SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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:
|X| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
|_| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Senesco Technologies, Inc.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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|_| Fee paid previously with preliminary materials.
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|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement no.:
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(3) Filing Party:
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(4) Date Filed:
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SENESCO TECHNOLOGIES, INC.
303 GEORGE STREET, SUITE 420
NEW BRUNSWICK, NEW JERSEY 08901
To Our Stockholders:
You are cordially invited to attend the 2002 Annual Meeting of Stockholders
of Senesco Technologies, Inc. at 9:30 A.M., local time, on December 13, 2002, at
The American Stock Exchange at 86 Trinity Place, New York, New York 10006.
The Notice of Meeting and Proxy Statement on the following pages describe
the matters to be presented at the meeting.
It is important that your shares be represented at this meeting to assure
the presence of a quorum. Whether or not you plan to attend the meeting, we hope
that you will have your stock represented by signing, dating and returning your
proxy card in the enclosed envelope, which requires no postage if mailed in the
United States as soon as possible. Your stock will be voted in accordance with
the instructions you have given in your proxy.
Thank you for your continued support.
Sincerely,
/s/ Ruedi Stalder
Ruedi Stalder
Chairman of the Board
SENESCO TECHNOLOGIES, INC.
303 GEORGE STREET, SUITE 420
NEW BRUNSWICK, NEW JERSEY 08901
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 13, 2002
The Annual Meeting of Stockholders (the "Meeting") of Senesco Technologies,
Inc., a Delaware corporation (the "Company"), will be held at The American Stock
Exchange at 86 Trinity Place, New York, New York 10006 on December 13, 2002, at
9:30 A.M., local time, for the following purposes:
(1) To elect seven (7) Directors to serve until the next Annual Meeting of
Stockholders and until their respective successors shall have been duly
elected and qualified;
(2) To approve a proposal to increase the maximum number of authorized shares
of the Company's common stock, $0.01 par value (the "Common Stock"), from
twenty million (20,000,000) shares to thirty million (30,000,000) shares;
(3) To approve an amendment to the Company's 1998 Stock Incentive Plan, as
amended (the "1998 Stock Plan"), to increase the maximum number of shares
of the Company's common stock available for issuance under the 1998 Stock
Plan from two million (2,000,000) shares to three million (3,000,000)
shares;
(4) To ratify the appointment of Goldstein Golub Kessler LLP as the independent
auditors for the fiscal year ending June 30, 2003; and
(5) To transact such other business as may properly come before the Meeting or
any adjournment or adjournments thereof.
Holders of the Company's Common Stock of record at the close of business on
October 21, 2002 (the "Stockholders"), are entitled to notice of and to vote at
the Meeting, or any adjournment or adjournments thereof. A complete list of such
Stockholders will be open to the examination of any Stockholder at the Company's
principal executive offices at 303 George Street, Suite 420, New Brunswick, New
Jersey 08901 for a period of ten (10) days prior to the Meeting and at The
American Stock Exchange in New York on the day of the Meeting. The Meeting may
be adjourned from time to time without notice other than by announcement at the
Meeting; provided, however, if the adjournment is for more than thirty (30)
days, or if after the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting is required to be given to each
Stockholder.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED REGARDLESS OF THE NUMBER OF
SHARES YOU MAY HOLD. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON,
PLEASE COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD PROMPTLY IN THE
ENCLOSED RETURN ENVELOPE. THE PROMPT RETURN OF PROXIES WILL ENSURE A QUORUM AND
SAVE THE COMPANY THE EXPENSE OF FURTHER SOLICITATION. EACH PROXY GRANTED MAY BE
REVOKED BY THE STOCKHOLDER APPOINTING SUCH PROXY AT ANY TIME BEFORE IT IS VOTED.
IF YOU RECEIVE MORE THAN ONE PROXY CARD BECAUSE YOUR SHARES ARE REGISTERED IN
DIFFERENT NAMES OR ADDRESSES, EACH SUCH PROXY CARD SHOULD BE SIGNED AND RETURNED
TO ENSURE THAT ALL OF YOUR SHARES WILL BE VOTED.
By Order of the Board of Directors
/s/ Sascha P. Fedyszyn
Sascha P. Fedyszyn
Secretary
New Brunswick, New Jersey
October 29, 2002
THE COMPANY'S 2002 ANNUAL REPORT ACCOMPANIES THE PROXY STATEMENT.
SENESCO TECHNOLOGIES, INC.
303 GEORGE STREET, SUITE 420
NEW BRUNSWICK, NEW JERSEY 08901
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PROXY STATEMENT
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This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of Senesco Technologies, Inc., a Delaware corporation
(the "Company"), of proxies to be voted at the Annual Meeting of Stockholders of
the Company to be held on December 13, 2002 (the "Meeting"), at The American
Stock Exchange at 86 Trinity Place, New York, New York 10006, at 9:30 A.M.,
local time, and at any adjournment or adjournments thereof. Holders of record of
the Company's common stock, $0.01 par value (the "Common Stock"), as of the
close of business on October 21, 2002 (the "Stockholders"), will be entitled to
notice of and to vote at the Meeting and any adjournment or adjournments
thereof. As of that date, there were 11,880,045 shares of Common Stock issued
and outstanding and entitled to vote. Each share of Common Stock is entitled to
one vote on any matter presented at the Meeting.
If proxies in the accompanying form are properly executed and returned, the
shares of Common Stock represented thereby will be voted in the manner specified
therein. If not otherwise specified, the shares of Common Stock represented by
the proxies will be voted: (i) FOR the election of the seven (7) nominees named
below as Directors; (ii) FOR the approval of the proposal to increase the
maximum number of authorized shares of Common Stock from twenty million
(20,000,000) shares to thirty million (30,000,000) shares; (iii) FOR the
approval of an amendment to the Company's 1998 Stock Incentive Plan, as amended
(the "1998 Stock Plan"), to increase the maximum number of shares of Common
Stock available for issuance under the 1998 Stock Plan from two million
(2,000,000) shares to three million (3,000,000) shares; (iv) FOR the
ratification of the appointment of Goldstein Golub Kessler LLP, as independent
auditors for the fiscal year ending June 30, 2003; and (v) in the discretion of
the persons named in the enclosed form of proxy, on any other proposals which
may properly come before the Meeting or any adjournment or adjournments thereof.
Any Stockholder who has submitted a proxy may revoke it at any time before it is
voted, by written notice addressed to and received by the Secretary of the
Company, by submitting a duly executed proxy bearing a later date or by electing
to vote in person at the Meeting. The mere presence at the Meeting of the person
appointing a proxy does not, however, revoke the appointment.
The presence, in person or by proxy, of holders of shares of Common Stock
having a majority of the votes entitled to be cast at the Meeting shall
constitute a quorum. The affirmative vote by the holders of a plurality of the
shares of Common Stock represented at the Meeting is required for the election
of Directors, provided a quorum is present in person or by proxy. If such a
quorum is present, all actions proposed herein, other than the election of
Directors, may be taken upon the affirmative vote of Stockholders possessing a
majority of the voting power represented at the Meeting.
Abstentions are included in the shares present at the Meeting for purposes
of determining whether a quorum is present, and are counted as a vote against
for purposes of determining whether a proposal is approved. Broker non-votes
(when shares are represented at the Meeting by a proxy specifically conferring
only limited authority to vote on certain matters and no authority to vote on
other matters) are included in the determination of the number of shares
represented at the Meeting for purposes of determining whether a quorum is
present but are not counted for purposes of determining whether a proposal has
been approved in matters where the proxy does not confer the authority to vote
on such proposal, and thus have no effect on its outcome.
On or about October 29, 2002, this Proxy Statement, together with the
related proxy card, is being mailed to the Stockholders of the Company of record
as of October 21, 2002. The Annual Report to Stockholders of the Company for the
fiscal year ended June 30, 2002 ("Fiscal 2002"), including financial statements
(the "Annual Report"), is being mailed together with this Proxy Statement to all
Stockholders of record as of October 21, 2002. In addition, the Company has
provided brokers, dealers, banks, voting trustees and their nominees, at the
Company's expense, with additional copies of the Annual Report so that such
record holders could supply such materials to beneficial owners as of October
21, 2002.
ELECTION OF DIRECTORS
At the Meeting, seven (7) Directors are to be elected (which number shall
constitute the entire Board of Directors of the Company) to hold office until
the next Annual Meeting of Stockholders and until their successors shall have
been duly elected and qualified.
Unless otherwise specified in the proxy, it is the intention of the persons
named in the enclosed form of proxy to vote the stock represented thereby for
the election as Directors, each of the nominees whose names and biographies
appear below. All of the nominees whose names and biographies appear below are
at present Directors of the Company. In the event any of the nominees should
become unavailable or unable to serve as a Director, it is intended that votes
will be cast for a substitute nominee designated by the Board of Directors. The
Board of Directors has no reason to believe that the nominees named will be
unable to serve if elected. Each nominee has consented to being named in this
Proxy Statement and to serve if elected.
The following are the nominees for election to the Board of Directors and
all are current members of the Board of Directors:
SERVED AS A POSITION WITH
NAME AGE DIRECTOR SINCE THE COMPANY
---- --- -------------- -------------
Ruedi Stalder 61 1999 Chairman of the Board and
Director
Bruce C. Galton 50 2001 President, Chief Executive
Officer and Director
John E. Thompson, Ph.D. 61 2001 Executive Vice President
of Research and Development
and Director
Christopher Forbes 51 1999 Director
Thomas C. Quick 47 1999 Director
David Rector 55 2002 Director
Philip B. Livingston 46 2002 Director
The principal occupations and business experience, for at least the past
five (5) years, of each Director and nominee is as follows:
RUEDI STALDER has been a Director of the Company since February 1999 and
was appointed as Chairman and Chief Executive Officer of the Company on January
10, 2000. On October 4, 2001, Mr. Stalder resigned as the Company's Chief
Executive Officer. Mr. Stalder is a former member of the Executive Boards of
Credit Suisse Group and Credit Suisse First Boston and former Chief Executive
Officer of the Americas Region of Credit Suisse Private Banking. Mr. Stalder
joined Credit Suisse in 1980 as a founding member and Deputy Head of the
Multinational Services Group. In 1986, he became Executive Vice President. He
was named to Credit Suisse's Executive Board in 1989. In 1990, he became Head of
the Commercial Banking Division and a Member of the Executive Committee. From
1991 to 1995, Mr. Stalder was Chief Financial Officer and a Member of the
Executive Boards of Credit Suisse Group and Credit Suisse First Boston. He
became head of Credit Suisse Private Banking in 1995 and retired in 1998. Prior
to moving to the United States, Mr. Stalder was a member of the Board of
Directors for several Swiss subsidiaries of major corporations including AEG,
Bayer, BTR, Hoechst, Saint Gobain, Solvay and Sony. He is a fellow of the World
Economic Forum. He was a member of the Leadership Committee of the Consolidated
Corporate Fund of Lincoln Center for the Performing Arts, Board of The American
Ballet Theatre and a Trustee of Carnegie Hall. Mr. Stalder received a diploma in
advanced finance management at the International Management Development
Institute in Lausanne, Switzerland in 1976. He completed the International
Senior Managers Program at Harvard University in 1985.
2
BRUCE C. GALTON has been a Director of the Company since November 2001 and
was appointed President and Chief Executive Officer of the Company on October 4,
2001. From April 2000 until June 2001, when it was acquired by Transgenomic,
Inc., Mr. Galton was President and Chief Operating Officer and a director of
Annovis, Inc., a manufacturer of specialty chemicals for DNA synthesis with
operations in Pennsylvania and Glasgow, United Kingdom. From January 1985 to May
1999, Mr. Galton held various senior management positions at Cistron
Biotechnology, Inc., including President and Chief Operating Officer from 1988
to 1997 and Chairman and Chief Executive Officer from 1997 to 1999. Cistron
Biotechnology, Inc. was engaged in the research and development of certain
cytokines, which act as key immune regulators. Mr. Galton is a member of the
Borough of Madison, New Jersey Downtown Development Commission and a former
trustee of the Museum of Early Trades and Crafts. Mr. Galton had also served as
a Councilman from 1996 through 1998 and a member of Madison's Planning Board
from 1994 through 1998. Mr. Galton received a Bachelor of Science in Commerce
with a major in accounting from the University of Virginia in 1974 and an M.B.A.
in finance from Fairleigh Dickinson University in 1977.
JOHN E. THOMPSON, PH.D. has been a Director of the Company since October
2001. Dr. Thompson was appointed the Company's President and Chief Executive
Officer in January 1999, and he continued in that capacity until September 1999
when he was appointed Executive Vice President of Research and Development. Dr.
Thompson is the inventor of the technology that is being developed by the
Company. Since July 2001, he has been the Associate Vice President, Research and
from July 1990 to June 2001 he was the Dean of Science at the University of
Waterloo in Waterloo, Ontario, Canada. Dr. Thompson has a Ph.D. in Biology from
the University of Alberta, Edmonton, and he is a Fellow of the Royal Society of
Canada. Dr. Thompson is also the recipient of a Lady Davis Visiting Fellowship,
the Sigma Xi Award for Excellence in Research, the CSPP Gold Medal and the
Technion Visiting Fellowship.
CHRISTOPHER FORBES has been a Director of the Company since January 1999.
Since 1989, Mr. Forbes has been Vice Chairman of Forbes, Inc., which publishes
Forbes Magazine, a leading business publication. He is responsible for Forbes'
advertising and promotion departments. From 1981 to 1989, Mr. Forbes was
Corporate Secretary at Forbes. Prior to 1981, he held the position of Vice
President and Associate Publisher. Mr. Forbes has been a director of Forbes,
Inc. since 1977. Mr. Forbes sits on the Boards of The New York Historical
Society, The Newark Museum, The Business Committee for the Arts, The Brooklyn
Museum, The Friends of New Jersey State Museum, The New York Academy of Art, The
Victorian Society in America, The Princess Margarita Foundation and the Prince
Wales Foundation. He is also a member of the Board of Advisors of The Princeton
University Art Museum, a National Trustee of the Baltimore Museum of Art, and
serves on the Advisory Committee of the Department of European Decorative Arts
of the Museum of Fine Arts in Boston. In 1987, he was appointed to the Board of
Regents of the Cathedral of St. John the Divine in New York City. Mr. Forbes is
also a member of the Board of Directors of Raffles Holdings, Ltd., a
publicly-held company. Mr. Forbes received a Bachelor of Arts degree in Art
History from Princeton University in 1972. In 1986, he was awarded the honorary
degree of Doctor of Humane Letters by New Hampshire College. Mr. Forbes is the
father-in-law of Phillip O. Escaravage, a former executive officer and former
Director of the Company who resigned as an executive officer in January 2000 and
as a Director in October 2001.
THOMAS C. QUICK has been a Director of the Company since February 1999.
From 1996 until he was appointed Vice Chairman in 2001, Mr. Quick was the
President and Chief Operating Officer and a director of Quick & Reilly/Fleet
Securities, Inc., successor to The Quick & Reilly Group, Inc. ("Quick &
Reilly"), a holding company for four (4) major financial services businesses.
From 1985 to 1996, he was President of Quick & Reilly, Inc., a Quick & Reilly
subsidiary and a national discount brokerage firm. Mr. Quick serves as a trustee
for the Securities Industry Foundation for Economic Education. He is also a
member of the Board of Directors of Best Buddies and a member of the Board of
Trustees, the Investment Advisory Board and the Endowment Committee for the St.
Jude Children's Hospital. He is a trustee and treasurer of the National
Corporate Theater Fund, the United World Colleges and the Alcoholism Council of
New York, and a Trustee of Fairfield University, Cold Spring Harbor Laboratories
and the Inter-City Scholarship Foundation of New York City. Mr. Quick is a
graduate of Fairfield University.
DAVID RECTOR has been a Director of the Company since February 2002. Mr.
Rector also serves as a director of Fullcom Technologies, Inc. and Return
Assured, Inc. Since 1985, Mr. Rector has been the Principal of The David Stephen
Group, which provides enterprise consulting services to emerging and developing
companies in a variety of industries. From 1983 until 1985, Mr. Rector served as
President and General Manager of Sunset Designs, Inc. ("Sunset Designs"), a
domestic and international manufacturer and marketer of consumer product craft
kits, and a wholly-owned subsidiary of Reckitt & Coleman N.A. From 1980 until
1983, Mr. Rector served as the Director of Marketing of Sunset Designs. From
1971 until 1980, Mr. Rector served in progressive roles in both the
3
financial and product marketing departments of Crown Zellerbach Corporation, a
multi-billion dollar pulp and paper industry corporation. Mr. Rector received a
Bachelor of Science degree in business/finance from Murray State College in
1969.
PHILIP B. LIVINGSTON has been a Director of the Company since October 2002.
Mr. Livingston is the director and audit committee chairman of Intrado, Inc. Mr.
Livingston is President and Chief Executive Officer of Financial Executives
International and has served in that capacity since 1999. From 1995 to 1998, Mr.
Livingston was Senior Vice President and Chief Financial Officer of Catalina
Marketing Corporation. From 1993 to 1995, Mr. Livingston was Vice President and
Chief Financial Officer of Celestial Seasonings, Inc. Mr. Livingston is a member
of the AICPA. He is also a member of the advisory council to the Financial
Accounting Standards Board and the International Accounting Standards Board. Mr.
Livingston received a Bachelor of Arts and Bachelor of Science degree from the
University of Maryland in 1979 and a Master of Business Administration degree
from the University of California, Berkeley in 1983.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR EACH OF THE
NOMINEES FOR THE BOARD OF DIRECTORS.
4
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors currently consists of Ruedi Stalder, Bruce C.
Galton, John E. Thompson, Ph.D., Christopher Forbes, Thomas C. Quick, David
Rector and Philip B. Livingston.
The Board of Directors held two (2) meetings in Fiscal 2002. In addition,
the Board of Directors often acted by unanimous written consent during Fiscal
2002. Throughout this period, each member of the Board of Directors attended or
participated in at least 75% of the aggregate of: (i) the total number of
meetings of the Board of Directors (held during the period for which such person
has been a Director); and (ii) the total number of meetings held by all
committees of the Board of Directors on which each such Director served (during
the periods such Director served). The Board of Directors has two (2) standing
committees: the Compensation Committee and the Audit Committee.
Compensation Committee. The Compensation Committee was established in July
----------------------
1999. The Compensation Committee makes recommendations concerning salaries and
incentive compensation for management and employees of the Company. During
Fiscal 2002, the Compensation Committee had been, and is currently, comprised of
Christopher Forbes and Thomas C. Quick. In addition, Ruedi Stalder was appointed
to the Compensation Committee in November 2001. The Compensation Committee held
one (1) meeting during Fiscal 2002.
Audit Committee. The Audit Committee was established in July 1999. The
----------------
primary responsibilities of the Audit Committee include: (i) evaluating and
recommending to the Board of Directors the engagement of the Company's
independent auditors; (ii) reviewing and reporting on the results of their audit
findings; (iii) reviewing the Company's periodic reports filed with the
Securities and Exchange Commission; and (iv) monitoring on a periodic basis the
internal controls of the Company. During Fiscal 2002, the Audit Committee had
been, and is currently, comprised of Christopher Forbes and Thomas C. Quick. In
addition, David Rector was appointed to the Audit Committee in February 2002.
The Audit Committee held one (1) meeting during Fiscal 2002.
Certain Directors of the Company had provided the Company with short-term
loans during Fiscal 2002. See "Certain Relationships and Related Transactions."
Although Mr. Quick had provided the Company with short-term loans in the
aggregate principal amount of $175,000 and such loans have since been converted
into Common Stock of the Company, the Company believes that Mr. Quick is an
independent member of the Board of Directors as defined in Section 121(A) of the
American Stock Exchange Listing Standards, Policies and Requirements.
Accordingly, Messrs. Quick and Rector are considered independent directors of
the Company because neither of them is an officer or employee of the Company or
its subsidiary, or have received any compensation from the Company or its
subsidiary, other than compensation for board service, nor do either of them
have a relationship which, in the opinion of the Company's Board of Directors,
would interfere with the exercise of independent judgment in carrying out the
responsibilities of a Director. Mr. Forbes is not an independent director as
defined in Section 121(A) of the American Stock Exchange Listing Standards,
Policies and Requirements because he is the father-in-law of Mr. Escaravage, a
former Director and former executive officer of the Company. The Company is
currently traded on the American Stock Exchange, which requires an Audit
Committee with a majority of independent directors.
5
REPORT OF THE AUDIT COMMITTEE
The Audit Committee has furnished the following report:
September 13, 2002
To the Board of Directors of Senesco Technologies, Inc.:
The Audit Committee reviewed the Company's audited financial statements for
the fiscal year ended June 30, 2002. The Audit Committee also reviewed and
discussed the audited financial statements and the matters required by Statement
on Auditing Standards 61 (Communication with Audit Committees) with Goldstein
Golub Kessler LLP, the Company's independent auditors.
The Company's independent auditors also provided the Audit Committee with
the written disclosures and the letter required by Independence Standards Board
Standard No.1 (Independence Discussions with Audit Committees). In addition, the
Audit Committee discussed with the independent auditors their independence from
the Company.
Based on its discussions with management and the independent auditors, and
its review of the representations and information provided by management and the
independent auditors, the Audit Committee recommended to the Company's Board of
Directors that the audited financial statements be included in the Company's
Annual Report on Form 10-KSB for the year ended June 30, 2002.
By the Audit Committee of the Board of
Directors ofSenesco Technologies, Inc.
Christopher Forbes
Thomas C. Quick
David Rector
6
COMPENSATION OF DIRECTORS
In accordance with a resolution unanimously approved by the Board of
Directors on October 4, 2001, the Company granted to each of Christopher Forbes,
Thomas C. Quick and Ruedi Stalder, effective as of December 1, 2001, options to
purchase forty thousand (40,000) shares of the Company's Common Stock (the
"Options"), pursuant to and in accordance with the 1998 Stock Plan, as
consideration for their service on the Board of Directors through June 30, 2001
("Fiscal 2001"). Options granted to Messrs. Forbes, Quick and Stalder have an
exercise price equal to the fair market value of the Company's Common Stock on
the date of grant, or $2.05 per share and have a term of ten (10) years. Options
granted to all of the Directors are exercisable as follows: (i) one-half (1/2)
of the Options were exercisable as of the date of grant; and (ii) one-half (1/2)
of the Options shall become exercisable as of December 1, 2002. No Director has
received cash compensation for his services on the Board of Directors. The
Company provides reimbursement to Directors for reasonable and necessary
expenses incurred in connection with attendance at meetings of the Board of
Directors and other Company business.
Mr. Stalder has received compensation for providing management services to
the Company. Dr. Thompson has also received compensation for providing research
and development management services to the Company. See "Executive Compensation"
which sets forth the details of the compensation for each of Mr. Stalder and Dr.
Thompson.
EXECUTIVE OFFICERS
The following table identifies the current executive officers of the
Company:
CAPACITIES IN IN CURRENT
NAME AGE WHICH SERVED POSITION SINCE
- ---- --- ------------- --------------
Bruce C. Galton (1)................ 50 President and Chief Executive Officer October 2001
John E. Thompson, Ph.D............. 61 Executive Vice President of Research October 1999
and Development
Sascha P. Fedyszyn (2)............. 27 Vice President of Corporate January 1999
Development and Secretary
Joel P. Brooks (3)................. 43 Chief Financial Officer and Treasurer December 2000
- -----------
(1) On October 4, 2001, upon the resignations of Ruedi Stalder as the Company's
Chief Executive Officer and Steven Katz as the Company's President and Chief
Operating Officer, Mr. Galton was duly appointed by the Company's Board of
Directors as the President and Chief Executive Officer of the Company.
(2) Mr. Fedyszyn was appointed the Company's Vice President of Corporate
Development in January 1999 and was appointed Secretary of the Company in
January 2000. Mr. Fedyszyn has been the Vice President of Senesco since its
inception in June 1998. Mr. Fedyszyn was also a Research Associate at the
Logistics Management Institute from May 1995 to September 1995. Mr. Fedyszyn
received a Bachelor of Arts degree in Biology from Princeton University in June
1997.
(3) Mr. Brooks was appointed Chief Financial Officer and Treasurer of the
Company in December 2000. From September 1998 until November 2000, Mr. Brooks
was the Chief Financial Officer of Blades Board and Skate, LLC, a retail
establishment specializing in the action sports industry. Mr. Brooks was Chief
Financial Officer from 1997 until 1998 and Controller from 1994 until 1997 of
Cable and Company Worldwide, Inc. He also held the position of Controller at USA
Detergents, Inc. from 1992 until 1994, and held various positions at several
public accounting firms from 1983 through 1992. Mr. Brooks received his Bachelor
of Science degree in Commerce with a major in Accounting from Rider University
in February 1983.
None of the Company's current executive officers are related to any other
executive officer or to any Director of the Company. Executive officers of the
Company are elected annually by the Board of Directors and serve until their
successors are duly elected and qualified.
7
EXECUTIVE COMPENSATION
Summary of Compensation in Fiscal 2002, 2001 and 2000
The following Summary Compensation Table sets forth information concerning
compensation during Fiscal 2002, Fiscal 2001 and the year ended June 30, 2000
("Fiscal 2000") for services in all capacities awarded to, earned by or paid to:
(i) each person who served as the Company's Chief Executive Officer at any time
during Fiscal 2002; (ii) those executive officers of the Company other than the
Chief Executive Officer who were serving as executive officers at the end of
Fiscal 2002; and (iii) those individuals for whom disclosure would have been
provided but for the fact that the individual was not serving as an executive
officer of the Company at the end of Fiscal 2002 (collectively, the "Named
Executives").
SUMMARY COMPENSATION TABLE
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Long-Term
Compensation
Annual Compensation Awards
- ------------------------------------------------------------------------------------------------
Securities
Other Annual Underlying
Fiscal Salary Bonus Compensation Options
Name and Principal Position Year ($) ($) ($) (#)(1)
- ------------------------------------------------------------------------------------------------
Ruedi Stalder(2)..................... 2002 -- -- -- 65,000
Chairman and former Chief
Executive Officer 2001 -- -- -- 265,000
2000 -- -- -- 40,000
- ------------------------------------------------------------------------------------------------
Bruce C. Galton (3).................. 2002 99,590 -- -- 430,000
President and Chief
Executive Officer 2001 -- -- -- --
2000 -- -- -- --
- ------------------------------------------------------------------------------------------------
John E. Thompson, Ph.D.(4)........... 2002 -- -- 36,000 --
Executive Vice President
of Research and Development 2001 -- -- 36,000 80,000
2000 -- -- 36,000 40,000
- ------------------------------------------------------------------------------------------------
Sascha P. Fedyszyn(5)................ 2002 66,225 -- -- 10,000
Vice President of
Corporate Development and 2001 68,059 -- -- 45,000
Secretary
2000 55,000 -- -- 30,000
- ------------------------------------------------------------------------------------------------
Joel P. Brooks(6).................... 2002 110,950 -- -- 12,500
Chief Financial Officer
and Treasurer 2001 67,765 -- -- 40,000
2000 -- -- -- --
- ------------------------------------------------------------------------------------------------
Steven Katz(7) ...................... 2002 -- -- 114,050 25,000
Former President and Chief
Operating Officer 2001 -- -- 277,225 115,000
2000 -- -- 238,995 40,000
- ------------------------------------------------------------------------------------------------
8
- -----------
(1) Unless otherwise noted, all options were granted at or above the fair market
value of the Common Stock on the date of grant, as defined in the 1998 Stock
Plan, and vest over time.
(2) Upon the resignation of Phillip O. Escaravage as the Company's Chairman,
President and Chief Executive Officer on January 10, 2000, Mr. Stalder was duly
appointed by the Company's Board of Directors as the Chairman and Chief
Executive Officer of the Company. On October 4, 2001, Mr. Stalder resigned as
the Company's Chief Executive Officer.
o The Company had accrued a total of $131,250 for services provided by
Mr. Stalder as the Company's Chief Executive Officer during Fiscal
2002, 2001 and 2000. On December 1, 2001, the Company granted fully
vested options to Mr. Stalder to purchase sixty-five thousand (65,000)
shares of Common Stock, with an exercise price equal to $2.05 per
share (options were granted in lieu of receiving $131,250 in cash
compensation for services provided as the Company's Chief Executive
Officer during the period from January 1, 2000 through September 30,
2001).
o For services provided in Fiscal 2001, the following options were
granted to Mr. Stalder: (i) options to purchase forty thousand
(40,000) shares of Common Stock were granted on December 1, 2001, with
an exercise price equal to $2.05 per share; (ii) fully vested options
to purchase seventy-five thousand (75,000) shares of Common Stock were
granted on October 2, 2001, with an exercise price equal to $1.50 per
share, which represented 85% of the fair market value of the Common
Stock on the date of grant; and (iii) options to purchase one hundred
fifty thousand (150,000) shares of Common Stock were granted on
November 1, 2001, with an exercise price equal to $4.00 per share.
o For services provided in Fiscal 2000, options to purchase forty
thousand (40,000) shares of Common Stock were granted to Mr. Stalder
on September 7, 1999, with an exercise price equal to $3.50 per share.
(3) Upon the resignations of Steven Katz as the Company's President and Chief
Operating Officer and Mr. Stalder as the Company's Chief Executive Officer on
October 4, 2001, Mr. Galton was duly appointed by the Company's Board of
Directors as the President and Chief Executive Officer of the Company.
o For services provided in Fiscal 2002, the following options were
granted to Mr. Galton: (i) fully vested options to purchase one
hundred thousand (100,000) shares of Common Stock were granted on
October 5, 2001, with an exercise price equal to $2.10 per share; and
(ii) options to purchase three hundred thousand (300,000) shares of
Common Stock were granted on December 1, 2001, with an exercise price
equal to $2.05 per share.
o Options to purchase thirty thousand (30,000) shares of Common Stock
were granted to Mr. Galton on October 5, 2001, with an exercise price
equal to $2.10 per share, in lieu of cash compensation for services
provided by Mr. Galton in his capacity as President and Chief
Executive Officer of the Company for the period from October 4, 2001
through December 31, 2001.
(4) Dr. Thompson was duly appointed by the Company's Board of Directors as the
Executive Vice President of Research and Development in October 1999. Dr.
Thompson was also elected to the Board of Directors on October 4, 2001.
o Dr. Thompson received $36,000 for consulting services provided to the
Company in each of Fiscal 2002, Fiscal 2001 and Fiscal 2000,
respectively.
o For services provided in Fiscal 2001, options to purchase eighty
thousand (80,000) shares of Common Stock were granted to Dr. Thompson
on December 1, 2001, with an exercise price equal to $2.05 per share.
o For services provided in Fiscal 2000, options to purchase forty
thousand (40,000) shares of Common Stock were granted to Dr. Thompson
on September 7, 1999, with an exercise price equal to $3.85 per share.
9
(5) Mr. Fedyszyn was appointed Secretary of the Company in January 2000.
o For services provided in Fiscal 2002, options to purchase ten thousand
(10,000) shares of Common Stock were granted to Mr. Fedyszyn on
October 9, 2002, with an exercise price equal to $1.65 per share.
o For services provided in Fiscal 2001, the following options were
granted to Mr. Fedyszyn: (i) options to purchase ten thousand (10,000)
shares of Common Stock were granted on November 1, 2001, with an
exercise price equal to $2.15 per share; and (ii) options to purchase
thirty-five thousand (35,000) shares of Common Stock were granted on
December 1, 2000, with an exercise price equal to $2.25 per share.
o For services provided in Fiscal 2000, options to purchase thirty
thousand (30,000) shares of Common Stock were granted to Mr. Fedyszyn
on September 7, 1999, with an exercise price equal to $3.50 per share.
(6) Mr. Brooks was appointed Chief Financial Officer and Treasurer of the
Company in December 2000.
o For services provided in Fiscal 2002, options to purchase twelve
thousand five hundred (12,500) shares of Common Stock were granted to
Mr. Brooks on October 9, 2002, with an exercise price equal to $1.65
per share.
o For services provided in Fiscal 2001, the following options were
granted to Mr. Brooks: (i) options to purchase twenty-five thousand
(25,000) shares of Common Stock were granted on December 1, 2000, with
an exercise price equal to $2.25 per share; and (ii) options to
purchase fifteen thousand (15,000) shares of Common Stock were granted
on November 1, 2001, with an exercise price equal to $2.15 per share.
(7) Upon the resignation of Phillip O. Escaravage as the Company's Chairman,
President and Chief Executive Officer on January 10, 2000, Mr. Katz was duly
appointed by the Company's Board of Directors as the President and Chief
Operating Officer of the Company. On October 4, 2001, Mr. Katz resigned as the
Company's President and Chief Operating Officer, but continued to provide
management services for the Company through December 31, 2001. On October 4,
2001, the Board of Directors amended all options granted to Mr. Katz to provide
that such options shall not expire until five (5) years after his termination of
services to the Company, or December 31, 2006.
o Mr. Katz received $114,050, $277,225 and $238,995 pursuant to an
informal arrangement with the Company to provide management services
for the Company in Fiscal 2002, Fiscal 2001 and Fiscal 2000,
respectively. Mr. Katz was appointed as an executive officer of the
Company in January 2000. Payments he received for services before such
date were not in the capacity as an executive officer, but were for
general consulting services.
o For services provided in Fiscal 2002, fully vested options to purchase
twenty-five thousand (25,000) shares of the Company's Common Stock
were granted to Mr. Katz on December 1, 2001, with an exercise price
equal to $2.05 per share.
o For services provided in Fiscal 2001, the following options were
granted to Mr. Katz: (i) options to purchase forty thousand (40,000)
shares of Common Stock were granted on December 1, 2001, with an
exercise price equal to $2.05 per share; (ii) fully vested options to
purchase twenty-five thousand (25,000) shares of Common Stock were
granted on October 2, 2001, with an exercise price equal to $1.50 per
share, which represented 85% of the fair market value of the Common
Stock on the date of grant; and (iii) options to purchase fifty
thousand (50,000) shares of Common Stock were granted on November 1,
2001, with an exercise price equal to $4.00 per share.
o For services provided in Fiscal 2000, options to purchase forty
thousand (40,000) shares of the Company's Common Stock were granted to
Mr. Katz on September 7, 1999, with an exercise price equal to $3.50
per share.
10
Option Grants in Fiscal 2002
The following table sets forth information concerning individual grants of
stock options made pursuant to the 1998 Stock Plan during Fiscal 2002 to each of
the Named Executives. The Company has never granted any stock appreciation
rights.
OPTION GRANTS IN LAST FISCAL YEAR
- -------------------------------------------------------------------------------------------------
Individual Grants
- -------------------------------------------------------------------------------------------------
Number of
Securities Percent of
Underlying Total Options
Options Granted in Exercise or
Name Granted Fiscal Year Base Price Expiration Date
(#)(1) (%)(1) ($/Sh)
- --------------------------------------------- ---------------- --------------- ------------------
Ruedi Stalder.................. 75,000(2) 6.4 1.50 October 2, 2011
150,000(3) 12.7 4.00 November 1, 2011
40,000(4) 3.4 2.05 December 1, 2011
65,000(5) 5.5 2.05 December 1, 2011
Bruce C. Galton................ 130,000(6) 11.0 2.10 October 4, 2011
300,000(7) 25.4 2.05 December 1, 2011
John E. Thompson, Ph.D......... 80,000(8) 6.8 2.05 December 1, 2011
Sascha P. Fedyszyn............. 10,000(9) 0.8 2.15 November 1, 2011
Joel P. Brooks................. 15,000(9) 1.3 2.15 November 1, 2011
Steven Katz.................... 40,000(10) 3.4 2.05 December 31, 2006
25,000(11) 2.1 1.50 December 31, 2006
50,000(12) 4.2 4.00 December 31, 2006
25,000(13) 2.1 2.05 December 31, 2006
- --------------------------------------------- ---------------- --------------- ------------------
11
- -----------
(1) An aggregate of 1,181,000 options were granted pursuant to and in
accordance with the Company's 1998 Stock Plan during Fiscal 2002. Options
are not assignable or otherwise transferable except by will or the laws of
descent and distribution.
(2) Options were granted on October 2, 2001, with all of such options
exercisable as of the date of grant.
(3) Options were granted on November 1, 2001, with one-third (1/3) of such
options being exercisable as of the date of grant, one-third (1/3) of such
options being exercisable as of January 15, 2002, and one-third of such
options shall become exercisable on January 15, 2003.
(4) Options were granted on December 1, 2001, with one-half (1/2) of such
options being exercisable as of the date of grant and one-half (1/2) of
such options shall become exercisable on December 1, 2002.
(5) Options were granted on December 1, 2001, with all of such options being
exercisable as of the date of grant.
(6) Options were granted on October 5, 2001, with one hundred thousand
(100,000) of such options being exercisable as of the date of grant, ten
thousand (10,000) of such options being exercisable as of October 31, 2001,
ten thousand (10,000) of such options being exercisable as of November 30,
2001, and ten thousand (10,000) of such options being exercisable as of
December 31, 2001.
(7) Options were granted on December 1, 2001, one-third (1/3) of such options
shall become exercisable as of December 1, 2002, one-third (1/3) of such
options shall become exercisable as of December 1, 2003, and one-third
(1/3) of such options shall become exercisable as of December 1, 2004.
(8) Options were granted on December 1, 2001, with one-third (1/3) of such
options being exercisable as of the date of grant, one-third (1/3) of such
options shall become exercisable on December 1, 2002, and one-third (1/3)
of such options shall become exercisable on December 1, 2003.
(9) Options were granted on November 1, 2001, with one-third (1/3) of such
options being exercisable as of the date of grant, one-third (1/3) of such
options being exercisable on November 1, 2002, and one-third (1/3) of such
options shall become exercisable on November 1, 2003.
(10) Options were granted on December 1, 2001, with one-half (1/2) of such
options being exercisable as of the date of grant and one-half (1/2) of
such options shall become exercisable on December 1, 2002.
(11) Options were granted on October 2, 2001, with all of such options being
exercisable as of the date of grant.
(12) Options were granted on November 1, 2001, with one-third (1/3) of such
options being exercisable as of the date of grant, one-third (1/3) of such
options being exercisable as of January 15, 2002, and one-third (1/3) of
such options shall become exercisable as of January 15, 2003.
(13) Options were granted on December 1, 2001, with all of such options being
exercisable as of the date of grant.
12
Aggregated Option Exercises in Fiscal 2002 and Fiscal Year-End Option Values
The following table sets forth information concerning each exercise of
options during Fiscal 2002 by each of the Named Executives and the fiscal
year-end value of unexercised in-the-money options.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
- ------------------------------------------------------------------------------------------------
Number of Value of
Securities Unexercised
Underlying In-the-Money
Unexercised Options at
Options at Fiscal
Shares Fiscal Year-End Year-End
Acquired on Value (#) ($)(1)
Exercise Realized Exercisable/ Exercisable/
Name (#) ($) Unexercisable Unexercisable
- -------------------------------------------------------------------------------- ---------------
Ruedi Stalder.............. -- -- 300,000 / 70,000 37,500 / 0
Bruce C. Galton............ -- -- 130,000 / 300,000 0 / 0
John E. Thompson, Ph.D..... -- -- 66,667 / 53,333 0 / 0
Sascha P. Fedyszyn......... -- -- 68,333 / 6,667 0 / 0
Joel P. Brooks............. -- -- 21,666 / 18,334 0 / 0
Steven Katz................ -- -- 180,000 / 0 12,500 / 0
- -------------------------------------------------------------------------------- ---------------
- -----------
(1) Based on a fiscal year-end fair market value of the underlying securities
equal to $2.00 per share.
13
Equity Compensation in Fiscal 2002
The following table provides information about the securities authorized
for issuance under the Company's equity compensation plans as of June 30, 2002.
EQUITY COMPENSATION PLAN INFORMATION
- ------------------------------------------------------------------------------------------------
Number of securities Number of securities
to be issued upon Weighted-average remaining available
exercise of exercise price of for future issuance
outstanding options, outstanding options, under equity
warrants and rights warrants and rights compensation plans
- ------------------------------------------------------------------------------------------------
Equity compensation
plans approved by
security holders 1,616,000(1) $2.63 384,000(2)
- ------------------------------------------------------------------------------------------------
Equity compensation
plans not approved
by security holders -- -- --
- ------------------------------------------------------------------------------------------------
Total 1,616,000 $2.63 384,000
- -------------------------- ---------------------------------------------------------------------
- ---------------------
(1) Issued pursuant to the Company's 1998 Stock Plan.
(2) Available for future issuance pursuant to the 1998 Stock Plan. Does not
include the additional one million (1,000,000) shares that would be available if
the proposal to increase the number of shares reserved for issuance under the
1998 Stock Plan is approved at the Meeting.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT, AND CHANGE-IN-CONTROL
ARRANGEMENTS
On October 4, 2001, the Company hired Bruce C. Galton as its new President
and Chief Executive Officer. In conjunction with Mr. Galton's appointment, the
Company entered into a three-year employment agreement with Mr. Galton,
effective October 4, 2001. The agreement shall automatically renew for
successive one-year terms thereafter, unless written notice of termination is
provided at least 120 days prior to the end of the applicable term. The
agreement provides Mr. Galton with an annual base salary of $200,000 plus
certain benefits, including potential bonuses, equity awards and other
perquisites as determined by the Board of Directors. The agreement also provides
that Mr. Galton is entitled to a lump sum payment of 1.5 times his base annual
salary if his employment with the Company is terminated without cause or with
good reason (as defined within the agreement). If Mr. Galton's employment with
the Company is terminated pursuant to a change in control (as defined within the
agreement), he is entitled to receive the difference between the monies actually
received upon termination and 1.5 times his annual base salary.
On January 21, 1999, Sascha P. Fedyszyn entered into an employment contract
with Senesco for a term of two (2) years, whereby the Company agreed to pay Mr.
Fedyszyn a base salary of $36,000 per annum. On July 20, 1999, the Company's
Board of Directors approved an increase in Mr. Fedyszyn's base salary to $55,000
and on December 1, 2000, the Company's Board of Directors approved another
increase in Mr. Fedyszyn's base salary, retroactive to May 14, 2000, to $66,000.
Mr. Fedyszyn's employment contract automatically renews for additional one-year
periods, unless terminated by either party before September in the year prior to
expiration. The term of Mr. Fedyszyn's employment contract currently runs
through January 21, 2004. The contract also provides for bonus payments at the
sole discretion of the Board of Directors, four (4) weeks paid vacation, life
and health insurance, employee benefits on the same basis as made available to
senior executives, and, under certain circumstances, a lump sum payment of 2.99
times his annual base salary if there is a change in control (as defined in his
employment agreement).
14
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities and Exchange Act of 1934, as amended (the
"Exchange Act"), requires a company's directors, officers and stockholders who
beneficially own more than 10% of any class of equity securities of the company
registered pursuant to Section 12 of the Exchange Act (collectively, the
"Reporting Persons") to file initial statements of beneficial ownership of
securities and statements of changes in beneficial ownership of securities with
respect to the company's equity securities with the Securities and Exchange
Commission (the "SEC"). All Reporting Persons are required by SEC regulation to
furnish the Company with copies of all reports that such Reporting Persons file
with the SEC pursuant to Section 16(a).
Based solely on the Company's review of the copies of such forms received
by the Company and upon written representations of the Company's Reporting
Persons received by the Company, the Company believes that there has been
compliance with all Section 16(a) filing requirements applicable to such
Reporting Persons.
15
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The Company's Common Stock is the only class of stock entitled to vote at
the Meeting. Only Stockholders of record as of the close of business on October
21, 2002 (the "Record Date") are entitled to receive notice of and to vote at
the Meeting. As of the Record Date, there were approximately [304] holders of
record of the Company's Common Stock, and the Company had outstanding 11,880,045
shares of its Common Stock and each outstanding share is entitled to one (1)
vote at the Meeting. The following table sets forth certain information, as of
the Record Date, with respect to holdings of the Company's Common Stock by (i)
each person known by the Company to be the beneficial owner of more than 5% of
the total number of shares of Common Stock outstanding as of such date; (ii)
each of the Company's Directors (which includes all nominees) and Named
Executives; and (iii) all Directors and current executive officers as a group.
Amount and Nature of Percent
Name and Address of Beneficial Owner(1) Beneficial Ownership(2) of Class(3)
- ------------------------------------ - ----------------------- -----------
(i) Certain Beneficial Owners:
Stanford Venture Capital Holdings, Inc.
201 S. Biscayne Blvd.
Miami, FL 33131........................................ 2,464,287(4) 19.5
Seneca Capital LP
527 Madison Avenue
New York, NY 10022..................................... 1,607,143(5) 12.7
Phillip O. Escaravage.................................. 816,352(6) 6.8
Moises Bucay Bissu..................................... 690,000(7) 5.7
(ii) Directors (which includes all nominees), Named
Executives and Chief Executive Officer:
Ruedi Stalder.......................................... 386,667(8) 3.2
Bruce C. Galton........................................ 230,000(9) 1.9
John E. Thompson, Ph.D................................. 665,334(10) 5.6
Christopher Forbes..................................... 806,029(11) 6.6
Thomas C. Quick........................................ 308,787(12) 2.6
David Rector .......................................... -- *
Philip B. Livingston .................................. 5,000(13) *
Sascha P. Fedyszyn .................................... 109,027(14) *
Joel P. Brooks......................................... 35,000(15) *
Steven Katz............................................ 218,040(16) 1.8
(iii)All Directors and current executive
officers as a group (9 persons)................... 2,545,844(17) 19.5
- -----------
* Less than 1%
(1) Unless otherwise provided, all addresses should be care of Senesco
Technologies, Inc., 303 George Street, Suite 420, New Brunswick, New Jersey
08901.
(2) Except as otherwise indicated, all shares are beneficially owned and
sole investment and voting power is held by the persons named.
(3) Applicable percentage of ownership is based on 11,880,045 shares of
Common Stock outstanding as of the Record Date, plus any Common Stock
equivalents and options or warrants held by such holder which are presently
or will become exercisable within sixty (60) days after the Record Date.
16
(4) Includes 750,000 shares issuable pursuant to presently exercisable
warrants.
(5) Includes 750,000 shares issuable pursuant to presently exercisable
warrants.
(6) Includes 80,000 shares issuable pursuant to presently exercisable
options or options which will become exercisable within sixty (60) days
after the Record Date and which are directly owned by Mr. Escaravage.
Includes 736,352 shares held by The Umbrella Project, LLC, of which Mr.
Escaravage is the sole member, and therefore, he is the indirect beneficial
owner of such shares.
(7) Includes 210,000 shares issuable pursuant to presently exercisable
warrants.
(8) Includes 320,000 shares issuable pursuant to presently exercisable
options or options which will become exercisable within sixty (60) days
after the Record Date. Excludes 50,000 shares underlying options which
become exercisable over time more than sixty (60) days after the Record
Date.
(9) Represents 230,000 shares issuable pursuant to presently exercisable
options or options which will become exercisable within sixty (60) days
after the Record Date. Excludes 200,000 shares underlying options which
become exercisable over time more than sixty (60) days after the Record
Date.
(10) Includes 93,334 shares issuable pursuant to presently exercisable
options or options which will become exercisable within sixty (60) days
after the Record Date. Excludes 26,666 shares underlying options which
become exercisable over time more than sixty (60) days after the Record
Date.
(11) Includes 258,106 shares issuable pursuant to presently exercisable
warrants and options or options which will become exercisable within sixty
(60) days after the Record Date.
(12) Includes 169,053 shares issuable pursuant to presently exercisable
warrants and options or options which will become exercisable within sixty
(60) days after the Record Date.
(13) Represents 5,000 shares of Common Stock.
(14) Includes 71,667 shares issuable pursuant to presently exercisable
options or options which will become exercisable within sixty (60) days
after the Record Date. Excludes 13,333 shares underlying options which
become exercisable over time more than sixty (60) days after the Record
Date.
(15) Represents 35,000 shares issuable pursuant to presently exercisable
options or options which will become exercisable within sixty (60) days
after the Record Date. Excludes 17,500 shares underlying options which
become exercisable over time more than sixty (60) days after the Record
Date.
(16) Includes 180,000 shares issuable pursuant to presently exercisable
options or options which will become exercisable within sixty (60) days
after the Record Date. Excludes 33,333 shares underlying options which
become exercisable over time more than sixty (60) days after the Record
Date.
(17) See Notes 8 through 15.
17
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Real Estate and Service Agreements
In January 1999, the Company entered into an arrangement to sublease office
space from The Umbrella Project, LLC, a company controlled by Phillip O.
Escaravage, who at the time of executing the agreement was a Director of the
Company and a beneficial owner of more than 5% of the Company's Common Stock.
The sublease was for a monthly rental of approximately $5,500 and was terminated
on May 31, 2001. The Company believes that this arrangement was on terms at
least as favorable as the Company would have received from a third party. Mr.
Escaravage is currently the beneficial owner of approximately 6.8% of the
Company's Common Stock.
Christopher Forbes, a Director of the Company, is Vice Chairman of Forbes,
Inc., which publishes Forbes Magazine. Forbes, Inc. has provided and will
continue to provide the Company with advertising, introductions to strategic
alliance partners and, from time to time, use of its office space, entertainment
facilities and various other support services. In recognition of these past
services and services to be provided in the future, on each of September 9, 1999
and November 1, 2001, the Company granted to Forbes, Inc., warrants to purchase
80,000 shares of the Company's Common Stock, at an exercise price of $3.50 and
$2.15 per share, respectively, which was the fair market value of the Company's
Common Stock on the dates of grant. The warrant granted on September 9, 1999,
has become fully exercisable and the warrant granted on November 1, 2001 is
exercisable as follows: one-third (1/3) became exercisable as of the date of
grant and one-third (1/3) shall become exercisable as of each of the first and
second anniversaries of the date of grant. On the dates of grants, the value of
these services was approximately $205,000 and $170,000, respectively.
Research and Development and Consulting Agreements
Effective September 1, 1998, the Company entered into a three-year research
and development agreement, which was then extended for one year through August
31, 2002, with John E. Thompson, Ph.D. and the University of Waterloo in
Waterloo, Ontario, Canada (the "University"). Dr. Thompson is a Director and
officer of the Company and beneficially owns approximately 5.6% of the Company's
Common Stock. Dr. Thompson is the Associate Vice President, Research and former
Dean of Science of the University. Dr. Thompson and the University will provide
research and development under the direction of the Company. Total amounts due
under the agreement for the four-year period were limited to CAN $1,683,700,
which represented US $1,120,872. Research and development expenses under this
agreement for the years ended June 30, 1999, 2000, 2001 and 2002 aggregated US
$169,140, US $300,492, US $348,985 and US $254,347, respectively. Effective
September 1, 2002, the Company, Dr. Thompson and the University extended the
agreement for an additional two-year period through September 1, 2004 in the
amount of CAN $1,092,800. As of September 1, 2002, such amount represented
approximately US $705,000.
Effective May 1, 2002, the Company entered into an additional one-year
research and development agreement with the University and Dr. Thompson. The
total amount due under this agreement is limited to CAN $50,000, which
represents approximately US $33,000 as of September 1, 2002.
Effective May 1, 1999, the Company entered into a consulting agreement for
research and development with Dr. Thompson. On July 1, 2001, the Company and Dr.
Thompson renewed the consulting agreement for an additional three-year term, as
provided for under the terms and conditions of the agreement. This agreement
provides for monthly payments of $3,000 through June 2004. The agreement is
automatically renewable for an additional three-year term, unless either of the
parties provides the other with written notice within six (6) months of the end
of the term.
Alan B. Bennett, Ph.D., a member of the Company's Scientific Advisory
Board, entered into a consulting agreement with the Company, dated July 16,
1999, whereby Dr. Bennett provided consulting services in consideration for
$5,400 per month. Dr. Bennett's consulting agreement with the Company expired on
July 15, 2000. From July 15, 2000 through October 31, 2001, Dr. Bennett
continued to provide services to the Company on a month-to-month basis.
Effective November 1, 2001, the Company entered into a new one-year consulting
agreement with Dr. Bennett, which provided for monthly payments of $2,400 to Dr.
Bennett through October 31, 2002. The Company extended the consulting agreement,
effective November 1, 2002, for an additional one-year period on the same terms
and conditions.
Steven Katz, a former Director and former officer of the Company, had an
informal arrangement to perform management services for the Company. Mr. Katz
received $114,050, $277,225 and $238,995 for such services in Fiscal 2002,
Fiscal 2001 and Fiscal 2000, respectively.
18
Promissory Notes
Certain Directors of the Company provided the Company with short-term loans
(the "Loans") with the proceeds being used for operating expenses. During the
period from July 10, 2001 through November 5, 2001, the Company issued four
promissory notes made payable to Mr. Forbes in the aggregate amount of $350,000,
in connection with the Loans. The notes had an annual interest rate equal to the
prime rate on the date that the notes were issued (5.50% to 6.75%), and such
interest was payable upon maturity of the notes. The notes and accrued interest
were due on January 15, 2002. On December 3, 2001, Mr. Forbes converted the
notes and accrued interest into 203,549 shares of the Company's Common Stock and
warrants to purchase 178,105 shares of the Company's Common Stock at the same
price per share and on the same terms and conditions as all other shares sold
pursuant to a private placement to unrelated third parties.
Also in connection with the Loans, the Company issued two promissory notes
on each of September 5, 2001 and October 9, 2001, made payable to Mr. Quick in
the amounts of $100,000 and $75,000, respectively. The notes had an annual
interest rate equal to the prime rate on the date that the notes were issued
(5.50% to 6.50%), and such interest was payable upon maturity of the notes. The
notes and accrued interest were due on January 15, 2002. On December 3, 2001,
Mr. Quick converted the notes and accrued interest into 101,774 shares of the
Company's Common Stock and warrants to purchase 89,052 shares of the Company's
Common Stock at the same price per share and on the same terms and conditions as
all other shares sold pursuant to a private placement to unrelated third
parties.
Private Placements
Christopher Forbes, a Director of the Company, participated in a private
placement of the Company's Common Stock consummated on January 26, 2000. In
connection with such private placement, Mr. Forbes purchased 17,436 shares of
the Company's Common Stock at the same price per share and on the same terms and
conditions as all other shares sold pursuant to the private placement to
unrelated third parties.
Ruedi Stalder, a current Director and former officer of the Company,
participated in a private placement of the Company's Common Stock consummated on
June 22, 2000. In connection with such private placement, Mr. Stalder purchased
66,667 shares of the Company's Common Stock at the same price per share and on
the same terms and conditions as all other shares sold pursuant to the private
placement to unrelated third parties. Mr. Stalder has certain registration
rights with respect to such shares. At the time of the transaction, Mr. Stalder
was an executive officer and Director of the Company. On October 4, 2001, Mr.
Stalder resigned as an executive officer, but he remains a Director.
On November 30, 2001, the Company consummated a private placement with
Stanford Venture Capital Holdings, Inc. and affiliates ("Stanford"), of
1,142,858 shares of Common Stock and warrants to purchase 1,000,000 shares of
Common Stock for the aggregate cash consideration of $2,000,000. Fifty percent
of such warrants have an exercise price equal to $2.00 per share and fifty
percent of such warrants have an exercise price equal to $3.25 per share. All of
such warrants were exercisable as of the date of grant and have a term of five
(5) years. In January 2002, the Company consummated an additional issuance to
Stanford for 571,429 shares of Common Stock and warrants to purchase 500,000
shares of Common Stock for the aggregate cash consideration of $1,000,000. Fifty
percent of such warrants have an exercise price equal to $2.00 per share and
fifty percent of such warrants have an exercise price equal to $3.25 per share.
All of such warrants were exercisable as of the date of grant and have a term of
five (5) years.
In connection with another private placement to unrelated third parties,
commencing in November 2001 and ending in April 2002, shares of the Company's
Common Stock and warrants to purchase Common Stock were sold to certain
accredited investors, including Moises Bucay Bissu and Seneca Capital L.P.. On
each of December 26, 2001 and February 21, 2002, Mr. Bissu purchased 380,000 and
100,000 shares of Common Stock, respectively, and warrants to purchase 166,250
and 43,750 shares of Common Stock, respectively, for the aggregate cash
consideration of $840,000. Fifty percent of such warrants have an exercise price
equal to $2.00 per share and fifty percent of such warrants have an exercise
price equal to $3.25 per share. All of such warrants were exercisable as of the
date of grant and have a term of five (5) years. On April 12, 2002, Seneca
Capital L.P. purchased 857,143 shares of Common Stock and warrants to purchase
750,000 shares of Common Stock for the aggregate cash consideration of
$1,500,000. Fifty percent of such warrants have an exercise price equal to $2.00
per share and fifty percent of such warrants have an exercise price equal to
$3.25 per share. All of such warrants were exercisable as of the date of grant
and have a term of five (5) years.
19
PROPOSAL TO INCREASE THE AUTHORIZED NUMBER OF SHARES
DESCRIPTION OF PROPOSAL
The Company's Certificate of Incorporation currently authorizes the Company
to issue up to twenty million (20,000,000) shares of Common Stock. On October 9,
2002, the Board of Directors approved, subject to stockholder approval, an
amendment to the Company's Certificate of Incorporation to increase the maximum
number of shares of the Company's Common Stock authorized from twenty million
(20,000,000) shares to thirty million (30,000,000) shares.
The Board of Directors has determined that an increase in the number of
shares of Common Stock authorized for issuance is in the Company's best
interests. The proposed increase in the number of shares of Common Stock
authorized for issuance will ensure that shares will be available, if needed,
for issuance in connection with stock splits, acquisitions and other corporate
purposes. The Board of Directors believes that the availability of the
additional shares for such purposes without delay or the necessity for a special
stockholders' meeting would be beneficial to the Company. The Company does not
have any immediate plans, arrangements, commitments or understandings with
respect to the issuance of any of the additional shares of Common Stock that
would be authorized by the proposed amendment. No further action or
authorization by the Company's stockholders would be necessary prior to the
issuance of the additional shares of Common Stock unless required by applicable
law or regulatory agencies or by the rules of any stock market on which the
Company's securities may then be listed.
The holders of any of the additional shares of Common Stock issued in the
future would have the same rights and privileges as the holders of the Common
Stock currently authorized and outstanding. Those rights do not include
preemptive rights with respect to the future issuance of any additional shares.
As of October 21, 2002, 11,880,045 shares of Common Stock were issued and
outstanding, 2,000,000 shares of Common Stock were reserved for issuance upon
the exercise of outstanding options granted under the 1998 Stock Plan and
4,202,153 shares of Common Stock were reserved for issuance upon the exercise of
warrants and options granted outside the 1998 Stock Plan. Accordingly, the
Company has 1,917,802 shares remaining available for issuance. If the proposed
amendment is approved, ten million (10,000,000) additional shares of Common
Stock would be authorized but unissued.
Upon approval by the Stockholders, the first section of the fourth
paragraph of the Company's Certificate of Incorporation would read as follows:
FOURTH: The total number of shares of all classes of stock which the
------
Corporation shall have authority to issue is Thirty Five Million
(35,000,000) shares. The Corporation is authorized to issue two classes of
stock designated "Common Stock" and "Preferred Stock," respectively. The
total number of shares of Common Stock authorized to be issued by the
Corporation is Thirty Million (30,000,000), each such share of Common Stock
having a $0.01 par value. The total number of shares of Preferred Stock
authorized to be issued by the Corporation is Five Million (5,000,000),
each such share of Preferred Stock having $0.01 par value.
PROPOSED AMENDMENT
The Stockholders are being asked to consider and vote upon a proposed
amendment to the Company's Certificate of Incorporation to increase the maximum
number of shares of the Company's Common Stock authorized from twenty million
(20,000,000) shares to thirty million (30,000,000) shares. Although the Company
has no present intent to issue any additional shares of Common Stock, the Board
of Directors believes that the additional shares would provide the Company with
added flexibility in connection with its future financing and stock issuance
requirements, including with respect to possible future stock splits, if any.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE AMENDMENT
TO THE COMPANY'S CERTIFICATE OF INCORPORATION.
20
PROPOSAL TO AMEND THE 1998 STOCK INCENTIVE PLAN
SUMMARY OF THE PLAN
The 1998 Stock Plan was adopted by the Company's Board of Directors on
December 31, 1998 and approved by the Stockholders of the Company on January 22,
1999. Those eligible to receive stock options or stock purchase rights under the
1998 Stock Plan include the Company's employees, Directors and consultants. The
1998 Stock Plan was adopted to: (i) attract and retain the best available
personnel for positions of substantial responsibility; (ii) provide additional
incentives to employees, members of the Board of Directors, members of the
Scientific Advisory Board and consultants of the Company and its subsidiary;
(iii) provide key employees, Directors and consultants with an interest in the
Company that is parallel to that of the stockholders; and (iv) promote the
success of the Company's business. Currently, there are two million (2,000,000)
shares of the Company's Common Stock reserved for issuance upon the exercise of
options and/or stock purchase rights granted under the 1998 Stock Plan. As of
October 21, 2002, there were approximately seven (7) employees and non-employee
Directors who have received stock options under the 1998 Stock Plan. Because
future participation in the 1998 Stock Plan and the level of participation will
vary, it is not possible to determine the value of benefits which may be
obtained by those eligible to participate in the 1998 Stock Plan.
The Board of Directors administers the 1998 Stock Plan and may grant
options to eligible employees, consultants and Directors recommended by the
Compensation Committee. The 1998 Stock Plan provides for the granting of options
intended to qualify as incentive stock options, or ISOs, as defined in Section
422 of the Internal Revenue Code of 1986, as amended (the "Code"), to employees
of the Company. The 1998 Stock Plan also provides for the granting of
non-qualified stock options, or NQSOs, to employees, non-employee Directors and
consultants who perform services for the Company or its subsidiary. The exercise
price of all ISOs granted under the 1998 Stock Plan may not be less than the
fair market value of the shares at the time the option is granted. In addition,
no ISO may be granted to an employee who owns more than 10% of the total
combined voting power of all classes of stock of the Company unless the exercise
price as to that employee is at least 110% of the fair market value of the stock
at the time of the grant. To the extent that options designated as ISOs become
exercisable for the first time during any calendar year for Common Stock having
a fair market value greater than one-hundred thousand dollars ($100,000)
(determined for each share as of the date of grant of the options covering such
share), the portion of such options which exceeds such amount shall be treated
as NQSOs. Options may be exercisable for a period of not more than ten (10)
years from the date of grant; provided, however, that the term of an ISO granted
to an employee who owns more than 10% of the total combined voting power of all
classes of stock of the Company may not exceed five (5) years. The exercise
price of NQSOs granted under the 1998 Stock Plan may not be less than 85% of the
fair market value per share of the Common Stock on the date of grant. The 1998
Stock Plan provides that no NQSO may be granted to a person who owns more than
10% of the total combined voting power of all classes of stock of the Company
unless the exercise price to that person is at least 110% of the fair market
value of the stock at the time of the grant. The exercise price must be paid in
full at the time an option is exercised, and at the discretion of the Board of
Directors, all or part of the exercise price may be paid with previously owned
shares or other approved methods of payment. An option is exercisable as
determined by the Board of Directors. The 1998 Stock Plan will terminate on
December 30, 2008.
Subject to the terms as specified in any option agreement, if a Grantee's
employment or consulting relationship terminates on account of disability, the
Grantee may exercise any outstanding option for one (1) year following the
termination. If a Grantee dies while in the employ of the Company or during the
period of the consulting arrangement, the Grantee's estate may exercise any
outstanding option for one (1) year following the Grantee's death. If
termination is for any other reason, the Grantee may exercise any outstanding
option for three (3) months following such termination. Options may not be sold,
pledged, assigned, hypothecated, transferred or disposed of in any manner except
by will or the laws of descent and distribution.
The 1998 Stock Plan also permits the awarding of stock purchase rights at
not less than 50% of the fair market value of the shares as of the date offered.
The 1998 Stock Plan requires the execution of a restricted stock purchase
agreement in a form determined by the Board of Directors. Once a stock purchase
right is exercised, the purchaser will have the rights of a shareholder and will
be a shareholder when the purchase is entered on the Company's records.
21
The 1998 Stock Plan provides that, in the event of a reorganization,
recapitalization, stock split, stock dividend, combination of or
reclassification of shares, or any other change in the corporate structure or
shares of the Company, the Board of Directors shall make adjustments with
respect to the shares that may be issued under the 1998 Stock Plan or that are
covered by outstanding options, or in the option price per share.
In the event of a dissolution or liquidation of the Company, the Board of
Directors shall notify the Grantee at least fifteen (15) days prior to such
proposed action. To the extent not previously exercised, the outstanding options
will terminate immediately prior to the consummation of such proposed action. In
the event of a merger or consolidation of the Company with or into another
corporation or the sale of all or substantially all of the Company's assets
(hereinafter, a "merger"), the outstanding options may be assumed or an
equivalent option may be substituted by such successor corporation or a parent
or subsidiary of such successor corporation. In the event that such successor
corporation does not agree to assume the outstanding options or to substitute
equivalent options, the Board of Directors will, in lieu of such assumption or
substitution, provide for the Grantee to have the right to exercise all of his
outstanding options. If the Board of Directors makes an option fully exercisable
in lieu of assumption or substitution, in the event of a merger, the Board of
Directors shall notify the Grantee that the option will be fully exercisable for
a period of fifteen (15) days from the date of such notice, and the option will
terminate upon the expiration of such period. The option will be considered
assumed if, following the merger, the option confers the right to purchase, for
each share of Common Stock subject to the option immediately prior to the
merger, the consideration (whether stock, cash, or other securities or property)
received in the merger by holders of Common Stock for each share held on the
effective date of the transaction (and if holders were offered a choice of
consideration, the type of consideration chosen by the holders of a majority of
the outstanding shares). If such consideration received in the merger was not
solely common stock of the successor corporation or its parent, the Board of
Directors may, with the consent of the successor corporation and the
participant, provide for the consideration to be received upon the exercise of
an option for each share of stock subject to the option to be solely common
stock of the successor corporation or its parent equal in fair market value to
the per share consideration received by holders of Common Stock in the merger or
sale of assets.
Section 162(m) of the Code generally disallows a tax deduction to public
companies for certain compensation in excess of $1 million paid to a company's
chief executive officer and the four other most highly compensated executive
officers. Certain compensation, including qualified performance-based
compensation, will not be subject to the deduction limit if certain requirements
are met. The Board of Directors reviews the potential effect of Section 162(m)
periodically and uses its judgment to authorize compensation payments that may
be subject to the limit when the Board of Directors believes such payments are
appropriate and in the best interests of the Company and its stockholders, after
taking into consideration changing business conditions and the performance of
its employees.
The Board of Directors may at any time amend, alter, suspend or discontinue
the 1998 Stock Plan, but no amendment, alteration, suspension or discontinuation
will be made which would impair the rights of any Grantee under any grant
theretofore made, without such Grantee's consent. In addition, to the extent
necessary and desirable to comply with Rule 16b-3 under the Exchange Act, or
with Section 422 of the Code (or any other applicable law or regulation,
including the requirements of the National Association of Securities Dealers or
an established stock exchange), the Company shall obtain shareholder approval of
any 1998 Stock Plan amendment in such a manner and to such a degree as so
required. Any such amendment or termination of the 1998 Stock Plan is not
permitted to affect options already granted and such options will remain in full
force and effect as if the 1998 Stock Plan had not been amended or terminated,
unless mutually agreed otherwise between the Grantee and the Board of Directors,
which agreement must be in writing and signed by the Grantee and the Company.
22
FEDERAL INCOME TAX CONSEQUENCES
The following generally summarizes the United States federal income tax
consequences that generally will arise with respect to awards granted under the
1998 Stock Plan. This summary is based on the tax laws in effect as of the date
of this Proxy Statement. Changes to these laws could alter the tax consequences
described below.
Incentive Stock Options
A participant will not have income upon the grant of an incentive stock
option. Also, except as described below, a participant will not have income upon
exercise of an incentive stock option if the participant has been employed by
the Company or its corporate parent or majority-owned corporate subsidiary at
all times beginning with the option grant date and ending three (3) months
before the date the participant exercises the option. If the participant has not
been so employed during that time, then the participant will be taxed as
described below under "Nonstatutory Stock Options." The exercise of an incentive
stock option may subject the participant to the alternative minimum tax.
A participant will have income upon the sale of the stock acquired under an
incentive stock option at a profit (if sales proceeds exceed the exercise
price). The type of income will depend on when the participant sells the stock.
If a participant sells the stock more than two (2) years after the option was
granted and more than one (1) year after the option was exercised, then all of
the profit will be long-term capital gain. If a participant sells the stock
prior to satisfying these waiting periods, then the participant will have
engaged in a disqualifying disposition and a portion of the profit will be
ordinary income and a portion may be capital gain. This capital gain will be
long-term if the participant has held the stock for more than one (1) year and
otherwise will be short-term. If a participant sells the stock at a loss (sales
proceeds are less than the exercise price), then the loss will be a capital
loss. This capital loss will be long-term if the participant held the stock for
more than one (1) year and otherwise will be short-term.
Nonstatutory Stock Options
A participant will not have income upon the grant of a nonstatutory stock
option. A participant will have compensation income upon the exercise of a
nonstatutory stock option equal to the value of the stock on the day the
participant exercised the option less the exercise price. Upon sale of the
stock, the participant will have capital gain or loss equal to the difference
between the sales proceeds and the value of the stock on the day the option was
exercised. This capital gain or loss will be long-term if the participant has
held the stock for more than one (1) year and otherwise will be short-term.
Restricted Stock
A participant will not have income upon the grant of restricted stock
unless an election under Section 83(b) of the Code is made within thirty (30)
days of the date of grant. If a timely Section 83(b) election is made, then a
participant will have compensation income equal to the value of the stock less
the purchase price. When the stock is sold, the participant will have capital
gain or loss equal to the difference between the sales proceeds and the value of
the stock on the date of grant. If the participant does not make a Section 83(b)
election, then when the stock vests the participant will have compensation
income equal to the value of the stock on the vesting date less the purchase
price. When the stock is sold, the participant will have capital gain or loss
equal to the sales proceeds less the value of the stock on the vesting date. Any
capital gain or loss will be long-term if the participant held the stock for
more than one (1) year and otherwise will be short-term.
Tax Consequences to the Company
There will be no tax consequences to the Company except that the Company
will be entitled to a deduction when a participant has compensation income. Any
such deduction will be subject to the limitations of Section 162(m) of the Code.
23
PREVIOUSLY GRANTED OPTIONS UNDER THE 1998 STOCK PLAN
As of October 21, 2002, options to purchase one million six hundred
thirty-eight thousand five hundred (1,638,500) shares of Common Stock have been
granted (net of forfeitures which are added back to the shares available for
issuance under the 1998 Stock Plan) under the 1998 Stock Plan. The weighted
average exercise price of such options is $2.62 per share.
The following table sets forth the options granted under the 1998 Stock
Plan to: (i) the Named Executives; (ii) each nominee for election as a Director;
(iii) all current executive officers as a group; (iv) all current Directors who
are not executive officers as a group; (v) each associate of any of such
Directors, executive officers or nominees; (vi) each person who has received or
is to receive 5% of such options or rights; and (vii) all employees, including
all current officers who are not executive officers, as a group:
NUMBER OF WEIGHTED AVERAGE
NAME AND TITLE OPTIONS GRANTED EXERCISE PRICE
-------------- --------------- ---------------
Ruedi Stalder, Chairman of the Board and Director............ 370,000 $2.89
Bruce C. Galton, President, Chief Executive Officer 430,000 2.07
and Director..............................................
John E. Thompson, Ph.D., Executive Vice President
of Research and Development and Director.................. 120,000 2.65
Christopher Forbes, Director................................. 80,000 2.78
Thomas C. Quick, Director.................................... 80,000 2.78
David Rector, Director ......................................
-- --
Philip B. Livingston, Director...............................
-- --
Sascha P. Fedyszyn, Vice President of Corporate
Development and Secretary................................. 85,000 2.61
Joel P. Brooks, Chief Financial Officer and Treasurer........ 52,500 2.08
Phillip O. Escaravage(1)..................................... 80,000 3.05
Steven Katz(2)............................................... 180,000 2.84
All current executive officers as a group (4 persons)........ 687,500 2.24
All current Directors and nominees who are not executive
officers as a group (5 persons)........................... 530,000 2.86
All employees, including all current officers who are not
executive officers as a group (1 person).................. 80,000 3.05
- -------------------------------------------------------------
(1) Former Director and executive officer of the Company and current beneficial
owner of 6.8% of the Company's Common Stock as of October 21, 2002.
(2) Former Director and executive officer of the Company.
Whether or not Stockholder approval of the amendment to the 1998 Stock Plan
is obtained, options previously granted pursuant to the 1998 Stock Plan will
remain valid and outstanding.
24
As of October 21, 2002, the fair market value of the Common Stock
underlying options granted pursuant to the 1998 Stock Plan was equal to $[2.25]
per share as determined by the closing price of the Company's Common Stock on
the American Stock Exchange on such date.
REGISTRATION
On October [ ], 2002, the Company filed a Form S-8 registration statement
covering the shares of the Company's Common Stock issued and issuable under the
1998 Stock Plan, and intends to file an amendment to such registration statement
to cover the additional shares reserved under the plan.
PROPOSED AMENDMENT
The Stockholders are being asked to consider and vote upon a proposed
amendment (the "Amendment") to the 1998 Stock Plan to increase the maximum
number of shares of the Company's Common Stock available for issuance under the
1998 Stock Plan from two million (2,000,000) shares to three million (3,000,000)
shares. The Board of Directors approved the Amendment on October 9, 2002.
Even though the 1998 Stock Plan by its terms does not require Stockholder
approval for the Amendment to be adopted, the Board of Directors is seeking that
approval, because the additional options which may be granted under the 1998
Stock Plan following adoption of the Amendment will not be considered incentive
stock options for federal income tax purposes unless Stockholder approval has
been obtained within twelve (12) months from the adoption of the Amendment by
the Board of Directors. If Stockholder approval is not obtained, then the
options will be treated as non-qualified stock options. The Board of Directors
believes it is in the Company's best interests to permit option holders to take
advantage of the more favorable tax treatment given to incentive stock options
(as discussed above).
The Board of Directors believes that the Amendment provides an important
inducement to recruit and retain the best available personnel. The Board of
Directors believes that providing employees, Directors and consultants with an
opportunity to invest in the Company rewards them appropriately for their
efforts on behalf of the Company.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE AMENDMENT.
25
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors of the Company has, subject to stockholder
ratification, retained Goldstein Golub Kessler LLP as independent auditors of
the Company for the fiscal year ending June 30, 2003. Goldstein Golub Kessler
has served as independent auditors of the Company since the fiscal year ending
June 30, 1999. Neither the firm nor any of its directors has any direct or
indirect financial interest in or any connection with the Company in any
capacity other than as auditors.
Although stockholder ratification of the selection of Goldstein Golub
Kessler LLP is not required by law, the Board of Directors believes that it is
desirable to give Stockholders the opportunity to ratify this selection. If this
proposal is not approved at the Meeting, the Board of Directors will reconsider
the selection of Goldstein Golub Kessler LLP.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF GOLDSTEIN GOLUB KESSLER LLP AS THE INDEPENDENT AUDITORS OF THE
COMPANY FOR THE FISCAL YEAR ENDING JUNE 30, 2003.
One or more representatives of Goldstein Golub Kessler LLP is expected to
attend the Meeting and have an opportunity to make a statement and/or respond to
appropriate questions from Stockholders.
INDEPENDENT AUDITORS' FEES AND OTHER MATTERS
Audit Fees
Goldstein Golub Kessler LLP billed the Company an aggregate of $63,600 in
fees for professional services rendered in connection with the audit of the
Company's financial statements during the fiscal year ended June 30, 2002 and
the reviews of the financial statements included in each of the Company's
Quarterly Reports on Form 10-QSB during the fiscal year ended June 30, 2002.
Financial Information Systems Design and Implementation Fees
Goldstein Golub Kessler LLP did not bill the Company for any professional
services rendered to the Company and its affiliates during the fiscal year ended
June 30, 2002 in connection with financial information systems design or
implementation, the operation of the Company's information system or the
management of its local area network.
Leased Employees
Goldstein Golub Kessler LLP has a continuing relationship with American
Express Tax and Business Services, Inc. ("TBS") from which it leases auditing
staff who are full time, permanent employees of TBS and through which its
partners provide non-audit services. As a result of this arrangement, Goldstein
Golub Kessler LLP has no full time employees and therefore, none of the audit
services performed were provided by permanent full-time employees of Goldstein
Golub Kessler LLP. Goldstein Golub Kessler LLP manages and supervises the audit
and audit staff, and is exclusively responsible for the opinion rendered in
connection with its examination.
All Other Fees
TBS billed the Company an aggregate of $7,500 for professional services
rendered to the Company and its affiliates during the fiscal year ended June 30,
2002 in connection with the preparation of the Company's tax returns. Goldstein
Golub Kessler LLP billed the Company an aggregate of $3,200 for other services
rendered to the Company and its affiliates during the fiscal year ended June 30,
2002.
26
STOCKHOLDERS' PROPOSALS
Stockholders who wish to submit proposals for inclusion in the Company's
proxy statement and form of proxy relating to the 2003 Annual Meeting of
Stockholders must advise the Secretary of the Company of such proposals in
writing by July 2, 2003.
Stockholders who wish to present a proposal at the 2003 Annual Meeting of
Stockholders without inclusion of such proposal in the Company's proxy materials
must advise the Secretary of the Company of such proposals in writing by
September 15, 2003.
If the Company does not receive notice of a stockholder proposal within
this timeframe, the Company's management will use its discretionary authority to
vote the shares they represent, as the Company's Board of Directors may
recommend. The Company reserves the right to reject, rule out of order, or take
other appropriate action with respect to any proposal that does not comply with
these requirements.
HOUSEHOLDING OF ANNUAL MEETING MATERIALS
Some banks, brokers and other nominee record holders may be participating
in the practice of "householding" proxy statements and annual reports. This
means that only one copy of the Company's proxy statement or annual report may
have been sent to multiple Stockholders in your household. The Company will
promptly deliver a separate copy of either document to you if you call or write
the Company at the following address or phone number: Senesco Technologies,
Inc., 303 George Street, Suite 420, New Brunswick, New Jersey 08901, (732)
296-8400. If you want to receive separate copies of the annual report and proxy
statement in the future or if you are receiving multiple copies and would like
to receive only one copy for your household, you should contact your bank,
broker, or other nominee record holders, or you may contact the Company at the
above address and phone number.
OTHER MATTERS
The Board of Directors is not aware of any matter to be presented for
action at the Meeting other than the matters referred to above and does not
intend to bring any other matters before the Meeting. However, if other matters
should come before the Meeting, it is intended that holders of the proxies will
vote thereon in their discretion.
27
GENERAL
The accompanying proxy is solicited by and on behalf of the Board of
Directors of the Company, whose notice of meeting is attached to this Proxy
Statement, and the entire cost of such solicitation will be borne by the
Company.
In addition to the use of the mails, proxies may be solicited by personal
interview, telephone and telegram by Directors, officers and other employees of
the Company who will not be specially compensated for these services. The
Company will also request that brokers, nominees, custodians and other
fiduciaries forward soliciting materials to the beneficial owners of shares held
of record by such brokers, nominees, custodians and other fiduciaries. The
Company will reimburse such persons for their reasonable expenses in connection
therewith.
Certain information contained in this Proxy Statement relating to the
occupations and security holdings of Directors and officers of the Company is
based upon information received from the individual Directors and officers.
SENESCO TECHNOLOGIES, INC. WILL FURNISH, WITHOUT CHARGE, A COPY OF ITS
REPORT ON FORM 10-KSB FOR THE YEAR ENDED JUNE 30, 2002, INCLUDING FINANCIAL
STATEMENTS AND SCHEDULES THERETO, BUT NOT INCLUDING EXHIBITS, TO EACH OF ITS
STOCKHOLDERS OF RECORD ON OCTOBER 21, 2002 AND TO EACH BENEFICIAL STOCKHOLDER ON
THAT DATE UPON WRITTEN REQUEST MADE TO THE SECRETARY OF THE COMPANY. A
REASONABLE FEE WILL BE CHARGED FOR COPIES OF REQUESTED EXHIBITS.
PLEASE DATE, SIGN AND RETURN THE PROXY CARD AT YOUR EARLIEST CONVENIENCE IN
THE ENCLOSED RETURN ENVELOPE. A PROMPT RETURN OF YOUR PROXY CARD WILL BE
APPRECIATED AS IT WILL SAVE THE EXPENSE OF FURTHER MAILINGS.
By Order of the Board of Directors
/s/ Sascha P. Fedyszyn
Sascha P. Fedyszyn
Secretary
New Brunswick, New Jersey
October 29, 2002
28
SENESCO TECHNOLOGIES, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF THE CORPORATION FOR THE ANNUAL MEETING OF STOCKHOLDERS
The undersigned hereby constitutes and appoints Ruedi Stalder and Sascha P.
Fedyszyn, and each of them, his or her true and lawful agent and proxy with full
power of substitution in each, to represent and to vote on behalf of the
undersigned all of the shares of Senesco Technologies, Inc. (the "Company")
which the undersigned is entitled to vote at the Annual Meeting of Stockholders
of the Company to be held at The American Stock Exchange, New York, New York at
9:30 A.M., local time, on December 13, 2002, and at any adjournment or
adjournments thereof, upon the following proposals more fully described in the
Notice of Annual Meeting of Stockholders and Proxy Statement for the Meeting
(receipt of which is hereby acknowledged).
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR PROPOSALS 1, 2, 3 AND 4.
1. ELECTION OF DIRECTORS.
Nominees: Ruedi Stalder, Bruce C. Galton, John E. Thompson, Ph.D.,
Christopher Forbes, Thomas C. Quick, David Rector and
Philip B. Livingston.
(Mark one only)
VOTE FOR all the nominees listed above; except vote withheld from the following
nominees (if any). | |
- --------------------------------------------------------------------------------
VOTE WITHHELD from all nominees. | |
2. APPROVAL OF PROPOSAL TO INCREASE THE MAXIMUM NUMBER OF AUTHORIZED SHARES OF
THE COMPANY'S COMMON STOCK FROM TWENTY MILLION (20,000,000) SHARES TO THIRTY
MILLION (30,000,000) SHARES.
FOR | | AGAINST | | ABSTAIN | |
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
3. APPROVAL OF PROPOSAL TO AMEND THE COMPANY'S 1998 STOCK INCENTIVE PLAN, AS
AMENDED (THE "1998 STOCK PLAN"), TO INCREASE THE MAXIMUM NUMBER OF SHARES OF THE
COMPANY'S COMMON STOCK AVAILABLE FOR ISSUANCE UNDER THE 1998 STOCK PLAN FROM TWO
MILLION (2,000,000) SHARES TO THREE MILLION (3,000,000) SHARES.
FOR | | AGAINST | | ABSTAIN | |
4. APPROVAL OF PROPOSAL TO RATIFY THE APPOINTMENT OF GOLDSTEIN GOLUB KESSLER LLP
AS THE INDEPENDENT AUDITORS OF THE COMPANY FOR THE FISCAL YEAR ENDING JUNE 30,
2003.
FOR | | AGAINST | | ABSTAIN | |
5. In his discretion, the proxy is authorized to vote upon other matters as may
properly come before the Meeting.
Dated: This proxy must be signed
---------------------------- exactly as the name appears
hereon. When shares are held
by joint tenants, both should
---------------------------------- sign. If the signer is a
Signature of Stockholder corporation, please sign full
corporate name by duly
authorized officer, giving
---------------------------------- full title as such. If a
Signature of Stockholder if held partnership, please sign in
jointly partnership name by authorized
person.
I WILL | | WILL NOT | | attend the Meeting.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY, USING THE ENCLOSED
ENVELOPE.
APPENDIX A
----------
SENESCO TECHNOLOGIES, INC.
1998 STOCK INCENTIVE PLAN
(as amended and restated on December 13, 2002)
1. Purposes of the Plan. The purposes of this Plan are to attract and
---------------------
retain the best available personnel for positions of substantial responsibility,
to provide additional incentive to Employees, non-Employee Directors and
Consultants of the Company and its Subsidiaries and to promote the success of
the Company's business. Options granted under the Plan may be incentive stock
options (as defined under Section 422 of the Code) or non-statutory stock
options, as determined by the Administrator at the time of grant of an option
and subject to the applicable provisions of Section 422 of the Code, as amended,
and the regulations promulgated thereunder. Stock purchase rights may also be
granted under the Plan.
2. Certain Definitions. As used herein, the following definitions shall
-------------------
apply:
(a) "Administrator" means the Board or any of its Committees
-------------
appointed pursuant to Section 4 of the Plan.
(b) "Board" means the Board of Directors of the Company.
-----
(c) "Code" means the Internal Revenue Code of 1986, as amended.
----
(d) "Committee" means the Committee appointed by the Board of
---------
Directors in accordance with paragraph (a) of Section 4 of the Plan.
(e) "Common Stock" means the Common Stock of the Company.
------------
(f) "Company" means Senesco Technologies, Inc., a Delaware
-------
corporation.
(g) "Consultant" means any person, including an advisor, who is
----------
engaged by the Company or any Parent or subsidiary to render services and is
compensated for such services.
(h) "Continuous Status as an Employee" means the absence of any
-----------------------------------
interruption or termination of the employment relationship by the Company or any
Subsidiary. Continuous Status as an Employee shall not be considered interrupted
in the case of: (i) sick leave; (ii) military leave; (iii) any other leave of
absence approved by the Board, provided that such leave is for a period of not
more than ninety (90) days, unless reemployment upon the expiration of such
leave is guaranteed by contract or statute, or unless provided otherwise
pursuant to Company policy adopted from time to time; or (iv) transfers between
locations of the Company or between the Company, its Subsidiaries or its
successor.
(i) "Director" means a director of the Company.
--------
(j) "Employee" means any person, including officers and directors,
--------
employed by the Company or any Parent or Subsidiary of the Company. The payment
of a director's fee by the Company shall not be sufficient to constitute
"employment" by the Company.
(k) "Exchange Act" means the Securities Exchange Act of 1934, as
-------------
amended.
(l) "Fair Market Value" means, as of any date, the value of Common
------------------
Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system including without limitation the
National Market System of the National Association of Securities Dealers,
Inc. Automated Quotation ("Nasdaq") System, its Fair Market Value shall be
the closing sales price for such stock (or the closing bid, if no sales
were reported) as quoted on such system or exchange for the last market
trading day prior to the time of determination as reported in the Wall
Street Journal or such other source as the Administrator deems reliable or;
(ii) If the Common Stock is quoted on Nasdaq (but not on the
National Market System thereof) or regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market
Value shall be the mean between the high and low asked prices for the
Common Stock or;
(iii)In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by
the Administrator.
(m) "Incentive Stock Option" means an Option intended to qualify as
-----------------------
an incentive stock option within the meaning of Section 422 of the Code.
(n) "Nonstatutory Stock Option" means an Option not intended to
---------------------------
qualify as an Incentive Stock Option.
(o) "Option" means a stock option granted pursuant to the Plan.
------
(p) "Optioned Stock" means the Common Stock subject to an Option.
--------------
(q) "Optionee" means a Director, Employee or Consultant who receives
--------
an Option.
(r) "Parent" means a "parent corporation," whether now or hereafter
------
existing, as defined in Section 424(e) of the Code.
(s) "Plan" means this 1998 Stock Incentive Plan, as amended.
----
2
(t) "Restricted Stock" means shares of Common Stock acquired pursuant
----------------
to a grant of stock purchase rights under Section 11 below.
(u) "Share" means a share of the Common Stock, as adjusted in
-----
accordance with Section 13 of the Plan.
(v) "Subsidiary" means a "subsidiary corporation", whether now or
----------
hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 13 of
-------------------------
the Plan, the maximum aggregate number of shares which may be optioned and sold
under the Plan is three million (3,000,000) shares of Common Stock. The shares
may be authorized, but unissued, or reacquired Common Stock.
If an option should expire or become unexercisable for any reason
without having been exercised in full, the unpurchased Shares which were subject
thereto shall, unless the Plan shall have been terminated, become available for
future grant under the Plan.
4. Administration of the Plan.
---------------------------
(a) Procedure.
---------
(i) Administration With Respect to Directors and Officers. With
-----------------------------------------------------
respect to grants of Options or stock purchase rights to Employees who are
also officers or Directors of the Company, the Plan shall be administered
by (A) the Board, if the Board may administer the Plan in compliance with
Rule 16b-3 promulgated under the Exchange Act or any successor thereto
("Rule 16b-3") with respect to a plan intended to allow transactions
between the Company and the Optionee to be exempt for Section 16(b) of the
Exchange Act, or (B) a Committee designated by the Board to administer the
Plan, which Committee shall be constituted in such a manner as to permit
the Plan to comply with Rule 16b-3 with respect to a plan intended to allow
transactions between the Company and the Optionee to be exempt for Section
16(b) of the Exchange Act. Once appointed, such Committee shall continue to
serve in its designated capacity until otherwise directed by the Board.
From time to time the Board may increase the size of the Committee and
appoint additional members thereof, remove members (with or without cause)
and appoint new members in substitution therefor, fill vacancies, however
caused, and remove all members of the Committee and thereafter directly
administer the Plan, all to the extent permitted by Rule 16b-3 with respect
to a plan intended to qualify thereunder as a discretionary plan.
(ii) Multiple Administrative Bodies. If permitted by Rule 16b-3,
-------------------------------
the Plan may be administered by different bodies with respect to Directors,
non-director officers and Employees who are neither Directors nor officers.
(iii)Administration With Respect to Consultants and Other
------------------------------------------------------------
Employees. With respect to grants of Options or stock purchase rights to
---------
Employees who are neither
3
Directors nor officers of the Company or to Consultants, the Plan shall be
administered by (A) the Board, if the Board may administer the Plan in
compliance with Rule 16b-3, or (B) a Committee designated by the Board,
which Committee shall be constituted in such a manner as to satisfy the
legal requirements relating to the administration of incentive stock option
plans, if any, of Idaho corporate law and applicable securities laws and of
the Code (the "Applicable Laws"). Once appointed, such Committee shall
continue to serve in its designated capacity until otherwise directed by
the Board. From time to time the Board may increase the size of the
Committee and appoint additional members thereof, remove members (with or
without cause) and appoint new members in substitution therefor, fill
vacancies, however caused, and remove all members of the Committee and
thereafter directly administer the Plan, all to the extent permitted by the
Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of the
----------------------------
Plan and in the case of a Committee, the specific duties delegated by the Board
to such Committee, the Administrator shall have the authority, in its
discretion:
(i) to determine the Fair Market Value of the Common Stock, in
accordance with Section 2(k) of the Plan;
(ii) to select the officers, Directors, Consultants and Employees
to whom Options and stock purchase rights may from time to time be granted
hereunder;
(iii)to determine whether and to what extent Options and stock
purchase rights or any combination thereof, are granted hereunder;
(iv) to determine the number of shares of Common Stock to be
covered by each such award granted hereunder;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions, not inconsistent with
the terms of the Plan, of any award granted hereunder (including, but not
limited to, the share price and any restriction or limitation or waiver of
forfeiture restrictions regarding any Option or other award and/or the
shares of Common Stock relating thereto, based in each case on such factors
as the Administrator shall determine, in its sole discretion);
(vii)to determine whether and under what circumstances an Option
may be settled in cash under subsection 9(f) instead of Common Stock;
(viii) to determine whether, to what extent and under what
circumstances Common Stock and other amounts payable with respect to an
award under this Plan shall
4
be deferred either automatically or at the election of the participant
(including providing for and determining the amount, if any, of any deemed
earnings on any deferred amount during any deferral period);
(ix) to reduce the exercise price of any Option to the then
current Fair Market Value if the Fair Market Value of the Common Stock
covered by such Option shall have declined since the date the Option was
granted; and
(x) to determine the terms and restrictions applicable to stock
purchase rights and the Restricted Stock purchased by exercising such stock
purchase rights.
(c) Effect of Committee's Decision. All decisions, determinations and
------------------------------
interpretations of the Administrator shall be final and binding on all Optionees
and any other holders of any Options.
5. Eligibility.
-----------
(a) Nonstatutory Stock Options may be granted to Directors, Employees
and Consultants. Incentive Stock Options may be granted only to Employees. A
Director, Employee or Consultant who has been granted an Option may, if he is
otherwise eligible, be granted an additional Option or Options.
(b) Each Option shall be designated in the written option agreement
as either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designations, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Options designated as Incentive Stock
Options are exercisable for the first time by any optionee during any calendar
year (under all plans of the Company or any Parent or Subsidiary) exceeds
$100,000, such excess Options shall be treated as Nonstatutory Stock Options.
(c) For purposes of Section 5(b), Incentive Stock Options shall be
taken into account in the order in which they were granted, and the Fair Market
Value of the Shares shall be determined as of the time the Option with respect
to such Shares is granted.
(d) The Plan shall not confer upon any Optionee any right with
respect to continuation of employment or consulting relationship with the
Company, nor shall it interfere in any way with his right or the Company's right
to terminate his employment or consulting relationship at any time, with or
without cause.
6. Term of Plan. The Plan shall become effective upon the earlier to
------------
occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company as described in Section 19 of the Plan. It shall
continue in effect for a term of ten (10) years unless sooner terminated under
Section 15 of the Plan.
5
7. Term of Option. The term of each Option shall be the term stated in
--------------
the Option Agreement; provided, however, that in the case of an Incentive Stock
Option, the term shall be no more than ten (10) years from the date of grant
thereof or such shorter term as may be provided in the Option Agreement.
However, in the case of an Option granted to an Optionee who, at the time the
Option is granted, owns stock representing more than ten percent (10%) of the
voting power of all classes of stock of the Company or any Parent or Subsidiary,
the term of the Option shall be five (5) years from the date of grant thereof or
such shorter term as may be provided in the Option Agreement.
8. Option Exercise Price and Consideration.
----------------------------------------
(a) The per share exercise price for the Shares to be issued pursuant
to exercise of an Option shall be such price as is determined by the Board, but
shall be subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time of the grant of
such Incentive Stock Option, owns stock representing more than ten percent
(10%) of the voting power of all classes of stock of the Company or any
Parent or Subsidiary, the per Share exercise price shall be no less than
110% of the Fair Market Value per Share on the date of grant.
(B) granted to any Employee, the per Share exercise price
shall be no less than 100% of the Fair Market Value per Share on the date
of grant.
(ii) In the case of a Nonstatutory Stock Option
(A) granted to a person who, at the time of the grant of
such Option, owns stock representing more than ten percent (10%) of the
voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be no less than 110% of the
Fair Market Value per Share on the date of the grant.
(B) granted to any person, the per Share exercise price
shall be no less than 85% of the Fair Market Value per Share on the date of
grant.
(b) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and may consist entirely of (1) cash, (2)
check, (3) promissory note, (4) other Shares which (x) in the case of Shares
acquired upon exercise of an Option either have been owned by the Optionee for
more than six months on the date of surrender or were not acquired, directly or
indirectly, from the
6
Company, and (y) have a Fair Market Value on the date of surrender equal to the
aggregate exercise price of the Shares as to which said Option shall be
exercised, (5) authorization from the Company to retain from the total number of
Shares as to which the Option is exercised that number of Shares having a Fair
Market Value on the date of exercise equal to the exercise price for the total
number of Shares as to which the option is exercised, (6) delivery of a properly
executed exercise notice together with irrevocable instructions to a broker to
promptly deliver to the Company the amount of sale or loan proceeds required to
pay the exercise price, (7) by delivering an irrevocable subscription agreement
for the Shares which irrevocably obligates the option holder to take and pay for
the Shares not more than twelve months after the date of delivery of the
subscription agreement, (8) any combination of the foregoing methods of payment,
or (9) such other consideration and method of payment for the issuance of Shares
to the extent permitted under Applicable Laws. In making its determination as to
the type of consideration to accept, the Administrator shall consider if
acceptance of such consideration may be reasonably expected to benefit the
Company.
9. Exercise of Option.
-------------------
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
---------------------------------------------------
granted hereunder shall be exercisable at such times and under such conditions
as determined by the Administrator, including performance criteria with respect
to the Company and/or the Optionee, and as shall be permissible under the terms
of the Plan.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of
such exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may, as authorized by the Administrator, consist of any
consideration and method of payment allowable under Section 8(b) of the Plan.
Until the issuance (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive dividends or any
other rights as a shareholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Company shall issue (or cause to
be issued) such stock certificate promptly upon exercise of the Option. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued, except as provided in
Section 11 of the Plan.
Exercise of an Option in any manner shall result in a decrease in
the number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
7
(b) Termination of Employment. In the event of termination of an
---------------------------
Optionee's consulting relationship, directorship or Continuous Status as an
Employee with the Company (as the case may be), such Optionee may, but only
within three (3) months (or such other period of time as is determined by the
Board, with such determination in the case of an Incentive Stock Option being
made at the time of grant of the Option and not exceeding three (3) months)
after the date of such termination (but in no event later than the expiration
date of the term of such Option as set forth in the Option Agreement), exercise
his Option to the extent that Optionee was entitled to exercise it at the date
of such termination. To the extent that Optionee was not entitled to exercise
the Option at the date of such termination, or if Optionee does not exercise
such Option to the extent so entitled within the time specified herein, the
Option shall terminate.
(c) Disability of Optionee. Notwithstanding the provisions of Section
----------------------
9(b) above, in the event of termination of an Optionee's consulting relationship
or Continuous Status as an Employee as a result of his total and permanent
disability (as defined in Section 22(e)(3) of the Code), Optionee may, but only
within twelve (12) months from the date of such termination (but in no event
later than the expiration date of the term of such Option as set forth in the
Option Agreement), exercise the Option to the extent otherwise entitled to
exercise it at the date of such termination. To the extent that Optionee was not
entitled to exercise the Option at the date of termination, or if Optionee does
not exercise such Option to the extent so entitled within the time specified
herein, the Option shall terminate.
(d) Death of Optionee. In the event of the death of an Optionee, the
-----------------
Option may be exercised, at any time within twelve (12) months following the
date of death (but in no event later than the expiration date of the term of
such Option as set forth in the Option Agreement), by the Optionee's estate or
by a person who acquired the right to exercise the Option by bequest or
inheritance, but only to the extent the Optionee was entitled to exercise the
Option at the date of death. To the extent that Optionee was not entitled to
exercise the Option at the date of termination, or if Optionee does not exercise
such Option to the extent so entitled within the time specified herein, the
Option shall terminate.
(e) Rule 16b-3. Options granted to persons subject to Section 16(b) of
----------
the Exchange Act must comply with Rule 16b-3 and shall contain such additional
conditions or restrictions as may be required thereunder to qualify for the
maximum exemption from Section 16 of the Exchange Act with respect to Plan
transactions.
(f) Buyout Provisions. The Administrator may at any time offer to buy
-----------------
out for a payment in cash or Shares, an Option previously granted, based on such
terms and conditions as the Administrator shall establish and communicate to the
Optionee at the time that such offer is made.
8
10. Non-Transferability of Options. The Option may not be sold, pledged,
-------------------------------
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee. The terms of the Option shall be
binding upon the executors, administrators, heirs, successors and assigns of the
Optionee.
11. Stock Purchase Rights.
---------------------
(a) Rights to Purchase. Stock purchase rights may be issued either
------------------
alone, in addition to, or in tandem with other awards granted under the Plan
and/or cash awards made outside of the Plan. After the Administrator determines
that it will offer stock purchase rights under the Plan, it shall advise the
offeree in writing of the terms, conditions and restrictions related to the
offer, including the number of Shares that such person shall be entitled to
purchase, the price to be paid (which price shall not be less than 50% of the
Fair Market Value of the Shares as of the date of the offer), and the time
within which such person must accept such offer, which shall in no event exceed
thirty (30) days from the date upon which the Administrator made the
determination to grant the stock purchase right. The offer shall be accepted by
execution of a Restricted Stock purchase agreement in the form determined by the
Administrator.
(b) Repurchase Option. Unless the Administrator determines otherwise,
-----------------
the Restricted Stock purchase agreement shall grant the Company a repurchase
option exercisable upon the voluntary or involuntary termination of the
purchaser's employment with the Company for any reason (including death or
Disability). The purchase price for Shares repurchased pursuant to the
Restricted Stock purchase agreement shall be the original price paid by the
purchaser and may be paid by cancellation of any indebtedness of the purchaser
to the Company. The repurchase option shall lapse at such rate as the Committee
may determine.
(c) Other Provisions. The Restricted Stock purchase agreement shall
----------------
contain such other terms, provisions and conditions not inconsistent with the
Plan as may be determined by the Administrator in its sole discretion. In
addition, the provisions of Restricted Stock purchase agreements need not be the
same with respect to each purchaser.
(d) Rights as a Shareholder. Once the stock purchase right is
-------------------------
exercised, the purchaser shall have the rights equivalent to those of a
shareholder, and shall be a shareholder when his or her purchase is entered upon
the records of the duly authorized transfer agent of the Company. No adjustment
will be made for a dividend or other right for which the record date is prior to
the date the stock purchase right is exercised, except as provided in Section 13
of the Plan.
12. Stock Withholding to Satisfy Withholding Tax Obligations. At the
-------------------------------------------------------------
discretion of the Administrator, Optionees may satisfy withholding obligations
as provided in this paragraph. When an Optionee incurs tax liability in
connection with an Option or stock purchase right,
9
which tax liability is subject to tax withholding under applicable tax laws, and
the Optionee is obligated to pay the Company an amount required to be withheld
under applicable tax laws, the Optionee may satisfy the withholding tax
obligation by electing to have the Company withhold from the Shares to be issued
upon exercise of the Option, or the Shares to be issued in connection with the
stock purchase right, if any, or delivery of additional shares of Common Stock,
that number of shares having a Fair Market Value equal to the amount required to
be withheld; provided, however, that the total tax withholding where stock is
-------- -------
being used to satisfy such tax obligations cannot exceed the Company's minimum
statutory withholding obligations (based on minimum statutory withholding rates
for federal and state tax purposes, including payroll taxes, that are applicable
to such supplemental taxable income). The Fair Market Value of the shares to be
withheld shall be determined on the date that the amount of tax to be withheld
is to be determined (the "Tax Date").
All elections by an Optionee to have Shares withheld for this purpose
shall be made in writing in a form acceptable to the Administrator and shall be
subject to the following restrictions:
(a) the election must be made on or prior to the applicable Tax Date;
(b) once made, the election shall be irrevocable as to the particular
Shares of the Option or Right as to which the election is made;
(c) all elections shall be subject to the consent or disapproval of
the Administrator;
(d) if the Optionee is subject to Rule 16b-3, the election must
comply with the applicable provisions of Rule 16b-3 and shall be subject to such
additional conditions or restrictions as may be required thereunder to qualify
for the maximum exemption from Section 16 of the Exchange Act with respect to
Plan transactions.
In the event the election to have Shares withheld is made by an
Optionee and the Tax Date is deferred under Section 83 of the Code because no
election is filed under Section 83(b) of the Code, the Optionee shall receive
the full number of Shares with respect to which the Option or stock purchase
right is exercised but such Optionee shall be unconditionally obligated to
tender back to the Company the proper number of Shares on the Tax Date.
13. Adjustments Upon Changes in Capitalization or Merger. Subject to any
-----------------------------------------------------
required action by the shareholders of the Company, the number of shares of
Common Stock covered by each outstanding Option, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options have yet been granted or which have been returned to the Plan
upon cancellation or expiration of an Option, as well as the price per share of
Common Stock covered by each such outstanding Option, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company; provided,
10
however, that conversion of any convertible securities of the Company shall not
be deemed to have been "effected without receipt of consideration." Such
adjustment shall be made by the Board, whose determination in that respect shall
be final, binding and conclusive. Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of shares
of Common Stock subject to an Option.
In the event of the proposed dissolution or liquidation of the
Company, the Board shall notify the Optionee at least fifteen (15) days prior to
such proposed action. To the extent it has not been previously exercised, the
Option will terminate immediately prior to the consummation of such proposed
action. In the event of a merger or consolidation of the Company with or into
another corporation or the sale of all or substantially all of the Company's
assets (hereinafter, a "merger"), the Option shall be assumed or an equivalent
option shall be substituted by such successor corporation or a parent or
subsidiary of such successor corporation. In the event that such successor
corporation does not agree to assume the Option or to substitute an equivalent
option, the Board shall, in lieu of such assumption or substitution, provide for
the Optionee to have the right to exercise the Option as to all of the Optioned
Stock, including Shares as to which the Option would not otherwise be
exercisable. If the Board makes an Option fully exercisable in lieu of
assumption or substitution in the event of a merger, the Board shall notify the
Optionee that the Option shall be fully exercisable for a period of fifteen (15)
days from the date of such notice, and the Option will terminate upon the
expiration of such period. For the purposes of this paragraph, the Option shall
be considered assumed if, following the merger, the Option or right confers the
right to purchase, for each Share of stock subject to the Option immediately
prior to the merger, the consideration (whether stock, cash, or other securities
or property) received in the merger by holders of Common Stock for each Share
held on the effective date of the transaction (and if holders were offered a
choice of consideration, the type of consideration chosen by the holders of a
majority of the outstanding Shares); provided, however, that if such
consideration received in the merger was not solely common stock of the
successor corporation or its Parent, the Board may, with the consent of the
successor corporation and the participant, provide for the consideration to be
received upon the exercise of the Option, for each Share of stock subject to the
Option, to be solely common stock of the successor corporation or its Parent
equal in Fair Market Value to the per share consideration received by holders of
Common Stock in the merger or sale of assets.
14. Time of Granting Options. The date of grant of an Option shall, for
-------------------------
all purposes, be the date on which the Administrator makes the determination
granting such Option, or such other date as is determined by the Board. Notice
of the determination shall be given to each Director, Employee or Consultant to
whom an Option is so granted within a reasonable time after the date of such
grant.
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15. Amendment and Termination of the Plan.
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(a) Amendment and Termination. The Board may at any time amend,
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alter, suspend or discontinue the Plan, but no amendment, alteration, suspension
or discontinuation shall be made which would impair the rights of any Optionee
under any grant theretofore made, without his or her consent. In addition, to
the extent necessary and desirable to comply with Rule 16b-3 under the Exchange
Act or with Section 422 of the Code (or any other applicable law or regulation,
including the requirements of the NASD or an established stock exchange), the
Company shall obtain shareholder approval of any Plan amendment in such a manner
and to such a degree as required.
(b) Effect of Amendment or Termination. Any such amendment or
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termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee and
the Board, which agreement must be in writing and signed by the Optionee and the
Company.
16. Conditions Upon Issuance of Shares. Shares shall not be issued
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pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, and the requirements of any stock exchange upon which the Shares may
then be listed, and shall be further subject to the approval of counsel for the
Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may require
the person exercising such Option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.
17. Reservation of Shares. The Company, during the term of this Plan, will
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at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
The inability of the Company to obtain authority from any regulatory
body having jurisdiction, which authority is deemed by the Company's counsel to
be necessary to the lawful issuance and sale of any Shares hereunder, shall
relieve the Company of any liability in respect of the failure to issue or sell
such Shares as to which such requisite authority shall not have been obtained.
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18. Agreements. Options and stock purchase rights shall be evidenced by
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written agreements in such form as the Board shall approve from time to time.
19. Shareholder Approval. Continuance of the Plan shall be subject to
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approval by the shareholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such shareholder approval shall be obtained
in the degree and manner required under applicable state and federal law.
20. Information to Optionees. The Company shall provide to each Optionee,
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during the period for which such Optionee has one or more Options outstanding,
copies of all annual reports and other information which are provided to all
shareholders of the Company. The Company shall not be required to provide such
information if the issuance of Options under the Plan is limited to key
employees whose duties in connection with the Company assure their access to
equivalent information.
* * * * * * * *
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