Severance Agreement), she
shall be paid severance pay in a lump sum amount equal to her annual base salary
that would have been paid to her had she not been terminated during the period
between the date of termination and October 27, 2001.
Pursuant to a Severance Agreement dated as of October 24, 1997 (the "Benken
Severance Agreement") between the Company and William B. Benken, the Company has
agreed to pay Mr. Benken for his services a base salary of $110,000; provided,
however, such amount shall be $99,000 from October 27, 1997 to the date at least
$5,000,000 in long term financing is obtained, at which time or upon his
termination the difference shall be paid to him. The Benken Severance Agreement
also provides for the grant of (1) a stock option under the Stock Option Plan to
purchase 150,000 shares of the Common Stock at $.50 per share, the option to
become immediately exercisable as to all shares subject thereto in the event he
is terminated without cause, the Company is acquired or sold without the Board's
approval, the manufacturing facility is relocated more than 100 miles from its
current location, the position of Vice President, Operations is eliminated or
his duties are substantially changed, and (2) stock options to purchase 100,000
shares of the Common Stock at $.50 per share, an option as to 50,000 shares to
be granted upon the completion of the working pilot plant and an option as to
50,000 shares to granted upon product release into the first targeted market.
The options have all been granted under the Stock Option Plan, with the stock
option described in (1) being exercisable in accordance with the standard
timetable (see the section "Option/SAR Grants in Last Fiscal Year" under this
caption "Executive Compensation"), except in the case of one of the events set
forth in the Benken Severance Agreement as described in (1), and with the stock
options described in (2) not to become exercisable until the happening of the
events specified in (2). In the event that Mr. Benken is terminated without
cause (as defined in the Benken Severance Agreement), he shall be paid severance
pay in a lump sum amount equal to one year's base salary that would have been
paid to him had he had not been terminated during the period from the date of
termination to October 27, 2001.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Because the Company was a majority-owned subsidiary of SAT during the first
seven months of fiscal 1998 and, accordingly, the Company's employees
participated in the benefit plans of SAT (except for the Stock Option Plan),
there was no Compensation Committee in the Company. On December 5, 1997, after
the sale by SAT of its majority interest in the Company, the Company's Board
appointed Peter S. Gold, Paul Sandler and Joseph R. Shaya, the three then
non-employee, non-officer directors elected that day as members of the
Compensation Committee, with Dr. Sandler as the Chairman. Mr. Shaya subsequently
resigned as a director, for personal reasons, effective March 20, 1998.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
As indicated in the preceding section, there was no Compensation Committee
in the Company during fiscal 1998 until December 5, 1997 and, between that date
and March 31, 1998, there were no meetings of the Compensation Committee.
All decisions as to executive compensation for the Company prior to August
14, 1997 were made by the SAT Board of Directors or the SAT Compensation
Committee as part of SAT's compensation planning for officers of SAT and its
subsidiaries and because all financing for the Company came from SAT. As a
result of
11
<PAGE> 14
the decision by the SAT Board in May and June 1997 that the Company should begin
to sever its interlocking relationships with SAT and seek its own funding, the
Company's Board of Directors adopted on August 14, 1997 the Stock Option Plan;
however, the principal affiliation of two of the three directors so acting was
with SAT (which continued until their resignation as directors of the Company on
October 31, 1997). Even when the independent Board on December 5, 1997 fixed the
salaries of the two executive officers of the Company, it was based on their
prior salaries authorized by SAT adjusted to reflect the Company's then
financial condition and the fact that the Company continued to be a development
stage company with no revenues (see the section Employment and Severance
Agreements under this caption "Executive Compensation").
PERFORMANCE GRAPH
Because market activity in the Common Stock was so limited during fiscal
1998 and 1997), which was undoubtedly influenced by SAT's proposal to take the
Company private first announced in February 1996 and the uncertainty as to the
Company's survival as a development stage enterprise because of SAT's inability
to fund, the Company's management has concluded that a performance graph as
required by Item 402(1) of Regulation S-K would be misleading and, accordingly,
inappropriate for this Proxy Statement and its Annual Report on Form 10-K for
fiscal 1998. The Company's management also noted that such a graph would not be
required for a "small business issuer" under Regulation S-B and that the Company
would qualify as a "small business issuer" except for its prior ownership by
SAT.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of the Record Date, certain information
with respect to (1) any person who beneficially owned more than 5% of the Common
Stock, (2) each director of the Company, (3) the Chief Executive Officer of the
Company; and (5) all directors and executive officers as a group. Each
beneficial owner has advised the Company that he or she has sole voting and
investment power as to the shares of the Common Stock, except that, until a
warrant or option is exercised, there is no voting right.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE OF
NAME AND ADDRESS OF COMMON STOCK COMMON STOCK
OF BENEFICIAL OWNER BENEFICIALLY OWNED BENEFICIALLY OWNED(1)
- ------------------- ------------------ ----------------------
<S> <C> <C>
Jonathan J. Pallin(2).................................... 4,841,595(3) 39.3%
10400 Trademark Street
Rancho Cucamonga, CA 91730
Herman Sandler........................................... 1,700,000(4) 13.9%
2 World Trade Center, 104th Floor
New York, NY 10041
The General Conference Corporation....................... 1,035,000 8.8%
of Seventh-Day Adventists
12501 Old Columbia Pike
Silver Spring, MD 20904
Peter S. Gold(5)......................................... 900,000(6) 7.5%
16027 Ventura Blvd., Suite 601
Encino, CA 91436
Linda H. Masterson(7).................................... 240,625(8) 2.0%
10400 Trademark Street
Rancho Cucamonga, CA 91730
Paul Sandler(5).......................................... 200,000 1.7%
33 West Hatcher Road
Phoenix, AZ 85021
All directors and executive.............................. 6,222,845(9) 48.6%
officers as a group (six persons)
</TABLE>
- ---------------
(1) The percentages computed in this column of the table are based upon
11,797,206 shares of the Common Stock outstanding on the Record Date. Effect
is given, pursuant to Rule 13d-3(l)(i) under the Exchange
12
<PAGE> 15
Act, to shares issuable upon the exercise of the LifePoint Common Stock
purchase warrants and stock options currently exercisable or exercisable
within 60 days of the Record Date.
(2) Chairman of the Board and a director of the Company since October 31, 1997.
(3) The shares reported in the table reflect 4,325,306 shares of the 5,575,306
shares acquired by Meadow Lane from SAT and 516,289 shares of the 666,289
shares issuable upon the exercise of the Meadow Lane Warrant.
(4) The shares reported in the table reflect (1) 1,250,000 shares of the
5,575,306 shares acquired by Meadow Lane from SAT; (2) 150,000 shares of the
666,289 shares issuable upon the exercise of the Meadow Lane Warrant; and
(3) 300,000 shares issuable upon the exercise of a Common Stock purchase
warrant expiring November 4, 2002 exercisable at $.50 per share.
(5) A director of the Company since December 5, 1997.
(6) The shares reported in the table include an aggregate of 200,000 shares
issuable upon the exercise of the two Common Stock purchase warrants
expiring November 4, 2002, one for 100,000 shares exercisable at $.50 per
share and the other exercisable at $1.00 per share.
(7) A director of the Company since May 31, 1996; effective August 1, 1996, its
President; and, effective May 23, 1997, its Chief Executive Officer. She
served as a director of SAT from September 26, 1996 to November 4, 1997 and
as its President from May 13, 1996 to May 23, 1997.
(8) The shares reported in this table reflect (a) 200,000 shares issuable upon
the exercise at $.50 per share of a Common Stock purchase warrant expiring
October 26, 2002 and (b) 40,625 shares issuable upon the exercise at $.50
per share of a stock option granted under the Stock Option Plan, which
becomes exercisable as to such shares within 60 days of the Record Date. The
shares reported in the table do not include (x) an additional 200,000 shares
of the Common Stock subject to the foregoing warrant because it does not
become exercisable as to such shares until the Company has realized at least
$5,000,000 in additional financing and (y) 109,375 shares subject to the
foregoing stock option because it only becomes exercisable as to 3,125
shares each month, for a period of 35 months, commencing October 14, 1998.
(9) The shares reported in the table include (a) those issuable upon the
exercise of the Common Stock purchase warrants and stock option described in
Notes (3) and (8) to the table and (b) 40,625 shares issuable upon the
exercise at $.50 per share of a stock option granted to an executive officer
under the Stock Option Plan, which option becomes exercisable as to such
shares within 60 days of the Record Date.
PROPOSAL TWO: APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has reappointed Ernst & Young LLP as the Company's
independent public accountants for fiscal 1999. Ernst & Young served as
independent auditors for the Company for the first time for fiscal 1996.
The Board is seeking stockholder approval of its selection of Ernst & Young
LLP. The General Corporation Law of the State of Delaware (the "GCL") does not
require the approval of the selection of independent auditors by the Company's
stockholders; however, in view of the importance of the financial statements to
stockholders, the Board of Directors deems it desirable that the Company's
stockholders pass upon the selection of auditors. In the event that stockholders
disapprove of the selection, the Board of Directors will consider the selection
of other auditors.
A representative of Ernst & Young LLP will be present at the Meeting. The
Company has been informed that the representative does not intend to make any
statement to the stockholders at the Meeting, but will be available to respond
to appropriate questions from stockholders.
13
<PAGE> 16
PROPOSAL THREE: ADOPT AND APPROVE STOCK OPTION PLAN AND
RATIFY GRANTS OF OPTIONS PURSUANT THERETO
GENERAL
The third item of business mentioned in the Notice of Annual Meeting is to
consider and vote upon a proposal to adopt and approve the Stock Option Plan, a
copy of which is annexed hereto as Appendix A and incorporated herein by this
reference, and ratify the grants of options pursuant thereto. The Stock Option
Plan provides for the grant of stock options to employees (including officers),
directors and consultants.
On August 14, 1997, the Board of Directors of the Company adopted the Stock
Option Plan, subject to stockholders' approval, permitting the grant of stock
options to purchase an aggregate of 1,000,000 shares of the Common Stock. On
June 5, 1998, the Board amended the Stock Option Plan to increase the authorized
number of shares to 2,000,000, also subject to stockholders' approval. The Stock
Option Plan provides for the grant of two types of stock options: (1) stock
options which qualify as incentive stock options under Section 422 of the Code
and (2) nonstatutory or nonqualified stock options. Employees may receive
incentive stock options or nonqualified stock options, while non-employee
directors and consultants may only receive nonqualified stock options.
RECOMMENDATION
THE BOARD RECOMMENDS A VOTE IN FAVOR OF THE ADOPTION AND APPROVAL OF THE
STOCK OPTION PLAN AND RATIFYING THE STOCK OPTIONS PREVIOUSLY GRANTED THEREUNDER.
The GCL does not require stockholders' approval, but the Code requires such
approval for incentive stock options. The Stock Option Plan is intended to
provide a method whereby employees of the Company who are largely responsible
for the management of the business and who are currently making and are expected
to make substantial contributions to the future of the Company may be offered
incentives in addition to those of current compensation and may be stimulated by
personal involvement in the fortunes of the Company to continue in its service.
Such method of compensation is common practice in industry. The executive and
managerial personnel who were and will be the recipients of the options
customarily expect to receive options as part of their compensation package. If
a meaningful option plan were not available, the Board believes that the
Company's cash expenditures for salaries and other employee benefits would be
significantly higher. The Board believes that, in those instances where a
consultant performs services for the Corporation, a stock option has the same
potential benefits of inducement to the consultant and lowering the costs to the
Company.
Because all executive officers and directors of the Company are eligible to
receive stock options under the Stock Option Plan and Ms. Masterson and Messrs.
Benken and Foley have already been granted stock options thereunder, each of the
executive officers and directors has an interest in Proposal Three being
approved.
TERMS OF PLAN
The Stock Option Plan, consistent with the provisions of the Code, provides
that the exercise price of an incentive stock option shall not be less than the
fair market value of the Common Stock on the date of grant, except that, if the
employee owns stock possessing more than 10% of the total combined voting power
of all classes of stock, the exercise price of the option must be at least 110%
of the fair market value of the Common Stock on the date of grant and the
incentive stock option cannot be exercised after five years from the date of
grant. The normal term of stock options under the Stock Option Plan is ten
years. The exercise price of a nonstatutory or nonqualified option may be less
than the fair market value on the date of grant. If, on the date of grant, there
is no fair market value, which term is defined in the Stock Option Plan as the
average of the closing bid and asked prices on the date of grant, then the Board
of Directors or the Compensation Committee may make a good faith determination
as to the exercise price. Because there was no active market for the Common
Stock until June 29, 1998, stock options were granted prior to that date at an
exercise price of $.50 per share, which was the offering price in the Company's
October to December 1997 private placement. Stock options granted on August 14,
1997 were initially granted with an exercise price of $1.25 per share, which was
the last traded price before trading of the Common Stock was suspended on May
13, 1997 on the Pacific Exchange, Inc. As indicated under "Executive
Compensation -- Report on Repricing of Options," the exercise price for such
options was reduced on December 5, 1997 to $.50 per share. Because trading in
the Common Stock was initiated on June 29, 1998, nonqualified stock options to
purchase an aggregate of 135,000 shares of the Common Stock were granted on June
30, 1998 to three executive officers and an employee of the
14
<PAGE> 17
Company with an exercise price of $.50 per share because of a prior commitment
to such optionees that the exercise price would be the same price as for their
earlier options, rather than the fair market value on the date of grant. All
stock options granted prior to that date were incentive stock options.
The number of shares subject to an outstanding stock option and the
exercise price thereof are subject to adjustment in the event of a stock
dividend, stock split, reorganization, recapitalization, combination of shares,
change in corporate structure or similar events. No fractional shares will be
issued upon exercise and the Company has no obligation to pay for such
fractional share.
Stock options have been granted generally to become exercisable as to
one-quarter of the shares subject thereto on the first anniversary of the date
of grant and thereafter as to 1/36th of the balance for a period of 36 months.
Some options granted by the Company to executive officers become exercisable
based on certain performance standards related to the Company and not the
optionee. See "Executive Compensation -- Employment and Severance Agreements"
for information with respect to certain stock options granted to Linda H.
Masterson, the President, the Chief Executive officer and a director of the
Company, and William B. Benken, the Vice President, Operations of the Company,
which either have possible earlier exercises upon the occurrence of a certain
event or have performance standards.
If the optionee's employment terminates for any reason other than his or
her death or disability, he or she may, for a period of up to three months,
exercise the stock option to the extent exercisable upon the date of
termination. If the optionee's employment terminates because of his or her
disability, the optionee has 12 months to exercise the option to the extent
exercisable upon the date of termination. If the optionee dies, his estate may
exercise the stock option to the extent exercisable upon the date of death of
the optionee, whether it occurred during the initial term or during the three or
12-month periods described in the two preceding sentences. In no event may a
stock option be exercised beyond its original expiration date.
ELIGIBLE OPTIONEES
As of the Record Date, there were 12 employees and four directors (one of
whom is also an employee) who were eligible to receive stock options under the
Stock Option Plan and, as the Company grows, these numbers will increase. It is
not practicable to determine the number of consultants that will be eligible for
the grant of stock options under the Stock Option Plan, or to determine the
number of shares each will receive.
OUTSTANDING OPTIONS
The following table gives certain information with respect to the 1,100,000
shares of the Common Stock subject to outstanding stock options under the Stock
Option Plan as of the Record Date granted to the enumerated categories and each
nominee for election as a director, all of whom are currently directors of the
Company. As of the Record Date, no non-employee director or consultant had been
granted a stock option under the Stock Option Plan.
<TABLE>
<CAPTION>
NUMBER OF
CATEGORY OR PERSON SHARES
- ------------------ ---------
<S> <C>
All executive officers as a group........................... 835,000
All directors who are not executive officers as a group..... 0
Linda H. Masterson.......................................... 350,000
Jonathan J. Pallin.......................................... 0
Peter S. Gold............................................... 0
Paul Sandler................................................ 0
Each other person holding 5% or more of the stock options... 0
All employees, including officers who are not executive
officers,
as a group................................................ 265,000
</TABLE>
FEDERAL INCOME TAX CONSEQUENCES OF OPTIONS
The discussion of Federal tax consequences which follows is based upon an
analysis by Messrs. Wachtel & Masyr, LLP, counsel to the Company, of the current
provisions of the Code and the regulations promulgated thereunder.
15
<PAGE> 18
1. Non-incentive stock options
No income will be recognized by an optionee upon the grant of an option
which is not an incentive stock option and which is not transferable nor
exercisable immediately in full by the optionee.
Upon the exercise of such a non-incentive stock option, the optionee will
recognize income equal to the excess of the fair market value of the shares
being acquired at the time the option is exercised over the exercise price of
such option. If the optionee is an employee, this excess will also constitute
wages subject to the withholding of income tax. An optionee's basis for the
shares acquired upon the exercise of a non-incentive stock option will be equal
to the fair market value of such shares on the date of exercise.
The gain or loss upon the subsequent disposition of the shares acquired
upon the exercise of a non-incentive stock option will be the difference between
the basis for such shares and the amount realized upon the sale thereof, and
will be capital gain or loss. For sales in tax years ending after December 31,
1997, the maximum capital gains rate is 20% for shares held more than 12 months.
If the shares are qualified small business stock as defined in the Code and are
held for more than five years, 50% of the gain realized on the disposition of
such stock may be excluded for income tax purposes.
At the time an optionee exercises a non-incentive stock option, the Company
will be entitled to a deduction in an amount equal to the amount required to be
reported by such optionee as ordinary income
In the event a non-incentive stock option is exercised by a director or
officer who is subject to the so-called "short swing" profits provisions of
Section 16(b) of the Exchange Act, such shares will be treated as being subject
to a substantial risk of forfeiture within the meaning of Section 83(a) of the
Code for the six-month period during which Section 16(b) applies. Thus, the
optionee will include in income and the Company may deduct at the time the
restriction lapses, rather than at the time the option was exercised, the
difference between the fair market value of the shares at the time of lapse and
the exercise price of the shares, and the optionee's holding period will begin
at that time. However, the optionee may elect, under the provisions of Section
83(b) of the Code, within 30 days after the transfer of the shares to the
optionee, to treat the shares acquired upon such exercise as not being subject
to a substantial risk of forfeiture, in which event the tax effects are as set
forth in the preceding paragraphs. In addition, because the grant, not the
exercise, of a stock option under the Stock Option Plan is generally the
"purchase" for the purpose of determining liability under Section 16(b) of the
Exchange Act for "short swing profits" and because the stock options granted
under the Stock Option Plan are generally not exercisable for at least a
one-year period subsequent to the date of grant, a director or officer will
generally not be taking his or her shares upon exercise of a stock option
subject to a substantial risk of forfeiture pursuant to Section 16(b) of the
Exchange Act and, accordingly, the tax consequences described in this paragraph
will not generally be applicable to his or her exercise.
2. Incentive Stock Options
If an optionee exercises an incentive stock option and does not dispose of
the shares until more than one year after the issuance of the shares to him or
her and two years after the grant of such option, then,
(a) no income will be realized by the optionee upon either the grant
of the incentive stock option or upon his or her purchase of the shares at
the time of the exercise of such option;
(b) the difference between the option price and the fair market value
of the shares at the time of exercise of such option will constitute an
item of tax preference, subject to the alternative minimum tax, for the
year in which the option is exercised; and
(c) when the shares are sold by the optionee, any amount realized in
excess of the option price will be treated as a capital gain and any loss
will be treated as a capital loss and, if the shares are qualified small
business stock as defined in the Code, 42% of the amount excluded from
income for regular tax purposes will constitute an item of tax preference
subject to the alternative minimum tax.
On the other hand, if the shares acquired upon exercise of an incentive
stock option are disposed of within one year of issuance or less than two years
after the grant of such option (a disqualifying disposition), the lesser of the
difference between the option price and the fair market value of the shares at
the time of exercise of such option and the excess (if any) of the amount
realized on such disposition over the adjusted basis of such shares (generally
cost) will be reportable by the optionee as ordinary income in the year of
disposition.
To the extent that an optionee exercises an incentive stock option and does
not make a disqualifying disposition, the Company will not be entitled to a
deduction for Federal income tax purposes at any time in
16
<PAGE> 19
respect of shares so acquired and disposed of. However, if a disqualifying
disposition is made, the Company will be entitled to a deduction equal to the
amount required to be reported by the optionee as ordinary income and the
Company will be required to make whatever arrangements are necessary to insure
that the amount of tax required to be withheld is available for payment in
money.
In the event an officer or director who is subject to Section 16(b)
restrictions on the date of exercise makes a disqualifying disposition of shares
acquired pursuant to an incentive stock option, the amount of ordinary income
recognized by such officer or director will be based on the fair market value of
the shares on the date the restrictions lapse (or, if less, on the date of
disposition) and not on the date of exercise (or the date of disposition, as the
case may be). The employee's holding period will be determined by reference to
the date on which the Section 16(b) restrictions lapse. An optionee may utilize
an election, similar to that available with respect to non-incentive stock
options, pursuant to Section 83(b) of the Code to have the value on the date of
exercise apply. In addition, because the grant, not the exercise, of a stock
option under the Stock Option Plan is generally the "purchase" for the purpose
of determining liability under Section 16(b) of the Exchange Act for "short
swing profits" and because the stock options granted under the Stock Option Plan
are generally not exercisable for at least a one-year period subsequent to the
date of grant, a director or officer will generally not be taking his or her
shares upon exercise of a stock option subject to a substantial risk of
forfeiture pursuant to Section 16(b) of the Exchange Act and, accordingly, the
tax consequences described in this paragraph will not generally be applicable to
his or her exercise.
OTHER MATTERS COMING BEFORE THE MEETING
As of the date of this Proxy Statement, the Board of Directors does not
know of any matters to be presented to the Meeting other than the three
proposals set forth in the attached Notice of Annual Meeting. If any other
matters properly come before the Meeting, it is intended that the holder of the
management proxies will vote thereon in their discretion.
MISCELLANEOUS
The solicitation of proxies on the enclosed form of proxy is made by and on
behalf of the Board of Directors of the Company and the cost of this
solicitation is being paid by the Company. In addition to the use of the mails,
proxies may be solicited personally, or by telephone or telegraph, by the
officers or directors of the Company.
Stockholders' proposals for inclusion in the Company's proxy statement for
the 1999 Annual Meeting of Stockholders must be received no later than a
reasonable time before the Company begins to print and mail its proxy material.
If a stockholder intends to submit a proposal for consideration at the 1999
Annual Meeting by means other than the inclusion of the proposal in the
Company's proxy statement for such Meeting, the stockholder must notify the
Company on or before June 12, 1999 of such intention or risk management
exercising discretionary voting authority with respect to the management proxies
to defeat such proposal when and if presented at the Meeting.
A copy of the Annual Meeting Report to Stockholders is being mailed to all
stockholders as of the Record Date with this Proxy Statement. A copy of the
Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1998,
including financial statements (there are no schedules), may be obtained by
written or oral request to Linda H. Masterson. President and Chief Executive
Officer of the Company, at the following address: 10400 Trademark Street, Rancho
Cucamonga, CA 91730 or telephone number: (909) 466-8047. A reasonable fee for
duplicating and mailing will be charged if a copy of any exhibit is requested.
By Order of the Board of Directors
/s/ Robert W. Berend
Robert W. Berend
Secretary
July 28, 1998
17
<PAGE> 20
APPENDIX A
LIFEPOINT, INC.
1997 STOCK OPTION PLAN
I. PURPOSE
The LIFEPOINT, INC. 1997 STOCK OPTION PLAN ("Plan") provides for the grant
of Stock Options to employees, directors and consultants of LifePoint, Inc. (the
"Company"), and such of its subsidiaries (as defined in Section 424(f) of the
Internal Revenue Code of 1986 (the "Code") as the Board of Directors of the
Company shall from time to time designate ("Participating Subsidiaries") in
order to advance the interests of the Company and its Participating Subsidiaries
through the motivation, attraction and retention of key personnel.
II. INCENTIVE STOCK OPTIONS AND NON-INCENTIVE STOCK OPTIONS
The Stock Options granted under the Plan may be either:
a) Incentive Stock Options ("ISO's") which are intended to be
"Incentive Stock Options" as that term is defined in Section 422 of the
Code; or
b) Nonstatutory Stock Options ("NSO's") which are intended to be
options that do not qualify as "Incentive Stock Options" under Section 422
of the Code.
All Stock Options shall be ISO's unless the Option Agreement clearly
designates the Stock Options granted thereunder, or a specified portion thereof,
as NSO's. Subject to the other provisions of the Plan, a Participant may receive
ISO's and NSO's at the same time, provided that the ISO's and NSO's are clearly
designated as such, and the exercise of one does not affect the exercise of the
other.
Except as otherwise expressly provided herein, all of the provisions and
requirements of the Plan relating to Stock Options shall apply to ISO's and
NSO's.
III. ADMINISTRATION
The Plan shall be administered by the Board of Directors (the "Board") of
the Company if each member of the Board is a Disinterested Person. If each
member of the Board is not a Disinterested Person, a committee of two or more
directors ("Committee") each of whom is a Disinterested Person shall administer
the Plan. The Committee or the Board of Directors, as the case may be, shall
have full authority to administer the Plan, including authority to interpret and
construe any provision of the Plan and any Stock Options granted thereunder, and
to adopt such rules and regulations for administering the Plan as it may deem
necessary in order to comply with the requirements of the Code or in order that
Stock Options that are intended to be ISO's will be classified as incentive
stock options under the Code, or in order to conform to any regulation or to any
change in any law or regulation applicable thereto.
All actions taken and all interpretations and determinations made by the
Board or Committee in good faith (including determinations of Fair Market Value)
shall be final and binding upon all Participants, the Company and all other
interested persons. No member of the Board or Committee shall be personally
liable for any action, determination or interpretation made in good faith with
respect to the Plan, and all members of the Board and Committee shall, in
addition to their rights as directors, be fully protected by the Company with
respect to any such action, determination or interpretation. Rule 16(b)-3 under
the Securities Exchange Act of 1934 (the "Act") provides that the grant of a
stock option to a director or officer of a company will be exempt from the
provisions of Section 16(b) of the Act if the conditions set forth in said Rule
are satisfied. Unless otherwise specified by the Board or Committee, grants of
Stock Options hereunder to individuals who are officers or directors of the
Company shall be made in a manner that satisfies the conditions of said Rule.
A-1
<PAGE> 21
IV. DEFINITIONS
4.1. "Stock Option." A Stock Option is the right granted under the Plan
to an Employee, director or consultant to purchase, at such time or times and at
such price or prices ("Option Price") as are determined by the Board or
Committee, the number of shares of Common Stock determined by the Board or
Committee.
4.2. "Common Stock." A share of Common Stock means a share of authorized
but unissued or reacquired common stock of the Company.
4.3. "Fair Market Value." If the Common Stock is traded publicly, the
Fair Market Value of a share of Common Stock on any date shall be the average of
the representative closing bid and asked prices, as quoted by any exchange that
the stock is listed on, for the date in question. If the Common Stock is not
traded publicly, the Fair Market Value of a share of Common Stock on any date
shall be determined in good faith by the Board of Directors or the Board or
Committee after such consultations with outside legal, accounting and other
experts as the Board of Directors or the Committee may deem advisable, and the
Board of Directors or the Committee shall maintain a written record of its
method of determining such value.
4.4. "Employee." An Employee is an employee of the Company or any
Participating Subsidiary.
4.5. "Participant." A Participant is an Employee, director or consultant
to whom a Stock Option is granted.
4.6. "Disinterested Person." A Disinterested Person is a person who
satisfies the definition of a "disinterested person" set forth in Rule 16(b)-3
under the Act or any successor rule or regulation, as it may be amended from
time to time.
V. ELIGIBILITY AND PARTICIPATION
Grants of ISO's and NSO's may be made to Employees of the Company or any
Participating Subsidiary. Grants of NSO's may be made to directors of or
consultants to the Company or any Participating Subsidiary. Any director of the
Company or of a Participating Subsidiary who is also an Employee shall also be
eligible to receive ISO's. The Board or Committee shall from time to time
determine the Participants to whom Stock Options shall be granted, the number of
shares of Common Stock subject to each Stock Option to be granted to each such
Participant, the Option Price of such Stock Options, all as provided in this
Plan. The Option Price of any ISO shall be not less than the Fair Market Value
of a share of Common Stock on the date on which the Stock Option is granted, but
the Option Price of an NSO may be less than the Fair Market Value on the date
the NSO is granted if the Board or Committee so determines. If an ISO is granted
to an Employee who then owns stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company or any parent or
subsidiary corporation of the Company, the Option price of such ISO shall be at
least 110% of the Fair Market Value of the Common Stock subject to the ISO at
the time such ISO's are granted, and such ISO shall not be exercisable after
five years after the date on which it was granted. Each Stock Option shall be
evidenced by a written agreement ("Option Agreement") containing such terms and
provisions as the Board or Committee may determine, subject to the provisions of
this Plan.
VI. SHARES OF COMMON STOCK SUBJECT TO THE PLAN
6.1. Maximum Number. The maximum aggregate number of shares of Common
Stock that may be made subject to Stock Options shall be 2,000,000 authorized
but unissued shares. The aggregate Fair Market Value (determined as of the time
the ISO is granted) of the stock as to all ISO's granted to an individual which
may first become exercisable in a particular calendar year may not exceed
$200,000. If any shares of Common Stock subject to Stock Options are not
purchased or otherwise paid for before such Stock Options expire, such shares
may again be made subject to Stock Options.
6.2. Capital Changes. In the event any changes are made to the shares of
Common Stock (whether by reason of reorganization, recapitalization, stock
dividend, stock split, combination of shares, exchange of shares, change in
corporate structure, or otherwise), appropriate adjustments shall be made in:
(i) the number of shares of Common Stock theretofore made subject to Stock
Options, and in the Option Price of said shares;
A-2
<PAGE> 22
and (ii) the aggregate number of shares which may be made subject to Stock
Options in the future. If any of the foregoing adjustments shall result in a
fractional share, the fraction shall be disregarded and the Company shall have
no obligation to make any cash or other payment with respect to such a
fractional share.
VII. EXERCISE OF STOCK OPTIONS
7.1. Time of Exercise. Subject to the provisions of the Plan, the Board
or Committee, in its discretion, shall determine the time when a Stock Option,
or a portion of a Stock Option, shall become exercisable, and the time when a
Stock Option, or a portion of a Stock Option, shall expire. Such time or times
shall be set forth in the Option Agreement evidencing such Stock Options. A
Stock Option shall expire, to the extent not exercised, no later than the tenth
anniversary of the date on which it was granted. The Board or Committee may
accelerate the vesting of any Participant's Stock Option by giving written
notice to the Participant. Upon receipt of such notice, the Participant and the
Company shall amend the Option Agreement to reflect the new vesting schedule.
The acceleration of the exercise period of a Stock Option shall not affect the
expiration date of that Stock Option.
7.2. Exchange of Outstanding Stock. The Board or Committee, in its sole
discretion, may permit a Participant to surrender to the Company shares of the
Common Stock previously acquired by the Participant as part of full payment for
the exercise of a Stock Option. Such surrendered shares shall be valued at their
Fair Market Value on the date of exercise.
7.3. Use of Promissory Note; Exercise Loans. The Board or Committee may,
in its sole discretion, impose terms and conditions, including conditions
relating to the manner and timing of payments, on the exercise of Stock Options.
Such terms and conditions may include, but are not limited to, permitting a
Participant to deliver to the Company his promissory note as full or partial
payment for the exercise of a Stock Option. The Board or Committee, in its sole
discretion, may authorize the Company to make a loan to a Participant in
connection with the exercise of Stock Options, or authorize the Company to
arrange or guarantee loans to a Participant by a third party.
7.3. Termination of Employment before Exercise. If the employment of a
Participant who was an employee of the Company or a Participating Subsidiary
when the Stock Option was granted shall terminate for any reason other than the
Participant's death or disability, any Stock Options then held by the
Participant, to the extent then exercisable under the applicable Option
Agreement(s), shall remain exercisable after the termination of his employment
for a period of three months (but not later than the specified expiration date).
If the Participant's employment is terminated because the Participant is
disabled within the meaning of Section 22(e)(3) of the Code, any Stock Option
then held by the Participant, to the extent then exercisable under the
applicable Option Agreement(s), shall remain exercisable after the termination
of his employment for a period of twelve months (but not later than the
specified expiration date). If the Participant dies while employed by the
Company or a participating Subsidiary, or during the three-month or twelve-month
periods referred to above, his Stock Options may be exercised to the extent that
they were exercisable on the date of cessation of his employment by his estate,
or duly appointed representative, or beneficiary who acquires the Stock Options
by will or by the laws of descent and distribution, but no further installments
of his Stock Options will become exercisable and each of his Stock Options shall
terminate on the first anniversary of the date of his death (but not later than
the specified expiration dates). If a Stock Option is not exercised during the
applicable period, it shall be deemed to have been forfeited and of no further
force or effect.
7.5. Disposition of Forfeited Stock Options. Any shares of Common Stock
subject to Stock Options forfeited by a Participant shall not thereafter be
eligible for purchase by the Participant, but may be made subject to Stock
Options granted to other Participants.
VIII. NO CONTRACT OF EMPLOYMENT
Nothing in this Plan shall confer upon the Participant the right to
continue in the employ of the Company, or any Participating Subsidiary, nor
shall it interfere in any way with the right of the Company, or any such
Participating Subsidiary, to discharge the Participant at any time for any
reason whatsoever, with or
A-3
<PAGE> 23
without cause. Nothing in this Article VIII shall affect any rights or
obligations of the Company or any Participant under any written contract of
employment.
IX. NO RIGHTS AS A STOCKHOLDER
A Participant shall have no rights as a stockholder with respect to any
shares of Common Stock subject to a Stock Option. Except as provided in Section
6.2, no adjustment shall be made in the number of shares of Common Stock issued
to a Participant or in any other rights of the Participant upon exercise of a
Stock Option by reason of any dividend, distribution or other right granted to
stockholders for which the record date is prior to the date of exercise of the
Participant's Stock Option.
X. ASSIGNABILITY
No Stock Option granted under this Plan, nor any other rights acquired by
Participant under this Plan, shall be assignable or transferable by a
Participant, other than by will or the laws of descent and distribution, and
Stock Options issued to a Participant are exercisable during his lifetime only
by him. Notwithstanding the preceding sentence, the Board or Committee may, in
its sole discretion, permit the assignment or transfer of an NSO and the
exercise thereof by a person other than a Participant, on such terms and
conditions as the Board or Committee in its sole discretion may determine. Any
such terms shall be determined at the time the NSO is granted, and shall be set
forth in the Option Agreement. In the event of his death, the Stock Option may
be exercised by the Personal Representative of the Participant's estate or by
the successor or successors in interest determined under the Participant's will
or under the applicable laws of descent and distribution.
XI. MERGER OR LIQUIDATION OF THE COMPANY
11.1. If within the duration of a Stock Option there shall be a corporate
merger, consolidation, acquisition of assets, or other reorganization and if
such transaction shall affect the Common Stock, the Participant shall thereafter
be entitled to receive upon the exercise of his Stock Option those shares or
securities that he would have received had the Stock Option been exercised prior
to such transaction and had the Participant been a stockholder of the Company
with respect to such shares.
11.2. If the Company or its stockholders enter into an agreement providing
for the sale of all, or substantially all, of the assets of the Company, or a
merger, consolidation or reorganization in which the Company is not the
surviving corporation, or the transfer of shares of the Company representing
more than 50% of the total combined voting power of all Company shares in one or
more transactions to a person or persons acting as a group for voting purposes,
the vesting schedule of some or all Stock Options may, at the sole discretion of
the Board or Committee, be accelerated so that all or any portion of Stock
Options outstanding under the Plan as of the day before the consummation of such
sale, liquidation, merger or reorganization, to the extent not exercised, shall
for all purposes under this Plan become exercisable as of such date.
XII. AMENDMENT
The Board of Directors may from time to time alter, amend, suspend, or
discontinue the Plan, including, where applicable, any modifications or
amendments as it shall deem advisable in order that ISO's will be classified as
incentive stock options under the Code, or in order to conform to any regulation
or to any change in any law or regulation applicable thereto; provided, however,
that no such action shall adversely affect the rights and obligations with
respect to Stock Options at any time outstanding under the Plan; and provided
further that no such action shall, without the approval of the stockholders of
the Company, (i) increase the maximum number of shares of Common Stock that may
be made subject to Stock Options (unless necessary to effect the adjustments
required by Section 6.2), (ii) materially increase the benefits accruing to
Participants under the Plan, or (iii) materially modify the requirements as to
eligibility for participation in the Plan.
A-4
<PAGE> 24
XIII. REGISTRATION OF OPTIONED SHARES
The Stock Options shall not be exercisable unless the purchase of such
optioned shares is pursuant to an applicable effective registration statement
under the Securities Act of 1933, as amended, or unless, in the opinion of
counsel to the Company, the proposed purchase of such optioned shares would be
exempt from the registration requirements of the Securities Act of 1933, as
amended, and from the registration or qualification requirements of applicable
state securities laws.
XIV. WITHHOLDING TAXES
The Company or Participating Subsidiary may take such steps as it may deem
necessary or appropriate for the withholding of any taxes which the Company or
the Participating Subsidiary is required by any law or regulation of any
governmental authority, whether federal, state or local, domestic or foreign to
withhold in connection with any Stock Options.
XV. BROKERAGE ARRANGEMENTS
The Board or Committee, in its discretion, may enter into arrangements with
one or more banks, brokers, or other financial institutions to facilitate the
disposition of shares acquired upon exercise of Stock Options including, without
limitation, arrangements for the simultaneous exercise of Stock Options and the
sale of shares acquired upon exercise.
XVI. NONEXCLUSIVITY OF THE PLAN
Neither the adoption of the Plan by the Board of Directors nor the
submission of the Plan to stockholders of the Company for approval shall be
construed as creating any limitations on the power or authority of the Board of
Directors to adopt such other or additional incentive or other compensation
arrangements of whatever nature as the Board of Directors may deem necessary or
desirable or preclude or limit the continuation of any other plan, practice or
arrangement for the payment of compensation or fringe benefits to employees
generally, or to any class or group of employees, which the Company or any
Participating Subsidiary now has lawfully put into effect, including, without
limitation, any retirement, pension, savings and stock purchase plan, insurance,
death and disability benefits and executive short-term incentive plans.
XVII. EFFECTIVE DATE
This Plan was adopted by the Board of Directors and became effective on
August 14, 1997, subject to the approval of the Company's stockholders within
twelve (12) months thereafter. No Stock Options shall be granted subsequent to
ten years after the effective date of the Plan. Stock Options outstanding
subsequent to ten years after the effective date of the Plan shall continue to
be governed by the provisions of the Plan.
A-5
<PAGE> 25
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Notice of the Annual Meeting
Stockholders......................
Proxy Statement:
Voting Securities................... 1
Proposal One: Election of
Directors......................... 2
Management.......................... 5
Executive Compensation.............. 8
Security Ownership of Certain
Beneficial Holders and
Management........................ 12
Proposal Two: Appointment of
Independent Auditors.............. 13
Proposal Three: Adoption and
Approval of Stock Option Plan and
Ratification of Options Granted
Thereunder........................ 14
Other Matters Coming Before the
Meeting........................... 17
Miscellaneous....................... 17
Appendix A: LifePoint, Inc. 1997
Stock Option Plan................. A-1
</TABLE>
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LIFEPOINT, INC.
NOTICE OF ANNUAL MEETING
OF STOCKHOLDERS AND
PROXY STATEMENT
JULY 28, 1998
- ------------------------------------------------------
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<PAGE> 26
LIFEPOINT, INC.
1400 TRADEMARK STREET
RANCHO, CUCAMONGA, CA 91730
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Linda H. Masterson and Jonathan J. Pallin as
Proxies, each with the power to appoint his or her substitute, and hereby
authorizes them to represent and to vote, as designated below, all of the Common
Stock of LifePoint, Inc. (the "Company") held of record by the undersigned on
July 24, 1998 at the Annual Meeting of Stockholders to be held on August 13,
1998 or at any adjournment thereof.
1. Election of Jonathan J. Pallin, Linda H. Masterson, Peter S. Gold and Paul
Sandler as Directors of the Company.
[ ] FOR all nominees listed above.
FOR all nominees listed above
EXCEPT: _____________________________________________
(INSTRUCTION: To withhold authority to vote on any individual nominee(s), write
his/her name(s) in the space above.)
[ ] WITHHOLD AUTHORITY to vote for all the nominees listed above.
2. Proposal to Ratify the Appointment of Ernst & Young LLP as Independent
Auditors of the Company.
<TABLE>
<S> <C> <C>
[ ] FOR [ ] AGAINST [ ] ABSTAIN
</TABLE>
3. Proposal to Adopt and Approve Stock Option Plan and Ratify Options Granted
Thereunder.
<TABLE>
<S> <C> <C>
[ ] FOR [ ] AGAINST [ ] ABSTAIN
</TABLE>
4. To transact such other business as may come before the Annual Meeting or any
adjournment thereof.
(continued on other side)
<PAGE> 27
(continued from other side)
This proxy, when executed, will be voted in the manner directed by the
undersigned shareholder(s). IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR PROPOSALS 1, 2 AND 3.
PLEASE MARK, SIGN, DATE, AND RETURN THIS CARD PROMPTLY USING THE ENCLOSED
ENVELOPE
I (we) shall attend the Annual Meeting in person ________ Yes ________ No
Please sign exactly as your name
appears to the left. When shares are
held by joint tenants, please both
sign. When signing as attorney,
executor, administrator, trustee or
guardian, please give full title as
such. If a corporation, please sign
in full corporate name by the
President or other authorized
officer. If a partnership, please
sign in full partnership name by a
duly authorized person.
------------------------------------
Signature
------------------------------------
Signature, if held jointly
Date: _______________________ , 1998
