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
|_| Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material under Rule 14a-12
MOLECULAR DEVICES CORPORATION
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)
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)(1) and 0-11.
1.(1) Title of each class of securities to which transaction applies:
2.----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
3.----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set(set forth the amount on which the
filing fee is calculated and state how it was determined):
4.----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
5.----------------------------------------------------------------------
(5) Total fee paid:
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|_| Fee paid previously with preliminary materials.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.
6.(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
Definitive 14A
8.----------------------------------------------------------------------
(3) Filing Party:
Molecular Devices Corporation
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(4) Date Filed:
April 26,2001----------------------------------------------------------------------
MOLECULAR DEVICES CORPORATION
1311 Orleans Drive
Sunnyvale, CA 94089
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 24, 200123, 2002
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TO THE STOCKHOLDERS OF MOLECULAR DEVICES CORPORATION:
NOTICE IS HEREBY GIVENNotice Is Hereby Given that the Annual Meeting of Stockholders of MOLECULAR DEVICES CORPORATION,Molecular
Devices Corporation, a Delaware corporation (the "Company"), will be held on
Thursday, May 24, 200123, 2002 at 10:30 a.m. local time at the Company's corporate
headquarters, located at 1311 Orleans Drive, Sunnyvale, California 94089 for the
following purposes:
1.(1) To elect directors to serve for the ensuing year and until their
successors are elected.
2.(2) To approve the Company's 1995 Stock Option Plan, as amended, to
increase the aggregate number of shares of Common Stock authorized for
issuance under such plan by 1,000,000 shares (resulting in a net
increase in the shares authorized for issuance under500,000 shares.
(3) To approve the Company's employee equity incentive plans of 470,991 shares based on a concurrent
reduction in the number of shares authorized under LJL BioSystems' 1994
Equity Incentive Plan, 19971995 Employee Stock Plan and 1998 Directors' StockPurchase Plan, as
described in the Proxy Statement accompanying this Notice).
3. To approve an amendment to the Company's Certificate of Incorporationamended, to increase the authorizedaggregate number of shares of Common Stock
from
30,000,000 to 60,000,000authorized for issuance under such plan by 200,000 shares.
4.(4) To ratify the selection of Ernst & Young LLP as independent auditors
of the Company for its fiscal year ending December 31, 2001.
5.2002.
(5) To transact such other business as may properly come before the
meeting or any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The Board of Directors has fixed the close of business on April 23,
2001,March 29, 2002,
as the record date for the determination of stockholders entitled to notice of
and to vote at this Annual Meeting and at any adjournment or postponement
thereof.
By Order of the Board of Directors
/s/ JAMES C. KITCH
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James C. Kitch
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James C. Kitch
SecretarySECRETARY
Sunnyvale, California
April 26, 200122, 2002
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ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN ORDER TO ENSURE YOUR
REPRESENTATION AT THE MEETING. A RETURN ENVELOPE (WHICH IS POSTAGE PREPAID IF
MAILED IN THE UNITED STATES) IS ENCLOSED FOR THAT PURPOSE. EVEN IF YOU HAVE
GIVEN YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE MEETING. PLEASE
NOTE, HOWEVER, THAT IF YOUR SHARES ARE HELD OF RECORD BY A BROKER, BANK OR OTHER
NOMINEE AND YOU WISH TO VOTE AT THE MEETING, YOU MUST OBTAIN FROM THE RECORD
HOLDER A PROXY ISSUED IN YOUR NAME.
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MOLECULAR DEVICES CORPORATION
1311 Orleans Drive
Sunnyvale,ORLEANS DRIVE
SUNNYVALE, CA 94089
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PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
MAY 24, 200123, 2002
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INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors (the
"Board") of Molecular Devices Corporation, a Delaware corporation ("Molecular
Devices" or the "Company"), for use at the Annual Meeting of Stockholders to be
held on May 24, 2001,23, 2002, at 10:30 a.m. local time (the "Annual Meeting"), or at any
adjournment or postponement thereof, for the purposes set forth herein and in
the accompanying Notice of Annual Meeting. The Annual Meeting will be held at
the Company's corporate headquarters, located at 1311 Orleans Drive, Sunnyvale,
California, 94089. The Company intends to mail this proxy statement and
accompanying proxy card on or about April 26, 2001,22, 2002 to all stockholders entitled
to vote at the Annual Meeting.
SOLICITATION
The Company will bear the entire cost of solicitation of proxies, including
preparation, assembly, printing and mailing of this proxy statement, the proxy
card and any additional information furnished to stockholders. Copies of
solicitation materials will be furnished to banks, brokerage houses, fiduciaries
and custodians holding in their names shares of Common Stock beneficially owned
by others to forward to such beneficial owners. The Company may reimburse
persons representing beneficial owners of Common Stock for their costs of
forwarding solicitation materials to such beneficial owners. Original
solicitation of proxies by mail may be supplemented by telephone, telegram or
personal solicitation by directors, officers or other regular employees of the
Company. No additional compensation will be paid to directors, officers or other
regular employees for such services.
VOTING RIGHTS AND OUTSTANDING SHARES
Only holders of record of Common Stock at the close of business on April 23, 2001March
29, 2002 will be entitled to notice of and to vote at the Annual Meeting. At the
close of business on April 23, 2001March 29, 2002, the Company had outstanding and entitled to
vote 16,532,86215,279,435 shares of Common Stock.
Each holder of record of Common Stock on such date will be entitled to one
vote for each share held on all matters to be voted upon at the Annual Meeting.
A quorum of stockholders is necessary to hold a valid meeting. A quorum
will be present if at least a majority of the outstanding shares are represented
by votes at the meeting or by proxy. All votes will be tabulated by the
inspector of election appointed for the meeting, who will separately tabulate
affirmative and negative votes, abstentions and broker non-votes. Abstentions
will be counted towards the tabulation of votes cast on proposals presented to
the stockholders and will have the same effect as negative votes. Except for Proposal 3, brokerBroker
non-votes are counted towards a quorum, but are not counted for any purpose in
determining whether a matter has been approved. With respect to Proposal 3, abstentions and
broker non-votes will have the same effect as negative votes.
REVOCABILITY OF PROXIES
Any person giving a proxy pursuant to this solicitation has the power to
revoke it at any time before it is voted. It may be revoked by filing with the
Secretary of the Company at the Company's principal executive office, 1311
Orleans Drive, Sunnyvale, California 94089, a written notice of revocation or a
duly executed proxy bearing a later date, or it may be revoked by attending the
meeting and voting in person. Attendance at the meeting will not, by itself,
revoke a proxy.
STOCKHOLDER PROPOSALS
The deadline for submitting a stockholder proposal for inclusion in the
Company's proxy statement and form of proxy for the Company's 20022003 annual
meeting of stockholders pursuant to Rule 14a-8 of the Securities and Exchange
Commission is December 13, 2001.2002. Stockholders wishing to submit proposals or
director nominations that are not to be included in such proxy statement and
proxy must do so by February 11, 2002.March 24, 2003. Such proposal or nomination, however, may
not be submitted before January 12, 2002.February 22, 2003. Stockholders are also advised to
review the Company's Bylaws, which contain additional requirements with respect
to advance notice of stockholder proposals and director nominations.
2
PROPOSAL 1
ELECTION OF DIRECTORS
There are eight nominees for the nineeight Board positions presently authorized
in the Company's Bylaws. Each director to be elected will hold office until the
next annual meeting of stockholders and until his successor is elected and has
qualified, or until such director's earlier death, resignation or removal. Each
nominee listed below is currently a director of the Company, having been elected
by the stockholders. Lev J. Leytes, who joined the Board in
August 2000 in connection with the Company's acquisition of LJL BioSystems, has
decided to resign from his position as a director of the Company, effective as
of the date of the Annual Meeting. (Currently, the Company's Bylaws authorize
nine directors; however, the Board intends to amend the Company's Bylaws,
effective as of the date of the Annual Meeting, to reduce the authorized size of
the Board to eight directors).
Directors are elected by a plurality of the votes present in person or
represented by proxy and entitled to vote. Shares represented by executed
proxies will be voted, if authority to do so is not withheld, for the election
of the eight nominees named below. In the event that any nominee should be
unavailable for election as a result of an unexpected occurrence, such shares
will be voted for the election of such substitute nominee as management may
propose. Each person nominated for election has agreed to serve if elected and
management has no reason to believe that any nominee will be unable to serve.
NOMINEES
The names of the nominees and certain information about them are set forth
below:
NAME AGE PRINCIPAL OCCUPATION/POSITION HELD WITH THE COMPANY
- ---- --- ---------------------------------------------------
Joseph D. Keegan, Ph.D.................. 4748 President, Chief Executive Officer
Moshe H. Alafi.......................... 7273 General Partner, Alafi Capital Company
David L. Anderson....................... 5758 Managing Director, Sutter Hill Ventures
A. Blaine Bowman........................ 5455 President, Chief Executive Officer,
Dionex Corporation
Paul Goddard, Ph.D...................... 51 President and Chief Executive Officer, Elan Pharmaceuticals52 Chairman, A.P. Pharma, Inc.
Andre F. Marion......................... 6566 Independent Investor
Harden M. McConnell, Ph.D............... 7374 Robert Eckles Swain Professor of
Physical Chemistry at Stanford University
Management Consultant
J. Allan Waitz, Ph.D.................... 6566 Independent Investor
JosephJOSEPH D. Keegan, Ph.D.KEEGAN, PH.D., was appointed as President and Chief Executive
Officer of the Company effective March 30, 1998. From 1992 to 1998, Dr. Keegan
served in various positions at Becton Dickinson and Company, a research and
diagnostic company, including the positions of Vice President, Sales and
Service, Vice President, General Manager of the Immunocytometry Systems Division
and, most recently, President of the Worldwide Tissue Culture Business. From
1987 to 1992, he was employed by LEICA, Inc., a microscope manufacturer, where
he held various senior management positions. Dr. Keegan is a member of the Board
of Directors of Argonex,Upstate Group, Inc. Dr. Keegan holds a Ph.D. in Chemistry from
Stanford University.
2
MosheMOSHE H. AlafiALAFI has been a director of the Company since 1985. Mr. Alafi has
been the general partnerGeneral Partner of Alafi Capital Company, which specializes in forming
new companies in the medical, pharmaceutical and biological fields, since
January 1984.
DavidDAVID L. AndersonANDERSON has been a director of the Company since 1983. Mr.
Anderson has been managing directora Managing Director of the General Partner of Sutter Hill
Ventures, a California limited partnership,Limited Partnership, a venture capital investment partnership,company, since
1974. Mr. Anderson is also a director of Dionex Corporation, (Dionex), a leading supplier
of analytical instrumentation, and Broadvision,BroadVision, Inc., a software company.
A. Blaine BowmanBLAINE BOWMAN has been director of the Company since 1985. Mr. Bowman
is, and has been since 1980, President, Chief Executive Officer and a director
of Dionex.
Paul Goddard, Ph.D.Dionex Corporation.
PAUL GODDARD, PH.D., has been a director of the Company since September
1995. Dr. Goddard is the Chairman of Advanced Polymer Systems,A.P. Pharma, Inc., which develops,
manufactures and sells patented delivery systems to enhance the safety and
effectiveness of prescription products, and Alchemia Inc., a private Australian
company.products. Dr. Goddard served as President and
Chief Executive Officer of Elan Pharmaceuticals, a division of Elan PLC, from
20001998 through 1998.2000. Dr. Goddard served as Chairman, Chief Executive Officer and
Director of Neurex Corporation from 1991 through 1998 when Neurex Corporation
was
3
acquired by Elan PLC. From 1976 through February 1991, Dr. Goddard was employed
by SmithKline Beecham Corp., a pharmaceutical company, and its predecessors in
various positions, most recently as Senior Vice President and Director,
Japan-Pacific. He is also a director of Onyx PharmaceuticalPharmaceuticals, Inc. Andreand Adolar
Corporation.
ANDRE F. MarionMARION has been a director of the Company since September 1995.
Mr. Marion was a founder of Applied Biosystems, Inc., a supplier of instruments
for biotechnology research, and served as its Chief Operating Officer from 1983
to 1986, its President from 1985 to 1993, its Chief Executive Officer from 1986
to 1993 and its Chairman of the Board from 1987 to February 1993, when it merged
with the Perkin-Elmer Corporation, a manufacturer of analytical instruments. Mr.
Marion served as Vice President of Perkin-Elmer Corporation and President of its
Applied Biosystems Division until his retirement in February 1995. Mr. Marion is
presently a management consultant and also a director of Cygnus, Inc., Applied
Imaging Corp., Alpha M.O.S., Aclara Biosciences Corp., Integrated Biosystems
Inc. and, Quantum Dot Corp.
Harden, EDC Biosystems and Guava Technologies, Inc.
HARDEN M. McConnell, Ph.D.MCCONNELL, PH.D., founder of the Company, has been a director of
and a consultant to the Company since the Company's inception in July 1983. He
is the Robert Eckles Swain Professor of Physical Chemistry at Stanford
University and a member of the National Academy of Sciences. Dr. McConnell has
received many awards in recognition of his scientific work, most recently these
include the 1987 Pauling Medal for Chemistry and, in 1988, the National Academy
of Sciences Award in Chemical Sciences. Dr. McConnell has also received the Wolf
Prize (1984), the Wheland Medal (1988), the National Medal of Science (1989),
the Peter Debeye Award in Physical Chemistry (1990) and the Bruker Prize of the
Royal Society of Chemistry (1995). Dr. McConnell holds a Ph.D. degree from the
California Institute of Technology.
J. Allan Waitz, Ph.D.ALLAN WAITZ, PH.D., has been a director of the Company since 1990. Dr.
Waitz is currently retired. Until 1992, Dr. Waitz was President and Chief
Executive Officer of DNAX Research Institute of Molecular and Cellular Biology,
Inc., a subsidiary of Schering-Plough Corporation, a pharmaceutical company.
From 1991 through December 1996, Dr. Waitz served as chairperson of the Area
Committee on Microbiology of the National Committee for Clinical Laboratory
Standards.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF EACH NAMED NOMINEE.
DIRECTOR WHOSE TERM EXPIRES AT THE ANNUAL MEETING
Lev J. Leytes, age 45, has been a director of the Company since August
2000. He co-founded LJL BioSystems, Inc. and served as its President, Chief
Executive Officer and Chairman since its inception in 1988 until it merged with
the Company in August 2000. Prior to the founding of LJL BioSystems, Mr. Leytes
worked in various technical and management positions at Beckman Instruments,
Inc., a life sciences company, as well as the Company. Mr. Leytes holds an M.S.
in engineering from the Moscow Engineering Institute.
3
BOARD COMMITTEES AND MEETINGS
During the fiscal year ended December 31, 20002001 the Board of Directors held
six meetings.five meetings and acted by unanimous written consent two times. The Board has an
Audit Committee and a Compensation Committee. The Board does not have a
nominating committee.Nominating Committee.
The Audit Committee meets with the Company's independent auditors at least
annually to review the results of the annual audit and discuss the financial
statements; recommends to the Board the independent auditors to be retained;
oversees the independence of the independent auditors; evaluates the independent
auditors' performance; and receives and considers the independent auditors'
comments as to controls, adequacy of staff and management performance and
procedures in connection with audit and financial controls. The Audit Committee
is composed of three directors: Dr. McConnell, Dr. Goddard and Mr. Bowman. It
met one timetwo times during the fiscal year ended December 31, 2000.2001. All members of the
Company's Audit Committee are independent (as independence is defined in Rule
4200(a)(14) of the NASD listing standards). The Audit Committee
has adopted a written Audit Committee Charter that is attached hereto as
Appendix A.
The Compensation Committee makes recommendations concerning salaries and
incentive compensation, awards stock options to employees and consultants under
the Company's stock option plans and otherwise determines compensation levels
and performs such other functions regarding compensation as the Board may
delegate. The Compensation Committee is composed of three outside directors: Mr.
Anderson, Mr. Marion and Dr. Waitz. It met one time during the fiscal year ended
December 31, 2000.2001.
During the fiscal year ended December 31, 2000,2001, all directors except Mr.
Alafi Dr. Goddard and Dr. McConnell attended at least 75% of the aggregate of the meetings of the Board, held
during the period for which they were a director, and all directors except Dr.
Goddard attended at least 75% of the aggregate of the meetings of the Board
committees on which they served, held during the period for which they were a
director or committee member,
respectively.member.
4
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS (1)DIRECTORS(1)
The audit committee oversees the Company's financial reporting process on
behalf of the board of directors. Management has the primary responsibility for
the financial statements and the reporting process including the systems of
internal controls. In fulfilling its oversight responsibilities, the committee
reviewed the audited financial statements in the Annual Report with management
including a discussion of the quality, not just the acceptability, of the
accounting principles, the reasonableness of significant judgments, and the
clarity of disclosures in the financial statements.
The committee reviewed with the independent auditors, who are responsible
for expressing an opinion on the conformity of those audited financial
statements with accounting principles generally accepted in the United
States,accounting principles, their judgments as to
the quality, not just the acceptability, of the Company's accounting principles
and such other matters as are required to be discussed with the committee under
auditing standards generally accepted in the United States, including those
described in Statement on Auditing Standards No. 61, as amended, "Communication
with Audit Committees" and discussed and reviewed results of the independent
auditors' examination of the financial statements. In addition, the committee
has discussed with the independent auditors the auditors' independence from
management and the Company and received a letter and
otherincluding the matters in the written disclosures from independent auditors, as
required by the Independence Standards Board Standard No. 1, "Independence
Discussions with Audit Committees." The committee also considered whether
provision of non-audit services are compatible with maintaining auditor's
independence.
The committee discussed with the Company's independent auditors the overall
scope and plans for their respective audits. The committee meets with the
internal and independent auditors, with and without management present, to
discuss the results of their examinations, their evaluations of the Company's
internal controls, and the overall quality of the Company's financial reporting.
The committee held one meetingtwo meetings during fiscal year 2000.2001.
In reliance on the reviews and discussions referred to above, the committee
recommended to the board of directors (and the board has approved) that the
audited financial statements be included in the Annual Report on Form 10-K for
the year ended December 31, 20002001 for filing with the Securities and Exchange
Commission. The committee has recommended toand the board or directorshave also recommended, subject to
stockholder approval, the selection of the Company's independent auditors.
AUDIT COMMITTEEAudit Committee
A. Blaine Bowman
Paul Goddard, Ph.D.
Harden M. McConnell, Ph.D.
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(1) This material in this report is not "soliciting material," is not deemed
"filed" with the SEC and is not to be incorporated by reference in any
filing of the Company under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, whether made before or after
the date hereof and irrespective of any general incorporation language in
any such filing.
5
PROPOSAL 2
APPROVAL OF 1995 STOCK OPTION PLAN, AS AMENDED
In October 1995, the Board of Directors adopted, and the stockholders
subsequently approved, the Company's 1995 Stock Option Plan (the "Option Plan").
In January 1999, the Board amended the Option Plan to make certain technical
amendments and to increase the number of shares of the Company's Common Stock
authorized for issuance to 2,750,000 shares. The stockholders subsequently
approved such amendment.
As of February 15, 2001, options (net of canceled or expired options)
covering an aggregate of 1,235,563 shares of the Company's Common Stock had been
granted and were outstanding under the Option Plan, and only 313,211There are 3,750,000 shares of Common Stock (plus any shares that might in the future be returned to the Option
Plan as a result of cancellations or expiration of options or the reacquisition
by the Company of issued shares) remained available for future grantreserved under the Option Plan.
In August 2000, the Company completed its acquisition of LJL
BioSystems, Inc. As part of the merger, the Company assumed LJL BioSystems' 1994
Equity Incentive Plan, 1997 Stock Plan and 1998 Directors' Stock Option Plan
(the "LJL Plans"), and all outstanding options to purchase shares of LJL
BioSystems common stock were converted into options to purchase Common Stock of
the Company. As of February 15, 2001, options to acquire 260,406 shares of the
Company's Common Stock were outstanding under the LJL Plans, and an aggregate of
529,009 shares of the Company's Common Stock remained available for grant under
the LJL Plans.
In February 2001, the Board amended the Company's Option Plan, subject
to stockholder approval, to increase the number of shares of Common Stock
authorized for issuance under the Option Plan by 1,000,000 shares. The Board has
approved, subject to stockholder approval of this Proposal 2, an amendment to
the LJL Plans to prohibit future grants under the plans and to decrease the
aggregate number of shares authorized for issuance under the plan to the number
of shares subject to outstanding options under the plan. Because the integration
of LJL BioSystems with the Company has been completed, the Board believes it to
be in the best interests of the Company to grant options in the future to
employees under a single plan, the Company's Option Plan. However, the amendment
of the LJL Plans will not become effective unless Proposal 2 is approved by the
stockholders. Based on the number of shares subject to outstanding options as of
February 15, 2001, the net effect of the amendment of the Company's Option Plan
and the amendment of the LJL Plans is an increase in the number of shares
authorized under the Company's employee equity incentive plans of 470,991
shares. The Board adopted these amendments in order to ensure that the Company
can continue to grant stock options at levels determined appropriate by the
Board.
In April 2001, the Board approved an amendment to the Option Plan to
eliminate certain provisions that concern the repricing of options granted
thereunder. These provisions had expressly conferred authority on the Board to
offer optionholders the opportunity to replace outstanding higher priced options
with new lower priced options in the event of a decline in the value of the
Company's Common Stock.
In January 2002, the Board amended the Option Plan, subject to stockholder
approval, to increase the number of shares of Common Stock authorized for
issuance under the Option Plan from a total of 3,750,000 shares to a total of
4,250,000 shares. The Board adopted this amendment in order to ensure that the
Company can continue to grant stock options at levels determined appropriate by
the Board.
As of February 15, 2002, options (net of canceled or expired options)
covering an aggregate of 2,216,900 shares of the Company's Common Stock had been
granted and were outstanding under the Option Plan, and only 293,677 shares of
Common Stock (plus any shares that might in the future be returned to the Option
Plan as a result of cancellations or expiration of options) remained available
for future grant under the Option Plan.
Stockholders are requested in this Proposal 2 to approve the Company's
1995 Stock Option Plan,
as amended, to increase the aggregate number of shares
of Common Stock authorized for issuance under such plan by 1,000,000 shares
(resulting in a net increase in the shares authorized for issuance under the
Company's employee equity incentive plans of 470,991 shares based on a
concurrent reduction in the number of shares authorized under the LJL Plans, as
described above). To summarize, if this proposal is approved: a) The aggregate
number of shares of common stock authorized for issuance under the 1995 Stock
Option Plan will be increased by 1,000,000 shares, b) the LJL Plans will be
amended to decrease the aggregate number of shares of common stock authorized
for issuance under the plans by 529,009, and c) the net increase in shares
authorized for issuance under the Company's employee equity incentive plans will
be 470,991.amended. The affirmative vote of the holders of a majority of the shares
present in person or represented by proxy and entitled to vote at the meeting
will be required to approve the amendment to the Company's Option Plan. Abstentions will
be counted toward the tabulation of votes cast on proposals presented to the
stockholders and will have the same effect as negative votes. Broker non-votes
are counted towards a quorum, but are not counted for any purpose in determining
whether this matter has been approved.
For purposes of
this vote abstentions and broker non-votes will not be counted for any purpose
in determining whether this matter has been approved.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 2.
6
The essential features of the Option Plan are outlined below:
GENERAL
The Option Plan provides for the grant of both incentive and nonstatutory
stock options. Incentive stock options granted under the Option Plan are
intended to qualify as "incentive stock options" within the meaning of Section
422 of the Internal Revenue Code of 1986, as amended (the "Code"). Nonstatutory
stock options granted under the Option Plan are not intended to qualify as
incentive stock options under the Code. See "Federal Income Tax Information" for
a discussion of the tax treatment of options.
PURPOSE
The Board adopted the Option Plan to provide a means by which employees,
directors and consultants of the Company and its affiliates may be given an
opportunity to purchase stock in the Company, to assist in retaining the
services of such persons, to secure and retain the services of persons capable
of filling such positions and to provide incentives for such persons to exert
maximum efforts for the success of the Company and its affiliates. All of the
approximately 370 employees, directors and consultants of the Company and its
affiliates are eligible to participate in the Option Plan.
ADMINISTRATION
The Board administers the Option Plan. Subject to the provisions of the
Option Plan, the Board has the power to construe and interpret the Option Plan
and to determine the persons to whom and the dates on which options will be
granted, the number of shares of Common Stock to be subject to each option, the
time or times during the term of each option within which all or a portion of
such option may be exercised, the exercise price, the type of consideration and
other terms of the option.
6
The Board has the power to delegate administration of the Option Plan to a
committee composed of not fewer than two members of the Board. In the discretion
of the Board, a committee may consist solely of two or more outside directors in
accordance with Section 162(m) of the Code or solely of two or more non-employee
directors in accordance with Rule 16b-3 of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"). The Board has not delegated administration of
the Option Plan to a committee of the Board. As used herein with respect to the
Option Plan, the "Board" refers to any committee the Board appoints as well as
to the Board itself.
The regulations under Section 162(m) of the Code require that the directors
who serve as members of the committee must be "outside directors." The Option
Plan provides that, in the Board's discretion, directors serving on the
committee may be "outside directors" within the meaning of Section 162(m). This
limitation would exclude from the committee directors who are (i) current
employees of the Company or an affiliate, (ii) former employees of the Company
or an affiliate receiving compensation for past services (other than benefits
under a tax-qualified pension Option Plan), (iii) current and former officers of
the Company or an affiliate, (iv) directors currently receiving direct or
indirect remuneration from the Company or an affiliate in any capacity (other
than as a director), and (v) any other person who is otherwise considered an
"outside director" for purposes of Section 162(m). The definition of an "outside
director" under Section 162(m) is generally narrower than the definition of a
"non-employee director" under Rule 16b-3 of the Exchange Act.
ELIGIBILITY
Incentive stock options may be granted under the Option Plan only to
employees (including officers) of the Company and its affiliates. Employees
(including officers), directors and consultants of both the Company and its
affiliates are eligible to receive nonstatutory stock options under the Option
Plan.
No option may be granted under the Option Plan to any person who, at the
time of the grant, owns (or is deemed to own) stock possessing more than 10% of
the total combined voting power of the Company or any affiliate of the Company,
unless the exercise price is at least 110% of the fair market value of the stock
subject to the option on the date of grant and the term of the option does not
exceed five years from the date of grant. In addition, the aggregate fair market
value, determined at the time of grant, of the shares of Common Stock with
respect to 7
which incentive stock options are exercisable for the first time by
an optionholder during any calendar year (under the Option Plan and all other
such plans of the Company and its affiliates) may not exceed $100,000.
No person may be granted options under the Option Plan exercisable for more
than 500,000 shares of Common Stock during any calendar fiscal year (the
"Section 162(m) Limitation").
STOCK SUBJECT TO THE OPTION PLAN
Subject to this Proposal, an aggregate of 2,750,0003,250,000 shares of Common Stock,
plus up to 1,000,000 shares issuable in connection with the Company's terminated
1988 Stock Option Plan (the "1988 Plan"), is reserved for issuance under the
Option Plan. If options granted under the Option Plan or the 1988 Plan expire or
otherwise terminate without being exercised, the shares of Common Stock not
acquired pursuant to such options again becomes available for issuance under the
Option Plan. If the Company reacquires unvested stock issued under the Option
Plan, the reacquired stock will not again become available for reissuance under
the Option Plan.
TERMS OF OPTIONS
The following is a description of the permissible terms of options under
the Option Plan. Individual option grants may be more restrictive as to any or
all of the permissible terms described below.
EXERCISE PRICE; PAYMENT. The exercise price of incentive stock options may
not be less than 100% of the fair market value of the stock subject to the
option on the date of the grant and, in some cases (see "Eligibility" above),
may not be less than 110% of such fair market value. The exercise price of
nonstatutory options may not be less than 85% of the fair market value of the
stock on the date of grant and, in some cases (see "Eligibility" above), may not
be less than 110% of such fair market value. If options were granted with
exercise prices below market value, deductions for compensation attributable to
the exercise of such options could be limited by Section 162(m) of the Code. See
"Federal Income Tax Information." As of March 26, 2001,28, 2002, the closing price of the
Company's Common Stock as reported on the Nasdaq National Market System was
$45.50$18.17 per share.
7
The exercise price of options granted under the Option Plan must be paid
either in cash at the time the option is exercised or at the discretion of the
Board, (i) by delivery of other Common Stock of the Company, (ii) pursuant to a
deferred payment arrangement or (iii) in any other form of legal consideration
acceptable to the Board.
OPTION EXERCISE. Options granted under the Option Plan may become
exercisable in cumulative increments ("vest") as determined by the Board. Shares
covered by currently outstanding options under the Option Plan typically vest at
the rate of 20-25% per year during the optionholder's employment by, or service
as a director or consultant to, the Company or an affiliate (collectively,
"service"). Shares covered by options granted in the future under the Option
Plan may be subject to different vesting terms. The Board has the power to
accelerate the time during which an option may vest or be exercised. In
addition, options granted under the Option Plan may permit exercise prior to
vesting, but in such event the optionholder may be required to enter into an
early exercise stock purchase agreement that allows the Company to repurchase
unvested shares, generally at their exercise price, should the optionholder's
service terminate before vesting. To the extent provided by the terms of an
option, an optionholder may satisfy any federal, state or local tax withholding
obligation relating to the exercise of such option by a cash payment upon
exercise, by authorizing the Company to withhold a portion of the stock
otherwise issuable to the optionholder, by delivering already-owned Common Stock
of the Company or by a combination of these means.
TERM. The maximum term of options under the Option Plan is 10 years, except
that in certain cases (see "Eligibility") the maximum term is five years.
Options under the Option Plan generally terminate three months after termination
of the optionholder's service unless (i) such termination is due to the
optionholder's disability, in which case the option may, but need not, provide
that it may be exercised (to the extent the option was exercisable at the
8
time
of the termination of service) at any time within 12 months of such termination;
(ii) the optionholder dies before the optionholder's service has terminated, or
within a period specified in the option after termination of such service, in
which case the option may, but need not, provide that it may be exercised (to
the extent the option was exercisable at the time of the optionholder's death)
within 18 months of the optionholder's death by the person or persons to whom
the rights to such option pass by will or by the laws of descent and
distribution; or (iii) the option by its terms specifically provides otherwise.
An optionholder may designate a beneficiary who may exercise the option
following the optionholder's death. Individual option grants by their terms may
provide for exercise within a longer period of time following termination of
service.
RESTRICTIONS ON TRANSFER
The optionholder may not transfer an incentive stock option otherwise than
by will or by the laws of descent and distribution. During the lifetime of the
optionholder, only the optionholder may exercise an incentive stock option. In
addition to transfers effective on death, an optionee may transfer a
nonstatutory stock option pursuant to certain domestic relations orders and the
transferee may then exercise such option according to its terms. Except as noted
above, options granted under the Option Plan are generally nontransferable.
Shares subject to repurchase by the Company under an early exercise stock
purchase agreement may be subject to restrictions on transfer that the Board
deems appropriate.
ADJUSTMENT PROVISIONS
Transactions not involving receipt of consideration by the Company, such as
a merger, consolidation, reorganization, stock dividend or stock split, may
change the class and number of shares of Common Stock subject to the Option Plan
and outstanding options. In that event, the Option Plan will be appropriately
adjusted as to the class and the maximum number of shares of Common Stock
subject to the Option Plan and the Section 162(m) Limitation, and outstanding
options will be adjusted as to the class, number of shares and price per share
of Common Stock subject to such options.
EFFECT OF CERTAIN CORPORATE EVENTS
The Option Plan provides that, in the event of a dissolution, liquidation
or sale of substantially all of the assets of the Company, specified types of
merger, or other corporate reorganization ("change in control"), to the extent
permitted by law, any surviving corporation will be required to either assume
options outstanding under the Option Plan or substitute similar options for
those outstanding under the Option Plan, or such outstanding options will
8
continue in full force and effect. If any surviving corporation declines to
assume options outstanding under the Option Plan, or to substitute similar
options, then, with respect to optionholders whose service has not terminated,
the vesting and the time during which such options may be exercised may, at the
discretion of the Board, be accelerated. AnIn addition, if any surviving
corporation declines to assume options outstanding under the Option Plan, or to
substitute similar options, then an outstanding option will terminate if the
optionholder does not exercise it before athe change in control. The acceleration
of an option in the event of an acquisition or similar corporate event may be
viewed as an anti-takeover provision, which may have the effect of discouraging
a proposal to acquire or otherwise obtain control of the Company.
DURATION, AMENDMENT AND TERMINATION
The Board may suspend or terminate the Option Plan without stockholder
approval or ratification at any time or from time to time. Unless sooner
terminated, the Option Plan will terminate on October 29, 2005.
The Board may also amend the Option Plan at any time or from time to time.
However, no amendment will be effective unless approved by the stockholders of
the Company within 12 months before or after its adoption by the Board if the
amendment would (i) modify the requirements as to eligibility for participation
(to the extent such modification requires stockholder approval in order for the
Option Plan to satisfy Section 422 of the Code, if applicable, or Rule 16b-3 of
the Exchange Act); (ii) increase the number of shares reserved for issuance upon
exercise of options; or (iii) change any other provision of the Option Plan in
any other way if such modification requires stockholder approval in order to
comply with Rule 16b-3 of the Exchange Act or satisfy the requirements of
Section 422 of the Code or any securities exchange listing requirements. The
Board may submit any other amendment to the Option Plan for stockholder
approval, including, but not limited to, amendments intended to 9
satisfy the
requirements of Section 162(m) of the Code regarding the exclusion of
performance-based compensation from the limitation on the deductibility of
compensation paid to certain employees.
FEDERAL INCOME TAX INFORMATION
Long-term capital gains currently are generally subject to lower tax rates
than ordinary income or short-term capital gains. The maximum long-term capital
gains rate for federal income tax purposes is currently 20% while the maximum
ordinary income rate and short-term capital gains rate is 39.6%effectively 38.6%.
Slightly different rules may apply to optionholders who acquire stock subject to
certain repurchase options or who are subject to Section 16(b) of the Exchange
Act.
INCENTIVE STOCK OPTIONS. Incentive stock options under the Option Plan are
intended to be eligible for the favorable federal income tax treatment accorded
"incentive stock options" under the Code.
There generally are no federal income tax consequences to the optionholder
or the Company by reason of the grant or exercise of an incentive stock option.
However, the exercise of an incentive stock option may increase the
optionholder's alternative minimum tax liability, if any.
If an optionholder holds stock acquired through exercise of an incentive
stock option for at least two years from the date on which the option is granted
and at least one year from the date on which the shares are transferred to the
optionholder upon exercise of the option, any gain or loss on a disposition of
such stock will be a long-term capital gain or loss.loss if the optionholder held the
stock for more than one year.
Generally, if the optionholder disposes of the stock before the expiration
of either of these holding periods (a "disqualifying disposition"), then at the
time of disposition the optionholder will realize taxable ordinary income equal
to the lesser of (i) the excess of the stock's fair market value on the date of
exercise over the exercise price, or (ii) the optionholder's actual gain, if
any, on the purchase and sale. The optionholder's additional gain or any loss
upon the disqualifying disposition will be a capital gain or loss, which will be
long-term or short-term depending on whether the stock was held for more than
one year.
To the extent the optionholder recognizes ordinary income by reason of a
disqualifying disposition, the Company will generally be entitled (subject to
the requirement of reasonableness, the provisions of Section 162(m) of the Code
and the satisfaction of a tax reporting obligation) to a corresponding business
expense deduction in the tax year in which the disqualifying disposition occurs.
9
NONSTATUTORY STOCK OPTIONS. Nonstatutory stock options granted under the
Option Plan generally have the following federal income tax consequences:
There are no tax consequences to the optionholder or the Company by reason
of the grant of a nonstatutory stock option. Upon exercise of a nonstatutory
stock option, the optionholder normally will recognize taxable ordinary income
equal to the excess, if any, of the stock's fair market value on the date of
exercise over the option exercise price. However, to the extent the stock is
subject to certain types of vesting restrictions, the taxable event will be
delayed until the vesting restrictions lapse unless the participant elects to be
taxed on receipt of the stock. With respect to employees, the Company is
generally required to withhold from regular wages or supplemental wage payments
an amount based on the ordinary income recognized. Subject to the requirement of
reasonableness, the provisions of Section 162(m) of the Code and the
satisfaction of a tax reporting obligation, the Company will generally be
entitled to a business expense deduction equal to the taxable ordinary income
realized by the optionholder.
Upon disposition of the stock, the optionholder will recognize a capital
gain or loss equal to the difference between the selling price and the sum of
the amount paid for such stock plus any amount recognized as ordinary income
upon exercise of the option (or vesting of the stock). Such gain or loss will be
long-term or short-term depending on whether the stock was held for more than
one year. Slightly different rules may apply to optionholders who acquire stock
subject to certain repurchase options or who are subject to Section 16(b) of the
Exchange Act.
10
POTENTIAL LIMITATION ON COMPANY DEDUCTIONS. Section 162(m) of the Code
denies a deduction to any publicly held corporation for compensation paid to
certain "covered employees" in a taxable year to the extent that compensation to
such covered employee exceeds $1 million. It is possible that compensation
attributable to stock options, when combined with all other types of
compensation received by a covered employee from the Company, may cause this
limitation to be exceeded in any particular year.
Certain kinds of compensation, including qualified "performance-based
compensation," are disregarded for purposes of the deduction limitation. In
accordance with Treasury regulations issued under Section 162(m), compensation
attributable to stock options will qualify as performance-based compensation if
the option is granted by a compensation committee comprised solely of "outside
directors" and either (i) the plan contains a per-employee limitation on the
number of shares for which options may be granted during a specified period, the
per-employee limitation is approved by the stockholders, and the exercise price
of the option is no less than the fair market value of the stock on the date of
grant, or (ii) the option is granted (or exercisable) only upon the achievement
(as certified in writing by the compensation committee) of an objective
performance goal established in writing by the compensation committee while the
outcome is substantially uncertain, and the option is approved by stockholders.
10
PROPOSAL 3
APPROVAL OF INCREASE IN NUMBER OF AUTHORIZED SHARES OF COMMON1995 EMPLOYEE STOCK ThePURCHASE PLAN, AS AMENDED
In October 1995, the Board of Directors has adopted, and the stockholders
subsequently approved, the Company's 1995 Employee Stock Purchase Plan (the
"Purchase Plan"). In October 2001, the Board amended and restated the Purchase
Plan to make certain technical amendments, effective as of January 2002. There
are 200,000 shares of Common Stock reserved for issuance under the Purchase
Plan.
In January 2002, the Board amended the Purchase Plan, subject to
stockholder approval, an
amendment to the Company's Restated Certificate of Incorporation to increase the
Company's authorized number of shares of Common Stock
authorized for issuance under the Purchase Plan from 30,000,000a total of 200,000 shares
to 60,000,000a total of 400,000 shares. The additionalBoard adopted this amendment in order to
ensure that the Company can continue to grant purchase rights at levels
determined appropriate by the Board.
During the last fiscal year, shares of Common Stock to be authorized by adoptionwere purchased in the
amounts and at the weighted average prices per share under the Purchase Plan as
follows: Joseph D. Keegan, Ph.D., 365 shares ($17.39), Timothy A. Harkness, 365
shares ($17.39), John S. Senaldi, 365 shares ($17.39), Robert J. Murray, 183
shares ($17.05), Patricia C. Sharp, 183 shares ($17.05), Tony M. Lima, 365
shares ($17.39), all executive officers as a group, 1826 shares ($17.32) and all
employees (excluding executive officers) as a group 35,888 shares ($17.33).
As of the
amendment would have rights identical to the currently outstanding Common StockFebruary 15, 2002, an aggregate of the Company. Adoption of the proposed amendment and issuance of the Common
Stock would not affect the rights of the holders of currently outstanding Common
Stock of the Company, except for effects incidental to increasing the number of156,806 shares of the Company's
Common Stock outstanding, such as dilution ofhad been granted under the earnings per share and voting rights of current holders of Common Stock. If the
amendment is adopted, it will become effective upon filing of a Certificate of
Amendment of the Company's Restated Certificate of Incorporation with the
Secretary of State of the State of Delaware.
In addition to the 16,331,167Purchase Plan. Only 43,194 shares of
Common Stock outstanding at
December 31, 2000,(plus any shares that might in the Board has reserved 2,881,278 sharesfuture be returned to the
Purchase Plan as a result of cancellations or expiration of purchase rights)
remained available for issuance upon
exercise of options and rights grantedfuture grant under the Company's stock option and
stock purchase plans.
Although at presentPurchase Plan.
Stockholders are requested in this Proposal 3 to approve the Board of Directors has no other plans to issue
the additional shares of Common Stock, it desires to have such shares available
to provide additional flexibility to use its capital stock for business and
financial purposes in the future. The additional shares may be used, without
further stockholder approval, for various purposes including, without
limitation, raising capital, providing equity incentives to employees, officers
or directors, establishing strategic relationships with other companies and
expanding the company's business or product lines through the acquisition of
other businesses or products.
The additional shares of Common Stock that would become available for
issuance if the proposal were adopted could also be used by the Company to
oppose a hostile takeover attempt or delay or prevent changes in control or
management of the Company. For example, without further stockholder approval,
the Board could strategically sell shares of Common Stock in a private
transaction to purchasers who would oppose a takeover or favor the current
Board. Although this proposal to increase the authorized Common Stock has been
prompted by business and financial considerations and not by the threat of any
hostile takeover attempt (nor is the Board currently aware of any such attempts
directed at the Company), nevertheless, stockholders should be aware that
approval of proposal could facilitate future efforts by the Company to deter or
prevent changes in control of the Company, including transactions in which the
stockholders might otherwise receive a premium for their shares over then
current market prices.
11
The Company's audited consolidated financial statements, management's
discussion and analysis of financial condition and results of operations, and
certain supplementary financial information are incorporated by reference to
pages 22 through 52 of the Company's 2000 annual report to stockholders.Purchase Plan,
as amended. The affirmative vote of the holders of a majority of the shares
ofpresent in person or represented by proxy and entitled to vote at the Common Stockmeeting
will be required to approve thisthe amendment to the Company's
Restated CertificatePurchase Plan. Abstentions will
be counted toward the tabulation of Incorporation. As a result, abstentionsvotes cast on proposals presented to the
stockholders and broker
non-votes will have the same effect as negative votes. Broker non-votes
are counted towards a quorum, but are not counted for any purpose in determining
whether this matter has been approved.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 3.
The essential features of the Purchase Plan, as amended, are outlined
below:
PURPOSE
The purpose of the Purchase Plan is to provide a means by which employees
of the Company (and any parent or subsidiary of the Company designated by the
Board to participate in the Purchase Plan) may be given an opportunity to
purchase Common Stock of the Company through payroll deductions, to assist the
Company in retaining the services of its employees, to secure and retain the
services of new employees, and to provide incentives for such persons to exert
maximum efforts for the success of the Company. All of the approximately 370
employees of the Company and its affiliates are eligible to participate in the
Purchase Plan.
The rights to purchase Common Stock granted under the Purchase Plan are
intended to qualify as options issued under an "employee stock purchase plan" as
that term is defined in Section 423(b) of the Code.
ADMINISTRATION
The Board administers the Purchase Plan and has the final power to construe
and interpret both the Purchase Plan and the rights granted under it. The Board
has the power, subject to the provisions of the Purchase Plan, to determine when
and how rights to purchase Common Stock of the Company will be granted, the
provisions of each offering of such rights (which need not be identical), and
whether employees of any parent or subsidiary of the Company will be eligible to
participate in the Purchase Plan.
The Board has the power, which it has not yet exercised, to delegate
administration of the Purchase Plan to a committee composed of not fewer than
two members of the Board. As used herein with respect to the Purchase Plan, the
"Board" refers to any committee the Board appoints as well as to the Board
itself.
11
STOCK SUBJECT TO PURCHASE PLAN
Subject to this Proposal, an aggregate of 400,000 shares of Common Stock is
reserved for issuance under the Purchase Plan. If rights granted under the
Purchase Plan expire, lapse or otherwise terminate without being exercised, the
shares of Common Stock not purchased under such rights again become available
for issuance under the Purchase Plan.
OFFERINGS
The Purchase Plan is implemented by offerings of rights to all eligible
employees from time to time by the Board. The maximum length for an offering
under the Purchase Plan is 27 months. The current offering under the Purchase
Plan commenced on January 2, 2002 and will terminate on June 28, 2002. Subject
to this Proposal, the Board plans to adopt a new offering under the Purchase
Plan with an offering period of approximately two years, divided into four
shorter "purchase periods" of approximately six months.
ELIGIBILITY
Any person who is customarily employed at least 20 hours per week and five
months per calendar year by the Company (or by any parent or subsidiary of the
Company designated by the Board) on the first day of an offering is eligible to
participate in that offering, provided that such employee has been continuously
employed by the Company or the designated parent or subsidiary corporation for a
period as long as the Board may require, which period shall not exceed two
years. The Board may provide that officers of the Company who are "highly
compensated" as defined in the Code are not eligible to participate in the
offerings.
However, no employee is eligible to participate in the Purchase Plan if,
immediately after the grant of purchase rights, the employee would own, directly
or indirectly, stock possessing 5% or more of the total combined voting power or
value of all classes of stock of the Company or of any parent or subsidiary of
the Company (including any stock which such employee may purchase under all
outstanding rights and options). In addition, no employee may purchase more than
$25,000 worth of Common Stock (determined at the fair market value of the shares
at the time such rights are granted) under all employee stock purchase plans of
the Company and its parent and subsidiary corporations in any calendar year.
PARTICIPATION IN THE PURCHASE PLAN
On each offering date, each eligible employee, pursuant to an offering made
under the Purchase Plan, shall be granted the right to purchase up to the number
of shares of Common Stock of the Company purchasable with a percentage
designated by the Board not exceeding 15% of such employee's earnings during the
period which begins on the offering date (or such later date as the Board
determines for a particular offering) and ends on the date stated in the
offering, which date shall be no later than the end of the offering.
PURCHASE PRICE
The purchase price per share at which shares of Common Stock are sold in an
offering under the Purchase Plan is the lower of (i) 85% of the fair market
value of a share of Common Stock on first day of the offering or (ii) 85% of the
fair market value of a share of Common Stock on the last day of the purchase
period.
PAYMENT OF PURCHASE PRICE; PAYROLL DEDUCTIONS
The purchase price of the shares is accumulated by payroll deductions over
the offering. At any time during the offering, a participant may reduce or
terminate his or her payroll deductions as the Board provides in the offering. A
participant may not increase or begin such payroll deductions after the
beginning of the offering, except, if the Board provides, in the case of an
employee who first becomes eligible to participate as of a date specified during
the offering. All payroll deductions made for a participant are credited to his
or her account under the Purchase Plan and deposited with the general funds of
the Company. A participant may not make additional payments into such account.
12
PURCHASE OF STOCK
By executing an agreement to participate in the Purchase Plan, the employee
is entitled to purchase shares under the Purchase Plan. In connection with
offerings made under the Purchase Plan, the Board specifies a maximum number of
shares of Common Stock an employee may be granted the right to purchase and the
maximum aggregate number of shares of Common Stock that may be purchased
pursuant to such offering by all participants. If the aggregate number of shares
to be purchased upon exercise of rights granted in the offering would exceed the
maximum aggregate number of shares of Common Stock available, the Board would
make a pro rata allocation of available shares in a uniform and equitable
manner. Unless the employee's participation is discontinued, his or her right to
purchase shares is exercised automatically at the end of the offering at the
applicable price. See "Withdrawal" below.
WITHDRAWAL
While each participant in the Purchase Plan is required to sign an
agreement authorizing payroll deductions, the participant may withdraw from a
given offering by terminating his or her payroll deductions and by delivering to
the Company a notice of withdrawal from the Purchase Plan. Such withdrawal may
be elected at any time prior to the end of the applicable offering, except as
provided otherwise in the offering document.
Upon any withdrawal from an offering by the employee, the Company will
distribute to the employee his or her accumulated payroll deductions without
interest, less any accumulated deductions previously applied to the purchase of
shares of Common Stock on the employee's behalf during such offering, and such
employee's interest in the offering will be automatically terminated. The
employee is not entitled to again participate in that offering. However, an
employee's withdrawal from an offering will not have any effect upon such
employee's eligibility to participate in subsequent offerings under the Purchase
Plan.
TERMINATION OF EMPLOYMENT
Rights granted pursuant to any offering under the Purchase Plan terminate
immediately upon cessation of an employee's employment for any reason, and the
Company will distribute to such employee all of his or her accumulated payroll
deductions, without interest.
RESTRICTIONS ON TRANSFER
Rights granted under the Purchase Plan are not transferable and may be
exercised only by the person to whom such rights are granted.
ADJUSTMENT PROVISIONS
Transactions not involving receipt of consideration by the Company, such as
a merger, consolidation, reorganization, stock dividend or stock split, may
change the type(s), class(es) and number of shares of Common Stock subject to
the Purchase Plan and to outstanding purchase rights. In that event, the
Purchase Plan will be appropriately adjusted in the type(s), class(es) and
maximum number of shares subject to the Purchase Plan and the outstanding
purchase rights granted under the Purchase Plan will be appropriately adjusted
in the type(s), class(es), number of shares and purchase limits of such purchase
rights.
EFFECT OF CERTAIN CORPORATE TRANSACTIONS
In the event of (i) the sale, lease, license or other disposition of all or
substantially all of the assets of the Company, (ii) the sale or other
disposition of at least 90% of the outstanding securities of the Company, or
(iii) certain specified types of merger, consolidation or similar transactions
(each, a "corporate transaction"), any surviving or acquiring corporation may
continue or assume rights outstanding under the Purchase Plan or may substitute
similar rights. If any surviving or acquiring corporation does not assume such
rights or substitute similar rights, then the participants' accumulated payroll
deductions will be used to purchase shares of Common Stock immediately prior to
the corporate transaction under the ongoing offering and the participants'
rights under the ongoing offering will terminate immediately after such
purchase.
13
DURATION, AMENDMENT AND TERMINATION
The Board may suspend or terminate the Purchase Plan at any time.
The Board may amend the Purchase Plan at any time. Any amendment of the
Purchase Plan must be approved by the stockholders within 12 months of its
adoption by the Board if the amendment is necessary for the Purchase Plan to
satisfy Sections 423 of the Code or other applicable laws and regulations.
Rights granted before amendment or termination of the Purchase Plan will
not be altered or impaired by any amendment, suspension or termination of the
Purchase Plan without consent of the employee to whom such rights were granted
except (i) with the consent of the employee to whom such rights were granted,
(ii) as necessary to comply with any laws or governmental regulations or (iii)
as necessary to ensure that the Purchase Plan and any such rights under the
Purchase Plan comply with the requirements of Section 423 of the Code.
FEDERAL INCOME TAX INFORMATION
Rights granted under the Purchase Plan are intended to qualify for
favorable federal income tax treatment associated with rights granted under an
employee stock purchase plan which qualifies under provisions of Section 423 of
the Code.
A participant will be taxed on amounts withheld for the purchase of shares
of Common Stock as if such amounts were actually received. Other than this, no
income will be taxable to a participant until disposition of the acquired
shares, and the method of taxation will depend upon the holding period of the
acquired shares.
If the stock is disposed of more than two years after the beginning of the
offering period and more than one year after the stock is transferred to the
participant, then the lesser of (i) the excess of the fair market value of the
stock at the time of such disposition over the exercise price or (ii) the excess
of the fair market value of the stock as of the beginning of the offering period
over the exercise price (determined as of the beginning of the offering period)
will be treated as ordinary income. Any further gain or any loss will be taxed
as a long-term capital gain or loss. At present, such capital gains generally
are subject to lower tax rates than ordinary income.
If the stock is sold or disposed of before the expiration of either of the
holding periods described above, then the excess of the fair market value of the
stock on the exercise date over the exercise price will be treated as ordinary
income at the time of such disposition. The balance of any gain will be treated
as capital gain. Even if the stock is later disposed of for less than its fair
market value on the exercise date, the same amount of ordinary income is
attributed to the participant, and a capital loss is recognized equal to the
difference between the sales price and the fair market value of the stock on
such exercise date. Any capital gain or loss will be short-term or long-term,
depending on how long the stock has been held.
There are no federal income tax consequences to the Company by reason of
the grant or exercise of rights under the Purchase Plan. The Company is entitled
to a deduction to the extent amounts are taxed as ordinary income to a
participant (subject to the requirement of reasonableness and the satisfaction
of tax reporting obligations).
14
PROPOSAL 4
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected Ernst & Young LLP as the Company's
independent auditors for the fiscal year ending December 31, 20012002 and has
further directed that management submit the selection of independent auditors
for ratification by the stockholders at the Annual Meeting. Ernst & Young LLP
has audited the Company's financial statements since its inception in 1983.
Representatives of Ernst & Young LLP are expected to be present at the Annual
Meeting, will have an opportunity to make a statement if they so desire and will
be available to respond to appropriate questions.
Stockholder ratification of the selection of Ernst & Young LLP as the
Company's independent auditors is not required by the Company's Bylaws or
otherwise. However, the Board is submitting the selection of Ernst & Young LLP
to the stockholders for ratification as a matter of good corporate practice. If
the stockholders fail to ratify the selection, the Audit Committee and the Board
will reconsider whether or not to retain that firm. Even if the selection is
ratified, the Audit Committee and the Board in their discretion may direct the
appointment of different independent auditors at any time during the year if
they determine that such a change would be in the best interests of the Company
and its stockholders.
The affirmative vote of the holders of a majority of the shares present in
person or represented by proxy and entitled to vote at the Annual Meeting will
be required to ratify the selection of Ernst & Young LLP. Abstentions will be
counted toward the tabulation of votes cast on proposals presented to the
stockholders and will have the same effect as negative votes. Broker non-votes
are counted towards a quorum, but are not counted for any purpose in determining
whether this matter has been approved.
DISCLOSURE OF AUDITOR FEES
In addition to retaining Ernst & Young LLP, the Company's independent
auditors, to audit the consolidated financial statements for the fiscal year
2000,ended December 31, 2001, the Company and its subsidiaries retained Ernst & Young
LLP to provide other services and expect to continue to do so in the future. The
aggregate fees incurred for professional services rendered by Ernst & Young LLP
relating to the fiscal year endedending December 31, 20002001 were:
AUDIT FEES: $207,234$280,000 for services rendered relating to the annual audit of
the Company's consolidated financial statements for the fiscal year ended
December 31, 20002001 and the quarterly reviews of the consolidated financial
statements included in the Company's quarterly reports on Form 10-Q filed during
fiscal year 2000.2001.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES: The Company
did not engage Ernst & Young LLP to provide advice to the Company regarding
financial information systems design and implementation during the fiscal year
2000.ended December 31, 2001.
ALL OTHER FEES: $376,000$402,000 for all other services rendered during the fiscal
year 2000.ended December 31, 2001. Of these fees, $229,000$163,000 relate to audit related
services (which typically include fees for accounting consultations, SEC
Registration Statements, and statutorily required audits in certain locations
outside the United States where the Company has operations)., and the remaining
$239,000 relate to tax consulting projects.
The Audit Committee has determined that the rendering of all other
non-audit services by Ernst & Young LLP is compatible with maintaining the
auditors' independence.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 4.
1315
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the ownership
of the Company's Common Stock as of February 15, 20012002 by: (i) each
director and nominee for
director; (ii) each of the executive officers named in the Summary Compensation
Table; (iii) all executive officers and directors of the Company as a group; and
(iv) all those known by the Company to be beneficial owners of more than five
percent of its Common Stock.
BENEFICIAL OWNERSHIP (1)
------------------------------------------
NUMBER OF SHARES PERCENT OF CLASS
---------------- ----------------
Wellington Management Company, LLP(2)..................... 2,058,310 13.3%
75 State Street
Boston, Massachusetts 02109
1,550,946 10.0%
Kopp Investment Advisors, Inc............................. 2,140,457 13.0%Inc.(3).........................
7701 France Ave. South, Ste. 500
Edina, Minnesota 55435
T. Rowe Price Associates, Inc............................. 1,183,849 7.2%
100 E. Pratt Street
Baltimore, Maryland 21202
Scudder Kemper Investments, Inc........................... 877,670 5.3%
345 ParkOrbiMed Advisors LLC(4)................................... 1,459,500 9.4%
767 Third Avenue, 6th Floor
New York, New York 10154
Pilgrim Baxter & Associates, Ltd.......................... 843,100 5.1%
825 Duportail Road
Wayne, Pennsylvania 1908710010
Brown Capital Management, Inc............................. 1,169,650 7.6%
1201 N. Calvert St.
Baltimore, MD 21202
Hartford Mutual Funds, Inc. on behalf of:
The Hartford Capital Appreciation Fund.................... 950,000 6.1%
200 Hopmeadow Street
Simsbury, CT 06089
Moshe H. Alafi(2)Alafi(5)......................................... 333,540 2.0%339,040 2.2%
Harden M. McConnell, Ph.D.(3)(6)............................. 262,000 1.6%267,500 1.7%
A. Blaine Bowman(4)Bowman(7)....................................... 67,500258,166 1.7%
Joseph D. Keegan, Ph.D.(8)................................ 129,267 *
David L. Anderson(5)Anderson(9)...................................... 54,40759,907 *
Joseph D. Keegan, Ph.D.(6)................................ 44,902Timothy A. Harkness (10).................................. 56,244 *
Robert J. Murray(7)Murray (11)..................................... 52,879 *
John S. Senaldi(12)....................................... 34,25939,825 *
Paul Goddard, Ph.D.(8).................................... 27,500(13)................................... 33,000 *
Patricia C. Sharp(14)..................................... 24,870 *
J. Allan Waitz, Ph.D.(9)..................................(15)................................. 23,000 *
Andre F.Marion(16)........................................ 17,500 *
Timothy A. Harkness(10)................................... 14,942 *
Tony M. Lima(11)Lima(17).......................................... 14,646 *
Andre F. Marion(12)....................................... 12,000 *
John S. Senaldi(13)....................................... 7,918 *
Lev J. Leytes 1,4127,500 *
All directors and executive officers as a group
(17 persons)(14).......................................... 961,939 5.8%(18)........................................ 1,398,606 9.0%
- ---------------
* Less than one percent
(1) This table is based upon information supplied by officers, directors
and principal stockholders and Schedules 13D and 13G filed with the
Securities and Exchange Commission (the "SEC"). Unless otherwise indicated
in the footnotes to this table and subject to community property laws where
applicable, the Company believes that each of the stockholders named in
this table has sole voting and investment power with respect to the shares
indicated as beneficially owned. Applicable percentages are based on
16,452,35915,467,368 shares outstanding on February 15, 2001,2002, adjusted as required by
rules promulgated by the SEC.
16
(2) Wellington Management Company, LLP is not the owner of record of such
shares and disclaims any pecuniary interest (as such term is defined in
Rule 16a-1(a) under the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) in such shares.
(3) Kopp Investment Advisors, Inc. is wholly-owned by Kopp Holding Company,
which is wholly-owned by LeRoy Kopp. Kopp Holding Company and LeRoy Kopp
are also deemed to beneficially own such shares. Kopp Investment Advisors,
Inc. disclaims beneficial ownership of 1,540,946 shares deemed to be
beneficially owned by it within the meaning of Rule 13d-3 under the
Exchange Act.
(4) OrbiMed Advisors LLC is affiliated with OrbiMed Advisors Inc. and Samuel D.
Isaly, each of which are also deemed to beneficially own such shares.
(5) Includes 306,040 shares beneficially owned by Alafi Capital Company, of
which Mr. Alafi, a director of the Company, is a general partner, and
27,50033,000 shares that may be acquired within 60 days after February 15, 20012002
pursuant to outstanding stock options.
(3)(6) Includes 251,000 shares held by the Harden M. McConnell and Sophia G. McConnell
Trust, of which Dr. McConnell is a co-trustee, and 11,00016,500 shares that may
be acquired within 60 days after February 15, 20012002 pursuant to outstanding
stock options.
(4)(7) Includes 27,500195,166 shares beneficially owned by Dionex Corporation, of which
Mr. Bowman, a director of the Company, is the President and Chief Executive
Officer, and 23,000 shares that may be acquired within 60 days after
February 15, 20012002 pursuant to outstanding stock options. (5)Mr. Bowman
disclaims beneficial ownership of the shares held by Dionex Corporation
within the meaning of Rule 13d-3 under the Exchange Act.
(8) Includes 26,9075,335 shares beneficially ownedheld by Anvest, L.P.,the Keegan 1990 Revocable Trust UAD 4/27/90,
of which Mr.
AndersonDr. Keegan is a general partner,trustee, and 27,500includes 123,750 shares that may be
acquired within 60 days after February 15, 20012002 pursuant to outstanding
stock options.
(9) Includes 26,907 shares held by the Anderson Living Trust UAD 1/22/98, of
which Mr. Anderson is a trustee, includes 33,000 shares that may be
acquired within 60 days after February 15, 2002 pursuant to outstanding
stock options. Mr. Anderson disclaims beneficial ownership of the shares
held by Sutter Hill Ventures and Anvest, L.P., and individuals and entities
associated with Sutter Hill Ventures and Anvest, L.P., except as to the shares heldAnderson Living Trust UAD 1/22/98 within the meaning of record in his name and his proportionate partnership
interest inRule
13d-3 under the shares held of record by Sutter Hill Ventures and Anvest,
L.P.
(6)Exchange Act.
(10) Includes 39,75052,187 shares that may be acquired within 60 days after February
15, 20012002 pursuant to outstanding stock options.
(7)(11) Includes 8,62527,062 shares that may be acquired within 60 days after February
15, 20012002 pursuant to outstanding stock options.
(8)(12) Includes 27,50036,142 shares that may be acquired within 60 days after February
15, 20012002 pursuant to outstanding stock options.
(9)(13) Includes 33,000 shares that may be acquired within 60 days after February
15, 2002 pursuant to outstanding stock options.
(14) Includes 22,812 and 313 shares that may be acquired within 60 days after
February 15, 2002 pursuant to outstanding stock options and periodic stock
grant rights, respectively.
(15) Includes 23,000 shares that may be acquired within 60 days after February
15, 2002 pursuant to outstanding stock options.
(16) Includes 17,500 shares that may be acquired within 60 days after February
15, 20012002 pursuant to outstanding stock options.
(10)(17) Includes 11,2507,500 shares that may be acquired within 60 days after February
15, 20012002 pursuant to outstanding stock options.
(11)(18) Includes 13,250 shares that may be acquired within 60 days after February
15, 2001 pursuant to outstanding stock options.
(12) Includes 12,000 shares that may be acquired within 60 days after February
15, 2001 pursuant to outstanding stock options.
(13) Includes 4,600 shares that may be acquired within 60 days after February
15, 2001 pursuant to outstanding stock options
(14) Includes 583,947757,541 shares held by entities affiliated with certain directors
and 271,340543,340 shares that certain directors and officers have the right to
acquire within 60 days after February 15, 20012002 pursuant to the exercise of
outstanding stock options and/or periodic stock grant rights. See Footnotes
(2)(5) through (13)(17).
1417
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and executive officers, and persons who own more than
ten percent of a registered class of the Company's equity securities, to file
with the SEC initial reports of ownership and reports of changes in ownership of
Common Stock and other equity securities of the Company. Officers, directors and
greater than ten percent stockholders are required by SEC regulation to furnish
the Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended December 31, 2000,2001 all
Section 16(a) filing requirements applicable to its officers, directors and
greater than ten percent beneficial owners were complied with; except that one
report, covering one transaction, was filed late by Mr. Alafi, one report,
covering one transaction, was filed late by Mr. Anderson, one report, covering
one transaction, was filed late by Mr. Bowman, one report, covering one
transaction, was filed late by Dr. Goddard, one report, covering one transaction
was filed late by Mr. Harkness, one report, covering one transaction, was filed
late by Dr. Humphries, one report, covering one transaction, was filed late by
Dr. Keegan, one report, covering one transaction, was filed late by Mr. Lima,
one report, covering one transaction, was filed late by Mr. Marion, one report,
covering one transaction, was filed late by Dr. McConnell, one report, covering
one transaction, was filed late by Dr. Modlin, one report, covering one
transaction, was delinquent in reportingfiled late by Mr. Murray, one report, covering one transaction,
was filed late by Mr. Senaldi, one report, covering one transaction, was filed
late by Ms. Sharp, one report, covering one transaction, was filed late by Dr.
Waitz, and one report, covering two transactions, in Decebmer 2000 andwas filed late by Dr. Zander.
Mr. Alafi timely filed a report but incorrectly reported an incorrect number of shares owned due to an error made in a previous
year. This errortransaction that was
subsequently corrected by amending his previous Form 3amendment on a subsequent report.
18
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers and certain key employees of the Company and their
ages and positions as of February 15, 20002002 are as follows:
NAME AGE POSITION
- ---- --- --------
Joseph D. Keegan, Ph.D.................. 4748 President, Chief Executive Officer
Timothy A. Harkness..................... 3435 Vice President, Finance, Chief Financial Officer
Gillian M.K. Humphries, Ph.D............ 6364 Vice President, AssayResearch and Reagent R&D
Tony M. Lima............................ 42Development
Robert J. Murray........................ 54 Vice President, Operations
Stephen J. Oldfield, Ph.D............... 46 Vice President, Worldwide Marketing
Thomas J. O'Lenic....................... 38 Vice President, North American Sales and Service
Douglas N. Modlin, Ph.D. ............... 48 Vice President, Instrument Technology R&D
Robert J. Murray........................ 53 Vice President, Operations
John S. Senaldi......................... 3637 Vice President, MarketingPresident/General Manager IonWorks (TM)
Patricia C. Sharp....................... 5758 Vice President, Human Resources
Andrew T. Zander, Ph.D. ................ 55Ph.D.................. 56 Vice President, Engineering
JosephJOSEPH D. Keegan, Ph.D.KEEGAN, PH.D., was appointed as President and Chief Executive
Officer of the Company effective March 30, 1998. From 1992 to 1998, Dr. Keegan
served in various positions at Becton Dickinson and Company, a research and
diagnostic company, including the positions of Vice President, Sales and
Service, Vice President, General Manager of the Immunocytometry Systems Division
and, most recently, President of the Worldwide Tissue Culture Business. From
1987 to 1992, he was employed by LEICA, Inc., a microscope manufacturer, where
he held various senior management positions. Dr. Keegan is a member of the Board
of Directors of Argonex,Upstate Group, Inc. Dr. Keegan holds a Ph.D. in Chemistry from
Stanford University.
TimothyTIMOTHY A. HarknessHARKNESS has served as Vice President Finance and Chief
Financial Officer of the CompanyMolecular Devices Corporation since July 1998. From 1997 to
1998, Mr. Harkness was Vice President of Business Development at Vivra Specialty
Partners, a physician practice management company. Previously, Mr. Harkness was
with Montgomery Securities in the Health Care Investment Banking Group from 1994
to 1997 and with Arthur Andersen & Co. from 1989 to 1992. Mr. Harkness is a
member of the Board of Directors of Essen Instruments, Inc. Mr. Harkness holds
an MBA from Stanford University Graduate School of Business and is a CPA.
GillianGILLIAN M.K. Humphries, Ph.D.HUMPHRIES, PH.D., has served as a Vice President of the
Company since March 1990. Dr. Humphries served as a consultant to the Company
since its inception in 1983. In 1984, Dr. Humphries joined the Company on a full
time basis as a research scientist and, from 1985 to 1990, she served as
Director of MAXline and Cytosensor Development. Dr. Humphries holds a Ph.D. in
Biochemistry from Stanford University and an MS in Biochemistry from San Jose
State University.
Tony M. Lima has served as Vice President, Sales and Service, of the
Company since July 1998. Previously, Mr. Lima was Manager, Sales and Marketing
at Cavro Scientific Instruments during a portion of 1998,
15
President/CEO of Aydius, Inc. from 1996 to 1997, and Vice President, Customer
Services of Behring Diagnostics (formerly Syva Company) from May 1995 to March
1996. From 1981 to May 1995 he was employed by Syva Co., a global clinical
diagnostics company, where he held various senior management positions in
England, Belgium and the United States. Mr. Lima holds a higher TEC Degree in
Electronics from Kingston College London, England.
Douglas N. Modlin, Ph.D., joined the Company in August 2000 when it
merged with LJL BioSystems, Inc., and was appointed as Vice President of
Instrument Technology Research and Development in October 2000. Since October
1997, Dr. Modlin worked at LJL BioSystems as Vice President of Instrumentation
Systems Research and Development and served as Senior Director of Research and
Development since December 1996. Prior to that, Dr. Modlin was the Manager of
Advanced Test Systems Development at Micro Module Systems, Inc., from November
1995 to December 1996, and was the Associate Technical Director of Research at
the Company August 1993 to October 1995. From November 1991 to August 1993, Dr.
Modlin was the Program Manager of Diagnostic Instrumentation for Affymax NV, a
drug discovery company. Dr. Modlin holds a B.S. in electrical engineering from
the California Polytechnic State University, San Luis Obispo, and an M.S. and
Ph.D in electrical engineering from Stanford University.
RobertROBERT J. MurrayMURRAY has served as a Vice President, in charge of Worldwide
Operations, since July 1995. Mr. Murray served as the Company's Director of
Operations from 1993 to 1995. During 1993, Mr. Murray was a consultant to Tandem
Computers, Incorporated, a computer manufacturer. From 1991 to 1993, Mr. Murray
was Vice President of Marketing and Manufacturing at Electromer Corporation, an
electronic component company, and from 1989 to 1991, as Vice President and
General Manager of Comptronix Corp., a contract manufacturing company. Prior to
that, Mr. Murray was Vice President of Operations of Gould, Inc., a diversified
conglomerate. Mr. Murray holds an M.S. in Electrical Engineering from San Jose
State University and a B.S. from the University of California at Davis.
John S. SenaldiSTEPHEN J. OLDFIELD, PH.D. has served as Vice President, in charge of
Worldwide Marketing, since December 2001. Dr. Oldfield served as the Company's
Marketing Director for Cell Analysis products from 1999 to 2001. From 1997 to
1999, Dr. Oldfield was the Director of Marketing at Molecular Probes, Inc., a
biotechnology company. From 1995 to 1997, Dr. Oldfield was the CompanyDirector of
Marketing at FMC Bioproducts, a biotechnology supplier, which was subsequently
acquired by Cambrex Corporation. Dr. Oldfield served in various management
positions at Molecular Dynamics, a bioanalytical instrument provider now part of
Amersham Biosciences, in England and the United States from 1988 to 1995, and at
Pharmacia Biotechnology, a biotechnology company in Sweden from 1984 to 1988.
Dr. Oldfield holds a Ph.D. from Imperial College, London and a BSc from the
University of Sheffield.
19
THOMAS J. O'LENIC has served as Vice President, North American Sales and
Service, since January 2002. From 1995 to 2002, Mr. O'Lenic served in various
Sales Management positions at Molecular Devices, most recently as Director of
North American Sales, Life Sciences Division. From 1994 to 1995, Mr. O'Lenic was
with PerSeptive Biosystems, a bioanalytical instrument company. From 1990 to
1994, Mr. O'Lenic worked for Millipore Corporation, a multinational bioscience
company, and from 1989 to 1990, he worked for Bios Corporation, a life science
products company. Mr. O'Lenic holds a B.S. in Biology from the University of
South Florida.
JOHN S. SENALDI was appointed Vice President and General Manager,
IonWorks(TM) business unit in November 2001. Prior to this role, Mr. Senaldi
served as Vice President, Worldwide Marketing from August 1998.1998, when he joined
the Company. From 1993 to 1998, Mr. Senaldi served inheld various management positions at
Becton Dickinson and Company, a research and diagnostic company, including
the positions ofProgram Management for Becton's Immunocytometry Systems Division, Director of
Business Development and Senior Product Manager in both Europe and North America
for Becton's Diabetes Healthcare business. Most recently, he was in a Program
Management role for Becton's Immunocytometry Systems Division. Prior to joining Becton Dickinson,
Mr. Senaldi held various management positions in manufacturing and marketing
with General Electric Company's Medical Systems Business GroupCompany and in engineering functions with several start-up
medical device/diagnostic companies. Mr. Senaldi holds an MBA from Harvard
Business School, an MSEE from Rensselaer Polytechnic Institute and a B.S. in
Engineering from Trinity College.
PatriciaPATRICIA C. SharpSHARP was appointed as Vice President of Human Resources of
the Company effective September 2000. From 1997 to 2000, Ms. Sharp served as
a
Human Resources consultant at Sharp Associates Consulting specializing in Human
Resources management, leadership and organizational development. Previously, Ms.
Sharp was withworked at Apple Computer, Inc., as Senior Vice President, Human Resources.
Ms. Sharp has a B.A. in Behavioral Sciences from San Jose State University.
AndrewANDREW T. Zander, Ph.D.ZANDER, PH.D., joined the CompanyMolecular Devices as Vice President,
Engineering in March 2000. Dr. Zander came to the Company from Transgenomic,
Inc., a biotechnology company, where he was Vice President, Research and
Development, and prior to that he was at Varian Associates, a medical systems
company, for 12 years, where he was a Director of Research for Varian's
corporate R&D activities. Before Varian, he had worked at Perkin-Elmer and
Beckman. As an Officer in the U.S. Naval Reserve, he worked with the Office of
Naval Research as a Scientific Liaison Officer. Dr. Zander holdholds a B.S. in
Chemistry from the University of Illinois and a Ph.D. in Analytical Chemistry
from the University of Maryland.
20
EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS
For the year 2001,2002, each member of the Company's Board of Directors will
receive $1,000 for each Board meeting attended by such director and $500 for
each Board committee meeting attended. In addition, the members of the Board may
be reimbursed for out-of-pocket and travel expenses incurred in connection with
attendance at Board and committee meetings.
16
Since the Company was founded in 1983 through the end of fiscal year
2000, Dr. McConnell provided consulting services to the Company regarding, among
other matters, the Company's research and development activities and business
strategy. Dr. McConnell was paid $5,000 per month for such services. This
consulting arrangement ended on December 31, 2000.
During 1995, the Board adopted the 1995 Non-Employee Directors' Stock
Option Plan (the "Directors' Plan") to provide for the automatic grant of
options to purchase shares of Common Stock to non-employee directors of the
Company ("Non-Employee Directors"). The maximum number of shares of Common Stock
that may be issued pursuant to options granted under the Directors' Plan is
347,500. Pursuant to the terms of the Directors' Plan, each Non-Employee
Director is automatically granted an option to purchase 16,50010,000 shares of Common
Stock on the date of his or her election to the Board. On the date of adoption
of the Directors' Plan, each person who was then a Non-Employee Director of the
Company was granted an option to purchase 16,500 shares of Common Stock of the
Company under the Directors' Plan, at an exercise price of $5.25 per share.
Thereafter, each Non-Employee Director is automatically granted an option to
purchase an additional 16,500 shares of Common Stock under the Directors' Plan
upon full vesting of any stock option previously granted to such person under
the Directors' Plan. Each newly elected Non-Employee Director is automatically
granted an option to purchase 10,000 shares of Common Stock on the date of his
or her initial election to the Board and each
Non-Employee Director will be granted an option to purchase an additional 4,000
shares of Common Stock immediately following each annual meeting of
stockholders.
The Company's
currently existing non-employee directors will not receive any option grants
under the Directors' Plan until September 2001 when their current options under
the Directors' Plan fully vest, at which time they will be treated as first-time
elected non-employee directors and receive the 10,000 share initial grant at
that time, and will receive the 4,000 share grants at the annual meetings of
stockholders thereafter.
Outstanding options under the Directors' Plan will vest over a period of threefour
years from the date of grant in equal annual installments. The exercise price of
options granted under the Directors' Plan must equal or exceed the fair market
value of the Common Stock on the date of grant. No option granted under the
Directors' Plan may be exercised after the expiration of ten years from the date
it was granted. Options granted under the Directors' Plan are generally
non-transferable. The Board may suspend or terminate the Directors' Plan at any
time. In the event of a merger or consolidation, or a reverse merger or
reorganization in which the Company is not the surviving corporation, options
outstanding under the Directors' Plan will automatically become fully vested and
will terminate if not exercised prior to such event.
Future option grants underDuring the Directors' Plan will vest over a periodlast fiscal year, the Company granted options covering 10,000
shares to each Non-Employee Director, at an exercise price of four years from$21.62 per share,
which was the fair market value of the Common Stock on the date of grant.
1721
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY OF COMPENSATION
The following table shows for the fiscal years ended December 31, 1998,
1999,
2000 and 2000,2001, compensation awarded or paid to, or earned by, the Company's
Chief Executive Officer, and its other four most highly compensated executive
officers at December 31, 20002001, and one other former executive officer who
departed from the Company during fiscal year 2001 (the "Named Executive
Officers"):
SUMMARY COMPENSATION TABLE
LONG-TERM
ANNUAL COMPENSATION LONG-TERM COMPENSATION AWARDS
--------------------------------- -------------------------------------------------------------------- ----------------------------
RESTRICTED SECURITIES ALL OTHER
NAME AND PRINCIPALSALARY BONUS OTHER ANNUAL STOCK AWARDS UNDERLYING ALL OTHERCOMPENSATION
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($)(1) COMPENSATION ($) ($) OPTIONS (#) COMPENSATION ($)(3)
------------------ ---- -------- ---- ------------------ ---------------- ------------ --- ----------- ---------------------------- ------------
Joseph D. Keegan, Ph.D............Ph.D....... 2001 $357,268 $ - $13,900(2) - 60,000 $3,706
President and Chief 2000 $325,000 $195,000325,000 195,000 12,000(4) - 75,000 $14,651(3)2,650
Executive Officer 1999 296,670 165,000 12,000(4) - 50,000 14,540(4)
President and Chief Executive Officer 1998 210,015 105,000 $577,500(2) 170,000 163,962(5)2,540
Timothy A. Harkness...............Harkness.......... 2001 219,450 - 74,275(5) - 35,000 3,104
Vice President, 2000 189,333 100,000 - - 30,000 2,104(7)
Vice President2,104
Finance and Chief Financial 1999 177,083 79,688 - - 30,000 1,859(7)1,859
Chief Financial Officer
1998 74,479 35,750 $167,500(6) 75,000 89,124(8)John S. Senaldi.............. 2001 196,660 - 18,110(5) - 27,500 2,846
Vice President/General 2000 172,577 80,000 - - 25,000 1,792
Manager, IonWorks (TM) 1999 164,170 65,668 - - 30,000 1,792
Robert J. Murray............. 2001 192,667 - - - 25,000 3,379
Vice President, 2000 183,750 73,500 - - 20,000 2,231
Operations 1999 160,683 64,273 - - - 2,161
Patricia C. Sharp(6)......... 2001 193,334 - - - 35,000 4,215
Vice President, 2000 60,244 52,110 - $194,220 (7) 25,000 2,050
Human Resources
Tony M. Lima......................Lima(8).............. 2001 220,705 - - - 27,500 2,913
Vice President, Sales 2000 189,000 95,000 - - 25,000 1,929(7)
Vice President, Sales1,929
and Service 1999 179,170 71,688 - 30,000 2,100(7)
1998 76,291 36,619 - 50,000 1,755(7)
John S. Senaldi................... 2000 172,577 80,000 - 25,000 1,792(7)
Vice President, Marketing 1999 164,170 65,668 - 30,000 1,792(7)
1998 64,707 31,000 $36,875(9) 46,000 31,622(10)
Robert J. Murray.................. 2000 183,750 75,000 - 22,500 1,583(7)
Vice President, Operations 1999 160,683 64,273 - 20,000 2,231(7)
1998 124,600 50,000 - - 2,161(7)2,100
- ----------------------
(1) Represents amounts accrued by the Company in 1998, 1999, 2000 and 2000,2001, but paid
in 1999, 2000, 2001 and 20012002 at the election of the Company.
(2) Consists of an award of 30,000 shares of restricted stock valued at
$577,500 on the date of grant.
(3) Consists of the following payments made by the Company: (i) $1,151 for
the taxable portion of the group life insurance, (ii) $1,500 for the
Company's discretionary contribution to employee's 401(k) account, and
(iii) $12,000 for
use of automobile by employee.
(4) Consists of the following payments made by the Company: (i) $1,040 for
the taxable portion of group life insurance, (ii) $1,500 for the
Company's discretionary contribution to employee's 401(k) account, and
(iii) $12,000 for use of automobile by employee.
(5) Consists of the following payments made by the Company: (i) $150,000
signing bonus upon employment with the Company on March 30, 1998, (ii)
$780 for the taxable portion of group life insurance (iii) $1,500 for
the Company's discretionary contribution to employee's 401(k) accounts,
(iii) $2,682 for relocation costs reimbursed to the employee, and (iv)
$9,000(ii) $1,900 for automobile costs reimbursed to the employee.
(6) Consists of an award of 10,000 shares of restricted stock valued at
$167,500 on the date of grant.
(7)professional services.
(3) Represents the taxable portion of group life insurance paid by the Company
and the Company's discretionary contribution to employee's 401(k) account.
(8) Consists(4) Represents amount for use of the following payments madeautomobile by employee.
(5) Represents loan amount forgiven by the Company: (i) $87,500
signing bonus upon accepting a new positionCompany for the previous payment of
certain taxes.
(6) Ms. Sharp started her employment with the Company on July 9,
1998, and (ii) $1,624 for the taxable portion of group life insurance
and the Company's discretionary contribution to employee's 401(k)
account.
(9)in September 2000.
(7) Consists of an award of 2,500 shares of restricted stock valued at
$36,875$194,220 on the date of grant.
(10) Consists of the following payments made by the Company: (i) $30,000
signing bonus upon accepting a position(8) Mr. Lima's employment with the Company on August 6,
1998, (ii) $1,622 for the taxable portion of group life insurance and
the Company's discretionary contribution to employee's 401(k) accounts.ended December 31, 2001.
22
STOCK OPTION GRANTS AND EXERCISES
The Company grants options to its executive officers under its 1995 Stock
Option Plan (the "Option Plan"). As of February 15, 2001,2002, options to purchase a
total of 1,235,5632,216,900 shares were outstanding under the Option Plan and options to
purchase 313,211293,677 shares remained available for grant thereunder.
18
The following tables show for the fiscal year ended December 31, 2000,2001,
certain information regarding options granted to, exercised by, and held at year
end by, the Named Executive Officers:
OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE
OPTION GRANTS IN LAST FISCAL YEAR
------------------------------------------------------ POTENTIAL REALIZABLE
VALUE AT ASSUMED ANNUAL
---------------------------------NUMBER OF % OF TOTAL RATES OF STOCK PRICE
% OF TOTALSECURITIES OPTIONS APPRECIATION FOR OPTION
NUMBER OF OPTIONS TERM (3)
SECURITIESUNDERLYING GRANTED TO EXERCISE -------------------------
UNDERLYINGTERM (3)
OPTIONS EMPLOYEES IN PRICE EXPIRATION -----------------------
NAME GRANTED (#) FISCAL YEAR(1) ($/SH)(2) DATE 5% ($) 10% ($)
- ---- ----------- -------------- ---------- ---- ------ ------------------ ---------- -----------
Joseph D. Keegan, Ph.D.(4)....... 75,000 9.96% $48.00 02/07/10 $2,332,740 $5,846,89760,000 6.78% $22.95 05/28/11 $ 865,995 $ 2,194,525
Timothy A. Harkness(4)........... 30,000 3.99% 48.00 02/07/10 933,096 2,338,759
Tony M. Lima(4).................. 25,000 3.32% 48.00 02/07/10 777,580 1,948,96635,000 3.96% 22.95 05/28/11 505,164 1,280,140
John S. Senaldi(4)............... 25,000 3.32% 48.00 02/07/10 777,580 1,948,966Senaldi (4).............. 27,500 3.11% 22.95 05/28/11 396,915 1,005,284
Robert J. Murray (4)............. 22,500 2.99% 48.00 02/07/10 699,822 1,754,06925,000 2.83% 22.95 05/28/11 360,831 914,385
Patricia C. Sharp (4)............ 35,000 3.96% 22.95 05/28/11 505,164 1,280,140
Tony M. Lima(4).................. 27,500 3.11% 22.95 05/28/11 396,915 1,005,284
- ---------------
(1) Based on 753,309884,950 shares subject to options granted to employees in 2000.2001.
(2) The exercise price is equal to 100% of the fair market value of the Common
Stock on the date of the Grant.grant.
(3) The potential realizable value is calculated based on the term of the
option at its time of grant (10 years) and is calculated by assuming that
the stock price on the date of grant as determined by the Board of
Directors appreciates at the indicated annual rate compounded annually for
the entire term of the option and that the option is exercised and sold on
the last day of its term for the appreciated price. The 5% and 10% assumed
rates of appreciation are derived from the rules of the Securities and
Exchange Commission and do not represent the Company's estimate or
projection of the future Common Stock price.
(4) The options have a ten-year term, subject to earlier termination upon
death, disability or termination of employment. These optionsOptions vest at the rate
of 25% per year.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT IN-THE-MONEY FY-END (#) OPTIONS AT FY-END
SHARES ACQUIRED VALUE EXERCISABLE/ ($) EXERCISABLE/
NAME ON EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE(1)
- ---- --------------- ------------ ------------- --------------------------------------- --------------------
Joseph A. Keegan, Ph.D......... 50,00043,500 $ 2,546,875 56,000/189,000 $2,667,750/2,262,682 77,750/183,750 $59,330/$6,873,18874,163
Timothy A. Harkness............ 35,310 1,490,816 5,940/93,750 307,024/3,686,0169,600 463,175 26,250/98,750 46,350/108,150
John S. Senaldi................ 6,250 142,375 19,000/77,350 76,130/106,582
Robert J. Murray............... 24,000 1,415,800 13,125/52,375 18,738/3,748
Patricia C. Sharp.............. - - 11,875/70,625 -/-
Tony M. Lima................... 4,300 153,725 27,500/75,000 1,238,381/2,849,063
John S. Senaldi................ 25,900 1,786,512 2,300/72,800 124,631/2,822,663
Robert J. Murray............... 34,999 823,227 24,500/40,000 2,151,572/1,559,92821,200 1,113,075 28,250/78,750 24,338 /56,788
- --------------------
(1) Represents the fair market value of the underlying shares on the last day
of the fiscal year ($68.437520.87 based on the closing sales price of the Common
Stock as reported on the Nasdaq National Market) less the exercise price
of the options multiplied by the number of shares underlying the option.
23
EMPLOYMENT AGREEMENTS AND CHANGE IN CONTROL ARRANGEMENTS
CHIEF EXECUTIVE OFFICER KEY EMPLOYEE AGREEMENT
On March 11, 1998, Joseph D. Keegan, Ph.D., entered into a Key Employee
Agreement with the Company that provided for the following:
o Dr. Keegan was appointed as President and Chief Executive Officer,
effective March 30, 1998 (the "Employment Date").
19
o Dr. Keegan would be paid an annual base salary of $280,000.
o Dr. Keegan would receive a one time "signing bonus" of $150,000.
Such bonus was subject to repayment if Dr. Keegan terminatedterminates his
employment with the Company within the first year of his employment.
o Dr. Keegan is eligible to receive an annual performance bonus up to
50% of his base salary based on achievement of certain goals
specified by the Board.
o The Board granted Dr. Keegan options to purchase 170,000 shares of
the Company's Common Stock with an exercise price equal to the fair
market value of the Common Stock on the Employment Date. The Options
will vest over five years with 34,000 shares vesting on the first
anniversary of the Employment Date and 8,500 shares vesting every
June 30, September 30, December 30, and March 30 thereafter. Vesting
ceases if Dr. Keegan's employment terminates at any time for any
reason with the following exceptions: (a) Dr. Keegan is retained by
the Company in a post-employment consulting position, as specified,
thus providing for an additional year of vesting, or (b) if Dr.
Keegan is demoted without cause, as defined in the agreement, within
two years following certain defined transactions, then vesting of
the remaining unvested options will accelerate such that Dr. Keegan
will be fully vested with respect to the options to purchase 170,000
shares of the Company's Common Stock.
o The Board granted Dr. Keegan an aggregate of 30,000 shares of the
Company's Common Stock subject to applicable securities laws
restrictions, over two years. A total of 3,750 shares willwould be
granted following the completion of each quarter of service with the
Company as President and Chief Executive Officer on June 30, 1998
and 1999, September 30, 1998 and 1999, December 30, 1998 and 1999,
and March 30, 1999 and 2000. Upon granting, each individual grant
would be fully earned and vested. Granting of stock would ceaseceases if Dr.
Keegan's employment terminatedterminates at any time for any reason, with the
following exception:except if
Dr. Keegan wasis demoted without cause, as defined in the agreement,
within two years following certain defined transactions, then
granting of the remaining ungranted shares wouldwill accelerate such that
Dr. Keegan would
be granted a total of 30,000170,000 shares of the Company's Common Stock.Stock will be
vested. The Company agreed to loan Dr. Keegan amounts required for
the payment of tax obligations related to these share grants. As of
December 31, 2000,2001, $378,825 was outstanding under these loans.
o In the event Dr. Keegan's employment is terminated by the Company
without cause, as defined in the agreement, the Company shall
provide Dr. Keegan with a one-year consulting agreement, as defined,
and outplacement services.
In April 2002, Dr. Keegan agreed to forgo the change in control severance
benefits under his Key Employee Agreement and enrolled in the Change in Control
Severance Benefit Plan, described below. In the event that the plan is amended
or terminated and, as a result, the benefits to Dr. Keegan under the plan are
reduced to the extent that such benefits would be less than those provided by
his Key Employee Agreement, then the change in control severance benefits under
his Key Employee Agreement would be restored.
24
CHIEF FINANCIAL OFFICER EMPLOYEE AGREEMENT
On July 8, 1998, Timothy A. Harkness, entered into an Employee Agreement
with the Company that provided for the following:
o Mr. Harkness was appointed as Vice President of Finance and Chief
Financial Officer, effective July 9, 1998 (the "Employment Date").
o Mr. Harkness would be paid an annual base salary of $150,000. His
salary would increase to $162,000 per year in 3 months and $175,000
per year in 6 months upon certain milestone achievements.
o Mr. Harkness would receive a one time hiring bonus of $87,500.
o Mr. Harkness is eligible to participate in the Company's bonus plan
at 40% of his base salary prorated for employment tenure.
o Mr. Harkness was eligible to receive options to purchase 75,000
shares of the Company's Common Stock. The options will vest over
five years with 15,000 shares vesting on the first anniversary of
the Employment Date and 3,750 shares vesting every quarter
thereafter.
20
o Mr. Harkness is eligible to receive an aggregate of 10,000 shares of
the Company's Common Stock. A total of 1,250 shares wouldwill be granted
following each quarter of service with the Company. Upon granting,
each share will be fully earned and vested. If Mr. Harkness is
terminated without cause within the first two years, then (i) the
granting of shares will accelerate such that Mr. Harkness wouldwill
receive 10,000 shares of the Company's Common Stock and (ii) Mr.
Harkness would receive a one-time severance payment equal to the
prior 6 months compensation. The Company agreed to loan Mr. Harkness
amounts required for the payment of tax obligations related to these
share grants. As of December 31, 2000, $148,5492001 $74,275 was outstanding under
these loans.loans, which will be forgiven over time under an employment
vesting schedule.
o In the event of a change of control resulting in either termination
or demotion, all of Mr. Harkness' stock options and shares will
become fully vested on such date. In addition, Mr. Harkness would be
granted a one-time severance payment equal to the last 12 months'months
compensation.
VICE PRESIDENT EMPLOYMENT AGREEMENT
On July 9, 1998, Tony M. Lima, Vice President of Worldwide SalesIn April 2002, Mr. Harkness agreed to forgo the change in control
severance benefits under his Employee Agreement and Service, entered into an employment agreement with the Company that provided for
the following:
o Mr. Lima would be paid an annual base salary of $175,000.
o Mr. Lima is eligible to participateenrolled in the Company's bonusChange in
Control Severance Benefit Plan, described below. In the event that the plan at 40% of his base salary prorated fromis
amended or terminated and, as a result, the time he has
been employed, with a guaranteed minimum bonus of $30,000benefits to Mr. Harkness under the
plan forare reduced to the 1998 plan year.
o Mr. Lima was eligible to receive options to purchase 50,000
shares ofextent that such benefits would be less than those
provided by his Employee Agreement, then the Company's Common Stock. The options will vest
over five years with 10,000 shares vesting on each of the
first and second anniversary of the employment date and 2,500
shares vesting quarterly following the second anniversary of
the employment date.change in control severance
benefits under his Employee Agreement would be restored.
VICE PRESIDENT EMPLOYMENT AGREEMENT
On July 13, 1998, John S. Senaldi, Vice President of Worldwide Marketing,
entered into an employment agreement with the Company that provided for the
following:
o Mr. Senaldi would be paid an annual base salary of $160,020. Mr.
Senaldi would receive a one timeone-time signing bonus of $30,000.
o Mr. Senaldi is eligible to participate in the Company's bonus plan
at 40% of his base salary prorated from the time he has been
employed, with a guaranteed minimum bonus of $30,000 under the plan
for the 1998 plan year.
o Mr. Senaldi was eligible to receive options to purchase 46,000
shares of the Company's Common Stock. The options will vest over
five years with 10,0009,200 shares vesting on each of the first and second
anniversary of the employment date and 2,5002,300 shares vesting
quarterly following the second anniversary of the employment date.
o Mr. Senaldi was eligible to receive an aggregate of 2,50025,000 shares of
the Company's Common Stock. The shares will be granted ratably and
quarterly over a period of two years. The Company agreed to loan Mr.
Senaldi amounts required for the payment of tax obligations related
to these share grants. As of December 31, 2000, $36,219$18,110 was
outstanding under these loans. In the event of a Change of Control,
all of Mr. Senaldi's stock options and shares will become fully
vested at such date.
o In the event of a Change of Control, all of Mr. Senaldi's stock
options and shares will become fully vested at such date.
2125
In April 2002, Mr. Senaldi agreed to forgo the change in control severance
benefits under his employment agreement and enrolled in the Change in Control
Severance Benefit Plan, described below. In the event that the plan is amended
or terminated and, as a result, the benefits to Mr. Senaldi under the plan are
reduced to the extent that such benefits would be less than those provided by
his employment agreement, then the change in control severance benefits under
his employment agreement would be restored.
VICE PRESIDENT EMPLOYMENT AGREEMENT
On July 25, 2000, Patricia C. Sharp, Vice President of Human Resources,
entered into an employment contract with the Company that provided for the
following:
o Ms. Sharp would be paid an annual base salary of $185,000. Ms. Sharp
would receive a one time signing bonus of $25,000. Upon the
completion of six months of satisfactory employment, Ms. Sharp would
receive an additional bonus of $25,000.
o Ms. Sharp would be eligible to participate in the Company's bonus
plan at 40% of her base salary prorated from the time she has been
employed.
o Ms. Sharp would be eligible to receive options to purchase 47,500
shares of the Company's Common Stock. The options would vest over
four years with 11,875 shares vesting on each anniversary of the
employment date. Ms. Sharp would be eligible to receive an aggregate
of 2,500 shares of restricted Common Stock. The shares would be
granted ratably and quarterly over a period of two years.
VICE PRESIDENT EMPLOYMENT AGREEMENT
On July 9, 1998, Tony M. Lima, Vice President of Worldwide Sales and
Service, entered into an employment agreement with the Company that provided for
the following:
o Mr. Lima would be paid an annual base salary of $175,000.
o Mr. Lima would be eligible to participate in the Company's bonus
plan at 40% of his base salary prorated from the time he has been
employed, with a guaranteed minimum bonus of $30,000 under the plan
for the 1998 plan year.
o Mr. Lima would be eligible to receive options to purchase 50,000
shares of the Company's Common Stock. The options would vest over
five years with 10,000 shares vesting on each of the first and
second anniversary of the employment date and 2,500 shares vesting
quarterly following the second anniversary of the employment date.
This agreement was terminated in connection with Mr. Lima's resignation on
December 31, 2001.
CHANGE IN CONTROL SEVERANCE BENEFIT PLAN
In February 2001, the Board of Directors adopted a Change in Control
Severance Benefit Plan to provide certain benefits and protections to designated
executive officers who have not entered into individual severance benefit or
change in control agreements with the Company. The plan provides that in the
event of a constructive or involuntarily termination without cause within 13
months after a Change in Control, as defined in the plan, such terminated
executive officer will receive (i) a lump sum payment equal to 12 months' salary,
(ii) a bonus payment equal to what would have been earned at 100% of target for
the year of termination, (iii) continued health insurance benefits for 18
months, unless the executive officer obtains coverage from another employer
during that time, (iv) full acceleration of vesting for all outstanding options,
and (v) payment for an executive assistance program lasting up to three months
and not to exceed $7,500, provided that the executive officer enrolls within six
months following termination. If the total amount of paymentspayment under the plan
would cause the executive officer to incur "golden parachute" excise tax
liability in connection with the Change in Control, then the payments will be
reduced to the extent necessary to leave him or her in a better after-tax
position than if no such reduction had occurred. The plan provides these certain
benefits and protections to the following executive officers: Gillian M.K.
Humphries, Ph.D., Robert J. Murray, Stephen J. Oldfield, Ph.D., Thomas J.
O'Lenic, Patricia C. Sharp and Andrew T. Zander, Ph.D.
26
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
ON EXECUTIVE COMPENSATION(1)
The Compensation Committee of the Board of Directors (the "Committee") is
comprised of Mr. Anderson, Mr. Marion and Dr. Waitz, none of whom has been a
permanent officer or employee of the Company. The Committee is responsible for
establishing the Company's compensation for executive officers.
The goals of the compensation program are to align compensation with
business objectives and performance and to enable the Company to attract, retain
and reward executive officers and other key employees who contribute to the
long-term success of the Company and to motivate them to enhance long-term
stockholder value. To meet these goals, the Committee has adopted a mix of the
compensation elements of salary, bonus and stock options.
BASE SALARY. The Committee meets at least annually to review and approve
each executive officer's salary for the ensuing year. When reviewing base
salaries, the Committee considers the following factors, in order of importance:
competitive pay practices, individual performance against goals, levels of
responsibility, breadth of knowledge and prior experience. To provide the
Committee with more information for making compensation comparisons, the Company
surveys a group of comparable companies with a capitalization similar to that of
the Company.
BONUS. The bonus program is a discretionary program for executive officers
and other key employees of the Company. The Committee meets in the first quarter
following the year of the awards to be made to determine the amount of the
bonuses. The bonus award depends on the extent to which the Company and
individual performance objectives are achieved. The Company's objectives consist
of operating, strategic and financial goals that are considered to be critical
to the Company's fundamental long-term goal of building stockholder value. For
fiscal year 2000,2001, these goals were related to specific increases in revenue,
operating income and earnings per share over the prior years.
STOCK OPTIONS. The Option Plan maintained by the Company was established
to provide employees of the Company with an opportunity to share, along with
stockholders of the Company, in the long-term performance of the Company.
Initial grants of stock options are generally made to eligible employees upon
commencement of employment, with additional grants being made to certain
employees periodically or following a significant change in the job
responsibilities, scope or title of such employment. Stock options under the
Options Plan generally vest over a four or five-year period and expire ten years
from the date of grant. The exercise price of such options is usually 100% of
the fair market value of the underlying stock on the date of grant.
- ----------
1 The material in this report is not "soliciting material," is not deemed
"filed" with the SEC, and is not to be incorporated by reference into any filing
of the Company under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, whether made before or after the date hereof
and irrespective of any general incorporation language contained in such filing.
22
Guidelines for the number of stock options for each participant under the
Option Plan are generally determined by a formula established by the Committee
whereby several factors are applied to the salary and performance level of each
participant and then related to the approximate market price of the stock at the
time of grant. In awarding stock options, the Committee considers individual
performance, overall contribution to the Company, officer retention, the number
of unvested stock options held by the officer and the total number of stock
options to be awarded.
Section 162(m) of the Internal Revenue Code of 1986 limits the Company to
a deduction for federal income tax purposes of up to $1 million of compensation
paid to certain Named Executive Officers in a taxable year. Compensation above
$1 million may be deducted if it is "performance-based compensation." The
Compensation Committee has determined that stock options granted under the
Company's Option Plan with an exercise price at least equal to the fair market
value of the Company's common stock on the date of grant shall be treated as
"performance-based compensation" and any compensation recognized by a Named
Executive Officer as a result of the grant of such a stock options is deductible
by the Company.
CEO COMPENSATION. The Committee used the same procedures described above
in setting the annual salary, bonus and stock option awards for the CEO. The
grant of restricted stock to Dr. Keegan was arrived at through arms-length
negotiations in connection with his initial hire as CEO. The CEO's salary is determined based on comparisons with companies with a
capitalization similar to that of the Company. Dr. Keegan did not receive a
bonus for the fiscal year 2001 as the Company did not achieve their performance
objectives.
- ----------------------------------
(1) The material in this report is not "soliciting material," is not deemed
"filed" with the SEC, and is not to be incorporated by reference into any
filing of the Company under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, whether made before or after
the date hereof and irrespective of any general incorporation language
contained in such filing.
27
SUMMARY. Through the plans described above, a significant portion of the
Company's compensation program for its executive officers (including the CEO) is
contingent upon the individual's and Company's performance, and realization of
benefits by the CEO and the other executive officers is closely linked to
increases in long-term stockholder value. The Company remains committed to this
philosophy of pay for performance, recognizing that the competitive market for
talented executives and the volatility of the Company's business may result in
highly variable compensation during any given annual period.
COMPENSATION COMMITTEECompensation Committee
David L. Anderson
Andre F. Marion
J. Allan Waitz, Ph.D.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As noted above, the Compensation Committee is comprised of three
non-employee directors: Mr. Anderson, Mr. Marion and Dr. Waitz. Mr. Marion
served as an interim chief executive officer of the Company between October 1997
and March 1998. No member of the Compensation Committee is or was formerly a
permanent officer or employee of the Company. No interlocking relationship
exists between the Company's Board of Directors or Compensation Committee and
the board of directors or compensation committee of any other company, nor has
such interlocking relationship existed in the past.
2328
PERFORMANCE MEASUREMENT COMPARISON(1)COMPARISON(2)
The following graph shows the total stockholder return of an investment of
$100 in cash on December 29, 199531, 1996 for (i) the Company's Common Stock, (ii) the
Nasdaq Stock Index and (iii) a peer group index comprised of all public
companies using SIC Code 3826 (Laboratory Analytical Instruments) (the "Peer
Group"). All values assume reinvestment of the full amount of all dividends and
are calculated as of December 31 of each year:
[PERFORMANCE CHART]
FISCAL YEAR ENDING
COMPANY/INDEX/MARKET 12/29/1995 12/31/1996 12/31/1997 12/31/1998 12/31/1999 12/29/2000
Molecular Devices 100 148.21 202.38 207.14 495.24 651.79
Analytical Instruments 100 119.67 141.97 178.27 288.43 453.27
NASDAQ Market Index 100 124.27 152.00 214.39 378.12 237.66
year.
PERFORMANCE CHART
1996 1997 1998 1999 2000 2001
---- ---- ---- ---- ---- ----
Molecular Devices Corp. . . 100.00 136.55 139.76 334.14 439.76 134.10
SIC Code Index. . . . . . . 100.00 118.63 148.98 241.03 378.77 222.76
NASDAQ Market Index . . . . 100.00 122.32 172.52 304.29 191.25 152.46
29
CERTAIN TRANSACTIONS
The Company has entered into employment agreements with certain of its
executive officers. See "Employment Agreements."
- ----------
(1) This Section is not "soliciting material," is not deemed "filed" with the
SEC and is not to be incorporated by reference in any filing of the Company
under the Securities Act of 1933, as amended, or the Securities Exchange Act of
1934, as amended, whether made before or after the date hereof and irrespective
of any general incorporation language in any such filing.
24
OTHER MATTERS
The Board of Directors knows of no other matters that will be presented
for consideration at the Annual Meeting. If any other matters are properly
brought before the meeting, it is the intention of the persons named in the
accompanying proxy to vote on such matters in accordance with their best
judgment.
By Orderorder of the Board of Directors
/s/ James C. Kitch
----------------------------------------------------------------
James C. Kitch
SECRETARY
April 22, 2002
The SEC has adopted rules that permit companies and intermediaries, such
as brokers, to satisfy the delivery requirements for proxy statements and annual
reports with respect to two or more stockholders sharing the same address by
delivering a single proxy statement addressed to those stockholders. This
process, which is commonly referred to as "householding," potentially means
extra convenience for stockholders and cost savings for companies.
This year, a number of brokers with account holders who are Molecular
Devices stockholders may be "householding" our proxy materials. A single proxy
statement may be delivered to multiple stockholders sharing an address unless
contrary instructions have been received from the affected stockholders. Once
you have received notice from your broker that they will be "householding"
communications to your address, "householding" will continue until you are
notified otherwise or until you revoke your consent. If, at any time, you no
longer wish to participate in "householding" and would prefer to receive a
separate proxy statement and annual report, please notify your broker directly
or direct your written request to: Corporate Secretary, April 26, 2001Molecular Devices
Corporation, 1311 Orleans Drive, Sunnyvale, CA 94089 or contact Corporate
Secretary, Molecular Devices Corporation at (408) 747-1700. Stockholders who
currently receive multiple copies of the proxy statement at their address and
would like to request "householding" of their communications should contact
their broker.
- --------------------------------------------------------------------------------
A COPY OF THE COMPANY'S ANNUAL REPORT TO THE SECURITIES AND EXCHANGE
COMMISSION ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 20002001 IS AVAILABLE
WITHOUT CHARGE UPON WRITTEN REQUEST TO: INVESTOR RELATIONS, MOLECULAR DEVICES
CORPORATION, 1311 ORLEANS DRIVE, SUNNYVALE, CALIFORNIA 94089.
25- --------------------------------------------------------------------------------
30
APPENDIX A
CHARTER OF THE AUDIT COMMITTEE
OFMOLECULAR DEVICES CORPORATION
PROXY SOLICITED BY THE BOARD OF DIRECTORS
PURPOSE:FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 23, 2002
The purposeundersigned hereby appoints Joseph D. Keegan, Ph.D., and Timothy A.
Harkness, and each of them, as attorneys and proxies of the Audit Committee (the "Committee")undersigned, with
full power of substitution, to vote all of the Boardshares of Directors (the "Board")stock of Molecular
Devices Corporation, a Delaware corporation
(the "Company")which the undersigned may be entitled to vote at the Annual
Meeting of Stockholders of Molecular Devices Corporation to be held at the
Company's headquarters, 1311 Orleans Drive, Sunnyvale, CA 94089, on Thursday,
May 23, 2002 at 10:30 a.m., shall be to make such examinations as are necessary to monitorlocal time, and at any and all postponements,
continuations and adjournments thereof, with all powers that the corporate financial reportingundersigned
would possess if personally present, upon and the internal and external auditsin respect of the Company, to provide to the Board the results of its examinationsfollowing
matters and recommendations derived therefrom, to outline to the Board improvements made, or
to be made, in internal accounting controls, to nominate independent auditors,
and to provide such additional information and materials as it may deem
necessary to make the Board aware of significant financial matters which require
the Board's attention.
COMPOSITION:
The Committee will be comprised of two or more members of the Board.
The members of the Committee and its Chairman will be appointed by and serve at
the discretion of the Board.
FUNCTIONS AND AUTHORITY:
The operation of the Committee shall be subject to the provisions of
the Bylaws of the Company, as in effect from time to time, and to Section 311 of
the California General Corporation Law. The Committee shall have the full power
and authority to carry outaccordance with the following responsibilities:
1. To recommend annuallyinstructions, with discretionary
authority as to the full Board the firm of certified
public accountants to be employed by the Company as its independent auditors for
the ensuing year.
2. To review the engagement of the independent auditors,
including the scope, extent and procedures of the audit and the compensation to
be paid therefore,any and all other matters that may properly come before the
Committee deems appropriate.
3.meeting.
UNLESS A CONTRARY DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED FOR ALL
NOMINEES LISTED IN PROPOSAL 1, PROPOSAL 2, PROPOSAL 3 AND PROPOSAL 4, AS MORE
SPECIFICALLY DESCRIBED IN THE PROXY STATEMENT. IF SPECIFIC INSTRUCTIONS ARE
INDICATED, THIS PROXY WILL BE VOTED IN ACCORDANCE THEREWITH.
SEE REVERSE SIDE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE SIDE
--------------------------DETACH HERE-----------------------------
PLEASE MARK VOTES AS IN THIS EXAMPLE: |X|
MANAGEMENT RECOMMENDS A VOTE FOR THE
NOMINEES FOR DIRECTORS LISTED BELOW
Proposal 1: To have familiarity, throughelect directors to hold office until the individual effortsnext Annual Meeting
of its
members, withStockholders and until their successors are elected.
NOMINEES: Joseph D. Keegan, Ph.D., Moshe H. Alafi, David L. Anderson,
A. Blaine Bowman, Paul Goddard, Ph.D., Andre F. Marion, Harden M.
McConnell, Ph.D., and J. Allan Waitz, Ph.D.
/ / / /
FOR all nominees listed above WITHHOLD AUTHORITY to vote
(except as marked to the accounting and reporting principles and practices appliedfor all nominees listed above.
contrary below).
- --------------------------------------------------------------------------------
TO WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE(S), WRITE SUCH NOMINEE(S)' NAME(S)
ABOVE:
MANAGEMENT RECOMMENDS A VOTE
FOR PROPOSALS 2, 3 AND 4 BELOW
Proposal 2: To approve the Company's 1995 Stock Option Plan, as amended, to
increase the aggregate number of shares of Common Stock
authorized for issuance under the plan by 500,000 shares.
/ / FOR / / AGAINST / / ABSTAIN
Proposal 3: To approve the Company in preparing its financial statements, including, without
limitation,Company's 1995 Employee Stock Purchase Plan, as
amended, to increase the policiesaggregate number of shares of Common
Stock authorized for recognitionissuance under such plan by 200,000 shares.
/ / FOR / / AGAINST / / ABSTAIN
Proposal 4: To ratify the selection of revenues in financial statements.
4. To review with management and theErnst & Young LLP as independent
auditors upon
completion of their audit, financial results for the year, as reported in the
Company's financial statements, or other disclosures.
5. To assist and interact with the independent auditors in order
that they may carry out their duties in the most efficient and cost effective
manner.
6. To evaluate the cooperation received by the independent
auditors during their audit examination, including their access to all requested
records, data and information, and elicit the comments of management regarding
the responsiveness of the independent auditors to the Company's needs.
7. To review the Company's balance sheet, profit and loss
statement and statements of cash flows and stockholders' equity for each interim
period, and any changes in accounting policy that have occurred during the
interim period.
8. To review and approve all professional services provided to
the Company by its independent auditors and consider the possible effect of such
services on the independence of such auditors.
9. To consult with the independent auditors and discuss with
Company management the scope and quality of internal accounting and financial
reporting controls in effect.
10. To investigate, review and report to the Board the propriety
and ethical implications of any transactions, as reported or disclosed to the
Committee by the independent auditors, employees, officers, members of the Board
or otherwise, between (a) the Company and (b) any employee, officer or member of
the Board of the Company or any affiliates of the foregoing.
11. To perform such other functions and have such power as may be
necessary or convenient in the efficient and lawful discharge of the foregoing.
MEETINGS:
The Committee will hold at least one regular meeting perfor its fiscal year and
additional meetings as the Chairman or Committee deem appropriate. The President
and Chief Executive Officer, Vice President and Chief Financial Officer may
attend any meeting of the Committee, except for portions of the meetings where
his, her or their presence would be inappropriate, as determined by the
Committee Chairman.
MINUTESending December 31,
2002.
/ / FOR / / AGAINST / / ABSTAIN
31.
PLEASE SIGN EXACTLY AS YOUR NAME APPEARS
HEREON. IF THE STOCK IS REGISTERED IN THE
NAMES OF TWO OR MORE PERSONS, EACH SHOULD
SIGN. EXECUTORS, ADMINISTRATORS,
TRUSTEES, GUARDIANS AND
REPORTS:
Minutes of each meeting shall be kept and distributed to each member of
the Committee, members of the Board who are not members of the Committee and the
Secretary of the Company. The Chairman of the Committee shall report to the
Board from time to time, or whenever so requested by the Board.ATTORNEYS-IN-FACT SHOULD ADD THEIR
TITLES. IF SIGNER IS A CORPORATION,
PLEASE GIVE FULL CORPORATE NAME AND HAVE
A DULY AUTHORIZED OFFICER SIGN, STATING
TITLE. IF SIGNER IS A PARTNERSHIP,
PLEASE SIGN IN PARTNERSHIP NAME BY
AUTHORIZED PERSON.
PLEASE VOTE, DATE AND PROMPTLY RETURN
THIS PROXY IN THE ENCLOSED RETURN
ENVELOPE WHICH IS POSTAGE PREPAID IF
MAILED IN THE UNITED STATES.
Signature: Date: Signature: Date:
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32.