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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OFProxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
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Filed by the Registrant [ ]|X|
Filed by a Party other than the Registrant [ ]|_|
Check the appropriate box:
[ ]- --------------------------------------------------------------------------------
|X| Preliminary Proxy Statement
[ ]|_| Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X]|_| Definitive Proxy Statement
[ ]|_| Definitive Additional Materials
[ ]|_| Soliciting Material Pursuant to sec.ss. 240.14a-11(c) or
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A-FEM MEDICAL CORPORATION
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
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A-FEM MEDICAL CORPORATION
10180 S.W. NIMBUS AVENUE, SUITENimbus Avenue, Suite J-5
PORTLAND, OREGONPortland, Oregon 97223
NOVEMBER 11, 1997February 9, 2001
Dear Stockholder:
You are cordially invited to attend a Special Meeting of Stockholders
(the "Special Meeting") of A-FEMA-Fem Medical Corporation (the "Company").
Place: The Governor Hotel
611 S.W. 10thA-Fem Medical Corporation
10180 SW Nimbus Avenue, Suite J-5
Portland, Oregon
97205
Date: December 12, 1997Thursday, March 8, 2001
Time: 2:00 p.m.9:30 a.m. local time
The Notice of the Special Meeting and Proxy Statement accompany this
letter. The Proxy Statement describes the business to be transacted at the
meeting and provides other information concerning the Company.
The principal business to be transacted at the Special Meeting will be
to consider and take action on an(i) election of directors; (ii) amendment toof the Articles of Incorporation to
authorize a classincrease the authorized number of shares of the Company's common stock ("Common
Stock") and preferred stock ("Preferred Stock"); (iii) amendment of the
Company's Amended and Restated 1994 Incentive and Non-Qualified Stock Option
Plan (the "1994 Plan") to be designated byincrease the Boardnumber of Directors.shares of Common Stock reserved
for issuance under the 1994 Plan; and (iv) ratification of the appointment of
Arthur Andersen LLP as the Company's independent public accountants for the
fiscal year ending December 31, 2001. The Board of Directors recommends that
stockholders vote for election of the amendment.nominated directors, amendment of the
Articles of Incorporation to increase authorized number of shares of Common
Stock and Preferred Stock, amendment of the 1994 Plan and ratification of Arthur
Andersen LLP as the Company's independent public accountants.
We know that many of our stockholders will be unable to attend the
Special Meeting. Proxies are therefore solicited so that each stockholder has an
opportunity to vote.vote on all matters that are scheduled to come before the
meeting. Whether or not you plan to attend the Special Meeting, we hope that you
will have your stock represented by marking, signing, dating and returning your
proxy card in the enclosed envelope as soon as possible. Your stock will be
voted in accordance with the instructions you have given in your proxy card. You
may, of course, attend the Special Meeting and vote in person even if you have
previously returned your proxy card.
Sincerely,
J. Peter BurkeSteven T. Frankel
President Chief Operating Officer and Chief FinancialExecutive Officer
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IMPORTANT
A proxy card is enclosed herewith. All stockholders are urged to complete and
mail the proxy card promptly. The enclosed envelope for return of the proxy card
requires no postage. Any stockholder attending the Special Meeting may
personally vote on all matters that are considered, in which event the signed
proxy will be revoked.
IT IS IMPORTANT THAT YOUR STOCK BE VOTEDVOTED.
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A-FEM MEDICAL CORPORATION
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 12, 1997MARCH 8, 2001
NOTICE IS HEREBY GIVEN that the Special Meeting of Stockholders (the
"Special Meeting") of A-FEMA-Fem Medical Corporation, a Nevada corporation (the
"Company"), will be held on December 12, 1997,Thursday, March 8, 2001, at 2:00 p.m.9:30 a.m. local time, at
The
Governor Hotel, 611 S.W. 10ththe Company's offices at 10180 SW Nimbus Avenue, Suite J-5, Portland, Oregon,
for the following purposes:
1. To elect seven directors to consider and take
action on a proposal tothe Company's Board of Directors.
2. To amend the Company's Articles of Incorporation to authorize a classincrease the
authorized number of shares of the Company's Common Stock and Preferred Stock.
3. To amend the Company's Amended and Restated 1994 Incentive and
Non-Qualified Plan (the "1994 Plan") to increase the number of shares of the
Company's Common Stock to be designated byreserved for issuance under the Board1994 Plan.
4. To ratify the appointment of Directors.Arthur Andersen LLP as independent
public accountants for the fiscal year ending December 31, 2001.
Only stockholders of record at the close of business on November 7, 1997,January 30,
2001, will be entitled to notice of and to vote at the Special Meeting or any
adjournment thereof.
The Company's Proxy Statement is submitted herewith. Financial and
other information concerning the Company is contained in the enclosed Annual
Report.
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE SPECIAL MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE COMPLETE, SIGN AND
DATE THE ENCLOSED PROXY CARD AND RETURN IT AS PROMPTLY AS POSSIBLE IN THE
ENCLOSED POSTAGE PREPAID ENVELOPE IN ORDER THAT THE PRESENCE OF A QUORUM MAY BE
ASSURED. THE GIVING OF SUCH PROXY DOES NOT AFFECT YOUR RIGHT TO REVOKE IT LATER
OR VOTE YOUR SHARES IN PERSON IN THE EVENT THAT YOU SHOULD ATTEND THE SPECIAL
MEETING.
By Order of the Board of Directors
J. Peter Burke,Steven T. Frankel, President Chief
Operating Officer and Chief FinancialExecutive Officer
Portland, Oregon
November 11, 1997February 9, 2001
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A-FEM MEDICAL CORPORATION
10180 S.W. NIMBUS, SUITENimbus, Suite J-5
PORTLAND, OREGONPortland, Oregon 97223
PROXY STATEMENT
FOR SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 12, 1997THURSDAY, MARCH 8, 2001
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERALGeneral
This Proxy Statement is furnished by the Board of Directors of A-FEMA-Fem
Medical Corporation, a Nevada corporation (the "Company"), to the holders of
common stock, par value $.01 per share, of the Company (the "Common Stock") and
the holders of the Series A Convertible Preferred Stock, $.01 par value (the
"Series A Stock") in connection with the solicitation of proxies by the Board of
Directors for use at the Company's Special Meeting of Stockholders in lieu of an
annual meeting (the "Special Meeting") to be held at 2:00 p.m.9:30 a.m. local time, on
December 12, 1997,Thursday, March 8, 2001, at The Governor Hotel, 611 S.W.
10ththe Company's offices at 10180 SW Nimbus Avenue,
Suite J-5, Portland, Oregon.
This Proxy Statement and the enclosed form of proxy are beingwere mailed to
stockholders on or about November 11, 1997.
RECORD DATE AND OUTSTANDING SHARESFebruary 9, 2001.
Record Date and Outstanding Shares
Only holders of record of the Company's Common Stock and Series A Stock
at the close of business on November 7, 1997,January 30, 2001, are entitled to notice of and to
vote at the Special Meeting. On that date, 12,798,6949,596,558 shares of the Company's Common Stock and
7,492,135 shares of Series A Stock were outstanding (the(together, the "Outstanding
Shares").
SOLICITATION OF PROXIESSolicitation of Proxies
The cost of preparing, printing and mailing this Proxy Statement and
the proxy solicited hereby has been or will be borne by the Company. In addition
to the use of the mails, proxies may be solicited by directors, officers and
other employees of the Company, without additional remuneration, in person or by
telephone or facsimile transmission. The Company will also request brokerage
firms, bank nominees, custodians, and fiduciaries to forward proxy materials to
the beneficial owners of the Common Stock as of the record date and will provide
reimbursement for the cost of forwarding the proxy materials in accordance with
customary practice. Your cooperation in promptly completing, signing, dating and
returning the enclosed proxy card will help avoid additional expense.
QUORUM AND VOTINGQuorum and Voting
Each Outstanding Share entitles the holder thereof to one vote onupon
each matter to be presented at the Special Meeting. Holders of the Common Stock
and Series A Stock are not entitled to cumulative voting rights in the election
of directors. A quorum, consisting of one-third of the Outstanding Shares, must
be present in person or by proxy for the transaction of business. TheIf a quorum is
present:
(i) a nominee for election to the Board of Directors will be
elected by a plurality of the votes cast at the Special Meeting by holders of
the Outstanding Shares;
(ii) the amendment toof the Articles of Incorporation, as
previously amended and restated (the "Articles"), to authorize a classincrease the authorized
number of Preferredshares of the Common Stock to be designated byand the Board of DirectorsCompany's preferred stock (the
"Preferred Stock") will be approved if it receives the affirmative vote of a
majority of the Outstanding Shares and the affirmative vote of a majority of the
outstanding Series A Stock;
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(iii) the amendment of the Company's Amended and Restated 1994
Incentive and Non-Qualified Stock Option Plan (the "1994 Plan") to increase the
number of shares of Common Stock reserved for issuance under the 1994 Plan will
be approved if it receives the affirmative vote of a majority of the Outstanding
Shares represented at the Special Meeting and the affirmative vote of a majority
of the outstanding Series A Stock; and
(iv) the appointment of Arthur Andersen, LLP, will be ratified
if the proposal receives the affirmative vote of a majority of the Outstanding
Shares.Shares represented at the Special Meeting.
Abstentions and other non-votes are counted for purposes of determining whether
a quorum exists at the Special Meeting.Meeting, but have no effect on the determination
of whether a plurality exists with respect to a given nominee. An abstention or
other non-vote has the effect of a vote against thea proposal. Proxies and ballots
will be received and tabulated by American Stock Transfer & Trust Company,Computershare Investor Services, the Company's
transfer agent.
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REVOCABILITY OF PROXIESRevocability of Proxies
Any proxy delivered pursuant to this solicitation is revocable at the
option of the person giving it at any time before it is exercised. A proxy may
be revoked prior to its exercise by delivering to the Company's Secretary a
written notice of revocation or a duly executed proxy card bearing a later date,
or by attending the Special Meeting and voting in person. Attendance at the
Special Meeting will not in and of itself constitute a revocation of a proxy.
Each proxy returned to the Company will be voted in accordance with the
instructions given.indicated thereon. If no instructions are given,indicated, the shares
will be voted "FOR" (i) election of the nominees for the Board of Directors
named in this Proxy Statement; (ii) amendment toof the Articles to authorizeincrease the
authorized number of shares of Common Stock and Preferred Stock; (iii) amendment
of the 1994 Plan; and (iv) ratification of the appointment of Arthur Andersen
LLP as independent public accountants for the fiscal year ending December 31,
2001.
PROPOSAL NO. 1 - ELECTION OF DIRECTORS
Election of Directors
The business and affairs of the Company are managed under the
direction of its Board of Directors. The Company's Bylaws provide that the Board
of Directors shall consist of not less than five nor more than nine members. The
Company's Bylaws provide for a classstaggered board. Pursuant to the Bylaws of Preferred Stockthe
Company, the Board of Directors is divided into two classes, with such classes
to be as equal in number as the total number of directors constituting the
entire Board permits. After the Special Meeting, the Company's Board of
Directors will consist of seven members, with three members in Class 1, whose
terms will expire in one year or when their respective successors have been
elected and qualified or until their death, resignation or removal from office,
and four members in Class 2, whose terms will expire in two years or when their
respective successors have been elected and qualified or until their death,
resignation or removal from office. At the expiration of each class's term,
directors are to be elected to serve for a term of two years or until their
respective successors have been elected and qualified or until their death,
resignation or removal from office. A director elected to fill a vacancy on the
Board of Directors will be elected for the unexpired term of his or her
predecessor in office.
At the Special Meeting, stockholders will elect three Class 1 directors
to serve for one year or until successors are elected and qualified and four
Class 2 directors to serve for two years or until successors are elected and
qualified. Unless otherwise directed, the persons named in the proxy intend to
cast all proxies in favor of Merry Disney, James E. Reinmuth and RoseAnna Sevcik
to serve as Class 1 directors of the Company and William H. Fleming, Steven T.
Frankel, Carol A. Scott, and James R. Wilson to serve as Class 2 directors of
the Company. In the event that Ms. Disney, Mr. Fleming, Mr. Frankel, Mr.
Reinmuth, Ms. Scott, Ms. Sevcik or Mr. Wilson should become unavailable for
election to the Board of Directors for any reason, the persons named in the
proxy have discretionary authority to vote the proxies for the election of other
nominees to be designated to fill each such vacancy by the Board of Directors of
the Company.
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Information about the Nominees and Management
Directors and Executive Officers Age Position
-------------------------------- --- --------
Merry L. Disney 54 Director
William H. Fleming, Ph.D. 54 Vice Chairman-Diagnostics, Secretary and Director
Steven T. Frankel 58 Chief Executive Officer, President and Director
James E. Reinmuth, Ph.D. 60 Chairman and Director
Carol A. Scott, Ph.D. 51 Director
RoseAnna Sevcik 37 Director
James Wilson 51 Treasurer, Director of Business Development and
Director
Key Employees
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Martin Harvey 59 Controller
Paul Mueggler, Ph.D. 50 Vice President, Clinical and Regulatory Affairs
Class 1 Director Nominees; terms expire in one year.
Merry L. Disney has been president and chief executive officer of
Disney West operations since 1985. From 1986 to 1988, she was president of
Bridaldale Development Corporation and served as a director from 1979 to 1986.
Ms. Disney worked as an Academic Instructor of Children with Reading
Disabilities from 1982 until 1991 and currently is active in major real estate
developments and acquisitions.
James E. Reinmuth, Ph.D. has served as Chairman of A-Fem since
September 1996, and has been a Director of A-Fem since May 1995. From September
1996 to April 1998, Dr. Reinmuth served as Chief Executive Officer of A-Fem.
From May 1995 to September 1996, Dr. Reinmuth served as Treasurer of A-Fem.
Since July 1994, Dr. Reinmuth has served as the Charles H. Lundquist
Distinguished Professor of Business at the University of Oregon. From June 1976
until July 1994, Dr. Reinmuth served as Dean of the College of Business at the
University of Oregon. Since 1988, Dr. Reinmuth has also served in several
administrative positions within the University of Oregon.
RoseAnna Sevcik has served as a Director of A-Fem since May 1995. Ms.
Sevcik has been serving as Director of Mortgage Backed Securities for SunAmerica
Investments since July of 1999. From March 1996 to May 1999, Ms. Sevcik served
as vice president/senior portfolio manager of Penn Mutual. From February 1993 to
March 1996, Ms. Sevcik was vice president/senior portfolio manager and served as
a director on the pension plans board of the Life Insurance Company of the
Southwest. From February 1990 to February 1993, Ms. Sevcik was senior portfolio
manager/securities analyst at Securities Management and Research, an investment
management services company.
Class 2 Director Nominees; terms expire in two years.
William H. Fleming, Ph.D., has served as Vice Chairman-Diagnostics of
A-Fem since August of 1997, and as a Director and Secretary of A-Fem since
February 1994. From February 1994 through August 1997, Dr. Fleming served as
President and Chief Operating Officer of A-Fem. He was president, chief
operating officer and a director of ProFem from July 1993 until its merger with
A-Fem in June 1994. From April 1992 until July 1993, Dr. Fleming served as an
associate with Sovereign Ventures, a healthcare consulting firm; concurrently he
served as director of corporate development of Antivirals, Inc., a biotechnology
company involved in antisense technology. Dr. Fleming is a director of ERC, a
non-profit company.
Steven T. Frankel has served as Chief Executive Officer and a Director
of A-Fem since April 1998, and as President of A-Fem since November 1998. From
May 1992 to March 1998, Mr. Frankel was president and chief executive officer of
Quidel Corporation, a manufacturer of physicians' office diagnostic test kits.
From January 1983 to May 1992, Mr. Frankel was president of various
international and domestic divisions of Becton, Dickinson and Company, a
diagnostic
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and medical device manufacturer. From 1979 to 1983, Mr. Frankel was vice
president and general manager of the Becton Dickinson Home Health Care unit. Mr.
Frankel also serves as a director of HIDA Educational Foundation, Washington,
D.C.
Carol A. Scott, Ph.D., has served as a Director of A-Fem since February
1995. Dr. Scott is a professor of marketing and the chairman of the marketing
faculty at The John E. Anderson Graduate School of Management at the University
of California, Los Angeles. Dr. Scott has been on the faculty at UCLA since
1977, and served the school in a variety of administrative positions from 1986
through 1994, including as chairman of the faculty and associate dean for
academic affairs. She was also a visiting associate professor at the Harvard
Business School in 1985, and was on the faculty at Ohio State University for
three years prior to joining UCLA in 1977. Dr. Scott is a frequent author and
lecturer and has served on the Editorial Board of the Journal of Consumer
Research since 1980. Dr. Scott also serves on the board of directors of Sizzler
International.
James R. Wilson has served as Treasurer and a Director of A-Fem since
September 1996 and as Director of Business Development since July 1997. In
addition, since August 1995 Mr. Wilson has been a private financial consultant
to firms in both manufacturing and service industries. From August 1992 to
August 1995, Mr. Wilson was a sales manager for Advanced Equipment Systems, Inc.
From January 1985 to August 1992, Mr. Wilson was treasurer and director of
marketing in various divisions of Production Technologies, Inc. Mr. Wilson also
serves as a director of Design Pacific/Oregon Dome, Inc.
Key Employees
Martin Harvey has served as the Company's Controller since June 1998.
From 1993 to 1998, Mr. Harvey held several other controller positions with a
variety of manufacturing companies. From August 1987 to June 1993, Mr. Harvey
was division controller for Spacelabs Medical, Inc., a manufacturer of critical
care medical monitors. From January 1980 to August 1987, Mr. Harvey was division
controller for the Medical Systems Division of Control Data, Inc.
Paul Mueggler, Ph.D. has served as Vice President, Clinical and
Regulatory Affairs of the Company since July 2000. Prior to this date, Dr.
Mueggler served as Director of Clinical Affairs for the Company since April of
1997. From August 1989 to January 1994, Dr. Mueggler served as director of
clinical and technical operations for OXIS Corporation, a diagnostic company.
From April 1984 to August 1989, he served as assistant professor and chief,
toxicology section for the Department of Clinical Pathology of the School of
Medicine at Oregon Health Sciences University.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE NOMINEES.
Board of Directors Meetings and Committees and Compensation of Directors
The Board of Directors has established an Audit Committee and
Compensation Committee, but no Nominating Committee.
The Audit Committee oversees actions with respect to the Company's
accounting and financial reporting practices and provides a channel of
communication between the Board and the Company's independent auditors. The
Audit Committee consists of Carol A. Scott, Chair, and RoseAnna Sevcik. The
Audit Committee held one meeting in 1999. Both members of the Audit Committee
are independent directors as defined by NASD Rule 4200(a)(15).
The Audit Committee reviews and makes recommendations to the Board
regarding services provided by the independent accountants, reviews with the
independent accountants the scope and results of their annual examination of the
Company's consolidated financial statements and any recommendations they may
have, and makes recommendations to the Board with respect to the engagement or
discharge of the independent accountants. The Audit Committee also reviews the
Company's procedures with respect to maintaining books and records, the adequacy
and implementation of internal auditing, accounting and financial controls, and
the Company's policies concerning financial reporting and business practices.
The Audit Committee: reviewed and discussed the audited financial statements
with management; discussed with the independent auditors the matters required to
be discussed under SAS 61; reviewed the written disclosures and the letter from
the independent accountants required by Independence Accounting Standards No. 1
and discussed with the independent accountants, the independent accountants'
independence; and, based on such review and
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discussions, recommended that the audited financial statements be included in
the Company's Annual Report on Form 10-KSB for the year ended December 31, 1999.
The Board of Directors has adopted a written charter for the Audit Committee, a
copy of which is attached to the Proxy Statement as Appendix 1.
The Compensation Committee administers the 1994 Plan. The Compensation
Committee currently consists of RoseAnna Sevcik, Chair, Carol A. Scott and Merry
Disney, who was appointed to the Compensation Committee when she became a member
of the Board of Directors. WhileFor the year ended December 31, 1999, the
Compensation Committee consisted of Ms. Scott and Ms. Sevcik and held one
meeting.
The Board of Directors held eight meetings during 1999. Each incumbent
director serving on the Board of Directors knowsduring 1999 was present for more than
75 percent of no
other mattersthe aggregate number of (i) all meetings of the Board of Directors
held during the year while he or she was a director and (ii) all meetings of
committees on which he or she served.
Directors of A-Fem who are also employed by A-Fem do not receive
additional compensation for their services as directors. Non-employee directors
of A-Fem receive compensation in the form of options to be presented atpurchase A-Fem's common
stock. Directors who serve on the Special Meeting or any adjournment thereof,
all proxies returnedcommittee that administers A-Fem's Amended and
Restated 1994 Incentive and Non-Qualified Stock Option Plan receive options
pursuant to paragraph 13 of the 1994 Plan.
James E. Reinmuth, A-Fem's Chairman of the Board receives fees of
$30,000 per year for consulting services provided to the Company will be voted onCompany.
MANAGEMENT INFORMATION
Executive Compensation
Compensation Summary
The following table sets forth certain information regarding the
compensation paid to the Chief Executive Officer and any such matterother corporate
officers who received in accordance withexcess of $100,000 in compensation in the judgmentfiscal year
ended December 31, 1999 (the "Named Executive Officers") for each of the proxy holders.fiscal
years ended December 31, 1999, 1998 and 1997.
Summary Compensation Table
Long-Term
Annual Compensation Compensation
----------------------- -----------------------
Other Annual Securities Underlying
Name and Principal Salary Compensation Options/Warrants
Position Year ($) ($) (#)
- ------------------------------- ------ ---------- ------------ -----------------------
James E. Reinmuth (1) 1999 30,000 - -
Chief Executive Officer, 1998 45,025 - 150,000
Chairman and Director 1997 40,000 - 26,667
Steven T. Frankel (2) 1999 300,769 - -
Chief Executive Officer, 1998 103,863 - 1,700,000
President and Director 1997 - - -
William H. Fleming 1999 115,000 - -
Vice Chairman-Diagnostics, 1998 119,449 - 150,000
Secretary and Director 1997 115,000 - 26,667
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(1) James E. Reinmuth served as Chief Executive Officer of A-Fem until
April 1998.
(2) Steven T. Frankel became Chief Executive Officer of A-Fem in April 1998
and President of A-Fem in November 1998. Mr. Frankel's 1999 salary
includes $60,769 in deferred salary from 1998.
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Grant of Stock Options
No options were granted to Named Executive Officers during the fiscal
year ended December 31, 1999.
Exercise of Stock Options and Year-End Option/Warrant Values
There were no exercises of stock options by the Named Executive
Officers during the fiscal year ended December 31, 1999. The following table
sets forth certain information regarding options and warrants of the Named
Executive Officers outstanding as of December 31, 1999.
Aggregated Option Exercises in 1999
and Year-End Option/Warrant Values
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options/Warrants at Options/Warrants at
December 31, 1999 December 31, 1999 (2)
--------------------------------- --------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ------------------- -------------- ----------------- ----------- -------------
James E. Reinmuth 326,667 150,000(1) -0- -0-
Steven T. Frankel 475,000 1,225,000(1) -0- -0-
William H. Fleming 176,667 150,000(1) -0- -0-
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(1) These options are subject to performance-based conditions.
(2) Based on a fair market value of $.72 per share, the price per share of
A-Fem's common stock on December 31, 1999.
Employment Agreements
A-Fem entered into a consulting agreement with James E. Reinmuth dated
effective December 1, 1998 (the "Reinmuth Consulting Agreement"), with respect
to Mr. Reinmuth's services as Chairman of the Board. The Reinmuth Consulting
Agreement provides for a fee of $2,500 per month. Either party may terminate the
Reinmuth Consulting Agreement on 30 days' prior notice.
A-Fem entered into an employment agreement with James R. Wilson dated
effective May 1, 1997 (the "Wilson Employment Agreement"), with respect to Mr.
Wilson's services as A-Fem's Treasurer. The Wilson Employment Agreement provides
for a salary of $5,000 per month. Either party may terminate the Wilson
Employment Agreement on 30 days' prior notice.
A-Fem entered into an employment agreement with Steven T. Frankel dated
effective April 25, 1998 (the "Frankel Employment Agreement"), with respect to
Mr. Frankel's services as A-Fem's Chief Executive Officer. The Frankel
Employment Agreement provides for a salary of $20,000 per month. Either party
may terminate the Frankel Employment Agreement on 30 days' prior notice.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership as of November 7, 1997December 31, 2000 of the Company's Common Stock by
(i) each beneficial owner of more than 5 percent of the Common Stock, (ii) the
Company's
SeniorNamed Executive Officers, (iii) each director and director nominee of the
Company and (iv) all directors and executive officers as a group. Each person
named in the table has sole investment and voting power with respect to the
shares set forth opposite his or her name, except as otherwise noted.
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AMOUNT AND NATURE OF PERCENT OF CLASS
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) OUTSTANDING
---------------------------------------- -----------------------Name and Address of Amount and Nature of Percent of Class
Beneficial Owner Beneficial Ownership (1) Outstanding
- ------------------------------------------- ------------------------ ----------------
Capital Consultants, LLC 7,976,335 (2) 45.4%
2300 SW First Avenue, Suite 200
Portland, OR 97201
Merry Disney 10,000 (3) *
c/o Pacific Group
100 Atlantic Avenue, Suite 409
Long Beach, CA 90802
Director
William H. Fleming...................... 788,925(2) 6.1%Fleming 791,367 (4) 8.1%
Suite J-5
10180 SW Nimbus Ave.,Avenue
Portland, OR 97223-4341
Vice-Chairman, Secretary and Director
Steven T. Frankel 487,500 (5) 4.8%
Suite J-5
10180 SW Nimbus Avenue
Portland, OR 97223
Vice Chairman97223-4341
Chief Executive Officer, President and
Director
James E. Reinmuth....................... 499,500(3) 3.8%Reinmuth 540,667 (6) 5.5%
5171 Solar Heights Drive
Eugene, OR 97405
Chairman and Chief Executive OfficerDirector
Richard T. Schroeder 539,000 (7) 5.5%
3840 SW 75th Ave.
Portland, OR 97225
Carol A. Scott.......................... 20,000(4)Scott 60,000 (8) *
1834 Park Blvd.
Palo Alto, CA 94306
Director
RoseAnna Sevcik......................... 37,500(5)Sevcik 60,000 (9) *
1736 Aidenn Lair
Dresher, PA 190253843 Cottonwood Grove Terrace
Calabasas, CA 91301
Director
James R. Wilson......................... 325,928(6) 2.5%
3198 Powder RiverWilson 410,095 (10) 4.2%
2968 Matt Drive
Eugene, OR 97408
Treasurer and Director
Robert L. Buck.......................... 287,500(7) 2.1%
10180 SW Nimbus Ave., Suite J-5
Portland, OR 97223
Vice President
J. Peter Burke.......................... 30,000(8) *
10180 SW Nimbus Avenue, Suite J-5
Portland, OR 97223
President, Chief Operating Officer and
Chief Financial Officer
Capital Consultants, Inc................ 3,792,419(9) 29.5%
2300 SW First Avenue, Suite 200
Portland, OR 97201
Cort MacKenzie Securities, Inc.......... 1,327,585(10) 9.5%
5335 SW Meadows Road, Suite 270
Lake Oswego, OR 97035
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AMOUNT AND NATURE OF PERCENT OF CLASS
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) OUTSTANDING
---------------------------------------- ----------------------- ----------------
John F. Perry........................... 735,710 5.7%
2451 S. Ponte Vedra Blvd.
Ponte Vedra, FL 32082
All directors and officers 2,359,629 (11) 21.8%
as a group (7(8 persons)........................... 1,989,353(11) 14.6%
- --------------------------------------
* Less than 1%.
-7-
(1) "Beneficial Ownership" is defined pursuant to Rule 13d-3 of the Exchange
Act, and generally means any person who directly or indirectly has or
shares voting or investment power with respect to a security. A person
shall be deemed to be the beneficial owner of a security if that person
has the right to acquire beneficial ownership of such security within 60
days, including, but not limited to, any right to acquire such security
through the exercise of any option or warrant or through the conversion
of a security. Any securities not outstanding that are subject to such
options or warrants shall be deemed to be outstanding for the purpose of
computing the percentage of outstanding securities of the class owned by
such person, but shall not be deemed to be outstanding for the purpose of
computing the percentage of the class owned by any other person.
(2) Includes 112,500 shares subject to option exercisable within 60 days after
November 7, 1997 and shares beneficially owned by various members of
William H. Fleming's family including 10,000 owned by his son, 10,000 owned
by his daughter and 1,000 owned by his father. Mr. Fleming disclaims the
beneficial ownership of the shares held by his son, daughter and father.
(3) Includes 37,500 shares subject to options exercisable within 60 days after
November 7, 1997 and 250,0007,492,135 shares issuable within 60 days after November
7, 1997 upon theconversion of shares of Series A
Stock, and an additional 484,200 shares issuable upon conversion of
shares issuable upon exercise of warrants to purchase CommonSeries A Stock.
(4) Includes 20,000 shares subject to options exercisable within 60 days after
November 7, 1997.
(5) Includes 37,500 shares subject to options exercisable within 60 days after
November 7, 1997.
(6) Includes 12,500 shares subject to options exercisable within 60 days after
November 7, 1997.
(7) Includes 287,500 shares subject to options exercisable within 60 days after
November 7, 1997.
(8) Includes 25,000 shares subject to options exercisable within 60 days of
November 7, 1997.
(9) Includes 50,000 shares issuable within 60 days after November 7, 1997 upon
exercise of a warrant to purchase Common Stock and all sharesCapital Consultants LLC acts as an agent for individual investors with
respect to whichall shares beneficially owned by it. Capital Consultants Inc. acts as an agent. Capital Consultants,
Inc.LLC
is an investment advisor registered under Section 203 of the Investment
Advisors Act of 1940 and has, on behalf of certain of its clients, sole
voting power and sole investment power with respect to certain of these
shares.
(10) Includes 642,250(3) Consists of 10,000 shares issuable after November 7, 1997 upon exercise of options to purchase
Common Stock.
(4) Includes 176,667 shares issuable upon the exercise of options to purchase
Common Stock.
(5) Consists of 487,500 shares issuable upon the exercise of options to
purchase Common Stock.
(6) Includes 23,000 shares of common stock held by the Reinmuth Family Trust,
23,000 shares held by Terry A. Reinmuth, 4,000 shares held by Hilary J.
Reinmuth, 4,000 shares held by Jennifer C. Reinmuth, 250,000 shares
issuable upon exercise of a warrant to purchase Common Stock and 76,667
shares issuable upon exercise of options to purchase Common Stock.
(7) Includes 200,000 shares issuable upon the exercise of warrants to
purchase Common Stock, 293,75030,000 shares held by Mr. Schroeder's spouse, and
270,00029,000 shares held by their children. Mr. Schroeder disclaims beneficial
ownership of the 29,000 shares held by his children.
(8) Includes 60,000 shares issuable after November 7, 1997 upon the exercise of warrantsoptions to purchase
Common Stock.
(9) Includes 60,000 shares issuable upon the exercise of options to purchase
Common Stock.
(10) Includes 160,000 shares of Common Stock held by Cort
MacKenzie & Thomas, Inc.jointly with Mr. Wilson's
spouse, 153,428 shares with respect to which Mr. Wilson shares voting
power with his spouse, and Thomas C. Stewart, respectively,96,667 shares issuable upon the exercise of
options to purchase Common Stock.
(11) Includes 532,500967,501 shares subjectissuable upon the exercise of options to options exercisable within 60 days after
November 7, 1997purchase
Common Stock and 250,000 shares issuable within 60 days after November
7, 1997 upon exercises of warrants to
purchase Common Stock.
-3-Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires that the Company's officers,
directors and persons who own more than 10 percent of the Common Stock file with
the Securities and Exchange Commission (the "SEC") initial reports of beneficial
ownership on Form 3 and reports of changes in beneficial ownership of Common
Stock and other equity securities of the Company on Form 4. Officers, directors,
and greater than 10 percent stockholders of the Company are required by SEC
regulations to furnish to the Company copies of all Section 16(a) reports that
they file. For the year ended December 31, 1999, William H. Fleming did not
timely report three transactions and failed to file a Form 5 for such year. Mr.
Fleming has reported these delinquencies on the Form 4 he filed for June 2000.
To the Company's knowledge, based solely on reviews of such reports furnished to
the Company and written representations that no other reports are required, all
other Section 16(a) filing requirements applicable to its officers, directors
and greater than 10 percent beneficial owners were complied with on a timely
basis for fiscal year ended December 31, 1999.
Certain Relationships and Related Transactions
As of December 31, 1999, William H. Fleming, A-Fem's Vice-Chairman of
the Board and Secretary, had an outstanding balance of approximately $66,000 on
a loan from A-Fem. This loan was made on November 18, 1994, and the
-8-
7original principal balance was $52,000. Interest accrues at a rate of 6.24
percent and is capitalized. Mr. Fleming used the proceeds from this loan to
purchase shares of A-Fem's Common Stock upon exercise of a stock option. Mr.
Fleming and the Company have agreed that the outstanding balance on this loan
shall become due and payable on July 1, 2001, and that Mr. Fleming may make such
payment by transferring to the Company shares of the Company's Common Stock that
he owns with a value equal to such outstanding balance on the date of repayment.
PROPOSAL NO. 1 --2 - APPROVAL OF AMENDMENT TO THE ARTICLES TO AUTHORIZE A
CLASSINCREASE THE
AUTHORIZED NUMBER OF SHARES OF THE COMPANY'S COMMON STOCK AND PREFERRED
STOCK TO BE DESIGNATED BY THE BOARD OF DIRECTORS
The Company's Articles currently authorize issuance of 43,000,000
shares of capital stock, consisting of 33,000,000 shares of Common Stock and
10,000,000 shares of Preferred Stock. The Board of Directors has adopted a
resolution to amend the Articles to authorize a classincrease the authorized capital stock of 10,000,000the
Company to 100,000,000 shares by increasing the number of authorized shares of
Common Stock to 75,000,000 shares and increasing the number of authorized shares
of Preferred Stock $.01 par
value, to be issued from time to time in one or more series, in any manner
permitted by law, as determined from time to time by the Board of Directors.25,000,000. The text of the Amendment to the Articles is
set forth as Appendix 1 to this proxy
statement.
Publicly held companies, such as the Company, often have a capital
structure which includesProxy Statement.
The additional authorized shares of Common Stock and Preferred Stock
which may be issued from time to time
in order to respond to financing needs.will not have preemptive rights.
The Company has no plans to issue
preferred stock at this time. However, the Company is seeking to raise
approximately $7,000,000 to fund the roll-out of its inSync miniform in the
Northwest Regionother terms of the United States. Although the Company does not currently
have definitive arrangements to secure this financing, the Company believes that
the ability to issue preferred stock may make it easier to raise those funds.
The termsadditional authorized shares of the Preferred Stock
cannot be stated or estimated at this time.time because no offering of the Preferred
Stock is contemplated in the proximate future. The Board of Directors will have
the authority to fix and determine the rights and preferences of the shares of
any series of Preferred Stock which is established, including dividends,
conversion prices, voting rights, redemption prices, maturity dates and similar
matters, without further action by the stockholders. The Company must obtain the
approval of the holders of a majority of the outstanding shares of Series A
Stock to issue additional shares of Preferred Stock.
Publicly held companies, such as the Company, need to have a sufficient
number of authorized shares of Common Stock and Preferred Stock available to be
issued from time to time in order to respond to financing needs. The Board of
Directors believes thatbelieve it is in the Company's best
interest to createhave a classvariety of Preferred Stock.financing
alternatives available to allow the Company to address its capital requirements
in rapidly changing capital markets.
The potential issuance of Preferred Stock may have the effect of
delaying, deferring or preventing a change in control of the Company, may
discourage bids for the Common Stock at a premium over the market price of the
Common Stock and may adversely affect the market price of, and the voting and
other rights of the holders of, Common Stock. The Company has no current plans
to issue additional shares of Preferred Stock.
The Company is governed by Nevada law, including the provisions of
Chapter 78 of Nevada Revised Statutes. In general, Section 78.438 prohibits a
resident domestic Nevada corporation from engaging in a "combination" with an
"interested stockholder" for a period of three years after the date of the
transaction in which the person became an interested stockholder, unless the
combination is approved in a prescribed manner. "Combination" includes mergers,
asset sales and other transactions resulting in a financial benefit to the
interested stockholder. An "interested stockholder" is a person who is the
beneficial owner, directly or indirectly, of 10%10 percent or more of the
corporation's voting stock or who is an affiliate or associate of the
corporation and at any time within three years prior to the date in question was
the beneficial owner, directly or indirectly, of 10%10 percent or more of the
corporation's voting stock.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE AMENDMENT
TO THE ARTICLES TO AUTHORIZEINCREASE THE AUTHORIZED NUMBER OF SHARES OF THE COMPANY'S
COMMON STOCK AND PREFERRED STOCK.
-9-
PROPOSAL NO. 3 - APPROVAL OF AMENDMENT TO THE COMPANY'S
AMENDED AND RESTATED 1994 INCENTIVE AND NON-QUALIFIED STOCK OPTION PLAN
Description of Plan
The Board of Directors has adopted a resolution amending the 1994 Plan
to increase the number of shares of Common Stock reserved for issuance under the
1994 Plan to 5,100,000 shares, subject to stockholder approval. A CLASS OF PREFERRED STOCK TO BE DESIGNATED BYcopy of the
1994 Plan, as amended to incorporate the proposed amendment, is attached to this
Proxy Statement as Appendix 3.
Before this increase, an aggregate of 3,300,000 shares (subject to
adjustment by reason of any reorganization, merger, consolidation, plan of
recapitalization, reclassification, stock split-up, combination of shares or
dividends payable in shares of the Company's Common Stock) was reserved for
issuance pursuant to awards under the 1994 Plan. As of December 31, 2000, an
aggregate of 1,530,090 shares were subject to outstanding stock options and
522,130 shares were available for grant. The exercise prices for currently
outstanding stock options range from $0.78 to $5.13 per share. Options for
1,247,780 shares have been exercised under the 1994 Plan.
Under the 1994 Plan, the Company may grant incentive stock options
(ISOs), nonqualified stock options (NSOs), stock bonuses, restricted stock,
stock appreciation rights, cash bonus rights, performance units, foreign
qualified grants and formula awards, separately or in combination. No grants of
stock bonuses, restricted stock, stock appreciation rights, cash bonus rights,
performance units, foreign qualified grants or formula awards have been made
under the 1994 Plan.
Eligibility
Awards may be granted under the 1994 Plan to selected employees,
officers, directors, nonemployee agents, consultants, advisors, persons involved
in the sale or distribution of the Company's products and independent
contractors of the Company; provided, however, that only employees of the
Company may be awarded ISOs. As of December 31, 2000, approximately 11 persons
were eligible to receive awards under the 1994 Plan. Since awards under the 1994
Plan are discretionary, awards thereunder for the 2001 fiscal year are not
currently determinable. In the fiscal year ended December 31, 2000, options to
purchase an aggregate of 30,000 shares at an exercise price of $1.00 per share
and 10,000 shares at an exercise price of $3.13 per share of Common Stock were
granted to Merry Disney and Rose Anna Sevcik respectively, each a director of
the Company, and options to purchase an aggregate of 362,500 shares of Common
Stock were granted to employees of the Company at an exercise price of $0.78 per
share.
Administration
The 1994 Plan may be administered by the Company's Board of Directors
or the Compensation Committee approved by the Board of Directors (the "Plan
Administrator"). The 1994 Plan is currently administered by a Committee of the
Board of Directors, which has the authority, subject to the provisions of the
1994 Plan, to determine the persons to whom awards will be made and the size and
terms of the awards.
Terms and Conditions of Options
Options granted under the 1994 Plan may be ISOs or NSOs. The Plan
Administrator determines the number of shares subject to the option, the option
price, the period of the option, the exercise time and whether an option is an
ISO or NSO; provided, however, that with regard to ISOs, the aggregate fair
market value of shares (determined at the time the ISO is granted) with respect
to which ISOs are exercisable for the first time by an employee during any
calendar year may not exceed $100,000. With regard to ISOs, the exercise price
cannot be less than the fair market value of the Common Stock on the date of
grant or 110 percent of such fair market value in the case of ISOs granted to
individuals who hold 10 percent or more of the Common Stock on the date of
grant. Upon exercise of any option, payment for shares as to which an option is
being exercised may be made in cash, or with the consent of the Board, in shares
of the Company's Common Stock valued at fair market value, restricted stock,
performance or other contingent awards denominated in either stock or cash,
promissory notes and other forms of consideration.
-10-
No option will be exercisable more than 10 years from the date on which
it is granted and an ISO granted to any individual who holds 10 percent or more
of the Common Stock on the date of grant will not be exercisable more than five
years from the date on which it is granted.
Options granted under the 1994 Plan are non-transferable by any
optionee other than by will or the laws of descent and distribution or, with
respect to NSOs, as otherwise determined by the Plan Administrator or pursuant
to a qualified domestic relations order as defined in the U.S. Internal Revenue
Code (the "Code") or the Employee Retirement Income Security Act of 1974, as
amended ("ERISA").
Stock Bonuses
The Plan Administrator is authorized to award shares to participants on
such terms and conditions and subject to such restrictions, if any (whether
based on period of service or performance goals), as the Plan Administrator may
determine. Restrictions may include restrictions concerning transferability and
forfeiture of the shares awarded. The Plan Administrator may require the
recipient to sign an agreement as a condition of the award, but may not require
monetary consideration other than amounts necessary to satisfy any tax
withholding requirements.
Restricted Stock
The Plan Administrator may issue shares of restricted stock under the
1994 Plan for such consideration (including promissory notes and services) as
determined by the Plan Administrator. All restricted stock issued will be
subject to a purchase agreement which will be executed by the Company and the
prospective recipient of the shares and may contain any terms, conditions,
restrictions, representations and warranties required by the Plan Administrator.
The restrictions may include limitations concerning transferability, repurchase
by the Company and forfeiture of the shares issued.
Stock Appreciation Rights
A stock appreciation right gives its holder the right to receive, upon
exercise, an amount equal in value to the excess of the fair market value on the
date of exercise of one share of Common Stock over its fair market value on the
date of grant, multiplied by the number of shares covered by the stock
appreciation right that is surrendered. The appreciation distribution may be
paid in Common Stock valued at fair market value, in cash, or partly in Common
Stock and partly in cash, as determined by the Plan Administrator. The Plan
Administrator may withdraw any stock appreciation right granted under the 1994
Plan at any time and may impose any conditions upon the exercise of the stock
appreciation right. The provisions of the 1994 Plan regarding nontransferability
of options apply equally to stock appreciation rights.
Cash Bonus Rights
Cash bonus rights may be granted under the 1994 Plan in connection with
options, stock appreciation rights, stock bonuses and shares sold under the 1994
Plan. Cash bonus rights will be subject to rules, terms and conditions as the
Plan Administrator may prescribe. A cash bonus right granted in connection with
an option will entitle an optionee to a cash bonus when the related option is
exercised in whole or in part. A cash bonus right granted in connection with a
stock bonus or stock purchase will entitle the recipient to a cash bonus payable
when the stock bonus is awarded or when shares are purchased, respectively, or
when restrictions, if any, to which the stock is subject lapse.
Performance Units
The Plan Administrator may grant performance units consisting of
monetary units which may be earned in whole or in part if the Company achieves
certain goals established by the Plan Administrator over a designated period of
time not to exceed 10 years. The goals established by the Plan Administrator may
include earnings per share, return on stockholders' equity, return on invested
capital and such other goals as may be established by the Plan Administrator.
Payment of an award earned may be in cash or in Common Stock or a combination of
both, and may be made when earned, or vested and deferred, as the Plan
Administrator determines. The provisions of the 1994 Plan regarding
nontransferability of options applies equally to performance units.
-11-
Foreign Qualified Grants
Awards under the 1994 Plan may be awarded to qualified persons residing
in foreign jurisdictions as the Plan Administrator may determine from time to
time. The Plan Administrator may adopt such supplements to the 1994 Plan as may
be necessary to comply with the applicable laws of such foreign jurisdictions
and to afford participants favorable treatment under such laws.
Formula Awards
Each director appointed to the Committee will be granted NSOs for
30,000 shares of Common Stock ("Formula Options") on the date such director is
appointed and further grants of NSOs for 30,000 shares of Common Stock on the
third anniversary of the grant of such member's most recent grant; provided,
however, that the grant to a newly appointed member will be reduced on an
option-for-option basis by the amount of any option grants accepted by such
appointee from the Company within the prior 24-month period. The Formula Options
will have an exercise price per share equal to the fair market value of Common
Stock on the date of grant and will vest in three equal installments on each of
the first three anniversaries of the date of grant.
Amendment and Acceleration
The 1994 Plan may be amended at any time by the Plan Administrator,
subject to approval by stockholders of any amendment that (i) materially
increases the total number of shares subject to the 1994 Plan; (ii) materially
modifies the class of eligible employees under the 1994 Plan; or (iii) effects a
change relating to ISOs that is inconsistent with the Code, ERISA, or the rules
and regulations adopted thereunder. All options and stock appreciation rights
outstanding under the 1994 Plan will become exercisable in full for the
remainder of their terms upon certain events, including a consolidation, merger
or plan of exchange involving the Company pursuant to which Common Stock is
converted into cash; any sale, lease, exchange or other transfer of all or
substantially all the assets of the Company; any tender or exchange offer other
than by the Company in which at least 20 percent of the outstanding Common Stock
is purchased; and certain changes in the equity ownership of the Company or
composition of the Board of Directors.
Federal Income Tax Consequences
The following discussion summarizes the material federal income tax
consequences of participation in the 1994 Plan. The discussion is general in
nature and does not address issues related to the tax circumstances of any
particular participant in the 1994 Plan. The discussion is based on federal
income tax laws in effect on the date hereof and is, therefore, subject to
possible future changes in law. The discussion does not address state, local or
foreign tax consequences. Under present law and regulations, no income will be
recognized by a participant upon the grant of stock options, stock appreciation
rights, and other stock-based awards or performance awards under the 1994 Plan.
Non-Qualified Stock Options. Upon the exercise of an NSO, an optionee
recognizes taxable ordinary income equal to the difference between the exercise
price for the shares and the fair market value of the shares on the date of
exercise.
Incentive Stock Options. An optionee does not recognize income upon the
exercise of an ISO, except that the excess of the fair market value of the
shares at the time of exercise over the option price will be income for purposes
of calculating the optionee's alternative minimum tax, if any. An option loses
its status as an ISO if the optionee exercises the ISO (i) more than three
months after the optionee terminates employment or retires for reasons other
than death or disability or (ii) more than one year after the optionee
terminates employment because of disability. If an optionee does not make a
"disqualifying disposition" (defined below) of an ISO, the gain, if any, upon a
subsequent sale (i.e., the excess of the proceeds received over the option
price) will be long-term capital gain.
For shares acquired through exercise of an ISO, a "disqualifying
disposition" is a transfer of the shares (i) within two years after the grant of
the ISO or (ii) within one year after the transfer of the shares to the optionee
pursuant to the ISO's exercise. If the optionee makes a disqualifying
disposition, the optionee generally will recognize income in the year of the
disqualifying disposition equal to the excess of the amount received for the
shares over the option price. Of that income, the portion equal to the excess of
the fair market value of the shares at the time the ISO was exercised over the
option price will
-12-
be ordinary income and the balance, if any, will be long-term or short-term
capital gain, depending on whether the shares were sold more than one year after
the ISO was exercised. If, however, the optionee sells the shares to an
unrelated party at a price that is below the fair market value of the shares at
the time the ISO was exercised and the sale is a disqualifying disposition, the
amount of ordinary income will be limited to the amount realized on the sale
over the option price.
Restricted Stock Awards. A participant who receives an award of
restricted stock under the 1994 Plan generally will recognize ordinary income at
the time at which the restrictions on such shares (the "Restrictions") lapse, in
an amount equal to the excess of (i) the fair market value of such shares at the
time the Restrictions lapse, over (ii) the price, if any, paid for such shares.
If the participant makes an election with respect to such shares under Section
83(b) of the Code not later than 30 days after the date shares are transferred
to the participant pursuant to such award, the participant will recognize
ordinary income at the time of transfer in an amount equal to the excess of (i)
the fair market value of the shares covered by the award (determined without
regard to any restriction other than a restriction which by its terms will never
lapse) at the time of such transfer over (ii) the price, if any, paid for such
shares.
A participant's tax basis in shares received pursuant to a restricted
stock award granted under the 1994 Plan will be equal to the sum of the price
paid for such shares, if any, and the amount of ordinary income recognized by
such participant with respect to the transfer of such shares or the lapse of the
Restrictions thereon. The participant's holding period for such shares for
purposes of determining gain or loss on a subsequent sale will begin immediately
after the transfer of such shares to the participant, if a Section 83(b)
election is made with respect to such shares, or immediately after the
Restrictions on such shares lapse, if no Section 83(b) election is made.
If, subsequent to the lapse of Restrictions on his or her shares, the
participant sells such shares, the difference, if any, between the amount
realized from such sale and the tax basis of such shares to the holder will be
taxed as long-term or short-term capital gain or loss, depending on whether the
participant's holding period for such shares exceeds the applicable holding
period at the time of sale and provided that the participant holds such shares
as a capital asset at such time.
If a Section 83(b) election is made and, before the Restrictions on the
shares lapse, the shares that are subject to such election are resold to the
Company or are forfeited, (i) no deduction would be allowed to such participant
for the amount included in the income of such participant by reason of such
Section 83(b) election and (ii) the participant would realize a loss in an
amount equal to the excess, if any, of the amount paid for such shares over the
amount received by the participant upon such resale or forfeiture (which loss
would be a capital loss if the shares are held as a capital asset at such time).
In such event, the Company would be required to include in its income the amount
of any deduction previously allowable to it in connection with the transfer of
such shares.
Other Awards. Upon payment to a participant in settlement of a stock
option or pursuant to the exercise of stock appreciation rights or pursuant to
other stock-based awards or a performance award, the participant will recognize
taxable ordinary income in an amount equal to the cash and/or fair market value
of the Common Stock received.
Special rules apply to a director or officer subject to liability under
Section 16(b) of the Exchange Act.
In all the foregoing cases the Company will be entitled to a deduction
at the same time and in the same amount as the participant recognizes ordinary
income, subject to the following limitations. Under Section 162(m) of the Code,
certain compensation payments in excess of $1 million are subject to a
limitation on deductibility of the Company. The limitation on deductibility
applies with respect to that portion of a compensation payment for a taxable
year in excess of $1 million to either the Company's Chief Executive Officer or
any one of the other four most highly compensated executive officers. Certain
performance-based compensation is not subject to the limitation on
deductibility. Options and stock appreciation rights can qualify for this
performance-based exception, but only if they are granted at fair market value,
the total number of shares that can be granted to an executive for any period is
stated, and stockholder and Board approval is obtained. Restricted stock does
not satisfy the definition of performance-based compensation unless the lapse of
the restriction period is based on the attainment of specified performance goals
approved by the Company's stockholders. The option, stock appreciation right and
performance award portions of the 1994 Plan have been drafted to allow
compliance with those performance-based criteria.
As of January 16, 2001, the last reported sales price per share of
Common Stock as reported on the OTC Bulletin Board was $1.00.
-13-
THE BOARD OF DIRECTORS OTHER BUSINESS
AtRECOMMENDS A VOTE FOR APPROVAL OF THE AMENDED
AND RESTATED 1994 PLAN TO INCREASE THE NUMBER OF SHARES OF COMMON STOCK RESERVED
FOR ISSUANCE UNDER THE 1994 PLAN.
PROPOSAL NO. 4 - RATIFICATION OF THE
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors will request that the datestockholders ratify the
appointment of this Proxy Statement, management knowsArthur Andersen LLP as independent public accountants to examine
the financial statements of the Company for the fiscal year ending December 31,
2001. A representative of Arthur Andersen LLP will be present at the Special
Meeting, will have an opportunity to make a statement if he or she desires to do
so, and will be available to respond to appropriate questions from stockholders.
Audit Fees. The aggregate fees billed for professional services
rendered for the audit of the Company's annual and quarterly financial
statements for the year ended December 31, 1999 were $26,000.
All Other Fees. The aggregate fees billed for services rendered by
Arthur Andersen LLP for the year ended December 31, 1999, other than the audit
fees disclosed above, were $5,750.
For the year ended December 31, 1999, the Company's Audit Committee did
not consider whether the provision of services unrelated to the audit was
compatible with maintaining the principal accountant's independence.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF ARTHUR ANDERSEN LLP AS INDEPENDENT PUBLIC ACCOUNTANTS OF THE
COMPANY.
PROPOSALS OF STOCKHOLDERS
Any stockholder wishing to have a proposal considered for inclusion in
the proxy materials for the Company's 2001 annual meeting of stockholders must
set forth such proposal in writing and file it with the Secretary of the Company
no other business
that may properly comelater than a reasonable time before the Special Meeting. However,Company begins to print and mail its
proxy materials for the Company's 2001 annual meeting of stockholders. In
addition, if any other matters
properly comethe Company receives notice of a shareholder proposal later than a
reasonable time before the Company mails its proxy materials for the Company's
2001 annual meeting of stockholders, the persons named as proxies in the enclosed form ofproxy
statement and accompanying proxy will have discretionary authority to vote on
that shareholder proposal.
INCORPORATION BY REFERENCE
The Financial Statements and Management's Discussion and Analysis of
Financial Condition and Results of Operations contained in the proxies received in responseCompany's Annual
Report to this solicitation in
accordanceStockholders for the fiscal year ended December 31, 1999, transmitted
with their best judgment on such matters.the Proxy Statement, are hereby incorporated by reference. No other
portions of the Annual Report shall be deemed incorporated herein.
FINANCIAL INFORMATION
THE COMPANY'S 1999 ANNUAL REPORT TO STOCKHOLDERS ACCOMPANIES THESE
MATERIALS. COPIES OF THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB FOR THE FISCAL
YEAR ENDED DECEMBER 31, 1999 MAY BE OBTAINED FROM THE COMPANY WITHOUT CHARGE
UPON WRITTEN REQUEST TO THE COMPANY. REQUESTS SHOULD BE DIRECTED TO THE
CONTROLLER, A-FEM MEDICAL CORPORATION, 10180 S.W. NIMBUS AVENUE, SUITE J-5,
PORTLAND, OREGON 97223.
By Order of the Board of Directors
J. Peter Burke/s/ Steven T. Frankel
--------------------------------------------------------
Steven T. Frankel, President Chief Operating Officer and Chief FinancialExecutive Officer
November 11, 1997
-4-February 9, 2001
-14-
8
APPENDIX 1
A-FEM MEDICAL CORPORATION
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
CHARTER
Adopted August 4, 2000
I. Overall Purpose
The primary purpose of the Audit Committee is to assist the Board of
Directors in achieving its oversight responsibilities in the following areas:
|X| Overseeing that management has maintained the reliability and integrity of
the accounting policies and
financial reporting and disclosure practices of the Company;
|X| Overseeing that management has established and maintained processes to
assure that an adequate system of internal control over key business risks
is functioning within the Company;
|X| Overseeing that management has established and maintained processes to
assure compliance by the Company with all applicable laws, regulations and
Company policies.
II. Composition
The Audit Committee shall be comprised of two or more directors as
determined by the Board, each of whom shall be independent directors, and free
from any relationship that, in the opinion of the Board, would interfere with
the exercise of his or her independent judgment as a member of the Committee.
All members of the Committee shall have a working familiarity with basic finance
and accounting practices, and at least one member of the Committee shall have
accounting or related financial management expertise.
The members of the Committee shall be elected by the Board at the
annual organizational meeting of the Board and will serve until their successors
shall be duly elected and qualified. Unless a Chair is elected by the full
Board, the members of the Committee may designate a Chair by majority vote of
the full Committee membership.
III. Meetings
The Committee shall meet at least quarterly, prior to the Company's
release of earnings for the preceding quarter. In addition to the Committee
members, Company management and the independent accountants will attend these
quarterly meetings. The agenda for the quarterly meetings shall include, at a
minimum, a review of the Company's financial results and an executive session
with the independent accountants. The Committee will include other agenda topics
which, in its opinion, are necessary to executing its responsibilities under
this charter. The Committee may meet more frequently as circumstances dictate.
IV. Activities
In fulfilling its overall purpose, the audit committee shall annually schedule
and carry out the following activities. The five broad areas of activities
include:
|X| General
|X| Reporting
|X| Independent Accountants
|X| Key Risks and Controls
|X| Ethical and Legal Standards
Activities
Area: GENERAL
1. Determine that each Committee member is independent and free from any
relationships that would interfere with the exercise of his or her judgment
as a member of the Committee. Definition of independence would exclude
directors who:
Have been employed by the corporation during the past three years,
o Accept compensation in excess of $60,000 from the Company, or any of
its affiliates during the previous fiscal year other than for board
service, benefits under a tax-qualified retirement plan, or
non-discretionary compensation,
o Are members of the immediate family of any executive officer employed
during the past three years,
o Are executives of other corporations where any of the corporations
executives serves on the compensation committee
o Is a partner in, a controlling shareholder or executive officer of any
for-profit business organization to which the corporation made or
received payments in any of the past three years that exceed 5% of the
company's or business organizations consolidated gross revenues for
that year, or $200,000, whichever is greater. Payments resulting
solely from investments in the company's securities need not be
considered for this purpose.
2. Determine that all Committee members are "financially literate" and at
least one member has financial management experience, as defined by the
full board.
3. Review and update this Charter periodically, at least annually, as
conditions dictate. Full board approval is required for adoption and
significant changes to the charter.
4. Submit the minutes of all meetings of the audit committee to, or discuss
the matters discussed at each meeting with the full Board of Directors.
5. The audit committee shall have the power to conduct or authorize
investigations into any matters within the committee's scope of
responsibilities. The committee shall be empowered to retain independent
counsel, accountants, or others to assist it in the conduct of any
investigation.
Area: REPORTING
1. Review the Company's annual financial statements and any reports or other
financial information submitted to any governmental body, or the public,
including any certification, report, opinion, or review rendered by the
independent accountants.
2. Review with management and the Company's independent public accountants the
applicability and impact of any new pronouncements issued by FASB or other
applicable regulatory agencies.
3. Disclose in the annual proxy statement whether the Committee has satisfied
its responsibilities in compliance with this charter. Specifically, the
report would require audit committees to state that they have reviewed and
discussed the financial statements with management, discussed the items
required by SAS 61 (including the quality of reporting) with independent
auditors, and indicate that the audit committee has received the written
report from auditors required by ISB 1 regarding auditors' independence.
Finally, the report would require audit committee's to recommend to the
Board of Directors that the audited financial statements be included in the
Annual Report on Form 10-K for filing with the Commission.
4. Publish the written charter in the annual report at least every three years
or in the next proxy statement after a significant amendment.
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5. Meet with (telephonic or in person) financial management and the
independent accountants following the completion of the independent
accountants SAS #71 interim financial review and prior to the form 10Q
filing/release of earnings.
Area: INDEPENDENT ACCOUNTANTS
1. Review and approve the selection of the independent accountants. It should
be clear to the independent accountants that they are ultimately
accountable to the board of directors and the audit committee as
representatives of the shareholders
2. Review with the independent accountants the scope of their examinations of
the books and records of the Company and its subsidiaries and direct the
special attention of the auditors to specific matters or areas deemed by
the Committee or the auditors to be of special significance; and
authorizing the auditors to perform such supplemental reviews or audits as
the Committee may deem desirable.
3. On an annual basis, receive a formal written statement from the independent
auditors as to all significant relationships the accountants have with the
Company to determine the accountants' independence.
4. Review with management and the independent auditor their qualitative
judgments about the appropriateness, not just the acceptability, of
accounting principles and financial disclosure practices used or proposed
and, particularly, about the degree of aggressiveness or conservatism of
its accounting principles and underlying estimates.
3
5. Review with management and the independent accountants at the completion of
their audit:
o The existence of any fraud or illegal acts that the auditor may have
become aware of;
o Any significant deficiencies in the design or operation of internal
controls noted during the audit;
o Selection of and changes in significant accounting policies or their
application;
o Process used by management in making significant accounting judgments
or estimates
o Significant audit adjustments
o Review by the auditors of other information in the audited financial
statements.
o Disagreements with management
o Consultation, if any, with other auditors on significant accounting
matters
Serious difficulties encountered during the audit
6. Consider recommendations from the independent accountants and internal
auditors regarding internal controls, information technology controls and
security and other matters relating to the Company and its subsidiaries and
reviewing the correction of controls or processes deemed to be needing
improvement.
7. Provide sufficient opportunity for the independent auditors to meet with
the members of the audit committee without members of management present.
Among the items to be discussed in these meetings are the independent
auditors' evaluation of the Company's financial, accounting, and auditing
personnel, and the cooperation that the independent auditors received
during the course of the audit.
Area: KEY RISKS AND CONTROLS
1. Inquire of management, the independent auditors about significant risks or
exposures and assess the steps management has taken to minimize such risks.
2. Review accounting and financial human resources and succession planning.
Area: ETHICAL AND LEGAL STANDARDS
1. Review, with the Company's counsel, legal compliance matters including
corporate securities trading policies.
2. Perform any other activities consistent with this Charter, the Company's
By-laws and governing law, as the Committee or the Board deems necessary or
appropriate.
3. Review and approve updates periodically to the Corporations Code of Conduct
and ensure that management has established a system to enforce this Code.
4. Perform any other activities consistent with this Charter, the
Corporation's By-laws and governing law, as the Committee or the Board
deems necessary or appropriate.
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APPENDIX 2
AMENDMENT TO THE ARTICLES OF INCORPORATION
OF A-FEM MEDICAL CORPORATION
Article FourthSection 4.1 of the Articles of Incorporation shall be deleted in its
entirety and the following substituted therefor.
FOURTH.therefor:
"4.1 Authorized Capital
The corporation is authorized to issue two classes of
stock to be designated, respectively, "Common Stock" and
"Preferred Stock." The total number of shares of stock whichthat
the corporation shall have authority to issue shall be
43,000,000,100,000,000, consisting of 33,000,00075,000,000 shares of Common Stock
with a par value of $.01 per share, and 10,000,00025,000,000 shares of
Preferred Stock with a par value of $.01 per share."
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APPENDIX 3
A-FEM MEDICAL CORPORATION
AMENDED AND RESTATED
1994 INCENTIVE AND NON-QUALIFIED STOCK OPTION PLAN
1. Purpose. The purpose of this Incentive and Non-Qualified Stock Option Plan
(the "Plan") is to enable A-Fem Medical Corporation (the "Company") to attract
and retain the services of: (i) selected employees, officers and directors of
the Company or of any subsidiary of the Company; and (ii) selected nonemployee
agents, consultants, advisors, persons involved in the sale or distribution of
the Company's products and independent contractors of the Company or any
subsidiary.
2. Shares Subject to the Plan. Subject to adjustment as provided below and in
paragraph 14, the shares to be offered under the Plan shall consist of Common
Stock of the Company, and the total number of shares of Common Stock that may be
issued under the Plan shall not exceed 5,100,000 shares. Subject to adjustment
from time to time as provided in paragraph 14, not more than 500,000 shares of
Common Stock may be made subject to awards under the Plan to any individual
participant in the aggregate in any one fiscal year of the Company, such
limitation to be applied in a manner consistent with the requirements of, and
only to the extent required for compliance with, the exclusion from the
limitation on deductibility of compensation under Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code"). The shares issued under the Plan
may be authorized and unissued shares or reacquired shares. If an option, stock
appreciation right or performance unit granted under the Plan expires,
terminates or is canceled, the unissued shares subject to such option, stock
appreciation right or performance unit shall again be available under the Plan.
If shares sold or awarded as a bonus under the Plan are forfeited to the Company
or repurchased by the Company, the number of shares forfeited or repurchased
shall again be available under the Plan.
3. Effective Date and Duration of Plan.
(a) Effective Date. This restatement of the Plan shall be effective as
of July 10, 1997, the date as of which the Plan was approved by the vote of the
holders of a majority of the shares of the Common Stock of the Company.
(b) Duration. The Plan shall continue in effect until all shares
available for issuance under the Plan have been issued and all restrictions on
such shares have lapsed. The Board of Directors may suspend or terminate the
Plan at any time except with respect to options, performance units and shares
subject to restrictions then outstanding under the Plan. Termination shall not
affect any outstanding options, any right of the Company to repurchase shares or
the forfeitability of shares issued under the Plan.
4. Administration. The Plan shall be administered by a committee appointed by
the Board of Directors of the Company (the "Committee"). If and so long as the
Common Stock is registered under Section 12(b) or 12(g) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), the Board of Directors
shall consider in selecting members of the Committee, the provisions regarding
(a) "outside directors" as contemplated by Section 162(m) of the Code and (b)
"nonemployee directors" as contemplated by Rule 16b-3 under the Exchange Act.
The Committee shall consist of not fewer than two members of the Company's Board
of Directors. The Board of Directors may from time to time remove members from,
or add members to, the Committee. Vacancies on the Committee, howsoever caused,
shall be filled by the Board of Directors. The Committee shall select one of its
members as Chairman, and shall hold meetings at such times and places as it may
determine. A majority of the Committee may act at a meeting at which a quorum is
present, or acts reduced to or approved in writing by a majority of the members
of the Committee shall be the valid acts of the Committee. The Committee shall
from time to time at its discretion determine: (i) those Officers, Directors,
employees (including key and non-key), consultants and others who shall be
granted options; (ii) the number of shares of stock to be optioned to each; and
(iii) subject to the express provisions of the Plan, the terms of all options so
granted. Other than "Formula Awards" granted pursuant to paragraph 13, no
Director while a member of the Committee shall be eligible to receive an option
under the Plan.
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The interpretation and construction by the Committee of any provision
of the Plan or of any option granted under it shall be final unless otherwise
determined by the Board of Directors. No member of the Board of Directors or the
Committee shall be liable for any action or determination made in good faith
with respect to the Plan or any option granted under it.
If at any time the Committee shall not be in office, or has fewer than
two members, the Board of Directors shall perform the functions of the
Committee.
If authority is delegated to the Committee, all references to the Board
of Directors in the Plan shall mean and relate to the Committee except: (i) as
otherwise provided by the Board of Directors; and (ii) only the Board of
Directors may amend or terminate the Plan as provided in paragraphs 3 and 17.
5. Types of Awards; Eligibility. The Board of Directors may, from time to time,
take the following actions, separately or in combination, under the Plan: (i)
grant Incentive Stock Options, as defined in Section 422 of the Code, as
provided in paragraphs 6(a) and 6(b); (ii) grant options other than Incentive
Stock Options ("Non-Statutory Stock Options") as provided in paragraphs 6(a) and
6(c); (iii) award stock bonuses as provided in paragraph 7; (iv) sell shares
subject to restrictions as provided in paragraph 8; (v) grant stock appreciation
rights as provided in paragraph 9; (vi) grant cash bonus rights as provided in
paragraph 10; (vii) grant performance units as provided in paragraph 11; and
(viii) grant foreign qualified awards as provided in paragraph 12. The persons
who shall be eligible to receive Incentive Stock Options shall be such
Officer-employees and other employees (whether or not they are Directors) of the
Company or its subsidiaries as the Committee or, if there is no Committee, the
Board of Directors, shall select from time to time. Directors who are not
employees, consultants and others, who have a relationship with the Company or
its subsidiaries, may only receive Non-Statutory Stock Options. Officers and
employees may also receive Non-Statutory Stock Options. An optionee may hold
more than one option, but only on the terms and subject to the restrictions
hereafter set forth. Members of the Committee, and members of the Board of
Directors if there is no Committee, shall only be eligible to receive grants
under the Plan pursuant to paragraph 13.
At the discretion of the Board of Directors or the Committee, if
appointed, an individual may be given an election to surrender an award in
exchange for the grant of a new award.
6. Option Grants.
(a) General Rules Relating to Options.
(i) Terms of Grant. The Board of Directors may grant options
under the Plan. With respect to each option grant, the Board of Directors shall
determine the number of shares subject to the option, the option price, the
period of the option, the time or times at which the option may be exercised and
whether the option is an Incentive Stock Option or a Non-Statutory Stock Option.
At the time of the grant of an option or at any time thereafter, the Board of
Directors may provide that an optionee who exercised an option with Common Stock
of the Company shall automatically receive a new option to purchase additional
shares equal to the number of shares surrendered and may specify the terms and
conditions of such new options.
(ii) Exercise of Options. Except as provided in paragraph
6(a)(iv) or as determined by the Board of Directors, no option granted under the
Plan may be exercised unless at the time of such exercise the optionee is
employed by or is in the service of the Company or any subsidiary of the Company
and shall have been so employed or have provided such service continuously since
the date such option was granted. Absence on leave or on account of illness or
disability under rules established by the Board of Directors shall not, however,
be deemed an interruption of employment or service for this purpose. Unless
otherwise determined by the Board of Directors, if the optionee does not
exercise an option in any one year with respect to the full number of shares to
which the optionee is entitled in that year, the optionee's rights shall be
cumulative and the optionee may purchase those shares in any subsequent year
during the term of the option.
(iii) Nontransferability. Each Incentive Stock Option and,
unless otherwise determined by the Board of Directors with respect to an option
granted to a person who is neither an Officer nor a Director of the Company,
each other option granted under the Plan by its terms shall be nonassignable and
nontransferable by the optionee, either voluntarily or by
2
operation of law, except by will or by the laws of descent and distribution of
the state or country of the optionee's domicile at the time of death or, for
options other than Incentive Stock Options, pursuant to a qualified domestic
relations order as defined under the Code or Title I of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA").
(iv) Termination of Employment or Service.
(A) General Rule. Unless otherwise determined by the
Board of Directors, in the event the employment or service of the optionee with
the Company or subsidiary terminates for any reason other than because of
physical disability or death as provided in subparagraphs 6(a)(iv)(B) and (C),
the option may be exercised at any time prior to the expiration date of the
option, but if the option is an Incentive Stock Option, it may not be exercised
more than three months following termination of employment. Any option may be
exercised only if and to the extent the optionee was entitled to exercise the
option at the date of such termination.
(B) Termination Because of Total Disability. Unless
otherwise determined by the Board of Directors, in the event of the termination
of employment or service of the optionee with the Company or a subsidiary
because of total disability, the option may be exercised at any time prior to
the expiration date of the option, but if the option is an Incentive Stock
Option, it must be exercised not more than one year after termination of
employment. The term "total disability" means a mental or physical impairment
that is expected to result in death or that has lasted or is expected to last
for a continuous period of 12 months or more and that causes the optionee to be
unable, in the opinion of the Company and two independent physicians, to perform
his or her duties as an employee, Director, Officer or consultant of the Company
and to be engaged in any substantial gainful activity. Total disability shall be
deemed to have occurred on the first day after the Company and the two
independent physicians have furnished their opinions of total disability to the
Company.
(C) Termination Because of Death. Unless otherwise
determined by the Board of Directors, in the event of the death of an optionee
while employed by or providing service to the Company or a subsidiary, the
option may be exercised at any time prior to the expiration date of the option,
but only if and to the extent the optionee was entitled to exercise the option
at the date of death and only by the person or persons to whom such optionee's
rights under the option shall pass by the optionee's will or by the laws of
descent and distribution of the state or country of domicile at the time of
death.
(D) Amendment of Exercise Period Applicable to
Termination. The Board of Directors, at the time of grant or at any time
thereafter, may increase the portion of an option that is exercisable, subject
to such terms and conditions as the Board of Directors may determine.
(E) Failure to Exercise Option. To the extent that
the option of any deceased optionee or of any optionee whose employment or
service terminates is not exercised within the applicable period, all further
rights to purchase shares pursuant to such option shall cease and terminate.
(v) Purchase of Shares. Unless the Board of Directors
determines otherwise, shares may be acquired pursuant to an option granted under
the Plan only upon receipt by the Company of notice in writing from the optionee
of the optionee's intention to exercise, specifying the number of shares as to
which the optionee desires to exercise the option and the date on which the
optionee desires to complete the transaction, and if required in order to comply
with the Securities Act of 1933, as amended, containing a representation that it
is the optionee's present intention to acquire the shares for investment and not
with a view to distribution. Unless the Board of Directors determines otherwise,
on or before the date specified for completion of the purchase of shares
pursuant to an option, the optionee must have paid the Company the full purchase
price of such shares in cash (including, with the consent of the Board of
Directors, cash that may be the proceeds of a loan from the Company) or, with
the consent of the Board of Directors, in whole or in part, in Common Stock of
the Company valued at fair market value, restricted stock, performance units or
other contingent awards denominated in either stock or cash, promissory notes
and other forms of consideration.
No shares shall be issued until full payment for the shares has been
made. With the consent of the Board of Directors, an optionee may request the
Company to apply automatically the shares to be received upon the exercise of a
portion of a stock option (even though stock certificates have not yet been
issued) to satisfy the purchase price for additional
3
portions of the option. Each optionee who has exercised an option shall
immediately upon notification of the amount due, if any, pay to the Company in
cash amounts necessary to satisfy any applicable federal, state and local tax
withholding requirements. If additional withholding is or becomes required
beyond any amount deposited before delivery of the certificates, the optionee
shall pay such amount to the Company on demand. If the optionee fails to pay the
amount demanded, the Company may withhold that amount from other amounts payable
by the Company to the optionee, including salary, subject to applicable law.
With the consent of the Board of Directors, an optionee may satisfy this
obligation, in whole or in part, by having the Company withhold amounts due or
by delivering to the Company Common Stock shares that would satisfy the
withholding amount. Upon the exercise of an option, the number of shares
reserved for issuance under the Plan shall be reduced by the number of shares
issued upon exercise of the option.
(b) Incentive Stock Options. Incentive Stock Options shall be
subject to the following additional terms and conditions:
(i) Limitation of Amount of Grants. No employee may be granted
Incentive Stock Options under the Plan if the aggregate fair market value, on
the date of grant, of the Common Stock with respect to which Incentive Stock
Options are exercisable for the first time by the employee during any calendar
year under the Plan and under any other incentive stock option plan (within the
meaning of Section 422 of the Code) of the Company or any parent or subsidiary
of the Company exceeds $100,000.
(ii) Limitation on Grants to 10 Percent Stockholders. An
Incentive Stock Option may be granted under the Plan to an employee possessing
more than 10 percent of the total combined voting power of all classes of stock
of the Company or of any parent or subsidiary of the Company only if the option
price is at least 110 percent of the fair market value of the Common Stock
subject to the option on the date it is granted, as described in paragraph
6(b)(iv), and the option by its terms is not exercisable after the expiration of
five years from the date it is granted.
(iii) Duration of Options. Subject to paragraphs 6(a)(ii) and
6(b)(ii), Incentive Stock Options granted under the Plan shall continue in
effect for the period fixed by the Board of Directors, except that no Incentive
Stock Option shall be exercisable after the expiration of 10 years from the date
it is granted.
(iv) Option Price. The option price per share shall be
determined by the Board of Directors at the time of grant. Except as provided in
paragraph 6(b)(ii), the option price shall not be less than 100 percent of the
fair market value of the Common Stock covered by the Incentive Stock Option at
the date the option is granted. During such time as the Common Stock is not
listed upon an established stock exchange, the fair market value per share shall
be the mean between the closing "bid" and "ask" prices of the Common Stock in
the New York over-the-counter market on the day the option is granted, as
reported by the National Association of Securities Dealers, Inc. If the stock is
listed upon an established stock exchange or exchanges, such fair market value
shall be deemed to be the highest closing price of the Common Stock on such
stock exchange or exchanges on the day the option is granted or if no sale of
the Company's Common Stock shall have been made on any stock exchange that day,
on the next preceding day on which there was a sale of such stock. If there is
no established market for the stock, the fair market value shall be determined
by the most recent prior private sale price of the Common Stock. Subject to the
foregoing, the Board of Directors in fixing the option price shall have full
authority and discretion so long as they shall act in good faith.
(v) Limitation on Time of Grant. No Incentive Stock Option
shall be granted on or after the tenth anniversary of the effective date of the
Plan.
(vi) Conversion of Incentive Stock Options. The Board of
Directors may at any preferentialtime without the consent of the optionee convert an
Incentive Stock Option to a Non-Statutory Stock Option.
(c) Non-Statutory Stock Options. Non-Statutory Stock Options shall
be subject to the following terms and conditions in addition to those set forth
in paragraph 6(a) above:
(i) Option Price. The option price for Non-Statutory Stock
Options shall be determined by the Board of Directors at the time of grant and
may be any amount determined by the Board of Directors.
4
(ii) Duration of Options. Non-Statutory Stock Options granted
under the Plan shall continue in effect for the period fixed by the Board of
Directors.
7. Stock Bonuses. The Board of Directors may award shares under the Plan as
stock bonuses. Shares awarded as a bonus shall be subject to the terms,
conditions and restrictions determined by the Board of Directors (which may be
based on continuous service with the Company or the achievement of performance
goals related to profits, profit growth, profit-related return ratios, cash flow
or total stockholder return, where such goals may be stated in absolute terms or
relative to comparison companies), as the Committee shall determine in its sole
discretion, which terms, conditions and restrictions shall be set forth in the
instrument evidencing the award. The restrictions may include restrictions
concerning transferability and forfeiture of the shares awarded, together with
such other restrictions as may be determined by the Board of Directors. If
shares are subject to forfeiture, all dividends or other distributions paid by
the Company with respect to the shares shall be retained by the Company until
the shares are no longer subject to forfeiture, at which time all accumulated
amounts shall be paid to the recipient. The Board of Directors may require the
recipient to sign an agreement as a condition of the award, but may not require
the recipient to pay any monetary consideration other than amounts necessary to
satisfy tax withholding requirements. The agreement may contain any terms,
conditions, restrictions, representations and warranties required by the Board
of Directors. The certificates representing the shares awarded shall bear any
legends required by the Board of Directors. The Company may require any
recipient of a stock bonus to pay to the Company in cash upon demand amounts
necessary to satisfy any applicable federal, state or local tax withholding
requirements. If the recipient fails to pay the amount demanded, the Company may
withhold that amount from other amounts payable by the Company to the recipient,
including salary or fees for services, subject to applicable law. With the
consent of the Board of Directors, a recipient may deliver Common Stock to the
Company to satisfy this withholding obligation. Upon the issuance of a stock
bonus, the number of shares reserved for issuance under the Plan shall be
reduced by the number of shares issued.
8. Restricted Stock. The Board of Directors may issue shares under the Plan for
such consideration (including promissory notes and services) as determined by
the Board of Directors. Shares issued under the Plan shall be subject to the
terms, conditions and restrictions determined by the Board of Directors. The
restrictions may include restrictions concerning transferability, repurchase by
the Company and forfeiture of the shares issued, together with such other
restrictions as may be determined by the Board of Directors. If shares are
subject to forfeiture or repurchase by the Company, all dividends or other
distributions paid by the Company with respect to the shares shall be retained
by the Company until the shares are no longer subject to forfeiture or
repurchase, at which time all accumulated amounts shall be paid to the
recipient. All Common Stock issued pursuant to this paragraph 8 shall be subject
to a purchase agreement, which shall be executed by the Company and the
prospective recipient of the shares prior to the delivery of certificates
representing such shares to the recipient. The purchase agreement may contain
any terms, conditions, restrictions, representations and warranties required by
the Board of Directors. The certificates representing the shares shall bear any
legends required by the Board of Directors. The Company may require any
purchaser of restricted stock to pay to the Company in cash upon demand amounts
necessary to satisfy any applicable federal, state or local tax withholding
requirements. If the purchaser fails to pay the amount demanded, the Company may
withhold that amount from other amounts payable by the Company to the purchaser,
including salary, subject to the applicable law. With the consent of the Board
of Directors, a purchaser may deliver Common Stock to the Company to satisfy
this withholding obligation. Upon the issuance of restricted stock, the number
of shares reserved for issuance under the Plan shall be reduced by the number of
shares issued.
9. Stock Appreciation Rights.
(a) Grant. Stock appreciation rights may be granted under the Plan by
the Board of Directors, subject to such rules, terms and conditions as the Board
of Directors prescribes.
(b) Exercise.
(i) Each stock appreciation right shall entitle the holder,
upon exercise, to receive from the Company in exchange therefor an amount equal
in value to the excess of the fair market value on the date of exercise of one
share of Common Stock of the Company over its fair market value on the date of
grant (or, in the case of a stock appreciation right granted in connection with
an option, the excess of the fair market value of one share of Common Stock of
the Company over the option price per share under the option to which the stock
appreciation right relates), multiplied by the number of
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shares covered by the stock appreciation right or the option, or portion
thereof, that is surrendered. No stock appreciation right shall be exercisable
at a time that the amount determined under this subparagraph is negative.
Payment by the Company upon exercise of a stock appreciation right may be made
in Common Stock valued at fair market value, in cash, or partly in Common Stock
and partly in cash, all as determined by the Board of Directors.
(ii) A stock appreciation right shall be exercisable only at
the time or times established by the Board of Directors. If a stock appreciation
right is granted in connection with an option, the following rules shall apply:
(1) the stock appreciation right shall be exercisable only to the extent and on
the same conditions that the related option could be exercised; (2) upon
exercise of the stock appreciation right, the option or portion thereof to which
the stock appreciation right relates terminates; and (3) upon exercise of the
option, the related stock appreciation right or portion thereof terminates.
(iii) The Board of Directors may withdraw any stock
appreciation right granted under the Plan at any time and may impose any
conditions upon the exercise of a stock appreciation right or adopt rules and
regulations from time to time affecting the rights of holders of stock
appreciation rights. Such rules and regulations may govern the right to exercise
stock appreciation rights granted prior to any
seriesadoption or amendment of Preferred Stock,such rules
and regulations as well as stock appreciation rights granted thereafter.
(iv) For purposes of this paragraph 9, the holders of sharesfair market value
of the Common Stock shall be entitled to receive dividends out of fundsdetermined as of the corporation legally available
therefor, atdate the rate and atstock appreciation
right is exercised, under the time or times asmethods set forth in paragraph 6(b)(iv).
(v) No fractional shares shall be issued upon exercise of a
stock appreciation right. In lieu thereof, cash may be providedpaid in an amount equal
to the value of the fraction or, if the Board of Directors shall determine, the
number of shares may be rounded downward to the next whole share.
(vi) Each stock appreciation right granted in connection with
an Incentive Stock Option, and unless otherwise determined by the Board of
Directors andwith respect to a stock appreciation right granted to a person who is
neither an Officer nor a Director of the Company, each other stock appreciation
right granted under the Plan by its terms shall be entitled to receive distributions legally payable to
stockholders onnonassignable and
nontransferable by the liquidationholder, either voluntarily or by operation of law, except
by will or by the laws of descent and distribution of the corporation. The holdersstate or country of
the holder's domicile at the time of death, and each stock appreciation right by
its term shall be exercisable during the holder's lifetime only by the holder;
provided, however, that a stock appreciation right not granted in connection
with an Incentive Stock Option shall also be transferable pursuant to a
qualified domestic relations order as defined under the Code or ERISA.
(vii) Each participant who has exercised a stock appreciation
right shall, upon notification of the amount due, pay to the Company in cash
amounts necessary to satisfy any applicable federal, state or local tax
withholding requirements. If the participant fails to pay the amount demanded,
the Company may withhold that amount from other amounts payable by the Company
to the participant including salary, subject to applicable law. With the consent
of the Board of Directors a participant may satisfy this obligation, in whole or
in part, by having the Company withhold from any shares to be issued upon the
exercise that number of shares that would satisfy the withholding amount due or
by delivering Common Stock to the satisfy the withholding amount.
(viii) Upon the exercise of a stock appreciation right for
shares, the number of shares reserved for issuance under the Plan shall be
reduced by the number of shares issued. Cash payments of stock appreciation
rights shall not reduce the number of shares of Common Stock onreserved for
issuance under the basisPlan.
10. Cash Bonus Rights.
(a) Grant. The Board of one vote per share, shall haveDirectors may grant cash bonus rights under the
rightPlan in connection with: (i) options granted or previously granted; (ii) stock
appreciation rights granted or previously granted; (iii) stock bonuses awarded
or previously awarded; and (iv) shares sold or previously sold under the Plan.
Cash bonus rights will be subject to vote
for the election of members ofrules, terms and conditions as the Board of
Directors may prescribe. Unless otherwise determined by the Board of Directors
with respect to a cash bonus right granted to a person who is neither an Officer
nor a Director of the corporationCompany, each cash bonus right granted under the Plan by
its terms shall be nonassignable and nontransferable by the right to vote on all other matters,holder, either
voluntarily or by
6
operation of law, except where a separate classby will or seriesby the laws of descent and distribution of
the corporation's stockholders vote by classstate or series. Holderscountry of the holder's domicile at the time of death or pursuant
to a qualified domestic relations order as defined under the Code or ERISA. The
payment of a cash bonus shall not reduce the number of shares of Common Stock
reserved for issuance under the Plan.
(b) Cash Bonus Rights in Connection With Option. A cash bonus right
granted in connection with an option will entitle an optionee to a cash bonus
when the related option is exercised (or terminates in connection with the
exercise of a stock appreciation right related to the option) in whole or in
part. If an optionee purchases shares upon exercise of an option and does not
exercise a related stock appreciation right, the amount of the bonus shall not be
entitleddetermined by multiplying the excess of the total fair market value of the
shares to cumulate their votesbe acquired upon the exercise over the total option price for the
electionshares by the applicable bonus percentage. If the optionee exercises a related
stock appreciation right in connection with the termination of directors.
Preferred Stock. Sharesan option, the
amount of Preferred Stock maythe bonus shall be issued from timedetermined by multiplying the total fair market
value of the shares and cash received pursuant to time
in one or more series, in any manner permittedthe exercise of the stock
appreciation right by law, asthe applicable bonus percentage. The bonus percentage
applicable to a bonus right shall be determined from time to time by the Board
of Directors but shall in no event exceed 75 percent.
(c) Cash Bonus Rights in Connection With Stock Bonus. A cash bonus
right granted in connection with a stock bonus will entitle the recipient to a
cash bonus payable when the stock bonus is awarded or when restrictions, if any,
to which the stock is subject lapse. If bonus stock awarded is subject to
restrictions and statedis repurchased by the Company or forfeited by the holder, the
cash bonus right granted in connection with the stock bonus shall terminate and
may not be exercised. The amount and timing of payment of a cash bonus shall be
determined by the Board of Directors.
(d) Cash Bonus Rights in Connection With Stock Purchase. A cash bonus
right granted in connection with the purchase of stock pursuant to paragraph 8
will entitle the recipient to a cash bonus when the shares are purchased or when
restrictions, if any, to which the stock is subject lapse. Any cash bonus right
granted in connection with shares purchased pursuant to paragraph 8 shall
terminate and may not be exercised in the resolutionevent the shares are repurchased by
the Company or resolutions
providingforfeited by the holder pursuant to applicable restrictions. The
amount of any cash bonus to be awarded and timing of payment of a cash bonus
shall be determined by the Board of Directors.
(e) Taxes. The Company shall withhold from any cash bonus paid pursuant
to this paragraph 10 the amount necessary to satisfy any applicable federal,
state and local withholding requirements.
11. Performance Units. The Board of Directors may grant performance units
consisting of monetary units which may be earned in whole or in part if the
Company achieves certain goals established by the Board of Directors over a
designated period of time, but not in any event more than 10 years. The goals
established by the Board of Directors may include earnings per share, return on
stockholders' equity, return on invested capital, and such other goals as may be
established by the Boards of Directors. In the event that the minimum
performance goal established by the Board of Directors is not achieved at the
conclusion of a period, no payment shall be made to the participants. In the
event the maximum corporate goal is achieved, 100 percent of the monetary value
of the performance units shall be paid to or vested in the participants. Partial
achievement of the maximum goal may result in a payment or vesting corresponding
to the degree of achievement as determined by the Board of Directors. Payment of
an award earned may be in cash or in Common Stock or in a combination of both,
and may be made when earned, or vested and deferred, as the Board of Directors
determines. Deferred awards shall earn interest on the terms and at a rate
determined by the Board of Directors. Unless otherwise determined by the Board
of Directors with respect to a performance unit granted to a person who is
neither an Officer nor a Director of the Company, each performance unit granted
under the Plan by its terms shall be nonassignable and nontransferable by the
holder, either voluntarily or by operation of law, except by will or by the laws
of descent and distribution of the state or country of the holder's domicile at
the time of death or pursuant to a qualified domestic relations order as defined
under the Code or ERISA. Each participant who has been awarded a performance
unit shall, upon notification of the amount due, pay to the Company in cash
amounts necessary to satisfy any applicable federal, state and local tax
withholding requirements. If the participant fails to pay the amount demanded,
the Company may withhold that amount from other amounts payable by the Company
to the participant, including salary or fees for services, subject to applicable
law. With the consent of the Board of Directors a participant may satisfy this
obligation, in whole or in part, by having the Company withhold from any shares
to be issued that number of shares that would satisfy the withholding amount due
or by delivering Common Stock to the Company to satisfy the withholding amount.
The payment of a performance unit in cash shall not reduce the number of shares
of Common Stock
7
reserved for issuance thereof,under the Plan. The number of shares reserved for issuance
under the Plan shall be reduced by the number of shares issued upon payment of
an award.
12. Foreign Qualified Grants. Awards under the Plan may be granted to such
Officers and employees of the Company and its subsidiaries and such other
persons described in paragraph 1 residing in foreign jurisdictions as the Board
of Directors may determine from time to time. The Board of Directors may adopt
such supplements to the Plan as may be necessary to comply with the applicable
laws of such foreign jurisdictions and to afford participants favorable
treatment under such laws; provided, however, that no award shall be granted
under any such supplement with terms which are more beneficial to the
participants than the terms permitted by the Plan.
13. Formula Awards to Committee Members. Each Director appointed to the
Committee shall be granted Non-Statutory Stock Options for 30,000 shares of
Common Stock on the day such Committee member is so appointed and thereafter
further grants of Non-Statutory Stock Options for 30,000 shares of Common Stock
on the third anniversary of the grant of such Committee member's most prior
grant under this paragraph 13; provided, however, that the aggregate grant to
newly appointed Committee members shall be reduced on an option for option basis
by the amount of any option grants accepted by such appointee from the Company
within the prior 24-month period (the "Formula Options"). The Formula Options
granted to such Committee member shall have an exercise price per share equal to
the fair market value of Common Stock on the date of grant. Each Formula Option
granted under this paragraph 13 shall become exercisable in three equal
installments on each of the first three anniversaries of the date of grant. Each
portion of each Formula Option granted under this paragraph 13 shall be
exercisable for 10 years after the date of grant. Upon termination of a
Director's membership on the Board other than due to such Director's death or
"total disability" (as defined in paragraph 6(a)(4)(B)), any Formula Options
which are then exercisable may be exercised by such Director at any time prior
to the issuanceexpiration of such option's term or within three months following such
cessation of membership, whichever period is shorter. The exercise price for
each Formula Option granted pursuant to this paragraph 13 is payable in the
manner prescribed in paragraph 6(a)(v). The terms and provisions of this Plan
shall also apply to the grant and exercise of Formula Options, to the extent
such other provisions do not contradict the express provisions of this paragraph
13.
14. Changes in Capital Structure. If the outstanding Common Stock of the Company
is hereafter increased or decreased or changed into or exchanged for a different
number or kind of shares or other securities of the Company or of another
corporation by reason of any reorganization, merger, consolidation, plan of
exchange, recapitalization, reclassification, stock split-up, combination of
shares thereof. Theor dividend payable in shares, appropriate adjustment shall be made by
the Board of Directors in the number and kind of shares available for awards
under the Plan. In addition, except with respect to transactions referred to in
paragraph 15, the Board of Directors shall make appropriate adjustment in the
number and kind of shares as to which outstanding options and stock appreciation
rights, or portions thereof then unexercised, shall be exercisable, so that the
optionee's proportionate interest before and after the occurrence of the event
is maintained. Notwithstanding the foregoing, the Board of Directors shall have
no obligation to effect any adjustment that would or might result in the
authority to fixissuance of fractional shares, and determineany fractional shares resulting from any
adjustment may be disregarded or provided for in any manner determined by the
rights and
preferencesBoard of Directors. Any such adjustments made by the Board of Directors shall be
conclusive. If the stockholders of the Company receive capital stock from
another corporation ("Exchange Stock") in exchange for their shares of Common
Stock in any series so established.
No Preemptive Rights. Stockholderstransaction involving a merger, consolidation or plan of exchange,
all options granted hereunder shall be converted into options to purchase shares
of Exchange Stock (unless the Company and the corporation issuing the Exchange
Stock, in their sole discretion, determine that any or all such options granted
hereunder are to be treated as set forth in the following sentence) in the same
proportion as used for determining the number of shares of Exchange Stock the
holders of the Common Stock receive in such merger. In the event of dissolution
of the Company or a merger, consolidation or plan of exchange affecting the
Company to which paragraph 15 does not apply, in lieu of providing for options
and stock appreciation rights as provided above in this paragraph 14, the Board
of Directors may, in its sole discretion, provide 30-day period prior to such
event during which optionees shall have the right to exercise options and stock
appreciation rights in whole or in part without any limitation on exercisability
and upon the expiration of which 30-day period all unexercised options and stock
appreciation rights shall immediately terminate.
15. Acceleration in Certain Events. Notwithstanding any other provisions of the
Plan, all options and stock appreciation rights outstanding under the Plan shall
immediately become exercisable in full for the remainder of their terms at any
time when any one of the following events has taken place:
8
(a) The stockholders of the Company approve one of the following
("Approved Transactions"):
(i) Any consolidation, merger or plan of exchange, involving
the Company ("Merger") pursuant to which Common Stock would be converted into
cash; or
(ii) Any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all or substantially all of
the assets of the Company or the adoption of any plan or proposal for the
liquidation or dissolution of the Company; or
(b) A tender or exchange offer, other than one made by the Company, is
made for Common Stock (or securities convertible into Common stock) and such
offer results in a portion of those securities being purchased and the offeror
after the consummation of the offer is the beneficial owner (as determined
pursuant to Section 13(d) of the Exchange Act), directly or indirectly, of at
least 20 percent of the outstanding Common Stock (an "Offer"); or
(c) The Company receives a report on Schedule 13D under the Exchange
Act reporting the beneficial ownership by any person of 20 percent or more of
the Company's outstanding Common Stock, except that if such receipt shall occur
during a tender offer or exchange offer by any person other than the Company or
a wholly owned subsidiary of the Company, acceleration of exercisability shall
not take place until the conclusion of such offer; or
(d) During any period of 12 months or less, individuals who at the
beginning of such period constituted a majority of the Board of Directors cease
for any reason to constitute a majority thereof unless the nomination or
election of such new Directors was approved by a vote of at least two-thirds of
the Directors then still in office who were Directors at the beginning of such
period.
All options and stock appreciation rights that are accelerated pursuant
to this paragraph 15 shall terminate upon the dissolution of the Company or upon
the consummation of any Merger pursuant to which Common Stock would be converted
to cash. The terms used in this paragraph 15 and not defined elsewhere in the
Plan shall have the same meanings as such terms have in the Exchange Act and the
rules and regulations adopted thereunder.
16. Corporate Mergers, Acquisitions, etc. The Board of Directors may also grant
options, stock appreciation rights, performance units, stock bonuses and cash
bonuses, and issue restricted stock under the Plan having terms, conditions and
provisions that vary from those specified in this Plan provided that any such
awards are granted in substitution for, or in connection with the assumption of,
existing options, stock appreciation rights, stock bonuses, cash bonuses,
restricted stock and performance units granted, awarded or issued by another
corporation doand assumed or otherwise agreed to be provided for by the Company
pursuant to or by reason of a transaction involving a corporate merger,
consolidation, acquisition of property or stock, separation, reorganization or
liquidation to which the Company or a subsidiary is a party.
17. Amendment of Plan. The Board of Directors may at any time, and from time to
time, modify or amend the Plan in such respects as it shall deem advisable
because of changes in the law while the Plan is in effect or for any other
reason. Except as provided in paragraphs 6(a) (iv), 9, 14 and 15, however, no
change in an award already granted shall be made without the written consent of
the holder of such award. Notwithstanding any of the foregoing, stockholder
approval (sufficient under applicable state law) is required for any Plan
amendment which: (a) materially increases the total number of shares subject to
the Plan (except as provided in paragraph 14); (b) materially modifies the class
of eligible employees under the Plan; or (c) effects a change relating to
Incentive Stock Options which is inconsistent with the Code, ERISA, or rules and
regulations adopted thereunder.
18. Approvals. The obligations of the Company under the Plan are subject to the
approval of state and federal authorities or agencies with jurisdiction in the
matter. The Company will use its best efforts to take steps required by state or
federal law or applicable regulations, including rules and regulations of the
Securities and Exchange Commission and any stock exchange on which the Company's
shares may then be listed, in connection with the grants under the Plan. The
foregoing notwithstanding, the Company shall not be obligated to issue or
deliver Common Stock under the Plan if such issuance or delivery would violate
applicable state or federal securities laws.
9
19. Employment and Service Rights. Nothing in the Plan, or any award pursuant to
the Plan, shall: (i) confer upon any employee any right to be continued in the
employment of the Company or any subsidiary or interfere in any way with the
right of the Company or any subsidiary by whom such employee is employed to
terminate such employee's employment at any time, for any reason, with or
without cause, or to decrease such employee's compensation or benefits; or (ii)
confer upon any person engaged by the Company any right to be retained or
employed by the Company or to the continuation, extension, renewal or
modification of any compensation, contract or arrangement with or by the
Company.
20. Rights as a Stockholder. The recipient of any award under the Plan shall
have preemptive rights.
-5-no rights as a stockholder with respect to any Common Stock until the date
of issue to the recipient of a stock certificate for such shares. Except as
otherwise expressly provided in the Plan, no adjustment shall be made for
dividend or other rights for which the record date occurs prior to the date such
stock certificate is issued.
10
9
PROXY FOR THE SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 12, 1997MARCH 8, 2001
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints James E. ReinmuthSteven T. Frankel and J. Peter Burke,William H. Fleming,
and each of them, as Proxies, with full power of substitution, and hereby
authorizes them to represent and to vote, as designed below, all the shares of
Common Stock of A-FEMA-Fem Medical Corporation (the "Company") held of record by the
undersigned on November 7, 1997,January 30, 2001, at the Special Meeting of Stockholders to be
held on December 12, 1997March 8, 2001 or at any adjournment thereof.
1. AMENDMENT OF THE COMPANY'S ARTICLES OF INCORPORATION TO AUTHORIZE A CLASS
OF PREFERRED STOCK.Election of Directors.
Election of the following three nominees to serve as Class 1 directors
for a one-year term or until their successors are duly elected and qualified.
Merry Disney James E. Reinmuth RoseAnna Sevcik
|_| FOR all nominees |_| WITHHOLD AUTHORITY to vote for all nominees
|_| WITHHOLD AUTHORITY for the following only:
(write the name(s) of the nominee(s) in this space)
Election of the following four nominees to serve as Class 2 directors
for a two-year term or until their successors are duly elected and qualified.
William H. Fleming Steven T. Frankel Carol A. Scott James R. Wilson
|_| FOR all nominees |_| WITHHOLD AUTHORITY to vote for all nominees
|_| WITHHOLD AUTHORITY for the following only:
(write the name(s) of the nominee(s) in this space)
- --------------------------------------------------------------------------------
2. Amendment of the Company's Articles of Incorporation to Increase the
Authorized Number of Shares of the Company's Common Stock and Preferred Stock.
Amend the Company's Articles of Incorporation to authorize a
classincrease the authorized number
of shares of the Company's Common Stock and Preferred Stock.
|_| FOR |_| AGAINST |_| ABSTAIN
- --------------------------------------------------------------------------------
-1-
3. Amendment of the A-Fem Medical Corporation 1994 Incentive and
Non-Qualified Stock Option Plan. Amend the A-Fem Medical Corporation 1994
Incentive and Non-Qualified Stock Option Plan (the "1994 Plan") to be designated byincrease the
Boardnumber of Directors.
[ ]shares of the Company's Common Stock reserved for issuance under the
1994 Plan.
|_| FOR [ ]|_| AGAINST [ ]|_| ABSTAIN
In their discretion,- --------------------------------------------------------------------------------
4. Ratification of Independent Auditors for 2001. Ratify the Proxies are authorized to vote upon such other
businessselection
of Arthur Andersen LLP as may properly come before the meeting.Company's independent auditors for the fiscal year
ending December 31, 2001.
|_| FOR |_| AGAINST |_| ABSTAIN
This proxy, when properly executed, will be voted in the manner
directed herein by the undersigned. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED "FOR THE NOMINEES" IN ITEM 1 AND "FOR" ITEM 1.
10ITEMS 2, 3 AND 4.
Please sign below exactly as your name appears
on your stock certificate. When shares are held
jointly, each person should sign. When signing
as attorney, executor, administrator, trustee
or guardian, please give full title as such. An
authorized person should sign on behalf of
corporations, partnerships, limited liabilities
companies and associations and give his or her
title.
Dated: , 1997
SIGNATURE
SIGNATURE IF HELD JOINTLY2001
-----------------------------------
-----------------------------------------------
-----------------------------------------------
Signature
-----------------------------------------------
Signature if held jointly
YOUR VOTE IS IMPORTANT. PROMPT RETURN OF THIS PROXY CARD WILL HELP SAVE THE
EXPENSE OF ADDITIONAL SOLICITATION EFFORTS
EFFORTS.
-2-