<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
(MARK ONE)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 0-28328
------------------------
UROCOR, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 75-2117882
(State of incorporation) (IRS Employer Identification No.)
800 RESEARCH PARKWAY, OKLAHOMA CITY, 73104
OK
(Address of principal executive (zip code)
offices)
</TABLE>
(405) 290-4000
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year, if changed since last
report)
------------------------
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /
The number of shares of issuer's Common Stock, $.01 par value, outstanding
on July 31, 1997 was 10,176,439 shares.
- --------------------------------------------------------------------------------
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<PAGE>
UROCOR, INC.
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1997
INDEX
PART I--FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE
---------
<S> <C> <C>
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
Balance Sheets as of June 30, 1997 and December 31, 1996.................................... 3
Statements of Operations for the three months and six months ended June 30, 1997 and 1996... 4
Statements of Cash Flows for the six months ended June 30, 1997 and 1996.................... 5
Notes to Unaudited Interim Financial Statements--June 30, 1997.............................. 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS....... 7-9
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS................................. 9
PART II--OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
ITEM 2. CHANGES IN SECURITIES
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
ITEM 5. OTHER INFORMATION
Cautionary Statements....................................................................... 10-13
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K............................................................ 13
Signatures................................................................................................ 14
</TABLE>
2
<PAGE>
PART I--FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
UROCOR, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
1996
JUNE 30, -------------
1997
-------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents........................................................ $ 10,642,034 $ 15,796,070
Short-term marketable investments................................................ 2,998,913 5,975,500
Accounts receivable, net of allowance for doubtful accounts of $1,717,425 in 1997
and $1,123,562 in 1996......................................................... 12,555,825 8,188,715
Prepaid expenses................................................................. 948,969 666,662
Laboratory supplies, at average cost............................................. 496,118 683,408
Other current assets............................................................. 1,093,154 530,796
------------- -------------
Total current assets........................................................... 28,735,013 31,841,151
------------- -------------
LONG-TERM MARKETABLE INVESTMENTS................................................... 12,705,059 11,703,521
PROPERTY AND EQUIPMENT, net........................................................ 6,890,307 4,745,662
INTANGIBLE AND OTHER ASSETS, net................................................... 2,083,268 1,979,575
------------- -------------
Total assets................................................................... $ 50,413,647 $ 50,269,909
------------- -------------
------------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable................................................................. $ 1,091,308 $ 1,960,446
Accrued compensation............................................................. 546,324 1,225,976
Other accrued liabilities........................................................ 149,539 114,352
Current installments of obligations under capital leases......................... 571,650 623,446
------------- -------------
Total current liabilities...................................................... 2,358,821 3,924,220
LINE OF CREDIT, long-term.......................................................... -- --
OBLIGATIONS UNDER CAPITAL LEASES, net of current installments...................... 392,165 659,131
------------- -------------
Total liabilities.............................................................. 2,750,986 4,583,351
------------- -------------
STOCKHOLDERS' EQUITY:
Convertible preferred stock, $.01 par value--authorized 6,000,000 shares at June
30, 1997 and at December 31, 1996; issued in series; no shares outstanding at
June 30, 1997 and at December 31, 1996......................................... -- --
Common stock, $.01 par value, authorized 20,000,000 shares at June 30, 1997 and
at December 31, 1996; 10,171,089 shares issued and outstanding at June 30, 1997
and 10,101,307 shares issued and outstanding at December 31, 1996.............. 101,711 101,013
Additional paid-in capital....................................................... 57,710,705 57,576,724
Accumulated deficit.............................................................. (10,149,755) (11,991,179)
------------- -------------
Total stockholders' equity..................................................... 47,662,661 45,686,558
------------- -------------
Total liabilities and stockholders' equity..................................... $ 50,413,647 $ 50,269,909
------------- -------------
------------- -------------
</TABLE>
The accompanying notes are an integral part of these balance sheets.
3
<PAGE>
UROCOR, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
---------------------------- ----------------------------
1997 1996 1997 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
REVENUE............................................. $ 7,794,707 $ 6,449,173 $ 15,873,272 $ 12,356,722
OPERATING EXPENSES:
Direct cost of services and products.............. 2,923,834 2,390,159 5,904,936 4,528,202
Selling, general and administrative expenses...... 3,990,749 3,103,859 7,680,110 5,965,736
Research and development.......................... 611,403 648,540 1,221,456 1,292,312
------------- ------------- ------------- -------------
Total operating expenses........................ 7,525,986 6,142,558 14,806,502 11,786,250
------------- ------------- ------------- -------------
Income from operations............................ 268,721 306,615 1,066,770 570,472
OTHER INCOME (EXPENSE):
Interest income................................... 413,957 214,063 867,574 237,351
Interest expense.................................. (42,350) (53,383) (92,930) (109,889)
------------- ------------- ------------- -------------
Total other income.............................. 371,607 160,680 774,644 127,462
------------- ------------- ------------- -------------
Income before income taxes.......................... 640,328 467,295 1,841,414 697,934
Income taxes........................................ -- -- -- --
------------- ------------- ------------- -------------
NET INCOME.......................................... $ 640,328 $ 467,295 $ 1,841,414 $ 697,934
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
NET INCOME PER SHARE................................ $ .06 $ .05 $ .17 $ .08
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
SHARES USED IN COMPUTING NET INCOME PER SHARE....... 11,076,759 9,427,284 11,108,336 8,516,658
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
UROCOR, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
----------------------------
1997 1996
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income....................................................................... $ 1,841,414 $ 697,934
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization.................................................. 685,563 524,312
Stock option compensation expense.............................................. 64,254 65,136
Loss on disposition of equipment............................................... 1,140 --
Other.......................................................................... -- (769)
Changes in assets and liabilities:
Increase in accounts receivable.............................................. (4,367,110) (1,119,181)
Increase in prepaid expense.................................................. (282,307) (419,626)
(Increase) decrease in laboratory supplies................................... 187,290 (314,251)
Increase in other current assets............................................. (562,358) (220,880)
Increase (decrease) in accounts payable...................................... (869,138) 167,348
Increase in accrued liabilities.............................................. 35,187 122,143
Decrease in accrued compensation............................................. (679,652) (238,017)
------------- -------------
Net cash used in operating activities...................................... (3,945,717) (735,851)
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Maturities (purchases) of short-term marketable investments, net................. 2,976,586 (3,965,421)
Purchases of long-term marketable investments, net............................... (1,001,539) (4,902,039)
Capital expenditures............................................................. (2,810,799) (951,830)
Proceeds from capital leases..................................................... -- 385,511
Intangible and other assets...................................................... (124,232) (148,297)
------------- -------------
Net cash used in investing activities...................................... (959,984) (9,582,076)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from stock issuances................................................ -- 34,603,514
Proceeds from exercise of stock options.......................................... 70,425 14,900
Principal payments under capital lease obligations and other indebtedness........ (318,760) (433,970)
Proceeds from line of credit..................................................... -- 600,000
Payments on line of credit....................................................... -- (1,300,000)
------------- -------------
Net cash provided by (used by) financing activities........................ (248,335) 33,484,444
------------- -------------
Net increase (decrease) in cash and cash equivalents............................... (5,154,036) 23,166,517
CASH AND CASH EQUIVALENTS, beginning of year....................................... 15,796,070 3,125,296
------------- -------------
CASH AND CASH EQUIVALENTS, end of period........................................... $ 10,642,034 $ 26,291,813
------------- -------------
------------- -------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest........................................................... $ 85,296 $ 96,603
Cash paid for income taxes....................................................... 350,000 34,000
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
UROCOR, INC.
NOTES TO INTERIM FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1997
NOTE 1--BASIS OF PRESENTATION:
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring items) considered necessary for a fair presentation have been
included. These interim financial statements should be read in conjunction with
the financial statements and notes included in the Company's Form 10-K filed on
March 28, 1997.
Operating results for the six-month period ended June 30, 1997 are not
necessarily indicative of the results that may be expected for the full year
ended December 31, 1997.
NOTE 2--NET INCOME PER SHARE:
Net income per share has been computed based upon the weighted average
number of common shares and common share equivalents outstanding during each
period. Common share equivalents recognize the potential dilutive effects of the
conversion of Preferred, Class A and Class B Stock to Common Stock for periods
prior to the Company's initial public offering and the impact of outstanding
options and warrants to acquire Common Stock using the treasury stock method and
the Company's estimate of the fair value of common stock during each period.
Pursuant to the rules of the Securities and Exchange Commission, common and
common share equivalent shares issued in the 12 months prior to the Company's
initial public offering, have been included in the computation of common and
common equivalent shares as if they were outstanding for all prior periods
presented.
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS 128").
SFAS 128 requires adoption of certain new accounting and disclosure rules for
earnings per share in financial statements dated after December 15, 1997, and
early adoption is prohibited. Upon adoption, SFAS 128 will require that all
prior-period earnings per share ("EPS") data presented be restated to conform
with the new requirements. The shares used to calculate net income per share, as
presented in these financial statements, will approximate the shares to be used
for Diluted EPS under SFAS 128. To calculate Basic EPS under SFAS 128, the
shares used in computing net income per share for the periods presented in these
financial statements will be reduced by approximately 916,000 and 1,156,000
shares for each of the three month periods ended June 30, 1997 and 1996,
respectively and 958,000 and 1,104,000 for each of the six month periods ended
June 30, 1997 and 1996, respectively.
NOTE 3--INITIAL PUBLIC OFFERING:
The Company's initial public offering was consummated on May 22, 1996,
pursuant to which the Company sold a total of 3,450,000 common shares at an
offering price to the public of $11 per share. The net proceeds to the Company
were approximately $34,500,000 after deducting expenses and underwriting
discount.
NOTE 4--INVESTMENTS:
Pursuant to the Company's investment policy, idle and excess funds are
invested in high grade, fixed income securities generally for no more than two
years. These securities are classified as Available-for-Sale as of June 30,
1997. The Company considers any net unrealized gain or loss on these investments
to be temporary, and reflects such gains or losses as a component of
stockholders' equity. As of June 30, 1997, there was not a material net
unrealized gain or loss on these investments.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Company's expectations with respect to future results of operations that
may be embodied in oral and written forward-looking statements, including any
forward-looking statements that may be contained in this Quarterly Report on
Form 10-Q, are subject to risks and uncertainties that must be considered when
evaluating the likelihood of the Company's realization of such expectations. The
Company's actual results could differ materially. Factors that could cause or
contribute to such differences include, but are not limited to, those discussed
in Item 5 of Part II of this Report.
OVERVIEW
UroCor provides a broad range of diagnostic services for the clinical
management of certain urological cancers and diseases. The Company's goal is to
complement its diagnostic services with therapeutic products and information
services in order to become an integrated disease management company serving the
urology market. The Company has established four business groups,
UroDiagnostics, UroSciences, UroTherapeutics and Disease Management Information
Systems, to serve the needs of urologists and managed care organizations for the
diagnostic, prognostic and therapeutic care of patients throughout the entire
course of their diseases.
The Company currently derives substantially all of its revenue from
diagnostic products and services that its UroDiagnostics Group provides to the
urology market to assist in the diagnosis, prognosis and management of prostate
cancer, bladder cancer and kidney stones disease. The Company recognizes revenue
when products are sold or services are rendered. The Company typically bills
various third-party payors for its products and services, including governmental
programs such as Medicare, private insurance and managed care plans, as well as
individual patients. For the six months ended June 30, 1997, approximately 48%,
38%, 10% and 4% of the Company's revenue was attributable to Medicare, private
insurance and managed care, individual patients, and physicians and hospitals,
respectively.
RESULTS OF OPERATIONS
REVENUE. Revenue increased 20.9%, from approximately $6.4 million in the
three months ended June 30, 1996 to approximately $7.8 million in the three
months ended June 30, 1997, and increased 28.5%, from approximately $12.4
million in the first six months of 1996 to approximately $15.9 million in the
first six months of 1997. These increases resulted from an increase in case
volume of 30.5% and 45.9% for the three and six month periods, respectively, due
primarily to expansion of the Company's client base, increased utilization of
the Company's diagnostic products and services by existing clients and increased
utilization of the Company's kidney stone product line. Case volume increased at
a higher rate than revenue primarily due to the continued expansion of the
kidney stone product line, introduced in early 1996, and an increase in serum
based tests, each of which generally has average selling prices below those of
most of the Company's other products.
DIRECT COST OF SERVICES AND PRODUCTS. Direct cost of services and products
increased 22.3%, from approximately $2.4 million in the three months ended June
30, 1996 to approximately $2.9 million in the three months ended June 30, 1997,
and increased 30.4%, from approximately $4.5 million in the first six months of
1996 to approximately $5.9 million in the first six months of 1997. These
increases were due principally to higher personnel costs and supply and
distribution costs resulting from increased case volume. As a percentage of
revenue, direct expenses increased to 37.5% for the three months ended June 30,
1997 from 37.1% for the three months ended June 30, 1996, and increased to 37.2%
of revenue for the first six months of 1997 from 36.6% for the first six months
of 1996. These increases are due principally to continued growth of the
Company's kidney stone and serum based tests, with each of these products having
lower profit margins than those of most of the Company's other products.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased 28.6%, from approximately $3.1 million in the
three months ended June 30, 1996 to approximately $4.0
7
<PAGE>
million in the three months ended June 30, 1997, and increased 28.7%, from
approximately $6.0 million in the first six months of 1996 to approximately $7.7
million in the first six months of 1997. These increases were due principally to
higher personnel costs related to marketing, sales staff and management
information services personnel, increased provision for doubtful accounts due to
higher revenues, and expanded investor relations activities. As a percentage of
revenue, selling, general and administrative expenses increased to 51.2% for the
three months ended June 30, 1997 from 48.1% for the three months ended June 30,
1996, and increased to 48.4% of revenue for the first six months of 1997 from
48.3% for the first six months of 1996.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development costs decreased
5.7%, from approximately $649,000 in the three months ended June 30, 1996 to
approximately $611,000 in the three months ended June 30, 1997, and decreased
5.5% , from approximately $1.3 million in the first six months of 1996 to
approximately $1.2 million in the first six months of 1997. As a percentage of
revenue, research and development expenses decreased to 7.8% for the three
months ended June 30, 1997 from 10.1% for the three months ended June 30, 1996,
and decreased to 7.7% of revenue for the first six months of 1997 from 10.5% for
the first six months of 1996.
OTHER INCOME (EXPENSE). Interest income increased in the three-month period
ended June 30, 1997 compared to the same period of 1996, due principally to the
increased cash, cash equivalents and investments that resulted from the proceeds
of the Company's initial public offering in May 1996. Interest expense decreased
in the three and six month periods ended June 30, 1997 compared to the same
periods of 1996, primarily because the Company did not renew a bank credit
facility upon its expiration in February 1997. The Company had no borrowings
under this facility during the three and six month periods ended June 30, 1997,
and did have borrowings thereunder during the comparable periods in 1996.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1997, the Company had cash and cash equivalents of
approximately $10.6 million, short-term marketable investments of approximately
$3.0 million and long-term marketable investments of approximately $12.7
million. Such marketable investments consisted principally of high-grade fixed
income securities, with a maturity of less than two years. As of June 30, 1997
the Company's working capital was approximately $26.4 million.
Accounts receivable, net of allowance for doubtful accounts, totaled
approximately $12.6 million at June 30, 1997, an increase of 53% from December
31, 1996. At June 30, 1997, the Company's average number of days sales in
receivables was approximately 146 compared to 117 and 97 at March 31, 1997 and
December 31, 1996, respectively. During 1996 and 1997, the Company's Medicare
intermediary and certain other third-party payors have continued a general trend
of increased time between their receipt of claims and payment to the Company.
The increase in accounts receivable during the second quarter of 1997 was due
primarily to payor delays caused by systems changes enacted by two of the
Company's larger payors during the quarter. The Company is working closely with
these two payors to resolve systems and related processing issues. In an effort
to reduce its average number of days sales in receivables, the Company has
implemented staffing, systems and process changes and is undertaking additional
initiatives intended to improve its claims and collections efficiencies.
The Company monitors the collection quality of its accounts receivable
through analytical review of aging categories by payor group and collections
performance compared to historical trends. The Company maintains what it
believes to be an adequate level of an allowance for doubtful accounts through
charges to operations which are included in selling, general and administrative
expenses. The Company historically has not experienced any material write-off or
collection problems for which adequate reserves had not been established through
its regular provision for doubtful accounts.
Operating activities used net cash of approximately $3.9 million for the six
months ended June 30, 1997 compared to approximately $736,000 for the six months
ended June 30, 1996. The net cash used in
8
<PAGE>
operating activities was primarily the result of an approximate $4.4 million
increase in accounts receivable, an approximate $869,000 decrease in accounts
payable, an approximate $680,000 decrease in accrued compensation, and an
approximate $562,000 increase in other current assets offset in part by net
income of approximately $1.8 million and depreciation and amortization of
approximately $686,000.
Net cash used by investing activities was approximately $960,000 for the six
months ended June 30, 1997 and consisted primarily of capital expenditures of
approximately $2.8 million and purchases of long-term investments of
approximately $1.0 million, offset by net sales of short-term investments of
approximately $3.0 million. Net cash used in financing activities was
approximately $248,000 for the first six months of 1997, consisting primarily of
principal payments under capital leases and other indebtedness of approximately
$319,000 offset by proceeds from exercise of stock options of approximately
$70,000.
The Company's capital expenditures of approximately $2.8 million for the six
months ended June 30, 1997, were primarily for computer hardware and software,
furniture and fixtures and software development for the Company's information
services. Of the total amount, approximately $496,000 related to internal
software development costs for information services. While future capital
expenditures will depend upon a number of factors, the level of expenditures is
expected to be higher than the historical level of such expenditures as the
Company expands to deliver therapeutics and information services and continues
to enhance current diagnostic services and operational capabilities. The Company
intends to finance the majority of these capital expenditures with existing cash
and investment balances.
In December 1994, the Company obtained distribution rights to a therapeutic
product currently under review for marketing approval by the United States Food
and Drug Administration (the "FDA"). The total cost of the distribution rights
is $3.0 million, which is payable in installments based on achievement of
certain milestones by the manufacturer. The Company made an initial payment of
$750,000 in December 1994 and a second installment of $500,000 in 1995 after the
product was submitted for FDA review in April 1995. The Company is obligated to
pay an additional milestone payment of $1.75 million if and when the product is
approved by the FDA for marketing in the United States. If the Company makes
this payment in 1998, it intends to make any such payment from existing cash and
investment balances.
The Company reported no tax expense for the three and six month periods
ended June 30, 1997, as a result of utilization of net operating loss
carryforwards. Prior to 1997, a valuation allowance against the future benefits
of these net deferred tax assets was recorded due to uncertainty regarding the
realizability of such assets through sustained profitable operations. As
realizability of this asset becomes more certain through a demonstrated positive
earnings history, the Company will continue to evaluate the appropriateness of
recognizing these future benefits to a greater extent later in 1997. Using an
assumed tax rate of 38%, the recognition of such net deferred tax benefits
totaled approximately $243,000 or $0.02 per share, for the second quarter of
1997 and $700,000 or $0.06 per share, for the six months ended June 30, 1997.
The Company believes that its existing capital resources will be sufficient
to provide the funds necessary to maintain its present level of operations and
implement its currently planned growth strategy. However, there may be
circumstances or new business opportunities that would require additional
resources. In such event, the Company may be required to seek additional
financing and there is no assurance that the Company would be able to obtain
such financing on acceptable terms.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable.
9
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PART II--OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On June 20, 1997, at the Company's annual meeting of stockholders:
A) The individuals listed below were elected to serve as Class I
directors until the 2000 annual meeting. Set forth is the tabulation of
votes cast. No votes were cast against any nominee for director.
<TABLE>
<CAPTION>
NAME SHARES VOTED FOR SHARES WITHHELD BROKER NON-VOTES
- ---------------------- ---------------- ----------------- -----------------------
<S> <C> <C> <C>
Herbert J. Conrad 9,117,228 4,200 0
Louis M. Sherwood 9,117,028 4,400 0
</TABLE>
B) The stockholders approved the UroCor, Inc. Second Amended and
Restated 1992 Stock Option Plan to increase the number shares for which
options may be granted under such Plan from 1,400,000 to 1,700,000 and amend
certain provisions of the plan to bring the plan into compliance with
recently amended federal securities and tax laws. The tabulation of votes
with respect to this item is as follows:
<TABLE>
<CAPTION>
SHARES VOTED
SHARES VOTED FOR AGAINST SHARES ABSTAINED BROKER NON-VOTES
- -------------------- ------------------- ----------------- -----------------------
<S> <C> <C> <C>
8,783,425 291,107 46,896 0
</TABLE>
C) The stockholders approved the UroCor, Inc. 1997 Non-Employee Director
Stock Option Plan. The tabulation of votes with respect to this item is as
follows:
<TABLE>
<CAPTION>
SHARES VOTED
SHARES VOTED FOR AGAINST SHARES ABSTAINED BROKER NON-VOTES
- -------------------- ------------------- ----------------- -----------------------
<S> <C> <C> <C>
9,026,821 38,611 55,996 0
</TABLE>
ITEM 5. OTHER INFORMATION
Cautionary Statements:
The Company's expectations with respect to future results of operations
that may be embodied in oral and written forward-looking statements,
including any forward-looking statements that may be contained in this
Quarterly Report on Form 10-Q, are subject to risks and uncertainties that
must be considered when evaluating the likelihood of the Company's
realization of such expectations. The Company's actual results could differ
materially. Factors that could cause or contribute to such differences
include, but are not limited to, those discussed below.
NEED FOR FUTURE FUNDING; UNCERTAINTY OF ACCESS TO CAPITAL. The
Company's growth since 1991 has required, and any future growth will
require, significant amounts of working capital. Although the Company
believes that existing capital resources will be adequate to fund its
present level of operations and implement its currently planned growth
strategy, there may be circumstances or new business opportunities that
would require additional resources. In such event, the Company may be
10
<PAGE>
required to seek additional financing, and there is no assurance that the
Company would be able to obtain such financing on acceptable terms.
UNCERTAINTIES RELATED TO THIRD-PARTY REIMBURSEMENT; POTENTIAL HEALTH
CARE REFORM. The Company typically bills governmental programs such as
Medicare and other third-party payors such as private insurance and managed
care plans for its products and services. Such third-party payors are
increasingly negotiating prices with the goal of lowering reimbursement
rates, which may result in lower profit margins for the Company.
Reimbursement rates have been established for most but not all of the
services performed by the Company. The Company cannot collect from Medicare
or other third-party payors for services that those payors have not approved
for reimbursement. There can be no assurance that the Company's Free/Total
PSA product or any other products under development will be approved for
reimbursement by Medicare or other third-party payors. From time to time,
the public and federal government focus significant attention on reforming
the health care system in the United States. Any future changes in Medicare
and other third-party payor reimbursement which may result from health care
reform or deficit reduction legislation will likely continue the downward
pressure on prices. A number of legislative proposals have been introduced
in Congress and state legislatures in recent years that would effect major
reforms of the health care system and otherwise reduce health care spending.
The Clinton Administration's recently proposed fiscal year 1998 federal
budget contains many provisions, which if enacted, will substantively affect
Medicare reimbursement. Because of the uncertainties surrounding the nature,
timing and extent of any such reform initiatives, the Company is unable to
predict the effects of any such changes on the Company.
DEPENDENCE ON CERTAIN PRODUCT LINES. A significant portion of the
Company's revenue has been, and is expected to continue to be, dependent
upon the Company's prostate tissue analysis and bladder cellular analysis
product lines. Any negative event related to these product lines, such as
increased competition, pricing pressures and clinical or technological
obsolescence would have a material and adverse effect on the Company's
financial condition and results of operations.
NO ASSURANCE OF SUCCESSFUL ACQUISITION OF DISTRIBUTION RIGHTS FOR
THERAPEUTIC PRODUCTS. Through its UroTherapeutics Group, the Company is
developing a therapeutic products distribution business. The Company
currently has acquired distribution rights for only one therapeutic product.
There can be no assurance that the Company will be successful in negotiating
any additional distribution or other agreements related to therapeutic
products in the future. Additionally, the Company has never marketed or
distributed any therapeutic products, and there can be no assurance that the
Company's efforts will be successful.
UNCERTAINTY RELATED TO GOVERNMENT REGULATION. The Company's diagnostic
laboratory operations currently are required to be certified or licensed
under the federal Clinical Laboratory Improvement Act of 1967, as amended in
1988 ("CLIA"), the Medicare and Medicaid programs and various state and
local laws. In some instances, the Company is also subject to licensing or
regulation under federal and state laws relating to the handling and
disposal of medical specimens, infectious and hazardous waste and
radioactive materials, as well as to the safety and health of laboratory
employees. The sanctions for failure to comply with these regulations may
include denial of the right to conduct business, significant fines and
criminal penalties. The loss of a license, imposition of a fine or an
increase in the complexity or substantive requirements of such federal,
state and local laws and regulations could have a material adverse effect on
the Company's financial condition and results of operations.
The Company's diagnostic laboratory operations currently are not
regulated by the FDA. While the FDA now indicates that it does not plan to
regulate assays developed by laboratories for in-house use, the FDA has in
the past considered drafting guidelines for regulation of such assays. If in
the future the FDA were to issue guidelines for the clinical laboratory
market sector, such guidelines might require the Company to meet certain FDA
medical device approval requirements for the
11
<PAGE>
Company's in-house assays. Such regulations, if enacted in a way that
affects the Company, would increase the cost of development and approval of
new products, slow their introduction to the market and could have a
material adverse effect on the Company's financial condition and results of
operations.
The FDA currently regulates a number of the products which the Company
purchases from third parties for use in its diagnostic services. The
manufacturers of such products are responsible for compliance with FDA
regulations relating to such products. There can be no assurance, however,
that action by the manufacturers or by the FDA would not impair the
Company's ability to obtain and offer certain services. The unavailability
of certain services and materials used in the Company's diagnostics business
would have a material adverse effect on the Company's financial condition
and results of operations.
Although the Company's existing and proposed information services
products currently are not subject to regulation by the FDA, the FDA could
determine in the future that the predictive applications of these products
are deemed to be medical devices subject to FDA regulation. In that event,
the Company could experience delays in developing and marketing new services
and increases in research and development costs.
As a provider of health care related services, the Company is subject to
extensive and frequently changing federal, state and local laws and
regulations governing licensure, billing, financial relationships,
referrals, conduct of operations, purchase of existing businesses,
cost-containment, direct employment of licensed professionals by business
corporations and other aspects of the Company's business relationships. The
Company cannot predict the timing or impact of any changes in such laws and
regulations or their interpretations by regulatory bodies, and no assurance
can be given that any such changes will not have a material adverse effect
on the Company's financial condition and results of operations.
UNCERTAINTIES RELATED TO THE FDA APPROVAL OF THERAPEUTIC PRODUCT. The
Company has a distribution agreement with IAF BioVac, Inc. ("BioVac"), for a
therapeutic product for use in treating certain types of bladder cancer.
Pursuant to the distribution agreement, BioVac is responsible for obtaining
approvals from the FDA for marketing the therapeutic product in the United
States. In April 1995, BioVac filed its initial applications with the FDA.
In April 1996, the FDA advised BioVac that its application was not
approvable and requested additional data regarding certain aspects of
manufacturing and testing of the product, which BioVac filed with the FDA
through an amended application in August 1996. Following a May 1997 site
inspection of BioVac's manufacturing facilities and operations, the FDA
issued a report on FDA Form 483 indicating that additional requirements
related to BioVac's facility, process and documentation were required before
these applications could be approved. Although BioVac has advised the
Company that it believes it can satisfy the FDA requirements, there can be
no assurance that approval will be obtained.
UNCERTAINTIES RELATED TO MANAGED CARE. Managed care organizations are
gaining increasing control over access to health care and payment for an
increasing number of patients with urological diseases. There can be no
assurance that the Company will be able to maintain its existing contracts
with managed care organizations or that it will be able to obtain additional
contracts with such organizations in the future which could preclude the
Company from serving large groups of patients in certain markets. The
Company has experienced increasing pricing pressure from managed care
organizations, and such pressure is expected to continue. There can be no
assurance that such pricing pressure and any contract restrictions will not
have a material adverse effect on the Company's financial condition and
results of operations.
NO ASSURANCE OF ACCESS TO AND DELIVERY OF NEW DIAGNOSTIC
TECHNOLOGY. The markets for the Company's diagnostic products and services
are characterized by rapidly changing technology, frequent new product
introductions and enhancement and, therefore, rapid product obsolescence.
There can be no
12
<PAGE>
assurance the Company will be able to identify new products, trends or
opportunities, develop and bring to market new products, respond effectively
to new technological changes or product announcements by others, develop or
obtain access to advanced materials and technologies, or receive commercial
acceptance for its products.
UNCERTAINTIES RELATED TO INVESTMENTS IN DISEASE MANAGEMENT INFORMATION
SYSTEMS. The Company has been and expects to continue investing in the
development of information-based capabilities and services which it plans to
introduce in the future related to the clinical management of urologists'
patients and the business management of their practices. Development and
delivery of these new services will require substantial additional
investment and represents an expansion of the type of services the Company
presently provides to urologists. There can be no assurance that any future
revenues from these services will be sufficient to cover or otherwise
justify the costs of development and introduction.
UNCERTAINTIES ASSOCIATED WITH COMPETITIVE PRESSURES. The industry in
which the Company's diagnostics business operates is characterized by
intense competition with many different types of competitors including
specialty laboratories, diagnostic kit and instrumentation manufacturers,
local and regional pathology services, hospital laboratories and large
general reference clinical laboratories. Many of the Company's competitors
are significantly larger and have significantly greater financial, technical
and administrative resources than the Company; many also have long
established relationships with the Company's current and prospective
customers and with managed care organizations. There can be no assurance
that the Company will be able to compete successfully with such entities in
the marketing of products and services and in the acquisition of new
technologies.
RISKS ASSOCIATED WITH MANAGEMENT OF GROWTH. The Company has recently
experienced substantial growth and expanded its operational capabilities.
The Company is also planning to offer a therapeutic product line and
information and business management services. This growth and expansion has
placed, and will continue to place, a significant strain on the Company's
management, production, technical, financial and other resources. To date,
the Company primarily has experience in managing a diagnostics service
business. There can be no assurance that the Company will be able to manage
expansion into and operation of therapeutics, business management or
information services businesses.
POTENTIAL FLUCTUATIONS IN OPERATING RESULTS. The Company's quarterly
and annual operating results are affected by a wide variety of factors, many
of which are outside the Company's control, which have in the past and could
in the future materially and adversely affect revenue, operating expenses
and income. These factors include seasonality, the quantities and timing of
specimens received, competitive pricing pressures, availability and cost of
diagnostic supplies, changes in the mix of products sold, timing and costs
of new product and technology introductions by the Company or its
competitors, retention and expansion of the sales force and timing of
payments from Medicare and other third-party payors. The need for continued
investment in research and development and expansion of its product lines
could limit the Company's ability to reduce expenses quickly. As a result of
these factors, the Company expects its operating results to continue to
fluctuate.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT NUMBER AND DESCRIPTION
- ---------------------------------------------------------------------------------
<C> <S>
10.1 Second Amended and Restated 1992 Stock Option Plan
10.2 1997 Non-Employee Director Stock Option Plan
10.3 Amendment No. 1 to Lease Agreement dated April 15, 1994, between
Presbyterian Health Foundation and UroCor, Inc.
11.1 Statement Regarding Computation of Per Share Earnings
</TABLE>
(b) Reports on Form 8-K
None
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
<TABLE>
<S> <C> <C>
UROCOR, INC.
By: /s/ WILLIAM A. HAGSTROM
-----------------------------------------
William A. Hagstrom
CHAIRMAN OF THE BOARD, PRESIDENT AND CHIEF
EXECUTIVE OFFICER
August 11, 1997
By: /s/ MICHAEL N. MCDONALD
-----------------------------------------
Michael N. McDonald
VICE-PRESIDENT AND CHIEF FINANCIAL OFFICER
August 11, 1997
</TABLE>
14
<PAGE>
EXHIBIT 10.1
UROCOR, INC.
SECOND AMENDED AND RESTATED 1992 STOCK OPTION PLAN
MAY 5, 1997
1. PURPOSE. This Second Amended and Restated 1992 Stock Option Plan (the
"Plan") of UroCor, Inc. (the "Company"), for certain employees, officers,
directors and independent contractors performing services for the Company is
intended to advance the best interest of the Company by providing those persons
who have substantial responsibility for its management and growth with
additional incentive and by increasing their proprietary interest in the success
of the Company--thereby encouraging them to continue their employment or
affiliation.
2. ADMINISTRATION. The Plan shall be administered by a committee to be
appointed by the Board of Directors of the Company (the "Committee"), which
Committee shall consist of not less than two members of the Board of Directors
and shall be comprised solely of members of the Board of Directors who qualify
as both non-employee directors as defined in Rule 16b-3(b)(3) of the Securities
Exchange Act of 1934, as amended (the "Securities Exchange Act") and outside
directors within the meaning of Department of Treasury Regulations issued under
Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code").
The Board of Directors of the Company shall have the power to add or remove
members of the Committee, from time to time, and to fill vacancies arising for
any reason. The Committee shall designate a chairman from among its members, who
shall preside at all of its meetings, and shall designate a secretary, without
regard to whether that person is a member of the Committee, who shall keep the
minutes of the proceedings and all records, documents, and data pertaining to
its administration of the Plan. Meetings shall be held at any time and place as
it shall choose. A majority of the members of the Committee shall constitute a
quorum for the transaction of business. The vote of a majority of those members
present at any meeting shall decide any question brought before that meeting. In
addition, the Committee may take any action otherwise proper under the Plan by
the affirmative vote, taken without a meeting, of a majority of its members. No
member of the Committee shall be liable for any act or omission of any other
member of the Committee or for any act or omission on his own part, including
but not limited to the exercise of any power or discretion given to him under
the Plan, except those resulting from his own gross negligence or willful
misconduct. All questions of interpretation and application of the Plan, or as
to options granted under it (the "Options"), shall be subject to the
determination of a majority of the Committee. In carrying out its authority
under this Plan, the Committee shall have full and final authority and
discretion, including but not limited to the rights, powers and authorities, to:
(a) determine the persons to whom and the time or times at which Options will be
made, (b) determine the number of shares and the purchase price of stock covered
in each Option, subject to the terms of this Plan, (c) determine the terms,
provisions and conditions of each Option, which need not be identical, (d)
accelerate the time at which any outstanding Option may be exercised, (e) define
the effect, if any, on an Option of the death, disability, retirement, or other
termination of employment of the Optionee, (f) prescribe, amend and rescind
rules and regulations relating to administration of this Plan, and (g) make all
other determinations and take all other actions deemed necessary, appropriate,
or advisable for the proper administration of this Plan. The actions of the
Committee in exercising all of the rights, powers, and authorities set out in
this Article and all other Articles of this Plan, when performed in good faith
and in its sole judgment, shall be final, conclusive and binding on all parties.
When appropriate the Plan shall be administered in order to qualify certain of
the Options granted under it as "incentive stock options" described in Section
422 of the Code ("Incentive Stock Options").
3. DEDICATED SHARES. The stock subject to the Options and other provisions
of the Plan shall be shares of the Company's Common Stock, $.01 par value (the
"Stock"). The total number of shares of Stock with respect to which Incentive
Stock Options may be granted shall be 1,700,000 shares. The maximum number of
shares subject to Options which may be issued to any Optionee under this Plan
during any period of three consecutive years is 500,000 shares. The class and
aggregate number of shares which may be subject to the Options granted hereunder
shall be subject to adjustment in accordance with the provisions of Paragraph 17
hereof.
<PAGE>
In the event that an outstanding Option expires or is surrendered for any
reason or terminates by reason of the death or other severance of employment of
the Optionee, the shares of Stock allocable to the unexercised portion of that
Option may again be subject to an Option under the Plan.
4. AUTHORITY TO GRANT OPTIONS. The Committee may grant the following
Options at any time during the term of this Plan to any eligible individual that
it chooses:
(a) "Incentive Stock Options". The Committee may grant to an eligible
employee an Option, or Options, to buy a stated number of shares of Stock
under the terms and conditions of the Plan, which Option or Options would be
an "incentive stock option" within the meaning of Section 422 of the Code.
(b) "Nonqualified Stock Options". The Committee may grant to an eligible
individual an Option, or Options, to buy a stated number of shares of Stock
under the terms and conditions of the Plan, which Option or Options would
not constitute an "incentive stock option" within the meaning of Section 422
of the Code.
Each Option granted shall be approved by the Committee. Subject only to any
applicable limitations set forth in this Plan, the number of shares of Stock to
be covered by an Option shall be as determined by the Committee.
5. ELIGIBILITY. The individuals who shall be eligible to receive Incentive
Stock Options shall be those full-time key employees, including officers and
directors if they are employees, of the Company, or of any parent or subsidiary
corporation, as the Committee shall determine during the term of this Plan.
However, no employee who owns stock possessing more than 10% of the total
combined voting power of all classes of stock of the corporation employing the
employee or of its parent or subsidiary corporation shall be eligible to receive
an Incentive Stock Option unless at the time that the Option is granted the
option price is at least 110% of the fair market value (as defined in this
Section 5) of the Stock at the time the Option is granted and the Option by its
own terms is not exercisable after the expiration of five years from the date
the Option is granted.
An employee will be considered as owning the stock owned, directly or
indirectly, by or for his brothers and sisters (whether by the whole or half
blood), spouse, ancestors, and lineal descendants. Stock owned, directly or
indirectly, by or for a corporation, partnership, estate or trust will be
considered as being owned proportionately by or for its shareholders, partners
or beneficiaries. For all purposes of this Plan, a parent corporation is any
corporation (other than the Company) in an unbroken chain of corporations ending
with the Company if, on the date of grant of the Option in question, each of the
corporations other than the Company owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in that chain; and a subsidiary corporation is any corporation in
an unbroken chain of corporations beginning with the Company if, on the date of
grant of the Option in question, each of the corporations, other than the last
corporation in the chain, owns stock possessing 50% or more of the total
combined voting power of all classes of stock in one of the other corporations
in that chain.
The individuals who shall be eligible to receive Nonqualified Stock Options
shall be such individuals as the Committee shall determine during the term of
this Plan.
No individual shall be eligible to receive an Option under the Plan while
that individual is a member of the Committee.
As used in this Plan, "fair market value" of the Stock as of any date means
(a) the closing price on that date on the principal securities exchange on which
the Stock is listed; or (b) if the Stock is not listed on a securities exchange,
the closing price of the Stock on that date as reported on The National
Association of Securities Dealers (the "NASD") Automated Quotation System
("Nasdaq") Stock Market's National Market; or (c) if the Stock is not listed on
The Nasdaq Stock Market's National Market, the average of the
2
<PAGE>
high and low bid quotations for the Stock on that date as reported by the
National Quotation Bureau Incorporated; or (d) if none of the foregoing is
applicable, an amount, at the election of the Committee equal to (x) the average
between the closing bid and ask prices per share of Stock on the last preceding
date on which those prices were reported or (y) the value of the Stock as
determined in good faith by the Committee in its sole discretion.
6. OPTION PRICE. The price at which shares may be purchased pursuant to an
Incentive Stock Option shall be not less than the fair market value of the
shares of Stock on the date the Option is granted. The price at which shares may
be purchased pursuant to a Nonqualified Stock Option shall be not less than the
fair market value of the shares of Stock on the date the Option is granted. The
Committee in its discretion may provide that the price at which shares may be
purchased shall be more than the minimum price required. If an employee owns
stock possessing more than 10% of the total combined voting power of all classes
of stock of the corporation employing the employee or of its parent or
subsidiary corporation, the option price at which shares may be purchased under
an Incentive Stock Option shall be not less than 110% of the fair market value
of the Stock on the date the Option is granted.
7. DURATION OF OPTIONS. No Incentive Stock Option shall be exercisable
after the expiration of ten years from the date such Option is granted. The
Committee in its discretion may provide that the Option shall be exercisable
throughout the ten-year period or during any lesser period of time commencing on
or after the date of grant of the Option and ending upon or before the
expiration of the ten-year period. If an employee owns stock possessing more
than 10% of the total combined voting power of all classes of stock of the
corporation employing the employee or of its parent or subsidiary corporation,
no Incentive Stock Option shall be exercisable after the expiration of five
years from the date such Option is granted. No Nonqualified Stock Option shall
be exercisable after the expiration of ten years from the date such Option is
granted. The Committee in its discretion may provide that the Option shall be
exercisable throughout the ten-year period or during any lesser period of time
commencing on or after the date of grant of the Option and ending upon or before
the expiration of the ten-year period.
8. $100,000 LIMITATION ON INCENTIVE STOCK OPTIONS. To the extent that the
aggregate fair market value (determined as of the time an Incentive Option is
granted) of the Stock with respect to which Incentive Options first become
exercisable by the Optionee during any calendar year (under this Plan and any
other incentive stock option plan(s) of the Company or any parent corporation or
subsidiary corporation) exceeds $100,000, the Incentive Options shall be treated
as Nonqualified Options. In making this determination, Incentive Options shall
be taken into account in the order in which they were granted.
9. AMOUNT EXERCISABLE. Each Option may be exercised, so long as it is
valid and outstanding, from time to time in part or as a whole, in the manner
and subject to the conditions that the Committee in its discretion may provide
in the Option agreement. However, the Committee in its absolute discretion may
accelerate the time at which any outstanding Option may be exercised.
Notwithstanding any provision of this Plan or an Option agreement to the
contrary, no Option awarded under this Plan after May 5, 1997, may be exercised
before this amendment and restatement of this Plan is approved by the
stockholders of the Company.
10. EXERCISE OF OPTIONS. Each Option shall be exercised by the delivery of
written notice to the Company setting forth the number of shares of Stock with
respect to which the Option is to be exercised, together with cash, certified
check, bank draft or postal or express money order payable to the order of the
Company for an amount equal to the exercise price of such shares, and specifying
the address to which the certificates for such shares are to be mailed. As
promptly as practicable after receipt of written notification and payment, the
Company shall deliver to the Optionee certificates for the number of shares with
respect to which the Option has been exercised, issued in the Optionee's name.
Delivery of the shares shall be deemed effected for all purposes when a stock
transfer agent of the Company shall have deposited the certificates in the
United States mail, addressed to the Optionee, at the address specified by the
Optionee in his notice of exercise.
3
<PAGE>
11. TRANSFERABILITY OF OPTIONS. Options shall not be transferable by the
Optionee except by will or under the laws of descent and distribution, and shall
be exercisable, during his lifetime, only by him.
12. TERMINATION OF EMPLOYMENT OR AFFILIATION OF OPTIONEE. Except as
otherwise expressly provided herein or in the Option agreement, Incentive Stock
Options shall terminate at 5:00 p.m., Oklahoma City time, on the 60th day
immediately following the date of severance of employment of the Optionee from
the Company for any reason, with or without cause, other than death or
retirement for age or disability under the then established rules of the
Company, and Nonqualified Stock Options shall terminate at 5:00 p.m., Oklahoma
City time, on the 60th day immediately following the date of the severance of
the employment or affiliation relationship between the Company and the Optionee
for any reason with or without cause other than death or retirement for age or
disability under the then established rules of the Company. Whether authorized
leave of absence or absence on military or government service shall constitute
severance of the employment or affiliation relationship between the Company and
the Optionee shall be determined by the Committee at that time. After such
severance of an Optionee holding either an Incentive Stock Option or
Nonqualified Stock Option, such Optionee shall have the right, at any time prior
to such termination, to exercise the Option to the extent to which he was
entitled to exercise it immediately prior to his severance.
If, before the expiration of an Incentive Stock Option or a Nonqualified
Stock Option held by an employee of the Company, the Optionee shall be retired
from the employ of the Company because of his age or disability under the then
established rules of the Company, such Incentive Stock Option or Non-incentive
Stock Option, as the case may be, shall terminate on the earlier of such date of
expiration or one day less than three months after his retirement. If, before
the expiration of a Nonqualified Stock Option held by an Optionee who is not an
employee of the Company, the Optionee's affiliation with the Company shall be
severed for age or disability under the then established rules of the Company,
such Nonqualified Stock Option shall terminate on the earlier of such date of
expiration or one day less than three months after his severance of affiliation.
In the event of retirement for age or disability, or severance of affiliation
for age or disability, as the case may be, the Optionee shall have the right
prior to the termination of the Option to exercise the Option to the extent to
which he was entitled to exercise it immediately prior to such retirement or
severance of affiliation for age or disability, as the case may be.
In the event of the death of a holder of an Incentive Stock Option while in
the employ of the Company or during the period after the retirement of the
employee for age or disability and before the date of expiration of the Option,
such Option will terminate on the earlier of such date of expiration or one year
following the date of his death. In the event of the death of a holder of a
Nonqualified Stock Option while in the employ of, or affiliated with, the
Company or during the period after the retirement of the holder for age or
disability or after the severance of his affiliation with the Company for age or
disability, as the case may be, and before the date of expiration of the Option,
the Option will terminate on the earlier of such date of expiration or one year
following the date of his death. After the death of an Optionee holding either
an Incentive Stock Option or a Nonqualified Stock Option, his executors,
administrators or any persons to whom his Option may be transferred by will or
by the laws of descent and distribution shall have the right, at any time prior
to such termination, to exercise the Option to the extent to which he was
entitled to exercise it immediately prior to his death.
An employment relationship between the Company and the Optionee shall be
deemed to exist during any period in which the Optionee is employed by the
Company, by any parent or subsidiary corporation, by a corporation issuing or
assuming a stock option in a transaction to which Section 424(a) of the Code
applies, or by a parent or subsidiary corporation of the corporation issuing or
assuming a stock option. For this purpose, the phrase "corporation issuing or
assuming a stock option" shall be substituted for the word "Company" in the
definitions of parent and subsidiary corporations in Section 5 and the
parent-subsidiary relationship shall be determined at the time of the corporate
action described in Section 424(a) of the Code.
4
<PAGE>
13. FORFEITURES. Notwithstanding any other provision of this Plan, if the
Committee finds by a majority vote, that the Optionee, before or after
termination of his employment or affiliation with the Company or any parent or
subsidiary corporation (as used in this Section, the "Employer"), committed
fraud, embezzlement, theft, commission of felony, or proven dishonesty in the
course of his employment by or affiliation with the Employer which conduct
damaged the Employer, or for disclosing trade secrets of the Employer, then any
outstanding options which have not been exercised by the Optionee will be
forfeited. The decision of the Committee as to the cause of an Optionee's
discharge, the damage done to the Employer and the extent of the Optionee's
competitive activity will be final. No decision of the Committee, however, will
affect the finality of the discharge of the Optionee by the Employer.
14. REQUIREMENTS OF LAW. The Company shall not be required to sell or
issue any shares under any Option if issuing the shares shall constitute a
violation by the Optionee or the Company of any provisions of any law or
regulation of any governmental authority. Each Option granted under this Plan
shall be subject to the requirements that, if at any time the Board of Directors
of the Company or the Committee shall determine that the listing, registration
or qualification of the shares upon any securities exchange or under any state
or federal law of the United states or of any other country or governmental
subdivision, or the consent or approval of any governmental regulatory body, or
investment or other representations, are necessary or desirable in connection
with the issue or purchase of shares subject to an Option, that Option shall not
be exercised in whole or in part unless the listing, registration,
qualification, consent, approval or representations shall have been effected or
obtained free of any conditions not acceptable to the Committee. In connection
with any applicable statute or regulation relating to the registration of
securities, upon exercise of any Option, the Company shall not be required to
issue any Stock unless the Committee has received evidence satisfactory to it to
the effect that the holder of that Option will not transfer the Stock except in
accordance with applicable law, including receipt of an opinion of counsel
satisfactory to the Company to the effect that any proposed transfer complies
with applicable law. Any determination by the Committee on these matters shall
be final, binding and conclusive. In the event the shares issuable on exercise
of an Option are not registered under applicable securities laws of any country
or any political subdivision the Company may imprint on the certificate for such
shares the following legend or any other legend which counsel for the Company
considers necessary or advisable to comply with applicable law:
"The shares of stock represented by this certificate have not been
registered under the Securities Act of 1933 or under the
securities laws of any state and may not be sold or transferred
except upon registration or upon receipt by the Company of an
opinion of counsel satisfactory to the Company, in form and
substance satisfactory to the Company, that registration is not
required for a sale or transfer."
The Company may, but shall in no event be obligated to, register any securities
covered by this Plan under applicable securities laws of any country or
political subdivision (as now in effect or as later amended) and, in the event
any shares are registered, the Company may remove any legend on certificates
representing those shares. The Company shall not be obligated to take any other
affirmative action in order to cause the exercise of an Option or the issuance
of shares under the Option to comply with any law or regulation or any
governmental authority.
15. NO RIGHTS AS STOCKHOLDER. No Optionee shall have rights as a
stockholder with respect to shares covered by his Option until the date a stock
certificate is issued for the shares. Except as provided in Section 17, no
adjustment for dividends, or other matters shall be made if the record date is
prior to the date the certificate is issued.
16. EMPLOYMENT OR AFFILIATION OBLIGATION. The granting of any Option shall
not impose upon the Company any obligation to employ or become affiliated with
or continue to employ or be affiliated with any Optionee. The right of the
Company to terminate the employment or affiliation of any person shall not be
diminished or affected by reason of the fact that an Option has been granted to
him.
5
<PAGE>
17. CHANGES IN THE COMPANY'S CAPITAL STRUCTURE. The existence of
outstanding Options shall not affect in any way the right or power of the
Company or its stockholders to make or authorize any or all adjustments,
recapitalizations, reorganizations or other changes in the Company's capital
structure or its business, or any merger or consolidation of the Company, or any
issue of bonds, debentures, preferred or prior preference stock ahead of or
affecting the Stock or the rights of the Stock, or the dissolution or
liquidation of the Company, or any sale or transfer of all or any part of its
assets or business, or any other corporate act or proceeding, whether of a
similar character or otherwise.
If the Company shall effect a subdivision or consolidation of shares or
other capital readjustment, the payment of a stock dividend, or other increase
or reduction of the number of shares of the Stock outstanding, without receiving
compensation for it in money, services or property, then (a) the number, class
and per share price of shares of stock subject to outstanding Options under this
Plan shall be appropriately adjusted in a manner as to entitle an Optionee to
receive upon exercise of an Option, for the same aggregate cash consideration,
the same total number and class or classes of shares as he would have received
had he exercised his Option in full immediately prior to the event requiring the
adjustment; and (b) the number and class of shares then reserved for issuance
under the Plan shall be adjusted by substituting for the total number and class
of shares of stock then reserved for the number and class or classes of shares
of stock that would have been received by the owner of an equal number of
outstanding shares of Stock as the result of the event requiring the adjustment.
If the Company merges or consolidates with another corporation, whether or
not the Company is a surviving corporation, or if the Company is liquidated or
sells or otherwise disposes of substantially all its assets while unexercised
Options remain outstanding under the Plan, or if any "person" (as that term is
used in Section 13(d) and 14(d)(2) of the Securities Exchange Act) is or becomes
the beneficial owner, directly or indirectly, of securities of the Company
representing greater than 50% of the combined voting power of the Company's then
outstanding securities, after the effective date of the merger, consolidation,
liquidation, sale or other disposition, or change in beneficial ownership, as
the case may be, each holder of an outstanding Option shall be entitled, upon
exercise of an Option, to receive, in lieu of shares of Stock, the number and
class or classes of shares of stock or other securities or property to which the
holder would have been entitled if, immediately prior to the merger,
consolidation, liquidation, sale or other disposition, or change in beneficial
ownership, the holder had been the holder of record of the number of shares of
Stock equal to the entire number of shares as to which the Option may be
exercised regardless of and without giving effect to any limitations set out in
or imposed pursuant to this Plan or any Option granted hereunder.
Except as expressly provided before in this Plan, the issue by the Company
of shares of stock of any class, or securities convertible into shares of stock
of any class, for cash or property, or for labor or services either upon direct
sale or upon the exercise of rights or warrants to subscribe for shares, or upon
conversion of shares or obligations of the Company convertible into shares or
other securities, shall not affect, and no adjustment by reason of it shall be
made with respect to, the number or price of shares of Stock then subject to
outstanding Options.
18. SUBSTITUTION OPTIONS. Options may be granted under this Plan from time
to time in substitution for stock options held by employees of other
corporations who are about to become employees of the Company, or whose employer
is about to become a parent or subsidiary corporation, conditioned in the case
of an Incentive Stock Option upon the employee becoming an employee as the
result of a merger or consolidation of the Company with another corporation, or
the acquisition by the Company of substantially all the assets of another
corporation, or the acquisition by the Company of at least 50% of the issued and
outstanding stock of another corporation as the result of which it becomes a
subsidiary of the Company. The terms and conditions of the substitute Options
granted may vary from the terms and conditions of this Plan to the extent the
Board of Directors of the Company at the time of grant may deem appropriate to
conform, in whole or in part, to the provisions of the stock options in
substitution for which they are
6
<PAGE>
granted. But with respect to Incentive Stock Options, no variation shall be made
which will affect the status of any substitute option as an "incentive stock
option" under Section 422 of the Code.
19. AMENDMENT OR TERMINATION OF PLAN. The Board of Directors may modify,
revise or terminate this Plan at any time and from time to time. However,
without the further approval of the holders of at least a majority of the
outstanding shares of voting stock, or if the provisions of the corporate
charter, by-laws or applicable state law prescribe a greater degree of
stockholder approval for this action, without the degree of stockholder approval
thus required, the Board of Directors may not (a) change the aggregate number of
shares which may be issued under Options pursuant to the provisions of this
Plan; (b) reduce the Option price permitted for Incentive Stock Options; (c)
extend the term during which an Incentive Stock Option may be exercised or the
termination date of this Plan; (d) change the class of employees eligible to
receive Incentive Stock Options; or (e) (i) materially increase the benefits
accruing to participants under the Plan, (ii) materially increase the number of
securities which may be issued under the Plan or (iii) materially modify the
requirements as to eligibility for participation in the Plan. The Board of
Directors, however, shall have the power to make all changes in the Plan and in
the regulations and administrative provisions under the Plan or in any
outstanding Option as in the opinion of counsel for the Company may be necessary
or appropriate from time to time to enable any Option granted pursuant to the
Plan to qualify as an incentive stock option under Section 422 of the Code and
the regulations which may be issued under that Section as in existence from time
to time. All Options granted under this Plan shall be subject to the terms and
provisions of this Plan and any amendment, modification or revision of this Plan
shall be deemed to amend, modify or revise all Options outstanding under this
Plan at the time of the amendment, modification or revision. In the event this
Plan is terminated by action of the Board of Directors, all Options outstanding
under this Plan may be terminated.
20. WRITTEN AGREEMENT. Each Option granted under this Plan shall be
embodied in a written agreement, which shall be subject to the terms and
conditions prescribed above, and shall be signed by the Optionee and by an
officer of the Company on behalf of the Committee and the Company. Each Option
agreement shall contain any other provisions that the Committee in its
discretion shall deem advisable which are not inconsistent with the terms of
this Plan.
21. INDEMNIFICATION OF THE COMMITTEE AND THE BOARD OF DIRECTORS. The
Company will, to the fullest extent permitted by law, indemnify, defend and hold
harmless any person who at any time is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding
(whether civil, criminal, administrative or investigative) in any way relating
to or arising out of this Plan or any Option or Options granted under it by
reason of the fact that that person is or was at any time a director of the
Company or a member of the Committee against judgments, fines, penalties,
settlements and reasonable expenses (including attorneys' fees) actually
incurred by that person in connection with the action, suit or proceeding. This
right of indemnification will inure to the benefit of the heirs, executors and
administrators of each person to be protected and is in addition to all other
rights to which that person may be entitled by virtue of the by-laws of the
Company or as a matter of law, contract or otherwise.
22. TAX WITHHOLDING. The Company shall be entitled to deduct from other
compensation payable to each employee any sums required by federal, state or
local tax law to be withheld with respect to the grant or exercise of an Option.
In the alternative, the Company may require the employee (or other individual
exercising the Option) to pay the sum directly to the Company. If the employee
(or other individual exercising the Option) is required to pay the sum directly,
payment in cash or by check of such sums for taxes shall be delivered within ten
days after the date of exercise. The Company shall have no obligation upon
exercise of any Option until payment has been received, unless withholding (or
offset against a cash payment) as of or prior to the date of exercise is
sufficient to cover all sums due with respect to that exercise. The Company
shall not be obligated to advise an employee of the existence of the tax or the
amount which the employer corporation will be required to withhold.
7
<PAGE>
23. GENDER. If the context requires, words of one gender when used in this
Plan shall include the others and words used in the singular or plural shall
include the other.
24. HEADINGS. Headings of Sections are included for convenience of
reference only and do not constitute part of this Plan and shall not be used in
construing the terms of this Plan.
25. OTHER OPTIONS. The grant of an Option shall not confer upon an
Optionee the right to receive any future or other Options under this Plan,
whether or not Options may be granted to similarly situated Optionees, or the
right to receive future Options upon the same terms or conditions as previously
granted.
26. ARBITRATION OF DISPUTES. Any controversy arising out of or relating to
this Plan or an Option Agreement shall be resolved by arbitration conducted
pursuant to the arbitration rules of the American Arbitration Association. The
arbitration shall be final and binding on the parties.
27. GOVERNING LAW. The provisions of this Plan shall be construed,
administered, and governed under the laws of the State of Delaware.
28. EFFECTIVE DATE OF PLAN. This Plan restates and integrates, and also
amends, the UroCor, Inc. 1992 Amended and Restated Stock Option Plan adopted
effective March 15, 1996.
The Plan shall become effective and shall be deemed to have been adopted on
May 5, 1997, if within one year of that date it has been approved by the holders
of at least a majority of the outstanding shares of voting stock of the Company
voting in person or by proxy at a duly held stockholders' meeting, or if the
provisions of the corporate charter, by-laws or applicable state law prescribe a
greater degree of stockholder approval for this action, the approval by the
holders of that percentage, at a duly held meeting of stockholders.
No Options shall be granted pursuant to the Plan after September 24, 2002.
8
<PAGE>
EXHIBIT 10.2
UROCOR, INC.
1997 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
MAY 5, 1997
1. PURPOSE.
This 1997 Non-Employee Director Stock Option Plan (this "Plan") of UroCor,
Inc., a Delaware corporation (the "Company"), is adopted, subject to stockholder
approval, for the benefit of the directors of the Company who at the time of
their service are not employees of the Company or any of its subsidiaries
("Non-Employee Directors"), and is intended to advance the interests of the
Company by providing the Non-Employee Directors with additional incentive to
serve the Company by increasing their proprietary interest in the success of the
Company.
2. ADMINISTRATION.
This Plan shall be administered by a committee to be appointed by the Board
of Directors of the Company (the "Committee"), which Committee shall consist of
not less than two members of the Board of Directors and shall be comprised
solely of members of the Board of Directors who qualify as non-employee
directors as defined in Rule 16b-3(b)(3) of the Securities Exchange Act of 1934,
as amended (the "Securities Exchange Act"). For the purposes of this Plan, a
majority of the members of the Committee shall constitute a quorum for the
transaction of business, and the vote of a majority of those members present at
any meeting shall decide any question brought before that meeting. No member of
the Committee shall be liable for any act or omission of any other member of the
Committee or for any act or omission on his own part, including (without
limitation) the exercise of any power or discretion given to him under this
Plan, except those resulting from his own gross negligence or willful
misconduct. All questions of interpretation and application of this Plan, or as
to options granted hereunder (the "Options"), shall be subject to the
determination, which shall be final and binding, of a majority of the whole
Committee. Notwithstanding the above, the selection of Non-Employee Directors to
whom Options are to be granted, the number of shares subject to any Option, the
exercise price of any Option and the term of any Option shall be as hereinafter
provided and the Committee shall have no discretion as to such matters.
3. OPTION SHARES.
The stock subject to the Options and other provisions of this Plan shall be
shares of the Company's Common Stock, $.01 par value per share (or such other
par value as may be designated by act of the Company's stockholders, the "Common
Stock"). The total amount of Common Stock with respect to which Options may be
granted shall not exceed 100,000 shares in the aggregate; PROVIDED, that the
class and aggregate number of shares which may be subject to the Options granted
hereunder shall be subject to adjustment in accordance with the provisions of
Section 12 of this Plan. Such shares may be treasury shares or authorized but
unissued shares.
If any outstanding Option for any reason shall expire or terminate by reason
of the death of the optionee or the fact that the optionee ceases to be a
director, the surrender of any such Option, or any other cause, the shares of
Common Stock allocable to the unexercised portion of such Option may again be
subject to an Option under this Plan.
4. GRANT OF OPTIONS.
(a) DIRECTORS ON THE EFFECTIVE DATE OF THIS PLAN.
(i) Subject to the provisions of Section 16 hereof, there shall be
granted, immediately following the close of business on the effective date
of this Plan, at a per share Option Price equal to the fair market value (as
defined in Subsection 4(c) below) of a share of Common Stock on the
effective date of this Plan, (A) to each person who was a Non-Employee
Director on January 1, 1989, and is a Non-Employee Director on the effective
date of this Plan, an Option to purchase 10,000 shares of Common Stock, (B)
to each person who was a Non-Employee Director on January 1, 1994, is a
Non-Employee
<PAGE>
Director on the effective date of this Plan and is not eligible to receive
an option under clause (A) of this Subsection 4(a)(i), an option to purchase
7,500 shares of Common Stock and (C) to each person who was a Non-Employee
Director on January 1, 1995, is a Non-Employee Director on the effective
date of this Plan and who is not eligible to receive an option under clauses
(A) or (B) of this Subsection 4(a)(i), an option to purchase 5,000 shares of
Common Stock.
(ii) For so long as this Plan is in effect and shares are available for
the grant of Options hereunder, on July 1 of each year beginning July 1,
1998, there shall be granted to each person who is a Non-Employee Director
on the effective date of this Plan and on such July 1 an Option to purchase
5,000 shares of Common Stock at a per share Option Price equal to the fair
market value of a share of the Company's Common Stock on such date (such
number of shares being subject to the adjustments provided in Section 12 of
this Plan).
(b) DIRECTORS ELECTED AFTER THE EFFECTIVE DATE OF THIS PLAN.
(i) Subject to the provisions of Section 16, for so long as this Plan is
in effect and shares are available for the grant of Options hereunder, each
person who shall become a Non-Employee Director after the effective date of
this Plan shall be granted, on the date of his election, whether by the
Stockholders or the Board of Directors in accordance with applicable law, an
Option to purchase 10,000 shares of Common Stock at a per share Option Price
equal to the fair market value of a share of Common Stock on such date (such
number of shares being subject to the adjustments provided in Section 12 of
this Plan).
(ii) For so long as this Plan is in effect and shares are available for
the grant of Options hereunder, on July 1 of each year beginning July 1,
1998, there shall be granted to each person who shall become a Non-Employee
Director after the effective date of this Plan and is a Non-Employee
Director on such July 1 an Option to purchase 5,000 shares of Common Stock
at a per share Option Price equal to the fair market value of a share of
Common Stock on such date (such number of shares being subject to the
adjustments provided in Section 12 of this Plan).
(c) FAIR MARKET VALUE. For purposes of this Section 4, the "fair market
value" of a share of Common Stock as of any particular date shall mean (i) if
the Common Stock is listed or admitted to trading on any securities exchange or
on The National Association of Securities Dealers (the "NASD") Automated
Quotation System ("Nasdaq") Stock Market's National Market, the closing price on
such day on the principal securities exchange or on The Nasdaq Stock Market's
National Market on which the Common Stock is traded or quoted, or if such day is
not a trading day for such securities exchange or The Nasdaq Stock Market's
National Market, the closing price on the first preceding day that was a trading
day, (ii) if the Common Stock is not then listed or admitted to trading on any
securities exchange or on The Nasdaq Stock Market's National Market, the closing
bid price on such day as reported by the NASD, or if no such price is reported
by the NASD for such day, the closing bid price as reported by the NASD on the
first preceding day for which such price is available, and (iii) if the Common
Stock is not then listed or admitted to trading on any securities exchange or on
The Nasdaq Stock Market's National Market and no such closing bid price is
reported by the NASD, as determined by another reputable quotation source
selected by the Committee in good faith.
5. DURATION OF OPTIONS.
Each Option granted under this Plan shall be exercisable for a term of nine
years from the date such Option first becomes exercisable pursuant to Section 6
hereof, subject to earlier termination as provided in Section 9 of this Plan.
6. AMOUNT EXERCISABLE.
Each Option granted under this Plan may be exercised in whole or in part at
any time commencing one year after the grant thereof.
2
<PAGE>
7. EXERCISE OF OPTIONS.
An optionee may exercise his Option by delivering to the Company a written
notice stating (a) that such optionee wishes to exercise such Option on the date
such notice is so delivered, (b) the number of shares of stock with respect to
which such Option is to be exercised and (c) the address to which the
certificate representing such shares of stock should be mailed. To be effective,
such written notice shall be accompanied by payment of the Option Price of each
of such shares of stock. Each such payment shall be made by cash, cashier's
check or bank draft drawn on a national banking association or postal or express
money order, payable to the order of the Company in United States dollars.
As promptly as practicable after the receipt by the Company of (a) such
written notice from the optionee and (b) payment, in the form required by the
foregoing provisions of this Section 7, of the Option Price of the shares of
stock with respect to which such Option is to be exercised, a certificate
representing the number of shares of stock with respect to which such Option has
been so exercised registered in the name of such optionee, shall be delivered to
such optionee, provided that such delivery shall be considered to have been made
when such certificate shall have been mailed, postage prepaid, to such optionee
at the address specified for such purpose in such written notice from the
optionee to the Company.
8. TRANSFERABILITY OF OPTIONS.
Options shall not be transferable by the optionee otherwise than by will or
under the laws of descent and distribution.
9. TERMINATION.
Except as may be otherwise expressly provided in this Plan, each Option, to
the extent it shall not have been exercised previously, shall terminate on the
earlier of the following:
(a) At 5:00 p.m., Oklahoma City time, on the last day of the 60-day
period commencing on the date on which the optionee ceases to be a member of
the Company's Board of Directors, for any reason other than the death or
permanent disability of the optionee, during which period the optionee shall
be entitled to exercise all Options held by the optionee on the date on
which the optionee ceased to be a member of the Company's Board of Directors
which could have been exercised on such date;
(b) On the last day of the one-year period commencing on the date of the
optionee's death while serving as a member of the Company's Board of
Directors, during which period the executor or administrator of the
optionee's estate or the person or persons to whom the optionee's Option
shall have been transferred by will or the laws of descent or distribution,
shall be entitled to exercise all Options in respect of the number of shares
that the optionee would have been entitled to purchase had the optionee
exercised such Options on the date of his death; or
(c) Ten years after the date of grant of such Option.
10. REQUIREMENTS OF LAW.
The Company shall not be required to sell or issue any shares under any
Option if the issuance of such shares shall constitute a violation by the
optionee or the Company of any provisions of any law or regulation of any
governmental authority. Each Option granted under this Plan shall be subject to
the requirements that, if at any time the Board of Directors of the Company or
the Committee shall determine that the listing, registration or qualification of
the shares subject thereto upon any securities exchange or under any state or
federal law of the United States or of any other country or governmental
subdivision thereof, or the consent or approval of any governmental regulatory
body, or investment or other representations, are necessary or desirable in
connection with the issue or purchase of shares subject thereto, no such Option
may be exercised in whole or in part unless such listing, registration,
qualification, consent, approval or representation shall have been effected or
obtained free of any conditions not acceptable to the Board of Directors. Any
determination in this connection by the Committee shall be
3
<PAGE>
final, binding and conclusive. If the shares issuable on exercise of an Option
are not registered under the Securities Act of 1933, as amended (the "Securities
Act"), the Company may imprint on the certificate for such shares the following
legend or any other legend which counsel for the Company considers necessary or
advisable to comply with the Securities Act:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR UNDER THE
SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR TRANSFERRED
EXCEPT UPON SUCH REGISTRATION OR UPON RECEIPT BY THE CORPORATION
OF AN OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION, IN FORM
AND SUBSTANCE SATISFACTORY TO THE CORPORATION, THAT REGISTRATION
IS NOT REQUIRED FOR SUCH SALE OR TRANSFER.
The Company may, but shall in no event be obligated to, register any securities
covered hereby pursuant to the Securities Act (as now in effect or as hereafter
amended) and, if any shares are so registered, the Company may remove any legend
on certificates representing such shares. The Company shall not be obligated to
take any other affirmative action to cause the exercise of an Option or the
issuance of shares pursuant thereto to comply with any law or regulation of any
governmental authority.
11. NO RIGHTS AS STOCKHOLDER.
No optionee shall have rights as a stockholder with respect to shares
covered by his Option until the date of issuance of a stock certificate for such
shares; and, except as otherwise provided in Section 12 hereof, no adjustment
for dividends, or otherwise, shall be made if the record date therefor is prior
to the date of issuance of such certificate.
12. CHANGES IN THE COMPANY'S CAPITAL STRUCTURE.
The existence of outstanding Options shall not affect in any way the right
or power of the Company or its stockholders to make or authorize any or all
adjustments, recapitalizations, reorganizations or other changes in the
Company's capital structure or its business, or any merger or consolidation of
the Company, or any issue of bonds, debentures, preferred or prior preference
stock ahead of or affecting the Common Stock or the rights thereof, or the
dissolution or liquidation of the Company, or any sale or transfer of all or any
part of its assets or business, or any other corporate act or proceeding,
whether of a similar character or otherwise.
If the Company shall effect a subdivision or consolidation of shares or
other capital readjustment, the payment of a stock dividend or other increase or
reduction of the number of shares of Common Stock outstanding, without receiving
compensation therefor in money, services or property, then (a) the number, class
and per share price of shares of stock subject to outstanding Options hereunder
shall be appropriately adjusted in such a manner as to entitle an optionee to
receive upon exercise of an Option, for the same aggregate cash consideration,
the same total number and class or classes of shares as he would have received
had he exercised his Option in full immediately prior to the event requiring the
adjustment; and (b) the number and class of shares then reserved for issuance
under this Plan and the number of shares to be subject to the grants to be made
pursuant to Subsections 4(a)(ii), 4(b)(i) and 4(b)(ii) shall be adjusted by
substituting for the total number and class of shares of stock then reserved or
subject to grant the number and class or classes of shares of stock that would
have been received by the owner of an equal number of outstanding shares of
Common Stock as the result of the event requiring the adjustment, disregarding
any fractional shares.
If the Company merges or consolidates with another corporation, whether or
not the Company is a surviving corporation, or if the Company is liquidated or
sells or otherwise disposes of substantially all its assets while unexercised
Options remain outstanding under this Plan, or if any "person" (as that term is
used in Section 13(d) and 14(d)(2) of the Securities Exchange Act) is or becomes
the beneficial owner, directly or indirectly, of securities of the Company
representing greater than 50% of the combined voting power of the Company's then
outstanding securities, after the effective date of such merger, consolidation,
4
<PAGE>
liquidation, sale or other disposition, as the case may be, each holder of an
outstanding Option shall be entitled, upon exercise of such Option, to receive,
in lieu of shares of Common Stock, the number and class or classes of shares of
such stock or other securities or property to which such holder would have been
entitled if, immediately prior to such merger, consolidation, liquidation, sale
or other disposition, such holder had been the holder of record of a number of
shares of Common Stock equal to the number of shares as to which such Option may
be exercised.
Except as otherwise expressly provided in this Plan, the issue by the
Company of shares of stock of any class, or securities convertible into shares
of stock of any class, for cash or property, or for labor or services either
upon direct sale or upon the exercise of rights or warrants to subscribe
therefor, or upon conversion of shares or obligations of the Company convertible
into such shares or other securities, shall not affect, and no adjustment by
reason thereof shall be made with respect to, the number or price of shares of
Common Stock then subject to outstanding Options.
13. AMENDMENT OR TERMINATION OF PLAN.
The Board of Directors may modify, revise or terminate this Plan at any time
and from time to time; PROVIDED, HOWEVER, that without the further approval of
the holders of at least a majority of the outstanding shares of voting stock, or
if the provisions of the corporate charter, bylaws or applicable state law
prescribes a greater degree of stockholder approval for this action, without the
degree of stockholder approval thus required, the Board of Directors may not (a)
materially increase the benefits accruing to participants under this Plan; (b)
materially increase the number of shares of Common Stock which may be issued
under this Plan; or (c) materially modify the requirements as to eligibility for
participation in this Plan, unless, in each such case, the Board of Directors of
the Company shall have obtained an opinion of legal counsel to the effect that
stockholder approval of the amendment is not required (x) by law, (y) by the
rules and regulations of, or any agreement with, the National Association of
Securities Dealers, Inc. or (z) to make available to the optionee with respect
to any option granted under this Plan, the benefits of Rule 16b-3 of the Rules
and Regulations under the Securities Exchange Act, or any similar or successor
rule. In addition, the provisions of this Plan may not be amended more than once
every six months other than to comport with changes in the Internal Revenue Code
of 1986, as amended, the Employee Retirement Income Security Act of 1974, as
amended, or the rules thereunder. All Options granted under this Plan shall be
subject to the terms and provisions of this Plan and any amendment, modification
or revision of this Plan shall be deemed to amend, modify or revise all Options
outstanding under this Plan at the time of such amendment, modification or
revision. If this Plan is terminated by action of the Board of Directors, all
outstanding Options may be terminated.
14. WRITTEN AGREEMENT.
Each Option granted hereunder shall be embodied in a written option
agreement, which shall be subject to the terms and conditions prescribed above,
and shall be signed by the optionee and by the appropriate officer of the
Company for and in the name and on behalf of the Company. Such an option
agreement shall contain such other provisions as the Committee in its discretion
shall deem advisable.
15. INDEMNIFICATION OF COMMITTEE AND BOARD OF DIRECTORS.
The Company shall, to the fullest extent permitted by law, indemnify, defend
and hold harmless any person who at any time is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or proceeding
(whether civil, criminal, administrative or investigative) in any way relating
to or arising out of this Plan or any Option or Options granted hereunder by
reason of the fact that such person is or was at any time a director of the
Company or a member of the Committee against judgments, fines, penalties,
settlements and reasonable expenses (including attorneys' fees) actually
incurred by such person in connection with such action, suit or proceeding. This
right of indemnification shall inure to the benefit of the heirs, executors and
administrators of each such person and is in addition
5
<PAGE>
to all other rights to which such person may be entitled by virtue of the
by-laws of the Company or as a matter of law, contract or otherwise.
16. EFFECTIVE DATE OF PLAN.
This Plan shall become effective, subject to stockholder approval, on May 5,
1997. This Plan, and all Options granted under this Plan on or after May 5,
1997, and prior to stockholder approval, shall be void and of no further force
and effect unless this Plan shall have been approved by the requisite vote of
the stockholders entitled to vote at a meeting of the stockholders of the
Company called for such purpose prior to May 5, 1998.
No Option shall be granted pursuant to this Plan on or after May 5, 2007.
6
<PAGE>
EXHIBIT 10.3
AMENDMENT NO. 1
(dated April 14, 1997 for reference purposes only)
To Lease Dated April 15, 1994
Between PRESBYTERIAN HEALTH FOUNDATION as Landlord,
and UROCOR, INC. formerly known as CytoDiagnostics, Inc., as Tenant
WHEREAS, Landlord and Tenant are the parties to the above described Lease
for the Building located at 800 N. Research Parkway; and,
Landlord and Tenant mutually desire to amend the lease with the Tenant leasing
additional Rentable Areas on the first floor of the Building consisting of
1,058, 2,695 and 5,663 square feet.
1) Commencing April 1, 1996, through the term of the Lease, Tenant leases an
additional 1,058 square feet of Rentable Area bringing the total Rentable
Area to 51,058 square feet.
2) Commencing January 1, 1997, through the term of the Lease, Tenant leases an
additional 2,695 square feet of Rentable Area on the first floor, bringing
the total Rentable Area to 53,753 square feet.
3) Commencing April 1, 1997, through the term of the Lease, Tenant leases an
additional 5,663 square feet of Rentable Area on the first floor, bringing
the total Rentable Area to 59,416 square feet.
4) The "Commencement Date" of the lease shall change from April 1, 1995 to June
15, 1995. Subject to the Tenant's right to terminate the Lease at the end of
the tenth year, the Lease shall terminate on June 30, 2010.
The lease rate per Rentable Square foot annually of the Lease shall be as
follows:
<TABLE>
<CAPTION>
LEASE RATE PER RENTABLE
PERIOD SQUARE FOOT ANNUALLY
- --------------- -----------------------
<S> <C>
7/1/95-6/30/99 $ 10.00
7/1/99-6/30/01 11.50
7/1/01-6/30/03 12.50
7/1/03-6/30/05 13.50
7/1/05-6/30/10 15.50
</TABLE>
Except as modified herein, all other items, conditions, covenants, rules and
regulations of the Lease referenced above shall remain in full force and effect.
<TABLE>
<S> <C> <C>
Landlord: Presbyterian Health Foundation
By: /s/ Dennis McGrath Date: 5/9/97
------------------------------
Dennis McGrath, Vice President
Tenant: UROCOR, INC.
By: /s/ William A. Hagstrom Date: 5/2/97
------------------------------
William A. Hagstrom, President
& Chief Executive Officer
</TABLE>
<PAGE>
EXHIBIT 11.1
UROCOR, INC.
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------------- ---------------------------
1997 1996 1997 1996
------------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
Net income............................................. $ 640,328 $ 467,295 $ 1,841,414 $ 697,934
------------- ------------ ------------- ------------
Divided by;
Weighted average shares outstanding(1)............... 11,076,759 9,427,284 11,108,336 8,321,159
Plus:
Supplemental shares(2)............................... -- -- -- 195,499
------------- ------------ ------------- ------------
Total weighted average shares outstanding.............. 11,076,759 9,427,284 11,108,336 8,516,658
------------- ------------ ------------- ------------
Earnings per share..................................... $ .06 $ .05 $ .17 $ .08
------------- ------------ ------------- ------------
------------- ------------ ------------- ------------
</TABLE>
- ------------------------
(1) Convertible Preferred Stock, Class A Stock and Class B Stock are reflected
on an "as if converted" basis for periods prior to the Company's initial
public offering. Common Stock issuable upon exercise of outstanding options
and warrants is reflected using the treasury stock method.
(2) Reflects common and common stock equivalent shares issued in the 12 months
prior to the Company's initial public offering at an exercise price below
the public offering price of $11.00 per share. After the first three months
of 1996, such common stock equivalent shares are included in the calculation
of the "weighted average shares outstanding" above.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET FOR JUNE 30, 1997 AND THE STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED
JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 10,642,034
<SECURITIES> 2,998,913
<RECEIVABLES> 14,273,250
<ALLOWANCES> 1,717,425
<INVENTORY> 496,118
<CURRENT-ASSETS> 28,735,013
<PP&E> 10,370,828
<DEPRECIATION> 3,480,521
<TOTAL-ASSETS> 50,413,647
<CURRENT-LIABILITIES> 2,358,821
<BONDS> 0
0
0
<COMMON> 101,711
<OTHER-SE> 47,560,950
<TOTAL-LIABILITY-AND-EQUITY> 50,413,647
<SALES> 0
<TOTAL-REVENUES> 15,873,272
<CGS> 0
<TOTAL-COSTS> 5,904,936
<OTHER-EXPENSES> 8,065,952
<LOSS-PROVISION> 835,614
<INTEREST-EXPENSE> 92,930
<INCOME-PRETAX> 1,841,414
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,841,414
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,841,414
<EPS-PRIMARY> 0.17
<EPS-DILUTED> 0.17
</TABLE>
