SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X] Filed by a Party other than the Registrant [] Check
the appropriate box:
[] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[] Definitive Additional Materials
[] Soliciting Material Pursuant toss.240.14a-12
VITRO DIAGNOSTICS, INC.
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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)
Payment of Filing Fee (Check the appropriate box):
[X] No Fee required.
[] Fee computed on table below per Exchange Act Rules 14a-6(I)(4) and 0-11. 1)
Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[] Fee paid previously with preliminary materials.
[] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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VITRO DIAGNOSTICS, INC.
8100 Southpark Way, Building B-1
Littleton, Colorado 80120
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
December 1, 2000April 10, 2001
The Annual Meeting of Shareholders of Vitro Diagnostics, Inc., a Nevada
corporation (the "Company"), will be held at the Hotel Teatro, located at 1100
14th Street, Denver, Colorado 80202, phone (303) 228-1100 on December 1, 2000,April 10, 2001, at
9:00 a.m., Mountain StandardDenver Time, for the following purposes:
1. To elect five members of the Board of Directors to serve until the next
annual meeting of shareholders and until their successors are elected;
2. To approve Amended and Restated Articles of Incorporation which: (i)
reconcile certain inconsistencies in the existing Articles; (ii) generally
update the existing Articles to be consistent with the current law; and (iii)
streamline, and give greater flexibility to, the capital structure of the
Company by: (a) decreasing the authorized capital of the Company from 500
million to 55 million shares and (b) authorizing 5 million of these shares as a
new equity incentive plan;class of preferred stock;
3. To ratify the appointment of Cordovano and Harvey, P.C. as the Company's
independent accountants for the fiscal year ending October 31, 2000;2001; and
4. To transact such other business as may properly come before the meeting
or any adjournment thereof.
OnlyThe Board of Directors has fixed the close of business on February 23, 2001
as the record date for the determination of the holders of the Company's common
stock, par value $.001, entitled to notice of, and to vote at, the meeting.
Accordingly, only shareholders of record on the books of the Company at the
close of business on October 25, 2000 arethat date will be entitled to notice of and to vote at the
Annual Meeting.Meeting and any adjournment and postponement thereof.
All shareholders are invited and urged to attend the meeting in person. EVEN IF YOU EXPECT TO ATTENDENSURE
YOUR REPRESENTATION AT THE ANNUAL MEETING, YOU ARE REQUESTEDURGED TO COMPLETE, SIGN,
DATE, AND RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED, PRE-ADDRESSED ENVELOPE.
If you attendAny shareholder attending the annual meeting you canmay revoke your Proxyhis or her proxy and
vote in person.person, even if that shareholder has returned a proxy.
A Proxy Statement explaining the matters to be acted upon at the meeting
follows. Please read it carefully.
By Order of the Board of Directors,
/s/ Henry C. Schmerler
-----------------------------
Henry C. Schmerler,William J. Schmuhl, Jr., Secretary
October 30, 2000March 1, 2001
PROXY STATEMENT
VITRO DIAGNOSTICS, INC.
Annual Meeting of Shareholders
December 1, 2000April 10, 2001
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation of
Proxies by the Board of Directors of Vitro Diagnostics, Inc., a Nevada
Corporation (the "Company"), for use at the Annual Meeting of Shareholders of
the Company to be held at the Hotel Teatro, located at 1100 14th Street, Denver,
Colorado 80202, phone (303) 228-1100 on December 1, 2000 a
tApril 10, 2001 at 9:00 a.m., Mountain
StandardDenver
Time, and at any and all adjournments of such meeting. This Proxy Statement and
the enclosed form of Proxy are first being sent to shareholders on or about
October 30, 2000.March 9, 2001.
If the enclosed Proxy is properly executed and returned in time to be voted
at the meeting, the shares represented will be voted in accordance with the
instructions contained therein. Executed Proxies that contain no instructions
will be voted FOR the election of all nominees named herein as directors, FOR
the adoption of a new equity incentive planthe Amended and Restated Articles of Incorporation and FOR the
ratification of the appointment of Cordovano and Harvey, P.C. as auditors.
Shareholders who execute Proxies for the Annual Meeting may revoke their
Proxies at any time prior to their exercise by delivering written notice of
revocation to the Company, by delivering a duly executed Proxy bearing a later
date, or by attending the meeting and voting in person.
The cost of the meeting, including the cost of preparing and mailing this
Proxy Statement and Proxy, will be borne by the Company. The Company may use the
services of its directors, officers, employees and contractors to solicit
Proxies, personally or by telephone, but at no additional salary or
compensation. The Company will also request banks, brokers and others who hold
common stock of the Company in nominee names to distribute Proxy soliciting
materials to beneficial owners and will reimburse such banks and brokers for
reasonable out-of-pocket expenses which they may incur in so doing.
Only holders of record of the Company's common stock, par value $.001 per
share, on October 25, 2000February 23, 2001 are entitled to receive notice and to vote at the
Annual Meeting. Each share of common stock is entitled to one vote. On October
25, 2000February
23, 2001, there were a total of 8,509,3058,809,923 shares of common stock outstanding.
The presence in person or by proxy of not less than one-third of the outstanding
common stock will constitute a quorum for the transaction of business at the
Annual Meeting.
Brokers who hold Common Stockcommon stock in street name and do not receive
instructions from their clients on how to vote on a particular proposal are
permitted to vote on routine proposals but not on non-routine proposals. The
absence of votes on non-routine proposals areis "broker nonvotes." Abstentions and
broker nonvotes will be counted as present for purposes of establishing a
quorum, but will have no effectaffect on the election of directors, the ratification
of the appointment of auditors, the adoption of a new stock option planamended and restated Articles of
Incorporation or any other matter voted on at the meeting because they will not
be counted as votes for or against any matter.
1
YOUR VOTE IS IMPORTANT. PLEASE RETURN YOUR MARKED PROXY CARD PROMPTLY SO YOUR
SHARES CAN BE REPRESENTED, EVEN IF YOU PLAN TO ATTEND THE MEETING IN PERSON.
ELECTION OF DIRECTORS
(Proposal 1 on Proxy Card)
Directors and Executive Officers
- --------------------------------
The Board of Directors currently consists of fourfive members, each of whom is
nominated to serve until the next Annual Meeting of Shareholders and until his
successor is elected and qualified. The Board of Directors has also voted to
increase the number of seats on the Board by one, to five members.
The following table reflects the directors
and executive officers of the Company as of the date of this Proxy Statement, and the additional director
nominee.Statement.
All of the current directors are nominees for reelection at the Annual Meeting.
Name Age Position
------------------------- --- -------------------------------------------
Ronald L. Goode, Ph.D(1) 5657 Chairman of the Board of Directors
James R. Musick, Ph.D 5355 President, Chief Executive Officer
and Director
Erik D. Van Horn 3233 Vice President and Director
Henry C. Schmerler(1) 59 Secretary,Schmerler1 60 Treasurer, Chief Financial Officer
and Director
William J. Schmulh,Schmuhl, Jr.(1) 57 Secretary and Director
nominee
- ------------------------------------------------------
(1) Members of the Audit and Compensation Committees.
- ------------------------------------------------------
The following information summarizes the business experience for the last
five years of the officers directors and director nomineesdirectors of the Company, as well as, where
relevant, the educational background of such individuals:
James R. Musick, Ph.D. was appointed as President and Chief Executive Officer
of the Company on August 7, 2000. From September 1, 1989 until August 7, 2000,
Dr. Musick served as Vice President, Secretary and Chief Operating Officer of
the Company. He has also served as a director of the Company since September 1,
1989. Dr. Musick received a Bachelor of Arts in Biological Sciences in 1968 and
a doctorate in Biological Sciences in 1975 from Northwestern University in
Chicago.
2
Evanston, Illinois.
Erik D. Van Horn was appointed Vice President of the Company on August 7,
2000. He has also been Production Manager and a Directordirector of the Company since
March of 1993. He received his Bachelor of Science in Chemical Engineering from
the University of Colorado in 1990.
2
Ronald L. Goode, Ph.D., a former executive in the pharmaceutical industry,
has served as a Directordirector of the Company since August 7, 2000 and was elected
Chairman of the Board on September 14, 2000. He currently is president and sole
shareholder of Pharma-Links, Inc., a consulting business focusing on strategic
alliances and other collaborative relationships within the pharmaceutical
industry, a position he has held since 1999. Dr. Goode's Ph.D. was earned in
microbial genetics at Thethe University of Georgia. From 1997 to 1999, Dr. Goode
was president and chief executive officer of Unimed Pharmaceuticals, a DelewareDelaware
corporation with securities traded on the Nasdaq National Market System. Prior
to that, Dr. Goode held a variety of executive positions with two major
pharmaceutical firms (G.D. Searle and Company and Pfizer Pharmaceuticals),
including senior vice president of licensing and business development of G.D.
Searle from 1995 to 1997 and president of Searle International from 1991 to
1995. In addition, Dr. Goode was Vice-President of Clinical and Scientific
Affairs for Pfizer Pharmaceuticals from 1985 to 1986.
Henry C. Schmerler has served as a director of the Company since August 7,
2000 and was elected Secretary and Treasurer on September 14, 2000. He also served as
Secretary from September 14, 2000 to December 1, 2000. Mr. Schmerler has acted
as a financial consultant since 1994. Prior to that, he was an executive with
Dun and Bradstreet Corporation, where he held various positions over the course
of thirty years including Vice President of Business Development (1991 - 1994),
Vice President of Customer Relations (1989 - 1991), President of the Credit
Clearing House (1986 - 1989) and President of the National Credit Office (1983 -
1986). Mr. Schmerler received a Bachelor's degree in Economics from Hobart
College, Geneva, New York in 1962.
William J. Schmulh,Schmuhl, Jr. has served as a director and Secretary of the
Company since December 1, 2000. He serves as president and chief executive
officer of Heywood Williams, Inc., a $600 million multi-division manufacturer
and distributor of building products. He has held that position since 1996. He
has been employed with Heywood Williams or one of its divisionspredecessors since 1978,
and served as president and chief executive officer of Bristol Corporation, a
$160 million subsidiary between 1990 and 1996. Prior to that,1978, Mr. SchmulhSchmuhl acted
as a business consultant with Cromwell Management Corporation. He also taught
accounting and business law and acted as department chair of the Department of
Business Administration and Economics at Saint Mary's College, Notre Dame,
Indiana. Prior to that, Mr. SchmulhSchmuhl practiced as an accountant and as an
attorney. He received his Bachelor's degree in Business Administration in 1965
and Juris Doctorate in 1967 from the University of Notre Dame, and an MBA from
the University of Chicago in 1972. Mr. Schmulh also completed the Executive
Program for Smaller Companies in 1984 at Stanford University.
Each director will serve until the next annual meeting of shareholders and
until his successor is duly elected and qualified, or until his resignation or
removal. Officers of the Company serve at the pleasure of the Board of
Directors. There is no family relationship between any of the Company's
directors or executive officers.
If a quorum is present, directors are elected by a plurality of votes (i.e.
the five candidates receiving the highest number of votes will be elected to the
Board of Directors). The Board of Directors unanimously recommends a vote FOR
the nominees listed above.
3
Board of Directors' Meetings and Committees
- -------------------------------------------
During the fiscal year ended October 31, 1999,2000 (hereinafter "last fiscal
year"), the Company's Board of Directors held five meetings and took action
eightthree times by unanimous written consent. Messrs. Roger D.
Hurst, Musick and Van Horn were
the directors during the entire last fiscal year and
all participated in each decision
made by the Board. Mr. Hurst resigned his
positions with the Company effectiveMessrs. Goode and Schmerler were directors from August 7,
2000.2000 through the end of the last fiscal year and participated in each decision
made by the Board during that time period. (See "Changes in Control")
The Board of Directors of the Company maintains a standing Audit and
Compensation Committee. The Audit Committee is responsible for reviewing and
evaluating the Company's financial controls and financial reporting obligations.
The Compensation Committee is responsible for reviewing and evaluating the
duties and performance of the Company's officers and key employees and making
recommendations concerning their compensation. The Compensation Committee also
oversees the Company's stock option plan. The members of the Audit and
Compensation Committees are Messrs. Goode, Schmerler and Schmerler. As theseSchmuhl.
There were no meetings of the Audit and Compensation Committees during the
last fiscal year, as the committees were only recently organized, there were no meetings in fiscal 1999.appointed.
Management Remuneration
- -----------------------
The following table summarizes the total compensation of the chief
executive officer,officer; any person who served as the chief executive officer during
the last fiscal year, ended October 31, 1999, and any other executive officers whose compensation from
the Company exceeded $100,000 during that period (the "Named Officers"):
SUMMARY COMPENSATION
Long Term
Compensation
----------------------Annual Securities
Year Ended Annual Compensation Underlying
Name October 31, Salary Options
- ------------------------------ ----------- --------------------- ---------------------------------- ---------------
James R. Musick, President 2000 $ 57,708 0
and Chief Executive Officer
Roger Hurst,
PresidentHurst* 2000 43,281 0
1999 $55,87655,876 31,848
1998 53,920 100,000
1997 21,600 100,000* Mr. Hurst, former President and Chief Executive Officer, resigned from
the Company effective August 7, 2000 and the compensation reflected is through
that date. See "Changes in Control" and "Certain Transactions - Disposition of
Assets" for additional transactions between Mr. Hurst and the Company.
4
Option Grants For 19992000
- -----------------------
The following table sets forth information regarding the grant of----------------------
No stock options were granted to any of the Named Officers of the Company during the last
fiscal year 1999.
4
Number of % of Total
Securities Options Granted
Underlying to Employees in Exercise Price Expiration
Name Options Fiscal Year ($/share) Date
- --------------------------------------------------------------------------------
Roger D. Hurst 31,848 16% $.625 06-06-2009year.
Year End Option Values
- ---------------------------------------------
The following table sets forth the value of unexercised options held by the
Named Officers at October 31, 19992000 and the value of common stock acquired by Mr.
Hurst during the last fiscal year ended October 31, 1999.year. The last sales price of the Company's common
stock on October 31, 19992000 was $2.31.$1.00.
Value of
Number of unexercised
Shares Unexercised Value of unexercisedin-the-money
Acquired Value Options at in-the-money options at
Name on Exercise Realized($) fiscal year end at fiscal year end
- --------------------------------------------------------------------------------
Roger D. Hurst 600,000 $1,340,000 31,848 $ 13,854 (1)11,943(1)
James R. Musick 0 0 31,848 $ 11,943(1)
- --------------------------------------------------
(1) Based onupon the difference between the exercise price of $.625 and the last
reported sale price of the Company's common stock of $1.06$1.00 per share on
October 25,31, 2000.
- --------------------------------------------------
Stock Option Plan
- -----------------
The Company adopted a new Equity Incentive Plan on October 9, 2000 (the
"New Plan") for the benefit of key personnel and others providing significant
services to the Company. An aggregate of 1,000,000 shares of common stock have
been reserved for issuance under the New Plan. The New Plan will replace the
1992 Equity Incentive Plan (the "1992 Plan"). The 1992 Plan will remain
effective only so long as options remain outstanding under the 1992 Plan. No new
options will be granted under the 1992 Plan, and the only shares that will be
issued under the 1992 Plan are those shares underlying currently outstanding
options.
During the last fiscal year, the Company issued 62,248 shares of common
stock through the cashless exercise of 82,656 options issued under the 1992
Plan. An additional 17,500 shares were issued for $1,400 through the exercise of
17,500 options at $.08 per share. At the fiscal year end, 1,194,844 options
remained outstanding under the 1992 Plan. Subsequently, on or about December 1,
2000, the Company issued 275,088 shares of common stock through the cashless
exercise of 357,480 options, and 323,500 options expired. Currently, 481,364
options remain outstanding under the 1992 Plan, with exercise prices ranging
from $.07 to $1.50 per share.
The New Plan authorizes total stock awards of up to 1,000,000 shares of the
Company's common stock. Awards may take the form of incentive stock options,
non-qualified stock options, restricted stock awards, stock bonuses and other
stock grants. If a stock award made under the New Plan expires, terminates, is
canceled or settled in cash without the issuance of all shares of common stock
covered by the award, those shares will be available for future awards under the
New Plan. Awards may not be transferred except by will or the laws of descent
and distribution. No awards may be granted under the Proposed Plan after
September 30, 2010.
5
The New Plan is administered by the Company's Board of Directors, which may
delegate its authority to a committee of the Board of Directors. The Board of
Directors has the authority to select individuals to receive awards, to
determine the time and type of awards, the number of shares covered by the
awards, and the terms and conditions of such awards in accordance with the terms
of the Plan. In making such determinations, the Board of Directors may take into
account the recipient's current and potential contributions and any other
factors the Board of Directors considers relevant. The recipient of an award has
no choice regarding the form of a stock award. The Board of Directors is
authorized to establish rules and regulations and make all other determinations
that may be necessary or advisable for the administration of the New Plan.
All options granted pursuant to the New Plan shall be exercisable at a
price not less than the fair market value of the common stock on the date of
grant. Unless otherwise specified, the options expire ten years from the date of
grant. As of the date of this Proxy Statement, 66,500 options have been issued
under the New Plan at exercise prices ranging from $.875 to $1.19, all of which
are still outstanding.
Compensation of Directors
- --------------------------
No compensation was paid to any director for the fiscal year ended October
31, 1999. No officer of the Company is entitled to receive any additional
compensation for his services to the Company, including his services as a
director. Beginning in August, 2000, each-------------------------
Each member of the Board of Directors who is not an employee of the Company
receivesreceived options to purchase 10,000 shares of common stock upon appointment to
the Board and is entitled to receive an additional 10,000 options upon
reelection for each additional term. However, as each existing member of the
Board received options in December, no further annual grants will be made until
the Company's annual meeting for the 2001 fiscal year. Additionally,
non-employee Board members receive options for 2000 shares of common stock for
each meeting attended. Additionally, theattended in person and 500 shares of common stock for each meeting
attended by telephone.
The Chairman of the Board received options to purchase 5,000 shares upon
his appointment and chairmen of each standing committee willof the Board receive
options for 20002,000 shares upon histheir appointment. Upon election or reelection as
Chairman of the Board or chairman of a standing committee, the member is
entitled to receive options for an additional 5,000 shares or 2,000 shares,
respectively. All of these options are exercisable at a price equal to the
closing bid price of the Company's common stock on the date of grant and for a
period of ten years thereafter. During the last fiscal year, a total of 35,000
options were granted to Directors.
Each director is also entitled to be reimbursed for reasonable and
necessary expenses incurred on behalf of the Company.
Security Ownership of Certain Beneficial Owners and Management
- --------------------------------------------------------------
The following table sets forth information with respect to the ownership of
the Company's common stock by all officers and directors individually, all
officers and directors as a group, and all beneficial owners known to the
Company to hold more than five percent (5%) of the Company's common stock. As of
September 30, 2000,February 23, 2001, a total of 8,509,3058,809,923 shares of common stock, the Company's
only class of voting stock, were issued and outstanding.
The following shareholders have sole voting and investment power with
respect to the shares, unless it is indicated otherwise.
56
Name and Address of Beneficial Owner Number of Shares %
- ------------------------------------ ---------------- -----
Officers and Directors
----------------------
James R. Musick (1,2) 1,342,189 15.71%1,342,198 15.18%
8100 Southpark Way
Unit B-1
Littleton, COColorado 80120
Erik Van Horn (3) 530,516 5.87%534,016 5.72%
8100 Southpark Way
Unit B-1
Littleton, COColorado 80120
Henry C. Schmerler(4) 166,000 1.92%193,500 2.19%
5095 Joewood Drive
Sanibel, Florida 33957
Ronald L. Goode(5) 71,000 *100,500 1.13%
1051 Melody Road
Lake Forest, ILIllinois 60045
William J. Schmuhl, Jr.(6) 54,800 *
1421 Honan Drive
Southbend, Indiana 46614
Officers and Directors as a group(1,2,3,4,5) 2,105,714 23.13%
(4group(1,2,3,4,5,6) 2,225,014 23.45%
(5 individuals)
Five Percent Shareholders
-------------------------
Roger D. Hurst(1) 1,159,027 13.57%Hurst(7) 1,145,482 13.0%
8100 Southpark Way
Unit B-1
Littleton, CO 80120
The James R. Musick Trust 855,209 10.05%9.70%
Lloyd HansenHansen(8) 1,280,000 15.04%14.53%
2646 S.W. Mapp Rd
STE #304
Palm City, FL 34990
World Wide Capital Investors, LLC 2,370,000 27.85%26.90%
P.O. Box 8
Westcliffe, CO 81252
6
- ---------------------------------------------------
* Less than 1%
7
(1) Includes 31,848 shares of common stock underlying an option exercisable at
$.625 until June 6, 2009.
(2) Includes 855,209 shares held by The James R. Musick Trust, of which Mr.
Musick is a trustee and beneficiary.
(3) Includes 530,516 shares of common stock underlying options exercisable at
prices ranging from $.07 to $.625 and expiring through 2009.
(4) Includes 16,00043,500 shares of common stock underlying options exercisable at
prices ranging from $1.34$.875 to $1.50 and expiring in 2010. Also includes
125,000 shares owned by a limited liability company in which Mr. Schmerler
is a member.member, representing the individual's pro-rata share of common stock
owned by that entity.
(5) Includes 21,00050,500 shares of commom stock underlying options exercisable at
prices ranging from $1.34$.875 to $1.50 and expiring in 2010.
(6) Includes 21,500 shares of common stock underlying options exercisable at
prices ranging from $.875 to $1.19 and expiring in 2010. Also includes
33,300 shares owned by a limited liability company in which Mr. Schmuhl is
a member, representing the individual's pro-rata share of common stock
owned by that entity.
(7) Includes 10,386 shares owned by Compion and 3,000 owned by Compion
Management Services, Inc., companies in which Mr. Hurst is the sole
shareholder.
(8) Includes 40,000 shares owned by Mr. Hansen's immediate family and 100,000
owned by the Barnabus Trust, of which Mr. Hansen is a trustee and
beneficiary.
- ---------------------------------------------------
Changes in Control and Voting Agreement
- ---------------------------------------
Effective August 7, 2000, the Company entered into a number of agreements,
as a result of which it experienced a change in control. Roger D. Hurst, former
President, Chief Executive Officer and a director of the Company, resigned from
those positions and James R. Musick succeeded Mr. Hurst as the President. Two
individuals, Mssrs. Goode and Schmerler, were added to the Board of Directors,
one to fill the vacancy created by the resignation of Mr. Hurst and one to fill
a new position. An additional position was added to the Board and filled by
William J. Schmuhl, Jr., by election of the shareholders on December 1, 2000. In
addition, certain of the Company's shareholders agreed to vote common stock of
the Company in favor of the election and retention of certain directors,
including the foregoing individuals.
OnAlso effective August 7, 2000, the Company sold certain assets formerly
used in its business to a private company controlled by Mr. Hurst. At the same
time, Mr. Hurst resigned his position as President, Chief Executive Officer and
a director of the Company. In accordance with the terms of a shareholders'
agreement executed on the same date, remaining members of the Board of Directors
voted to increase the Board to four individuals. Messrs. Henry Schmerler and
Ronald Goode were then elected to fill the vacancy created by the resignation of
Mr. Hurst and the vacancy created by the expansion of the Board. Simultaneously,
the Board elected James R. Musick, formerly the Company's Vice President and
Secretary, was elected as President on an interim basis pending further consideration by the
Board. Erik Van Horn was elected Vice President and Secretary.
Pursuant to the terms of the shareholders' agreement, World Wide Capital
Investors, LLC ("WWC"), the owner of 2,370,000 shares of the Company's common
stock, Messrs. Musick and Van Horn agreed to vote their shares such thatfor the Board will be comprisedelection
of Messrs. Musick, Schmerler, Goode, Van Horn and William J. Schmulh.Schmuhl, Jr. for a
period of three years. Also in conjunction with the shareholders' agreement,
Messrs. Hurst and Musick granted a proxy with regard to 1,4000,0001,400,000 shares of
their common stock to Ronald Goode or Henry Schmerler to vote as determined by a
majority vote of the Board of Directors. The shareholders' agreement represented
a compromise between the Company's existingthen management and WWC with regard to the
efforts of WWC to nominate and elect certain individuals to the Company's Board
of Directors and otherwise exercise control of the Company.
8
The Company knows of no other arrangements, including the pledge of
securities by any person, which would result in a change of control of the
Company.
7
Certain Transactions
- --------------------
Disposition Of Assets
- ---------------------
Also effective August 7, 2000, pursuant to the terms of a purchase
agreement, the Company sold all of the assets of its antigen divisiondiagnostic operation to
AspenBio, Inc., a private Colorado corporation ("purchaser") controlled by Mr.
Hurst. This transaction was effective for accounting purposes on July 31, 2000.
In exchange for the assets, the purchaser agreed to pay the Company $700,000 and
assume a majority of its debts and liabilities. At closing, the Company received
$250,000 cash and a promissory note in the principal amount of $450,000 payable
September 7, 2000. This note was personally guaranteed by Mr. Hurst. The Note was paid in full on September 7, 2000. In addition,
the purchaser assumed all of the Company's debts and liabilities except for
certain excluded liabilities associated with the business and assets which it retained. As of the date of closing, the
Company estimated thatretained. The debts and liabilities assumed by the assumed liabilities totaled approximately $600,000 on
an unaudited basis.purchaser were valued
at $269,897. The purchaser agreed to payhas paid all of thesematerial liabilities as they
become due and, if not sooner paid, within ninety days of closing, or to obtain
a release ofobtained
releases for the Company from allfor the outstanding liabilities. See MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR RESULTS OF OPERATION and the
Financial Statements contained in the Company's Annual Report on Form 10-KSB for
a more complete description of those liabilities.this transaction.
The assets included in this sale were all of the assets formerly used by
the Company in its antigen division.diagnostic operations. These assets include equipment,
furniture, fixtures, inventory, accounts receivable and intangible assets
associated with the antigen division.that business. These assets were formerly used by the Company to
produce and distribute antigens primarily for diagnostic purposes. Following the
sale, the Company retained patents and other intellectual property which it uses
or proposes to use in connection with aits therapeutic business. The Company intends
to continue that therapeutic business in the future.
The value of the assets transferred in this sale was based on a variety of
factors considered by the Board of Directors. These factors included
negotiations between the parties, historical cash flow of the assets during the
preceding fiscal years, estimated replacement cost of certain assets and
estimates of the assets provided by third parties. The Board did not find it
suitable to and did not assign relative weights to the individual factors
considered in reaching a conclusion as to the estimated value of the assets.
However, the Board believes that each of those factors was material to a
determination of the sale price. The Board of Directors of the Company as then
constituted considered the terms of that transaction no less favorable than
could have been obtained from an unaffiliated third party.
In connection with the purchase agreement, the Company agreed to indemnify
Mr. Hurst and Mr. Hurst has indemnified the Company as to certain liabilities
related to the transaction. The indemnification includes liabilities of the
Company which were assumed by the purchaser.
89
Consulting Agreement
The Company executed an agreement on November 3, 2000 with Pharma-Links,
Inc. (the "Agreement"), a consulting company focusing on strategic alliances and
other collaborative relationships within the pharmaceutical industry. The
agreement allows Pharma-Links, Inc. to investigate and negotiate, if
appropriate, strategic alliances, joint ventures, partnerships, equity
investments, licenses, mergers, sales of assets or other business relationships
to develop the Company's products and technology. It contemplates that
Pharma-Links may make introductions to potential partners, provide counsel to
the Company in negotiating or structuring the relationship, make presentations
and negotiate on the Company's behalf. Pharma-Links is owned and operated by Dr.
Ronald Goode, a director of the Company.
The Agreement provides for payment of a fee to Pharma-Links, Inc. equal to
5% of the aggregate consideration received with respect to any agreement entered
into by the Company with a third-party pursuant to the terms and conditions of
the Agreement, and an additional 1% for each $10 million of such aggregate
consideration in excess of $30 million, subject to a maximum fee of 10% for any
aggregate consideration in excess of $80 million. The Board of Directors
considered the terms and conditions of this agreement no less favorable than
could have been obtained from an unaffiliated third party.
Other Events
- ------------
In connection with the compromise with WWC and the sale of assets to the
purchaser, the Company executed a settlement agreement and mutual release
relating to claims pending between the parties. Parties to the settlement
include the Company, purchaser, Hurst individually, WWC, Kyln Roth, a manager of
WWC, Musick and Van Horn individually. This agreement releases and discharges
each party from any and all claims pending between them except for claims
arising out of the shareholders' agreement, purchase agreement or other
documents referenced therein.
In conjunction with the settlement agreement, the Company and WWC executed
a registration rights agreement relating to common stock owned by WWC. This
agreement obligates the Company to register up to 2,370,000 shares of the
Company's common stock with the Securities and Exchange Commission upon the
request of WWC and to keep that registration effective for a period of up to six
months. The Company agreed to pay all costs and expenses in connection with that
registration except commissions payable upon sale of the common stock by the
shareholder.
During fiscal year 1999, the Company retired all promissory notes
previously outstanding to officers or directors. The Company paid $28,400 to Mr.
Hurst, former President and Chief Executive Officer of the Company, including
$4,200 in interest and $62,222 to Dr. Musick, including $29,811 of interest. The
Board of Directors, as then constituted, considered the terms of those
transactions to be no less favorable than could have been obtained from an
unaffiliated third party.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
- -----------------------------------------------------------------------------------------------------------------------------------------
The following sets forth each director, officer or beneficial owner of more
than ten percent of any class of equity securities of the registrant registered
pursuant to Section 12 that failed to file on a timely basis, Forms 3, 4 or 5 as
required by Section 16(a) during the most recent fiscal year or prior years.
The numbers of late Form 3, Form 4 and Form 5 reports, and the late Form 4
transactions reported are as follows:
10
Name of reporting Person Late Form 3 Late Form 4 Late Form 5 Transactions
- ------------------------ ----------- ----------- ----------- ------------
Roger D. HurstErik Van Horn 2 2
Lloyd Hansen* 1
1 1 1
James R. Musick 1 1 1 1* Mr. Hansen is a beneficial owner of more than ten percent, but the
Company does not believe that Mr. Hansen has filed any reporting Forms in the
most recent fiscal years.
ADOPTION OF PROPOSED EQUITY INCENTIVE PLANAMENDED AND RESTATED
ARTICLES OF INCORPORATION
(Proposal 2 on Proxy Card)
The Board of Directors has also adopted and recommended to the shareholders
the adoption of an Equity Incentive Plan ("Proposed Plan") which was adopted byOn February 11, 2001, the Board of Directors asunanimously adopted, subject
to shareholder approval, the Amended and Restated Articles of October 9, 2000.Incorporation
("Proposed Articles") and requests that the shareholders ratify the adoption of
those Articles. The complete text of the Proposed PlanArticles is included as
Exhibit A3.1 to this proxy statement. The Board recommends that the shareholders
carefully review the Proposed Plan.
TheArticles, and recommends a vote FOR the Proposed
Plan is intended to promote the Company's long-term financial
interests by attracting and retaining directors, executive, managerial and other
key employeesArticles.
By way of outstanding ability and also consultants and other persons
rendering substantial service tobackground, the Company was originally formed as Labtek, Inc., a
Colorado corporation, on February 3, 1986. It merged with Imperial Management,
Inc., a Nevada corporation on December 8, 1986, with Imperial Management being
the surviving corporation. Imperial Management amended its Articles to change
its name to Labtek, Inc. contemporaneous with the merger. The new entity was,
and continues to be, governed by providing a competitive
compensation programNevada law and by aligning the interestsArticles of the Company's directors,
employeesIncorporation
and others with thoseBylaws of its shareholders.
9
CURRENT PLAN
Effective December 2, 1992,Imperial Management. In 1987, the Company adopted thechanged its name to
Vitro Diagnostics, Inc.1992 Stock Option Plan (the "1992 Plan") forInc. In 1988, the benefitCompany amended its Articles again to
increase the number of officers,
directors and other personnel providing substantial assistance to the Company.
An aggregate of 3,000,000authorized shares of common stock were reserved for issuance
underfrom 50,000,000 to
500,000,000 shares. This history of the 1992 Plan. To date, optionsmerger and the name change has caused
some confusion as to purchasewhich Articles and Bylaws actually govern the Company.
Furthermore, the Articles have not been substantially revised since the original
merger. For this reason, the Board believes an aggregateamendment and restatement of 1,910,003the
Articles is necessary so that one document with all of the accurate information
regarding the Company, including its current name, is available to govern the
Company.
The Proposed Articles are intended to decrease the amount of authorized
common stock, to authorize a class of preferred stock, to update the existing
Articles of Incorporation to be consistent with the current law and to cure
certain inconsistencies within the Articles themselves and between the Articles
and the Bylaws.
The material changes made by the Proposed Articles are summarized as
follows:
o The authorized common stock of the Company is proposed to be reduced from
500,000,000 shares have been issued under the 1992 Plan.to 50,000,000 shares. The 1992 Plan is administered by a Compensation Committee as designated by
the Board of Directors believes
that 500,000,000 is an excessive amount of authorized common stock and that
it is not necessary in relation to the Company's present capital structure.
The authorization of 500,000,000 shares was made at a time when the Company
had many more shares outstanding, and needed more shares to maintain its
then existing capital structure. After the reverse split of all outstanding
common stock on a one for 200 basis in 1991, and in view of the Company.present
needs of the Company, 500,000,000 is no longer necessary. The Compensation Committee presently
consistsBoard of
Ronald Goode and Henry Schmerler. The 1992 Plan provides forDirectors believes that this reduction will more accurately reflect the
issuance of stock options for the benefit of employees, non-employee directors,
consultantsneeds of the Company and others who render significant service. According
to the 1992 Plan, the determinationreduce potential dilution of those eligible to receive stock options,
and the amount, price, type and timing of each stock option and the terms and
conditionsshareholders.
11
o The authorized capital of the respectiveCompany is proposed to include a new class of
5,000,000 shares of preferred stock option agreements shall rest in the sole
discretion of the Compensation Committee, subjectand to the provisions of the 1992
Plan. Also, all stock options granted under the plan must be granted within ten
years from the date the plan was adopted.
The Proposed Plan is intended to offer more flexibility to the Company by
allowing a greater variety of compensation alternatives. Where the 1992 Plan
provides for the issuance of stock options only, the Proposed Plan permits
incentive and non-qualified stock options, restricted stock awards, stock
bonuses and other stock awards. In addition, the Proposed Plan has been updated
to reflect changes to the Internal Revenue Code, as amended, and various
provisions of securities laws.
Finally, the Board believes that it is prudent to put an updated equity
incentive plan into place before the 1992 Plan expires by its terms.
STOCK COVERED BY THE PROPOSED PLAN
Subject to adjustments described below and annual increases of 4% of the
Company's outstanding common stock or an amount determined bygrant the Board of Directors the
Proposed Plan authorizes totalauthority, consistent with Nevada law, to designate different series of
preferred stock awards of upand to 1,000,000
sharesfix the dividend rights, voting rights (which may be
greater or lesser then the voting rights of the Company's common stock. Awards may take the form of grant of
incentive stock options, non-qualified stock options, restricted stock awards,
stock bonuses,stock) and other
stock grants. If a stock award made under the Proposed
Plan expires, terminates, is canceled or settled in cash without the issuance of
all shares of common stock covered by the award, those shares will be available
for future awards under the Proposed Plan. Awards may not be transferred except
by will or the laws of descentrights and distribution. No awards may be granted under
the Proposed Plan after September 30, 2010.
10
ADMINISTRATION
The Proposed Plan is administered by the Company's Board of Directors,
which may delegate its authority to a committeepreferences of the Boardpreferred stock, to the fullest extent now or
hereafter permitted by law. The current Articles do not contain
authorization of Directors.preferred stock. The Board of Directors hasbelieves that the
authority to select individuals to receive awards, to
determineexistence of a class of preferred stock will provide greater flexibility
for financing of the time and type of awards,Company's activities in the number of shares covered by the
awards, and the terms and conditions of such awards in accordance with the termsfuture.
Adoption of the Proposed Plan. In making such determinations,Articles and subsequent issuance of preferred
stock may subject the holders of the common stock to certain risks. The
preferred stock, if approved, would allow the Board of Directors, without
further shareholder approval, to designate the preferences and rights of
any preferred stock issued in the future. Holders of any preferred stock
may take into accountbe granted preferences on liquidation in the recipient'sevent the Company were
dissolved or may receive a preference in payment of dividends. The issuance
of preferred stock may also dilute the earnings per share and voting rights
of current common stock holders. However, no sale or grant of preferred
stock is currently being contemplated, and potential contributions and any
other factorssuch preferred stock would only
be issued when, in the Board of Directors considers relevant. The recipient of an
award has no choice regarding the formjudgment of a stock award. The Board of Directors
is authorized to establish rules and regulations and make all other
determinations that may be necessary or advisable for the administration of the
Proposed Plan.
PARTICIPATION
Participants in the Proposed Plan will consist of directors and such
executive, managerial and other key employees and consultants and others
providing substantial service to the Company as the Board of Directors may
select from time to time. In view of the discretionary authority vested in the
Board of Directors, it is not possible to estimate the number of shares that may
be subject to awards with respect to any individual or group of individuals,
except directors as described previously in this Proxy Statement. Although no
determination has been made as to the number of employees, including officers,
who will be eligible for awards under the Proposed Plan, the Company estimates
that the majority of its directors, officers, employees and consultants,
including non-employee consultants, will be eligible to be considered for awards
under the Proposed Plan.
ANTICIPATED AWARDS
No awards have been made under the Proposed Plan. However, if the Proposed
Plan is approved by the Company's stockholders, it is contemplated that future
awards to members of the Board of Directors,
as described above will be made
under the new plan.
Ifissuance is in the Proposed Plan is approved by the Company's shareholders, it intends
to keep the 1992 Plan in place only so long as options remain outstanding under
the Plan. No new options will be granted under the 1992 Plan, and any shares
which remain available under the 1992 Plan will be added to the authorized but
unissued capital stockbest interests of the Company.
TYPES OF AWARDS
STOCK OPTIONS: A stock option entitlesshareholders.
o The current Articles call for the holder to purchase sharespresence, in person or by proxy, of
one-third of the Company's common stockshares outstanding in order to constitute a quorum at a
price and upon the terms established by themeeting of shareholders. The Board of Directors at the timebelieves it more
appropriate for a majority of the grant. Stock options may be granted for a term of
up to 10 years with an exercise priceoutstanding shares to be establishedpresent in
person or by proxy in order to have a quorum constituted. The Proposed
Articles accomplish this more stringent requirement by being silent on the
Boardsubject, thereby allowing either the bylaws or state law (both of Directorswhich
reflect the majority standard) to designate the required quorum.
o The current Articles state in one section that a majority of not less than the fair market valuea quorum may
take shareholder action, and elsewhere that a majority of the Company's common stock
on the dateholders of
the grant. Subjectoutstanding shares entitled to an individual limit for each recipient, the
Proposed Plan authorizes the grant of both non-qualified stock optionsvote shall be required to take action. These
requirements are inconsistent, and
incentive stock options, in the discretionopinion of the Board of Directors
provided,
however,the appropriate standard, consistent with that only non-qualified options maydictated by current law, is
that a vote of the majority of the shares represented at a meeting should
be grantednecessary to eligible consultants,take shareholder action. Again, the Proposed Articles will
accomplish this more stringent requirement by remaining silent, permitting
either the Bylaws or state law to dictate the appropriate standard.
o Currently, the Articles contain a provision restricting the number of
shareholders if there are less than three directors, and provided thatrequire a related
restrictive legend on the aggregate value (determinedshare certificates. These restrictive provisions
reflected the law at the time the Articles were originally drafted, and
such restrictions are no longer legally required, nor does the Board
believe such restrictions are appropriate or offer any benefit to the
Company. These restrictions have been removed from the Proposed Articles.
12
Because of the grant) ofextensive amendments proposed to the common stock with respectArticles, the Board has
determined that it is appropriate to which incentive stock options are exercisable
forrestate the first time by any employee during any calendar year may not exceed
$100,000. Stock options granted underArticles in full, rather than
to file the various changes as amendments to the 1986 Articles, as already
amended. If the Proposed Plan may be exercised at any
time during the exercise period established by the Board of Directors. The
Proposed Plan sets forth restrictionsArticles are adopted, they will become effective upon
the exercise of stock options upon
termination of the holder's relationshipfiling with the Company by reasonNevada Secretary of death,
disability, retirement or otherwise. The Board of Directors may permit the
exercise price of options to be paid in cash, in shares of common stock, or in
any combination of cash and common stock.
11
RESTRICTED STOCK AWARD: A restricted stock award is an award of common stock
that is subject to certain restrictions imposed pursuant to the plan. The right
of a holder to retain a restricted stock award shall be subject to such
restrictions, including but not limited to his continuous employment by or
performance of services for the Company for a restriction period specified by
the Board or the attainment of specified performance goals and objectives, as
may be established by the Board with respect to such award. The Board may in its
sole discretion require different periods of service or different performance
goals and objectives with respect to different individuals, to different
restricted stock awards or to separate, designated portions of the Stock shares
constituting a restricted stock award.
STOCK BONUS: A stock bonus may be either an outright grant of common stock or a
grant of common stock subject to and conditioned upon certain employment or
performance related goals. The Board may award stock bonuses, subject to such
conditions and restrictions, as it determines in its sole discretion.
OTHER STOCK AWARDS: From time to time during the duration of this plan, the
board may, in its sole discretion, adopt one or more incentive compensation
arrangements pursuant to which the participants may acquire shares of common
stock, whether by purchase, outright grant, or otherwise. Any such arrangements
shall be subject to the general provisions of this plan and all shares of common
stock issued pursuant to such arrangements shall be issued under this plan.
ADJUSTMENTS
In the event of a significant corporate transaction such as a stock
dividend, stock split, extraordinary cash dividend, recapitalization,
reorganization, merger, consolidation, split-up, spin-off, combination or
exchange of shares, the aggregate number of shares with respect to which awards
may be made under the Proposed Plan and the terms and the number of shares of
any outstanding award shall be equitably adjusted by the Company's Board of
Directors in accordance with the plan.
AMENDMENT AND TERMINATION
The Board may at any time terminate, and from time to time may amend or
modify the plan provided, however, that no amendment or modification may become
effective without approval of the amendment or modification by the shareholders
if shareholder approval is required to enable the plan to satisfy any applicable
statutory or regulatory requirements, or if the Company, on the advice of
counsel, determines that shareholder approval is otherwise necessary or
desirable.
No amendment, modification or termination of the plan shall in any manner
adversely affect any options, restricted stock awards, stock bonuses or other
award theretofore granted under the plan, without the consent of the participant
holding such options, restricted stock awards, stock bonuses or other awards.
12
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
Under current United States federal income tax laws, awards granted under
the Proposed Plan will have the consequences set forth below.
The grant of a non-qualified stock option or incentive stock option will
not result in taxable income to the holder at the time of the grant, and the
Company will not be entitled to a deduction at that time.
A holder of a non-qualified stock option generally will realize taxable
ordinary income, at the time of exercise of the option, in an amount equal to
the excess of the fair market value of the shares acquired over the exercise
price for those shares, and the Company will be entitled to a corresponding
deduction.
The exercise of an incentive stock option generally will not result in
taxable income to the holder, nor will the Company be entitled to a deduction at
that time. Generally, if the holder does not dispose of the underlying common
stock during the applicable holding period, then, upon disposition, any amount
realized in excess of the exercise price will be taxed to the holder as capital
gain, and the Company will not be entitled to any deduction for federal income
tax purposes. If the holding period requirements are not met, the holder will
generally realize taxable ordinary income, and a corresponding deduction will be
allowed to the Company, at the time of disposition, in an amount equal to the
lesser of (1) the excess of the fair market value of the shares on the date of
exercise over the exercise price, or (2) the excess, if any, of the amount
realized upon disposition of the shares over the exercise price. The exercise of
an incentive stock option and the disposition of common stock acquired pursuant
thereto must be taken into account in computing the holder's alternative minimum
taxable income.
Upon grant of a restricted or deferred stock award, the fair market value
of the common stock received will be taxable to the holder as ordinary income
when the award vests, and the Company will be entitled to a corresponding
deduction.
All taxable income recognized by a holder of a stock award under the
Proposed Plan is subject to applicable tax withholding which may be satisfied,
under circumstances set forth in the Proposed Plan, through the surrender of
shares of common stock that the holder already owns or to which the holder is
otherwise entitled under the Proposed Plan.
VOTE REQUIRED FOR APPROVALState.
The affirmative vote of a majority of the votesshares entitled to vote at the
annual meeting is required for the adoption of the proposed equity incentive
plan.Amended and Restated
Articles of Incorporation. The Board of Directors recommends a vote forFOR the
adoption of the proposed equity incentive plan,amended and restated Articles of Incorporation, and
proxies solicited by the Board of Directors will be so voted in the absence of
instructions to the contrary.
13
APPOINTMENT OF AUDITORS
(Proposal 3 on Proxy Card)
On October 9, 2000,February 5, 2001, the Board of Directors approved the engagementappointment of
Cordovano and Harvey, P.C. as the principal accountant and independent auditors
for the fiscal year ending October 31, 2000,2001, and solicits the ratification of
this appointment by the shareholders. Cordovano and Harvey, P.C. has acted as
the principal accountant and independent auditor since October 9, 2000. Neither
such firm, any of its members nor any of their associates, has or has had during
the past four years, any financial interest in the business or affairs, direct
or indirect, or any relationship with the Company other than in connection with
their duties as auditors and accountants.
Simultaneous with the engagement of Cordovano and Harvey, P.C., the Board
of Directors dismissedPrior to October 9, 2000, Larry O'Donnell, CPA, P.C. acted as the Company's previous
accountant. The reports of Larry O'Donnell, CPA, P.C.principal
accountant and independent auditors for the past two fiscal
years did not contain an adverse opinion or a disclaimer of opinion and were not
qualified or modified as to uncertainty, audit scope or accounting principles.Company. During ourthe Company's two
most recent fiscal years and the interim period up to October 9, 2000, there
were no disagreements with Larry O'Donnell, CPA, P.C. on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope and procedure which, if not resolved to the satisfaction of Larry
O'Donnell, CPA, P.C., would have caused Larry O'Donnell, CPA, P.C. to make
reference to the matter in its report. Further, there were no reportable events
as that term is described in Item 304(a)(1)(iv)(B) of Regulation S-K.
During the two most recent fiscal years and any subsequent interim period,
the Company has not consulted Cordovano and Harvey, P.C., regarding any matter
requiring disclosure.
Representatives of Cordovano and Harvey, P.C. are expected to be present at
the annual meeting to respond to shareholders' questions and to make any
statements they consider appropriate.
The affirmative vote of a majority of the votesshares entitled to vote at the
annual meeting is required for the adoption of the proposed appointment of the
independent auditors. The Board of Directors recommends a vote forFOR the
ratification of appointment of the independent auditors, and proxies solicited
by the Board of Directors will be so voted in the absence of instructions to the
contrary.
14
SHAREHOLDER PROPOSALS FOR THE 20002001 ANNUAL MEETING
Shareholders who wish to submit a proposal for action at the 20002001 Annual
Meeting of Shareholders must do so in accordance with the regulations of the
Securities and Exchange Commission. In order to be eligible to submit a
proposal, a shareholder must own and have owned, for one year prior to the date
of the annual meeting, at least 1% or $1,000 in market value of securities
entitled to be voted on the proposal, and must continue to hold such securities
through the date of the meeting. For proposals to be considered for inclusion in
the Proxy Statement for the 20002001 annual meeting, they must be received by the
Company no later than November 1, 2000.December 10, 2001. It is anticipated that the next annual
meeting will be held in MarchApril of 2001.2002. Such proposals should be directed to
Vitro Diagnostics, Inc., 8100 Southpark Way, Building B-1, Littleton, Colorado
80120, Attention: Henry C. Schmerler,William J. Schmuhl, Jr., Secretary.
13
ANNUAL REPORT TO SHAREHOLDERS
The Company's Annual Report on Form 10-KSB for the last fiscal year, ended October 31,
1999,
including financial statements and schedules, is included with this Proxy
Statement. WeThe Company will provide a copy without charge of any exhibitexhibits to the Form 10-KSB
without charge to any shareholder upon request.
OTHER BUSINESS
The Board of Directors is not aware of any business to come before the
meeting other than those matters described above in this Proxy Statement. If,
however, any other matters should properly come before the meeting, it is
intended that holders of the Proxies will act in accordance with their judgment
on such matters.
BY ORDER OF THE BOARD OF DIRECTORS:
/s/ Henry C. Schmerler
------------------------------
Henry C. Schmerler,William J. Schmuhl, Jr., Secretary
1514
PROXY
VITRO DIAGNOSTICS, INC.
ANNUAL MEETING OF STOCKHOLDERS
December 1, 2000April 10, 2001
9:00 A.M.
The undersigned hereby appoints Ronald L. Goode and James R. Musick, or
either of them, with full power of substitution, to act as Proxy for the
undersigned, and to vote all shares of common stock of the Company that the
undersigned is entitled to vote at the annual meeting of the Company's
stockholders to be held at the Hotel Teatro, located at 1100 14th Street,
Denver, Colorado 80202, phone (303) 228-1100. The annual meeting will begin at
9:00 a.m. Denver time, on December 1, 2000.April 10, 2001. The phone number of the Company is
(303) 794-2000.798-6882.
This proxy is revocable and will be voted as directed, but if you do not
provide instructions, this proxy will be voted FOR the nominees for director set
forth below and FOR each of the proposals listed. If any other business is
presented at the annual meeting, including whether or not to adjourn the
meeting, this proxy will be voted by the Proxy in accordance with his judgment
of the best interests of the Company and its stockholders.
So that your vote may be represented at the annual meeting, please complete
and sign this proxy as soon as possible. You may return this proxy in the
enclosed postage-paid envelope or you may fax it to the Company at (303)
798-8332.
The Board of Directors recommends a vote FOR each of the nominees for director
set forth below, FOR the adoption of a new equity incentive planthe Amended and Restated Articles of
Incorporation and FOR the ratification of the appointment of Cordovano and
Harvey, P.C. as auditors.
[X] Please indicate your votes by placing and "X" in the corresponding box.
ELECTION OF DIRECTORS
(Proposal 1)
Indicate your vote with respect to the nomination of James R. Musick, Erik D.
Van Horn, Ronald L. Goode, Henry Schmerler and William J. SchmulhSchmuhl, Jr. as
directors:
[ ] FOR all nominees
[ ] FOR all nominees EXCEPT the nominees written on the line below:
------------------------------------------------------------------
[ ] WITHHOLD VOTE with respect to all the nominees
1615
ADOPTION OF PROPOSED EQUITY INCENTIVE PLANAMENDED AND RESTATED
ARTICLES OF INCORPORATION
(Proposal 2)
Indicate your vote with respect to adoption of the proposed equity incentive
plan.Amended and Restated
Articles of Incorporation.
[ ] FOR the proposed equity incentive planAmended and Restated Articles of Incorporation
[ ] AGAINST the proposed equity incentive planAmended and Restated Articles of Incorporation
[ ] ABSTAIN with respect to the proposed equity incentive planAmended and Restated Articles
of Incorporation
APPROVAL OF AUDITORS
(Proposal 3)
Indicate your vote with respect to Proposal 3 which ratifies the appointment of
Cordovano and Harvey, P.C. as the Company's independent accountants for the
fiscal year ending October 31, 2000.
[ ] FOR approval of the auditors
[ ] AGAINST approval of the auditors
[ ] ABSTAIN with respect to the approval of the auditors
The undersigned acknowledges receipt from the Company of (1) the Notice of
Annual Meeting of Stockholders dated October 30, 2000,March 1, 2001, (2) the Proxy Statement
dated October 30, 2000March 1, 2001 and (3) the Annual Report of the Company for the 19992000 fiscal
year prior to the execution of this proxy.
- -----------------------------------------------------------------------------------------------
Signature of Stockholder or Authorized Person:
- -----------------------------------------------------------------------------------------------
Title (if applicable):
Date:
-----------------------------------------------------------------------------------
INSTRUCTIONS: If you are signing as an individual, please sign exactly as your
name appears here in.herein. If you are signing as an attorney, executor, administrator,
trustee, guardian, corporate officer or other authorized person, please give
your full title. If shares are held jointly, either stockholder may sign but
only one signature is required.
17
EXHIBIT A
VITRO DIAGNOSTICS, INC.
EQUITY INCENTIVE PLAN
VITRO DIAGNOSTICS, INC.
EQUITY INCENTIVE PLAN
ARTICLE I
INTRODUCTION
1.1 Establishment. Vitro Diagnostics, Inc., a Nevada corporation (hereinafter
referred to, together with its Affiliated Corporations (as defined in
subsection 2.1(a)) as the "Company" except where the context otherwise
requires), hereby establishes the Vitro Diagnostics, Inc. Equity Incentive
Plan (the "Plan") for certain key employees, directors, consultants and
other persons rendering substantial service to the Company. The Plan
permits the grant of incentive stock options ("Incentive Options") within
the meaning of Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code"), non-qualified stock options ("Non-Qualified Options"),
Restricted Stock Awards, Stock Bonuses, and other stock grants to certain
key employees of the Company and others providing valuable service to the
Company.
1.2 Purposes. The purposes of the Plan are to provide those who are selected
for participation in the Plan with added incentives to continue in the
long-term service of the Company and to create in such persons a more
direct interest in the future success of the operations of the Company by
relating incentive compensation to increases in shareholder value, so that
the income of those participating in the Plan is more closely aligned with
the income of the Company's shareholders. The Plan is also designed to
provide a financial incentive that will help the Company attract, retain
and motivate the most qualified employees and consultants.
ARTICLE II
DEFINITIONS
2.1 Definitions. The following terms shall have the meanings set forth below:
(a) "Affiliated Corporation" means any corporation or other entity
(including but not limited to a partnership) that is affiliated with
the Company through stock ownership or otherwise and is designated as
an "Affiliated Corporation" by the Board, provided, however, that for
purposes of Incentive Options granted pursuant to the Plan, an
"Affiliated Corporation" means any parent or subsidiary of the Company
as defined in Section 424 of the Code.
(b) "Award" means an Option, a Restricted Stock Award, grants of Stock
pursuant to Article IX or other issuances of Stock hereunder.
(c) "Board" means the Board of Directors of the Company.
1
(d) "Code" means the Internal Revenue Code of 1986, as it may be amended
from time to time.
(e) "Committee" means a committee consisting of members of the Board who
are empowered hereunder to take actions in the administration of the
Plan. The Committee shall be so constituted at all times as to permit
the Plan to comply with Rule 16b-3 or any successor rule promulgated
under the Securities Exchange Act of 1934 (the "1934 Act") and the
provisions of section 162(m) of the Code and the regulations
promulgated thereunder. Members of the Committee shall be appointed
from time to time by the Board, shall serve at the pleasure of the
Board and may resign at any time upon written notice to the Board. The
Committee shall select Participants from Eligible Employees and
Eligible Consultants of the Company, and shall determine the awards to
be made pursuant to the Plan and the terms and conditions thereof.
(f) "Disabled" or "Disability" shall have the meaning given to such terms
in Section 22(e)(3) of the Code.
(g) "Effective Date" means the effective date of the Plan, October 9,
2000.
(h) "Eligible Employees" means those key employees (including, without
limitation, officers, directors (whether or not they are also
employees of the Company) and other individuals or entities providing
substantial service) of the Company or any subsidiary or division
thereof, upon whose judgment, initiative and efforts the Company is,
or will become, largely dependent for the successful conduct of its
business. For purposes of the Plan, an employee is an individual whose
wages are subject to the withholding of federal income tax under
Section 3401 of the Internal Revenue Code.
(i) "Eligible Consultants" means those consultants to the Company who are
determined, by the Committee, to be individuals whose services are
important to the Company and who are eligible to receive Awards, other
than Incentive Options, under the Plan.
(j) "Fair Market Value" means the closing price of the Stock on a
securities exchange, national market system, automated quotation
system or bulletin board on which the Stock is traded or reported on a
particular date. If there are no Stock transactions on such date, the
Fair Market Value shall be determined as of the immediately preceding
date on which there were Stock transactions. If the price of the Stock
is not reported or quoted in any such medium, the Fair Market Value of
the Stock on a particular date shall be as determined by the
Committee; provided, however, that even if the Stock is traded or
reported in a recognized medium, if the number of transactions
reported in that medium is such that the Committee determines that the
closing price is not indicative of the price of the Stock, it may
nonetheless determine the Fair Market Value in its discretion. If,
upon exercise of an Option, the exercise price is paid by a broker's
transaction as provided in subsection 7.2(g)(ii)(D), Fair Market
Value, for purposes of the exercise, shall be the price at which the
Stock is sold by the broker.
(k) "Incentive Option" means an Option designated as such and granted in
accordance with Section 422 of the Code.
2
(l) "Non-Qualified Option" means any Option other than an Incentive
Option.
(m) "Option" means a right to purchase Stock at a stated or formula price
for a specified period of time. Options granted under the Plan shall
be either Incentive Options or Non-Qualified Options.
(n) "Option Certificate" shall have the meaning given to such term in
Section 7.2 hereof.
(o) "Option Holder" means a Participant who has been granted one or more
Options under the Plan.
(p) "Option Price" means the price at which shares of Stock subject to an
Option may be purchased, determined in accordance with subsection
7.2(b).
(q) "Participant" means an Eligible Employee or Eligible Consultant
designated by the Committee from time to time during the term of the
Plan to receive one or more of the Awards provided under the Plan.
(r) "Restricted Stock Award" means an award of Stock granted to a
Participant pursuant to Article VIII that is subject to certain
restrictions imposed in accordance with the provisions of such
Section.
(s) "Share" means a share of Stock.
(t) "Stock" means the $0.001 par value Common Stock of the Company.
(u) "Stock Bonus" means either an outright grant of Stock or a grant of
Stock subject to and conditioned upon certain employment or
performance related goals.
2.2 Gender and Number. Except when otherwise indicated by the context, the
masculine gender shall also include the feminine gender, and the definition
of any term herein in the singular shall also include the plural.
ARTICLE III
PLAN ADMINISTRATION
3.1 The Plan shall be administered by the Committee, or in the absence of
appointment of a Committee, by the entire Board of Directors. All
references in the Plan to the Committee shall include the entire Board of
Directors if no such Committee is appointed.
3.2 In accordance with the provisions of the Plan, the Committee shall, in its
sole discretion, select the Participants from among the Eligible Employees
and Eligible Consultants,
3
determine the Awards to be made pursuant to the Plan, the number of shares
of Stock to be issued thereunder and the time at which such Awards are to
be made, fix the Option Price, period and manner in which an Option becomes
exercisable, establish the duration and nature of Restricted Stock Award
restrictions, establish the terms and conditions applicable to Stock
Bonuses and establish such other terms and requirements of the various
compensation incentives under the Plan as the Committee may deem necessary
or desirable and consistent with the terms of the Plan. The Committee shall
determine the form or forms of the agreements with Participants that shall
evidence the particular provisions, terms, conditions, rights and duties of
the Company and the Participants with respect to Awards granted pursuant to
the Plan, which provisions need not be identical except as may be provided
herein; provided, however, that Eligible Consultants shall not be eligible
to receive Incentive Options.
3.3 The Committee may from time to time adopt such rules and regulations for
carrying out the purposes of the Plan as it may deem proper and in the best
interests of the Company. The Committee may correct any defect, supply any
omission or reconcile any inconsistency in the Plan or in any agreement
entered into hereunder in the manner and to the extent it shall deem
expedient and it shall be the sole and final judge of such expediency. No
member of the Committee shall be liable for any action or determination
made in good faith. The determinations, interpretations and other actions
of the Committee pursuant to the provisions of the Plan shall be binding
and conclusive for all purposes and on all persons.
ARTICLE IV
STOCK SUBJECT TO THE PLAN
4.1 Number of Shares. Subject to the provisions regarding changes in capital
described below, the number of Shares that are authorized for issuance
under the Plan in accordance with the provisions of the Plan and subject to
such restrictions or other provisions as the Committee may from time to
time deem necessary shall not exceed 1,000,000 plus, an annual increase to
be added on the day of each Annual Stockholders Meeting beginning with the
Annual Stockholders Meeting in 2001 equal to the least of the following
amounts (i) 4% of the Company's outstanding shares on such date (rounded to
the nearest whole share and calculated on a fully diluted basis), that is
assuming the exercise of all outstanding stock options and warrants to
purchase common stock or (ii) an amount determined by the Board. The Shares
may be either authorized and unissued Shares or previously issues Shares
acquired by the Company. This authorization may be increased from time to
time by approval of the Board and by the stockholders of the Company if, in
the opinion of counsel for the Company, stockholder approval is required.
Shares of Stock that may be issued upon exercise of Options, that are
issued as Restricted Stock Awards or Stock Bonuses, and that are issued as
incentive compensation or other Stock grants under the Plan shall be
applied to reduce the maximum number of Shares remaining available for use
under the Plan. The Company shall at all times during the term of the Plan
and while any Options are outstanding retain as authorized and unissued
Stock at least the number of Shares from time to time required under the
provisions of the Plan, or otherwise assure itself of its ability to
perform its obligations hereunder.
4
4.2 Other Shares of Stock. Any Shares that are subject to an Option that
expires or for any reason is terminated unexercised shall automatically
become available for use under the Plan.
4.3 Adjustments for Stock Split, Stock Dividend, Etc. If the Company shall at
any time increase or decrease the number of its outstanding Shares or
change in any way the rights and privileges of such Shares by means of the
payment of a stock dividend or any other distribution upon such shares
payable in Stock, or through a stock split, subdivision, consolidation,
combination, reclassification or recapitalization involving the Stock, then
in relation to the Stock that is affected by one or more of the above
events, the numbers, rights and privileges of the following shall be
increased, decreased or changed in like manner as if they had been issued
and outstanding, fully paid and nonassessable at the time of such
occurrence: (i) the Shares as to which Awards may be granted under the Plan
and (ii) the Shares then included in each outstanding Award granted
hereunder.
4.4 Other Distributions and Changes in the Stock. If:
(a) the Company shall at any time distribute with respect to the Stock
assets or securities of persons other than the Company (excluding cash
or distributions referred to in Section 4.3), or
(b) the Company shall at any time grant to the holders of its Stock rights
to subscribe pro rata for additional shares thereof or for any other
securities of the Company, or
(c) there shall be any other change (except as described in Section 4.3)
in the number or kind of outstanding Shares or of any stock or other
securities into which the Stock shall be changed or for which it shall
have been exchanged, and if the Committee shall in its discretion
determine that the event described in subsection (a), (b), or (c)
above equitably requires an adjustment in the number or kind of Shares
subject to an Option or other Award, an adjustment in the Option Price
or the taking of any other action by the Committee, including without
limitation, the setting aside of any property for delivery to the
Participant upon the exercise of an Option or the full vesting of an
Award, then such adjustments shall be made, or other action shall be
taken, by the Committee and shall be effective for all purposes of the
Plan and on each outstanding Option or Award that involves the
particular type of stock for which a change was effected.
Notwithstanding the foregoing provisions of this Section 4.4, pursuant
to Section 8.3 below, a Participant holding Stock received as a
Restricted Stock Award shall have the right to receive all amounts,
including cash and property of any kind, distributed with respect to
the Stock upon the Participant's becoming a holder of record of the
Stock.
4.5 General Adjustment Rules. No adjustment or substitution provided for in
this Article IV shall require the Company to sell a fractional share of
Stock under any Option, or otherwise issue a fractional share of Stock, and
the total substitution or adjustment with respect to each Option and other
Award shall be limited by deleting any fractional share. In the case of any
such substitution or adjustment, the total Option Price for the shares of
Stock then subject to
5
an Option shall remain unchanged but the Option Price per share under each
such Option shall be equitably adjusted by the Committee to reflect the
greater or lesser number of shares of Stock or other securities into which
the Stock subject to the Option may have been changed, and appropriate
adjustments shall be made to other Awards to reflect any such substitution
or adjustment.
4.6 Determination by the Committee, Etc. Adjustments under this Article IV
shall be made by the Committee, whose determinations with regard thereto
shall be final and binding upon all parties thereto.
ARTICLE V
CORPORATE REORGANIZATION
5.1 Reorganization. Upon the occurrence of any of the following events, if the
notice required by Section 5.2 shall have first been given, the Plan and
all Options then outstanding hereunder shall automatically terminate and be
of no further force and effect whatsoever, and other Awards then
outstanding shall be treated as described in Sections 5.2 and 5.3, without
the necessity for any additional notice or other action by the Board or the
Company: (a) the merger or consolidation of the Company with or into
another corporation or other reorganization (other than a reorganization
under the United States Bankruptcy Code) of the Company (other than a
consolidation, merger, or reorganization in which the Company is the
continuing corporation and which does not result in any reclassification or
change of outstanding shares of Stock); or (b) the sale or conveyance of
the property of the Company as an entirety or substantially as an entirety
(other than a sale or conveyance in which the Company continues as holding
company of an entity or entities that conduct the business or business
formerly conducted by the Company); or (c) the dissolution or liquidation
of the Company.
5.2 Required Notice. At least 30 days' prior written notice of any event
described in Section 5.1 shall be given by the Company to each Option
Holder and Participant unless (a) in the case of the events described in
clauses (a) or (b) of Section 5.1, the Company, or the successor or
purchaser, as the case may be, shall make adequate provision for the
assumption of the outstanding Options or the substitution of new options
for the outstanding Options on terms comparable to the outstanding Options
except that the Option Holder shall have the right thereafter to purchase
the kind and amount of securities or property or cash receivable upon such
merger, consolidation, other reorganization, sale or conveyance by a holder
of the number of Shares that would have been receivable upon exercise of
the Option immediately prior to such merger, consolidation, sale or
conveyance (assuming such holder of Stock failed to exercise any rights of
election and received per share the kind and amount received per share by a
majority of the non-electing shares), or (b) the Company, or the successor
or purchaser, as the case may be, shall make adequate provision for the
adjustment of outstanding Awards (other than Options) so that such Awards
shall entitle the Participant to receive the kind and amount of securities
or property or cash receivable upon such merger, consolidation, other
reorganization, sale or conveyance by a holder of the number of Shares that
would have been receivable with respect to such Award immediately prior to
such merger, consolidation, other reorganization, sale or
6
conveyance (assuming such holder of Stock failed to exercise any rights of
election and received per share the kind and amount received per share by a
majority of the non-electing shares). The provisions of this Article V
shall similarly apply to successive mergers, consolidations,
reorganizations, sales or conveyances. Such notice shall be deemed to have
been given when delivered personally to a Participant or when mailed to a
Participant by registered or certified mail, postage prepaid, at such
Participant's address last known to the Company.
5.3 Acceleration of Exercisability. Participants notified in accordance with
Section 5.2 may exercise their Options at any time before the occurrence of
the event requiring the giving of notice (but subject to occurrence of such
event), regardless of whether all conditions of exercise relating to length
of service, attainment of financial performance goals or otherwise have
been satisfied. Upon the giving of notice in accordance with Section 5.2,
and all restrictions with respect to Restricted Stock and other Awards
shall lapse immediately. Any Options that are not assumed or substituted
under clauses (a) or (b) of Section 5.2 that have not been exercised prior
to the event described in Section 5.1 shall automatically terminate upon
the occurrence of such event.
5.4 Limitation on Payments. If the provisions of this Article V would result in
the receipt by any Participant of a payment within the meaning of Section
280G of the Code and the regulations promulgated thereunder and if the
receipt of such payment by any Participant would, in the opinion of
independent tax counsel of recognized standing selected by the Company,
result in the payment by such Participant of any excise tax provided for in
Sections 280G and 4999 of the Code, then the amount of such payment shall
be reduced to the extent required, in the opinion of independent tax
counsel, to prevent the imposition of such excise tax; provided, however,
that the Committee, in its sole discretion, may authorize the payment of
all or any portion of the amount of such reduction to the Participant.
ARTICLE VI
PARTICIPATION
Participants in the Plan shall be those Eligible Employees or Consultants
who, in the judgment of the Committee, are performing, or during the term of
their incentive arrangement will perform, vital services in the management,
operation and development of the Company or an Affiliated Corporation, and
significantly contribute, or are expected to significantly contribute, to the
achievement of long-term corporate economic objectives. Eligible Consultants
shall be selected from those non-employee consultants to the Company who are
performing services important to the operation and growth of the Company.
Participants may be granted from time to time one or more Awards; provided,
however, that the grant of each such Award shall be separately approved by the
Committee and receipt of one such Award shall not result in automatic receipt of
any other Award. Upon determination by the Committee that an Award is to be
granted to a Participant, written notice shall be given to such person,
specifying the terms, conditions, rights and duties related thereto. Each
Participant shall, if required by the Committee, enter into an agreement with
the Company, in such form as the Committee shall determine and which is
consistent with the provisions of the Plan, specifying such terms, conditions,
7
rights and duties. Awards shall be deemed to be granted as of the date specified
in the grant resolution of the Committee, which date shall be the date of any
related agreement with the Participant. In the event of any inconsistency
between the provisions of the Plan and any such agreement entered into
hereunder, the provisions of the Plan shall govern.
ARTICLE VII
OPTIONS
7.1 Grant of Options. Coincident with or following designation for
participation in the Plan, a Participant may be granted one or more
Options. The Committee in its sole discretion shall designate whether an
Option is an Incentive Option or a Non-Qualified Option; provided, however,
that only Non-Qualified Options may be granted to Eligible Consultants. The
Committee may grant both an Incentive Option and a Non-Qualified Option to
an Eligible Employee at the same time or at different times. Incentive
Options and Non-Qualified Options, whether granted at the same time or at
different times, shall be deemed to have been awarded in separate grants
and shall be clearly identified, and in no event shall the exercise of one
Option affect the right to exercise any other Option or affect the number
of shares for which any other Option may be exercised, except as provided
in subsection 7.2(j). An Option shall be considered as having been granted
on the date specified in the grant resolution of the Committee.
7.2 Stock Option Certificates. Each Option granted under the Plan shall be
evidenced by a written stock option certificate (an "Option Certificate").
An Option Certificate shall be issued by the Company in the name of the
Participant to whom the Option is granted (the "Option Holder") and in such
form as may be approved by the Committee. The Option Certificate shall
incorporate and conform to the conditions set forth in this Section 7.2 as
well as such other terms and conditions that are not inconsistent as the
Committee may consider appropriate in each case.
(a) Number of Shares. Each Option Certificate shall state that it covers a
specified number of shares of Stock, as determined by the Committee.
(b) Price. The price at which each share of Stock covered by an Option may
be purchased shall be determined in each case by the Committee and set
forth in the Option Certificate, but in no event shall the price be
less than 100 percent of the Fair Market Value of the Stock on the
date an Incentive Option is granted. Furthermore, no ten percent
Stockholder shall be eligible for the grant of an Incentive Stock
Option unless the exercise price of such Option is at least one
hundred ten percent (110%) of the Fair Market Value of the Common
Stock at the date of grant and the Option is not exercisable after the
expiration of five (5) years from the date of grant.
(c) Duration of Options; Restrictions on Exercise. Each Option Certificate
shall state the period of time, determined by the Committee, within
which the Option may be exercised by the Option Holder (the "Option
Period"). The Option Period must end, in all cases, not more than ten
years from the date the Option is granted. The Option Certificate
shall also set forth any installment or other restrictions on Option
exercise during such period, if any, as may be determined by the
Committee. Each Option shall become exercisable (vest) over such
period of time, if any, or upon such events, as determined by the
Committee.
8
(d) Termination of Services, Death, Disability, Etc. The Committee may
specify at the time of granting the Option but not thereafter the
period, if any, after which an Option may be exercised following
termination of the Option Holder's services. The effect of this
subsection 7.2(d) shall be limited to determining the consequences of
a termination and nothing in this subsection 7.2(d) shall restrict or
otherwise interfere with the Company's discretion with respect to the
termination of any individual's services. If the Committee does not
otherwise specify, the following shall apply:
(i) If the services of the Option Holder are terminated within the
Option Period for "cause", as determined by the Company, the
Option shall thereafter be void for all purposes. As used in this
subsection 7.2(d), "cause" shall mean a gross violation, as
determined by the Company, of the Company's established policies
and procedures.
(ii) If the Option Holder becomes Disabled, the Option may be
exercised by the Option Holder within one year following the
Option Holder's termination of services on account of Disability
(provided that such exercise must occur within the Option
Period), but not thereafter. In any such case, the Option may be
exercised only as to the shares as to which the Option had become
exercisable on or before the date of the Option Holder's
termination of services because of Disability.
(iii)If the Option Holder dies during the Option Period while still
performing services for the Company or within the one year period
referred to in (ii) above or the three-month period referred to
in (iv) below, the Option may be exercised by those entitled to
do so under the Option Holder's will or by the laws of descent
and distribution within one year following the Option Holder's
death, (provided that such exercise must occur within the Option
Period), but not thereafter. In any such case, the Option may be
exercised only as to the shares as to which the Option had become
exercisable on or before the date of the Option Holder's death.
(iv) If the services of the Option Holder are terminated (which for
this purpose means that the Option Holder is no longer performing
services for the Company or for Affiliated Corporation) by the
Company within the Option Period for any reason other than cause,
Disability or the Option Holder's death, the Option may be
exercised by the Option Holder within three months following the
date of such termination (provided that such exercise must occur
within the Option Period), but not thereafter. In any such case,
the Option may be exercised only as to the shares as to which the
Option had become exercisable on or before the date of
termination of services.
(e) Transferability. Each Option shall not be transferable by the Option
Holder except by will or pursuant to the laws of descent and
distribution. Each Option is exercisable during the Option Holder's
lifetime only by him or her, or in the event of Disability or
incapacity, by his or her guardian or legal representative.
9
(f) Intentionally omitted
(g) Exercise, Payments, Etc.
(i) Manner of Exercise. The method for exercising each Option granted
hereunder shall be by delivery to the Company of written notice
specifying the number of Shares with respect to which such Option
is exercised. The purchase of such Shares shall take place at the
principal offices of the Company within thirty days following
delivery of such notice, at which time the Option Price of the
Shares shall be paid in full by any of the methods set forth
below or a combination thereof. Except as set forth in the next
sentence, the Option shall be exercised when the Option Price for
the number of shares as to which the Option is exercised is paid
to the Company in full. If the Option Price is paid by means of a
broker's loan transaction described in subsection 7.2(g)(ii)(D),
in whole or in part, the closing of the purchase of the Stock
under the Option shall take place (and the Option shall be
treated as exercised) on the date on which, and only if, the sale
of Stock upon which the broker's loan was based has been closed
and settled, unless the Option Holder makes an irrevocable
written election, at the time of exercise of the Option, to have
the exercise treated as fully effective for all purposes upon
receipt of the Option Price by the Company regardless of whether
or not the sale of the Stock by the broker is closed and settled.
A properly executed certificate or certificates representing the
Shares shall be delivered to or at the direction of the Option
Holder upon payment therefore. If Options on less than all shares
evidenced by an Option Certificate are exercised, the Company
shall deliver a new Option Certificate evidencing the Option on
the remaining shares upon delivery of the Option Certificate for
the Option being exercised.
(ii) The exercise price shall be paid by any of the following methods
or any combination of the following methods at the election of
the Option Holder, or by any other method approved by the
Committee upon the request of the Option Holder:
(A) in cash;
(B) by certified, cashier's check or other check acceptable to
the Company, payable to the order of the Company;
(C) by delivery to the Company of certificates representing the
number of shares then owned by the Option Holder, the Fair
Market Value of which equals the purchase price of the Stock
purchased pursuant to the Option, properly endorsed for
transfer to the Company; provided however, that no Option
may be exercised by delivery to the Company of certificates
representing Stock, unless such Stock has been held by the
Option Holder for more than six months; for purposes of this
Plan, the Fair Market Value of any shares of Stock delivered
in payment of the purchase price upon exercise of the Option
shall be the Fair Market Value as of the exercise date; the
exercise date shall be the day of delivery of the
certificates for the Stock used as payment of the Option
Price; or
10
(D) by delivery to the Company of a properly executed notice of
exercise together with irrevocable instructions to a broker
to deliver to the Company promptly the amount of the
proceeds of the sale of all or a portion of the Stock or of
a loan from the broker to the Option Holder required to pay
the Option Price.
(h) Date of Grant. An Option shall be considered as having been granted on
the date specified in the grant resolution of the Committee.
(i) Withholding.
(i) Non-Qualified Options. Upon exercise of an Option, the Option
Holder shall make appropriate arrangements with the Company to
provide for the amount of additional withholding required by
Sections 3102 and 3402 of the Code and applicable state income
tax laws, including payment of such taxes through delivery of
shares of Stock or by withholding Stock to be issued under the
Option, as provided in Article XV.
(ii) Incentive Options. If an Option Holder makes a disposition (as
defined in Section 424(c) of the Code) of any Stock acquired
pursuant to the exercise of an Incentive Option prior to the
expiration of two years from the date on which the Incentive
Option was granted or prior to the expiration of one year from
the date on which the Option was exercised, the Option Holder
shall send written notice to the Company at the Company's
principal place of business of the date of such disposition, the
number of shares disposed of, the amount of proceeds received
from such disposition and any other information relating to such
disposition as the Company may reasonably request. The Option
Holder shall, in the event of such a disposition, make
appropriate arrangements with the Company to provide for the
amount of additional withholding, if any, required by Sections
3102 and 3402 of the Code and applicable state income tax laws.
(j) Issuance of Additional Option. If an Option Holder pays all or any
portion of the exercise price of an Option with Stock, or pays all or
any portion of the applicable withholding taxes with respect to the
exercise of an Option with Stock that has been held by the Option
Holder for more than a period, not shorter than six months, to be
determined by the Committee, the Committee may, in its sole
discretion, grant to such Option Holder a new Option covering the
number of shares of Stock used to pay such exercise price and/or
withholding tax. The new Option shall have an Option Price per share
equal to the Fair Market Value of a share of Stock on the date of the
exercise of the Option and shall have the same terms and provisions as
the exercised Option, except as otherwise determined by the Committee
in its sole discretion.
11
7.3 Restrictions on Incentive Options.
(a) Initial Exercise. The aggregate Fair Market Value of the Shares with
respect to which Incentive Options are exercisable for the first time
by an Option Holder in any calendar year, under the Plan or otherwise,
shall not exceed $100,000. For this purpose, the Fair Market Value of
the Shares shall be determined as of the date of grant of the Option.
(b) Ten Percent Stockholders. Incentive Options granted to an Option
Holder who is the holder of record of 10% or more of the outstanding
Stock of the Company shall have an Option Price equal to 110% of the
Fair Market Value of the Shares on the date of grant of the Option and
the Option Period for any such Option shall not exceed five years.
7.4 Shareholder Privileges. No Option Holder shall have any rights as a
shareholder with respect to any shares of Stock covered by an Option until
the Option Holder becomes the holder of record of such Stock, and no
adjustments shall be made for dividends or other distributions or other
rights as to which there is a record date preceding the date such Option
Holder becomes the holder of record of such Stock, except as provided in
Article IV.
ARTICLE VIII
RESTRICTED STOCK AWARDS
8.1 Grant of Restricted Stock Awards. Coincident with or following designation
for participation in the Plan, the Committee may grant a Participant one or
more Restricted Stock Awards consisting of Shares of Stock. The number of
Shares granted as a Restricted Stock Award shall be determined by the
Committee.
8.2 Restrictions. A Participant's right to retain a Restricted Stock Award
granted to him under Section 8.1 shall be subject to such restrictions,
including but not limited to his continuous employment by or performance of
services for the Company or an Affiliated Corporation for a restriction
period specified by the Committee or the attainment of specified
performance goals and objectives, as may be established by the Committee
with respect to such Award. The Committee may in its sole discretion
require different periods of service or different performance goals and
objectives with respect to different Participants, to different Restricted
Stock Awards or to separate, designated portions of the Stock shares
constituting a Restricted Stock Award. In the event of the death or
Disability of a Participant, or the retirement of a Participant in
accordance with the Company's established retirement policy, all required
periods of service and other restrictions applicable to Restricted Stock
Awards then held by him shall lapse with respect to a pro rata part of each
such Award based on the ratio between the number of full months of
employment or services completed at the time of termination of services
from the grant of each Award to the total number of months of employment or
continued services required for such Award to be fully nonforfeitable, and
such portion of each such Award shall become fully nonforfeitable. The
remaining portion of each such Award shall be forfeited and shall be
immediately returned to the Company. In the event of a Participant's
termination of employment or consulting services for any other reason, any
Restricted Stock Awards as to which the period for which services are
required or other restrictions have not been satisfied (or waived or
accelerated as provided herein) shall be forfeited, and all shares of Stock
related thereto shall be immediately returned to the Company.
12
8.3 Privileges of a Stockholder, Transferability. A Participant shall not
posses or exercise any voting, dividend, liquidation or other rights with
respect to Stock granted under the Plan unless and until any restrictions
issued in connection with the Stock have been satisfied by the Participant.
Upon the satisfaction of those conditions, if any, the Participant shall be
entitled to exercise and possess voting, dividend, liquidation and other
rights with respect to the Stock in accordance with its terms received by
the Participant under this Article VIII.
8.4 Enforcement of Restrictions. The Committee shall cause a legend to be
placed on the Stock certificates issued pursuant to each Restricted Stock
Award referring to the restrictions provided by Sections 8.2 and 8.3 and,
in addition, may in its sole discretion require one or more of the
following methods of enforcing the restrictions referred to in Sections 8.2
and 8.3:
(a) Requiring the Participant to keep the Stock certificates, duly
endorsed, in the custody of the Company while the restrictions remain
in effect; or
(b) Requiring that the Stock certificates, duly endorsed, be held in the
custody of a third party while the restrictions remain in effect.
ARTICLE IX
STOCK BONUSES
The Committee may award Stock Bonuses to such Participants, subject to such
conditions and restrictions, as it determines in its sole discretion. Stock
Bonuses may be either outright grants of Stock, or may be grants of Stock
subject to and conditioned upon certain employment or performance related goals.
ARTICLE X
OTHER COMMON STOCK GRANTS
From time to time during the duration of this Plan, the Board may, in its
sole discretion, adopt one or more incentive compensation arrangements for
Participants pursuant to which the Participants may acquire shares of Stock,
whether by purchase, outright grant, or otherwise. Any such arrangements shall
be subject to the general provisions of this Plan and all shares of Stock issued
pursuant to such arrangements shall be issued under this Plan.
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ARTICLE XI
RIGHTS OF PARTICIPANTS
11.1 Service. Nothing contained in the Plan or in any Award, or other Award
granted under the Plan shall confer upon any Participant any right with
respect to the continuation of his employment by, or consulting
relationship with, the Company or any Affiliated Corporation, or interfere
in any way with the right of the Company or any Affiliated Corporation,
subject to the terms of any separate employment agreement or other contract
to the contrary, at any time to terminate such services or to increase or
decrease the compensation of the Participant from the rate in existence at
the time of the grant of an Award. Whether an authorized leave of absence,
or absence in military or government service, shall constitute a
termination of service shall be determined by the Committee at the time.
11.2 Nontransferability. No right or interest of any Participant in an Option, a
Restricted Stock Award (prior to the completion of the restriction period
applicable thereto), or other Award granted pursuant to the Plan, shall be
assignable or transferable during the lifetime of the Participant, either
voluntarily or involuntarily, or subjected to any lien, directly or
indirectly, by operation of law, or otherwise, including execution, levy,
garnishment, attachment, pledge or bankruptcy. In the event of a
Participant's death, a Participant's rights and interests in Options,
Restricted Stock Awards, and other Awards, shall, to the extent provided in
Articles VII, VIII, and IX, be transferable by will or the laws of descent
and distribution, and payment of any amounts due under the Plan shall be
made to, and exercise of any Options may be made by, the Participant's
legal representatives, heirs or legatees. If in the opinion of the
Committee a person entitled to payments or to exercise rights with respect
to the Plan is disabled from caring for his affairs because of mental
condition, physical condition or age, payment due such person may be made
to, and such rights shall be exercised by, such person's guardian,
conservator or other legal personal representative upon furnishing the
Committee with evidence satisfactory to the Committee of such status.
11.3 No Plan Funding. Obligations to Participants under the Plan will not be
funded, trusteed, insured or secured in any manner. The Participants under
the Plan shall have no security interest in any assets of the Company or
any Affiliated Corporation, and shall be only general creditors of the
Company.
ARTICLE XII
GENERAL RESTRICTIONS
12.1 Investment Representations. The Company may require any person to whom an
Option, Restricted Stock Award, or Stock Bonus is granted, as a condition
of exercising such Option or receiving such Restricted Stock Award, or
Stock Bonus, to give written assurances in substance and form satisfactory
to the Company and its counsel to the effect that such person is acquiring
the Stock for his own account for investment and not with any present
intention of selling or otherwise distributing the same, and to such other
effects as the Company deems necessary or appropriate in order to comply
with Federal and applicable state securities laws. Legends evidencing such
restrictions may be placed on the Stock Certificates.
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12.2 Compliance with Securities Laws. Each Option, Restricted Stock Award, and
Stock Bonus grant shall be subject to the requirement that, if at any time
counsel to the Company shall determine that the listing, registration or
qualification of the shares subject to such Award grant upon any securities
exchange or under any state or federal law, or the consent or approval of
any governmental or regulatory body, is necessary as a condition of, or in
connection with, the issuance or purchase of shares thereunder, such Award
may not be accepted or exercised in whole or in part unless such listing,
registration, qualification, consent or approval shall have been effected
or obtained on conditions acceptable to the Committee. Nothing herein shall
be deemed to require the Company to apply for or to obtain such listing,
registration or qualification.
ARTICLE XIII
OTHER EMPLOYEE BENEFITS
The amount of any compensation deemed to be received by a Participant as a
result of the exercise of an Option, the sale of shares received upon such
exercise, the vesting of any Restricted Stock Award, receipt of Stock Bonuses,
or the grant of Stock shall not constitute "earnings" or "compensation" with
respect to which any other employee benefits of such employee are determined,
including without limitation benefits under any pension, profit sharing, life
insurance or salary continuation plan.
ARTICLE XIV
PLAN AMENDMENT, MODIFICATION AND TERMINATION
The Board may at any time terminate, and from time to time may amend or
modify the Plan provided, however, that no amendment or modification may become
effective without approval of the amendment or modification by the shareholders
if shareholder approval is required to enable the Plan to satisfy any applicable
statutory or regulatory requirements, or if the Company, on the advice of
counsel, determines that shareholder approval is otherwise necessary or
desirable.
No amendment, modification or termination of the Plan shall in any manner
adversely affect any Options, Restricted Stock Awards, Stock Bonuses or other
Award theretofore granted under the Plan, without the consent of the Participant
holding such Options, Restricted Stock Awards, Stock Bonuses or other Awards.
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ARTICLE XV
WITHHOLDING
15.1 Withholding Requirement. The Company's obligations to deliver shares of
Stock upon the exercise of any Option, the vesting of any Restricted Stock
Award, or the grant of Stock shall be subject to the Participant's
satisfaction of all applicable federal, state and local income and other
tax withholding requirements.
15.2 Withholding With Stock. At the time the Committee grants an Option,
Restricted Stock Award, Stock Bonus, other Award, or Stock, it may, in its
sole discretion, grant the Participant an election to pay all such amounts
of tax withholding, or any part thereof, by electing to transfer to the
Company, or to have the Company withhold from shares otherwise issuable to
the Participant, shares of Stock having a value equal to the amount
required to be withheld or such lesser amount as may be elected by the
Participant. The value of shares of Stock to be withheld shall be based on
the Fair Market Value of the Stock on the date that the amount of tax to be
withheld is to be determined (the "Tax Date"). Any such elections by
Participants to have shares of Stock withheld for this purpose will be
subject to the following restrictions:
(a) All elections must be made prior to the Tax Date.
(b) All elections shall be irrevocable.
(c) If the Participant is an officer or director of the Company within the
meaning of Section 16 of the 1934 Act ("Section 16"), the Participant
must satisfy the requirements of such Section 16 and any applicable
Rules thereunder with respect to the use of Stock to satisfy such tax
withholding obligation.
ARTICLE XVI
REQUIREMENTS OF LAW
16.1 Requirements of Law. The issuance of Stock and the payment of cash pursuant
to the Plan shall be subject to all applicable laws, rules and regulations.
16.2 Federal Securities Law Requirements. If a Participant is an officer or
director of the Company within the meaning of Section 16, Awards granted
hereunder shall be subject to all conditions required under Rule 16b-3, or
any successor rule promulgated under the 1934 Act, to qualify the Award for
any exception from the provisions of Section 16(b) of the 1934 Act
available under that Rule. Such conditions shall be set forth in the
agreement with the Participant which describes the Award or other document
evidencing or accompanying the Award.
16.3 Governing Law. The Plan and all agreements hereunder shall be construed in
accordance with and governed by the laws of the State of Colorado.
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ARTICLE XVII
DURATION OF THE PLAN
Unless sooner terminated by the Board of Directors, the Plan shall
terminate on September 30, 2010, and no Option, Restricted Stock Award, Stock
Bonus, other Award or Stock shall be granted, or offer to purchase Stock made,
after such termination. Options, Restricted Stock Awards, and other Awards,
outstanding at the time of the Plan termination may continue to be exercised, or
become free of restrictions, or paid, in accordance with their terms.
Dated: October 9, 2000
VITRO DIAGNOSTICS, INC.
ATTEST:
_________________________ By: ________________________________
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APPENDIX
Exhibits Description of Exhibit
- ------------- ------------------------------------
Appendix "A" Form of Option Certificate
Appendix "B" Number of Shares Subject to the Plan
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TABLE OF CONTENTS
Page
ARTICLE I - INTRODUCTION 1
1.1 Establishment
1.2 Purposes 1
ARTICLE II - DEFINITIONS 1
2.1 Definitions 1
2.2 Gender and Number 3
ARTICLE III - PLAN ADMINISTRATION 3
ARTICLE IV - STOCK SUBJECT TO THE PLAN 4
4.1 Number of Shares 4
4.2 Other Shares of Stock 5
4.3 Adjustments for Stock Split, Stock Dividend, Etc. 5
4.4 Other Distributions and Changes in the Stock 5
4.5 General Adjustment Rules 5
4.6 Determination by the Committee, Etc. 6
ARTICLE V - CORPORATE REORGANIZATION 6
5.1 Reorganization 6
5.2 Required Notice 6
5.3 Acceleration of Exercisability 7
5.4 Limitation on Payments 7
ARTICLE VI - PARTICIPATION 7
ARTICLE VII - OPTIONS 8
7.1 Grant of Options 8
7.2 Stock Option Certificates 8
7.3 Restrictions on Incentive Options 12
7.4 Shareholder Privileges 12
ARTICLE VIII - RESTRICTED STOCK AWARDS 12
8.1 Grant of Restricted Stock Awards 12
8.2 Restrictions 12
8.3 Privileges of a Stockholder, Transferability 13
8.4 Enforcement of Restrictions 13
ARTICLE IX - STOCK BONUSES 13
ARTICLE X - OTHER COMMON STOCK GRANTS 13
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ARTICLE XI - RIGHTS OF PARTICIPANTS 14
11.1 Service 14
11.2 Nontransferability 14
11.3 No Plan Funding 14
ARTICLE XII - GENERAL RESTRICTIONS 14
12.1 Investment Representations 14
12.2 Compliance with Securities Laws 15
ARTICLE XIII - OTHER EMPLOYEE BENEFITS 15
ARTICLE XIV - PLAN AMENDMENT, MODIFICATION AND TERMINATION 15
ARTICLE XV - WITHHOLDING 16
15.1 Withholding Requirement 16
15.2 Withholding With Stock 16
ARTICLE XVI - REQUIREMENTS OF LAW 16
16.1 Requirements of Law 16
16.2 Federal Securities Law Requirements 16
16.3 Governing Law 16
ARTICLE XVII - DURATION OF THE PLAN 17
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