<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
<TABLE>
<S> <C>
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or 14a-12
</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:
--------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
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(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:
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(2) Form, schedule or registration statement no.:
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(3) Filing party:
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(4) Date filed:
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<PAGE> 2
LIFEPOINT, INC.
1205 SOUTH DUPONT STREET
ONTARIO, CA 91761
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 Radisson Wilshire Plaza Hotel located at 3515 Wilshire Boulevard,
Los Angeles, California 90010, on Friday, August 25, 2000, at 1:30 p.m., Pacific
Daylight Time (the "Annual Meeting"), for the following purposes:
1. To approve an Amendment to the Company's Restated Certificate of
Incorporation
(a) to classify the directors into three classes to serve initially as
follows: Class A -- to serve until the Annual Meeting of
Stockholders in 2001; Class B -- to serve until the Annual Meeting
of Stockholders in 2002; and Class C -- to serve until the Annual
Meeting of Stockholders in 2003; and to provide that thereafter each
class of directors shall serve for a three-year term; and
(b) to provide that the number of directors shall not be less than three
nor more than nine.
2. In the event of the approval of the Amendment to the Company's Restated
Certificate of Incorporation referred to in Proposal 1, to elect one
Class A director for a term of one year, two Class B directors for a
term of two years and two Class C directors for a term of three years,
each to serve in his or her class until his or her successor is duly
elected and qualifies, or, in the event of the disapproval of said
Amendment, to elect five directors for a one-year term, each to serve
until the Annual Meeting of Stockholders in 2001 and until his or her
successor is duly elected and qualifies.
3. To ratify the appointment of Ernst & Young LLP as independent
accountants of the Company for the fiscal year ending March 31, 2001.
4. To approve an Amendment to the Company's Restated Certificate of
Incorporation to increase the authorized number of shares of the Common
Stock, $.001 par value, from 50,000,000 shares to 75,000,000 shares.
5. To adopt and approve the LifePoint, Inc. 2000 Stock Option Plan.
6. 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 Wednesday, July 19,
2000, are entitled to notice of, and to vote at, the Annual Meeting or any
adjournment thereof.
By Order of the Board of Directors
[Robert W. Berend signature]
Robert W. Berend
Secretary
July 26, 2000
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.
1205 SOUTH DUPONT STREET
ONTARIO, CA 91761
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
AUGUST 25, 2000
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of LifePoint, Inc. (the "Company") of proxies to be voted
at the Company's Annual Meeting of Stockholders (the "Meeting") to be held on
Friday, August 25, 2000, 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 Friday, July 28, 2000, 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 Wednesday, July 19, 2000 (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, 30,096,201 shares of the Common Stock, which is the
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 of business on the Record Date. A plurality of the votes cast at
the Meeting shall be necessary to elect each of the five directors (i.e.,
Proposal Two). The affirmative vote of the holders of a majority of the shares
present in person or represented by proxy and entitled to vote at the Meeting
shall be necessary (1) to approve the selection of the independent auditors
(i.e., Proposal Three) and (2) to adopt and approve the LifePoint, Inc. 2000
Stock Option Plan (the "2000 Option Plan") relating to 2,000,000 shares of the
Common Stock (i.e., Proposal Five). The affirmative vote of the holders of a
majority of the outstanding shares of the Common Stock shall be necessary to
authorize the two Amendments to the Company's Restated Certificate of
Incorporation: (1)(a) to classify the directors into three classes and (b) to
fix the number of directors (i.e., Proposal One) and (2) to increase the number
of authorized shares of the Common Stock from 50,000,000 to 75,000,000 shares
(i.e., Proposal Four). If either or both of Proposals One and Four are adopted,
the Board of Directors intends to integrate the Restated Certificate of
Incorporation, as currently in effect, and the proposed Amendment or Amendments
which is or are adopted into a single instrument, as well as to eliminate all
references therein to the Company's Series A 10% Cumulative Convertible
Preferred Stock, $.001 per value (the "Series A Preferred Stock"), the last
outstanding shares of which were redeemed on March 24, 2000, all as permitted by
Section 245 of the General Corporation Law of the State of Delaware (the "GCL").
Accordingly, a vote by a stockholder in favor of Proposal One and/or Proposal
Four shall also be deemed to be a vote to restate the Restated Certificate of
Incorporation.
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, except for Proposals One and Four,
each of which requires the affirmative vote of a majority of all of the
outstanding shares of the Common Stock.
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 address
in the heading to this Proxy Statement.
Rules 576 and 577 of the American Stock Exchange LLC (the "AMEX"), on which
Exchange the Common Stock has been traded since April 19, 2000, permit a member
firm to vote for the election of the
<PAGE> 4
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, provided that the beneficial owner has received the proxy
material at least 15 days before the Meeting. However, under the Rules the
beneficial owner must give specific instructions to the member firm for it to
vote the stockholder's shares on the proposals (1)(a) to classify the directors
into three classes and (b) to fix the number of directors, (2) to approve an
increase in the authorized number of shares and (3) to adopt and approve the
2000 Option Plan.
Rules 451 and 452 of the New York Stock Exchange, Inc. (the "NYSE") permit
a member firm to vote for the election of 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 Rules
the beneficial owner must give specific instructions to the member firm for it
to vote the stockholder's shares on the proposals (1)(a) classify the directors
into three classes and (b) to fix the number of directors, (2) to approve an
increase in the authorized number of shares of the Common Stock and (3) to adopt
and approve the 2000 Option Plan. In the event of a conflict between the AMEX
and the NYSE Rules in their application to the Company, the AMEX Rules will
govern the member firm.
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 five proposals submitted to the stockholders for a vote.
A stockholder shall have no right to receive payment for his, her or its
shares as a result of stockholders' approval of any proposal in the Notice of
Annual Meeting.
Each of the persons who has served as a director or as an executive officer
of the Company since April 1, 1999 (i.e., the beginning of the last fiscal year
of the Company) and each of the persons nominated for election as a director at
the Meeting, all of which nominees are currently serving as directors, has no
substantial interest, direct or indirect, by security holdings or otherwise, in
any of the proposals submitted to a vote at the Meeting (as described in the
sixth preceding paragraph), other than, if he or she is a nominee for election
as a director, in the election of directors (i.e., Proposal Two) and Proposal
One relating to the classification and number of directors and except that he or
she, if still a director or executive officer of the Company, could be an
optionee under the 2000 Option Plan as discussed under the caption "Proposal
Five: Adopt and Approve the 2000 Option Plan" if the same is adopted by the
stockholders at the Meeting or the recipient of some of the additional shares
should the increased number of authorized shares of the Common Stock be
authorized and thereafter used for a stock incentive or benefit plan as
described in the section "Possible Uses of Additional Authorized Shares" under
the caption "Proposal Four: Authority to Increase Authorized Shares."
PROPOSAL ONE: AUTHORITY TO CLASSIFY BOARD AND FIX NUMBER OF DIRECTORS
CLASSIFIED BOARD
Section 141(b) of the GCL provides that a director shall hold office until
such director's successor is elected and qualified or until such director's
earlier resignation or removal. Pursuant to Section 211(b) of the GCL, directors
are generally elected annually at the annual meeting of stockholders. Consistent
with these statutory provisions and the provisions of Article II, Section 2 of
its By-Laws, the Company has, during the past two years, elected the directors
at the Annual Meetings of Stockholders, although the Board had filled vacancies
between the Annual Meeting in 1999 and this Meeting and between the Annual
Meeting in 1994 and the Annual Meeting in 1998.
Section 141(d) of the GCL permits a classified or staggered board with as
many as three classes, with the longest term of office to be three years and
with no requirement that the classes be equal in number or that there be a
particular number of directors in each class.
2
<PAGE> 5
The Board, at its meeting on June 16, 2000, adopted, subject to
stockholders' approval, a new paragraph 4 to Article SEVENTH of the Company's
Restated Certificate of Incorporation which provides that the Company's
directors will be divided into three classes as nearly equal in number as is
reasonably possible, with the term of office of the directors of the first class
expiring at the Annual Meeting of Stockholders in 2001, the term of office of
the directors of the second class expiring at the Annual Meeting of Stockholders
in 2002 and the term of office of the third class expiring at the Annual Meeting
of Stockholders in 2003. The new paragraph further provides that (1) at future
elections, directors chosen to succeed those whose terms then expire shall be
elected for a term of office expiring at the third Annual Meeting of
Stockholders after their election; (2) when the number of directors is increased
by resolution of the Board of Directors and the resultant vacancies are filled
by the Board, such additional directors shall serve only until the next Annual
Meeting of Stockholders, at which time they are subject to election and
classification by the stockholders; and (3) any director elected by the Board to
fill a vacancy, which occurs as a result of the death, resignation or removal of
another director, will hold office until the Annual Meeting of Stockholders at
which the director who died, resigned or was removed would have been required,
in the regular order of business, to stand for re-election, even though such
term may thereby extend beyond the next Annual Meeting. Each director who is
elected as provided in this proposed new paragraph 4 of Article SEVENTH will
serve until his or her successor is duly elected and qualifies. The text of the
proposed paragraph 4 of Article SEVENTH is set forth in Appendix A to this Proxy
Statement and is incorporated herein by this reference. On June 16, 2000, the
Board approved an amendment to Article II, Section 2 of the Company's By-Laws to
make the provision consistent with the proposed Amendment to the Restated
Certificate of Incorporation, which amendment to the By-Laws would become
effective only if Proposal One is adopted by stockholders at the Meeting. A copy
of Article II, Section 2 of the By-Laws as currently in effect and as amended is
included in Appendix A and is incorporated herein by this reference.
Section 141(k)(1) of the GCL provides that, if the certificate of
incorporation provides for a classified board, stockholders may remove a
director only for cause.
Inasmuch as classification and staggering of the terms of office of the
directors will result in only one class of directors standing for election by
the stockholders each year, at least two successive annual elections will
ordinarily be required to replace a majority of the directors in order to effect
a change in management. The Board of Directors urges approval of the foregoing
proposal because the division of the directors into three classes will assure
continuity and stability in the management of the Company, as approximately
two-thirds of the directors (when the total number reaches nine) at any time
will have had prior experience on the Board. The proposed Amendment, if
approved, will provide outsiders who seek to take control with the opportunity
to learn the business of the Company first hand over a reasonable period of
time, rather then permitting them to take control immediately and possibly
adversely affecting the Company through inexperience. In addition, the
stockholders would be afforded the opportunity to re-evaluate the abilities and
performance of the incumbent directors before determining whether replacing them
is in the Company's and the stockholders' best interests. At a time when the
Company is about to initiate its first marketing effort in the law enforcement
and other non-medical markets and to submit its first product to the Food and
Drug Administration (the "FDA") for approval to enter the medical market in the
United States, continuity of management is, in the opinion of the Board,
especially in the best interests of the Company and its stockholders. However,
the directors recognize that they have a personal interest in the adoption of
Proposal One.
The proposed classification of directors would, in the opinion of the Board
of Directors, also better enable the Board to protect the interest of the
remaining stockholders of the Company in the event that any entity should
obtain, through a takeover bid or otherwise, a substantial amount of the
Company's capital stock in order to merge subsequently the Company with such
entity (or an affiliate thereof) by providing continuing Board representation
for the views and interests of the remaining stockholders. In the past 25 years
a number of companies have been subject to takeover attempts. These attempts
typically have involved efforts to acquire stock interests in the target
company, often by a tender offer, followed in some cases by a merger or other
transaction to absorb the target company into the entity (or an affiliate of the
entity) which acquired the stock interests. The takeover procedures, and the
speed with which they are completed, may limit the ability of the management of
the target company to evaluate the terms offered and to advise the stockholders
adequately of
3
<PAGE> 6
such evaluation. The takeover attempt often proceeds without advance
consultation with the management of the target company, thus avoiding
negotiation as to the terms to be offered, as well as the mutual investigation
into compatibility of the businesses to be combined, which would normally
precede the consummation of a negotiated acquisition. It should be noted,
however, that the proposed classification of directors may frustrate a takeover
attempt which a majority of the then stockholders believe to be in the best
interests of the Company.
Management is not aware of any existing or threatened effort to take over
control of the Company.
As indicated under "Proposal Two: Election of Directors -- Nominees for
Election as Directors," the Board is currently only nominating five directors,
but hopes, during the period prior to the next Annual Meeting of Stockholders in
2001, to add up to four more. There can be no assurance that the Board will
succeed in achieving this objective, whether in the time frame contemplated or
at all; however, as the Company moves closer to the end of its development stage
and the obtaining of its first revenues, the Board believes that more persons
will be agreeable to serve as directors of the Company. If Proposal One is
adopted and only five directors are elected as proposed, one will serve for one
year as a Class A Director, two will serve for two years as Class B Directors
and two will serve for three years as Class C Directors. Each will serve within
his or her Class until his or her successor is duly elected and qualifies.
FIX NUMBER OF DIRECTORS
Currently, paragraph 1 of Article SEVENTH of the Company's Restated
Certificate of Incorporation provides that "the number of directors which shall
constitute the whole Board of Directors shall be fixed by, or in the manner
provided in, the Bylaws." Article II, Section 2 of the Company's By-Laws
currently provides that the number of directors shall be four; however, by vote
of a majority of the entire Board of Directors or by an amendment of the
By-Laws, the number thereof may be increased or decreased.
The Board of Directors recommends that Article SEVENTH be amended to
provide that the Board of Directors shall consist of not less than three nor
more than nine directors, as shall be determined by resolution of the Board of
Directors. On June 16, 2000, the Board approved this Amendment and repeal of the
contradictory provision of the By-Laws, subject to obtaining stockholders'
approval of the Amendment. The text of paragraph 1 of Article SEVENTH as
currently in effect and as proposed to be amended is set forth in Appendix A to
this Proxy Statement and is incorporated herein by this reference. As indicated
in the preceding section "Classified Board" under this caption "Proposal One:
Authority to Classify Board and Fix Number of Directors," a copy of Article II,
Section 2 of the By-Laws as currently in effect and as amended, subject to the
adoption of Proposal One, is also included in Appendix A and is incorporated
herein by this reference.
The Company currently has five directors and is seeking others, not to
exceed four. See "Proposal Two: Election of Directors -- Nominees for Election
as Directors." As previously indicated in the section "Classified Board" under
this caption "Proposal One: Authority to Classify Board and Fix Number of
Directors," there can be no assurance that the Board will achieve this
objective.
The Board makes this recommendation to amend paragraph 1 of Article SEVENTH
of the Company's Restated Certificate of Incorporation as a corollary to its
proposal to classify the Board as discussed in the preceding section "Classified
Board" under this caption "Proposal One: Authority to Classify Board and Fix
Number of Directors." Otherwise, absent this Amendment to the Restated
Certificate of Incorporation, one or more stockholders could vote a majority of
the outstanding shares of the Common Stock to amend the By-Laws to increase the
number of directors by adding an unlimited number of directors and, thus,
destroy the purpose and intent of a classified board of directors.
The two Amendments, i.e., to classify the Board and to fix number of
directors, are presented as one proposal, rather than as two separate proposals,
because they are interrelated. The Board believes that, unless the classified
board Amendment is approved by stockholders at the Meeting, there is no
necessity to adopt the Amendment to fix the number of directors, which is being
proposed only for the reason set forth in the preceding paragraph.
4
<PAGE> 7
RECOMMENDATION
FOR THE REASONS DESCRIBED ABOVE, THE BOARD OF DIRECTORS RECOMMENDS THAT THE
STOCKHOLDERS VOTE FOR PROPOSAL ONE TO AMEND THE RESTATED CERTIFICATE OF
INCORPORATION TO CLASSIFY THE BOARD AND TO FIX THE NUMBER OF DIRECTORS.
PROPOSAL TWO: ELECTION OF DIRECTORS
NOMINEES FOR ELECTION AS DIRECTORS
If Proposal One to amend the Restated Certificate of Incorporation of the
Company (1) to provide for the election of directors by classes and (2) to fix
the number of directors at not less than three nor more than nine is approved by
the stockholders, five directors will be elected at the Meeting, one of whom
will hold office for one year and until his or her successor is duly elected and
qualifies (Class A Director); two of whom will hold office each for two years
and until his or her successor is duly elected and qualifies (Class B
Directors); and two of whom will hold office each for three years and until his
or her successor is duly elected and qualifies (Class C Directors). The Board's
nominees and the Classes in which each nominee will serve, if elected, is set
forth in the table below.
If the proposed Amendment classifying the Board of Directors into three
classes is not adopted, there will be nominated for election as directors the
five persons named in the table below who have been nominated by the Board of
Directors, each to serve for a one-year term until the next Annual Meeting of
Stockholders in 2001 and until his or her successor is duly elected and
qualifies.
The Board intends to seek additional directors after this Meeting and, if
appropriate candidates are determined after screening by the Company's
Nominating Committee (see the section "Committees and Board Meetings" under this
caption "Proposal Two: Election of Directors"), to increase the number of
authorized directors and to elect such candidate or candidates as permitted by
the Restated Certificate of Incorporation or the By-Laws of the Company. If
Proposal One is adopted by stockholders at the Meeting, not more than four
directors may be so elected and each, whenever elected by the Board, will serve
only until the next Annual Meeting of Stockholders at which time he or she must
be designated to a Class and elected as such by the stockholders for him or her
to continue in office as a director. If Proposal One is not adopted, there will
be no limit on the number of additional directors who may be elected and each,
whenever elected by the Board, will serve until the next Annual Meeting of
Stockholders and until his or her successor is duly elected and qualifies. There
can be no assurance that additional directors will be added, whether in the
period September 2000 to August 2001 or thereafter.
Proxies received in response to this solicitation, unless specified
otherwise, will be voted in favor of the five nominees named below, all of whom
are currently serving as directors of the Company, although Charles J. Casamento
and Stanley Yakatan were first elected by the Board of Directors on June 16,
2000. 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 five nominees.
The following table sets forth certain information, as of the Record Date,
concerning the Board's nominees for election as directors of the Company. The
information as to age has been furnished to the Company by the individual named.
For information as to the shares of the Common Stock beneficially owned
5
<PAGE> 8
by each nominee, see the table under the caption "Security Ownership of Certain
Beneficial Holders and Management" elsewhere in this Proxy Statement.
<TABLE>
<CAPTION>
YEAR
FIRST TERM
ELECTED POSITION AND OFFICES TO
NAME OF NOMINEE AGE DIRECTOR WITH THE COMPANY CLASS(1) EXPIRE(2)
--------------- --- -------- -------------------- -------- ---------
<S> <C> <C> <C> <C> <C>
Peter S. Gold................... 75 1997 Director A 2001
Paul Sandler.................... 60 1997 Director B 2002
Stanley Yakatan................. 57 2000 Director B 2002
Charles J. Casamento............ 55 2000 Director C 2003
Linda H. Masterson.............. 49 1996 Chairman of the Board, C 2003
President, Chief Executive
Officer and a Director
</TABLE>
---------------
(1) This class designation will be applicable only if Proposal One to classify
the Board of Directors is approved by stockholders at the Meeting.
(2) This term assumes Proposal One is approved at the Meeting; if not, the term
of all directors will expire in 2001 and when his or her successor is duly
elected and qualifies.
FAMILY RELATIONSHIPS OF NOMINEES AND EXECUTIVE OFFICERS
There are no family relationships among the nominees for election as
directors and the executive officers of the Company.
BUSINESS HISTORY OF NOMINEES
Linda H. Masterson has over 25 years' experience in marketing, sales and
business development, and substantial experience as a senior manager, in the
medical diagnostics, healthcare and biotechnology fields. She was elected a
director of Substance Abuse Technologies, Inc. ("SAT"), the then parent of the
Company, on September 26, 1995. Effective May 13, 1996, she became the President
and the 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 the Chief
Operating Officer of the Company. Effective November 19, 1996, she relinquished
her duties as the Chief Operating Officer of SAT in order to devote more time to
supervising the development program of the Company and the operations of the
then 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. On June 16, 2000, she was elected as Chairman of
the Board 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 the 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 Company. Ms. Masterson has a B.S. in Medical Technology
from the University of Rhode Island and an M.S. 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.
6
<PAGE> 9
Peter S. Gold was elected as a director of the Company on December 5, 1997.
He retired in 1990 as the Chairman and the 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 Corp. 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 the Chairman of the Board of Trustees of Pitzer
College (Claremont College), Claremont, California, 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, California, and received a law degree at Southwestern
University, Los Angeles, California.
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, Arizona. Additionally, Dr. Sandler is the
Medical Director at Walter Boswell Memorial Hospital, the Phoenix Artificial
Kidney Center, and 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 M.D.
at the State University of New York and his B.A. from Emory University.
Charles J. Casamento was elected as a director of the Company on June 16,
2000. Mr. Casamento has extensive experience in marketing, business development
and executive management in pharmaceutical, biotechnology and medical products
companies. From November 1999 to date, he has been serving as the Chairman,
President and Chief Executive Officer of Questcor Pharmaceuticals, Inc.
("Questcor"), a specialty pharmaceutical company focusing on serving the acute
care and critical care hospital markets. From June 1993 to November 1999, he
served as the Chairman, President and Chief Executive Officer of RiboGene, Inc.,
a therapeutics company which merged with another company to form Questcor in
November 1999. From March 1989 to May 1993, he served as the President and Chief
Executive Officer of Interneuron Pharmaceuticals, a biopharmaceutical company of
which he was a co-founder. From December 1970 to March 1989, he held management
positions with Genzyme Corporation, Sandoz, Inc., Hoffman-La Roche, Inc.,
Johnson & Johnson, Inc. and American Hospital Supply Corporation, all in the
pharmaceutical area of their businesses. Mr. Casamento received his B.S. in
Pharmacy from Fordham University and his M.B.A. from Iona College and is a
licensed pharmacist.
Stanley Yakatan was elected as a director of the Company on June 16, 2000.
During the past ten years, he has dedicated his career to helping establish new
companies in conjunction with venture capital firms throughout the world on a
project assignment basis, particularly in medical device, biotechnology,
biopharmaceutical and hi-technology companies. Mr. Yakatan also has extensive
experience in sales, marketing and business development and as a senior manager
in a variety of diagnostic, biotechnology and pharmaceutical companies. From May
1999 to date, he has been serving as the Chairman, President and Chief Executive
Officer of Katan Associates which furnishes advisory services to its clients on
strategic planning, marketing, business development and other matters and
assists its clients in obtaining financing. Since July 1994, he has served as a
consultant to Medical Science Partners, an international healthcare venture
fund, and a member of the investment committee of BioCapital, also a healthcare
venture fund. From May 1996 to May 1999, he served as the Chairman, President
and Chief Executive Officer of Quantum Biotechnologies, which develops products
to the research products molecular biology market. From September 1994 to
December 1995, he served as the President and Chief Executive Officer of
CryoSurge, a medical device development stage company. From July 1969 to July
1994, he advanced from a sales representative to managerial positions to
executive officerships with Sandoz, Inc., New England Nuclear, E.I. Dupont de
Nemours & Co., ICN Pharmaceuticals Inc., New Brunswick Scientific, Inc., Unisyn
Technologies, Inc., Proteine Performance and Cystar, Inc. Mr. Yakatan received
his M.B.A. from the Wharton School of Business of the University of
Pennsylvania.
DIRECTORSHIPS ON OTHER PUBLIC COMPANIES
Charles J. Casamento, in addition to serving as a director of Questcor
Pharmaceuticals, Inc., for which public company (its Common Stock is traded on
the AMEX) he also serves as its Chairman, President and
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<PAGE> 10
Chief Executive Officer, serves as a director of Cortex Pharmaceuticals, Inc.,
the Common Stock of which is traded in the over-the-counter market.
Peter S. Gold currently serves as a director of Arden Realty, Inc., the
Common Stock of which is traded on the NYSE.
Stanley Yakatan currently serves as a director of BTX-Genetronics GEB, the
Common Stock of which is traded on the Vancouver Stock Exchange.
Linda H. Masterson and Paul Sandler do not currently serve on any board
other than the Company with a class of securities registered pursuant to Section
12 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or
subject to the reporting requirement of Section 15(d) of the Exchange Act or any
company registered as an investment company under the Investment Company Act of
1940, as amended.
COMMITTEES AND BOARD MEETINGS
The Board has three standing committees: Audit, Compensation and
Nominating, the first two of which were created on December 5, 1997 after the
Company obtained its independence from SAT on October 29, 1997 and the third of
which was created on February 26, 1999.
Peter S. Gold has served since December 5, 1997, and Charles J. Casamento
and Stanley Yakatan have served since June 16, 2000, on the Audit Committee,
with Mr. Gold serving as the Chairperson. Paul Sandler served on the Audit
Committee from December 5, 1997 to June 16, 2000. All of such persons are
"independent" as such term is defined in Section 121(A) of the AMEX's listing
standards. The Audit Committee recommends annually to the stockholders the
independent auditors to be retained by the Company, reviews 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 reviews various
reports and recommendations with respect to internal controls and any
significant changes in accounting.
During the fiscal year ending March 31, 2001, ("fiscal 2001"), the Audit
Committee intends to initiate reviews of quarterly reports with the independent
auditors and to implement the other requirements adopted for audit committees by
the Securities and Exchange Commission (the "Commission") and the National
Association of Securities Dealers, Inc. (the "NASD") on behalf of the AMEX.
The Board of Directors hereby certifies that, on June 16, 2000, the
directors adopted a Charter for the Audit Committee, superseding the resolutions
of authorization originally adopted by the then Board on December 5, 1997. A
copy of the Audit Committee Charter is annexed hereto as Appendix B and is
incorporated herein by this reference.
Messrs. Gold and Sandler have served since December 5, 1997, and Mr.
Casamento has served since June 16, 2000, on the Compensation Committee, with
Dr. Sandler serving as the Chairperson. The Compensation Committee approves the
remuneration of key officers of the Company and, if incorporated or acquired,
its subsidiaries, reviews and recommends to the Board of Directors changes in
the Company's stock benefit and executive, managerial or employee compensatory
and benefit plans or programs and administers stock option and, when adopted,
restricted stock or similar plans of the Company.
Linda H. Masterson has been serving since February 26, 1999, and Messrs.
Casamento and Yakatan have served since June 16, 2000, on the Nominating
Committee, with Mr. Casamento replacing Mr. Gold, who had served from February
26, 1999 to June 16, 2000, as the Chairperson. Jonathan J. Pallin, who resigned
as a director of the Company on March 3, 2000, previously served as the third
member of the Nominating Committee. The Nominating Committee will recommend to
the Board, among, other matters, nominees for election or re-election as
directors of the Corporation, including screening any nomination received from a
stockholder, director or officer of the Corporation, criteria relating to tenure
and retention of directors, changes in directors' compensation, appointments to
committees and procedures as to management succession.
If a stockholder has a recommendation as to a nominee for election as a
director, such stockholder should make his, her or its recommendation in writing
addressed to Charles J. Casamento, as the Chairperson of the Nominating
Committee, at the Company's address shown in the heading to this Proxy
Statement, giving the
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<PAGE> 11
business history and other relevant biographical information as to the proposed
nominee and the reasons for suggesting such person as a director of the Company.
The Nominating Committee will then promptly review the recommendation and advise
the stockholder of its conclusion and, if a rejection, the reasons therefor.
During the fiscal year ended March 31, 2000 ("fiscal 2000"), there were 12
meetings of the Board. Each of the incumbent directors participated in all
meetings of the Board and the Committees on which he or she served. During
fiscal 2000, the Board also acted twice by unanimous consent. The Audit
Committee held one meeting and acted on unanimous consent on one occasion, and
the Compensation Committee held four meetings and acted on unanimous consent on
three occasions during fiscal 2000. The Audit Committee intends to meet on the
date of this Meeting 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 2000. Commencing
with the financial statements for fiscal 2001, the Audit Committee will meet
with the independent auditors prior to the filing of the Company's Annual Report
on Form 10-K so the Committee may report thereon in the proxy material for the
next Annual Meeting of Stockholders as required by the new Commission/NASD
rules. The Nominating Committee held one meeting in fiscal 2000.
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>
Linda H. Masterson........................ 49 Chairman of the Board, President, Chief
Executive Officer and a Director
Thomas J. Foley........................... 60 Senior Vice President, Research and
Development
Lawrence A. Reynolds...................... 51 Vice President, Marketing and Sales
Jeffrey G. Uding.......................... 45 Vice President, Operations
Michele A. Clark.......................... 47 Controller and Chief Accounting Officer
Charles J. Casamento...................... 55 Director
Peter S. Gold............................. 75 Director
Paul Sandler.............................. 60 Director
Stanley Yakatan........................... 57 Director
</TABLE>
Each director is currently elected to serve until the next Annual Meeting
of Stockholders or until his or her successor is elected and shall have
qualified. If Proposal One to classify the Board is adopted by the stockholders
at the Meeting, then a director's term of office will change. See "Proposal One:
Authority to Classify Board and Fix Number of Directors - Classified Board" and
"Proposal Two: Election of Directors - Nominees for Election as Directors" for
information as to the new terms of office in such event. Linda H. Masterson,
Peter S. Gold and Paul Sandler who are named as directors in the table were
initially elected by the then Board to fill a vacancy (Ms. Masterson on May 31,
1996 and Messrs. Gold and Sandler on December 5, 1997) and were re-elected by
the stockholders at the last two Annual Meetings of Stockholders on August 13,
1998 and August 20, 1999. Jonathan J. Pallin, who was initially elected as a
director by the then Board on October 31, 1997 and was re-elected at the 1998
and 1999 Annual Meetings, resigned as a director on March 3, 2000 in order to
pursue other interests. Charles J. Casamento and Stanley Yakatan were elected by
the Board as directors on June 16, 2000. Ms. Masterson and Messrs. Casamento,
Gold, Sandler and Yakatan are the Board's nominees for re-election as directors
at the Meeting. See "Proposal Two: Election of Directors-Nominees for Election
as Director." Each officer of the Company is elected by the Board of Directors
to serve at the discretion of the Board.
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<PAGE> 12
BUSINESS HISTORY
For information as to the business histories of Ms. Masterson and Messrs.
Casamento, Gold, Sandler and Yakatan, see the section "Business History of
Nominees" under the caption "Proposal Two: Election of Directors."
Thomas J. Foley has over 25 years' experience in the medical diagnostic
industry. He was elected as Vice President, Research and Development of the
Company effective March 9, 1998 and his title was changed to Senior Vice
President, Research and Development on March 12, 1999. 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 the 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 the 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.
Lawrence A. Reynolds has more than 20 years of marketing and sales
experience in senior management positions in the biomedical field. He became an
employee of the Company on January 17, 2000 and was elected as its Vice
President, Marketing and Sales on January 21, 2000. He served as Vice President,
New Business Development and Strategic Planning for Microgenics Corporation, a
manufacturer of point of care diagnostic products, from January to June in 1999
until its divestiture to Sybron Corporation. From February 1997 to December
1998, he served as Vice President, International Marketing of Abaxis, Inc., a
manufacturer of point of care diagnostic products. From April 1996 to February
1997, he served as managing principal of Lar Business Consulting which provided
consulting services to point of care diagnostic and biomedical client companies.
From 1977 to 1996, he held various managerial positions first with Syva Company
("Syva") and, after Syva's acquisition in 1995, its acquiror Behring Diagnostic,
Inc. Syva is one of the leading providers of devices which test for drugs of
abuse using urine as the specimen. Mr. Reynolds holds a B.S. in Chemistry and
Mathematics from Haughton College and an M.S. in Laboratory Business
Administration from Georgia State University.
Jeffrey G. Uding has more than 20 years of managerial experience in
manufacturing and other aspects of operations. He became an employee of the
Company and was elected as its Vice President, Operations on February 14, 2000.
Prior thereto and since March 1995, he served as Director of OEM Products of
Ansys Diagnostics Inc., a manufacturer of diagnostic devices. From March 1994 to
March 1995, he served as Operations Manager of Pacesetter Inc., a manufacturer
of pacemakers. Prior thereto, he held various positions with Mallenckrodt
Medical, a manufacturer of respiratory devices, from 1990 to 1994; Baxter
Healthcare Corp., a manufacturer of medical devices, from 1986 to 1990; American
Hospital Supply Corp., a manufacturer of medical devices, from 1984 to 1986; and
Travenol Labs, Inc. a manufacturer of medical devices, from 1978 to 1984. Mr.
Uding has a A.S. in Engineering from Harper College, a B.S. from Roosevelt
University, an M.S. in Management from the University of La Verne and an M.B.A.
in Financial Management from Pepperdine University.
Michele A. Clark has more than 25 years of accounting and finance
experience in manufacturing and high tech companies. She became an employee of
the Company on April 12, 1999 and was elected as its Controller and appointed as
its Chief Accounting Officer on April 16, 1999. Ms. Clark was, prior to joining
the Company, the Controller at Auto-Graphics, Inc. ("Auto-Graphics"), a software
development company, where she managed all accounting, finance, human resource
and administrative functions within the company. Additionally, she was
responsible for all filings with the Commission and shareholder relations. Prior
to Auto-Graphics, Ms. Clark was Controller at Typecraft, Inc. ("Typecraft"), a
commercial lithographer, where she was responsible for all accounting, finance
and human resource functions. Prior to Typecraft, Ms. Clark served
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<PAGE> 13
as accounting manager for three retail companies with multiple locations. Ms.
Clark graduated Cum Laude with a B.S. in Accounting from the University of La
Verne.
SIGNIFICANT EMPLOYEES
The following two paragraphs furnish certain information with respect to
two persons who are not executive officers of the Company, but who are expected
by the Company to make a significant contribution to its business in fiscal
2001:
Kenneth L. Berger, the Vice President, Regulatory Affairs, age 55, has over
25 years of experience in pharmaceutical, biological and diagnostic development,
including over 20 years experience in regulatory affairs, quality assurance and
validation. He joined the Company on November 10, 1999. Prior thereto and from
April 1998, Dr. Berger was an executive consultant at QVS, Quality and
Validation Services, where he was responsible for the creation and
implementation of quality systems, validation program management and regulatory
procedures and submissions. From November 1992 to April 1998, Dr. Berger was
Senior Vice President at Techniclone Corporation ("Techniclone"), where he was
responsible for regulatory affairs, product development and good manufacturing
practices (GMP) validation required by the FDA. Prior to Techniclone, Dr. Berger
was a Vice President at Synbiotics Corporation, where he was responsible for all
research and development, including regulatory affairs, quality assurance and
technical business development. Dr. Berger has a Ph.D. in Biochemistry from the
University of Southern California and a B.S. in Biology from Dartmouth College.
David J. Smith, the Director of Engineering, age 55, has over 20 years of
experience in research and development and technical management, primarily in
medical devices. Mr. Smith specializes in developing electro-optical systems for
commercial, medical and military markets. Prior to coming to the Company on May
12, 1997, Mr. Smith was Director of Engineering at the Ophthalmics Division of
Pharmacia Corporation ("Pharmacia"). While at Pharmacia, which he joined in
April 1995, he managed an international staff of scientists and engineers in the
development of intraocular lenses, glaucoma shunts, and phacoemulsification
systems for United States and foreign markets. He established policies and
procedures to obtain ISO9000 certification for Pharmacia Ophthalmics and CE
approval for several products. Prior to Pharmacia, Mr. Smith was a new product
manager for ophthalmic devices at Allergan Medical Optics where he developed
multifocal ophthalmic devices, surgical instruments and an automated optical
inspection system. Mr. Smith has designed optical sighting systems for military
ground combat vehicles, avionic systems and field artillery weapons. He holds
several patents in laser systems for both military and commercial markets,
including enhanced vision systems for viewing through turbid media, eye-safe
laser range finders and designators and automated optical inspection systems.
Mr. Smith received a M.S. in Mathematical Physics from Central Washington
University and has completed postgraduate work at the Institute of Optics at the
University of Rochester.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Based solely on a review of Forms 3 and 4 furnished to the Company under
Rule 16a-3(e) promulgated under the Exchange Act, with respect to fiscal 2000,
the Company is not aware of any director or executive officer of the Company who
failed to file on a timely basis, as disclosed in such forms, reports required
by Section 16(a) of the Exchange Act, except that because of a turn-over at
counsel in personnel with EDGAR filing experience, counsel filed 11 days late in
the same month (a) a Form 3 for Michele A. Clark, the Controller and Chief
Accounting Officer of the Company (one transaction), and (b) a Form 4 for each
of Peter S. Gold and Paul Sandler, each a director of the Company (one
transaction each).
As of March 31, 2000, i.e., the end of fiscal 2000, Jonathan J. Pallin, a
former director of the Company, and the General Conference Corporation of
Seventh-day Adventists (the "Seventh-day Adventists") were the only beneficial
owners of 10% or more of the Common Stock known to the Company. Both Mr. Pallin
and the Seventh-day Adventists have advised the Company that they made timely
filings with respect to their transactions in fiscal 2000, except that the
latter was ten days late with respect to filing a Form 4 (two transactions)
because of a delay by the Company in confirming the closing with respect to the
Company's private placement in which this stockholder was a subscriber.
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<PAGE> 14
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On September 10, 1997, SAT, the then parent of the Company, filed a
petition for reorganization under the Federal Bankruptcy Code, which
reorganization proceeding was successfully completed on May 26, 1998. However,
the directors of the Company in September 1997, Robert S. Stutman (who was also
SAT's Chairman of the Board and Chief Executive Officer), Michael S. McCord and
Linda H. Masterson (who currently is the Chairman of the Board, President and
Chief Executive Officer of the Company), who were also directors of SAT,
decided, at the request of Ms. Masterson, to resolve the Company's financial
problems at that time outside the bankruptcy court and, accordingly, no petition
in bankruptcy was filed for the Company. The Company subsequently successfully
raised funds to continue the development of the product being commercialized and
has significantly increased stockholder value during the past two years.
On October 29, 1997, SAT, with the approval of its bankruptcy court, sold
its controlling stockholder interest in the Company (i.e., 5,575,306 shares or
76.4% of the 7,297,206 then outstanding shares of the Common Stock) to Meadow
Lane Partners, LLC ("Meadow Lane"), which action, together with the subsequent
resignations of Messrs. Stutman and McCord who served on both boards of
directors, terminated SAT's relationship as the parent of the Company. As a
result of the subsequent issuances of shares of the Common Stock so that the
number of shares outstanding at the Record Date was 30,096,201, Meadow Lane's
distributions of its shares to its two members (one of whom was Jonathan J.
Pallin, a former director and Chairman of the Board of the Company), such
members' subsequent sales of shares of the Common Stock (reducing Mr. Pallin's
beneficial ownership at the Record Date to 12.7% and the other former member's
beneficial ownership to 2.8%) and the distribution of Meadow Lane's Common Stock
purchase warrant, Mr. Pallin's advice that Meadow Lane has been dissolved, and
the various changes in the composition of the Board of Directors of the Company,
including Mr. Pallin's resignation, neither Meadow Lane is, nor its former
members are, in the opinion of the Board, after consultation with Wachtel &
Masyr, LLP, the Company's counsel, any longer a parent of the Company. As of the
Record Date, the Board of Directors did not believe that the Company has any
parent and was not aware of any arrangement which might result subsequently in a
change in control of the Company. See "Security Ownership of Certain Beneficial
Owners and Management." Although as indicated in the table thereunder, General
Conference Corporation of Seventh-day Adventists may be deemed the beneficial
owner of 20.2% of the shares of the Common Stock outstanding at the Record Date,
such stockholder has never taken any action to exercise control of the Company
and has, in its filings under the Exchange Act, specifically disclaimed any
intention to do so and, accordingly, is not deemed by the Board to be a parent
of the Company.
See the section "Employment and Severance Agreements" under the caption
"Executive Compensation" for information relating to the Company's severance
agreement with Linda H. Masterson, the Chairman of the Board, the President, the
Chief Executive Officer and a director of the Company.
On October 10, 1999 (as modified by the Board on April 5, 2000), after over
four months of due diligence, the Compensation Committee granted to Ms.
Masterson five Common Stock purchase warrants (the "Masterson Warrants"), each
to purchase 500,000 shares of the Common Stock at $1.72 per share, which
exercise price was the average of the high bid and low asked prices of the
Common Stock during the prior 20 trading days. Each of the Masterson Warrants
was not to become exercisable unless the Company achieved a specified goal
before a specified date as follows:
(1) A definitive agreement with a strategic partner is executed on or
before October 9, 2001;
(2) A second definitive agreement with another strategic partner is
executed on or before October 9, 2001;
(3) A financing pursuant to which the Company realizes at least
$4,500,000 in net proceeds is closed on or before October 9, 2000;
(4) The clinical trials for the saliva based testing product are
completed on or before March 31, 2001; and
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<PAGE> 15
(5) Sales of the Company's saliva based testing product to third
parties (other than to a strategic partner) aggregating at least $100,000
are consummated on or before March 31, 2001.
Each of the Masterson Warrants expires five years from the date the Warrant
becomes exercisable, but not later than five years from the respective deadline
dates as set forth above. The third Masterson Warrant as described above became
exercisable upon the consummation of the Company's private placement in February
2000 and, as indicated in the fifth succeeding paragraph, Ms. Masterson
exercised the same on March 6, 2000.
On October 10, 1999 (as modified by the Board on April 5, 2000), the
Compensation Committee granted to Thomas J. Foley, the Senior Vice President,
Research and Development of the Company, two Common Stock purchase warrants (the
"Foley Warrants"), each to purchase 250,000 shares of the Common Stock at the
same exercise price as for the Masterson Warrants. Each of the Foley Warrants
will not become exercisable unless the Company achieves a specified goal before
a specified date as follows:
(1) The saliva based testing product is submitted to the FDA for
approval on or before March 31, 2001; and
(2) Sales of the saliva based testing product to third parties (other
than to a strategic partner) aggregating at least $100,000 are consummated
on or before March 31, 2001.
Each of the Foley Warrants expires as provided for the Masterson Warrants.
All of the remaining four Masterson Warrants and the Foley Warrants will
become immediately exercisable in the event of a "hostile takeover" of the
Company (as such term is defined in the Warrants). In addition, if a Masterson
Warrant or a Foley Warrant is terminated for a reason other than cause or
disability (as such terms are defined in the Warrants) or death, the applicable
Warrant will also become exercisable upon the happening of the event, but only
if the holder has made a substantial contribution to the achievement of the
goal, as, for example, Ms. Masterson negotiating all of the terms of the
financing and then is not the Chief Executive Officer of the Company at the
closing. The Warrant terminates before becoming exercisable in the event there
is no such contribution or in the event the reason for the termination is cause,
disability or death. Each of the remaining four Masterson Warrants or the Foley
Warrants terminates, even if it has become exercisable, if the holder is
terminated for cause.
On October 10, 1999, pursuant to its then recently adopted policy of making
annual reviews of each optionee, the Compensation Committee also granted,
pursuant to the LifePoint, Inc. 1997 Option Plan (the "1997 Option Plan"), stock
options ("Options") expiring October 9, 2009 exercisable at $1.67 per share to
Ms. Masterson to purchase 120,000 shares of the Common Stock and Mr. Foley to
purchase 60,000 shares of the Common Stock. These Options become exercisable in
accordance with the terms of the 1997 Option Plan (see "Executive
Compensation-Option/SAR Grants in the Last Fiscal Year").
On March 6, 2000, the Compensation Committee authorized that executive
officers who are optionees under the 1997 Option Plan (on June 16, 2000 this
right was extended to the 2000 Option Plan) or who hold Common Stock purchase
warrants (as, for example, the Masterson Warrants and the Foley Warrants) may
exercise an Option or a warrant by delivering a promissory note (the "Note") to
the order of the Company providing as follows: (1) principal and interest on the
Note shall become due and payable on the earlier to occur of (a) the first
business day which is 18 months after the date of the Note (which date of the
Note shall be the date of exercise of the Option or warrant) or (b) the shares
of the Common Stock securing the Note are sold; (2) payments of principal and
interest shall be secured by a pledge of the shares issued upon the exercise of
the Option or warrant; (3) the principal due under the Note shall bear interest
at the rate equal to the amount required to be charged under the Internal
Revenue Code of 1986, as amended (the "Code"), at the date of the Note, so that
the interest will not be deemed to be "below market" under Section 7872 of the
Code; (4) the Note may be prepaid at any time without penalty provided that the
net proceeds from any sale of the shares of the Common Stock so pledged shall be
applied as a prepayment; and (5) the Note shall become due and payable in the
event of an Event of Default (as defined in the Note) which shall occur (a) on
the executive officer's failure to pay principal and interest when due, which
default is not cured within 30 days, (b) if a bankruptcy or similar petition is
filed against the executive officer and not discharged within 60 days,
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<PAGE> 16
(c) if the executive officer seeks relief under Title 11 of the United States
Code or similar statute or (e) when the executive officer is unable to pay his
or debts as they mature; provided that this method of exercise may be used by an
officer only two times in any fiscal year. The Transfer Agent for the Common
Stock is directed to deliver the certificates evidencing the shares of the
Common Stock issued upon exercise to Robert W. Berend, the Secretary of the
Company and a partner of Wachtel & Masyr, LLP, general counsel to the Company,
to be held as security for the Company's loan. In authorizing this procedure to
exercise, the Compensation Committee noted that, if an executive officer was
required to sell his or her shares received upon exercise to meet tax or other
obligations, he or she could subject himself or herself to "short swing"
liability under Section 16(b) of the Exchange Act or violate some "lock-up"
provision a future underwriter may impose on directors and officers of the
Company and that permitting this method of exercise might ease problems under
Section 422(d) of the Code relating to incentive stock options which first
become exercisable in a year with a value in excess of $100,000 having the
excess shares losing their incentive stock option treatment under the Code,
thereby subjecting the executive officer to immediate tax liability. The
Compensation Committee also noted that this type of exercise was permitted to
optionees in other public companies.
On March 6, 2000, Linda H. Masterson, the Chairman of the Board, the
President and Chief Executive Officer of the Company, exercised (1) the two
Common Stock purchase warrants described under "Executive
Compensation-Employment and Severance Agreements" for an aggregate of 400,000
shares at $.50 per share, (2) the Masterson Warrant relating to obtaining
financing as described in the fifth preceding paragraph of this section "Certain
Transactions" under this caption "Management" for 500,000 shares at $1.72 per
share, (3) an Option expiring August 13, 2007 for 93,780 shares at $.50 per
share and (4) an Option expiring June 30, 2008 for 20,000 shares at $.50 per
share. As consideration for the exercises as to this aggregate of 1,013,750
shares, Ms. Masterson issued a Note dated March 6, 2000 to the Company for the
principal amount of $1,074,687.50 and bearing interest at the annual rate of 8%
per annum and the certificates evidencing the shares were delivered to Mr.
Berend to hold as agent for the Company and as security for payment of principal
and interest on the Note. One other executive officer subsequently exercised an
Option by issuing a Note to the Company and having the underlying shares of the
Common Stock held as security for the indebtedness.
On April 28, 1998, the Board authorized the following compensation
arrangement for Jonathan J. Pallin, then the Chairman of the Board and a
director of the Company, for his services as a financial consultant to 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 obtained cash financing of
$5,000,000 to $6,900,000; (b) $100,000 if the Company obtained cash financing of
$7,000,000 to $9,900,000; and (c) $125,000 if the Company obtained cash
financing of over $10,000,000, subject to certain limitations.
On January 8, 1999, the Board accepted the resignation of Mr. Pallin as the
Chairman of the Board, cancelled the foregoing bonus compensation arrangement
and authorized his engagement as a financial consultant to the Company through
March 31, 1999 on the following terms:
(1) he would continue to receive $10,000 per month through March 31,
1999 on the basis he would continue to serve the Company on a daily basis
as a financial consultant; and
(2) he would receive a finder's fee of 10% of the gross proceeds from
any purchaser whom or which he secured for a Company financing.
He received $420,451 as his finder's fee for the Company's third private
placement closed on January 21, 1999 relating to the sale of 600,000 shares of
the Series A Preferred Stock. He resigned as a director on March 3, 2000,
thereby severing all relationships with the Company except as a security holder.
See "Security Ownership of Certain Beneficial Owners and Management."
On April 16, 1999, the Board of Directors of the Company authorized as a
policy of the Company that it would not enter into any agreement in the future
with a director or an officer of the Company or a person who is the beneficial
owner of 5% or more of the outstanding shares of the Common Stock, the
beneficial ownership being determined in the manner contemplated by Rule 13d-3
under the Exchange Act, unless such agreement is on terms and conditions no less
favorable than those which could be obtained from an independent unaffiliated
third party to the Company.
14
<PAGE> 17
On April 16, 1999, the Board also authorized as a policy of the Company
that in the future any forgiveness of loans to the persons named in the
preceding paragraph must be approved by a majority of the Company's independent
directors who do not have an interest in the transaction and who have access, at
the Company's expense, to the Company's or other independent legal counsel.
Since the Company obtained its independence from SAT in October 1997, all
transactions with persons described in the second preceding paragraph, including
those described above in this section for Ms. Masterson, Mr. Foley and Mr.
Pallin, were authorized by all of the Company's independent directors who did
not have an interest in the transactions and who access to the Company's outside
counsel.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table provides certain summary information concerning
compensation paid or accrued by the Company during fiscal 2000 and the fiscal
years ended March 31, 1999 ("fiscal 1999") and 1998 ("fiscal 1998") to the sole
person who served as the Chief Executive Officer during fiscal 2000 and to the
only other executive officer whose total annual salary and bonus exceeded
$100,000 during fiscal 2000.
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION ------------
---------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS COMPENSATION
--------------------------- ---- -------- -------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Linda H. Masterson........... 2000 $173,654 120,000
Chief Executive Officer 1999 184,038(2) 50,000
and President(1) 1998 125,249(2) 700,000
Thomas J. Foley.............. 2000 $140,000 60,000
Senior Vice President, 1999 135,769 220,000
Research and
Development(3)
</TABLE>
---------------
(1) Ms. Masterson was elected the President of the Company effective August 1,
1996 and designated as its Chief Executive Officer on May 26, 1997. On June
16, 2000, she was elected as the Chairman of the Board of the Company.
(2) The amount shown in the table for 1998 does not reflect $33,654 paid by SAT
to Ms. Masterson for the period April 1 to June 1, 1997 nor $19,038.47 in
deferred salary which was paid in October 1998 after the Company obtained
long-term financing. Effective August 11, 1997, the Company directly paid
all compensation for Ms. Masterson.
(3) Mr. Foley was elected as Vice President, Research and Development effective
March 9, 1998 and his title was changed by the Board to Senior Vice
President, Research and Development on March 12, 1999.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
On August 14, 1997, the Board of Directors adopted, subject to
stockholders' approval, the 1997 Option Plan providing for the granting of
Options to purchase up to 1,000,000 shares of the Common Stock to employees
(including officers) and persons who also serve as directors and consultants of
the Company. On June 5, 1998, the Board increased the number of shares subject
to the 1997 Option Plan to 2,000,000, again subject to stockholders' approval.
Stockholders' approval was given on August 13, 1998. The Options may either be
incentive stock options as defined in Section 422 of the Code which were or may
be granted to employees or nonqualified stock options which were or may be
granted to employees, directors or consultants.
As of March 31, 2000, Options to purchase an aggregate of 1,543,293 shares
of the Common Stock granted to employees (including five executive officers, one
of whom is also a director, two non-employee, non-consultant directors and, as
described in the next paragraph, three members of the Company's Scientific
Advisory Board) were outstanding. As of such date, Options to purchase an
aggregate of 184,451 shares of the
15
<PAGE> 18
Common Stock had been exercised by employees and Options to purchase an
aggregate of 121,012 shares of the Common Stock were then exercisable. Options
granted to date under the 1997 Option Plan 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, with any odd amount being
exercisable in the 36th month. Certain Options will become exercisable upon the
achievement of certain performance goals related to corporate performance and
not that of the optionee. The exercise price per share for incentive stock
options under the Code may not be less than 100% of the fair market value per
share of the Common Stock on the date of grant. For nonqualified stock options,
the exercise price per share may not be less than 85% of such fair market value.
No Option may have a term in excess of ten years. Of the Options outstanding as
of March 31, 2000, all were incentive stock options except for Options to
purchase an aggregate of 160,000 shares and the outstanding Options had exercise
prices ranging from $.50 to $3.28 per share. The Options had expiration dates
ranging from August 13, 2002 to February 21, 2010.
The Company has not granted any Options to consultants other than to the
three current members of its Scientific Advisory Board, each receiving an Option
to purchase 10,000 shares, and will grant a similar Option to any future member
of the Scientific Advisory Board. For information as to six Options granted to
four non-employee, non-consultant directors, see the section "Compensation of
Directors" under this caption "Executive Compensation." For information as to
two Options granted in Fiscal 2000 to two executive officers (one of whom is
also a director), see "Management -- Certain Relationships and Related
Transactions." Since March 31, 2000 and through the Record Date, Options were
granted to four non-employee, non-consultant directors to purchase an aggregate
of 50,000 shares, which Options are referred to in the second sentence of this
paragraph, Options to purchase an aggregate of 134,000 shares were granted to
employees, Options to purchase an aggregate of 21,700 shares have been exercised
and an Option to purchase 7,500 shares has been cancelled.
The Company has never granted any stock appreciation rights.
The following table contains information concerning the grant of Options to
the Chief Executive Officer of the Company and the other named executive officer
whose compensation for fiscal 2000 exceeded $100,000 as reported in the Summary
Compensation Table under this caption "Executive Compensation."
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
------------------------------------------------------ ANNUAL RATES OF
NUMBER OF PERCENTAGE OF STOCK PRICE
SECURITIES TOTAL OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM(3)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION ---------------------
NAME GRANTED(#) FISCAL 2000(1) ($/SH)(2) DATE 5%($) 10%($)
---- ---------- -------------- ----------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Linda H. Masterson........... 120,000 12.2% $1.67 10/9/09 $326,400 $519,600
Thomas J. Foley.............. 60,000 6.1% $1.67 10/9/09 $163,200 $259,800
</TABLE>
---------------
(1) Based upon Options to purchase an aggregate of 985,297 shares of Common
Stock granted in fiscal 2000.
(2) The exercise price is equal to 100% of the fair market value of the Common
Stock at the date of grant as determined by the Compensation Committee at
the time of grant.
(3) The potential realizable value is calculated based upon the term of the
Option at the time of grant (ten years). Stock price appreciation of five
percent and ten percent is assumed pursuant to rules promulgated by the
Commission and does not represent the Company's prediction of the stock
price performance.
AGGREGATE OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES
Options to purchase an aggregate of 143,254 shares of the Common Stock were
exercised by employees during fiscal 2000.
As indicated in the preceding section, the Company has never granted any
stock appreciation rights.
16
<PAGE> 19
The following table shows the fiscal year-end option values for the Chief
Executive Officer of the Company and the other named executive officer whose
compensation for fiscal 2000 exceeded $100,000 as reported in the Summary
Compensation Table under this caption "Executive Compensation".
<TABLE>
<CAPTION>
SHARES NUMBER OF SECURITIES VALUE OF UNEXERCISED
ACQUIRED VALUE UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
ON EXERCISE REALIZED OPTIONS AT FISCAL YEAR-END FISCAL YEAR END
NAME (#) ($) (#) EXERCISABLE/UNEXERCISABLE ($) EXERCISABLE/UNEXERCISABLE
---- ----------- -------- ----------------------------- -----------------------------
<S> <C> <C> <C> <C>
Linda H. Masterson...... 113,750 $188,398 5,003/351,247 $ 8,286/$581,753(1)
Thomas J. Foley......... 0 0 58,749/221,251 $97,303/$366,447(1)
</TABLE>
---------------
(1) The market value of the options on March 31, 2000 is based on the average of
the high bid and low asked prices of $1.65625 per share on that date.
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 2000
or thereafter.
COMPENSATION OF DIRECTORS
On January 21, 2000, the Board of Directors modified the compensation
arrangements previously adopted on April 16, 1999 for outside directors. In
consideration of the services to be performed as a director of the Corporation,
each director:
(a) who is not an employee of the Corporation, or any subsidiary of
the Corporation (if hereafter created), or
(b) who is not a consultant to the Corporation, or, when incorporated,
any subsidiary of the Corporation, and who is not paid a fee on a monthly
basis
shall receive as compensation (1) an annual cash payment of $10,000, payable
quarterly, but subject to retroactive pro rata adjustment in the fourth quarter
if he or she fails to attend, or participate in, at least 75% of the directors'
meetings held during the calendar year, and (2) a grant of an Option pursuant to
the 1997 Option Plan or, since June 16, 2000, a stock option pursuant to the
2000 Option Plan, depending on the then availability of shares under the
respective Plan. Each grant shall be for the right to purchase 10,000 shares
(previously 15,000 shares) of the Common Stock on an annual basis, except that
in the first year as a director the grant is for 15,000 shares. Except for
incumbent directors as of January 21, 2000, the initial grant shall be on the
day of his or her first election as a director of the Corporation, whether by
the Board or the stockholders, and thereafter on the anniversary day of such
first election. The exercise price of each Option or stock option shall be the
Fair Market Value as determined pursuant to the 1997 Option Plan or the 2000
Option Plan on the respective date of the grant, or if not a business day, on
the preceding day on which the Common Stock was traded. Each Option or stock
option will expire ten years from its date of grant and will become exercisable
as to one quarter of the shares of the Common Stock on the first anniversary of
the date of grant and 1/36th of the remaining shares of the Common Stock on the
same date each month thereafter for a period of 36 months, with any odd amount
being exercisable in the 36th month.
In addition, each director is entitled to receive annually (1) a fee of
$2,000 for any Board Committee as to which he or she serves as the Chairperson
and (2) a fee of $1,000 for each Board Committee on which he or she serves. For
information as to the three Board Committees, see "Proposal Two: Election of
Directors -- Committees and Board Meetings."
In lieu of receiving the cash payments described in the preceding two
paragraphs, a director may elect, prior to the commencement of the calendar
year, to receive, pursuant to either the 1997 Option Plan or the 2000 Option
Plan, an Option or a stock option subject to the following terms and conditions:
(1) the right to purchase that number of shares of the Common Stock which is the
dividend of (a) the cash compensation otherwise payable to him or her for the
year and (b) the value of having the right to purchase that number of shares
over a ten-year period at the exercise price hereinafter set forth, the value to
be determined in
17
<PAGE> 20
accordance with a customary formula; (2) an exercise price equal to 85% of the
closing sales price of Common Stock on the date of election to receive an Option
or a stock option in lieu of cash; and (3) an expiration date of ten years from
the date of election. The number of shares is subject to the same retroactive
pro rata adjustment as is the cash payment. Paul Sandler, a non-employee,
non-consultant director, has made the election to receive an Option in lieu of
cash payments for 2000 and, accordingly, was granted on Option expiring January
20, 2010 to purchase 4,797 shares at $2.40 per share.
On April 16, 1999, pursuant to the original authorization, each of Peter S.
Gold and Dr. Sandler, each a non-employee, non-consultant director, was granted
an Option expiring April 15, 2009 under the 1997 Option Plan to purchase 15,000
shares of the Common Stock at $1.81 per share. The Option became, and will
continue to become, exercisable as provided in the third preceding paragraph.
April 16th of each year, which commenced in 2000, will be the date of grant of
an Option or stock option for each of Messrs. Gold and Sandler assuming he is
still a director of the Company on such date of grant. Each of Messrs. Gold and
Sandler was granted as of April 16, 2000 an Option expiring April 15, 2010 under
the 1997 Option Plan to purchase 10,000 shares of the Common Stock at $3.22 per
share pursuant to the revised authorization. Pursuant to the original
authorization Jonathan J. Pallin, then a non-employee, non-consultant director,
was granted an Option expiring September 19, 2009 to purchase 15,000 shares of
the Common Stock at $1.625 per share, which Option expired with his resignation
on March 3, 2000.
Pursuant to the revised authorization, each of Charles J. Casamento and
Stanley Yakatan, each a non-employee, non-consultant director, was granted on
June 16, 2000 an Option expiring June 15, 2010 under the 1997 Option Plan to
purchase 15,000 shares of the Common Stock at $6.5625 per share. Assuming the
person is still a director on the anniversary date, June 16 of each year,
commencing 2001, will be the date of grant for an Option or a stock option for
each of Messrs. Casamento and Yakatan.
See section "Certain Transactions" under the caption "Management" for
information as to a compensation arrangement with Jonathan J. Pallin for his
former services as a financial consultant to the Company.
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 had agreed to pay Ms. Masterson for her services as the Chief Executive
Officer and the President of the Company a base salary of $165,000; provided,
however, such amount was to be $120,000 from October 27, 1997 to the date on
which at least $5,000,000 in long term financing was obtained, at which time or
upon her termination the difference was to be paid to her. As a result of the
consummation of the Company's third private placement on January 21, 1999
relating to the Series A Preferred Stock, this limitation terminated and,
effective January 29, 1999, she was being paid at the authorized rate (which was
increased on August 13, 1999 to $180,000 effective September 1, 1999). $19,038
of the deferred salary was paid to her in October 1998.
The Masterson Severance Agreement also provided for the grant of:
(1) a stock option under the 1997 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 changed;
(2) stock options to purchase 150,000 shares of the Common Stock, an
option to purchase 75,000 shares to be granted upon completion of the
working pilot plant project 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
Common Stock at $.50 per share, a warrant to purchase 200,000 shares which
was granted upon the purchase on October 29,
18
<PAGE> 21
1997 of SAT's shares of the Common Stock by Meadow Lane and a warrant to
purchase 200,000 shares to be granted at the completion of a long term
financing of at least $5,000,000.
The stock options have all been granted as Options under the 1997 Option Plan.
Also as a result of the private placement consummated on January 21, 1999 as
described in the preceding paragraph, the second warrant became exercisable.
Both of these warrants and the first option (in part) were subsequently
exercised. See "Management -- Certain Relationships and Related Transactions."
In the event that Ms. Masterson is terminated without cause (as defined in
the Masterson Severance Agreement), she will 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.
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 known to the Company who beneficially owned more
than 5% of the Common Stock, (2) each director of the Company, each of whom is a
nominee for election at the Meeting, (3) the Chief Executive Officer of the
Company and (4) all directors and executive officers as a group. Each beneficial
owner who is a natural person 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 Common Stock purchase warrant or an Option is exercised, there is no
voting right.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE OF
OF COMMON STOCK COMMON STOCK
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED BENEFICIALLY OWNED(1)
------------------------------------ ------------------ ---------------------
<S> <C> <C>
General Conference Corporation........................... 6,115,000(2) 20.2%
of Seventh-day Adventists
12501 Old Columbia Pike
Silver Spring, MD 20804-6600
Jonathan J. Pallin(3).................................... 3,866,995(4) 12.7%
722 Starlight Heights Drive
La Canada, CA 91011
Linda H. Masterson(5).................................... 1,042,713(6) 3.5%
1205 South Dupont Street
Ontario, CA 91761
Peter S. Gold(7)......................................... 905,315(8) 3.0%
16027 Ventura Blvd., Suite 601
Encino, CA 91436
Paul Sandler(7).......................................... 205,315(9) nil
533 West Hatcher Road
Phoenix, Arizona 85021
Charles J. Casamento(10)................................. 0(11) 0
99 Belbrook Way
Atherton, CA 94027
Stanley Yakatan(10)...................................... 0(11) 0
635 Euclid Avenue, Unit 110
Miami Beach, FL 33139
All directors and executive officers as a group (nine
persons)............................................... 2,242,302(12) 7.4%
</TABLE>
---------------
(1) The percentages computed in this column of the table are based upon
30,096,201 shares of the Common Stock which were outstanding on the Record
Date. Effect is given, pursuant to Rule 13d-3(l)(i) under the Exchange Act,
to shares issuable upon the exercise of the Common Stock purchase warrants
and the Options currently exercisable or exercisable within 60 days of the
Record Date.
19
<PAGE> 22
(2) The shares reported in the table include 190,000 shares issuable upon the
exercise at $3.00 per share of a Common Stock purchase warrant expiring
February 28, 2005.
(3) A director of the Company from October 31, 1997 to March 3, 2000 and the
Chairman of the Board from October 31, 1997 to January 8, 1999.
(4) The shares reported in the table reflect (a) 3,560,706 shares of the
5,575,306 shares acquired by Meadow Lane from SAT on October 29, 1997, of
which 4,325,306 shares were initially distributed to Mr. Pallin, and (b)
306,289 shares of the 666,289 shares issuable upon the exercise of a Common
Stock purchase warrant expiring January 7, 2003 (the "Meadow Lane Warrant")
exercisable at $.50 per share granted to Meadow Lane. Mr. Pallin was one of
the two members of Meadow Lane and received the shares and a portion of the
Meadow Lane Warrant as a distribution from Meadow Lane. See
"Management -- Certain Relationships and Related Transactions."
(5) A director of the Company since May 31, 1996; effective August 1, 1996, its
President; effective May 23, 1997, its Chief Executive Officer; and,
effective June 16, 2000, its chairman of the Board.
(6) The shares reported in this table include (a) 21,875 shares issuable upon
the partial exercises at $.50 per share of an Option expiring August 13,
2007 and (b) 7,088 shares issuable upon the partial exercises at $.50 per
share of an Option expiring June 29, 2008. Of the shares reported in the
table, 1,013,750 shares will not be released from escrow to Ms. Masterson
until her Note to the Company in the principal amount of $1,074,687.50 is
paid. See "Management -- Certain Relationships and Related Transactions."
The shares reported in the table do not include (w) an aggregate of 57,287
shares subject to the foregoing Options as to which the Options were not
exercisable at the Record Date or within 60 days thereafter, (x) 150,000
shares subject to another Option expiring August 13, 2007 and exercisable
at $.50 per share which was not exercisable at the Record Date or within 60
days thereafter, (y) 120,000 shares issuable upon the exercise at $1.67 per
share of an Option expiring October 9, 2009 which was not exercisable at
the Record Date or within 60 days thereafter and (z) an aggregate of
2,000,000 shares issuable upon the exercises at $1.72 per share of the four
remaining Masterson Warrants which were not exercisable at the Record Date
or within 60 days thereafter (see "Management -- Certain Relationships and
Related Transactions").
(7) A director of the Company since December 5, 1997.
(8) The shares reported in the table include (a) an aggregate of 200,000 shares
issuable upon the exercise of 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, and (b) 5,315 shares issuable
upon the exercise at $1.81 per share of an Option expiring April 15, 2009.
The shares reported in the table do not include (a) 9,685 shares subject to
the foregoing Option as to which it is not exercisable at the Record Date
or within 60 days thereafter and (b) 10,000 shares issuable upon the
exercise at $3.22 per share of an Option expiring April 15, 2010, which is
not exercisable at the Record Date or within 60 days thereafter.
(9) The shares reported in the table include 5,315 shares issuable upon the
exercise at $1.81 per share of an Option expiring April 15, 2009. The
shares reported in the table do not include (a) 9,685 shares subject to the
foregoing Option as to which it is not exercisable at the Record Date or
within 60 days thereafter, (b) 10,000 shares issuable upon the exercise at
$3.22 per share of an Option expiring April 15, 2010, which is not
exercisable at the Record Date or within 60 days thereafter and (c) 4,797
shares issuable upon the exercise at $2.40 per share of an Option expiring
January 20, 2010, which is not exercisable at the Record Date or within 60
days thereafter.
(10) A director of the Company since June 16, 2000.
(11) The ownership reported in the table does not reflect 15,000 shares issuable
upon the exercise at $6.5625 per share of an Option expiring June 15, 2010
which is not exercisable at the Record Date or within 60 days thereafter.
(12) The shares reported in the table include (a) those issuable upon the
exercise of the Common Stock purchase warrants and the Options described in
Notes (6), (8), (9) and (11) to the table, (b) an aggregate of 71,249
shares issuable upon the partial exercises at $.50 per share of two Options
granted to
20
<PAGE> 23
an executive officer, one Option expiring March 19, 2008 and the other
expiring June 29, 2008, and (c) 4,210 shares issuable upon the exercise at
$1.81 per share of an Option expiring April 25, 2009 granted to another
executive officer. The shares reported in the table do not include (u) an
aggregate of 81,041 shares subject to the foregoing three Options granted
to the two executive officers as to which the Options were not exercisable
at the Record Date or within 60 days thereafter, (v) 100,000 shares subject
to another Option expiring March 19, 2008 and exercisable at $.50 per share
granted to the first executive officer which was not exercisable at the
Record Date or within 60 days thereafter, (w) 60,000 shares subject to
another Option expiring October 9, 2009 and exercisable at $1.67 per share
granted to the first executive officer which was not exercisable at the
Record Date or within 60 days thereafter, (x) 50,000 shares subject to an
Option expiring November 16, 2009 and exercisable at $1.87 per share
granted to the second executive officer which was not exercisable at the
Record Date or within 60 days thereafter, (y) an aggregate of 100,000
shares subject to three Options each expiring January 20, 2010 and each
exercisable at $2.83 per share granted to a third executive officer which
were not exercisable at the Record Date or within 60 days thereafter, and
(z) an aggregate of 110,000 shares subject to three Options each expiring
February 21, 2010 and each exercisable at $3.28 per share granted to a
fourth executive officer which were not exercisable at the Record Date or
within 60 days thereafter.
PROPOSAL THREE: APPOINTMENT OF INDEPENDENT AUDITORS
The Audit Committee has re-appointed Ernst & Young LLP as the Company's
independent public accountants for fiscal 2001. Ernst & Young has served as
independent auditors for the Company since the audit for the fiscal year ended
March 31, 1996.
The Board is seeking stockholders' approval of the Audit Committee's
selection of Ernst & Young LLP. 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 Audit Committee 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.
PROPOSAL FOUR: AUTHORITY TO INCREASE AUTHORIZED SHARES
GENERAL
As indicated in the Notice of Annual Meeting of Stockholders, the Board is
also seeking as Proposal Four stockholders' approval to amend the Company's
Related Certificate of Incorporation to increase the number of authorized shares
of the Common Stock from 50,000,000 to 75,000,000 shares, a proposed increase of
25,000,000 shares. The Board is seeking approval of Proposal Four because of its
concern that the Company may not have sufficient shares, after meeting the
requirements for which shares are currently reserved as indicated in the
succeeding paragraph, to effect a financing, a strategic partnering arrangement,
or an acquisition or to consummate the other possible uses of the Common Stock
as described in the succeeding section "Possible Uses of Additional Authorized
Shares" under this caption "Proposal Four: Authority to Increase Authorized
Shares."
As of the Record Date, the Company had outstanding 30,096,201 shares of the
Common Stock and had reserved for issuance an aggregate of 13,051,912 shares of
the Common Stock consisting of (1) an aggregate of 9,258,063 shares issuable
upon the exercise of Common Stock purchase warrants (including the Masterson
Warrants and the Foley Warrants); (2) an aggregate of 1,793,849 shares issuable
upon the exercise of Options outstanding on the Record Date or to be granted
under the 1997 Option Plan; and (3) an aggregate of 2,000,000 shares issuable
upon the exercise of stock options to be granted under the 2000 Option Plan,
21
<PAGE> 24
assuming stockholders' approval is obtained for Proposal Five in the Notice of
Annual Meeting of Stockholders. If all 13,051,912 reserved shares were to be
issued, as to which there can be no assurance, the then outstanding shares of
the Common Stock would become 43,148,113, leaving 6,851,887 authorized shares to
be issued for other corporate purposes.
POSSIBLE USES OF ADDITIONAL AUTHORIZED SHARES
Primarily, the Board believes that additional shares should be authorized
because it is uncertain how many shares will be required on any additional
financing, both (1) those shares sold to investors directly or subsequently
issued upon the conversion or exercise of the securities which are sold to
investors and (2) those used in payment of underwriter's or placement agent's
fees or as finder's fees. In addition, as the Company grows, additional funding
could become desirable to fund such expansion.
The Board believes that, as a result of the Company's fourth private
placement closed in February and March 2000 in which net proceeds of $8,595,294
were realized, the Company has sufficient funds to bring to market the Company's
first product, i.e., its device using a person's saliva to test on-site for the
presence of drugs of abuse and alcohol in such person, and to fund certain of
the expenses once marketing begins. However, there can be no certainty as to
what additional funds will be required to cover the Company's expenses until it
achieves profitability from such operations. Management currently anticipates
that the Company will not have revenues from product sales until the first
quarter of 2001 at the earliest and there can be no assurance as to whether the
Company will have revenues at that time or as to when the Company will achieve
profitability thereafter, if at all.
The Company has also been seeking a strategic partner, particularly for
marketing assistance. Shares of the Common Stock may be required as a finder's
fee for securing such a strategic partner, as indicated by the Company's
terminated agreement in May 1999 with Burrill & Company ("Burrill") for Burrill
to seek such a partner for the Company or its current agreement with Venture
Management Group ("VMG") for VMG to seek such a partner for the Company. In
addition, the strategic partner or partners could also desire a stock interest
in the Company as part of the partnering arrangement or arrangements. Any
payments received from a strategic partner, whether as a fee for marketing
rights or otherwise, will, of course, reduce the Company's possible financing
requirements described in the preceding two paragraphs.
In addition, the Board deems it advisable for the Company to be in a
position to grant stock options additional to those authorized under the 1997
Option Plan, to grant stock awards and to have a stock purchase plan as an
incentive for attracting and retaining in the future qualified and competent
employees by providing them with the ability to acquire a proprietary interest
in the Company through ownership of the Common Stock. The Company has in the
past used shares of the Common Stock as compensation for consultants performing
various services and could require such usage in the future. As of the Record
Date, the only such benefit plan was the 1997 Option Plan pursuant to which
Options to purchase an additional 95,756 shares of the Common Stock could be
issued (assuming all of the Options outstanding as of the Record Date to
purchase an aggregate of 1,701,093 shares were exercised and did not terminate
prior to exercise). If approved by stockholders at the Meeting, an additional
2,000,000 shares will be made available under the 2000 Option Plan.
Although the Board has no specific company as to which its stock or assets
would be acquired under consideration, the Board believes that, should an
appropriate acquisition opportunity present itself in the future, the Company
should have the flexibility to use shares of the Common Stock instead of, or in
addition to, cash to effect such an acquisition.
There are no proposals for use of the additional shares of the Common Stock
which have been approved or which are currently under consideration by the Board
of Directors. In describing the possible uses in the five preceding paragraphs
of the additional shares of the Common Stock to be authorized, the Board
recognizes that additional stockholders' approval may be required before certain
of these uses can be implemented, even if the additional shares are made
available by approval and then filing of the proposed Amendment to the Company's
Restated Certificate of Incorporation. In addition, there can be no assurance
that the Company will issue additional shares of the Common Stock, whether
currently or to be authorized, in any of the ways
22
<PAGE> 25
described in the preceding five paragraphs except exercises under the 1997
Option Plan and, if approved, the 2000 Option Plan and with respect to exercises
of Common Stock purchase warrants outstanding on the Record Date and, even then,
it is pure speculation as to the number of shares that will be issued upon these
exercises.
EFFECT ON STOCKHOLDERS
Holders of the Common Stock have no preemptive, subscription or conversion
rights and are entitled to dividends on a pro rata basis when and if declared by
the Board of Directors. However, because of the continuing losses in the Company
and its cash requirements to fund first its development program and later
manufacturing and marketing of its drugs of abuse and alcohol testing product,
the likelihood of dividends being paid on the Common Stock in the foreseeable
future is extremely remote.
Each holder of the Common Stock has one vote per share on all matters
submitted to stockholders for a vote.
Upon liquidation of the Company, each holder of the Common Stock is
entitled to share ratably any assets available for distribution after payment of
all debts and distributions, if any, in respect of the then outstanding shares
or the Company's Preferred Stock, $.001 par value (the "Preferred Stock"), of
which no series is currently authorized.
Authorization of the additional shares of the Common Stock will have no
effect on the rights of the existing holders of the Common Stock. Their rights
will continue as described in the preceding three paragraphs, unless and until
such shares are issued, in which event the only effect would be a dilution of
the voting rights of existing holders as a result of the increased number of
outstanding shares of the Common Stock. However, this result would occur even if
Proposal Four was not adopted by the stockholders at the Meeting or, even if
adopted, was not implemented because of the currently existing reserve for
issuances of shares of the Common Stock (see the section "General" under this
caption "Proposal Four: Authority to Increase Authorized Shares").
Although the issuance of additional shares of the Common Stock would
theoretically increase the amount necessary to pay dividends, the Board does not
anticipate, because of the reasons cited in the fourth preceding paragraph, that
dividends on the Common Stock will be paid in the foreseeable future.
Authorization of a new series of the Preferred Stock could have an adverse
influence on the dividend, voting and liquidation rights of the Common Stock, as
did the formerly outstanding shares of the Series A Preferred Stock. Pursuant to
the Restated Certificate of Incorporation, the Board of Directors of the Company
is authorized, without seeking any stockholders' approval, with respect to the
authorized 3,000,000 shares of the Preferred Stock, to designate a new series
and to fix the powers, preferences and rights of the shares of each series and
the qualifications, limitations or restrictions thereof. However, the Board has
no current intention to use any of the shares of the Preferred Stock.
The Board recognizes that, when a public company has a substantial number
of authorized and unreserved shares of the Common Stock, this condition could
create concern among existing stockholders that their stock interests could be
substantially diluted when such additional shares are issued. Sometimes such
concerns may even have a depressive effect on the market price for the Common
Stock. The Board believes that the addition of 25,000,000 authorized shares
should not have such an adverse effect, especially in view of certain of the
intended uses of such shares. See the section "Possible Uses of Additional
Authorized Shares" under this caption "Proposal Four: Authority to Increase
Authorized Shares" for information as to the possible uses of the additional
shares, all of which the Board believes will be beneficial to the Company and
its stockholders.
In voting on this Proposal Four, stockholders should be aware that the
Board may use the additional shares to enter into a transaction which other
stockholders do not believe would be in their best interests. One example of
this is for the Board to authorize the issuance of shares to a third person or
persons in an attempt to defeat an acquisition proposal by another party whom
the Board opposes but these stockholders favor. The
23
<PAGE> 26
Board, in proposing this Amendment to the Restated Certificate of Incorporation
to increase the authorized number of shares, has no such current intention.
The number of the additional shares which may be issued and the extent of
dilution of voting rights cannot be predicted because the Board does not know
for what number of shares, if any, whether part or all of the outstanding
Options or Common Stock purchase warrants will be exercised. In addition, the
Board does not know the number of shares, whether of the Common Stock or
securities convertible or exercisable into shares of the Common Stock, that may
be issued in the future for the purposes described in the section "Possible Uses
of Additional Authorized Shares" under this caption "Proposal Four: Authority to
Increase Authorized Shares."
RECOMMENDATION
FOR THE REASONS DESCRIBED ABOVE, THE BOARD OF DIRECTORS RECOMMENDS THAT THE
STOCKHOLDERS VOTE FOR PROPOSAL FOUR TO AMEND THE RESTATED CERTIFICATE OF
INCORPORATION TO INCREASE THE AUTHORIZED SHARES OF THE COMMON STOCK.
PROPOSAL FIVE: ADOPT AND APPROVE THE 2000 OPTION PLAN
GENERAL
The fifth item of business mentioned in the Notice of Annual Meeting is to
consider and vote upon a proposal to adopt and approve the 2000 Option Plan, a
copy of which is annexed hereto as Appendix C and incorporated herein by this
reference. The 2000 Option Plan provides for the grant of stock options to
employees (including officers), directors and consultants.
On June 16, 2000, the Board of Directors of the Company adopted the 2000
Option Plan, subject to stockholders' approval, permitting the grant of stock
options to purchase an aggregate of 2,000,000 shares of the Common Stock. The
2000 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, non-employee officers and consultants may only receive nonqualified
stock options.
The 1997 Option Plan, adopted by the Board of Directors of the Company on
August 14, 1997, amended by the Board on August 13, 1998 and approved by the
stockholders on August 13, 1998, provides for the granting of Options to
purchase an aggregate of 2,000,000 shares of the Common Stock. See "Executive
Compensation -- Option/SAR Grants in Last Fiscal Year" for additional
information as to the 1997 Option Plan. As of the Record Date, Options granted
under the 1997 Option Plan to purchase an aggregate of 206,151 shares of the
Common Stock had been exercised and there were outstanding Options to purchase
an aggregate of 1,701,093 shares of the Common Stock, leaving only 95,756 shares
available for grant of Options under the 1997 Option Plan, assuming none of the
outstanding Options terminate prior to exercise and, accordingly, the shares
subject thereto become eligible for future grants.
REASONS FOR PROPOSAL TO STOCKHOLDERS
The GCL does not require stockholders' approval of the 2000 Option Plan,
but the Code requires such approval for incentive stock options. In addition,
pursuant to the additional listing requirements of the AMEX, stockholder
approval may also be required.
The 2000 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 will
be the recipients of the stock options customarily expect to receive stock
24
<PAGE> 27
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. See, however, the section
"Eligible Optionees" under this caption "Proposal Five: Adopt and Approve the
2000 Option Plan" for information as to the types of consultants excluded from
participation in the 2000 Option Plan.
The Board believes that the 1997 Option Plan has achieved the objectives
described in the preceding paragraph; however, as indicated in the preceding
section "General" under this caption "Proposal Five: Adopt and Approve the 2000
Option Plan," there are only 95,756 shares still available under the 1997 Option
Plan, an amount which the directors believe is not sufficient to facilitate the
further growth of the Company. There can, of course, be no assurance that the
future grant of stock options under the 2000 Stock Option Plan will induce
employees to join the Company or to remain in its employ.
Because all directors and executive officers of the Company will be
eligible to receive stock options under the 2000 Option Plan, as they are under
the 1997 Option Plan, each of the current directors and executive officers has
an interest in Proposal Five being approved.
TERMS OF PLAN
The 2000 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. As of the Record Date, no employee owned stock possessing more than 10%
of the total voting power of all classes of stock of the Company (the Common
Stock being the only class outstanding). No stock option to be granted under the
2000 Option Plan may have a term in excess of ten years. The exercise price of a
nonstatutory or nonqualified option may be less than the fair market value on
the date of grant. Because the Common Stock is listed on the AMEX, the closing
sales price on the date of grant will generally be deemed to be the fair market
value of the Common Stock and, accordingly, used as the exercise price of an
option.
The number of shares subject to an outstanding stock option and the
exercise price thereof will be 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 of a stock option and the Company will have no obligation
to pay for such fractional share.
Options under the 1997 Option Plan 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, with any odd amount being exercisable in the 36th month.
Some Options granted by the Company to executive officers and other key
employees become exercisable based on certain performance standards related to
corporate performance and not that of the optionee. It is expected that grants
similar to those described in this paragraph will be made under the 2000 Option
Plan.
Stock options to be granted under the 2000 Option Plan will generally be
non-transferable and not immediately exercisable, which provisions will be
similar to those in the 1997 Option Plan.
If the optionee's employment will terminate 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 will terminate because of his or her
total and permanent disability (as defined in the Code), the optionee will have
12 months to exercise the stock option to the extent exercisable upon the date
of termination. In the event of other disability causing termination, the
optionee may have six (three months in the event the optionee wants continuous
treatment of the stock option as an incentive stock option) to exercise the
stock 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
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<PAGE> 28
the optionee, whether it occurred during the initial term or during the three,
six or 12-month periods described in the three preceding sentences. In no event
may a stock option be exercised beyond its original expiration date. Similar
provisions will be applicable to optionees who are not employees. These
provisions of the 2000 Option Plan are substantially similar to those in the
1997 Option Plan.
ELIGIBLE OPTIONEES
As of the Record Date, there were 29 employees and five directors (one of
whom is also an employee) who were eligible to receive stock options under the
2000 Option Plan and, as the Company grows, these numbers will increase.
The Board is currently unable to determine how many shares of the Common
Stock the Compensation Committee may make subject to stock options to be granted
under the 2000 Option Plan to (1) the Chief Executive Officer of the Company,
(2) the other executive officer whose compensation is reported in the Summary
Compensation Table under the caption "Executive Compensation," (3) all current
executive officers as a group, (4) all current directors who are not executive
officers as a group, and (5) all employees (including all current officers who
are not executive officers) as a group. See, however, "Executive
Compensation -- Compensation of Directors" for information as to possible grants
to directors who are not executive officers or consultants to the Company.
During fiscal 2000, Options pursuant to the 1997 Stock Option Plan were
granted as follows (net of terminations):
<TABLE>
<CAPTION>
DOLLAR NUMBER
NAME AND POSITION VALUE(1) OF SHARES
----------------- ---------- ---------
<S> <C> <C>
Linda H. Masterson,
Chief Executive Officer................................... $ 200,400 120,000
Thomas J. Foley,
Senior Vice President, Research and Development........... $ 100,200 60,000
All current executive officers as a group................... $1,128,500 490,000
All current directors who are not executive officers as a
group..................................................... $ 54,300 30,000
All employees, including officers who are not executive
officers, as a group...................................... $ 667,950 353,000
</TABLE>
---------------
(1) The dollar values have been computed on the basis of the exercise prices of
the Options, each of which exercise prices was the respective fair market
value of the Common Stock on the respective date of grant.
For a consultant to be eligible to receive a grant of a stock option under
the 2000 Option Plan, the optionee must be a natural person and the services
rendered for the Company must be of a bona fide nature and not in connection
with the offer or sale of securities of the Company in a capital raising
transaction and do not directly or indirectly promote or maintain a market for
the Company's securities. The Board cannot currently determine how many shares
of the Common Stock may be made subject to grants of stock options to
consultants. To date the only Options to have been granted to consultants
pursuant to the 1997 Option Plan were Options to purchase an aggregate of 30,000
shares of the Common Stock to the three members of the Company's Scientific
Advisory Board. The Company intends to grant an Option (if under the 1997 Option
Plan) or a stock option (if under the 2000 Option Plan) to purchase 10,000
shares of the Common Stock to each future member of the Scientific Advisory
Board. However, there can be no assurance as to how many additional members will
be added.
MARKET PRICE
The closing sales price of the Common Stock on July 21, 2000 as reported by
the AMEX was $5.125 per share.
26
<PAGE> 29
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.
1. Non-incentive or nonqualified 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. As indicated in the section
"Terms of Plan" under this caption "Proposal Five: Adopt and Approve 2000 Option
Plan," the stock options to be granted as nonqualified stock options under the
2000 Option Plan will generally meet this requirement of the Code.
Upon 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. Under the Code, the maximum capital gains rate is
currently 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; however, in such event, the gain not excluded is taxed
at the rate of 28%.
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 and not transferable 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 2000 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 to be granted under the 2000 Option Plan will generally not be
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 because of 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. This has
been the experience with respect to grants under the 1997 Option Plan.
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;
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<PAGE> 30
(b) the difference between the option price and the fair market value
of the shares at the time of exercise of such option will be an adjustment
for the purpose of computing 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 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
for the purpose of computing 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 reported by the optionee as ordinary income in the year of
disposition. Any additional gain will be long-term or short-term capital gain
and any loss will be long-term or short-term capital loss.
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 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.
To the extent that the aggregate fair market value of the Common Stock with
respect to which incentive stock options are exercisable for the first time by
any optionee during any calendar year (under all plans of the Company) exceeds
$100,000, such options shall be treated as options which are not incentive stock
options. Under this provision of the Code, the options are taken into account in
the order in which they were granted and the fair market value is determined as
of the time the option with respect to such shares was granted.
In the event an officer or director who is subject to the so-called "short
swing" profits provisions of Section 16(b) of the Exchange Act 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 2000 Option
Plan will generally be 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 to be granted under the 2000 Option Plan will generally not be
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. This has been the experience with respect to grants under the 1997
Option Plan.
RECOMMENDATION
FOR THE REASONS DESCRIBED ABOVE, THE BOARD OF DIRECTORS RECOMMENDS THAT THE
STOCKHOLDERS VOTE FOR PROPOSAL FIVE TO ADOPT AND APPROVE THE 2000 OPTION PLAN.
28
<PAGE> 31
FINANCIAL STATEMENTS
The following financial statements and management's discussion and
analysis, all of which appear in the 2000 Annual Report to Stockholders which
accompanies this Proxy Statement, are incorporated herein by this reference.
<TABLE>
<CAPTION>
PAGE
IN 2000
ANNUAL
ITEM REPORT
---- -------
<C> <S> <C>
1. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 21
2. Report of Ernst & Young LLP................................. 24
3. Report of Wolinetz, Gottlieb & Lafazan, P.C. ............... 25
4. Balance Sheet at March 31, 2000............................. 26
5. Statements of Operations for the Years Ended March 31, 2000
and 1999 and for the Period from October 8, 1992 (Inception)
to March 31, 2000........................................... 27
6. Statements of Stockholders' Equity for the Period October 8,
1992 (Inception) to
March 31, 2000.............................................. 28
7. Statements of Cash Flows for the Years Ended March 31, 2000
and 1999 and for the Period from October 8, 1992 (inception)
to March 31, 2000........................................... 29
8. Notes to Financial Statements............................... 31
</TABLE>
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 five 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 Annual Meeting of Stockholders in 2001 must be received no later than March
26, 2001. If a stockholder intends to submit a proposal for consideration at the
Annual Meeting in 2001 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 18, 2001 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 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-KSB for the fiscal year ended May 31, 2000,
including financial statements (there are no schedules), may be obtained by
written or oral request to Michele A. Clark, the Controller and the Chief
Accounting Officer of the Company, at the following address: 1205 South Dupont
Street,, Ontario, CA 91761, or telephone number: (909) 418-3052. 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
[Robert W. Berend signature]
Robert W. Berend
Secretary
July 26, 2000
29
<PAGE> 32
APPENDIX A
PROPOSED AMENDMENTS TO ARTICLE SEVENTH OF RESTATED CERTIFICATION OF
INCORPORATION OF LIFEPOINT, INC.
1. Paragraph 1 of Article SEVENTH currently reads:
"1. The management of the business and the conduct of the affairs of the
Corporation shall be vested in its Board of Directors. The number of
directors which shall constitute the whole Board of Directors shall be
fixed by, or in the manner provided in, the Bylaws. The phrase "whole
Board" and the phrase "total number of directors" shall be deemed to have
the same meaning, to wit, the total number of directors which the
Corporation would have if there were no vacancies. No election of directors
need be by written ballot."
2. Paragraph 1 of Article SEVENTH as proposed to be amended (changes are
underlined):
"1. The management of the business and the conduct of the affairs of the
Corporation shall be vested in its Board of Directors. The number of
directors which shall constitute the whole Board of Directors shall be not
less than three (3) nor more than nine (9). The exact number of directors
shall be determined from time to time by a majority of the whole Board and
such number shall be five (5) until otherwise determined by a resolution
adopted by the majority of the whole Board. In the event that the number of
directors is increased by such a resolution of the whole Board, the vacancy
or vacancies so resulting shall be filled by a vote of a majority of the
directors then in office. No decrease in the number of directors shall
shorten the term of any incumbent director. The phrase "whole Board" and
the phrase "total number of directors shall be deemed to have the same
meaning, to wit, the total number of directors which the Corporation would
have if there were no vacancies. No election of directors need be by
written ballot."
3. Paragraph 4 as proposed to be added to Article SEVENTH:
"4. The Board of Directors shall be divided into three (3) classes as
nearly equal in number as possible, with the term of office of Class A
expiring at the annual meeting of stockholders in 2001, of Class B expiring
at the annual meeting of stockholders in 2002, and of Class C expiring at
the annual meeting of stockholders in 2003. At each annual meeting of
stockholders beginning with the annual meeting of stockholders held in
2001, directors chosen to succeed those whose terms then expire shall be
elected for a term of office expiring at the third succeeding annual
meeting of stockholders after their election. When the number of directors
is changed, any newly created directorships or any decreases in
directorships shall be so apportioned among the classes as to make all
classes as nearly equal in numbers as possible. When the number of
directors is increased by the Board of Directors and the resultant
vacancies are filled by the Board of Directors, such additional directors
shall serve only until the next annual meeting of stockholders, at which
time they shall be subject to election and classification by the
stockholders. In the event that any director is elected by the Board to
fill a vacancy, which occurs as a result of the death, resignation or
removal of another director, such director will hold office until the
annual meeting of stockholders at which the director who died, resigned or
was removed would have been required, in the regular order of business, to
stand for re-election, even though such term may thereby extend beyond the
next annual meeting of stockholders. Each director who is elected as
provided in this paragraph 4 of Article SEVENTH shall serve until his or
her successor is duly elected and qualifies."
PROPOSED AMENDMENT TO ARTICLE II, SECTION 2 OF THE BY-LAWS
1. Section 2 of Article II currently reads:
"The number of directors of the Corporation shall be four (4) but, by vote
of a majority of the entire Board of Directors or amendment of these
By-Laws, the number thereof may be increased or decreased
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as may be so provided, subject to the provisions of Section 11 of this
Article II. All of the directors shall be of full age. Directors need not
to be stockholders. Except as, otherwise provided by statute or these By-
Laws, the directors shall be elected at the annual meeting of the
stockholders for the election of directors at which a quorum is present,
and the persons receiving a plurality of the votes cast at such election
shall be elected. Each director shall hold office until the next annual
meeting of stockholders and until his or her successor shall have been duly
elected and qualified or until his or her death, or until he or she shall
have resigned, or have been removed, as hereinafter provided in these
By-Laws, or as otherwise provided by statute or the Certificate of
Incorporation."
2. Section 2 of Article II as proposed to become effective (changes are
underlined) if Proposal One to Amend the Restated Certificate of
Incorporation is adopted:
"The number of directors of the Corporation shall be as set forth in the
Certificate of Incorporation. All of the directors shall be of full age.
Directors need not be stockholders. Except as otherwise provided by
statute, these By-Laws or the Certificate of Incorporation, the directors
shall be elected at the annual meeting of the stockholders for the election
of directors at which a quorum is present, and the persons receiving a
plurality of the votes cast at such election shall be elected. Each
director shall hold office until his or her successor shall have been duly
elected and qualified or until his or her death, or until he or she shall
have resigned, or have been removed, as hereinafter provided in these
By-Laws, or as otherwise provided by statute or the Certificate of
Incorporation."
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APPENDIX B
LIFEPOINT, INC.
AUDIT COMMITTEE CHARTER
ORGANIZATION
This Charter governs the operations of the Audit Committee (the
"Committee") of LifePoint, Inc. (the "Company"). The Committee shall review and
reassess the Charter at least annually and obtain the approval of the Board of
Directors (the "Board"). The Committee shall be appointed by the Board and shall
consist of at least three directors appointed annually and serving at the
pleasure of the Board, each of whom are independent of management and the
Company. For the meetings of the Committee two members (a majority if there are
more than three members of the Committee) of the Committee shall constitute a
quorum. No action may be taken except by the affirmative vote of at least two
members (a majority if there are more than three members of the Committee) of
the Committee. In the absence or disqualification of a member of the Committee,
the member or members present at any meeting and not disqualified from voting,
whether or not he, she or they constitute a quorum, may unanimously appoint
another member of the Board to act at the meeting in place of any such absent or
disqualified member, provided that a majority of the persons acting at the
meeting is independent of management and the Company. Members of the Committee
shall be considered independent if they have no relationship that may interfere
with the exercise of their independence from management and the Company. So long
as the Company's Common Stock is listed on the American Stock Exchange LLC, or
if in the future the Common Stock shall be traded on The Nasdaq Stock Market,
Inc., the Board shall interpret "independence" as defined in the rules of the
National Association of Securities Dealers, Inc. (the "NASD"). If the Common
Stock should instead ever be listed on the New York Stock Exchange, Inc., the
Board shall interpret "independence" as defined by such Exchange or, if
appropriate, continue to use the definition in the NASD rules. All Committee
members shall be financially literate, or shall become financially literate
within a reasonable period of time after appointment to the Committee, and at
least one member shall have accounting or related financial management
expertise.
STATEMENT OF POLICY
The Committee shall provide assistance to the Board in fulfilling its
oversight responsibility to the stockholders, potential stockholders, the
investment community and others relating to the Company's financial statements
and the financial reporting process, the systems of internal accounting and
financial controls, the internal audit function (when established), the annual
independent audit of the Company's financial statements and the legal compliance
and ethics programs as established by management and the Board. In so doing, it
is the responsibility of the Committee to maintain free and open communication
between the Committee, the independent auditors, the internal auditors (when
engaged) and management of the Company. In discharging its oversight role, the
Committee is empowered to investigate any matter brought to its attention with
full access to all books, records, facilities and personnel of the Company and
the power to retain outside counsel, including outside counsel to the Company,
or other experts for this purpose.
RESPONSIBILITIES AND PROCESSES
The Committee shall be established for the purpose of (1) ensuring direct
communication among the internal accounting and financial staff and the
independent auditors of the Corporation and the Board; (2) assuring the internal
accounting and financial staff and independent auditors the freedom, cooperation
and opportunity necessary to accomplish their functions and (3) ensuring
appropriate actions on the recommendations of the independent auditors and the
internal accounting and financial staff. The primary responsibility of the
Committee is to oversee the Company's financial reporting process on behalf of
the Board and report the results of its activities to the Board. Management is
responsible for preparing the Company's financial statements, and the
independent auditors are responsible for auditing those financial statements.
The Committee, in carrying out its responsibilities, believes its policies and
procedures should remain flexible, in
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order to best react to changing conditions and circumstances. The Committee
should take the appropriate actions to set the overall corporate "tone" for
quality financial reporting, sound business risk practices and ethical behavior.
The following shall be the principal recurring processes of the Committee
in carrying out its oversight responsibilities. The processes are set forth as a
guide with the understanding that the Committee may supplement them as
appropriate.
- The Committee shall have a clear understanding with management and the
independent auditors that the independent auditors are ultimately
accountable to the Board and the Audit Committee as representatives of
the Company's stockholders. The Committee shall have the ultimate
authority and responsibility to evaluate and, where appropriate, to
replace the independent auditors. The Committee shall discuss with the
auditors their independence from management and the Company and the
matters included in the written disclosures required by the Independence
Standards Board. Annually, the Committee shall review and recommend to
the Board the selection of the Company's independent auditors, subject to
stockholders' approval.
- The Committee shall approve the scope of the annual audit by the
independent auditor and authorize any supplementary reviews,
investigations or audits as it shall deem advisable. Also the Committee
shall discuss with management, the internal auditors (when engaged) and
the independent auditors the adequacy and effectiveness of the accounting
and financial controls, including the Company's system to monitor and
manage business risk and legal and ethical compliance programs. Further,
the Committee shall meet separately with the internal auditors (when
engaged) and the independent auditors, with and without management
present, to discuss the results of their examinations.
- The Committee shall review the interim financial statements with
management and the independent auditors prior to the filing of the
Company's Quarterly Report on Form 10-Q. Also, the Committee shall
discuss the results of the quarterly review and any other matters
required to be communicated to the Committee by the independent auditors
under generally accepted auditing standards. The Chairperson of the
Committee may represent the entire Committee for the purposes of this
review.
- The Committee shall review with management and the independent auditors
the financial statements to be included in the Company's Annual Report on
Form 10-K, including their judgment about the quality, not just
acceptability, of accounting principles, the reasonableness of
significant judgments and the clarity of the discourses in the financial
statements. Also, the Committee shall discuss the results of the annual
audit and any other matters required to be communicated to the Committee
by the independent auditors under generally accepted auditing standards.
- The Committee shall review the independent auditors' management letters
with the auditors and with the corporate staff and engage in the
appropriate follow-up of a recommendation in any such management letter.
- The Committee shall determine the appropriate actions that should be
taken regarding all irregularities uncovered.
- The Committee shall report to the Board on the activities and findings of
the Committee and, where appropriate, make recommendations to the Board
based on these findings.
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APPENDIX C
LIFEPOINT, INC.
2000 STOCK OPTION PLAN
SECTION 1. PURPOSE OF THE PLAN. The purpose of this 2000 Stock Option Plan
(the "Plan") is to promote the growth and general prosperity of LifePoint, Inc.,
a Delaware corporation (the "Company"), by permitting the Company to grant
options to purchase shares of the Company's Common Stock, $.001 par value (the
"Common Stock"), to directors, officers, employees and consultants of the
Company and, when and if incorporated, subsidiaries thereof. The Plan is
designed to help attract and retain superior personnel for positions of
substantial responsibility with the Company and, if incorporated, its
subsidiaries and to provide directors, officers, employees and consultants with
an additional incentive to contribute to the success of the Company and, if
incorporated, its subsidiaries.
SECTION 2. DEFINITIONS. In addition to the definitions used in Section 1
hereof, as used herein, the following definitions shall apply:
(a) "Administrator" means the Board, its Compensation Committee or any
other Committee appointed to act in lieu of the Compensation Committee pursuant
to Section 4 of the Plan.
(b) "Applicable Laws" means the legal requirements relating to the
administration of stock option plans under applicable United States state
corporate laws, United States federal and applicable state securities laws, the
Code, any Stock Exchange or Nasdaq rules or regulations and the applicable laws
of any other country or jurisdiction where Options are granted under the Plan,
as such laws, rules, regulations and requirements shall be in effect from time
to time.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) "Committee" means the Compensation Committee appointed by the Board or
any other Committee appointed by the Board to act in lieu of the Compensation
Committee in accordance with Section 4(a) of the Plan.
(f) "Consultant" means any person, including an advisor, who is engaged by
the Company or any Subsidiary to render services in a capacity other than as an
Employee and is compensated for such services and any director or officer of the
Company, whether compensated for such services or not, who is not an Employee.
(g) "Continuous Status as an Employee or Consultant" means the absence of
any interruption or termination of service as an Employee or Consultant.
Continuous Status as an Employee or Consultant shall not be considered
interrupted in the case of: (i) sick leave; (ii) military leave; (iii) any other
leave of absence approved by the Administrator, provided that such leave is for
a period of not more than 90 days, unless reemployment upon the expiration of
such leave is guaranteed by contract or statute, or unless provided otherwise
pursuant to any Company policy adopted from time to time; or (iv) transfers
between locations of the Company or between the Company, its Subsidiaries or
their respective successors. For purposes of this Plan, a change in status from
an Employee to a Consultant or from a Consultant to an Employee will not
constitute an interruption of Continuous Status as an Employee or Consultant.
(h) "Employee" means any person, including officers and directors, employed
by the Company or any Subsidiary of the Company, with the status of employment
determined based upon such minimum number of hours or periods worked as shall be
determined by the Administrator in its discretion, subject to any requirements
of the Code. The payment by the Company of a director's fee to a director shall
not be sufficient to constitute "employment" of such director by the Company.
(i) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
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(j) "Fair Market Value" means, as of any date, the fair market value of the
Common Stock determined as follows:
(i) If the Common Stock is listed on any established Stock Exchange or
traded on the Nasdaq System (whether its National Market System or its
SmallCap Market), its Fair Market Value shall be the closing sales price
for the Common Stock (or the closing bid price, if no sales were reported)
as quoted on such Exchange or the Nasdaq System, or, if traded on more than
one Exchange, the Exchange with the greatest volume of trading in the
Common Stock on the date of determination or, if such date is not a market
trading day, on the last market trading day prior to the time of
determination, as reported in The Wall Street Journal or such other source
as the Administrator deems reliable; or
(ii) If the Common Stock is quoted on the NASD's OTC Bulletin Board or
regularly quoted by a recognized securities dealer, but selling prices are
not reported, its Fair Market Value shall be the mean between the high bid
and low asked prices for the Common Stock on the date of determination or,
if such date is not a market trading day, on the last market trading day
prior to the time of determination, as reported in The Wall Street Journal
or such other source as the Administrator deems reliable.
(k) "Incentive Stock Option" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code, or any
successor provision, as designated in the applicable written Option Agreement.
(l) "Nasdaq" means The Nasdaq Stock Market, Inc.
(m) "NASD" means the National Association of Securities Dealers, Inc.
(n) "Nonqualified Stock Option" means an Option not intended to qualify as
an Incentive Stock Option as designated in the applicable written Option
Agreement.
(o) "Option" means a stock option granted pursuant to the Plan.
(p) "Option Agreement" means a written agreement between an Optionee and
the Company reflecting the terms of an Option granted under the Plan and
includes any documents attached to such Option Agreement, including, but not
limited to, a notice of stock option grant and a form of exercise notice.
(q) "Optioned Stock" means the Common Stock subject to an Option.
(r) "Optionee" means an Employee or Consultant who is granted an Option.
(s) "Reporting Person" means an officer, director, or greater than 10%
stockholder of the Company within the meaning of Rule 16a-2 under the Exchange
Act, or any successor provision, who is required to file reports pursuant to
Rule 16a-3 under the Exchange Act.
(t) "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act, as
the same may be amended from time to time, or any successor provision.
(u) "Securities Act" means the Securities Act of 1933, as amended.
(v) "Share" means a share of the Common Stock, as adjusted in accordance
with Section 11 of the Plan.
(w) "Stock Exchange" means any national securities exchange on which prices
for the Common Stock are quoted at any given time.
(x) "Subsidiary" means a "subsidiary corporation," whether now or hereafter
existing, as defined in Section 424(f) of the Code, or any successor provision.
SECTION 3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 11
of the Plan, the maximum aggregate number of Shares that may be optioned and
sold under the Plan is 2,000,000 shares of the Common Stock. The Shares may be
authorized, but unissued, or reacquired shares of the Common Stock. If an Option
should expire or become unexercisable for any reason without having been
exercised in full, the unpurchased Shares that were subject thereto shall,
unless the Plan shall have been terminated, become available for future grant
under the Plan. In addition, any Shares which are retained by the Company upon
exercise of an Option
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in order to satisfy the exercise price for such Option or any withholding taxes
due with respect to such exercise shall be treated as not issued and shall
continue to be available for future grant under the Plan.
SECTION 4 ADMINISTRATION OF THE PLAN.
(a) PLAN PROCEDURE.
(i) MULTIPLE ADMINISTRATION BODIES. If permitted by Rule 16b-3,
grants under the Plan may be made by different bodies with respect to
directors, non-director officers and Employees or Consultants who are not
Reporting Persons.
(ii) ADMINISTRATION WITH RESPECT TO REPORTING PERSONS. With respect
to grants of Options to Employees or Consultants who are Reporting Persons,
such grants shall be made by (A) the Board if the Board may make grants to
Reporting Persons under the Plan in compliance with Rule 16b-3, or (B) the
Compensation Committee designated by the Board unless the Board designates
another Committee to make grants to Reporting Persons under the Plan, which
Compensation Committee or other Committee shall be constituted in such a
manner as to permit grants under the Plan to comply with Rule 16b-3. Once
appointed, either such Committee shall continue to serve in its designated
capacity until otherwise directed by the Board. From time to time the Board
may increase the size of either such Committee and appoint additional
members thereof, remove members (with or without cause) and appoint new
members in substitution therefor, fill vacancies, however caused, and
remove all members of either such Committee and thereafter directly make
grants to Reporting Persons under the Plan, all to the extent permitted by
Rule 16b-3.
(iii) ADMINISTRATION WITH RESPECT TO OTHER CONSULTANTS AND OTHER
EMPLOYEES. With respect to grants of Options to Employees or Consultants
who are not Reporting Persons, the Plan shall be administered by (A) the
Board or (B) the Compensation Committee designated by the Board unless the
Board designates another Committee, which Compensation Committee or other
Committee shall be constituted in such a manner as to satisfy the
Applicable Laws. Once appointed, either such Committee shall continue to
serve in its designated capacity until otherwise directed by the Board.
From time to time the Board may increase the size of either such Committee
and appoint additional members thereof, remove members (with or without
cause) and appoint new members in substitution therefor, fill vacancies,
however caused, and remove all members of either such Committee and
thereafter directly administer the Plan, all to the extent permitted by the
Applicable Laws.
(c) POWER OF THE ADMINISTRATOR. Subject to the provisions of the Plan,
Applicable Laws and in, the case of a Committee, the specific duties delegated
by the Board to such Committee, and subject to the approval of any relevant
authorities, including the approval, if required, of any Stock Exchange or
Nasdaq, the Administrator shall have the authority, in its discretion:
(i) to determine the Fair Market Value of the Common Stock in
accordance with Section 2(j) of the Plan;
(ii) to select the Consultants and Employees to whom Options may from
time to time be granted hereunder;
(iii) to determine whether and to what extent Options are granted
hereunder;
(iv) to determine the number of shares of the Common Stock to be
covered by each such Option granted hereunder;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions, not inconsistent with the
terms of the Plan, of any award granted hereunder;
(vii) to determine the consideration to be paid upon exercise of an
Option consistent with Section 8(b) hereof;
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(viii) to reduce the exercise price of any Option to the then current
Fair Market Value if the Fair Market Value of the Common Stock covered by
such Option shall have declined since the date the Option was granted;
(ix) to construe and interpret the terms of the Plan and Options
granted pursuant to the Plan; and
(x) in order to fulfill the purposes of the Plan and without amending
the Plan, to modify grants of Options to participants who are foreign
nationals or employed outside of the United States in order to recognize
differences in local law, tax policies or customs.
(d) EFFECT OF ADMINISTRATOR'S DECISION. All decisions, determinations and
interpretations of the Administrator shall be final and binding on all holders
of Options.
SECTION 5. ELIGIBILITY.
(a) RECIPIENTS OF GRANTS. Nonqualified Stock Options may be granted to
Employees and Consultants. Incentive Stock Options may be granted only to
Employees. An Employee or Consultant who has been granted an Option may, if he
or she is otherwise eligible, be granted additional Options.
(b) TYPE OF OPTION. Each Option shall be designated in the Option
Agreement as either an Incentive Stock Option or a Nonqualified Stock Option.
However, notwithstanding such designations, to the extent that the aggregate
Fair Market Value of Shares with respect to which Options designated as
Incentive Stock Options are exercisable for the first time by any Optionee
during any calendar year (under all plans of the Company or any Subsidiary)
exceeds $100,000, such Options shall be treated as Nonqualified Stock Options
with respect to the excess Shares. For purposes of this Section 5(b), Incentive
Stock Options shall be taken into account in the order in which they were
granted and the Fair Market Value of the Shares subject to an Incentive Stock
Option shall be determined as of the date of the grant of such Option.
(c) NO EFFECT ON EMPLOYMENT OR CONSULTING RIGHTS. The Plan shall not
confer upon the holder of any Option any right with respect to continuation of
employment or consulting relationship with the Company, nor shall it interfere
in any way with such holder's right or the Company's right to terminate his or
her employment or consulting relationship at any time, with or without cause.
(d) CONSULTANT ELIGIBILITY. To be eligible to receive an Option under the
Plan, a Consultant other than a director or officer must be a natural person and
must provide bona fide services to the Company or a Subsidiary which are not in
connection with the offer or sale of securities of the Company in a capital
raising transaction and do not directly or indirectly promote or maintain a
market for the Company's securities.
SECTION 6. TERM OF PLAN. The Plan shall become effective upon the earlier to
occur of its adoption by the Board of Directors or its approval by the
stockholders of the Company as described in Section 18 of the Plan. It shall
continue in effect for a term of ten years unless sooner terminated under
Section 14 of the Plan.
SECTION 7. TERM OF OPTION. The term of each Option shall be the term stated in
the Option Agreement; provided, however, that the term shall be no more than ten
years from the date of grant thereof or such shorter term as may be provided in
the Option Agreement and provided further that, in the case of an Incentive
Stock Option granted to an Optionee who, at the time the Option is granted, owns
stock representing more than 10% of the total combined voting power of all
classes of stock of the Company or any Subsidiary, the term of the Option shall
be five years from the date of grant thereof or such shorter term as may be
provided in the Option Agreement.
SECTION 8. OPTION EXERCISE PRICE AND CONSIDERATION.
(a) PER SHARE EXERCISE PRICE. The per share exercise price for the Shares
to be issued pursuant to exercise of an Option shall be such price as is
determined by the Administrator and set forth in the applicable Option
Agreement, but shall be subject to the following:
(i) In the case of an Incentive Stock Option that is:
(A) granted to an Employee who, at the time of the grant of such
Incentive Stock Option, owns stock representing more than 10% of the
total combined voting power of all classes of stock of
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the Company or any Subsidiary, the per Share exercise price shall be no
less than 110% of the Fair Market Value per Share on the date of grant.
(B) granted to any other Employee, the per Share exercise price
shall be no less than 100% of the Fair Market Value per Share on the
date of grant.
(ii) In the case of a Nonqualified Stock Option, the per Share
exercise price shall be no less than 85% of the Fair Market Value per Share
on the date of grant if required by Applicable Laws and, if not so
required, shall be such price as is determined by the Administrator.
(b) CONSIDERATION. The consideration to be paid for the Shares to be
issued upon exercise of an Option, including the method of payment, shall be
determined by the Administrator. The consideration may consist entirely of (i)
cash, (ii) check, (iii) promissory note (subject to the provisions of Applicable
Laws), (iv) other Shares that (A), in the case of Shares acquired upon exercise
of an Option, have been owned by the Optionee for more than six months on the
date of surrender or such other period as may be required to avoid a charge to
the Company's earnings, and (B) have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to which such
Option shall be exercised, (v) authorization for the Company to retain from the
total number of Shares as to which the Option is exercised that number of Shares
having a Fair Market Value on the date of exercise equal to the exercise price
for the total number of Shares as to which the Option is exercised, (vi)
delivery of a properly executed exercise notice together with such other
documentation as the Administrator and the broker, if applicable, shall require
to effect an exercise of the Option and delivery to the Company of the sale or
loan proceeds required to pay the exercise price and any applicable income or
employment taxes, (vii) any combination of the foregoing methods of payment, or
(viii) such other consideration and method of payment for the issuance of Shares
to the extent permitted under the Applicable Laws. In making its determination
as to the type of consideration to accept, the Administrator shall consider if
acceptance of such consideration may be reasonably expected to benefit the
Company.
SECTION 9. EXERCISE OF OPTION.
(a) PROCEDURE FOR EXERCISE. Any Option granted hereunder shall be
exercisable at such times and under such conditions as determined by the
Administrator and reflected in the Option Agreement, which may include vesting
requirements and/or performance criteria with respect to the Company and/or the
Optionee.
An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and the Company has
received full payment for the Shares with respect to which the Option is
exercised. Full payment may, as authorized by the Administrator, consist of any
consideration and method of payment allowable under Section 8(b) of the Plan.
Exercise of an Option in any manner shall result in a decrease in the
number of Shares that thereafter may be available, both for purposes of the Plan
and for sale under the Option, by the number of Shares as to which the Option is
exercised.
(b) FRACTIONAL SHARES. An Option may not be exercised for a fraction of a
Share. Any fraction of a Share shall be cancelled.
(c) RIGHTS AS STOCKHOLDERS. Until the issuance (as evidenced by the
appropriate entry on the books of a duly authorized transfer agent of the
Company) of the stock certificate evidencing the Shares issuable upon exercise
of an Option, no right to vote or receive dividends or any other rights as a
stockholder shall exist with respect to the shares subject to the Option
notwithstanding the exercise of the Option. The Company shall cause to be issued
such stock certificate promptly upon exercise of the Option. No adjustment will
be made for a dividend or other right for which the record date is prior to the
date the stock certificate is issued, except as provided in Section 11 of the
Plan.
(d) TERMINATION OF EMPLOYMENT OR CONSULTING RELATIONSHIP. Subject to
Section 9(e) below, in the event of termination of an Optionee's Continuous
Status as an Employee or Consultant with the Company, such Optionee may, but
only within three months (or such other period of time not less than 30 days as
is
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determined by the Administrator, with such determination in the case of an
Incentive Stock Option being made at the time of grant of the Option and not
exceeding three months) after the date of such termination (but in no event
later than the expiration date of the term of such Option as set forth in the
Option Agreement), exercise his or her Option to the extent that the Optionee
was entitled to exercise it at the date of such termination. To the extent that
the Optionee was not entitled to exercise the Option at the date of such
termination, or if the Optionee does not exercise such Option to the extent so
entitled within the time specified herein, the Option shall terminate. No
termination shall be deemed to occur and this Section 9(d) shall not apply if
(i) the Optionee is a Consultant who becomes an Employee, or (ii) the Optionee
is an Employee who becomes a Consultant.
(e) DISABILITY OF OPTIONEE.
(i) Notwithstanding Section 9(d) above, in the event of termination of
an Optionee's Continuous Status as an Employee or Consultant as a result of
his or her total and permanent disability (within the meaning of Section
22(e)(3) of the Code), such Optionee may, but only within 12 months from
the date of such termination (but in no event later than the expiration
date of the term of such Option as set forth in the Option Agreement),
exercise the Option to the extent otherwise entitled to exercise it at the
date of such termination. To the extent that the Optionee was not entitled
to exercise the Option at the date of termination, or if the Optionee does
not exercise such Option to the extent so entitled within the time
specified herein, the Option shall terminate.
(ii) In the event of termination of an Optionee's Continuous Status as
an Employee or Consultant as a result of a disability which does not fall
within the meaning of total and permanent disability (as set forth in
Section 22(e)(3) of the Code), such Optionee may, but only within six
months from the date of such termination (but in no event later than the
expiration date of the term of such Option as set forth in the Option
Agreement), exercise the Option to the extent otherwise entitled to
exercise it at the date of such termination. However, to the extent that
such Optionee fails to exercise an Option which is an Incentive Stock
Option (within the meaning of Section 422 of the Code) within three months
of the date of such termination, the Option will not qualify for Incentive
Stock Option treatment under the Code. To the extent that the Optionee was
not entitled to exercise the Option at the date of termination, or if the
Optionee does not exercise such Option to the extent so entitled within six
months or three months, as the case may be, from the date of termination,
the Option shall terminate.
(f) DEATH OF OPTIONEE. In the event of the death of an Optionee during the
period of Continuous Status as an Employee or Consultant since the date of grant
of the Option, or within 30 days following termination of the Optionee's
Continuous Status as an Employee or Consultant, the Option may be exercised, at
any time within 12 months following the date of death (but in no event later
than the expiration date of the term of such Option as set forth in the Option
Agreement), by such Optionee's estate or by a person who acquired the right to
exercise the Option by bequest or inheritance, but only to the extent of the
right to exercise that had accrued at the date of death or, if earlier, the date
of termination of the Optionee's Continuous Status as an Employee or Consultant.
To the extent that the Optionee was not entitled to exercise the Option at the
date of death or termination, as the case may be, or if the Optionee does not
exercise such Option to the extent so entitled within the time specified herein,
the Option shall terminate.
(g) Anything in subsections (d), (e) and (f) of this Section 9
notwithstanding and always subject to Applicable Laws, particularly the Code in
the case of an Incentive Stock Option, the Administrator may provide in the
Option Agreement for a different date of termination (but in no event later than
the expiration date of the term of the Option) and may provide for termination
in the event of certain events which the Administrator shall define as Cause or
as shall be so defined in any employment or consulting agreement between the
Company and the Optionee.
(h) RULE 16b-3. Options granted to Reporting Persons shall comply with
Rule 16b-3 and shall contain such additional conditions or restrictions as may
be required thereunder to qualify for the maximum exemption for Plan
transactions.
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SECTION 10. STOCK WITHHOLDING TO SATISFY WITHHOLDING TAX OBLIGATIONS. At the
discretion of the Administrator, Optionees may satisfy withholding obligations
as provided in this Section 10. When an Optionee incurs tax liability in
connection with an Option, which tax liability is subject to tax withholding
under applicable tax laws, and the Optionee is obligated to pay the Company an
amount required to be withheld under applicable tax laws, the Optionee may
satisfy the withholding tax obligation by one or some combination of the
following methods: (a) by cash or check payment, (b) out of the Optionee's
current compensation, (c) if permitted by the Administrator, in its discretion,
by surrendering to the Company Shares that (i), in the case of Shares previously
acquired from the Company, have been owned by the Optionee for more than six
months on the date of surrender, and (ii) have a Fair Market Value on the date
of surrender equal to or more than the Optionee's marginal tax rate times the
ordinary income recognized, or (d) by electing to have the Company withhold from
the Shares to be issued upon exercise of the Option, if any, that number of
Shares having a Fair Market Value equal to the amount required to be withheld.
For this purpose, the Fair Market Value of the Shares to be withheld shall be
determined on the date that the amount of tax to be withheld is to be determined
(the "Tax Date").
Any surrender by a Reporting Person of previously owned Shares to satisfy
tax withholding obligations arising upon exercise of this Option must comply
with the applicable provisions of Rule 16b-3.
All elections by an Optionee to have Shares withheld to satisfy tax
withholding obligations shall be made in writing in a form acceptable to the
Administrator and shall be subject to the following restrictions:
(a) the election must be made on or prior to the applicable Tax Date;
(b) once made, the election shall be irrevocable as to the particular
Shares of the Option as to which the election is made; and
(c) all elections shall be subject to the consent or disapproval of
the Administrator.
SECTION 11. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, MERGER OR CERTAIN OTHER
TRANSACTIONS.
(a) CHANGE IN CAPITALIZATION. Subject to any required action by the
stockholders of the Company, the number of shares of Common Stock covered by
each outstanding Option, and the number of shares of Common Stock that have been
authorized for issuance under the Plan but as to which no Options have yet been
granted or that have been returned to the Plan upon cancellation or expiration
of an Option, as well as the exercise price per share of Common Stock covered by
each such outstanding Option, shall be proportionately adjusted for any increase
or decrease in the number of issued shares of Common Stock resulting from a
stock split, reverse stock split, stock dividend, combination, recapitalization
or reclassification of the Common Stock, or any other increase or decrease in
the number of issued shares of the Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the
Administrator, whose determination in that respect shall be final, binding and
conclusive. Except as expressly provided herein, no issuance by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares of Common Stock subject to an Option.
(b) DISSOLUTION OR LIQUIDATION. In the event of the proposed dissolution
or liquidation of the Company, the Administrator shall notify the Optionee at
least 15 days prior to such proposed action. To the extent it has not been
previously exercised, the Option will terminate immediately prior to the
consummation of such proposed action.
(c) MERGER OR SALE OF ASSETS. In the event of a proposed sale of all or
substantially all of the Company's assets or a merger of the Company with or
into another corporation where the successor corporation issues its securities
to the Company's stockholders, each outstanding Option shall be assumed or an
equivalent option shall be substituted by such successor corporation or a parent
or subsidiary of such successor corporation, unless the successor corporation
does not agree to assume the Option or to substitute an equivalent option, in
which case such Option shall terminate upon the consummation of the merger or
sale of assets.
(d) CERTAIN DISTRIBUTIONS. In the event of any distribution to the
Company's stockholders of securities of any other entity or other assets (other
than dividends payable in cash or stock of the Company) without
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<PAGE> 43
receipt of consideration by the Company, the Administrator may, in its
discretion, appropriately adjust the price per share of Common Stock covered by
each outstanding Option to reflect the effect of such distribution.
SECTION 12. NON-TRANSFERABILITY OF OPTIONS. Options may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised during the
lifetime of the Optionee only by the Optionee.
SECTION 13. TIME OF GRANTING OPTIONS. The date of grant of an Option shall,
for all purposes, be the date on which the Administrator makes the determination
granting such Option, or such other date as is determined by the Administrator;
provided, however, that in the case of any Incentive Stock Option, the grant
date shall be the later of the date on which the Administrator makes the
determination granting such Incentive Stock Option or the date of commencement
of the Optionee's employment relationship with the Company. Notice of the
determination shall be given to each Employee or Consultant to whom an Option is
so granted within a reasonable time after the date of such grant.
SECTION 14. AMENDMENT AND TERMINATION OF THE PLAN.
(a) AUTHORITY TO AMEND OR TERMINATE. The Board may at any time amend,
alter, suspend or discontinue the Plan, but no amendment, alteration, suspension
or discontinuation shall be made that would impair the rights of any Optionee
under any grant theretofore made, without his or her consent. In addition, to
the extent necessary and desirable to comply with Rule 16b-3 or with Section 422
of the Code (or any other applicable law or regulation, including the
requirements of any Stock Exchange or Nasdaq), the Company shall obtain
stockholders' approval of any Plan amendment in such a manner and to such a
degree as required.
(b) EFFECT OF AMENDMENT OR TERMINATION. No amendment or termination of the
Plan shall adversely affect Options already granted, unless mutually agreed
otherwise between the Optionee and the Board, which agreement must be in writing
and signed by the Optionee and the Company.
SECTION 15. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act,
the Exchange Act, the rules and regulations promulgated under the Securities Act
or the Exchange Act, and the requirements of any Stock Exchange or Nasdaq.
As a condition to the exercise of an Option, the Company may require the
person exercising such Option to represent and warrant at the time of any such
exercise that the Shares are being purchased only for investment and without any
present intention to sell or distribute such Shares if, in the opinion of
counsel for the Company, such a representation is required by law.
SECTION 16. RESERVATION OF SHARES. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan. The inability of the Company
to obtain authority from any regulatory body having jurisdiction, which
authority is deemed by the Company's counsel to be necessary to the lawful
issuance and sale of any Shares hereunder, shall relieve the Company of any
liability in respect of the failure to issue or sell such Shares as to which
such requisite authority shall not have been obtained.
SECTION 17. OPTION AGREEMENTS. Options shall be evidenced by written Option
Agreements in such form(s) as the Administrator shall approve from time to time.
SECTION 18. STOCKHOLDER APPROVAL. Continuance of the Plan shall be subject to
approval by the stockholders of the Company within 12 months before or after the
date the Plan is adopted. Such stockholder approval shall be obtained in the
degree and manner required under applicable state and federal law and the rules
of any Stock Exchange upon which the Common Stock is listed or Nasdaq if the
Common Stock is traded therein. All Options issued under the Plan shall become
void in the event such approval is not obtained.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Notice of the Annual Meeting
Stockholders....................... N/A
Proxy Statement:
Voting Securities.................... 1
Proposal One: Authority to Classify
Board and Fix Number of
Directors.......................... 2
Proposal Two: Election of
Directors.......................... 5
Management........................... 9
Executive Compensation............... 15
Security Ownership of Certain
Beneficial Owners and Management... 19
Proposal Three: Appointment of
Independent Auditors............... 21
Proposal Four: Authority to Increase
Authorized Shares.................. 21
Proposal Five: Adopt and Approve the
2000 Option Plan................... 24
Financial Statements................. 29
Other Matters Coming Before
Meeting............................ 29
Miscellaneous........................ 29
Appendix A -- Proposed Amendments To
Article SEVENTH of Restated
Certificate of Incorporation....... A-1
Appendix B -- Audit Committee
Charter............................ B-1
Appendix C -- 2000 Stock Option
Plan............................... C-1
</TABLE>
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LIFEPOINT, INC.
NOTICE OF ANNUAL MEETING
OF STOCKHOLDERS AND
PROXY STATEMENT
JULY 26, 2000
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<PAGE> 45
LIFEPOINT, INC.
1205 SOUTH DUPONT STREET, ONTARIO, CA 91764
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Linda H. Masterson and Robert W. Berend as
Proxies, each with the power to appoint her or his substitute, and hereby
authorizes them to represent and to vote, as designated below, all of the shares
of the Common Stock of LifePoint, Inc. (the "Company") held of record by the
undersigned on July 19, 2000 at the Annual Meeting of Stockholders to be held on
August 25, 2000 or at any adjournment thereof.
1. Proposal to Classify Board and Fix Number of Directors
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2 Election of Peter S. Gold (Class A), Paul Sandler
(Class B), Stanley Yakatan (Class B), Charles J.
Casamento (Class C) and Linda H. Masterson (Class C) 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.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE.)
-----------
SEE REVERSE
SIDE
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<PAGE> 46
FOR AGAINST ABSTAIN
3. Proposal to Ratify the Appointment [ ] [ ] [ ]
of Ernst & Young LLP as
Independent Auditors of the Company.
4. Proposal to Authorize an Increase
in Authorized Shares. [ ] [ ] [ ]
5. Proposal to Adopt and Approve
2000 Option Plan. [ ] [ ] [ ]
6. To transact such other business
as may come before the Annual
Meeting or any adjournment thereof. [ ] [ ] [ ]
MARK HERE FOR
ADDRESS CHANGE AND [ ]
NOTE AT LEFT
This proxy, when executed, will be voted in the manner directed by the
undersigned stockholder(s). IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR PROPOSALS 1, 2, 3, 4, AND 5.
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:___________________________________________Date:______________
Signature:___________________________________________Date:______________
