<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /x/
Filed by a Party other than the Registrant / /
Check the appropriate box:
<TABLE>
<S> <C>
/ / Preliminary Proxy Statement / / Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
/x/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
Consep, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/x/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(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 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
LOGO
April 14, 1997
Dear Shareholder:
You are cordially invited to attend the annual meeting of shareholders of
Consep, Inc. which will be held on Thursday, May 22, 1997, at 10:00 a.m., local
time, at Mount Bachelor Village in The Bachelor Butte Room, 19717 Mount Bachelor
Drive, Bend, Oregon 97702. I look forward to greeting as many of our
shareholders as possible.
Details of the business to be conducted at the annual meeting are given in
the attached Notice of Annual Meeting and Proxy Statement.
Whether or not you attend the annual meeting it is important that your
shares be represented and voted at the meeting. Therefore, I urge you to sign,
date and promptly return the enclosed proxy in the enclosed postage-paid
envelope. If you decide to attend the annual meeting and vote in person, you
will, of course, have that opportunity.
On behalf of the Board of Directors, I would like to express our
appreciation for your continued interest in the affairs of the Company.
Sincerely,
/s/ VOLKER G. OAKEY
Volker G. Oakey
Chairman of the Board of Directors,
President and Chief Executive Officer
<PAGE> 3
LOGO
213 S.W. COLUMBIA STREET
BEND, OREGON 97702
(541) 388-3688
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 22, 1997
------------------------
To the Shareholders of
Consep, Inc.:
NOTICE IS HEREBY GIVEN that the annual meeting of shareholders (the "Annual
Meeting") of Consep, Inc. (the "Company") will be held on Thursday, May 22, 1997
at 10:00 a.m., local time, at Mount Bachelor Village in The Bachelor Butte Room,
19717 Mount Bachelor Drive, Bend, Oregon 97702, for the following purposes:
1. ELECTION OF DIRECTORS. To elect four directors, two of whom shall
each be elected to serve for a three-year term and two of whom shall each
be elected to serve for a one-year term;
2. APPROVAL OF THE 1997 STOCK INCENTIVE PLAN. To approve the Consep,
Inc. 1997 Stock Incentive Plan;
3. RATIFICATION OF APPOINTMENT OF AUDITORS. To ratify the appointment
by the Board of Directors of KPMG Peat Marwick LLP as independent auditors
of the Company for the fiscal year ending December 31, 1997; and
4. OTHER BUSINESS. To transact any other business which may properly
come before the meeting or any adjournments or postponements thereof.
The Board of Directors of the Company has fixed the close of business on
March 21, 1997 as the record date for the determination of shareholders entitled
to notice of and to vote at the Annual Meeting. Only shareholders of record at
the close of business on that date will be entitled to notice of and to vote at
the Annual Meeting or any adjournments or postponements thereof.
By Order of the Board,
/s/ VOLKER G. OAKEY
Volker G. Oakey
Chairman of the Board of Directors,
President and Chief Executive Officer
Bend, Oregon
April 14, 1997
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, WHETHER OR
NOT YOU PLAN TO BE PRESENT IN PERSON AT THE ANNUAL MEETING, PLEASE DATE, SIGN
AND COMPLETE THE ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
<PAGE> 4
CONSEP, INC.
213 S.W. COLUMBIA STREET
BEND, OREGON 97702
(541) 388-3688
------------------------
PROXY STATEMENT
FOR THE
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 22, 1997
------------------------
INTRODUCTION
GENERAL
This Proxy Statement is being furnished to the shareholders of Consep,
Inc., an Oregon corporation ("Consep" or the "Company"), as part of the
solicitation of proxies by the Company's Board of Directors (the "Board of
Directors") from holders of the outstanding shares of Consep common stock, par
value $0.01 per share (the "Common Stock"), for use at the Company's Annual
Meeting of Shareholders to be held on May 22, 1997, and at any adjournments or
postponements thereof (the "Annual Meeting"). At the Annual Meeting,
shareholders will be asked to elect four members of the Board of Directors,
approve the Company's 1997 Stock Incentive Plan, ratify the appointment by the
Board of Directors of KPMG Peat Marwick LLP as independent auditors of the
Company for the fiscal year ending December 31, 1997, and transact such other
business as may properly come before the meeting or any adjournments or
postponements thereof. This Proxy Statement, together with the enclosed proxy
card, is first being mailed to shareholders of Consep on or about April 14,
1997.
SOLICITATION, VOTING AND REVOCABILITY OF PROXIES
The Board of Directors has fixed the close of business on March 21, 1997 as
the record date for the determination of the shareholders entitled to notice of
and to vote at the Annual Meeting . Accordingly, only holders of record of
shares of Common Stock at the close of business on such date will be entitled to
vote at the Annual Meeting, with each such share entitling its owner to one vote
on all matters properly presented at the Annual Meeting. On the record date,
there were approximately 2,875 beneficial holders of the 9,444,078 shares of
Common Stock then outstanding. The presence, in person or by proxy, of a
majority of the total number of outstanding shares of Common Stock entitled to
vote at the Annual Meeting is necessary to constitute a quorum at the Annual
Meeting.
If the enclosed form of proxy is properly executed and returned in time to
be voted at the Annual Meeting, the shares represented thereby will be voted in
accordance with instructions marked thereon. EXECUTED BUT UNMARKED PROXIES WILL
BE VOTED FOR THE ELECTION OF THE FOUR NOMINEES FOR ELECTION TO THE BOARD OF
DIRECTORS, FOR APPROVAL OF THE COMPANY'S 1997 STOCK INCENTIVE PLAN AND FOR THE
RATIFICATION OF THE APPOINTMENT OF KPMG PEAT MARWICK LLP AS THE COMPANY'S
INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING DECEMBER 31, 1997. The Board of
Directors does not know of any matters other than those described in the Notice
of Annual Meeting that are to come before the Annual Meeting. If any other
matters are properly brought before the Annual Meeting, the persons named in the
proxy will vote the shares represented by such proxy upon such matters as
determined by a majority of the Board of Directors.
The presence of a shareholder at the Annual Meeting will not automatically
revoke such shareholder's proxy. A shareholder may, however, revoke a proxy at
any time prior to its exercise by filing a written notice of revocation with, or
delivering a duly executed proxy bearing a later date to, Assistant Corporate
Secretary, Consep, Inc., 213 SW Columbia Street, Bend, Oregon 97702, or by
attending the Annual Meeting and voting in person. However, a shareholder who
attends the meeting need not revoke a previously executed proxy and vote in
person unless such shareholder wishes to do so. All valid, unrevoked proxies
will be voted at the Annual Meeting.
<PAGE> 5
ELECTION OF DIRECTORS
At the Annual Meeting, four directors will be elected, two of whom shall
each be elected to serve for a three-year term and two of whom shall each be
elected to serve for a one-year term. Unless otherwise specified on the proxy,
it is the intention of the persons named in the proxy to vote the shares
represented by each properly executed proxy for the election as directors of the
persons named below as nominees. The Board of Directors believes that the
nominees will stand for election and will serve if elected as directors.
However, if any of the persons nominated by the Board of Directors fails to
stand for election or is unable to accept election, the proxies will be voted
for the election of such other person as the Board of Directors may recommend.
Under the Company's articles of incorporation and bylaws, the directors are
divided into three classes composed of two directors each. The term of office of
only one class of directors expires in each year, and their successors are
elected for terms of three years and until their successors are elected and
qualified. At the Annual Meeting, in addition to electing two directors for a
three-year term, shareholders will be electing two directors for a one-year term
to fill the vacancies created by the resignations of former directors Fred F.
Nazem and Richard M. Welch, Sr. in June 1996. There is no cumulative voting for
election of directors.
Information as to Nominees and Continuing Directors. The following table
sets forth the names of the Board of Directors' nominees for election as a
director and those directors who will continue to serve after the Annual
Meeting. Also set forth is certain other information with respect to each such
person's age at April 1, 1997, principal occupation or employment during the
past five years, the periods during which he has served as a director of Consep
and positions currently held with Consep.
<TABLE>
<CAPTION>
DIRECTOR EXPIRATION POSITION(S) HELD
AGE SINCE OF TERM WITH CONSEP
--- -------- ---------- ---------------------------------
<S> <C> <C> <C> <C>
NOMINEES:
Walter C. Babcock.............. 49 1984 2000 Director and Member of Scientific
Advisory Board
John A. Beaulieu............... 62 -- 2000 --
Philip E. Barak................ 45 1996 1998 Director
Kenneth D. MacKay.............. 54 -- 1998 --
CONTINUING DIRECTORS:
Volker G. Oakey................ 56 1984 1999 Chairman of the Board, President
and Chief Executive Officer
Peter H. Gleason............... 51 1992 1999 Director
</TABLE>
DR. WALTER C. BABCOCK. Dr. Babcock has been a director of the Company since
it was formed in 1984 and was appointed to the Compensation Committee of the
Board of Directors of the Company in September 1996. Dr. Babcock is President,
Chief Executive Officer and Chairman of the Board of Directors of Bend Research,
Inc., where he has been employed since 1976. Dr. Babcock holds a Ph.D. in
Physical Chemistry from the University of Oregon. For a discussion of the
transactions and relationships between the Company and Bend Research, Inc., see
"Certain Transactions and Relationships."
JOHN A. BEAULIEU. Mr. Beaulieu is the Managing Partner of Cascadia Pacific
Management, LLC, where he has served since 1994. Cascadia Pacific Management,
LLC is the contract manager for Oregon Resource and Technology Development Fund,
a state-funded venture capital firm. Prior to joining Cascadia Pacific
Management, LLC, Mr. Beaulieu served as President of Oregon Resource and
Technology Development Fund since its formation in 1986. Mr. Beaulieu is also a
general partner in Seed Management, a Vancouver, B.C.-based venture capital
firm. Mr. Beaulieu is a director of TCC Communications, Biozyme Inc., EPC Inc.,
Puriponics LLC and AntiVirals Inc. Mr. Beaulieu received his BS&C degree in
Accounting and an M.B.A. from the University of Santa Clara.
PHILIP E. BARAK. Mr. Barak has been a director of the Company since June
1996. Mr. Barak is the Chief Financial Officer of Nazem, Inc., where he has
worked since 1983. Mr. Barak is also a Special Limited Partner of Nazem &
Company III, L.P. Prior to joining Nazem, Inc., Mr. Barak was the Chief
Financial Officer of a privately-held distributor of petrochemicals. Mr. Barak
is a C.P.A. and spent five years in public
2
<PAGE> 6
accounting with Arthur Andersen & Co. Mr. Barak is a director of Spatial
Technology, Inc. Mr. Barak holds a B.S. from Rider College.
DR. KENNETH D. MACKAY. Dr. MacKay is the Vice President, Research and
Development and Chief Technical Officer of Henkel Corporation, a specialty
chemicals and adhesives manufacturer, where he has been employed in various
management and research positions since 1977. From 1991 to 1996, Dr. MacKay
served as President of Cognis, Inc., a wholly-owned subsidiary of Henkel
Corporation. Dr. MacKay holds a B.S. in Chemistry from the University of
Michigan and a Ph.D. in Organic Chemistry from the University of Minnesota.
VOLKER G. OAKEY. Mr. Oakey has been a director of the Company since 1984
and was appointed President and Chief Executive Officer of the Company in 1988.
From 1986 to 1988, Mr. Oakey was a Manager with the investment banking firm of
Brown Brothers Harriman. Prior to that, Mr. Oakey spent fifteen years at
Bethlehem Steel Corporation, serving most recently as Assistant Treasurer of
that company. Mr. Oakey is a member of the Board of Directors of Bend Research,
Inc. Mr. Oakey holds an M.B.A. from The Wharton School of Business at the
University of Pennsylvania and a B.A. in Economics from the University of
Maryland.
PETER H. GLEASON. Mr. Gleason has been a director of the Company since May
1992. Mr. Gleason is a Manager and Director of J.P. Morgan Investment
Corporation. Mr. Gleason also serves as Managing Director of J.P. Morgan Capital
Corporation, where he has been employed since 1991. Prior to that, Mr. Gleason
served as Vice President of J.P. Morgan & Co. Incorporated. Mr. Gleason is also
a member of the Board of Directors of Amerin Corporation. Mr. Gleason holds a
B.A. from Harvard University and an M.B.A. from Columbia University.
Board of Directors Committees and Nominations by Shareholders. The Board
of Directors acts as a nominating committee for selecting nominees for election
as directors. The Company's bylaws also permit shareholders to make nominations
for the election of directors, if such nominations are made pursuant to timely
notice in writing to the Company's Secretary. To be timely, notice must be
delivered to, or mailed to and received at, the principal executive offices of
the Company not less than 60 days nor more than 90 days prior to the date of the
meeting, provided that at least 60 days' notice or prior public disclosure of
the date of the meeting is given or made to shareholders. If less than 60 days'
notice or prior public disclosure of the date of the meeting is given or made to
shareholders, notice by the shareholder to be timely must be received by the
Company not later than the close of business on the tenth day following the date
on which such notice of the date of the meeting was mailed or such public
disclosure was made. A shareholder's notice of nomination must also set forth
certain information specified in Article III, Section 3.16 of the Company's
bylaws concerning each person the shareholder proposes to nominate for election
and the nominating shareholder.
The Board of Directors has appointed a standing Audit Committee which
during the fiscal year ended December 31, 1996, held one meeting. The members of
the Audit Committee currently are Messrs. Gleason and Barak. The Audit Committee
reviews the scope of the independent annual audit, the independent public
accountants' letter to the Board of Directors concerning the effectiveness of
the Company's internal financial and accounting controls and management's
response to that letter, if deemed necessary. The Board of Directors has also
appointed a Compensation Committee which reviews executive compensation and
makes recommendations to the full Board regarding changes in compensation, and
also administers the Company's stock option plans. During the fiscal year ended
December 31, 1996, the Compensation Committee held two meetings. The members of
the Compensation Committee currently are Messrs. Gleason and Babcock.
During 1996, the Company's Board of Directors held four meetings. Each
incumbent director attended more than 75% of the aggregate of the total number
of meetings held by the Board of Directors and the total number of meetings held
by all committees of the Board on which he served during the period that he
served.
See "Management -- Executive Compensation" for certain information
regarding compensation of directors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR
THE ELECTION OF ITS NOMINEES FOR DIRECTOR. If a quorum is present at the Annual
Meeting, the Company's bylaws provide that directors are elected by a plurality
of the votes cast by the shares entitled to vote. Abstentions and broker
non-votes are
3
<PAGE> 7
counted for purposes of determining whether a quorum exists at the Annual
Meeting, but are not counted and have no effect on the determination of whether
a plurality exists with respect to a given nominee.
MANAGEMENT
EXECUTIVE OFFICERS
The following table sets forth certain information with respect to the
executive officers of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION(S)
------------------------------------ --- ------------------------------------
<S> <C> <C>
Volker G. Oakey..................... 56 Chairman of the Board of Directors,
President and Chief Executive
Officer
Larry Katz.......................... 41 Vice President, Finance and Chief
Financial Officer
Kenneth C. "Curt" Rymer............. 45 Vice President, Consumer Products
Steven R. Hartmeier................. 39 Vice President, Commercial
Agriculture Products
</TABLE>
Information concerning the principal occupation of Mr. Oakey is set forth
under "Election of Directors." Information concerning the principal occupation
during at least the last five years of the executive officers of the Company who
are not also directors of the Company is set forth below.
LARRY KATZ. Mr. Katz has been Consep's Vice President, Finance and Chief
Financial Officer since June 1996. Prior to joining Consep, Mr. Katz was Vice
President and Research Analyst at Pacific Crest Securities from 1992 to 1996. In
the preceding eight years Mr. Katz served in various positions with Gregory
Forest Products, primarily as Vice President of Operations. Mr. Katz also spent
two years from 1982 to 1984 with Arthur Andersen & Co. Mr. Katz holds a B.S. in
Forestry from the University of California and an M.B.A. from the University of
Oregon.
KENNETH C. "CURT" RYMER. Mr. Rymer joined the Company in February 1985, as
Controller. Mr. Rymer served as Controller until June 1987, at which time he was
named National Sales Manager of Consumer Products for Consep. In May 1994, Mr.
Rymer was named Vice President, Consumer Products, and became an executive
officer of the Company. Prior to joining Consep, Mr. Rymer served as Controller
for Xytec Corporation from February 1983 to January 1985. Prior to joining Xytec
Corporation, Mr. Rymer held various positions with Dean Witter Reynolds, Moss
Adams, and Peat, Marwick, Mitchell and Company. Mr. Rymer holds a B.S. in
Business from the University of Northern Colorado.
STEVEN R. HARTMEIER. Mr. Hartmeier was named Vice President, Commercial
Agriculture Products and became an officer of the Company in September 1996. Mr.
Hartmeier served as the Company's Director, Sales and Marketing, Agriculture
Products from July 1994 to September 1996. From July 1991 to July 1994, Mr.
Hartmeier held various positions in the Company-owned distribution group,
Pacoast, Inc., most recently as Manager of Sales and Marketing. Mr. Hartmeier
joined the Company in July 1991. Prior to joining the Company, Mr. Hartmeier
held various sales and marketing positions with Monsanto Agricultural Company,
focusing on both the agricultural and industrial, turf and ornamental markets.
Mr. Hartmeier holds a B.S. in Plant Science from the University of California,
Davis.
4
<PAGE> 8
EXECUTIVE COMPENSATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table provides information concerning the compensation of the
Company's Chief Executive Officer and each of the other executive officers of
the Company (the "named executive officers") for the fiscal years ended December
31, 1994, 1995 and 1996.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION STOCK ALL OTHER
NAME AND -------------------- OPTIONS COMPENSATION
PRINCIPAL POSITION(S) YEAR SALARY BONUS GRANTED (1)
- -------------------------------------- ----- -------- ------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Volker G. Oakey....................... 1994 $150,000 $30,000 5,000 $ 4,988
President, Chief Executive 1995 135,000 -- 15,000 --
Officer and Chairman of the 1996 157,500 -- 25,000 --
Board of Directors
Larry Katz(2)......................... 1994 -- -- -- --
Vice President, Finance 1995 -- -- -- --
and Chief Financial Officer 1996 55,417 -- 42,500 --
Kenneth C. "Curt" Rymer............... 1994 81,405 17,000 22,433 2,879
Vice President, 1995 76,500 5,000 10,333 --
Consumer Products 1996 89,250 -- 12,500 --
Steven R. Hartmeier(3)................ 1994 -- -- -- --
Vice President, Commercial 1995 -- -- -- --
Agriculture Products 1996 81,333 5,000 35,000 --
</TABLE>
- ---------------
(1) The amounts set forth under All Other Compensation represent matching
amounts contributed on behalf of the named executive officers to the Company
sponsored 401(k) employee savings and retirement plan covering all of the
Company's employees.
(2) Mr. Katz first became an executive officer in June 1996.
(3) Mr. Hartmeier first became an executive officer in September 1996.
STOCK OPTIONS
The following table sets forth information concerning options granted to
the named executive officers during the fiscal year ended December 31, 1996
under the Company's 1993 Stock Incentive Plan.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
PERCENT OF STOCK
NUMBER OF TOTAL PRICE APPRECIATION
SECURITIES OPTIONS EXERCISE FOR
UNDERLYING GRANTED TO PRICE OPTION TERM(2)
OPTIONS EMPLOYEES PER EXPIRATION --------------------
NAME GRANTED IN 1996 SHARE(1) DATE 5% 10%
- ------------------------- ---------- ---------- -------- ----------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Volker G. Oakey.......... 25,000(3) 13.77% $2.875 12/18/2006 $45,202 $114,550
Larry Katz............... 30,000(4) 16.52 4.25 06/04/2006 80,184 203,202
12,500(3) 6.88 2.875 12/18/2006 22,601 57,275
Kenneth C. "Curt" Rymer.. 12,500(3) 6.88 2.875 12/18/2006 22,601 57,275
Steven R. Hartmeier...... 25,000(5) 13.77 3.25 10/23/2006 51,098 129,492
10,000(3) 5.51 2.875 12/18/2006 18,081 45,820
</TABLE>
- ---------------
(1) Options were granted at an exercise price equal to the fair market value of
the Company's Common Stock, as determined by reference to the closing price
reported on the Nasdaq National Market System on the last trading day prior
to the date of the grant.
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<PAGE> 9
(2) The potential realizable valve is calculated based on the term of the option
at its time of grant (10 years) and is calculated by assuming that the stock
price on the date of grant appreciates at the indicated annual rate
compounded annually for the entire term of the option and that the option is
exercised and sold on the last day of its term for the appreciated price.
The 5% and 10% assumed rates of appreciation are derived from the rules of
the Securities and Exchange Commission and do not represent the Company's
estimates or projections of the future Common Stock price. There can be no
assurance that the Common Stock will appreciate at any particular rate or at
all in future years.
(3) Options become exercisable starting March 18, 1997, with one-fourth of the
options becoming exercisable at that time and with an additional one-fourth
of the options becoming exercisable on June 18, 1997, September 18, 1997 and
December 18, 1997, respectively.
(4) Options become exercisable starting June 3, 1997, with one-fifth of the
options becoming exercisable at that time and with an additional one-fifth
becoming exercisable on the second, third, fourth and fifth anniversary
dates of the option grant, respectively.
(5) Options become exercisable starting October 23, 1997, with one-fifth of the
options becoming exercisable at that time and with an additional one-fifth
becoming exercisable on the second, third, fourth and fifth anniversary
dates of the option grant, respectively.
OPTION EXERCISES AND HOLDINGS
The following table provides information with respect to the named
executive officers concerning the exercise of options during the last fiscal
year and unexercised options held as of December 31, 1996.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT OPTIONS AT
ACQUIRED DECEMBER 31, 1996 DECEMBER 31, 1996(1)
ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------- -------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Volker G. Oakey................ -- -- 112,000 33,000 $ 194,625 $ 7,250
Larry Katz..................... -- -- -- 42,500 -- 3,125
Kenneth C. "Curt" Rymer........ 8,000 $24,000 22,006 30,660 13,708 4,425
Steven R. Hartmeier............ -- -- 9,134 39,000 8,717 4,000
</TABLE>
- ---------------
(1) Amounts reflected are based upon the market value of the underlying
securities at exercise date or fiscal year end, as appropriate, minus the
exercise price.
DIRECTOR COMPENSATION
The members of the Company's Board of Directors are not compensated for
their service on the Board, but are reimbursed for out-of-pocket and travel
expenses incurred in attending Board meetings. Nonemployee members of the Board
of Directors participate in the Company's 1993 Stock Option Plan for Nonemployee
Directors (the "1993 Nonemployee Director Plan"), under which each eligible
nonemployee director receives, after each annual meeting of shareholders, an
option to purchase 2,000 shares of Common Stock. Options granted to nonemployee
directors have an exercise price equal to the fair market value of the Company's
Common Stock as of the date of grant and are 100% vested on the date of grant.
All of the Company's nonemployee directors are eligible to participate in the
1993 Nonemployee Director Plan, except Mr. Gleason, who is prohibited by his
employer from directly owning any equity interest in the Company. Dr. Babcock
will also be compensated for his service on the Company's Scientific Advisory
Board by receiving $1,500 per meeting attended and a stock option to purchase
750 shares of Common Stock on an annual basis under the Company's 1997 Stock
Incentive Plan, assuming the 1997 Stock Incentive Plan is approved by the
Company's shareholders at the Annual Meeting.
6
<PAGE> 10
COMPENSATION REPORT OF THE COMPENSATION COMMITTEE
COMPENSATION COMMITTEE REPORT
Under rules established by the Securities and Exchange Commission (the
"SEC"), the Company is required to provide certain data and information in
regard to the compensation and benefits provided to the Company's Chairman of
the Board of Directors and Chief Executive Officer and the four other most
highly compensated executive officers. In fulfillment of this requirement, the
Compensation Committee has prepared the following report for inclusion in this
Proxy Statement.
The Compensation Committee of the Board of Directors, which is responsible
for reviewing and evaluating the compensation of the Company's executive
officers, approves and recommends to the Board of Directors compensation and
award levels for executive officers of the Company. The full Board of Directors
approves executive compensation, but executive officers who are also directors
do not participate in deliberations or decisions involving their own
compensation. Stock option grants to executive officers under the Company's 1993
Stock Incentive Plan and 1997 Stock Incentive Plan may be made by the
Compensation Committee alone or the full Board of Directors following review of
the recommendations of the Compensation Committee; provided, that executive
officers who are also directors do not participate in deliberations or decisions
regarding their own stock option grants.
EXECUTIVE OFFICER COMPENSATION POLICIES
The Company's executive officer compensation policies are designed to
attract, motivate, and retain senior management by providing an opportunity for
competitive compensation based on performance. Executive officer compensation
includes competitive base salaries, annual cash incentive opportunities, and
long-term incentive opportunities in the form of stock options, along with
benefits offered to all employees of the Company.
The Omnibus Budget Reconciliation Act of 1993 added Section 162(m) to the
Internal Revenue Code of 1986, as amended (the "Code"), which limits to
$1,000,000 the deductibility of compensation (including stock-based
compensation) individually paid to a publicly-held company's chief executive
officer and the four other most highly compensated executive officers. The Board
of Directors and the Compensation Committee intend to take the necessary steps
to conform the Company's executive compensation policies with this limit on the
deductibility of executive compensation.
EXECUTIVE OFFICER COMPENSATION COMPONENTS
The key components of the Company's compensation program are base salary,
annual incentive awards and equity participation. These components are
administered with the goal of providing total compensation that is competitive
in the marketplace, rewards successful financial performance and aligns
executive officers' interests with those of shareholders.
Base Salary. Base salaries for executive officers are set at levels
believed by the Compensation Committee to be sufficient to attract and retain
qualified executive officers. Base pay increases are provided to executive
officers based on an evaluation of each executive's performance, as well as the
performance of the Company as a whole. In establishing base salaries, the
Compensation Committee not only considers the financial performance of the
Company, but also the success of the executive officers in developing and
executing the Company's strategic plans, developing management employees and
exercising leadership. The Compensation Committee believes that executive
officer base salaries for 1996 were reasonable as compared to amounts paid by
companies of similar size.
Annual Performance Incentive. The Compensation Committee believes that a
significant proportion of total cash compensation for executive officers should
be subject to attainment of specific Company and individual performance
criteria. This approach creates a direct incentive for executive officers to
achieve desired performance goals and places a significant percentage of each
executive officer's compensation at risk. Consequently, each year the
Compensation Committee establishes potential bonuses for executive officers
7
<PAGE> 11
based on the Company's and the specific individual's achievement of certain
performance criteria. For fiscal 1996, annual bonuses equal to 0 - 6% of base
salaries were accrued or paid to executive officers based on the achievement of
such predetermined performance criteria.
Stock Options. The Compensation Committee believes that equity
participation is a key component of its executive compensation program. Stock
options are granted to executive officers primarily based on the officer's
actual and potential contribution to the Company's growth and profitability and
competitive marketplace practices. Option grants are designed to retain
executive officers and motivate them to enhance stockholder value by aligning
the financial interests of executive officers with those of shareholders. Stock
options also provide an effective incentive for management to create shareholder
value over the long term since the full benefit of the compensation package
cannot be realized unless an appreciation in the price of the Company's Common
Stock occurs over a number of years.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
Consistent with the executive compensation policies and components
described above, the Compensation Committee determined the salary, bonus and
stock options received by Volker G. Oakey, Chief Executive Officer of the
Company, for services rendered in fiscal 1996. Mr. Oakey received a base salary
of $157,500 for 1996. Mr. Oakey also received an option to purchase 25,000
shares of the Company's Common Stock at the market price on the last trading day
before the date of the grant, vesting over a twelve-month period in four equal
quarterly increments. This option grant related to a corresponding reduction in
base salary effective January 1, 1997.
SUBMITTED BY THE COMPENSATION
COMMITTEE
Peter H. Gleason
Walter C. Babcock
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Oakey serves as a member of the Compensation Committee of the Board of
Directors of Bend Research, Inc., and Dr. Babcock, an executive officer of Bend
Research, Inc., serves as a member of the Compensation Committee of the Board of
Directors of the Company. For a discussion of the transactions and relationships
between the Company and Bend Research, Inc., see "Certain Transactions and
Relationships."
8
<PAGE> 12
STOCK PERFORMANCE GRAPH
The following graph compares the monthly cumulative total returns for the
Company, the Nasdaq Stock Market Index and an index of peer companies selected
by the Company.
COMPARISON OF CUMULATIVE TOTAL RETURN*
AMONG CONSEP, NASDAQ STOCK MARKET INDEX AND PEER INDEX**
<TABLE>
<CAPTION>
MEASUREMENT PERIOD NASDAQ COMPOSITE
(FISCAL YEAR COVERED) 'CONSEP, INC.' PEER GROUP (US)
<S> <C> <C> <C>
2/9/94 100 100 100
12/30/94 50 40.3 95.6
12/29/95 45.8 30 134.8
12/31/96 50 10 165.39
</TABLE>
* Assumes $100 invested in each index on February 9, 1994.
** Total return assumes reinvestment of dividends.
The total cumulative return on investment (change in stock price plus
reinvested dividends) for each of the periods for the Company, the peer group
and the Nasdaq Stock Market Index is based on the stock price or index on
February 9, 1994, the date of the Company's initial public offering.
The above graph compares the performance of the Company with that of the
Nasdaq Stock Market Index and a group of peer companies with the investment
weighted on market capitalization. Companies in the peer group are as follows:
AgriDyne Technologies, Inc., Crop Genetics International Corp., Ecoscience
Corporation, Ecogen, Inc. and biosys, inc. Crop Genetics International Corp. is
included in the peer group through March 31, 1995, at which date it merged with
a wholly-owned subsidiary of biosys, inc. AgriDyne Technologies, Inc. is
included in the peer group through March 15, 1996, at which date it merged with
a wholly-owned subsidiary of biosys, inc.
9
<PAGE> 13
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the "1934
Act"), requires the Company's directors and officers, and persons who own more
than 10% of a registered class of the Company's equity securities, to file
initial reports of ownership and reports of changes in ownership with the SEC.
Such persons also are required to furnish the Company with copies of all Section
16(a) reports they file.
Based solely on its review of the copies of such reports received by it
with respect to fiscal 1996, or written representations from certain reporting
persons, the Company believes that all filing requirements applicable to its
directors, officers and persons who own more than 10% of a registered class of
the Company's equity securities have been complied with for fiscal 1996.
CERTAIN TRANSACTIONS AND RELATIONSHIPS
The Company has entered into an agreement with Bend Research, Inc. ("Bend
Research") pursuant to which the Company has obtained a license to certain
technologies and under which the Company is obligated to (i) pay Bend Research
royalties on the sale of certain of the Company's products and (ii) request Bend
Research to perform research and development services budgeted at not less than
$600,000 a year, at least $400,000 of which must be directed towards development
of biorational products. The Company's agreement with Bend Research was amended
for 1996 to require the Company to request research and development services
from Bend Research budgeted at not less than $191,500 with no specific amount
allocated to biorational products. In 1996, the Company requested Bend Research
to perform research and development services budgeted at $246,804. Payments by
the Company to Bend Research for research and development services provided to
the Company totalled $257,340 in 1996. For 1997 only, the Company's agreement
with Bend Research has been amended to require the Company to request research
and development services from Bend Research budgeted at not less than $125,000,
with no specific amount allocated to biorational products. As of April 1, 1997,
Bend Research held 316,466 shares of the Company's Common Stock. Walter C.
Babcock, President, Chief Executive Officer, Chairman of the Board of Directors
and a shareholder of Bend Research, serves as a member of the Company's Board of
Directors and its Scientific Advisory Board. Kelly L. Smith, Senior Fellow of
Bend Research, and a former member of the Board of Directors and Secretary of
Bend Research, serves as the Company's Secretary. In addition, Volker G. Oakey,
President, Chief Executive Officer and Chairman of the Board Directors of the
Company serves as a member of the Board of Directors of Bend Research.
The Company believes that the transactions set forth above were made on
terms no less favorable to the Company than could have been obtained from
unaffiliated third parties. All future transactions between the Company and its
officers, directors, principal shareholders and affiliates will be approved by a
majority of the Board of Directors, including a majority of the independent and
disinterested outside directors on the Board of Directors, and will be on terms
no less favorable to the Company than could be obtained from unaffiliated third
parties.
10
<PAGE> 14
STOCK OWNED BY MANAGEMENT AND PRINCIPAL SHAREHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock as of April 1, 1997 by: (i)
each person known by the Company to beneficially own more than 5% of the
outstanding shares of Common Stock, (ii) each of the Company's directors, (iii)
each of the Company's nominees for election as a director, (iv) each of the
Company's named executive officers, and (v) all directors and executive officers
as a group. Except as otherwise indicated, the Company believes that each of the
following shareholders has sole voting and investment power with respect to the
shares beneficially owned by such shareholder.
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK PERCENT OF
BENEFICIALLY COMMON STOCK
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED(1) OUTSTANDING
- ---------------------------------------------------------------- ------------ ------------
<S> <C> <C>
Peter H. Gleason(2)............................................. 707,773 7.5%
J.P. Morgan Investment Corporation(2)........................... 707,773 7.5
J.P. Morgan & Co. Incorporated(2)............................... 707,773 7.5
60 Wall Street
14th Floor
New York, NY 10260
Nazem & Company III, L.P.(3).................................... 692,470 7.3
645 Madison Avenue
12th Floor
New York, NY 10022
Volker G. Oakey(4).............................................. 401,066 4.2
61055 Bachelor View Drive
Bend, OR 97702
Walter C. Babcock(5)............................................ 359,639 3.8
64550 Research Road
Bend, OR 97701
Philip E. Barak................................................. -- *
John A. Beaulieu................................................ -- *
Kenneth D. MacKay............................................... -- *
Larry Katz(6)................................................... 32,055 *
Kenneth C. Rymer(7)............................................. 29,051 *
Steven R. Hartmeier(8).......................................... 21,634 *
All directors and executive officers
as a group (9 persons)(9)..................................... 1,551,218 16.1
</TABLE>
- ---------------
* Less than 1%.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission, and includes voting and investment power
with respect to shares. Shares of Common Stock subject to options or
warrants currently exercisable or exercisable within 60 days after April 1,
1997 are deemed outstanding for computing the percentage ownership of the
person holding such options or warrants, but are not deemed outstanding for
computing the percentage of any other person.
(2) Represents 707,773 shares beneficially owned by J.P. Morgan Investment
Corporation, which includes 23,167 shares issuable upon the exercise of
immediately exercisable warrants. J.P. Morgan & Co. Incorporated is the
indirect parent corporation of J.P. Morgan Investment Corporation and
therefore also beneficially owns shares owned by J.P. Morgan Investment
Corporation. Mr. Gleason is a Manager and Director of J.P. Morgan Investment
Corporation and may be deemed to share with others the power to vote and
dispose of the shares owned by that corporation. Mr. Gleason disclaims
beneficial ownership of the shares beneficially owned by J.P. Morgan
Investment Corporation.
(3) Includes 7,667 shares issuable upon the exercise of immediately exercisable
warrants.
11
<PAGE> 15
(4) Includes 118,250 shares issuable upon exercise of stock options that are
exercisable within 60 days. Also includes 37,685 shares beneficially owned
by Mr. Oakey's wife and children. Mr. Oakey is a director of Bend Research,
Inc. Mr. Oakey disclaims beneficial ownership of the (i) 316,466 shares
beneficially owned by Bend Research, Inc. and (ii) the 37,685 shares
beneficially owned by Mr. Oakey's wife and children.
(5) Includes 8,250 shares issuable upon the exercise of immediately exercisable
stock options. Also includes 880 shares beneficially owned by Dr. Babcock's
wife. Also includes 316,466 shares beneficially owned by Bend Research, Inc.
Dr. Babcock is President, Chief Executive Officer, a shareholder and a
director of Bend Research, Inc. Dr. Babcock disclaims beneficial ownership
of (i) the 316,466 shares beneficially owned by Bend Research, Inc. and (ii)
the 880 shares beneficially owned by Dr. Babcock's wife.
(6) Includes 3,125 shares issuable upon exercise of stock options that are
exercisable within 60 days. Also includes 5,000 shares beneficially owned by
Mr. Katz's wife. Mr. Katz disclaims beneficial ownership of the 5,000 shares
beneficially owned by Mr. Katz's wife.
(7) Represents 29,051 shares issuable upon exercise of stock options that are
exercisable within 60 days.
(8) Includes 11,634 shares issuable upon exercise of stock options that are
exercisable within 60 days.
(9) Includes 193,477 shares issuable upon exercise of stock options and warrants
that are exercisable within 60 days. Also includes shares that Messrs.
Gleason, Oakey and Babcock, respectively, may be deemed to beneficially own,
but as to which each disclaims beneficial ownership. See notes (2), (4) and
(5). The table does not include shares subject to options that will be
granted to Messrs. Babcock, Barak, Beaulieu and MacKay under the 1993 Stock
Option Plan for Nonemployee Directors immediately after the Annual Meeting.
12
<PAGE> 16
APPROVAL OF THE 1997 STOCK INCENTIVE PLAN
The Board of Directors is requesting that the Company's shareholders
approve the Company's 1997 Stock Incentive Plan (the "1997 Plan")which was
adopted by the Board of Directors on February 19, 1997. The Board of Directors
adopted the 1997 Plan because, as of December 31, 1996, less than 1,000 shares
remained available for grant under the Company's 1993 Stock Incentive Plan and
the Board of Directors believes that the availability of stock incentives is an
important factor in the Company's ability to attract and retain experienced and
competent employees. The purposes of the 1997 Plan are to attract and retain the
best available personnel for positions of substantial responsibility, to provide
additional incentives to the employees and consultants of the Company and to
promote the success of the Company's business. The following discussion is
intended only as a summary of the material provisions of the 1997 Plan.
Shareholders are encouraged to review the 1997 Plan, included herein as Exhibit
A, in its entirety before voting on this proposal.
The 1997 Plan provides for grants of both "incentive stock options" within
the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code") and "nonqualified stock options" which are not qualified for treatment
under Section 422 of the Code, and for direct stock grants and sales to
employees or consultants of the Company. A total of 300,000 shares of Common
Stock have been reserved for issuance under the 1997 Plan upon the exercise of
stock options which may be granted to employees, officers, directors and
consultants of the Company. As of March 15, 1997, approximately 140 persons were
eligible to participate in the 1997 Plan. Because the officers and employees of
the Company who may participate in the 1997 Plan and the amount of their options
will be determined on a discretionary basis by the Compensation Committee or the
full Board of Directors, it is not possible to state the names or positions of,
or the number of options that may be granted to, the Company's officers and
employees. No employee may receive options under the 1997 Plan for more than
75,000 shares in any one fiscal year, except that options for up to an
additional 75,000 shares may be granted in connection with a person's initial
employment with the Company.
The administration of the 1997 Plan has been delegated initially to the
Compensation Committee of the Board of Directors (the "Committee"). In addition
to determining who will be granted options, the Committee has the authority and
discretion to determine when options will be granted and the number of options
to be granted and whether the options will be incentive stock options or
nonqualified stock options. Only "employees" of the Company as that term is
defined in the Code will be entitled to receive Incentive Stock Options. See
"Federal Income Tax Consequences" below. The Committee also may determine the
time or times when each option becomes exercisable, the duration of the exercise
period for options and the form or forms of the instruments evidencing options
granted under the Plan. The Committee also may construe the Plan and the
provisions in the instruments evidencing options granted under the Plan to
employee and officer participants and is empowered to make all other
determinations deemed necessary or advisable for the administration of the Plan.
The term of each option granted under the 1997 Plan will be ten years from
the date of grant, or such shorter period as may be established at the time of
the grant. An option granted under the 1997 Plan may be exercised at such times
and under such conditions as determined by the Compensation Committee. If a
person who has been granted an option ceases to be an employee or consultant of
the Company, such person may exercise that option only during the three month
period after the date of termination, and only to the extent that the option was
exercisable on the date of termination. If a person who has been granted an
option ceases to be an employee or consultant as a result of such person's total
and permanent disability, such person may exercise that option at any time
within twelve months after the date of termination, but only to the extent that
the option was exercisable on the date of termination. Except as otherwise
provided by the Compensation Committee at the time an option is granted, no
option granted under the 1997 Plan is transferable other than at death, and each
option is exercisable during the life of the optionee only by the optionee. In
the event of the death of a person who has received an option, the option
generally may be exercised by a person who acquired the option by bequest or
inheritance during the twelve month period after the date of death to the extent
that such option was exercisable at the date of death.
The exercise price of incentive stock options granted under the 1997 Plan
may not be less than the fair market value of a share of Common Stock on the
last market trading day prior to the date of grant of the
13
<PAGE> 17
option. For nonqualified stock options, the exercise price may be less than,
equal to, or greater than the fair market value of the Common Stock on the date
of grant, provided that the Compensation Committee must specifically determine
that any option grant at an exercise price less than fair market value is in the
best interests of the Company. The consideration to be paid upon exercise of an
option, including the method of payment, will be determined by the Compensation
Committee and may consist entirely of cash, check, shares of Common Stock, such
other consideration and method of payment permitted by applicable law or any
combination of such methods of payment as permitted by the Compensation
Committee. The Compensation Committee has the authority to reset the price of
any stock option after the original grant and before exercise. In the event of
stock dividends, splits, and similar capital changes, the 1997 Plan provides for
appropriate adjustments in the number of shares available for option and the
number and option prices of shares subject to outstanding options.
In the event of a proposed sale of all or substantially all of the assets
of the Company, or a merger of the Company with and into another corporation,
outstanding options shall be assumed or equivalent options shall be substituted
by such successor corporation, unless the Committee provides all option holders
with the right to immediately exercise all of their options, whether vested or
unvested. In the event of a proposed dissolution or liquidation of the Company,
outstanding options will terminate immediately prior to the consummation of such
proposed action, unless otherwise provided by the Board. In such a situation,
the Board is authorized to give option holders the right to immediately exercise
all of their options, whether vested or unvested.
The 1997 Plan will continue in effect until February 19, 2007, unless
earlier terminated by the Board of Directors, but such termination will not
affect the terms of any options outstanding at that time. The Board of Directors
may amend, terminate or suspend the 1997 Plan at any time. Amendments to the
1997 Plan must be approved by shareholders if required by applicable tax,
securities or other law or regulation.
The issuance of shares of Common Stock upon the exercise of options is
subject to registration with the Securities and Exchange Commission of the
shares reserved by the Company under the 1997 Plan.
FEDERAL INCOME TAX CONSEQUENCES
The federal income tax discussion set forth below is included for general
information only. Optionees are urged to consult their tax advisors to determine
the particular tax consequences applicable to them, including the application
and effect of foreign, state and local income and other tax laws.
Incentive Stock Options. Certain options authorized to be granted under
the 1997 Plan are intended to qualify as incentive stock options for federal
income tax purposes. Under federal income tax law currently in effect, the
optionee will recognize no income upon grant or upon a proper exercise of an
incentive stock option. If an employee exercises an incentive stock option and
does not dispose of any of the option shares within two years following the date
of grant and within one year following the date of exercise, then any gain
realized upon subsequent disposition of the shares will be treated as income
from the sale or exchange of a capital asset. If an employee disposes of shares
acquired upon exercise of an incentive stock option before the expiration or
either the one-year holding period or the two-year waiting period, any amount
realized will be taxable as ordinary compensation income in the year of such
disqualifying disposition to the extent that the lesser of the fair market value
of the shares on the exercise date or the proceeds of the sale of the shares
exceeds the exercise price. The Company will not be allowed any deduction for
federal income tax purposes at either the time of the grant or exercise of an
incentive stock option. Upon any disqualifying disposition by an employee, the
Company will be entitled to a deduction to the extent the employee realized
ordinary income.
Nonqualified Stock Options. Certain options authorized to be granted under
the 1997 Plan will be treated as non-qualified stock options for federal income
tax purposes. Under federal income tax law presently in effect, no income is
realized by the grantee of a nonqualified stock option pursuant to the 1997 Plan
until the option is exercised. At the time of exercise of a nonqualified stock
option, the optionee will realize ordinary compensation income, and the Company
will be entitled to a deduction, in the amount by which the market value of the
shares subject to the option at the time of exercise exceeds the exercise price.
Upon the sale of shares acquired upon exercise of a nonqualified stock option,
the excess of the amount realized from the sale over the market value of the
shares on the date of exercise will be taxable.
14
<PAGE> 18
Consequences to the Company. The Company recognizes no deduction at the
time of grant or exercise of an incentive stock option. The Company will
recognize a deduction at the time of exercise of a nonqualified stock option on
the difference between the option price and the fair market value of the shares
on the date of grant. The Company also will recognize a deduction to the extent
the optionee recognizes income upon a disqualifying disposition of shares
underlying an incentive stock option.
BOARD RECOMMENDATION
For the reasons discussed above, the Board recommends a vote FOR approval
of the Company's 1997 Stock Incentive Plan. If a quorum is present, this
proposal will be approved if a majority of the votes cast on the proposal are
voted in favor of approval. Abstentions and broker non-votes are counted in
determining whether a quorum exists at the Annual Meeting, but are not counted
as votes cast and have no effect on whether the 1997 Stock Incentive Plan is
approved. No options may be granted under the 1997 Stock Incentive Plan if this
proposal is not approved. PROXIES SOLICITED BY THE BOARD WILL BE VOTED FOR
APPROVAL OF THE 1997 STOCK INCENTIVE PLAN UNLESS A VOTE AGAINST THE PROPOSAL OR
ABSTENTION IS SPECIFICALLY INDICATED.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THIS PROPOSAL.
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed KPMG Peat Marwick LLP to act as
independent auditors for the Company's fiscal year ending December 31, 1997,
subject to ratification of such appointment by the Company's shareholders.
Unless otherwise indicated, properly executed proxies will be voted in
favor of ratifying the appointment of KPMG Peat Marwick LLP to audit the books
and accounts of the Company for the fiscal year ending December 31, 1997. No
determination has been made as to what action the Board of Directors would take
if the shareholders do not ratify the appointment.
A representative of KPMG Peat Marwick LLP is expected to be present at the
Annual Meeting and will be given an opportunity to make a statement if he or she
desires to do so and will be available to respond to appropriate questions.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THIS PROPOSAL.
DATE FOR SUBMISSION OF SHAREHOLDER PROPOSALS
Any shareholder proposal intended for inclusion in the proxy statement and
form of proxy relating to the Company's 1998 annual meeting of shareholders must
be received by the Company not later than December 17, 1997, pursuant to the
proxy soliciting regulations of the SEC. In addition, the Company's bylaws
require that notice of shareholder proposals and nominations for director be
delivered to the Secretary of the Company not less than 60 days nor more than 90
days prior to the date of an annual meeting, unless notice or public disclosure
of the date of the meeting occurs less than 60 days prior to the date of such
meeting, in which event, shareholders may deliver such notice not later than the
10th day following the day on which notice of the date of the meeting was mailed
or public disclosure thereof was made. Nothing in this paragraph shall be deemed
to require the Company to include in its proxy statement and form of proxy for
such meeting any shareholder proposal which does not meet the requirements of
the SEC in effect at the time.
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors does not
know of any other matters to be presented for action by the shareholders at the
1997 Annual Meeting. If, however, any other matters not now known are properly
brought before the meeting, the persons named in the accompanying proxy will
vote such proxy in accordance with the determination of a majority of the Board
of Directors.
15
<PAGE> 19
COST OF SOLICITATION
The cost of soliciting proxies will be borne by the Company. In addition to
use of the mails, proxies may be solicited personally or by telephone by
directors, officers and employees of the Company, who will not be specially
compensated for such activities. The Company will request persons, firms and
companies holding shares in their names or in the name of their nominees, which
are beneficially owned by others, to send proxy materials to and obtain proxies
from such beneficial owners. The Company will reimburse such persons for their
reasonable expenses incurred in that connection.
ADDITIONAL INFORMATION
A COPY OF THE COMPANY'S ANNUAL REPORT TO SHAREHOLDERS FOR THE FISCAL YEAR
ENDED DECEMBER 31, 1996 ACCOMPANIES THIS PROXY STATEMENT. THE COMPANY IS
REQUIRED TO FILE AN ANNUAL REPORT ON FORM 10-K FOR ITS FISCAL YEAR ENDED
DECEMBER 31, 1996 WITH THE SECURITIES AND EXCHANGE COMMISSION. SHAREHOLDERS MAY
OBTAIN, FREE OF CHARGE, A COPY OF THE FORM 10-K (WITHOUT EXHIBITS) BY WRITING TO
LARRY KATZ, VICE PRESIDENT, FINANCE AND CHIEF FINANCIAL OFFICER, 213 SW COLUMBIA
STREET, BEND, OREGON 97702.
By Order of the Board of Directors
/s/ VOLKER G. OAKEY
-------------------------------------
Volker G. Oakey
Chairman of the Board of Directors,
President and Chief Executive Officer
Bend, Oregon
April 14, 1997
16
<PAGE> 20
EXHIBIT A
CONSEP, INC.
1997 STOCK INCENTIVE PLAN
1. Purposes of the Plan. The purposes of this Stock Incentive Plan are to
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to the Employees and Consultants
of the Company and to promote the success of the Company's business.
Options granted hereunder may be either "incentive stock options," as
defined in Section 422 of the Internal Revenue Code of 1986, as amended, or
"nonqualified stock options," at the discretion of the Board and as reflected in
the terms of the written option agreement. In addition, shares of the Company's
Common Stock may be Sold hereunder independent of any Option grant.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Administrator" shall mean the Board or any of its Committees as shall
be administering the Plan, in accordance with Section 4.(a) of the Plan.
(b) "Board" shall mean the Board of Directors of the Company.
(c) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(d) "Committee" shall mean a committee appointed by the Board in accordance
with Section 4.(a) of the Plan.
(e) "Common Stock" shall mean the Common Stock of the Company.
(f) "Company" shall mean Consep, Inc., an Oregon corporation.
(g) "Consultant" shall mean any person who is engaged by the Company or any
Parent or Subsidiary to render consulting services and is compensated for such
consulting services and any Director of the Company whether compensated for such
services or not.
(h) "Continuous Status as an Employee or Consultant" shall mean the absence
of any interruption or termination of service as an Employee or Consultant.
Continuous Status as an Employee or Consultant shall not be considered
interrupted in the case of: (i) any sick leave, military leave, or any other
leave of absence approved by the Company; provided, however, that for purposes
of Incentive Stock Options, any such leave is for a period of not more than
ninety days or reemployment upon the expiration of such leave is guaranteed by
contract or statute, provided, further, that on the ninety-first day of such
leave (where re-employment is not guaranteed by contract or statute) the
Optionee's Incentive Stock Option shall automatically convert to a Nonqualified
Stock Option; or (ii) transfers between locations of the Company or between the
Company, its Parent, its Subsidiaries or its successor.
(i) "Director" shall mean a member of the Board.
(j) "Disability" shall mean total and permanent disability as defined in
Section 22(e)(3) of the Code.
(k) "Employee" shall mean any person, including Officers and Directors,
employed by the Company or any Parent or Subsidiary. Neither the payment of a
director's fee by the Company nor service as a Director shall be sufficient to
constitute "employment" by the Company.
(l) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(m) "Fair Market Value" shall mean, as of any date, the value of Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock exchange or
a national market system, including without limitation the Nasdaq National
Market or the Nasdaq SmallCap Market of The Nasdaq Stock Market, its Fair
Market Value shall be the closing sales price for such stock (or the
closing
A-1
<PAGE> 21
bid, if no sales were reported) as quoted on such exchange or system for
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;
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market
Value of a Share of Common Stock shall be the mean between the high bid and
low asked prices for the Common Stock on the last market trading day prior
to the day of determination, as reported in The Wall Street Journal or such
other source as the Administrator deems reliable;
(iii) In the absence of an established market for the Common Stock,
the Fair Market Value shall be determined in good faith by the
Administrator.
(n) "Incentive Stock Option" shall mean an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code.
(o) "Nonqualified Stock Option" shall mean an Option not intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code.
(p) "Notice of Grant" shall mean a written notice evidencing certain terms
and conditions of an individual Option grant. The Notice of Grant is part of the
Option Agreement.
(q) "Officer" shall mean a person who is an officer of the Company within
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(r) "Option" shall mean a stock option granted pursuant to the Plan.
(s) "Option Agreement" shall mean a written agreement between the Company
and an Optionee evidencing the terms and conditions of an individual Option
grant. The Option Agreement is subject to the terms and conditions of the Plan.
(t) "Optioned Stock" shall mean the Common Stock subject to an Option.
(u) "Optionee" shall mean an Employee or Consultant who receives an Option.
(v) "Parent" shall mean a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(w) "Plan" shall mean this 1997 Stock Incentive Plan.
(x) "Rule 16b-3" shall mean Rule 16b-3 of the Exchange Act or any successor
to Rule 16b-3, as in effect when discretion is being exercised with respect to
the Plan.
(y) "Sale" or "Sold" shall include, with respect to the sale of Shares
under the Plan, the sale of Shares for consideration in the form of cash or
notes, as well as a grant of Shares for consideration in the form of past or
future services.
(z) "Share" shall mean a share of the Common Stock, as adjusted in
accordance with Section 11 of the Plan.
(aa) "Subsidiary" shall mean a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 11 of
the Plan, the maximum aggregate number of Shares which may be optioned and/or
Sold under the Plan is 300,000 shares of Common Stock. The Shares may be
authorized, but unissued, or reacquired Common Stock.
If an Option should expire or become unexercisable for any reason without
having been exercised in full, the unpurchased Shares which were subject thereto
shall, unless the Plan shall have been terminated, become available for future
Option grants and/or Sales under the Plan; provided, however, that Shares that
have actually been issued under the Plan shall not be returned to the Plan and
shall not become available for future distribution under the Plan.
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4. Administration of the Plan.
(a) Procedure.
(i) Multiple Administrative Bodies. If permitted by Rule 16b-3, the
Plan may be administered by different bodies with respect to Directors,
Officers who are not Directors, and Employees who are neither Directors nor
Officers.
(ii) Administration With Respect to Directors and Officers Subject to
Section 16(b). With respect to Option grants made to Employees who are
also Officers or Directors subject to Section 16(b) of the Exchange Act,
the Plan shall be administered by (A) the Board, if the Board may
administer the Plan in compliance with the rules governing a plan intended
to qualify as a discretionary plan under Rule 16b-3, or (B) a Committee
designated by the Board to administer the Plan, which Committee shall be
constituted to comply with the rules, if any, governing a plan intended to
qualify as a discretionary plan under Rule 16b-3. Once appointed, 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 the Committee and appoint additional members, remove members
(with or without cause) and substitute new members, fill vacancies (however
caused), and remove all members of the Committee and thereafter directly
administer the Plan, all to the extent permitted by the rules, if any,
governing a plan intended to qualify as a discretionary plan under Rule
16b-3. With respect to persons subject to Section 16 of the Exchange Act,
transactions under the Plan are intended to comply with all applicable
conditions of Rule 16b-3. To the extent any provision of the Plan or action
by the Administrator fails to so comply, it shall be deemed null and void,
to the extent permitted by law and deemed advisable by the Administrator.
(iii) Administration With Respect to Other Persons. With respect to
Option grants made to Employees or Consultants who are neither Directors
nor Officers of the Company, the Plan shall be administered by (A) the
Board or (B) a Committee designated by the Board, which Committee shall be
constituted to satisfy the legal requirements relating to the
administration of stock option plans under applicable corporate and
securities laws and the Code. Once appointed, such Committee shall serve in
its designated capacity until otherwise directed by the Board. The Board
may increase the size of the Committee and appoint additional members,
remove members (with or without cause) and substitute new members, fill
vacancies (however caused), and remove all members of the Committee and
thereafter directly administer the Plan, all to the extent permitted by the
legal requirements relating to the administration of stock option plans
under state corporate and securities laws and the Code.
(b) Powers of the Administrator. Subject to the provisions of the Plan,
and in the case of a Committee, subject to the specific duties delegated by the
Board to such Committee, the Administrator shall have the authority, in its
discretion:
(i) to grant Incentive Stock Options in accordance with Section 422 of
the Code, or Nonqualified Stock Options;
(ii) to authorize Sales of Shares of Common Stock hereunder;
(iii) to determine, upon review of relevant information, the Fair
Market Value of the Common Stock;
(iv) to determine the exercise/purchase price per Share of Options to
be granted or Shares to be Sold, which exercise/purchase price shall be
determined in accordance with Section 8.(a) of the Plan;
(v) to determine the Employees or Consultants to whom, and the time or
times at which, Options shall be granted and the number of Shares to be
represented by each Option;
(vi) to determine the Employees or Consultants to whom, and the time
or times at which, Shares shall be Sold and the number of Shares to be
Sold;
(vii) to interpret the Plan;
(viii) to prescribe, amend and rescind rules and regulations relating
to the Plan;
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<PAGE> 23
(ix) to determine the terms and provisions of each Option granted
(which need not be identical) and, with the consent of the holder thereof,
modify or amend each Option;
(x) to determine the terms and provisions of each Sale of Shares
(which need not be identical) and, with the consent of the purchaser
thereof, modify or amend each Sale;
(xi) to accelerate or defer (with the consent of the Optionee) the
exercise date of any Option;
(xii) to accelerate or defer (with the consent of the Optionee or
purchaser of Shares) the vesting restrictions applicable to Shares Sold
under the Plan or pursuant to Options granted under the Plan;
(xiii) to authorize any person to execute on behalf of the Company any
instrument required to effectuate the grant of an Option or Sale of Shares
previously granted or authorized by the Board;
(xiv) to determine the restrictions on transfer, vesting restrictions,
repurchase rights, or other restrictions applicable to Shares issued under
the Plan;
(xv) to effect, at any time and from time to time, with the consent of
the affected Optionees, the cancellation of any or all outstanding Options
under the Plan and to grant in substitution therefor new Options under the
Plan covering the same or different numbers of Shares, but having an Option
price per Share consistent with the provisions of Section 8 of this Plan as
of the date of the new Option grant;
(xvi) to establish, on a case-by-case basis, different terms and
conditions pertaining to exercise or vesting rights upon termination of
employment, whether at the time of an Option grant or Sale of Shares, or
thereafter;
(xvii) to approve forms of agreement for use under the Plan;
(xviii) 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;
(xix) to determine whether and under what circumstances an Option may
be settled in cash under subsection 9(f) instead of Common Stock; and
(xx) to make all other determinations deemed necessary or advisable
for the administration of the Plan.
(c) Effect of Administrator's Decision. All decisions, determinations and
interpretations of the Administrator shall be final and binding on all Optionees
and any other holders of any Options granted under the Plan or Shares Sold under
the Plan.
5. Eligibility.
(a) Persons Eligible. Options may be granted and/or Shares Sold only to
Employees and Consultants. Incentive Stock Options may be granted only to
Employees. An Employee or Consultant who has been granted an Option or Sold
Shares may, if he or she is otherwise eligible, be granted an additional Option
or Options or Sold additional Shares.
(b) ISO Limitation. To the extent that the aggregate Fair Market Value:
(i) of Shares subject to an Optionee's Incentive Stock Options granted by the
Company, any Parent or Subsidiary, which (ii) become exercisable for the first
time during any calendar year (under all plans of the Company or any Parent or
Subsidiary) exceeds $100,000, such excess Options shall be treated as
Nonqualified Stock Options. 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 shall be determined as of the time of grant.
(c) Section 5.(b) Limitations. Section 5.(b) of the Plan shall apply only
to an Incentive Stock Option evidenced by an Option Agreement which sets forth
the intention of the Company and the Optionee that such Option shall qualify as
an Incentive Stock Option. Section 5.(b) of the Plan shall not apply to any
Option evidenced by a Option Agreement which sets forth the intention of the
Company and the Optionee that such Option shall be a Nonqualified Stock Option.
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<PAGE> 24
(d) No Right to Continued Employment. The Plan shall not confer upon any
Optionee any right with respect to continuation of employment or consulting
relationship with the Company, nor shall it interfere in any way with his or her
right or the Company's right to terminate his employment or consulting
relationship at any time, with or without cause.
(e) Other Limitations. The following limitations shall apply to grants of
Options to Employees:
(i) No Employee shall be granted, in any fiscal year of the Company,
Options to purchase more than 75,000 Shares.
(ii) In connection with his or her initial employment, an Employee may
be granted Options to purchase up to an additional 75,000 Shares which
shall not count against the limit set forth in subsection (i) above.
(iii) The foregoing limitations shall be adjusted proportionately in
connection with any change in the Company's capitalization as described in
Section 11.
(iv) If an Option is canceled in the same fiscal year of the Company
in which it was granted (other than in connection with a transaction
described in Section 11), the canceled Option shall be counted against the
limits set forth in subsections (i) and (ii) above. For this purpose, if
the exercise price of an Option is reduced, the transaction will be treated
as a cancellation of the Option and the grant of a new Option.
6. Term of Plan. The Plan shall become effective upon the earlier to
occur of its adoption by the Board or its approval by the shareholders of the
Company as described in Section 17 of the Plan. It shall continue in effect for
a term of ten (10) years, unless sooner terminated under Section 13 of the Plan.
7. Term of Option. The term of each Option shall be stated in the Notice
of Grant; provided, however, that in the case of an Incentive Stock Option, the
term shall be ten (10) years from the date of grant or such shorter term as may
be provided in the Notice of Grant. However, in the case of an Incentive Stock
Option granted to an Optionee who, at the time the Incentive Stock Option is
granted, owns stock representing more than ten percent (10%) of the voting power
of all classes of stock of the Company or any Parent or Subsidiary, the term of
the Incentive Stock Option shall be five (5) years from the date of grant
thereof or such shorter term as may be provided in the Notice of Grant.
8. Exercise/Purchase Price and Consideration.
(a) Exercise/Purchase Price. The per-Share exercise/purchase price for the
Shares to be issued pursuant to exercise of an Option or a Sale shall be such
price as is determined by the Administrator, but shall be subject to the
following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time of the grant of such
Incentive Stock Option, owns stock representing more than ten percent
(10%) of the voting power of all classes of stock of the Company or any
Parent or Subsidiary, the per Share exercise price shall be no less than
one hundred ten percent (110%) of the Fair Market Value per Share on the
date of the grant.
(B) granted to any other Employee, the per Share exercise price
shall be no less than one hundred percent (100%) of the Fair Market
Value per Share on the date of grant.
(ii) In the case of a Nonqualified Stock Option or Sale, the per Share
exercise/purchase price shall be determined by the Administrator.
(iii) Any determination to establish an Option exercise price or
effect a Sale of Common Stock at less than Fair Market Value on the date of
the Option grant or authorization of Sale shall be accompanied by an
express finding by the Administrator specifying that the sale is in the
best interest of the Company, and specifying both the Fair Market Value and
the Option exercise price or Sale price of the Common Stock.
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<PAGE> 25
(b) Consideration. The consideration to be paid for the Shares to be
issued upon exercise of an Option or pursuant to a Sale, including the method of
payment, shall be determined by the Administrator. In the case of an Incentive
Stock Option, the Administrator shall determine the acceptable form of
consideration at the time of grant. Such consideration may consist of:
(i) cash;
(ii) check;
(iii) promissory note;
(iv) transfer to the Company of Shares which
(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, and
(B) have a Fair Market Value on the date of surrender equal to the
aggregate exercise price of the Shares to be acquired;
(v) delivery of a properly executed exercise notice together with
irrevocable instructions to a broker to promptly deliver to the Company the
amount of sale or loan proceeds required to pay the exercise price;
(vi) such other consideration and method of payment for the issuance
of Shares to the extent permitted by legal requirements relating to the
administration of stock option plans and issuances of capital stock under
applicable corporate and securities laws and the Code; or
(vii) any combination of the foregoing methods of payment.
If the Fair Market Value of the number of whole Shares transferred or the
number of whole Shares surrendered is less than the total exercise price of the
Option, the shortfall must be made up in cash or by check. Notwithstanding the
foregoing provisions of this Section 8.(b), the consideration for Shares to be
issued pursuant to a Sale may not include, in whole or in part, the
consideration set forth in subsections (iv) and (v) above.
9. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any Option granted
hereunder shall be exercisable at such times and under such conditions as
determined by the Administrator, including performance criteria with respect to
the Company and/or the Optionee, and as shall be permissible under the terms of
the Plan.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may, as authorized by the Administrator, consist of any
consideration and method of payment allowable under the Option Agreement and
Section 8.(b) of the Plan. Each Optionee who exercises an Option shall, upon
notification of the amount due (if any) and prior to or concurrent with delivery
of the certificate representing the Shares, pay to the Company amounts necessary
to satisfy applicable federal, state and local tax withholding requirements. An
Optionee must also provide a duly executed copy of any stock transfer agreement
then in effect and determined to be applicable by the Administrator. Until the
issuance (as evidenced by the appropriate entry on the books of the Company or
of a duly authorized transfer agent of the Company) of the stock certificate
evidencing such Shares, no right to vote or receive dividends or any other
rights as a shareholder shall exist with respect to the Optioned Stock
represented by such stock certificate, notwithstanding the 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.
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<PAGE> 26
Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) Termination of Employment or Consulting Relationship. In the event
that an Optionee's Continuous Status as an Employee or Consultant terminates
(other than upon the Optionee's death or Disability), the Optionee may exercise
his or her Option, but only within such period of time as is determined by the
Administrator, and only to the extent that the Optionee was entitled to exercise
it at the date of termination (but in no event later than the expiration of the
term of such Option as set forth in the Notice of Grant). In the case of an
Incentive Stock Option, the Administrator shall determine such period of time
(in no event to exceed three (3) months from the date of termination) when the
Option is granted. If, at the date of termination, the Optionee is not entitled
to exercise his or her entire Option, the Shares covered by the unexercisable
portion of the Option shall revert to the Plan. If, after termination, the
Optionee does not exercise his or her Option with the time specified by the
Administrator, the Option shall terminate, and the Shares covered by such Option
shall revert to the Plan.
(c) Disability of Optionee. In the event that an Optionee's Continuous
Status as an Employee or Consultant terminates as a result of the Optionee's
Disability, the Optionee may exercise his or her Option at any time within
twelve (12) months from the date of such termination, but only to the extent
that the Optionee was entitled to exercise it at the date of such termination
(but in no event later than the expiration of the term of such Option as set
forth in the Notice of Grant). If, at the date of termination, the Optionee is
not entitled to exercise his or her entire Option, the Shares covered by the
unexercisable portion of the Option shall revert to the Plan. If, after
termination, the Optionee does not exercise his or her Option within the time
specified herein, the Option shall terminate, and the Shares covered by such
Option shall revert to the Plan.
(d) Death of Optionee. In the event of the death of an Optionee, the
Option may be exercised at any time within twelve (12) months following the date
of death (but in no event later than the expiration of the term of such Option
as set forth in the Notice of Grant), by the Optionee's estate or by a person
who acquired the right to exercise the Option by bequest or inheritance, but
only to the extent that the Optionee was entitled to exercise the Option at the
date of death. If, at the time of death, the Optionee was not entitled to
exercise his or her entire Option, the Shares covered by the unexercisable
portion of the Option shall revert to the Plan. If, after death, the Optionee's
estate or a person who acquired the right to exercise the Option by bequest or
inheritance does not exercise the Option within the time specified herein, the
Option shall terminate, and the Shares covered by such Option shall revert to
the Plan.
(e) Rule 16b-3. Options granted to persons subject to Section 16(b) of the
Exchange Act must comply with Rule 16b-3 and shall contain such additional
conditions or restrictions as may be required thereunder to qualify for the
maximum exemption from Section 16 of the Exchange Act with respect to Plan
transactions.
(f) Buyout Provisions. The Administrator may at any time offer to buy out,
in whole or in part, for a payment in cash or Shares, an Option previously
granted, based on such terms and conditions as the Administrator shall establish
and communicate to the Optionee at the time that such offer is made.
10. Nontransferability of Options. Except as otherwise specifically
provided in the Option Agreement, an Option may not be sold, pledged, assigned,
hypothecated, transferred or disposed of in any manner other than by will, or by
the laws of descent and distribution, and may be exercised during the lifetime
of the Optionee only by the Optionee or, if incapacitated, by his or her legal
guardian or legal representative.
11. Adjustments Upon Changes in Capitalization or Merger.
(a) Changes in Capitalization: Subject to any required action by the
shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option and the number of shares of Common Stock which have been
authorized for issuance under the Plan but as to which no Options have yet been
granted or Sales made or which have been returned to the Plan upon cancellation
or expiration of an Option, as well as the price per share of Common Stock
covered by each such outstanding Option, shall be proportionately adjusted for
any increase or decrease in the number of issued shares of Common Stock
resulting from a stock split, reverse stock split, stock dividend, combination
or reclassification of the Common
A-7
<PAGE> 27
Stock, or any other increase or decrease in the number of issued shares of
Common Stock effected without receipt of consideration by the Company; provided,
however, that conversion of any convertible securities of the Company shall not
be deemed to have been "effected without receipt of consideration." Such
adjustment shall be made by the Administrator, whose determination in that
respect shall be final, binding and conclusive. Except as expressly provided
herein, no issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or price
of shares of Common Stock subject to an Option.
(b) Dissolution or Liquidation. In the event of the proposed dissolution
or liquidation of the Company, each outstanding Option will terminate
immediately prior to the consummation of such proposed action, unless otherwise
provided by the Administrator. The Administrator may, in the exercise of its
sole discretion in such instances, declare that any Option shall terminate as of
a date fixed by the Board and give each Optionee the right to exercise his or
her Option as to all or any part of the Optioned Stock, including Shares as to
which the Option would not otherwise be exercisable.
(c) Merger or Asset Sale. In the event of a proposed sale of all or
substantially all of the assets of the Company, or the merger of the Company
with or into another corporation, 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 Administrator
determines, in the exercise of its sole discretion and in lieu of such
assumption or substitution, that the Optionee shall have the right to exercise
the Option as to all of the Optioned Stock, including Shares as to which the
Option would not otherwise be exercisable. If the Administrator makes an Option
fully exercisable in lieu of assumption or substitution in the event of a merger
or sale of assets, the Administrator shall notify the Optionee that the Option
shall be fully exercisable for a period of thirty (30) days from the date of
such notice or such shorter period as the Administrator may specify in the
notice, and the Option will terminate upon the expiration of such period. For
the purposes of this paragraph, the Option shall be considered assumed if,
following the merger or sale of assets, the Option confers the right to
purchase, for each Share of Optioned Stock subject to the Option immediately
prior to the merger or sale of assets, the consideration (whether stock, cash,
or other securities or property) received in the merger or sale of assets by
holders of Common Stock for each Share held on the effective date of the
transaction (and if holders were offered a choice of consideration, the type of
consideration chosen by the holders of a majority of the outstanding Shares);
provided, however, that if such consideration received in the merger or sale of
assets was not solely common stock of the successor corporation or its Parent,
the Administrator may, with the consent of the successor corporation and the
Optionee, provide for the consideration to be received upon the exercise of the
Option, for each Share of Optioned Stock subject to the Option, to be solely
common stock of the successor corporation or its Parent equal in Fair Market
Value to the per share consideration received by holders of Common Stock in the
merger or sale of assets.
12. 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. Notice of the determination shall be given to each
Optionee within a reasonable time after the date of such grant.
13. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may amend or terminate the Plan
from time to time in such respects as the Board may deem advisable.
(b) Shareholder Approval. The Company shall obtain shareholder approval of
any Plan amendment to the extent necessary and desirable to comply with Rule
16b-3 or with Section 422 of the Code (or any successor rule or statute or other
applicable law, rule or regulation, including the requirements of any exchange
or quotation system on which the Common Stock is listed or quoted). Such
shareholder approval, if required, shall be obtained in such a manner and to
such a degree as is required by the applicable law, rule or regulation.
(c) Effect of Amendment or Termination. Any such amendment or termination
of the Plan shall not affect Options already granted, and such Options shall
remain in full force and effect as if this Plan had not
A-8
<PAGE> 28
been amended or terminated, unless mutually agreed otherwise between the
Optionee and the Administrator, which agreement must be in writing and signed by
the Optionee and the Company.
14. Conditions Upon Issuance of Shares. Shares shall not be issued
pursuant to the exercise of an Option or a Sale unless the exercise of such
Option or consummation of the Sale and the issuance and delivery of such Shares
pursuant thereto shall comply with all relevant provisions of law, including,
without limitation, the Securities Act of 1933, as amended, applicable state
securities laws, the Exchange Act, the rules and regulations promulgated
thereunder, and the requirements of any stock exchange (including NASDAQ) upon
which the Shares may then be listed, and shall be further subject to the
approval of counsel for the Company with respect to such compliance.
15. 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.
16. Liability of Company.
(a) Inability to Obtain Authority. 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.
As a condition to the exercise of an Option or a Sale, the Company may
require the person exercising such Option or to whom Shares are being Sold to
represent and warrant at the time of any such exercise or Sale that the Shares
are being purchased only for investment and without any present intention to
sell or distribute such Shares if, in the opinion of counsel for the Company,
such a representation is required by any of the aforementioned relevant
provisions of law.
(b) Grants Exceeding Allotted Shares. If the Optioned Stock covered by an
Option exceeds, as of the date of grant, the number of Shares which may be
issued under the Plan without additional shareholder approval, such Option shall
be void with respect to such excess Optioned Stock, unless shareholder approval
of an amendment sufficiently increasing the number of Shares subject to the Plan
is timely obtained in accordance with Section 13 of the Plan.
17. Shareholder Approval. Continuance of the Plan shall be subject to
approval by the shareholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such shareholder approval shall be obtained
in the manner and to the degree required under applicable federal and state law.
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<TABLE>
<S><C>
PROXY
CONSEP, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of Consep, Inc., an Oregon corporation (the "Company"), hereby appoints Volker G. Oakey and
Larry Katz, or either of them, with full power of substitution in each, as proxies to cast all votes which the undersigned
shareholder is entitled to cast at the Annual Meeting of Shareholders (the "Annual Meeting") to be held on Thursday, May 22, 1997,
at 10:00 a.m., local time, at Mount Bachelor Village in The Bachelor Butte Room, 19717 Mount Bachelor Drive, Bend, Oregon 97702,
and any adjournments or postponements thereof upon the matters set forth on the reverse side of this Proxy Card.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. UNLESS
DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED "FOR" THE ELECTION OF THE NOMINEES LISTED IN PROPOSAL 1, FOR PROPOSALS 2 AND 3, AND IN
ACCORDANCE WITH THE RECOMMENDATIONS OF A MAJORITY OF THE BOARD OF DIRECTORS AS TO OTHER MATTERS.
The undersigned hereby acknowledges receipt of the Company's Proxy Statement and hereby revokes any proxy or proxies
previously given.
(Continued and to be signed on reverse side.)
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FOLD AND DETACH HERE
</TABLE>
<PAGE> 30
<TABLE>
<S><C>
PLEASE MARK
YOUR VOTES [ X ]
LIKE THIS.
FOR WITHHOLD
THE NOMINEE AUTHORITY
LISTED BELOW (EXCEPT TO VOTE FOR ALL
AS INDICATED BELOW) NOMINEES LISTED BELOW
1. Election of two directors for a three-year term. [ ] [ ]
NOMINEES: Walter C. Babcock and John A. Beaulieu
Election of two directors for a one-year term. [ ] [ ]
NOMINEES: Philip E. Barak and Kenneth D. MacKay
INSTRUCTION: To withhold authority to vote for any
nominee write that nominee's name in this space:
--------------------------------------------------
FOR AGAINST ABSTAIN
2. Approval of the 1997 Stock Incentive Plan. [ ] [ ] [ ]
FOR AGAINST ABSTAIN
3. Ratification of appointment of auditors. [ ] [ ] [ ]
4. In their discretion, the proxies are authorized to vote upon such other matters as may
properly come before the meeting or any adjournments or postponements thereof.
I PLAN TO ATTEND THE MEETING [ ]
Please sign below exactly as your name appears on this Proxy Card.
If shares are registered in more than one name, the signatures of all
such persons are required. A corporation should sign in its full
corporate name by a duly authorized officer, stating his/her title.
Trustees, guardians, executors and administrators should sign in their
official capacity, giving their full title as such. If a partnership,
please sign in the partnership name by authorized person(s).
If you receive more than one Proxy Card, please sign and return all
such cards in the accompanying envelope.
Signature(s) Date
----------------------------------------------------------------------- ------
Please sign, date and return this proxy card today, using the enclosed envelope.
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FOLD AND DETACH HERE
</TABLE>
