<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
FILED BY THE REGISTRANT /X/ FILED BY A PARTY OTHER THAN THE REGISTRANT / /
- --------------------------------------------------------------------------------
Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to [Section]240.14a-11(c) or
[Section]240.14a-12
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
HPR INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
HPR INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD NOVEMBER 1, 1996
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of HPR Inc.,
a Delaware corporation ("HPR" or the "Company"), will be held at the Royal
Sonesta Hotel, 5 Cambridge Parkway, Cambridge, Massachusetts, on Friday,
November 1, 1996 at 12:00 noon, Eastern Standard Time, for the purpose of
considering and voting upon the following matters:
1. To fix the number of directors and elect a Board of Directors to serve
until the next Annual Meeting of Stockholders and until their
successors are elected and qualified;
2. To approve amendments to the HPR 1995 Stock Plan;
3. To approve amendments to the HPR 1991 Stock Plan;
4. To approve amendments to the HPR 1995 Eligible Directors Stock Plan;
5. To ratify the selection of Coopers & Lybrand L.L.P. as independent
auditors of the Company for the fiscal year ending June 30, 1997; and
6. To transact such other business as may properly come before the meeting
or any adjournment thereof.
The Board of Directors has fixed the close of business on September 9, 1996
as the record date for the determination of stockholders entitled to notice of
and to vote at this meeting. Accordingly, only stockholders of record at the
close of business on that date are entitled to vote at the meeting or at any
adjournment thereof.
A copy of the Company's Annual Report to Stockholders for the fiscal year
ended June 30, 1996, which contains financial statements and other information
of interest to stockholders, accompanies this Notice and the accompanying Proxy
Statement.
The business matters enumerated above are discussed more fully in the
accompanying Proxy Statement. Whether or not you plan to attend the meeting, you
are urged to study the Proxy Statement carefully and then to fill out, sign and
date the enclosed Proxy. To avoid unnecessary expense, please mail your Proxy
promptly in the enclosed return envelope, which requires no postage if mailed in
the United States.
By order of the Board of Directors,
BRIAN D. CAHILL
Secretary
September 23, 1996
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE REQUESTED TO SIGN
AND MAIL PROMPTLY THE ENCLOSED PROXY WHICH IS BEING SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS. A RETURN ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE
UNITED STATES IS ENCLOSED FOR THAT PURPOSE.
<PAGE> 3
HPR INC.
245 FIRST STREET
CAMBRIDGE, MASSACHUSETTS 02142
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD NOVEMBER 1, 1996
The Proxy accompanying this Proxy Statement is solicited by the Board of
Directors of HPR Inc. ("HPR" or the "Company") to be voted at the Annual Meeting
of Stockholders to be held at the Royal Sonesta Hotel, 5 Cambridge Parkway,
Cambridge, Massachusetts at 12:00 noon on Friday, November 1, 1996 and at any
adjournment thereof (the "Meeting").
It is expected that copies of the Notice of Meeting, this Proxy Statement
and the enclosed form of Proxy will be mailed approximately September 23, 1996
to each stockholder entitled to vote at the Meeting. The Company's Annual Report
to Stockholders for the fiscal year ended June 30, 1996 accompanies this Proxy
Statement.
VOTING SECURITIES
Only the record holders of shares of common stock ($0.01 par value) of the
Company ("Common Stock") at the close of business on September 9, 1996 may vote
at the Meeting. Each share of Common Stock is entitled to one vote on the
matters to be voted upon at the Meeting.
On August 30, 1996, there were 15,112,047 shares of Common Stock issued and
outstanding. The following table sets forth certain information, as of August
30, 1996, with respect to the beneficial ownership of HPR's Common Stock (i) by
each person who is known by HPR to own beneficially more than 5% of its Common
Stock, (ii) by each of HPR's directors and nominees, (iii) by each of HPR's
executive officers, and (iv) by such directors and executive officers as a
group. Unless otherwise noted, the persons named in the table have sole voting
and investment power with respect to all shares of Common Stock shown as
beneficially owned by each of them, subject to community property laws, where
applicable. Under the heading "Number of Shares Issuable" are listed (and under
the heading "Total" are included) shares issuable within 60 days of August 30,
1996 upon exercise of stock options owned by the party indicated. The percentage
owned is calculated with respect to each party by treating its issuable shares
as outstanding in accordance with rules of the Securities and Exchange
Commission.
<PAGE> 4
<TABLE>
<CAPTION>
NAME OF
BENEFICIAL OWNER NUMBER
(AND ADDRESS OF OWNER NUMBER OF OF SHARES
OF MORE THAN FIVE PERCENT) ISSUED SHARES ISSUABLE TOTAL PERCENT
-------------------------- ------------- --------- --------- -------
<S> <C> <C> <C> <C>
Howard E. Cox, Jr.(1)......................... 2,815,894 1,000 2,816,894 18.6
c/o Greylock Limited Partnership
One Federal Street
Boston, MA 02110
Greylock Limited Partnership.................. 2,687,500 0 2,687,500 17.8
One Federal Street
Boston, MA 02110
Marcia J. Radosevich, Ph.D.................... 640,900 290,362 931,262 6.0
c/o HPR Inc.
245 First Street
Cambridge MA 02142
Richard H. Egdahl, M.D.(2).................... 613,666 0 613,666 4.1
Harris A. Berman.............................. 68,300 0 68,300 *
Brian D. Cahill............................... 211,150 22,187 233,337 1.5
Thomas M. McNamara............................ 399,142 8,437 407,579 2.7
William G. Nelson, Ph.D....................... 100,000 0 100,000 *
Steven J. Rosenberg........................... 0 116,900 116,900 *
James B. Stowe................................ 0 48,100 48,100 *
All directors and executive officers as a
group (9 persons)(1)........................ 4,849,052 486,986 5,336,038 34.2
<FN>
- ---------------
* Less than one percent
(1) Includes 2,687,500 shares of Common Stock owned by Greylock Limited
Partnership, of which Mr. Cox is a general partner. Mr. Cox shares voting
and investment power with respect to such shares; however, he disclaims
beneficial ownership of such shares except as to his proportionate
partnership interest therein.
(2) Dr. Egdahl disclaims beneficial ownership as to 65,000 shares held by his
spouse, Cynthia T. Egdahl.
</TABLE>
2
<PAGE> 5
PROPOSAL ONE
ELECTION OF DIRECTORS
The Company's Certificate of Incorporation provides for a Board of
Directors of not fewer than three nor more than twelve directors. The persons
named as proxies in the accompanying form of Proxy intend (unless authority to
vote therefor is specifically withheld) to vote to fix the number of directors
for the ensuing year at five and to vote for the election of the five persons
named below, being the nominees of the present Board, as directors to hold
office until the next Annual Meeting and until their respective successors are
elected and qualified. If any of the nominees becomes unavailable to serve as a
director, the persons named as proxies have discretionary authority to vote for
a substitute. The Board of Directors has no reason to believe that any of the
nominees will be unavailable to serve if elected.
NOMINEES FOR ELECTION AS DIRECTORS
Information regarding each nominee is presented below.
MARCIA J. RADOSEVICH, PH.D., age 43, has served as Chief Executive Officer
and a director of the Company since 1988 and was elected Chairman of the Board
of Directors in June 1995. From 1988 until 1992, and since May 31, 1996 she also
has held the position of President of the Company. She served as Vice Chairman
of the Board from 1992 to June 1995. Dr. Radosevich is a director of Oxford
Health Plans, a health maintenance organization.
HARRIS A. BERMAN, M.D., age 58, has been a director of the Company since
1994. Since 1986, Dr. Berman has been President and Chief Executive Officer of
Tufts Associated Health Plans, Inc., which manages a large health maintenance
organization and other managed care organizations.
HOWARD E. COX, JR., age 52, has been a director of the Company since 1991.
He is a general partner of Greylock Limited Partnership, a national venture
capital firm headquartered in Boston, and has been associated with certain
affiliated partnerships for the past 24 years. Mr. Cox is a director of Stryker
Corporation, a medical equipment manufacturer, Arbor Health Care Company, a
medical services company, AMISYS Managed Care Systems, Inc., a software company,
and The Vincam Group, Inc., a professional employment organization.
RICHARD H. EGDAHL, M.D., age 69, has been a director of the Company since
1988 and was elected to the position of Vice Chairman of the Board and chairman
of the Company's Medical Advisory Board in June 1995. He served as Chairman of
the Board from 1988 until June 1995. Since 1973, Dr. Egdahl has been Director of
the Boston University Medical Center, where he had previously held the position
of Chief of Surgery. Dr. Egdahl is also a trustee or director of each of the
registered investment companies in the Pioneer Family of Mutual Funds, a
director of CORE, INC., a software company, and a director of Essex Investment
Management Company, a private investment company.
WILLIAM G. NELSON, PH.D., age 62, has been a director of the Company since
1992. Dr. Nelson has served as Chairman and Chief Executive Officer of
Harrisdata Service of Wisconsin, Inc., a software company, since 1990. From 1991
to 1994, he was President and Chief Executive Officer of Pilot Software, Inc., a
software company. Dr. Nelson is also a director and, as of September 1, 1996,
Chairman and Chief Executive Officer of GEAC Computer Corporation Limited, a
computer hardware and software company, and a director of Manugistics, Inc., a
software company, and Project Software and Development, Inc., a software
company.
3
<PAGE> 6
COMMITTEES OF THE BOARD OF DIRECTORS
The Company has standing audit and compensation committees of the Board of
Directors. The Audit Committee consists of Drs. Nelson (Chairman), Berman and
Egdahl. The Committee met five times during the last fiscal year and has
recommended to the Board of Directors the selection of Coopers & Lybrand L.L.P.
to serve as the Company's accountants for the fiscal year ending June 30, 1997.
The Compensation Committee consists of Mr. Cox (Chairman) and Drs. Berman and
Egdahl. The Committee met twice in fiscal year 1996 to consider directors' and
officers' compensation and to review the annual evaluation of the Company's
officers.
The Board of Directors met nine times during fiscal year 1996. All of the
directors attended at least 75% of the meetings of the Board of Directors and
committees of the Board on which they served.
COMPENSATION OF DIRECTORS
Directors of the Company generally receive as compensation for all services
as directors $3,000 per year plus $1,000 for membership on a committee of the
Board and for each Board meeting attended. Directors of the Company will be
granted options pursuant to the Company's 1995 Eligible Directors Stock Plan
(the "Directors Plan"), which provides that each director who is not an officer
or employee of the Company or any subsidiary of the Company (an "outside
director") will be granted, upon first being elected to the Board of Directors,
an option to purchase 10,000 shares of Common Stock at an exercise price equal
to the fair market value on the date of grant. In addition, on the thirtieth day
after re-election at each annual meeting of stockholders, each outside director
will be granted an option to purchase 4,000 shares of Common Stock at an
exercise price equal to the fair market value on the date of grant. A total of
150,000 shares of Common Stock are available for awards under the Directors
Plan, subject to approval by the stockholders of certain amendments to the
Directors Plan set forth in Proposal Four. The options granted under the
Directors Plan will vest in five equal annual installments commencing one year
after the date of grant. Marcia J. Radosevich receives no compensation for her
service as a director.
COMPENSATION COMMITTEE INTERLOCKS, INSIDER PARTICIPATION AND CERTAIN
TRANSACTIONS
The members of the Compensation Committee are Mr. Cox, Dr. Berman and Dr.
Egdahl. Except for Dr. Radosevich, the Company's Chairman of the Board,
President and Chief Executive Officer, and Mr. Percy, the Company's former
President and Chief Operating Officer, no officer or employee of the Company
participated in deliberations of the Board of Directors concerning executive
officer compensation during fiscal 1996.
Tufts Associated Health Plans, Inc., of which Dr. Berman is President and
Chief Executive Officer, is a licensee of the Company's products. Managed Health
Services Insurance Corp., of which Mr. Cox is a director, is a licensee of the
Company's products.
The spouse of Dr. Egdahl is employed by the Company. Her compensation in
fiscal 1996 was $109,784.
Pursuant to a Stock Purchase Agreement dated December 20, 1991, the Company
granted to Greylock Limited Partnership, a Delaware limited partnership
("Greylock"), of which Mr. Cox is a general partner, certain registration rights
in connection with Greylock's purchase of Company stock. The Stock Purchase
Agreement provides that the Company shall pay as consulting fees to Greylock or
its designee, so long as any person affiliated with Greylock serves on the
Company's Board of Directors, an amount of no less than $20,000 per year (or
such larger amount as is paid to any member of the Board of Directors of the
Company). For fiscal 1996 Greylock was owed $6,000 pursuant to this arrangement,
which amount was paid subsequent to June 30, 1996.
4
<PAGE> 7
Pursuant to a consulting agreement with the Company, dated January 1, 1992,
and amended on June 26, 1995, the Company compensates Dr. Egdahl for consulting
services at the rate of $10,000 per year. Such agreement will terminate if Dr.
Egdahl ceases to serve as Chairman of the Medical Advisory Board.
In the event the Company proposes to register any of its securities under
the Securities Act, for its own account or otherwise at any time, certain
stockholders of the Company, including Dr. Radosevich, had been entitled to
notice of such registration and to include shares of such Common Stock therein,
subject to certain conditions and limitations. These rights expired after the
Company's second public offering in February 1996.
SECTION 16 BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Company is not aware that any person subject to Section 16 of the
Securities Exchange Act of 1934 (the "Exchange Act") failed to file on a timely
basis the reports required by Section 16(a) of the Exchange Act.
VOTE REQUIRED FOR APPROVAL
The affirmative vote of a plurality of the shares present or represented at
the Meeting and entitled to vote thereon is required for election of directors.
Votes may be cast in favor of or withheld from each nominee. Unless authority to
vote for any director is withheld in the Proxy, votes will be cast in favor of
election of the nominees listed herein. Votes withheld from election of
directors will be excluded entirely from the vote and will have no effect. THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR FIXING THE NUMBER OF
PERSONS CONSTITUTING THE FULL BOARD AT FIVE AND FOR EACH OF THE NOMINEES LISTED
ABOVE.
5
<PAGE> 8
EXECUTIVE COMPENSATION
COMPENSATION SUMMARY
<TABLE>
The following table sets forth all compensation paid by the Company through
September 9, 1996 to the Chief Executive Officer and to each of the other four
most highly compensated executive officers of the Company (the "Named Executive
Officers") in all capacities for services rendered during the fiscal years ended
June 30, 1994, 1995 and 1996.
SUMMARY COMPENSATION TABLE
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL ------------
COMPENSATION SECURITIES
NAME AND ------------------ UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS COMPENSATION($)
- ------------------ ---- -------- ------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Marcia J. Radosevich, Ph.D. 1996 $188,280 $60,626 0 $ 0
Chairman of the Board, 1995 181,913 60,487 250,000 0
President, and Chief 1994 173,750 57,000 0 0
Executive Officer
Thomas M. McNamara 1996 163,013 57,670 0 0
Senior Vice President, Sales 1995 157,500 43,225 45,000 0
1994 150,000 58,808 56,916 16,223(1)
Brian D. Cahill, 1996 147,630 28,908 0 0
Vice President, Corporate 1995 142,500 24,225 40,000 0
Finance and Planning, 1994 109,375 25,000 215,000 0
Chief Financial Officer,
Treasurer and Secretary
Lawrence G. Miller, M.D.(2) 1996 191,170 14,000 0 0
Vice President, Clinical Affairs 1995 191,170 18,480 45,000 0
1994 189,000 17,850 0 0
Steven J. Rosenberg 1996 145,600 22,714 0 0
Vice President, Software 1995 125,000 26,000 65,000 0
and Services 1994 23,029 0 165,000 0
<FN>
- ---------------
(1) Represents reimbursed amounts associated with Mr. McNamara's relocation in
connection with commencing his employment with the Company.
(2) Dr. Miller resigned his employment with the Company on August 1, 1996.
</TABLE>
OPTION GRANTS/SAR GRANTS
No options or stock appreciation rights ("SARs") were granted during fiscal
1996.
6
<PAGE> 9
OPTION EXERCISES AND YEAR-END VALUES
<TABLE>
Stock options exercised by the Named Executive Officers during fiscal 1996
are set forth in the following table, which also sets forth certain information
regarding non-exercised options held by each of the Named Executive Officers as
of June 30, 1996. There were no SARs outstanding during fiscal 1996.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES AT FISCAL YEAR-END(#) AT FISCAL YEAR-END($)(2)
ACQUIRED VALUE -------------------------- --------------------------
ON EXERCISE REALIZED($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
------------ -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Marcia J. Radosevich, Ph.D... 25,000 $ 573,600 335,750 139,250 $6,805,638 $2,179,263
Thomas M. McNamara.......... 71,916 1,139,869 6,750 23,250 105,637 363,862
Brian D. Cahill............. 0 0 20,750 19,250 398,988 301,263
Lawrence G. Miller,
M.D.(3)................... 15,000 260,250 6,750 23,250 105,637 363,862
Steven J. Rosenberg......... 37,475 677,566 143,025 49,500 2,869,590 774,675
<FN>
- ---------------
(1) "Value Realized" represents the market price of the underlying securities on
the exercise date minus the exercise price of such options.
(2) Based on the market price for the Common Stock at June 28, 1996 of $21.25
per share, less the option exercise price.
(3) Dr. Miller resigned his employment with the Company on August 1, 1996.
</TABLE>
Severance and Change of Control Agreements
On December 6, 1989, the Company entered into a severance payment agreement
with Dr. Radosevich, then the Company's President and Chief Executive Officer
and a director, providing that the Company will pay Dr. Radosevich her base
salary for a 12-month period if the Company terminates her employment, other
than for cause (as defined in the agreement) or due to death or disability. The
agreement also provides that in the event of such a termination or a change of
control of the Company, any right of the Company to repurchase any shares of
Common Stock held by Dr. Radosevich shall immediately terminate and all her
outstanding stock options shall become immediately exercisable and not subject
to repurchase.
On June 12, 1992, the Company entered into a severance payment agreement
with Dr. Lawrence Miller, the Company's Vice President, Clinical Affairs,
providing that the Company will pay Dr. Miller his base salary for an
eight-month period if the Company terminates his employment other than for cause
or due to death or disability. Dr. Miller resigned his employment by the Company
effective August 1, 1996 and such agreement was terminated.
On November 2, 1992, the Company entered into a severance pay agreement
with Thomas McNamara, the Company's Senior Vice President, Sales, providing that
the Company will pay Mr. McNamara his base salary for a six-month period if the
company terminates his employment, other than for cause or due to death or
disability.
The Company has entered into non-competition agreements with each of its
executive officers. These agreements provide that upon termination of such
officer's employment by the Company, he or she will refrain for a period to be
determined by the Company (up to 24 months in the case of Messrs. Cahill and
Rosenberg and Dr. Radosevich; and up to 12 months in the case of Mr. McNamara
and Dr. Miller), from certain competitive activities with respect to the
Company. If the Company exercises its option to restrain any such
7
<PAGE> 10
officer from competitive activity, it will pay such officer 33% of his or her
monthly salary for each month for which the executive officer agrees to refrain
from competing with the Company.
COMPENSATION COMMITTEE REPORT
The Company's executive compensation program is administered by the
Compensation Committee of the Board of Directors (the "Committee") currently
consisting of Howard E. Cox, Jr. (Chairman), Harris A. Berman, and Richard H.
Egdahl, all of whom are outside directors.
The Committee has primary responsibility for analyzing the compensation of
executive officers of the Company, making recommendations to the full Board with
respect to such compensation, establishing performance goals for executive
officers, and administering the Company's stock option plans.
In recommending salaries for the Company's executive officers for the year,
the Committee considered the overall performance of the Company, particularly in
terms of revenue growth, earnings growth, satisfaction of product delivery
milestones, and earnings per share; the responsibilities of each officer and the
increase in those responsibilities during the year as a result of the Company's
continued growth; the importance of individual executive officers to the future
growth and profitability of the Company; cash compensation levels of competitors
in the industry (these competitors are included in the peer group index
appearing in the performance graph on page 9 hereof); and the success of the
management team in achieving the Company's short-term and longer-term goals.
Although all of such factors were considered by the Committee in exercising its
judgment as to compensation levels for the Chief Executive Officer and the other
executive officers, no precise formula has been used to weight the relative
importance of such factors. Based on publicly available information the
committee believes that cash compensation of the Chief Executive Officer and the
other executive officers for fiscal 1995 was at or near the median of the range
of cash compensation paid by the Company's competitors in the industry. In
allocating compensation among salary, bonuses and stock options, the committee
seeks to provide appropriate balance between current fixed and
performance-related compensation, and long-term incentives.
The means by which the Committee established the Chief Executive Officer's
compensation for fiscal 1996 differed in no material way from that employed with
respect to the other executive officers of the Company, again using no precise
formula to weight the relative importance of the factors considered.
Bonus payments to executive officers for fiscal 1996 were based on a
combination of the Company's performance and the individual officer's
achievement of pre-established performance goals. The Company's Executive
Officer Bonus Plan provides for payment of bonuses only if the Company achieves
pre-established targets for revenues and profits. If the Company achieves the
annual targets, the Committee evaluates each executive officer's achievement of
pre-established individual performance goals. The amount of annual bonuses to
executive officers ranges from 20% to 50% of base compensation.
The Committee did not grant any options to the Company's executive officers
in fiscal 1996. The Company did grant options to its executive officers on June
26, 1995, based on those officers' performance in fiscal 1995.
None of the compensation paid to any executive officer in fiscal 1996 is
subject to Section 162(m) of the Internal Revenue Code of 1986, as amended,
which precludes a public corporation from taking a deduction in 1995 or
subsequent years for compensation of certain executive officers in excess of $1
million.
COMPENSATION COMMITTEE
Harris A. Berman, M.D.
Howard E. Cox, Jr. (Chairman)
Richard H. Egdahl, M.D.
8
<PAGE> 11
PERFORMANCE GRAPH
<TABLE>
The following chart and corresponding table compare the value of $100
invested in HPR Inc. Common Stock from August 10, 1995 (the date of the
Company's initial public offering) through June 30, 1996 with a similar
investment in the Nasdaq Market Index and with a peer group consisting of six
publicly held companies which are in the same industry as the Company.
<CAPTION>
Measurement Period Nasdaq
(Fiscal Year Covered) HPR Inc. Peer Group* Market Index
<S> <C> <C> <C>
8/11/95 100.00 100.00 100.00
9/30/95 128.28 108.36 103.57
12/31/95 166.21 159.02 102.74
3/31/96 213.10 175.98 107.49
6/30/96 234.48 212.93 115.45
<FN>
* Peer Group:
Access Health Inc. AMISYS Managed Care Systems GMIS Inc.
HCIA Inc. Health Systems Design Corporation Summit Medical Systems
</TABLE>
9
<PAGE> 12
PROPOSAL TWO
APPROVAL OF AMENDMENTS TO HPR 1995 STOCK PLAN
The HPR 1995 Stock Plan (the "1995 Plan") was adopted by the Board of
Directors on June 26, 1995 and approved by the stockholders on July 20, 1995.
For informational purposes and pursuant to Rule 16b-3 ("Rule 16b-3") under the
Exchange Act, the Company is providing the following description of the 1995
Plan as so adopted. Rule 16b-3 provides an exemption from Section 16(b) of the
Exchange Act, which imposes liability on certain officers and directors of the
Company for short-swing profits made on the Company's securities, for
transactions under certain employee benefit plans. Currently, Awards made under
the 1995 Plan are eligible for the Rule 16b-3 exemption. Effective August 15,
1996, the Securities and Exchange Commission amended Rule 16b-3. In order to
qualify Awards for exemption under Rule 16b-3 as recently amended, the Company
must bring the 1995 Plan into compliance with Rule 16b-3 on or before November
1, 1996.
The Board has adopted and recommends that the stockholders approve
amendments to the 1995 Plan to bring the 1995 Plan into compliance with Rule
16b-3 and to increase the number of shares which may be subject to Awards made
under the 1995 Plan. The Company believes that it is important that Awards made
under the 1995 Plan be exempt from Section 16(b). The Company further believes
that additional shares should be made available under the 1995 Plan to give the
Company maximum flexibility in providing appropriate incentives to key
personnel.
The 1995 Plan was adopted to ensure that an adequate number of option
shares are available to provide appropriate incentives to key employees and
other persons who provide significant services to the Company and its
subsidiaries (the "Company Group") by providing these individuals with an
opportunity to purchase or receive as bonuses stock of the Company and thereby
permitting them to share in the Company's success. The Company's future success
is highly dependent on the retention and continuing motivation of the persons
who perform key services for and make key contributions to the Company. The
Company believes that an active program of awarding stock options to those key
employees and other individuals has been, and will continue to be, an important
component of their compensation arrangements in a way that directly associates
their interests with those of the Company's stockholders.
The 1995 Plan provides for the granting of incentive stock options
("ISOs"), non-incentive stock options ("NSOs") (both ISOs and NSOs are
collectively referred to as "Options"), stock purchase authorizations ("Purchase
Authorizations"), stock bonus awards ("Bonuses"), and Stock Appreciation Rights
("SARs"). (The above-listed items are referred to herein collectively as
"Awards".) There initially were 1,535,000 shares available for Awards under the
1995 Plan (giving effect to the two-for-one stock split effected in the form of
a 100% stock dividend on May 6, 1996). On August 30, 1996, there remained
available 799,994 shares for future Awards under the 1995 Plan. If the proposed
amendments to the 1995 Plan are approved, an additional 500,000 shares will be
reserved for Awards under the 1995 Plan. The closing price of the Company's
Common Stock as reported by the Nasdaq National Market System on September 6,
1996 was $15-39/64 ($15.6094).
The 1995 Plan is administered by the Compensation Committee of the Board
(the "Committee"). The 1995 Plan provides that each member of the Committee must
be a "disinterested person" as defined in Rule 16b-3, as in effect prior to its
recent amendment, and an "outside director" under Section 162(m) of the Internal
Revenue Code (the "Code"). Under the 1995 Plan, the Committee determines which
employees will be granted Awards under the 1995 Plan, the number of shares
covered by, and the duration of, each Award under the 1995 Plan, and other terms
and conditions applicable to each Award granted under the 1995 Plan. These
determinations are made at the time the Award is granted. If the proposed
amendments to the 1995 Plan are approved, the Board of Directors will administer
the 1995 Plan, but may delegate such administration
10
<PAGE> 13
to the Committee, including the power to make recommendations to the Board of
Directors regarding which employees will be granted Awards under the 1995 Plan
and the terms and conditions of such Awards; however, all grants of Awards must
be approved by a majority vote of the Board of Directors.
Under the 1995 Plan, the Committee selects the key employees, consultants
and other individual contributors of or to the Company Group ("Participants") to
receive Awards under the 1995 Plan, except that only employees of the Company
Group may be granted ISOs. Because certain directors of the Company are
employees of the Company, such directors, as well as the Named Executive
Officers and other key employees and service providers, are eligible to
participate in the 1995 Plan and may be granted Awards thereunder. The Committee
also has authority to interpret the 1995 Plan and Awards; to prescribe, amend
and rescind rules and regulations relating to the 1995 Plan; and to make all
other determinations necessary or desirable for the administration of the 1995
Plan. The Committee may establish guidelines for the grant of Awards to key
employees of the Company Group who are not executive officers of the Company,
and the Committee may delegate to the Company's Chief Executive Officer the
authority to grant Awards, within those guidelines, to eligible non-executive
key employees. If the proposed amendments are approved, the Board must approve
each Award granted under the 1995 Plan.
In accordance with Code Section 162(m), a public company may not deduct
certain executives' compensation in excess of $1,000,000 per individual unless
such compensation is performance-based. Awards are deemed performance-based only
to the extent that, among other things, the plan to which they relate specifies
the maximum number of options which may be granted to any Participant during a
specified period of time. Accordingly, the 1995 Plan indicates that the maximum
number of Awards which may be granted to any individual during each successive
twelve-month period commencing on the effective date of the 1995 Plan is 400,000
shares.
At the time of granting an Award, the Committee will determine the purchase
price per share to be paid upon the exercise of each Option or upon the purchase
pursuant to each Purchase Authorization granted or made under the 1995 Plan,
each within certain parameters. The exercise price per share to be paid upon the
exercise of each ISO granted under the 1995 Plan must be at least one hundred
percent (100%) of the fair market value on the date of grant, or in the case of
an ISO granted to an employee owning more than ten percent (10%) of the Common
Stock of the Company or its subsidiaries, must be at least one hundred ten
percent (110%) of the fair market value. The purchase price per share payable on
exercise of each NSO or upon the purchase of shares pursuant to each Purchase
Authorization granted under the 1995 Plan must be at least eighty-five percent
(85%) of the fair market value of the Common Stock on the date of the grant.
Bonus shares will be issued in consideration of services previously rendered,
which will be valued for such purposes by the Committee. No Award under the 1995
Plan may be granted with a purchase price less than the par value of the Common
Stock. The aggregate fair market value, as determined on the grant date, of the
shares for which ISOs are exercisable for the first time by a Participant during
any calendar year under all the plans of the Company may not exceed $100,000.
The Company receives no consideration from a Participant for the grant of an
Award under the 1995 Plan.
Each Option is exercisable for the full amount or for any part thereof. At
the discretion of the Committee, Options granted under the 1995 Plan may be made
exercisable in installments which become available to the Participant from time
to time during the term of the Option. However, no Option may be exercised later
than ten (10) years after the date of grant and no ISO granted to a person who
owns over 10% of the Common Stock at the time of the grant may be exercised more
than five years from the date of the grant.
Payment must be made in full at the time the Option is exercised, or at the
time the purchase pursuant to a Purchase Authorization is made. Payment must be
made in cash or by check, or, if approved in advance by
11
<PAGE> 14
the Committee and subject to the provisions of applicable law, by delivery and
assignment to the Company of other shares of Company stock having a market price
equal to the exercise or purchase price, or by the Participant's recourse
promissory note, or by a combination of any of the above methods. In addition,
the Participant must satisfy all applicable federal, state and local income and
employment tax withholding obligations before the Company is required to deliver
any shares under the 1995 Plan.
A Participant may not transfer an Option, SAR or Purchase Authorization
except by will or the laws of descent or distribution, and only the Participant
may exercise an Option, SAR or Purchase Authorization during the Participant's
lifetime. If the proposed amendments to the 1995 Plan are approved, the Board
may permit a Participant to transfer an Award made under the 1995 Plan if such
transfer is made pursuant to generally applicable criteria established by the
Board, or by the Committee as its delegate, prior to such transfer.
Under the current 1995 Plan, Participants who are directors or executive
officers of the Company, if required to comply with rules promulgated under
Section 16 of the Exchange Act as in effect prior to August 15, 1996, may not
acquire unrestricted ownership of shares of Common Stock pursuant to an Award
for at least six months after the date of grant of the Award, and may not sell
or otherwise dispose of shares acquired under the 1995 Plan for at least six
months after such acquisition. If the proposed amendments are approved, this
provision would be eliminated.
The number of shares that may be issued under the 1995 Plan is subject to
adjustment for stock dividends, stock splits, stock combinations,
recapitalizations and other similar changes. Any shares subject to an Award
which expires or terminates unexercised as to such shares, any shares reacquired
by the Company pursuant to forfeiture or a repurchase right under the 1995 Plan,
and any shares subject to an SAR which are not issued upon exercise of the SAR
will again become available for future Awards under the 1995 Plan.
If the Company's Common Stock changes as the result of a merger or similar
reorganization as to which the Company is the surviving corporation, the number
and kind of shares which thereafter may be purchased pursuant to an Award, the
number and kind of shares then subject to Awards, and the price per share shall
be appropriately adjusted as the Committee determines to prevent dilution or
enlargement of the rights available or granted under the 1995 Plan. Except as
otherwise determined by the Committee, a merger or a similar reorganization
which the Company does not survive, or a sale of all or substantially all of the
assets of the Company, will cause every Award under the 1995 Plan to terminate,
to the extent not then exercised, unless the surviving entity agrees to assume
the Company's obligations thereunder. Alternatively, the Committee may provide
that some or all of the unexercised portion of any outstanding Award and some or
all of the unvested shares acquired upon exercise of any such Award will be
immediately exercisable and vested or no longer subject to repurchase rights as
of a specified date prior to the merger, similar reorganization or sale of
assets.
Within certain limits, the Committee may amend the 1995 Plan or the terms
of any Awards or agreements thereunder at any time without the consent of the
Participants. The Committee may not, however, amend the 1995 Plan (1) to
adversely affect or impair any then outstanding Award or related agreement
without the consent of the Participant holding such Award or related agreement;
or (2) under the current 1995 Plan, without obtaining or being conditioned upon
stockholder approval, to increase the maximum number of shares available under
the 1995 Plan (except in the event of a change in the capital structure of the
Company), materially increase the benefits accruing to Participants, materially
modify the requirements as to eligibility for participation in the 1995 Plan, or
make any other change which, pursuant to the Code or regulations thereunder or
Section 16(b) of the Exchange Act and rules and regulations thereunder, requires
action by the stockholders. If the proposed amendments are approved, the Board
of Directors may amend the
12
<PAGE> 15
1995 Plan without stockholder approval, unless such approval is otherwise
required to protect the intended tax treatment of the Awards.
The 1995 Plan will terminate on June 26, 2005. The expiration date of each
Award will be no later than ten years from the date of grant.
FEDERAL INCOME TAX CONSIDERATIONS
The rules governing the tax treatment of options and stock acquired from
the exercise of options are quite technical. Therefore, the description of tax
consequences set forth below is necessarily general in nature and does not
purport to be complete. Moreover, statutory provisions are subject to change, as
are their interpretations, and their application may vary in individual
circumstances. Finally, the tax consequences under applicable state and local
income tax laws may not be the same as under the federal income tax laws.
ISOs granted pursuant to the 1995 Plan are intended to qualify as
"Incentive Stock Options" within the meaning of Section 422 of the Code. If the
Participant makes no disposition of the shares acquired pursuant to the exercise
of an ISO within one year after the transfer of shares to such Participant and
within two years from the grant of the ISO, such Participant will realize no
taxable income as a result of the grant or exercise of such ISO; any gain or
loss that is subsequently realized will be treated as long-term capital gain or
loss, as the case may be. Under these circumstances, the Company will not be
entitled to a deduction for federal income tax purposes with respect to either
the issuance of such ISOs or the transfer of shares upon their exercise. Under
current law, long-term capital gain is taxed at a maximum rate of 28%.
Participants generally will realize income for purposes of the federal
alternative minimum tax to the extent that the fair market value of the shares
purchased upon exercise of an ISO exceeds the option price for the shares (the
"spread amount"). Under current law, the maximum rate of alternative minimum tax
is 28%. For purposes of the alternative minimum tax only, the spread amount will
be added to the option price in calculating a purchaser's basis in the stock and
thus determining the purchaser's gain or loss on the sale of shares acquired
upon exercise of such ISOs. A credit for any net alternative minimum tax paid by
an ISO holder on exercise may be available to offset the Participant's regular
income tax in subsequent years, including any tax on the income resulting from a
sale of the shares acquired upon the exercise.
If shares subject to ISOs are disposed of prior to the expiration of the
time periods described above, the Participant will recognize ordinary income in
the year in which the disqualifying disposition occurs, the amount of which will
generally be the lesser of (i) the excess of the market value of the shares on
the date of exercise over the exercise price, or (ii) the gain recognized on
such disposition. Such amount will ordinarily be deductible by the Company for
federal income tax purposes in the same year, provided that the Company
satisfies certain federal income tax withholding requirements. In addition, the
excess, if any, of the amount realized on a disqualifying disposition over the
market value of the shares on the date of exercise will be treated as capital
gain.
A Participant who acquires shares by exercise of a NSO generally recognizes
as taxable ordinary income, at the time of exercise, the difference between the
exercise price and the fair market value of the shares on the date of exercise.
The amount of the Participant's taxable income will ordinarily be deductible by
the Company in the same year in which the Participant recognizes the taxable
income, subject to the requirements of Section 162(m).
SARs are grants entitling a Participant to receive, upon exercise of the
SAR, distribution of an amount in cash or shares or a combination thereof with a
value equal to or less than the difference between the market price per share of
the Company's Common Stock on the date of exercise and the market price on the
date of grant, multiplied by the number of shares for which the SAR is
exercised. A Participant will realize
13
<PAGE> 16
compensation income in the full amount of such distribution. The Company will be
allowed a corresponding deduction of the amount of the distribution, generally
in the Company's tax year in which the exercise occurs. The Participant will
obtain a basis in any shares distributed in satisfaction of SARs equal to the
fair market value of such shares at the time of such exercise (which is the
amount of compensation income realized), for purposes of determining capital
gain or loss on the later sale of such shares. The Company must withhold federal
and applicable state and local income taxes with respect to a SAR distribution.
For SAR distributions made in shares of the Company's stock, withholding will be
applied against other compensation payable from the Company.
Under Section 162(m) of the Code, the Company may be limited as to federal
income tax deductions to the extent that total individual compensation paid to
the Named Executive Officers exceeds $1,000,000 in any one year. The Company can
preserve the deductibility of certain compensation in excess of $1,000,000,
however, provided that it complies with conditions imposed by Section 162(m) of
the Code, including the payment of performance-based compensation pursuant to a
plan approved by stockholders. The 1995 Plan is designed to provide the Company
flexibility and the opportunity to qualify certain aspects of compensation as
performance-based compensation under Section 162(m), should the Company at some
time in the future pay compensation that is subject to Section 162(m).
BENEFITS UNDER 1995 PLAN
Due to the discretionary nature of the 1995 Plan, it is not possible to
determine who the future Participants in the 1995 Plan will be, or the number or
value of Awards to be received by any Participant or group under the 1995 Plan.
During the last fiscal year, no Awards were made under the 1995 Plan except to
certain non-executive officer employees of the Company. The following table sets
forth information with respect to the aggregate grants of Awards to the Named
Executive Officers, to all current executive officers as a group, to all
non-employee directors as a group, to all other employees as a group during
fiscal year 1995 (the year of adoption of the 1995 Plan), and to non-executive
officer employees of the Company during fiscal 1996 under the 1995 Plan.
<TABLE>
<CAPTION>
NAME AND POSITION DOLLAR VALUE($)(1) NUMBER OF UNITS(2)
- ----------------- ------------------ ------------------
<S> <C> <C>
Marcia J. Radosevich, Ph.D.................................. 2,738,750 175,000
Chairman, President and Chief
Executive Officer
Thomas M. McNamara.......................................... 469,500 30,000
Senior Vice President, Sales
Brian D. Cahill............................................. 391,250 25,000
Vice President, Corporate Finance
and Planning, Chief Financial
Officer, Treasurer and Secretary
Lawrence G. Miller, M.D..................................... 469,500 30,000(3)
Vice President, Clinical Affairs
Steven J. Rosenberg......................................... 1,017,250 65,000
Vice President, Software and Services
All Current Executive Officers as a Group (5 persons)....... 7,746,750 495,000
All Current Directors Who Are Not Executive Officers as a
Group..................................................... -0- -0-
All Non-Executive Officer Employees as a Group (fiscal
1996)..................................................... 483,436 68,256
All Non-Executive Officer Employees as a Group (fiscal
1995)..................................................... 2,582,250 165,000
<FN>
- ---------------
(1) Value of in-the-money options at fiscal year-end. An "in-the-money" option
is an option for which the option price of the underlying stock is less than
the June 28, 1996 market price of $21.25; the value shown reflects stock
market appreciation since the date of the granting of the option.
</TABLE>
14
<PAGE> 17
(2) Includes all options granted under the 1995 Plan in fiscal 1995 (or fiscal
1996, as indicated), whether vested or unvested, and whether exercised or
unexercised as of fiscal 1996 year-end.
(3) Dr. Miller resigned his employment with the Company on August 1, 1996. Dr.
Miller has exercised options for 6,750 shares; options to purchase 23,250
shares lapsed upon his resignation.
No directors or nominees received option grants under the 1995 Plan in
fiscal 1996. The only director or nominee who received an Option grant in fiscal
1995 under the 1995 Plan was Marcia J. Radosevich, who received Awards for an
aggregate of 175,000 shares. All other nominees for director were granted
options under the HPR 1991 Stock Plan and the HPR 1995 Eligible Directors Stock
Plan, which are described more fully under Proposals Three and Four,
respectively, in this proxy statement.
PROPOSED AMENDMENTS TO THE 1995 PLAN
The Board has adopted and recommends that the stockholders approve the
following amendments to the 1995 Plan:
(a) Provide that the 1995 Plan shall be administered by the Board of
Directors and that the Board may delegate such administration to the
Committee;
(b) Provide that all Awards be approved by majority vote of the Board
of Directors of the Company;
(c) Provide for transferability of Awards granted under the 1995 Plan
where expressly permitted by the Board pursuant to previously established
criteria;
(d) Eliminate the six-month holding period required for Options to
become unrestricted and for sale or other distribution of shares acquired
pursuant to Options granted under the 1995 Plan;
(e) Permit amendments to the 1995 Plan by majority vote of the board
of directors without stockholder approval unless such approval is required
to protect the intended tax treatment of Awards; and
(f) Increase by 500,000 shares to 2,035,000 the maximum number of
shares available for Awards under the 1995 Plan.
The Board believes that the 1995 Plan should be brought into compliance
with Rule 16b-3 and that additional shares should be made available to give the
Company maximum flexibility in providing appropriate incentives to key
personnel.
VOTE REQUIRED FOR APPROVAL
The affirmative vote of the holders of a majority of all outstanding shares
present or represented at the Meeting and entitled to vote thereon is required
to approve the amendments to the 1995 Plan. Abstentions will count as shares
present or represented at the Meeting and will, therefore, be included in
determining whether the required vote has been received and effectively count as
a vote "against" approval. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE
FOR APPROVAL OF THE PROPOSED AMENDMENTS TO THE 1995 PLAN AND YOUR PROXY WILL BE
SO VOTED UNLESS YOU SPECIFY OTHERWISE.
15
<PAGE> 18
PROPOSAL THREE
APPROVAL OF AMENDMENTS TO HPR 1991 STOCK PLAN
The HPR 1991 Stock Plan (the "1991 Plan") was adopted by the Board of
Directors on December 17, 1991 and approved by the stockholders on May 27, 1992.
The 1991 Plan was subsequently amended and restated on March 31, 1992 and
further amended on April 7, 1995 and June 26, 1995, and approved by the
Company's stockholders on July 20, 1995. As of August 30, 1996, 630,394 shares
of Common Stock were reserved for issuance under the 1991 Plan (net of
exercises, and giving effect to the two-for-one stock split effected in the form
of a 100% stock dividend on May 6, 1996), 619,002 of which shares are subject to
outstanding options. The Company does not intend to grant any further Awards
under the 1991 Plan.
For informational purposes and pursuant to Rule 16b-3, the Company is
providing the following description of the 1991 Plan as approved by the
stockholders on July 20, 1995. Additionally, the Board has adopted and
recommends that the stockholders approve certain amendments to the 1991 Plan to
bring the 1991 Plan into compliance with Rule 16b-3.
The 1991 Plan was adopted to ensure that an adequate number of option
shares are available to provide appropriate incentives to key employees and
other persons who provide significant services to the Company and its
subsidiaries (the "Company Group") by providing these individuals with an
opportunity to purchase or receive as bonuses stock of the Company and thereby
permitting them to share in the Company's success. The Company's future success
is highly dependent on the retention and continuing motivation of the persons
who perform key services for and make key contributions to the Company. The
Company believes that an active program of awarding stock options to those key
employees and other individuals has been, and will continue to be, an important
component of their compensation arrangements in a way that directly associates
their interests with those of the Company's stockholders.
The 1991 Plan provides for the granting of incentive stock options
("ISOs"), non-incentive stock options ("NSOs") (both ISOs and NSOs are
collectively referred to as "Options"), stock purchase authorizations ("Purchase
Authorizations"), and stock bonus awards ("Bonuses"). (The above-listed items
are referred to herein collectively as "Awards".) The closing price of the
Company's Common Stock as reported by the Nasdaq National Market System on
September 6, 1996 was $15-39/64 ($15.6094).
The 1991 Plan has been administered by the Compensation Committee of the
Board (the "Committee"). The 1991 Plan provides that each member of the
Committee must be a "disinterested person" as defined in Rule 16b-3, as in
effect prior to its recent amendment, and an "outside director" under Section
162(m) of the Code. Under the 1991 Plan, the Committee has had the power to
determine which employees will be granted Awards under the 1991 Plan, the number
of shares covered by, and the duration of, each Award under the 1991 Plan, and
other terms and conditions applicable to each Award granted under the 1991 Plan.
These determinations were made at the time each Award was granted. If the
proposed amendments to the 1991 Plan are approved, the Board of Directors will
administer the 1991 Plan, but may delegate such administration to the Committee,
including the power to make recommendations to the Board of Directors regarding
which employees will be granted Awards under the 1991 Plan and the terms and
conditions of such Awards; however, all grants of Awards must be approved by a
majority vote of the Board of Directors.
Under the 1991 Plan, the Committee has selected the key employees,
consultants and other individual contributors of or to the Company Group
("Participants") to receive Awards under the 1991 Plan, except that only
employees of the Company Group have been eligible for grant of ISOs. Because
certain directors of the Company are employees of the Company, such directors,
as well as the Named Executive Officers and other key employees and service
providers, have been eligible to participate in the 1991 Plan and have been
eligible
16
<PAGE> 19
for grant of Awards thereunder. The Committee has authority to interpret the
1991 Plan and Awards; to prescribe, amend and rescind rules and regulations
relating to the 1991 Plan; and to make all other determinations necessary or
desirable for the administration of the 1991 Plan. The Committee has been
authorized to establish guidelines for the grant of Awards to key employees of
the Company Group who are not executive officers of the Company, and the
Committee has been authorized to delegate to the Company's Chief Executive
Officer the authority to grant Awards, within those guidelines, to eligible
non-executive key employees. If the proposed amendments are approved, the Board
must approve all future Awards granted under the 1991 Plan.
In accordance with Code Section 162(m), a public company may not deduct
certain executives' compensation in excess of $1,000,000 per individual unless
such compensation is performance-based. Awards are deemed performance-based only
to the extent that, among other things, the plan to which they relate specifies
the maximum number of options which may be granted to any Participant during a
specified period of time. Accordingly, the 1991 Plan indicates that the maximum
number of Awards which may be granted to any individual during each successive
twelve-month period commencing on the effective date of the 1991 Plan is 500,000
shares.
At the time of granting an Award, the Committee has determined the purchase
price per share to be paid upon the exercise of each Option or upon the purchase
pursuant to each Purchase Authorization granted or made under the 1991 Plan,
each within certain parameters. The exercise price per share to be paid upon the
exercise of each ISO granted under the 1991 Plan must be at least one hundred
percent (100%) of the fair market value of such share on the date of the grant,
or in the case of an ISO granted to an employee owning more than ten percent
(10%) of the Common Stock of the Company or its subsidiaries, at least one
hundred ten percent (110%) of the fair market value. The purchase price per
share payable on exercise of each NSO or upon the purchase of shares pursuant to
each Purchase Authorization granted under the 1991 Plan must be at least
eighty-five percent (85%) of the fair market value of the Common Stock on the
date of the grant. Bonus shares have been issued in consideration of services
previously rendered, which have been valued for such purposes by the Committee.
No Award under the 1991 Plan can be granted with a purchase price less than the
par value of the Common Stock. The aggregate fair market value, as determined on
the grant date, of the shares for which ISOs are exercisable for the first time
by a Participant during any calendar year under all the plans of the Company may
not exceed $100,000. The Company has received no consideration from a
Participant for the grant of an Award under the 1991 Plan.
Each Option is exercisable for the full amount or for any part thereof. At
the discretion of the Committee, Options granted under the 1991 Plan may be made
exercisable in installments which become available to the Participant from time
to time during the term of the Option. However, no Option may be exercised later
than ten (10) years after the date of grant and no ISO granted to a person who
owns over 10% of the Common Stock at the time of the grant may be exercised more
than five years following the date of the grant.
Payment must be made in full at the time the Option is exercised, or at the
time the purchase pursuant to a Purchase Authorization is made. Payment must be
made in cash or by check, or, if approved in advance by the Committee and
subject to the provisions of applicable law, by delivery and assignment to the
Company of other shares of Company stock having a market price equal to the
exercise or purchase price, or by the Participant's recourse promissory note, or
by a combination of any of the above methods. In addition, the Participant must
satisfy all applicable federal, state and local income and employment tax
withholding obligations before the Company is required to deliver any shares
under the 1991 Plan.
A Participant may not transfer an Option or Purchase Authorization except
by will or the laws of descent or distribution, and only the Participant may
exercise an Option or Purchase Authorization during the
17
<PAGE> 20
Participant's lifetime. If the proposed amendments to the 1991 Plan are
approved, the Board may permit a Participant to transfer an Award granted under
the 1991 Plan if such transfer is made pursuant to generally applicable criteria
established by the Board, or by the Committee as its delegate, prior to such
transfer.
Under the 1991 Plan, Participants who are directors or executive officers
of the Company, if required to comply with rules promulgated under Section 16 of
the Exchange Act as in effect prior to August 15, 1996, may not acquire
unrestricted ownership of shares of Common Stock pursuant to an Award for at
least six months after the date of grant of the Award, and may not sell or
otherwise dispose of shares acquired under the 1991 Plan for at least six months
after such acquisition. If the proposed amendments are approved, this provision
would be eliminated.
The number of shares that may be issued under the 1991 Plan is subject to
adjustment for stock dividends, stock splits, stock combinations,
recapitalizations and other similar changes. Any shares subject to an Award
which expires or terminates unexercised as to such shares, and any shares
reacquired by the Company pursuant to forfeiture or a repurchase right under the
1991 Plan will again become available for future Awards, if any, under the 1991
Plan.
If the Company's Common Stock changes as the result of a merger or similar
reorganization as to which the Company is the surviving corporation, the number
and kind of shares which thereafter may be purchased pursuant to an Award, the
number and kind of shares then subject to Awards, and the price per share shall
be appropriately adjusted as the Committee determines to prevent dilution or
enlargement of the rights available or granted under the 1991 Plan. Except as
otherwise determined by the Committee, a merger or a similar reorganization
which the Company does not survive, or a sale of all or substantially all of the
assets of the Company, will cause every Award under the 1991 Plan to terminate,
to the extent not then exercised, unless the surviving entity agrees to assume
the Company's obligations thereunder. Alternatively, the Committee may provide
that some or all of the unexercised portion of any outstanding Award and some or
all of the unvested shares acquired upon exercise of any such Award will be
immediately exercisable and vested or no longer subject to repurchase rights as
of a specified date prior to the merger, similar reorganization or sale of
assets.
Within certain limits, the Committee may amend the 1991 Plan or the terms
of any Awards or agreements thereunder at any time without the consent of the
Participants. The Committee may not, however, amend the 1991 Plan (1) to
adversely affect or impair any then outstanding Award or related agreement
without the consent of the Participant holding such Award or related agreement;
or (2) under the 1991 Plan, without obtaining or being conditioned upon
stockholder approval, to increase the maximum number of shares available under
the 1991 Plan (except in the event of a change in the capital structure of the
Company), materially increase the benefits accruing to Participants, materially
modify the requirements as to eligibility for participation in the 1991 Plan, or
make any other change which, pursuant to the Code or regulations thereunder or
Section 16(b) of the Exchange Act and rules and regulations thereunder, requires
action by the stockholders. If the proposed amendments are approved, the Board
of Directors may amend the 1991 Plan without stockholder approval, unless such
approval is required to protect the intended tax treatment of Awards.
The 1991 Plan will terminate on December 17, 2001. The expiration date of
each Award will be no later than ten years from the date of grant.
FEDERAL INCOME TAX CONSIDERATIONS
The rules governing the tax treatment of options and stock acquired from
the exercise of options are quite technical. Therefore, the description of tax
consequences set forth below is necessarily general in nature and does not
purport to be complete. Moreover, statutory provisions are subject to change, as
are their
18
<PAGE> 21
interpretations, and their application may vary in individual circumstances.
Finally, the tax consequences under applicable state and local income tax laws
may not be the same as under the federal income tax laws.
ISOs granted pursuant to the 1991 Plan are intended to qualify as
"Incentive Stock Options" within the meaning of Section 422 of the Code. If the
Participant makes no disposition of the shares acquired pursuant to the exercise
of an ISO within one year after the transfer of shares to such Participant and
within two years from the grant of the ISO, such Participant will realize no
taxable income as a result of the grant or exercise of such ISO; any gain or
loss that is subsequently realized will be treated as long-term capital gain or
loss, as the case may be. Under these circumstances, the Company will not be
entitled to a deduction for federal income tax purposes with respect to either
the issuance of such ISOs or the transfer of shares upon their exercise. Under
current law, long-term capital gain is taxed at a maximum rate of 28%.
Participants generally will realize income for purposes of the federal
alternative minimum tax to the extent that the fair market value of the shares
purchased upon exercise of the ISO exceeds the option price for the shares (the
"spread amount"). Under current law, the maximum rate of alternative minimum tax
is 28%. For purposes of the alternative minimum tax only, the spread amount will
be added to the option price in calculating a purchaser's basis in the stock and
thus determining the purchaser's gain or loss on the sale of shares acquired
upon exercise of such ISOs. A credit for any net alternative minimum tax paid by
an ISO holder on exercise may be available to offset the Participant's regular
income tax in subsequent years, including any tax on the income resulting from a
sale of the shares acquired upon the exercise.
If shares subject to ISOs are disposed of prior to the expiration of the
time periods described above, the Participant will recognize ordinary income in
the year in which the disqualifying disposition occurs, the amount of which will
generally be the lesser of (i) the excess of the market value of the shares on
the date of exercise over the exercise price, or (ii) the gain recognized on
such disposition. Such amount will ordinarily be deductible by the Company for
federal income tax purposes in the same year, provided that the Company
satisfies certain federal income tax withholding requirements. In addition, the
excess, if any, of the amount realized on a disqualifying disposition over the
market value of the shares on the date of exercise will be treated as capital
gain.
A Participant who acquires shares by exercise of a NSO generally recognizes
as taxable ordinary income, at the time of exercise, the difference between the
exercise price and the fair market value of the shares on the date of exercise.
The amount of the Participant's taxable income will ordinarily be deductible by
the Company in the same year in which the Participant recognizes the taxable
income, subject to the requirements of Section 162(m).
Under Section 162(m) of the Code, the Company may be limited as to federal
income tax deductions to the extent that total individual compensation paid to
the Named Executive Officers exceeds $1,000,000 in any one year. The Company can
preserve the deductibility of certain compensation in excess of $1,000,000,
however, provided that it complies with conditions imposed by Section 162(m) of
the Code, including the payment of performance-based compensation pursuant to a
plan approved by stockholders. The 1991 Plan is designed to provide the Company
flexibility and the opportunity to qualify certain aspects of compensation as
performance-based compensation under Section 162(m), should the Company at some
time in the future pay compensation that is subject to Section 162(m).
19
<PAGE> 22
BENEFITS UNDER 1991 PLAN
<TABLE>
No Awards were made under the 1991 Plan in fiscal 1996. The following
Participants received the following benefits under the 1991 Plan in fiscal 1995:
<CAPTION>
NAME AND POSITION DOLLAR VALUE ($)(1) NUMBER OF UNITS(2)
- ----------------- ------------------- ------------------
<S> <C> <C>
Marcia J. Radosevich, Ph.D........................ 1,477,500 75,000
Chairman, President and
Chief Executive Officer
Thomas M. McNamara................................ 309,000 15,000
Senior Vice President, Sales
Brian D. Cahill................................... 309,000 15,000
Vice President, Corporate Finance
and Planning, Chief Financial
Officer, Treasurer and Secretary
Lawrence G. Miller, M.D........................... 309,000 15,000(3)
Vice President, Clinical Affairs
Steven J. Rosenberg............................... -0- -0-
Vice President, Software and Services
All Current Executive Officers as a
Group (5 persons)............................... 2,095,000 105,000
All Current Directors who Are Not Executive
Officers as a Group (4 persons)................. 2,310,400 116,000
All Non-Executive Officer Employees as a Group.... 4,746,401 234,700
<FN>
- ---------------
(1) Value of in-the-money options at fiscal year-end. An "in-the-money" option
is an option for which the option price of the underlying stock is less than
the June 28, 1996 market price of $21.25; the value shown reflects stock
market appreciation since the date of the granting of the option.
(2) Includes all options granted under the 1991 Plan in fiscal 1995, whether
vested or unvested, and whether exercised or unexercised as of fiscal 1996
year-end.
(3) Options to purchase 7,500 shares have been repurchased from Dr. Miller by
the Company. The balance have been exercised. Dr. Miller resigned his
employment with the Company on August 1, 1996.
</TABLE>
The Company intends to grant no further Awards under the 1991 Plan.
PROPOSED AMENDMENTS TO THE 1991 PLAN
The Board has adopted and recommends that the stockholders approve the
following amendments to the 1991 Plan:
(a) Provide that the 1991 Plan shall be administered by the Board of
Directors and that the Board may delegate such administration to the
Committee;
(b) Provide that all Awards be approved by majority vote of the Board
of Directors of the Company;
(c) Provide for transferability of Awards granted under the 1991 Plan
where expressly permitted by the Board pursuant to previously established
criteria;
(d) Eliminate the six-month holding period required for Options to
become unrestricted and for sale or other distribution of shares acquired
pursuant to Options granted under the 1991 Plan; and
20
<PAGE> 23
(e) Permit amendments to the 1991 Plan by majority vote of the board
of directors without stockholder approval unless such approval is required
to protect the intended tax treatment of Awards.
The Board believes that the 1991 Plan should be brought into compliance
with Rule 16b-3 to give the Company maximum flexibility in providing appropriate
incentives to key personnel who previously have been granted Awards under the
1991 Plan.
VOTE REQUIRED FOR APPROVAL
The affirmative vote of the holders of a majority of all outstanding shares
present or represented at the Meeting and entitled to vote thereon is required
to approve the amendments to the 1991 Plan. Abstentions will count as shares
present or represented at the Meeting and will, therefore, be included in
determining whether the required vote has been received and effectively count as
a vote "against" approval. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE
FOR APPROVAL OF THE PROPOSED AMENDMENTS TO THE 1991 PLAN AND YOUR PROXY WILL BE
SO VOTED UNLESS YOU SPECIFY OTHERWISE.
PROPOSAL FOUR
APPROVAL OF AMENDMENTS TO HPR 1995 ELIGIBLE DIRECTORS STOCK PLAN
The HPR 1995 Eligible Directors Stock Plan (the "Directors Plan") was
adopted by the Board of Directors on June 26, 1995 and approved by the
stockholders on July 20, 1995. For informational purposes and pursuant to Rule
16b-3, the Company is providing the following description of the Directors Plan
as so adopted. Rule 16b-3 provides an exemption from Section 16(b) of the
Exchange Act, which imposes liability on certain officers and directors of the
Company for short-swing profits made on the Company's securities, for
transactions under certain employee benefit plans. Currently, options granted
under the Directors Plan are eligible for the Rule 16b-3 exemption. Effective
August 15, 1996, the Securities and Exchange Commission amended Rule 16b-3. In
order to qualify options for exemption under Rule 16b-3 as recently amended, the
Company must bring the Directors Plan into compliance with Rule 16b-3 on or
before November 1, 1996.
The Board has adopted and recommends that the stockholders approve
amendments to the Directors Plan to bring the Directors Plan into compliance
with Rule 16b-3 and to increase the number of shares which may be subject to
options granted under the Directors Plan. The Company believes that it is
important that options granted under the Directors Plan be exempt from Section
16(b). The Company further believes that additional shares should be made
available under the Directors Plan to give the Company maximum flexibility in
providing appropriate incentives to key personnel. If the proposed amendments
are approved at the Meeting, 50,000 additional shares will become available
under the Directors Plan and the Directors Plan will be brought into compliance
with Rule 16b-3.
The Directors Plan was adopted to increase the Company's ability to attract
and retain non-employee directors of the Company by providing them with an
opportunity to purchase Common Stock, to provide additional incentives to the
Company's directors and to encourage the highest level of performance by them by
offering them a personal financial stake in the Company's success. The Company
also believes that the Directors Plan encourages directors to make a greater
equity investment in the Company, more closely aligning the interests of the
directors and the stockholders.
All options granted under the Directors Plan are non-statutory stock
options ("Options"). The Company initially reserved 100,000 shares of Common
Stock for issuance under the Directors Plan, none of which are subject to
outstanding Options. If the proposed amendments are approved, an additional
50,000 shares of Common Stock would be available for Options under the Directors
Plan. The closing price of the Company's
21
<PAGE> 24
Common Stock as reported by the Nasdaq National Market System on September 6,
1996 was $15-39/64 ($15.6094).
All current directors of the Company who are not employees are eligible to
participate in the Directors Plan ("Eligible Directors"). Under the Directors
Plan, each Eligible Director will be granted, upon first being elected to the
Board of Directors and, if the proposed amendments to the Directors Plan are
approved, upon approval by a majority of the Board, an Option to purchase 10,000
shares of Common Stock at an exercise price equal to the fair market value on
the date of the grant (the "Option Price"), which is the thirtieth day following
the annual meeting of stockholders of the Company at which he or she is elected
as a director. In addition, on the thirtieth day after re-election to the Board
and, if the proposed amendments are approved, upon approval by a majority of the
Board, each Eligible Director will be granted an Option to purchase 4,000 shares
of Common Stock at the Option Price. The Options granted under the Directors
Plan vest in five equal annual installments commencing one year after the date
of grant. The compensation committee of the Board (the "Committee") is
responsible for the interpretation and administration of the provisions of the
Directors Plan. If the proposed amendments to the Directors Plan are approved,
the Board of Directors will administer the Directors Plan, but may delegate such
administration to the Committee, including the power to make recommendations to
the Board of Directors regarding which employees will be granted Options under
the Directors Plan and the terms and conditions of such Options; however, all
grants of Options must be approved by a majority vote of the Board of Directors.
Each Option granted under the Directors Plan will expire 10 years from the
date of grant of such Option, and is not exercisable until six months after the
grant date. If the proposed amendments to the Directors Plan are approved, the
six-month holding period would be eliminated. Each Option will terminate and may
no longer be exercised if the Eligible Director ceases to provide services to
the Company.
Each Eligible Director to whom an Option is granted may exercise that
Option from time to time, in whole or in part, during the period that it is
exercisable, by payment of the Option Price of each share purchased, in cash or
by delivery to the Company of a number of shares of Common Stock having a total
current market value equal to the Option Price multiplied by the number of
shares the participant intends to purchase under the Option. However, the
exercise price of an Option may not be paid by delivery to the Company of shares
of Common Stock if such delivery would constitute a violation of the provisions
of any law (including without limitation Section 16 of the Exchange Act) or
related regulation or rule.
An Eligible Director may not transfer an Option except by will or the laws
of descent or distribution, and only the Eligible Director may exercise an
Option during his or her lifetime. If the proposed amendments to the Directors
Plan are approved, the Board may permit a Participant to transfer an Option
granted under the Directors Plan if such transfer is made pursuant to generally
applicable criteria established by the Board, or by the Committee as its
delegate, prior to such transfer.
The number of shares that may be issued under the Directors Plan is subject
to adjustment for stock dividends, stock splits, stock combinations,
recapitalizations and other similar changes. Any shares subject to an Option
which expires or terminates unexercised as to such shares, and any shares
reacquired by the Company pursuant to forfeiture under the Directors Plan will
again become available for future Option grants under the Directors Plan.
In the event of a dissolution, liquidation, merger, consolidation or
reorganization of the Company, the Board may decide to terminate each
outstanding Option as of the date of such event, and if it does so, shall
suspend the exercise of all outstanding Options a reasonable time prior to any
such event upon fourteen days advance written notice of such suspension to each
optionee so as to permit exercise of outstanding exercisable Options prior to
such suspension. If the event does not occur, the suspension will be removed and
all Options will continue in full force and effect.
22
<PAGE> 25
Within certain limits, the Committee may amend, suspend, or terminate the
Directors Plan. However, under the Directors Plan, no such action may, without
approval or ratification by the stockholders, increase the maximum number of
shares reserved under the Directors Plan, change the number of shares subject to
Options to be granted to Eligible Directors or change the exercise price for
those Options (other than because of a stock split, stock dividend, or other
similar form of recapitalization by the Company); alter the class of individuals
eligible for Options; change the date of grant or the terms and conditions
expressly set forth in the Directors Plan; or make any other change which,
pursuant to the Code or regulations thereunder or Section 16(b) of the Act and
the rules and regulations promulgated thereunder, requires action by the
stockholders. If the proposed amendments are approved, the Board would be
permitted to take such actions without stockholder approval, unless such
approval is required to protect the intended tax treatment of the Options. The
Committee may not, without the consent of the holder of the Option, take any
action that would alter or impair any Option previously granted.
Under the Directors Plan, the Committee may not amend the Directors Plan to
change the amount, timing or price of Option grants made to Eligible Directors
more often than once every six months, except to comport with changes in the
Code, the Employee Retirement Income Security Act of 1974, as amended, or the
applicable rules and regulations thereunder. If the proposed amendments are
approved, this provision would be eliminated.
The Directors Plan will terminate on June 26, 2005. Any shares remaining
under the Directors Plan at that time which are not subject to outstanding
Options and any shares which become available because of the expiration or
termination of an Option will cease to be reserved for purposes of the Directors
Plan.
FEDERAL INCOME TAX CONSIDERATIONS
The rules governing the tax treatment of Options and stock acquired from
the exercise of Options are quite technical. Therefore, the description of tax
consequences set forth below is necessarily general in nature and does not
purport to be complete. Moreover, statutory provisions are subject to change, as
are their interpretations, and their application may vary in individual
circumstances. Finally, the tax consequences under applicable state and local
income tax laws may not be the same as under the federal income tax laws.
An Eligible Director who acquires shares by exercise of an Option generally
recognizes as taxable ordinary income, at the time of exercise, the difference
between the exercise price and the fair market value of the shares on the date
of exercise. The amount of the Eligible Director's taxable income will
ordinarily be deductible by the Company in the same year in which the Eligible
Director recognizes the taxable income, subject to the requirements of Section
162(m).
BENEFITS UNDER DIRECTORS PLAN
<TABLE>
The following Eligible Directors will receive the following benefits under
the Directors Plan in fiscal 1997, assuming each individual's election as
director at the Meeting:
<CAPTION>
NAME DOLLAR VALUE($) NUMBER OF UNITS (NSOS)
- ---- --------------- ----------------------
<S> <C> <C>
All Current Directors Who Are Not Executive
Officers as a Group (4 persons).................. not determinable 16,000
</TABLE>
Only current directors are eligible to receive Options under the Directors
Plan.
23
<PAGE> 26
PROPOSED AMENDMENTS TO THE DIRECTORS PLAN
The Board has adopted and recommends that the stockholders approve the
following amendments to the Directors Plan:
(a) Provide that the Directors Plan shall be administered by the Board
of Directors and that the Board may delegate such administration to the
Committee;
(b) Provide that all grants of Options be approved by majority vote of
the Board of Directors;
(c) Eliminate the six-month holding period for sale or other
distribution of shares acquired pursuant to Options granted under the
Directors Plan;
(d) Eliminate the prohibition on amendments to the Directors Plan more
than once every six months;
(e) Provide for transferability of Options granted under the Directors
Plan where expressly authorized by the Board of Directors pursuant to
previously established criteria;
(f) Permit amendments to the Directors Plan by majority vote of the
Board of Directors without stockholder approval; and
(g) Increase by 50,000 shares, to 150,000 shares, the maximum number
of shares available for Options under the Directors Plan.
The Board believes that the Directors Plan should be brought into
compliance with Rule 16b-3, and that additional shares should be made available
for the grant of Options under the Directors Plan, to give the Company maximum
flexibility in providing appropriate rewards and incentives to the directors of
the Company.
VOTE REQUIRED FOR APPROVAL
The affirmative vote of the holders of a majority of all outstanding shares
present or represented at the Meeting and entitled to vote thereon is required
to approve the amendments to the Directors Plan. Abstentions will count as
shares present or represented at the Meeting and will, therefore, be included in
determining whether the required vote has been received and effectively count as
a vote "against" approval. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE
FOR APPROVAL OF THE PROPOSED AMENDMENTS TO THE DIRECTORS PLAN AND YOUR PROXY
WILL BE SO VOTED UNLESS YOU SPECIFY OTHERWISE.
PROPOSAL FIVE
SELECTION OF AUDITORS
Upon the recommendation of its Audit Committee, the Board of Directors
selected the firm of Coopers & Lybrand L.L.P. as auditors of the Company for the
fiscal year ending June 30, 1997, subject to the ratification by a vote of the
holders of a majority of the shares of Common Stock voting thereon at the Annual
Meeting. A representative of Coopers & Lybrand L.L.P., which served as auditors
for fiscal year 1996, is expected to be present at the Meeting, with the
opportunity to make a statement if he or she desires to do so, and to be
available to respond to appropriate questions.
The persons named as proxies in the accompanying form of Proxy intend
(unless specific contrary instructions are given) to vote for ratification of
the selection of Coopers & Lybrand L.L.P. as auditors for the 1997 fiscal year.
A vote by the holders of the majority of all outstanding shares present or
represented at the Meeting and entitled to vote thereon is required for
ratification.
24
<PAGE> 27
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the 1997 Annual
Meeting of Stockholders must be received by the Company, at its offices at 245
First Street, Cambridge, Massachusetts 02142, no later than July 3, 1997, in
order to be considered for inclusion in the Proxy Statement and form of proxy
relating to that meeting.
OTHER MATTERS
The Board of Directors knows of no business which will be presented for
consideration at the Meeting other than that shown above. However, if any other
proper business should come before the Meeting, it is the intention of the
persons named in the enclosed form of Proxy to vote the Proxies with respect to
any such business in accordance with their best judgment. Matters with respect
to which the enclosed form of Proxy confers such discretionary authority are as
follows: (i) matters which the Board of Directors does not know of a reasonable
time before the mailing of this Proxy Statement which are to be presented at the
Annual meeting; (ii) approval of the minutes of the prior meeting of
stockholders, such approval not constituting ratification of the action taken at
such meeting; (iii) election of any person as a director if any of the nominees
named herein are unable to serve or for good cause will not serve; and (iv)
matters incident to the conduct of the meeting.
The cost of preparing, assembling and mailing the proxy material will be
borne by the Company. In addition to the use of the mails, certain officers and
regular employees of the Company, without additional compensation, may use their
personal efforts, by telephone or otherwise, to obtain Proxies. The Company will
also request brokerage houses, custodians, nominees and fiduciaries to forward
copies of the proxy material to those persons for whom they hold shares and to
request instruction for voting the Proxies. The Company will reimburse such
brokerage houses and other persons for their reasonable expenses in connection
therewith.
Any stockholder giving a Proxy in the accompanying form retains the power
to revoke it, by appropriate written notice to the Secretary of the Company or
by the giving of a later-dated Proxy, at any time prior to the exercise of the
powers conferred thereby. Attendance in person at the Meeting will not in itself
be deemed to revoke a Proxy unless the stockholder gives an affirmative notice
at the Meeting that the stockholder intends to revoke the Proxy and to vote in
person.
The shares represented by a Proxy will be voted as directed by the
stockholder giving the Proxy.
Brokers holding shares for beneficial owners must vote those shares
according to the specific instructions they receive from the owners. If specific
instructions are not received, however, brokers may vote these shares in their
discretion, depending on the type of proposal involved. However, the NASD
(National Association of Securities Dealers) Manual provides that brokers may be
precluded from exercising their voting discretion on certain proposals. Absent
specific instructions from the beneficial owner in such case, the broker may not
vote on that proposal. This results in what is known as a "broker non-vote" on
such a proposal. In the event of a broker non-vote with respect to any issue
coming before the Meeting, the Proxy will nonetheless be counted as present for
purposes of determining the existence of a quorum. A broker non-vote with
respect to any proposal herein will have the same effect as an abstention as to
that proposal.
IF NO CONTRARY INSTRUCTIONS ARE GIVEN, THE PROXY WILL BE VOTED (1) TO FIX
THE NUMBER OF DIRECTORS AT FIVE AND TO ELECT THE PERSONS NAMED UNDER "ELECTION
OF DIRECTORS," (2) TO APPROVE THE AMENDMENTS TO THE HPR 1995 STOCK PLAN, (3) TO
APPROVE THE AMENDMENTS TO THE HPR 1991 STOCK PLAN, (4) TO APPROVE THE AMENDMENTS
TO THE HPR 1995 ELIGIBLE DIRECTORS STOCK PLAN, (5) TO RATIFY THE SELECTION OF
COOPERS & LYBRAND L.L.P. AS AUDITORS FOR FISCAL YEAR 1997, AND (6) IN THE
DISCRETION OF THE PROXY HOLDERS AS TO ANY OTHER MATTERS WHICH MAY PROPERLY COME
BEFORE THE MEETING.
25
<PAGE> 28
<TABLE>
HPR INC.
MEETING OF STOCKHOLDERS - NOVEMBER 1, 1996
THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF HPR INC.
The undersigned stockholder in HPR Inc. (the "Company") hereby appoints Marcia J. Radosevich, Ph. D. and Brian D. Cahill, and each
of them, attorneys, agents and proxies, with power of substitution to each, to vote all shares of Common Stock that the undersigned
is entitled to vote at the Annual Meeting of Stockholders of the Company to be held at the Royal Sonesta Hotel, 6 Cambridge
Parkway, Cambridge, Massachusetts on November 1, 1996 at 12:00 noon, Eastern Standard Time, and any adjournments thereof, on
matters which may properly come before the Annual Meeting, in accordance with and as more fully described in the Notice of
Meeting and Proxy Statement, receipt of which is acknowledged.
The shares represented by this Proxy will be voted as directed by the undersigned.
IF NO CONTRARY INSTRUCTIONS ARE INDICATED, THIS PROXY WILL BE VOTED IN FAVOR OF FIXING THE NUMBER OF DIRECTORS AT FIVE, FOR THE
NOMINEES FOR DIRECTORS LISTED ON THE REVERSE SIDE AND IN FAVOR OF PROPOSALS 2, 3, 4 AND 5.
-------------------------------------------------------------------------------------------------
- ---------------- PLEASE VOTE, DATE AND SIGN ON OTHER SIDE AND RETURN PROMPTLY IN ENCLOSED ENVELOPE. -------------------
-------------------------------------------------------------------------------------------------
Please sign this proxy exactly as your name appears on the books of the Company. Joint owners should each sign personally.
Trustees and other fiduciaries should indicate the capacity in which they sign, and where more than one name appears, a majority
must sign. If a corporation, this signature should be that of an authorized officer who should state his or her title.
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
- ----------------------------------------------------------------- ------------------------------------------------------------
- ----------------------------------------------------------------- ------------------------------------------------------------
- ----------------------------------------------------------------- ------------------------------------------------------------
</TABLE>
<PAGE> 29
<TABLE>
<S> <C>
/X/ PLEASE MARK VOTES
AS IN THIS EXAMPLE With- For All
For hold Except For Against Abstain
1) To fix the number of persons constituting the / / / / / / 2) To approve the amendments to the / / / / / /
full Board of Directors at five and to elect HPR 1995 Stock Plan.
the following nominees as Directors.
MARCIA J. RADOSEVICH, HARRIS A. BERMAN
HOWARD E. COX, JR., RICHARD H. EGDAHL
AND WILLIAM G. NELSON
For Against Abstain
To withhold authority to vote "FOR" a particular nominee, mark 3) To approve the amendments to the / / / / / /
the "For All Except" box and strike a line through that nominee's HPR 1991 Stock Plan.
name. Your shares shall be voted to set the number of directors
at five and for the other nominees.
RECORD DATE SHARES:
For Against Abstain
4) To approve the amendments to the / / / / / /
HPR 1995 Eligible Directors
Stock Plan.
For Against Abstain
5) To ratify the selection of / / / / / /
Coopers & Lybrand L.L.P. as
auditors of the Company for the
fiscal year ending June 30, 1997.
-------------------
Please be sure to sign and date this Proxy. Date Mark box at right if you plan / / Mark box at right if / /
- -------------------------------------------------------------------- to attend the Meeting. address change has
been noted on the
reverse side of this
- ---------Shareholder sign here--------------Co-owner sign here------ card.
DETACH CARD
HPR INC.
Dear Stockholder:
Please take note of the important information enclosed with this Proxy Ballot. There are a number of issues related to the
management and operation of your Company that require your immediate attention and approval. These are discussed in
detail in the enclosed proxy materials.
Your vote counts, and you are strongly encouraged to exercise your right to vote your shares.
Please mark the boxes on the proxy card to indicate how your shares shall be voted. Then sign the card, detach it and
return your proxy vote in the enclosed postage paid envelope.
Your vote must be received prior to the Annual Meeting of Stockholders, November 1, 1996.
Thank you in advance for your prompt consideration of these matters.
Sincerely,
Marcia J. Radosevich, Ph. D.
Chief Executive Officer, President and Chairman
HPR, Inc.
</TABLE>
<PAGE> 30
ATTACHMENT
As adopted 6/26/95 and amended and restated
7/22/96 to be effective 11/1/96
HPR INC.
AMENDED AND RESTATED HPR 1995 STOCK PLAN
1. PURPOSE. The purpose of this HPR 1995 Stock Plan (the "Plan") is to
advance the interests of HPR Inc., a Delaware corporation (the "Company"), by
strengthening the ability of the Company to attract, retain and motivate key
employees, consultants and other individual contributors of or to the Company or
any present or future parent or subsidiary of the Company (the "Company Group")
by providing them with an opportunity to purchase or receive as bonuses stock of
the Company and thereby permitting them to share in the Company's success. It is
intended that this purpose will be effected by granting (i) incentive stock
options ("Incentive Options") which are intended to qualify under the provisions
of Section 422 of the Internal Revenue Code of 1986, as heretofore and hereafter
amended (the "Code"), and non-statutory stock options ("Nonqualified Options")
which are not intended to meet the requirements of Section 422 of the Code and
which are intended to be taxed under Section 83 of the Code (both Incentive
Options and Nonqualified Options shall be collectively referred to as
"Options"), (ii) stock purchase authorizations ("Purchase Authorizations"),
(iii) stock bonus awards ("Bonuses") and (iv) Stock Appreciation Rights
("SARs"). (Items (i) through (iv) above shall collectively be referred to herein
as "Awards".)
2. EFFECTIVE DATE. This Plan was adopted by the Board of Directors of the
Company (the "Board") on June 26, 1995 (the "effective date" of the Plan) and
approved by the stockholders on July 20, 1995. This Plan was amended and
restated by the Board of Directors on July 22, 1996, such amendment and
restatement to be effective on November 1, 1996, subject to approval by the
stockholders on or before July 22, 1997.
3. STOCK COVERED BY THE PLAN. Subject to adjustment as provided in Sections
10 and 11 below, the shares that may be made subject to Awards under this Plan
("Shares") shall not exceed in the aggregate 2,035,000 shares of the common
stock, $.01 par value, of the Company ("Common Stock"). Any Shares subject to an
Option, SAR or Purchase Authorization which for any reason expires or is
terminated unexercised as to such Shares, any Shares reacquired by the Company
pursuant to forfeiture or a repurchase right hereunder, and any Shares subject
to an SAR which are not issued upon exercise of the SAR may again be the subject
of an Award under the Plan. The Shares purchased pursuant to Purchase
Authorizations or the exercise of Options under this Plan or issued as Bonuses
or pursuant to SARs may, in whole or in
<PAGE> 31
part, be either authorized but unissued Shares or issued Shares reacquired by
the Company.
4. ADMINISTRATION. This Plan shall be administered by the Board of
Directors, whose construction and interpretation of the Plan's terms and
provisions shall be final and conclusive. The Board shall have the authority to
delegate to the Compensation Committee of the Board (the "Committee") the
authority to administer this Plan as set forth in this Section 4 and to
recommend that the Board grant Awards. Each member of the Committee shall be,
and shall have been at all times within the one-year period ending on the date
of his or her appointment to the Committee, a person who in the opinion of
counsel to the Company is an "outside director" as such term is used in proposed
regulation 1.162-27(e)(3) under Section 162(m) of the Code. The Board shall have
authority, subject to the express provisions of the Plan, to construe the Plan
and the respective Awards and related agreements, to prescribe, amend and
rescind rules and regulations relating to the Plan, to determine the terms and
provisions of the respective Awards and related agreements, and to make all
other determinations in the judgment of the Board necessary or desirable for the
administration of the Plan. The Board may correct any defect or supply any
omission or reconcile any inconsistency in the Plan or in any Award or related
agreement in the manner and to the extent it shall deem expedient to carry the
Plan into effect, and it shall be the sole and final judge of such expediency.
No member of the Board and no delegate of the Board shall be liable for any
action or determination under the Plan made in good faith. Notwithstanding the
foregoing, the Board, or the Committee as its delegate, shall have authority to
establish guidelines for the grant of Awards to key employees of the Company
Group who are not executive officers of the Company and to delegate to the
Company's Chief Executive Officer the authority to recommend to the Board the
grant of Awards, within such guidelines, to such eligible non-executive key
employees.
5. APPROVAL BY BOARD OF DIRECTORS. Notwithstanding anything in this Plan to
the contrary, including without limitation the delegation of authority to the
Committee, all grants of Awards shall be approved by the Board of Directors.
6. ELIGIBLE RECIPIENTS. Awards may be granted to such key employees,
consultants or other individual contributors of or to the Company Group,
including without limitation members of the Board who are employees and members
of any medical scientific or technical advisory boards, as are selected by the
Board or (except as to employees who are Company executive officers) by the
Board's delegate pursuant to section 4 above (a "Participant"); provided, that
only employees of the Company Group shall be eligible for grant of an Incentive
Option.
7. DURATION OF THE PLAN. This Plan shall terminate ten (10) years from the
effective date hereof, unless terminated earlier pursuant to Section 14
hereafter, and no Awards may be granted or made thereafter.
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<PAGE> 32
8. TERMS AND CONDITIONS OF OPTIONS, PURCHASE AUTHORIZATIONS, SARS AND
BONUSES. Awards granted or made under this Plan shall be evidenced by agreements
in such form and containing such terms and conditions as the Board shall
determine; provided, however, that such agreements shall evidence among their
terms and conditions the following:
(a) PRICE. The purchase price per Share payable upon the exercise of
each Option or the purchase pursuant to each Purchase Authorization granted or
made hereunder shall be determined by the Board at the time the Option or
Purchase Authorization is granted or made. Subject to the condition of paragraph
8(k)(i), if applicable, the purchase price per Share payable upon the exercise
of each Incentive Option granted hereunder shall not be less than one hundred
percent (100%) of the Market Price (as such term is defined below) per Share of
the Common Stock on the day the Incentive Option is granted. The purchase price
per Share payable on exercise of each Nonqualified Option or upon the purchase
of Shares pursuant to each Purchase Authorization granted hereunder shall be not
less than eighty-five percent (85%) of the Market Price per Share of the Common
Stock on the date of the grant. Bonus Shares shall be issued in consideration of
services previously rendered, which shall be valued for such purposes by the
Board. No Share shall be issued for less than its par value, paid in cash,
property or services. As used herein, "Market Price" shall mean the closing
price of the Common Stock as reported on the Nasdaq National Market System for
the relevant date (or, if such date is not a trading date or if no trades took
place on such date, then such closing price for the last previous trading date
or the last previous date on which a trade occurred, as the case may be);
provided that if the Common Stock is no longer traded on the Nasdaq National
Market System on the relevant date, then the Market Price as of such date shall
be determined by the Board equal to the fair market value of the Common Stock in
accordance with applicable provisions of the Code then in effect.
(b) STOCK APPRECIATION RIGHTS. Stock Appreciation Rights shall be
grants entitling a Participant to receive an amount in cash or Shares or a
combination thereof having a value equal to or less than the excess of the
Market Price per share of the Company's Common Stock on the date of exercise
over the Market Price per share of the Company's Common Stock on the date of
grant, multiplied by the number of Shares with respect to which the SAR shall
have been exercised.
(c) NUMBER OF SHARES. Each agreement shall specify the number of
Shares to which it pertains.
(d) EXERCISE OF OPTIONS. Each Option shall be exercisable for the full
amount or for any part thereof and at such intervals or in such installments as
the Board may determine or as the Committee may determine at the time it
recommends that the Board grant such Option; provided, however, that no Option
shall be exercisable with respect to any Shares later than ten (10) years after
the date of the grant of such Option
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<PAGE> 33
(or five (5) years in the case of Incentive Options to which paragraph 8(k)(ii)
applies). An Option shall be exercisable only by delivery of a written notice to
the Company's Treasurer, or any other officer of the Company designated by the
Board to accept such notices on its behalf, specifying the number of Shares for
which the Option is exercised and accompanied by either (i) payment or (ii) if
permitted by the Board, irrevocable instructions to a broker to promptly deliver
to the Company full payment in accordance with paragraph 8(e)(ii) below of the
amount necessary to pay the aggregate exercise price. With respect to an
Incentive Option, the permission of the Board referred to in clause (ii) of the
preceding sentence must be granted at the time the Incentive Option is granted.
(e) PAYMENT. Payment shall be made in full (i) at the time the Option
is exercised, (ii) promptly after the Participant forwards the irrevocable
instructions referred to in paragraph 8(d)(ii) above to the appropriate broker,
if exercise of an Option is made pursuant to paragraph 8(d)(ii) above, or (iii)
at the time the purchase pursuant to a Purchase Authorization is made. Payment
shall be made either (a) in cash, (b) by check, (c) if permitted by the Board
(with respect to an Incentive Option, such permission to have been granted at
the time of the Incentive Option grant), by delivery and assignment to the
Company of shares of Company stock having a Market Price (as determined by the
Board) equal to the exercise or purchase price, (d) if permitted by the Board,
stated in the agreement evidencing the Option or Purchase Authorization, and to
the extent permitted by any applicable law, by the Participant's recourse
promissory note, which note must be due and payable not more than five (5) years
after the date the Option or Purchase Authorization is exercised, or (e) by a
combination of (a), (b), (c) and/or (d). If shares of Company stock are to be
used to pay the exercise price of an Incentive Option, the Company prior to such
payment must be furnished with evidence satisfactory to it that the acquisition
of such shares and their transfer in payment of the exercise price satisfy the
requirements of Section 422 of the Code and other applicable laws.
Notwithstanding the foregoing, the purchase or exercise price of an Option or
Purchase Authorization may not be paid by delivery and assignment to the Company
of shares of Company stock or through irrevocable instructions to a broker as
referred to in Paragraph 8(d)(ii) above to the extent that such delivery and
assignment or the execution of such irrevocable instructions would constitute a
violation of the provisions of any law (including without limitation Section 16
of the Exchange Act) or related regulation or rule, or any agreement or policy
of the Company, restricting the transfer or redemption of the Company's stock.
(f) WITHHOLDING TAXES; DELIVERY OF SHARES. The Company's obligation to
deliver Shares upon exercise of an Option or SAR or upon purchase pursuant to a
Purchase Authorization or issuance pursuant to a Bonus shall be subject to the
Participant's satisfaction of all applicable federal, state and local income and
employment tax withholding obligations. Without limiting the generality of the
foregoing, the Company shall have the right to deduct from payments of any kind
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<PAGE> 34
otherwise due to the Participant any federal, state or local taxes of any kind
required by law to be withheld with respect to any Shares issued upon exercise
of Options or SARs or purchased or issued pursuant to Purchase Authorizations or
Bonuses. The Participant may elect to satisfy such obligation(s), in whole or in
part, by (i) delivering to the Company a check for the amount required to be
withheld or (ii) if the Board in its sole discretion approves in any specific or
general case, having the Company withhold Shares or delivering to the Company
already-owned shares of Common Stock, having a value equal to the amount
required to be withheld, as determined by the Board.
(g) NON-TRANSFERABILITY. No Option, SAR or Purchase Authorization
shall be transferable by the Participant otherwise than by will or the laws of
descent or distribution, and each Option, SAR or Purchase Authorization shall be
exercisable during the Participant's lifetime only by the Participant, provided,
however, that the Board may permit a Participant to transfer an Award if such
transfer is made pursuant to uniformly applied criteria established by the Board
prior to such transfer.
(h) TERMINATION OF OPTIONS, SARS AND PURCHASE AUTHORIZATIONS. Nothing
in this Plan or in any agreement representing any Award shall restrict the right
of any member of the Company Group to terminate the employment of any
Participant at any time and for any reason, with or without notice. Each
Purchase Authorization and SAR shall terminate and may no longer be exercised if
the Participant ceases for any reason to provide services to a member of the
Company Group. Except to the extent the Board provides specifically in an
agreement evidencing an Option for a lesser period (or a greater period,
provided that in the case of Incentive Options such period shall not exceed
three months), each Option shall terminate and may no longer be exercised if the
Participant ceases for any reason to provide services to a member of the Company
Group in accordance with the following provisions:
(i) if the Participant ceases to perform services for any reason
other than death or disability (as defined in Section
22(e)(3) of the Code), the Participant may, at any time
within a period of one month after the date of such
cessation of the performance of services, exercise the
Option to the extent that the Option was exercisable on the
date of such cessation;
(ii) if the Participant ceases to perform services because of
disability (as defined in Section 22(e)(3) of the Code), the
Participant may, at any time within a period of six months
after the date of such cessation of the performance of
services, exercise the Option to the extent that the Option
was exercisable on the date of such cessation; and
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<PAGE> 35
(iii) if the Participant ceases to perform services because of
death, the Option, to the extent that the Participant was
entitled to exercise it on the date of death, may be
exercised within a period of six months after the
Participant's death by the person or persons to whom the
Participant's rights under the Option pass by will or by the
laws of descent or distribution;
provided, however, that no Option, SAR or Purchase Authorization may be
exercised to any extent by anyone after the date of its expiration; and
provided, further, that Options, SARs and Purchase Authorizations may be
exercised only as to Vested Shares (as defined in the applicable agreement with
the Participant) after the Participant has ceased to perform services for any
member of the Company Group.
(i) RIGHTS AS STOCKHOLDER. A Participant shall have no rights as a
stockholder with respect to any Shares covered by an Award until the date of
issuance of a stock certificate, if any, in the Participant's name for such
Shares.
(j) REPURCHASE OF SHARES BY THE COMPANY. Any Shares purchased or
acquired upon exercise of an Option or SAR or pursuant to a Purchase
Authorization or Bonus may in the discretion of the Board be subject to
repurchase by or forfeiture to the Company if and to the extent and at the
repurchase price, if any, specifically set forth in the option, purchase, SAR or
bonus agreement pursuant to which the Shares were purchased or acquired.
Certificates representing Shares subject to such repurchase or forfeiture may be
subject to such escrow and stock legending provisions as may be set forth in the
option, purchase, SAR or bonus agreement pursuant to which the Shares were
purchased or acquired.
(k) 10% STOCKHOLDER. If any Participant to whom an Incentive Option is
granted pursuant to the provisions of the Plan is on the date of grant the owner
of stock (as determined under Section 424(d) of the Code) possessing more than
10% of the total combined voting power or value of all classes of stock of the
Company, its parent, if any, or subsidiaries, then the following special
provisions shall be applicable:
(i) The exercise price per Share subject to such Option shall
not be less than 110% of the fair market value of each Share
on the date of grant; and
(ii) The Option shall not have a term in excess of five years
from the date of grant.
(l) CONFIDENTIALITY AGREEMENTS. Each Participant shall execute, prior
to or contemporaneously with the grant of any Award hereunder, the Company's
then standard form of agreement relating to nondisclosure of confidential
information, assignment of inventions and related matters.
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<PAGE> 36
(m) AGGREGATE LIMITATION. The maximum number of Shares with respect to
which any Awards may be granted under the Plan to any individual during each
successive twelve-month period commencing on the effective date of the Plan
shall not exceed 400,000 shares.
9. RESTRICTIONS ON INCENTIVE OPTIONS. Incentive Options granted under this
Plan shall be specifically designated as such and shall be subject to the
additional restriction that the aggregate Market Price, determined as of the
date the Incentive Option is granted, of the Shares with respect to which
Incentive Options are exercisable for the first time by a Participant during any
calendar year shall not exceed $100,000. If an Incentive Option which exceeds
the $100,000 limitation of this paragraph 9 is granted, the portion of such
Option which is exercisable for shares in excess of the $100,000 limitation
shall be treated as a Nonqualified Option pursuant to Section 422(d) of the
Code. In the event that such Participant is eligible to participate in any other
stock incentive plans of the Company, its parent, if any, or a subsidiary which
are also intended to comply with the provisions of Section 422 of the Code, such
annual limitation shall apply to the aggregate number of shares for which
options may be granted under all such plans.
10. STOCK DIVIDENDS; STOCK SPLITS; STOCK COMBINATIONS; RECAPITALIZATIONS.
Appropriate adjustment shall be made by the Board in the maximum number of
Shares subject to the Plan and in the number, kind, and exercise or purchase
price of Shares covered by outstanding Options, SARs and Purchase Authorizations
granted hereunder to give effect to any stock dividends, stock splits, stock
combinations, recapitalizations and other similar changes in the capital
structure of the Company after the effective date of the Plan.
11. MERGER; SALE OF ASSETS. In the event of a change of the Common Stock
resulting from a merger or similar reorganization as to which the Company is the
surviving corporation, the number and kind of Shares which thereafter may be
purchased pursuant to an Option, SAR or Purchase Authorization under the Plan
and the number and kind of Shares then subject to Options, SARs or Purchase
Authorizations granted hereunder and the price per Share thereof shall be
appropriately adjusted in such manner as the Board may deem equitable to prevent
dilution or enlargement of the rights available or granted hereunder. Except as
otherwise determined by the Board, a merger or a similar reorganization which
the Company does not survive, or a sale of all or substantially all of the
assets of the Company, shall cause every Option, SAR and Purchase Authorization
hereunder to terminate, to the extent not then exercised, unless any surviving
entity agrees to assume the obligations hereunder; provided, however, that, in
the case of such a merger or similar reorganization, or such a sale of all or
substantially all of the assets of the Company, if there is no such assumption,
the Board may provide that some or all of the unexercised
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<PAGE> 37
portion of any one or more of the outstanding Options, SARs or Purchase
Authorizations and some or all of the unvested Shares acquired upon exercise of
any one or more of such Options, SARs or Purchase Authorizations or acceptance
of any one or more of the outstanding Bonuses shall be immediately exercisable
and vested or no longer subject to repurchase rights as of such date prior to
such merger, similar reorganization or sale of assets as the Board determines.
12. INVESTMENT REPRESENTATIONS; TRANSFER RESTRICTIONS. The Company may
require Participants, as a condition of purchasing Shares pursuant to the
exercise of an Option or SAR or to a Purchase Authorization or receipt of shares
as a Bonus, to give written assurances in substance and form satisfactory to the
Company to the effect that such person is acquiring the Shares for the
Participant's own account for investment and not with any present intention of
selling or otherwise distributing the same, unless there shall be an effective
registration statement under the Securities Act of 1933, as amended (the "1933
Act"), with respect thereto, and to such other effects as the Company deems
necessary or appropriate (including without limitation confirmation that the
Participant is aware of any applicable restrictions on transfer of the Shares,
as specified in the by-laws of the Company or otherwise) in order to comply with
federal and applicable state securities laws.
13. DEFINITIONS.
(a) The term "employee" shall have, for purposes of this Plan, the
meaning ascribed to "employee" under Section 3401(c) of the Code and the
regulations promulgated thereunder.
(b) The term "Exchange Act" shall mean the Securities Exchange Act of
1934, as heretofore and hereafter amended.
(c) The term "parent" shall have, for purposes of this Plan, the
meaning ascribed to it under Section 424(e) of the Code and the regulations
promulgated thereunder.
(d) The term "subsidiary" shall have, for all purposes under this
Plan, the meaning ascribed to it under Section 424(f) of the Code and the
regulations promulgated thereunder.
14. TERMINATION OR AMENDMENT OF PLAN. The Board may at any time terminate
the Plan or make such changes in or additions to the Plan as it deems advisable
without further action on the part of the stockholders of the Company, provided:
(a) that no such termination or amendment shall adversely affect or
impair any then outstanding Award or related agreement without the consent of
the Participant holding such Award or related agreement; and
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<PAGE> 38
(b) that no such amendment which, pursuant to the Code or regulations
thereunder, requires action by the stockholders may be made without obtaining,
or being conditioned upon, stockholder approval.
With the consent of the Participant affected, the Board may amend
outstanding Awards or related agreements in a manner not inconsistent with the
Plan. The Board shall have the right to amend or modify the terms and provisions
of the Plan and of any outstanding Incentive Options granted under the Plan to
the extent necessary to qualify any or all such Options for such favorable
federal income tax treatment (including deferral of taxation upon exercise) as
may be afforded incentive stock options under Section 422 of the Code.
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<PAGE> 39
As adopted 12/17/91, amended and restated 3/31/92,
amended 4/7/95 and 6/26/95,
and amended and restated 7/22/96,
to be effective 11/1/96
HPR INC.
AMENDED AND RESTATED HPR 1991 STOCK PLAN
1. PURPOSE. The purpose of this HPR 1991 Stock Plan (the "Plan") is to
advance the interests of HPR Inc., a Delaware corporation (the "Company"), by
strengthening the ability of the Company to attract, retain and motivate key
employees, consultants and other individual contributors of or to the Company or
any present or future parent or subsidiary of the Company (the "Company Group")
by providing them with an opportunity to purchase or receive as bonuses stock of
the Company and thereby permitting them to share in the Company's success. It is
intended that this purpose will be effected by granting (i) incentive stock
options ("Incentive Options") which are intended to qualify under the provisions
of Section 422 of the Internal Revenue Code of 1986, as heretofore and hereafter
amended (the "Code"), and non-statutory stock options ("Nonqualified Options")
which are not intended to meet the requirements of Section 422 of the Code and
which are intended to be taxed under Section 83 of the Code (both Incentive
Options and Nonqualified Options shall be collectively referred to as
"Options"), (ii) stock purchase authorizations ("Purchase Authorizations") and
(iii) stock bonus awards ("Bonuses"). (Items (i) through (iii) above shall
collectively be referred to herein as "Awards".)
2. EFFECTIVE DATE. This Plan was adopted by the Board of Directors of the
Company (the "Board") on December 17, 1991 (the "effective date" of the Plan).
This Plan retitles and replaces in its entirety the 1991 Stock Option Plan of
the Company, which was amended and restated, effective March 31, 1992, the date
of adoption of such amendment and restatement by the Board. The Plan was further
amended on April 7, 1995 and June 26, 1995. This Plan restates in its entirety
the HPR 1991 Stock Plan, which was amended and restated by the Board on July 22,
1996, such amendment and restatement to be effective on November 1, 1996,
subject to approval by the stockholders on or before July 22, 1997.
3. STOCK COVERED BY THE PLAN. Subject to adjustment as provided in Sections
10 and 11 below, the shares that may be made subject to Awards under this Plan
("Shares") shall not exceed in the aggregate 1,160,000 shares of the common
stock, $0.01 par value, of the Company ("Common Stock"). Any Shares subject to
an Option
<PAGE> 40
or Purchase Authorization which for any reason expires or is terminated
unexercised as to such Shares and any Shares reacquired by the Company pursuant
to forfeiture or a repurchase right hereunder may again be the subject of an
Award under the Plan. The Shares purchased pursuant to Purchase Authorizations
or the exercise of Options under this Plan or issued as Bonuses may, in whole or
in part, be either authorized but unissued Shares or issued Shares reacquired by
the Company.
4. ADMINISTRATION. This Plan shall be administered by the Board of
Directors, whose construction and interpretation of the Plan's terms and
provisions shall be final and conclusive. The Board shall have the authority to
delegate to the Compensation Committee of the Board (the "Committee") the
authority to administer this Plan as set forth in this Section 4 and to
recommend that the Board grant Awards hereunder. Each member of the Committee
shall be, and shall have been at all times within the one-year period ending on
the date of his or her appointment to the Committee, a person who in opinion of
counsel to the Company is an "outside director" as such term is used in proposed
regulation 1.162-27(e)(3) under Section 162(m) of the Code. The Board shall have
authority, subject to the express provisions of the Plan, to construe the Plan
and the respective Awards and related agreements, to prescribe, amend and
rescind rules and regulations relating to the Plan, to determine the terms and
provisions of the respective Awards and related agreements, and to make all
other determinations in the judgment of the Board necessary or desirable for the
administration of the Plan. The Board may correct any defect or supply any
omission or reconcile any inconsistency in the Plan or in any Award or related
agreement in the manner and to the extent it shall deem expedient to carry the
Plan into effect, and it shall be the sole and final judge of such expediency.
No member of the Board and no delegate of the Board shall be liable for any
action or determination under the Plan made in good faith. Notwithstanding the
foregoing, the Board, or the Committee as its delegate, shall have authority to
establish guidelines for the grant of Awards to key employees of the Company
Group who are not executive officers of the Company and to delegate to the
Company's Chief Executive Officer the authority to recommend to the Board the
grant of Awards, within such guidelines, to such eligible non-executive key
employees.
5. APPROVAL BY BOARD OF DIRECTORS. Notwithstanding anything in this Plan to
the contrary, including without limitation the delegation of authority to the
Committee, all grants of Awards shall be approved by the Board of Directors.
6. ELIGIBLE RECIPIENTS. Awards may be granted to such key employees,
consultants or other individual contributors of or to the Company Group,
including without limitation members of the Board who are employees (but,
effective July 1, 1995, excluding members of the Board who are not employees)
and members of any medical, scientific or technical advisory boards, as are
selected by the Board or (except as to employees who are Company executive
officers) by the Board's delegate pursuant
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<PAGE> 41
to section 4 above (a "Participant"); provided, that only employees of the
Company Group shall be eligible for grant of an Incentive Option.
7. DURATION OF THE PLAN. This Plan shall terminate ten (10) years from the
effective date hereof, unless terminated earlier pursuant to Section 14
hereafter, and no Awards may be granted or made thereafter.
8. TERMS AND CONDITIONS OF OPTIONS, PURCHASE AUTHORIZATIONS AND BONUSES.
Awards granted or made under this Plan shall be evidenced by agreements in such
form and containing such terms and conditions as the Board shall determine;
provided, however, that such agreements shall evidence among their terms and
conditions the following:
(a) PRICE. The purchase price per Share payable upon the exercise of
each Option or the purchase pursuant to each Purchase Authorization granted or
made hereunder shall be determined by the Board at the time the Option or
Purchase Authorization is granted or made. Subject to the condition of paragraph
8(j)(i), if applicable, the purchase price per Share payable upon the exercise
of each Incentive Option granted hereunder shall not be less than one hundred
percent (100%) of the Market Price (as such term is defined below) per Share of
the Common Stock on the day the Incentive Option or Purchase Authorization is
granted or made. The purchase price per Share payable on exercise of each
Nonqualified Option or upon the purchase of Shares pursuant to each Purchase
Authorization granted hereunder shall be not less than eighty-five percent (85%)
of the Market Price per Share of the Common Stock on the date of the grant. Fair
market value shall be determined by the Board in accordance with applicable
provisions of the Code then in effect. Bonus Shares shall be issued in
consideration of services previously rendered, which shall be valued for such
purposes by the Board. No Share shall be issued for less than its par value,
paid in cash, property or services. As used herein, "Market Price" shall mean
the closing price of the Common Stock as reported on the Nasdaq National Market
System for the relevant date (or, if such date is not a trading date or if no
trades took place on such date, then such closing price for the last previous
trading date or the last previous date on which a trade occurred, as the case
may be); provided that if the Common Stock is no longer traded on the Nasdaq
National Market System on the relevant date, then the Market Price as of such
date shall be determined by the Board equal to the fair market value of the
Common Stock in accordance with applicable provisions of the Code then in
effect.
(b) NUMBER OF SHARES. Each agreement shall specify the number of
Shares to which it pertains.
(c) EXERCISE OF OPTIONS. Each Option shall be exercisable for the full
amount or for any part thereof and at such intervals or in such installments as
the Board may determine or as the Committee may determine at the time it
recommends that the Board grant such Option; provided, however, that no Option
shall be exercisable with
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<PAGE> 42
respect to any Shares later than ten (10) years after the date of the grant of
such Option (or five (5) years in the case of Incentive Options to which
paragraph 8(j)(ii) applies). An Option shall be exercisable only by delivery of
a written notice to the Company's Treasurer, or any other officer of the Company
designated by the Board to accept such notices on its behalf, specifying the
number of Shares for which the Option is exercised and accompanied by either (i)
payment or (ii) if permitted by the Board, irrevocable instructions to a broker
to promptly deliver to the Company full payment in accordance with paragraph
8(d)(ii) below of the amount necessary to pay the aggregate exercise price. With
respect to an Incentive Option, the permission of the Board referred to in
clause (ii) of the preceding sentence must be granted at the time the Incentive
Option is granted.
(d) PAYMENT. Payment shall be made in full (i) at the time the Option
is exercised, (ii) promptly after the Participant forwards the irrevocable
instructions referred to in paragraph 8(c)(ii) above to the appropriate broker,
if exercise of an Option is made pursuant to paragraph 8(c)(ii) above, or (iii)
at the time the purchase pursuant to a Purchase Authorization is made. Payment
shall be made either (a) in cash, (b) by check, (c) if permitted by the Board
(with respect to an Incentive Option, such permission to have been granted at
the time of the Incentive Option grant), by delivery and assignment to the
Company of shares of Company stock having a Market Price (as determined by the
Board) equal to the exercise or purchase price, (d) if permitted by the Board,
stated in the agreement evidencing the Option or Purchase Authorization, and to
the extent permitted by any applicable law, by the Participant's recourse
promissory note, which note must be due and payable not more than five (5) years
after the date the Option or Purchase Authorization is exercised, or (e) by a
combination of (a), (b), (c) and/or (d). If shares of Company stock are to be
used to pay the exercise price of an Incentive Option, the Company prior to such
payment must be furnished with evidence satisfactory to it that the acquisition
of such shares and their transfer in payment of the exercise price satisfy the
requirements of Section 422 of the Code and other applicable laws.
Notwithstanding the foregoing, the purchase or exercise price of an Option or
Purchase Authorization may not be paid by delivery and assignment to the Company
of shares of Company stock or through irrevocable instructions to a broker as
referred to in Paragraph 8(c)(ii) above to the extent that such delivery and
assignment or the execution of such irrevocable instructions would constitute a
violation of the provisions of any law (including without limitation Section 16
of the Exchange Act) or related regulation or rule, or any agreement or policy
of the Company, restricting the transfer or redemption of the Company's stock.
(e) WITHHOLDING TAXES; DELIVERY OF SHARES. The Company's obligation to
deliver Shares upon exercise of an Option or upon purchase pursuant to a
Purchase Authorization or issuance pursuant to a Bonus shall be subject to the
Participant's satisfaction of all applicable federal, state and local income and
employment tax withholding obligations. Without limiting the generality of the
foregoing, the Company
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<PAGE> 43
shall have the right to deduct from payments of any kind otherwise due to the
Participant any federal, state or local taxes of any kind required by law to be
withheld with respect to any Shares issued upon exercise of Options or purchased
or issued pursuant to Purchase Authorizations or Bonuses. The Participant may
elect to satisfy such obligation(s), in whole or in part, by (i) delivering to
the Company a check for the amount required to be withheld or (ii) if the Board
in its sole discretion approves in any specific or general case, having the
Company withhold Shares or delivering to the Company already-owned shares of
Common Stock, having a value equal to the amount required to be withheld, as
determined by the Board.
(f) NON-TRANSFERABILITY. No Option or Purchase Authorization shall be
transferable by the Participant otherwise than by will or the laws of descent or
distribution, and each Option or Purchase Authorization shall be exercisable
during the Participant's lifetime only by the Participant, provided, however,
that the Board may permit a Participant to transfer an Award if such transfer is
made pursuant to uniformly applied criteria, established by the Board prior to
such transfer.
(g) TERMINATION OF OPTIONS AND PURCHASE AUTHORIZATIONS. Nothing in
this Plan or in any agreement representing any Award shall restrict the right of
any member of the Company Group to terminate the employment of any Participant
at any time and for any reason, with or without notice. Each Purchase
Authorization shall terminate and may no longer be exercised if the Participant
ceases for any reason to provide services to a member of the Company Group.
Except to the extent the Board provides specifically in an agreement evidencing
an Option for a lesser period (or a greater period, provided that in the case of
Incentive Options such period shall not exceed three months), each Option shall
terminate and may no longer be exercised if the Participant ceases for any
reason to provide services to a member of the Company Group in accordance with
the following provisions:
(i) if the Participant ceases to perform services for any reason
other than death or disability (as defined in Section
22(e)(3) of the Code), the Participant may, at any time
within a period of one month after the date of such
cessation of the performance of services, exercise the
Option to the extent that the Option was exercisable on the
date of such cessation;
(ii) if the Participant ceases to perform services because of
disability (as defined in Section 22(e)(3) of the Code), the
Participant may, at any time within a period of six months
after the date of such cessation of the performance of
services, exercise the Option to the extent that the Option
was exercisable on the date of such cessation; and
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<PAGE> 44
(iii) if the Participant ceases to perform services because of
death, the Option, to the extent that the Participant was
entitled to exercise it on the date of death, may be
exercised within a period of six months after the
Participant's death by the person or persons to whom the
Participant's rights under the Option pass by will or by the
laws of descent or distribution;
provided, however, that no Option or Purchase Authorization may be exercised to
any extent by anyone after the date of its expiration; and provided, further,
that Options and Purchase Authorizations may be exercised only as to Vested
Shares (as defined in the applicable agreement with the Participant) after the
Participant has ceased to perform services for any member of the Company Group.
(h) RIGHTS AS STOCKHOLDER. A Participant shall have no rights as a
stockholder with respect to any Shares covered by an Award until the date of
issuance of a stock certificate, if any, in the Participant's name for such
Shares.
(i) REPURCHASE OF SHARES BY THE COMPANY. Any Shares purchased or
acquired upon exercise of an Option or pursuant to a Purchase Authorization or
Bonus may in the discretion of the Board be subject to repurchase by or
forfeiture to the Company if and to the extent and at the repurchase price, if
any, specifically set forth in the option, purchase, or bonus agreement pursuant
to which the Shares were purchased or acquired. Certificates representing Shares
subject to such repurchase or forfeiture may be subject to such escrow and stock
legending provisions as may be set forth in the option, purchase, or bonus
agreement pursuant to which the Shares were purchased or acquired.
(j) 10% STOCKHOLDER. If any Participant to whom an Incentive Option is
granted pursuant to the provisions of the Plan is on the date of grant the owner
of stock (as determined under Section 424(d) of the Code) possessing more than
10% of the total combined voting power or value of all classes of stock of the
Company, its parent, if any, or subsidiaries, then the following special
provisions shall be applicable:
(i) The exercise price per Share subject to such Option shall
not be less than 110% of the fair market value of each Share
on the date of grant; and
(ii) The Option shall not have a term in excess of five years
from the date of grant.
(k) CONFIDENTIALITY AGREEMENTS. Each Participant shall execute, prior
to or contemporaneously with the grant of any Award hereunder, the Company's
then
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standard form of agreement relating to nondisclosure of confidential
information, assignment of inventions and related matters.
(l) AGGREGATE LIMITATION. The maximum number of Shares with respect to
which any Awards may be granted under the Plan to any individual during each
successive twelve-month period commencing on the effective date of the Plan
shall not exceed 500,000 shares.
9. RESTRICTIONS ON INCENTIVE OPTIONS. Incentive Options granted under this
Plan shall be specifically designated as such and shall be subject to the
additional restriction that the aggregate Market Price, determined as of the
date the Incentive Option is granted, of the Shares with respect to which
Incentive Options are exercisable for the first time by a Participant during any
calendar year shall not exceed $100,000. If an Incentive Option which exceeds
the $100,000 limitation of this paragraph 9 is granted, the portion of such
Option which is exercisable for shares in excess of the $100,000 limitation
shall be treated as a Nonqualified Option pursuant to Section 422(d) of the
Code. In the event that such Participant is eligible to participate in any other
stock incentive plans of the Company, its parent, if any, or a subsidiary which
are also intended to comply with the provisions of Section 422 of the Code, such
annual limitation shall apply to the aggregate number of shares for which
options may be granted under all such plans.
10. STOCK DIVIDENDS; STOCK SPLITS; STOCK COMBINATIONS; RECAPITALIZATIONS.
Appropriate adjustment shall be made by the Board in the maximum number of
Shares subject to the Plan and in the number, kind, and exercise or purchase
price of Shares covered by outstanding Options and Purchase Authorizations
granted hereunder to give effect to any stock dividends, stock splits, stock
combinations, recapitalizations and other similar changes in the capital
structure of the Company after the effective date of the Plan.
11. MERGER; SALE OF ASSETS. In the event of a change of the Common Stock
resulting from a merger or similar reorganization as to which the Company is the
surviving corporation, the number and kind of Shares which thereafter may be
purchased pursuant to an Option or Purchase Authorization under the Plan and the
number and kind of Shares then subject to Options or Purchase Authorizations
granted hereunder and the price per Share thereof shall be appropriately
adjusted in such manner as the Board may deem equitable to prevent dilution or
enlargement of the rights available or granted hereunder. Except as otherwise
determined by the Board, a merger or a similar reorganization which the Company
does not survive, or a sale of all or substantially all of the assets of the
Company, shall cause every Option and Purchase Authorization hereunder to
terminate, to the extent not then exercised, unless any surviving entity agrees
to assume the obligations hereunder; provided, however, that, in
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<PAGE> 46
the case of such a merger or similar reorganization, or such a sale of all or
substantially all of the assets of the Company, if there is no such assumption,
the Board may provide that some or all of the unexercised portion of any one or
more of the outstanding Options or Purchase Authorizations and some or all of
the unvested Shares acquired upon exercise of any one or more of such Options or
Purchase Authorizations or acceptance of any one or more of the outstanding
Bonuses shall be immediately exercisable and vested or no longer subject to
repurchase rights as of such date prior to such merger, similar reorganization
or sale of assets as the Board determines.
12. INVESTMENT REPRESENTATIONS; TRANSFER RESTRICTIONS. The Company may
require Participants, as a condition of purchasing Shares pursuant to the
exercise of an Option or to a Purchase Authorization or receipt of shares as a
Bonus, to give written assurances in substance and form satisfactory to the
Company to the effect that such person is acquiring the Shares for the
Participant's own account for investment and not with any present intention of
selling or otherwise distributing the same, unless there shall be an effective
registration statement under the Securities Act of 1933, as amended (the "1933
Act"), with respect thereto, and to such other effects as the Company deems
necessary or appropriate (including without limitation confirmation that the
Participant is aware of any applicable restrictions on transfer of the Shares,
as specified in the by-laws of the Company or otherwise) in order to comply with
federal and applicable state securities laws.
13. DEFINITIONS.
(a) The term "employee" shall have, for purposes of this Plan, the
meaning ascribed to "employee" under Section 3401(c) of the Code and the
regulations promulgated thereunder.
(b) The term "Exchange Act" shall mean the Securities Exchange Act of
1934, as heretofore and hereafter amended.
(c) The term "parent" shall have, for purposes of this Plan, the
meaning ascribed to it under Section 424(e) of the Code and the regulations
promulgated thereunder.
(d) The term "subsidiary" shall have, for all purposes under this
Plan, the meaning ascribed to it under Section 424(f) of the Code and the
regulations promulgated thereunder.
14. TERMINATION OR AMENDMENT OF PLAN. The Board may at any time terminate
the Plan or make such changes in or additions to the Plan as it deems advisable
without further action on the part of the stockholders of the Company, provided:
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(a) that no such termination or amendment shall adversely affect or
impair any then outstanding Award or related agreement without the consent of
the Participant holding such Award or related agreement; and
(b) that no such amendment which, pursuant to the Code or regulations
thereunder, requires action by the stockholders may be made without obtaining,
or being conditioned upon, stockholder approval.
With the consent of the Participant affected, the Board may amend
outstanding Awards or related agreements in a manner not inconsistent with the
Plan. The Board shall have the right to amend or modify the terms and provisions
of the Plan and of any outstanding Incentive Options granted under the Plan to
the extent necessary to qualify any or all such Options for such favorable
federal income tax treatment (including deferral of taxation upon exercise) as
may be afforded incentive stock options under Section 422 of the Code.
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<PAGE> 48
As adopted 6/26/95 and amended 7/22/96
to be effective 11/1/96
HPR INC.
HPR 1995 ELIGIBLE DIRECTORS STOCK PLAN
1. PURPOSE. The purpose of this plan (the "Plan") is to grant options to
purchase shares of the common stock, $.01 par value (the "Common Stock"), of HPR
Inc. (the "Company") to Eligible Directors (as defined in Section 6 of the Plan)
of the Company at market value on the date of grant. The Company believes that
the granting of such options (the "Options") will serve to enhance the Company's
ability to attract and retain the services of such persons, to provide
additional incentives to them and to encourage the highest level of performance
by them by offering them a proprietary interest in the Company's success. The
Company also believes that the Plan will encourage directors to make greater
equity investment in the Company, more closely aligning the interests of the
directors and the stockholders.
2. EFFECTIVE DATE. This Plan was adopted by the Board of Directors of the
Company (the "Board") on June 26, 1995 (the "effective date" of the Plan) and
approved by the stockholders on July 20, 1995, and further amended July 22,
1996 to be effective November 1, 1996, subject to approval by the stockholders
on or before July 22, 1997.
3. STOCK COVERED BY THE PLAN. Subject to adjustment as provided in Section
9, the aggregate number of shares of Common Stock which may be issued and sold
pursuant to Options granted under the Plan shall not exceed 150,000 shares,
which may be either authorized but unissued shares or treasury shares. If any
Option granted under the Plan shall terminate or expire without being fully
exercised, the shares which have not been purchased thereunder will again become
available for purposes of the Plan.
4. ADMINISTRATION. The Plan shall be administered by the Board of
Directors, whose construction and interpretation of the Plan's terms and
provisions shall be final and conclusive. The Board shall have the authority to
delegate to the Compensation Committee of the Board (the "Committee") the
authority to administer this Plan as set forth in this Section 4 and to
recommend that the Board grant Options. No members of the Board or the Committee
shall be held liable for any action or determination under the Plan made in good
faith with respect to the Plan or any Option granted thereunder.
5. APPROVAL BY BOARD OF DIRECTORS. Notwithstanding anything in this Plan to
the contrary, including without limitation the delegation of authority to the
Committee, all grants of Options under the Plan shall be approved by the Board
of Directors.
<PAGE> 49
6. OPTION GRANTS. "Eligible Directors" shall mean directors of the Company
who are directors on the date of grant, and who are not employees of the
Company. All Options granted under the Plan shall be non-statutory stock options
which are not intended to meet the requirements of Section 422 of the Internal
Revenue Code of 1986 as amended (the "Code") and which are intended to be taxed
under Section 83 of the Code.
After June 30, 1996, each Eligible Director on the 30th day following
the date on which the first Annual Meeting of the Stockholders of the Company
(the "Annual Meeting") in which he is elected as a director is held shall, upon
approval by the Board of Directors, be granted an Option to purchase 10,000
shares of Common Stock. After June 30, 1996, each Eligible Director who is such
on the 30th day following the date on which each subsequent Annual Meeting is
held during the term of the Plan shall on such 30th day, upon approval by the
Board of Directors, be granted an Option to purchase 4,000 shares of Common
Stock. Each such Option is referred to herein as a "Regular Option."
The date of grant of an Option to an Eligible Director under the Plan
shall be the applicable day referred to immediately above.
7. OPTION PRICE. The price per share at which each Regular Option granted
under the Plan to an Eligible Director may be exercised ("Regular Option Price")
shall be the Market Price of the Common Stock as determined by the closing price
of such Common Stock as reported on the Nasdaq National Market for the relevant
date (or, if such date is not a trading date or if no trades took place on such
date, then such closing price for the last previous trading date or the last
previous date on which a trade occurred, as the case may be); provided that if
the Common Stock is no longer traded on the Nasdaq National Market on the
relevant date, then the Market Price as of such date shall be determined by the
Committee.
In no event shall the Option Price per share for any Option under the
Plan be less than the par value per share.
8. TERMS AND CONDITIONS OF OPTIONS. Each Option granted under the Plan
shall be evidenced by and subject to the terms and conditions of an Option
Grant. Each Option Grant executed and delivered to an Eligible Director shall
contain the following terms and conditions:
(a) EXERCISE OF OPTIONS. Each Option shall expire 10 years from
the date of grant of such Option.
(b) PAYMENT. Each Eligible Director to whom an Option is granted may
exercise such Option from time to time, in whole or in part, during the period
that it is exercisable, by payment of the Option Price of each share purchased,
in cash, or by delivery to the Company of a number of shares of Common Stock
having an aggregate
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Market Price of not less than the product of the Option Price multiplied by the
number of shares the participant intends to purchase upon exercise of the Option
on the date of delivery. Notwithstanding the foregoing, the exercise price of an
Option may not be paid by delivery to the Company of shares of Common Stock to
the extent that such delivery would constitute a violation of the provisions of
any law (including without limitation Section 16 of the Act) or related
regulation or rule.
(c) TRANSFER RESTRICTIONS. The shares of Common Stock issued upon
exercise of an Option granted under this Plan will be acquired for investment
and not with a view to distribution thereof unless there shall be an effective
registration statement under the Securities Act of 1933, as amended (the "1933
Act"), with respect thereto. In the event that the Company, upon the advice of
counsel, deems it necessary to list upon official notice of issuance shares to
be issued pursuant to the Plan on a national securities exchange or to register
under the 1933 Act or other applicable federal or state statute any shares to be
issued pursuant to the Plan, or to qualify any such shares for exemption from
the registration requirements of the 1933 Act under the Rules and Regulations of
the Securities and Exchange Commission or for similar exemption under state law,
then the Company shall notify each Eligible Director to that effect and no
shares of Common Stock subject to an Option shall be issued until such
registration, listing or exemption has been obtained. The Company shall make
prompt application for any such registration, listing or exemption pursuant to
federal or state law or rules of such securities exchange which it deems
necessary and shall make reasonable efforts to cause such registration, listing
or exemption to become and remain effective. The shares of Common Stock issued
on exercise of the Option shall be subject to any restrictions on transfer then
in effect pursuant to the Certificate of Incorporation or By-laws of the
Company.
(d) NON-TRANSFERABILITY. No Option may be transferred by the Optionee,
other than by will or the laws of descent and distribution. An Option can be
exercised during such individual's lifetime only by him or her, provided,
however, that the Board may permit an Eligible Director to transfer an Option if
such transfer is made pursuant to uniformly applied criteria established by the
Board prior to such transfer.
(e) TERMINATION OF DIRECTORSHIP. Nothing in this Plan or in any Option
Grant shall confer upon any Eligible Director the right to continue as a
director of the Company. An Eligible Director's right to participate in the Plan
shall automatically terminate if and when such Director becomes an employee of
the Company. Each Option shall terminate and may no longer be exercised if the
Eligible Director ceases to provide services to the Company in accordance with
the following provisions:
(i) Options granted to an Eligible Director shall cease to be
exercisable 12 months after the date such Director ceases to
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be a director for any reason other than death, but in no
event after the expiration of the Option.
(ii) If an Eligible Director ceases to be a director on account
of his death, any Option previously granted to him, whether
or not exercisable at the date of death, may be exercised by
his executor, administrator or the person or persons to whom
his rights under the Option shall pass by will or the
applicable laws of descent and distribution, at any time
within 12 months after the date of death, but in no event
after the expiration of the Option.
9. STOCK DIVIDENDS; STOCK SPLITS; STOCK COMBINATIONS; RECAPITALIZATIONS.
The aggregate number and kind of shares reserved under the Plan, the maximum
number of shares as to which Options may be granted to any individual and the
Option Price per share shall be appropriately adjusted by the Committee in the
event of any recapitalization, stock split, stock dividend, combination of
shares, or other similar change in the capitalization of the Company which
occurs after the expiration date of the Plan, but no adjustment in the Option
Price shall be made which would reduce the Option Price per share to less than
the par value per share.
10. MERGER; SALE OF ASSETS. Prior to a dissolution, liquidation, merger,
consolidation, or reorganization of the Company (the "Event"), the Committee may
decide to terminate each outstanding Option. If the Committee so decides, such
Option shall terminate as of the effective date of the Event, but the Committee
shall suspend the exercise of all outstanding Options a reasonable time prior to
the Event, giving each Optionee not less than fourteen days written notice of
the date of suspension, prior to which an Optionee may purchase in whole or in
part the shares available to him as of the date of receipt of the notice. If the
Event is not consummated, the suspension shall be removed and all Options shall
continue in full force and effect subject to the terms of their respective
Option Grants.
11. TERMINATION OR AMENDMENT OF PLAN. The Committee may amend, suspend, or
terminate the Plan, including the form of Option Grant incorporated herein by
reference. No such action, however, may be taken without approval or
ratification by the stockholders if such approval or ratification is required
under Section 162(m) of the Code. No such action may, without the consent of
the holder of the Option, alter or impair any Option previously granted.
In any event, the Plan shall terminate 10 years from the date of
adoption by the Board of Directors, or if earlier, from the date of approval by
the stockholders. Any shares remaining under the Plan at the time of termination
which are not subject to outstanding Options and any shares which thereafter
become available because of the expiration or termination of an Option shall
cease to be reserved for purposes of the Plan.
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