NEOPROBE CORPORATION
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1997 ANNUAL MEETING OF STOCKHOLDERS
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
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Neoprobe Corporation
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(Name of Registrant as Specified in Its Charter)
Registrant
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pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
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[LOGO] neoprobe
1997 ANNUAL MEETING OF STOCKHOLDERS
April 23, 1997
Dear Stockholder:
You are cordially invited to attend the 1997 Annual Meeting of
Stockholders of Neoprobe Corporation which will be held at 11:00 a.m., Eastern
Daylight Time, on May 29, 1997 at The Hyatt on Capitol Square, 75 East State
Street, Columbus, Ohio. The matters on the meeting agenda are described in the
Notice of 1997 Annual Meeting of Stockholders and Proxy Statement which
accompany this letter.
We hope you will be able to attend the meeting, but whatever your plans,
we ask that you please complete, execute, and date the enclosed proxy card and
return it in the envelope provided so that your shares will be represented at
the meeting.
Very truly yours,
John L. Ridihalgh
Chairman of the Board and
Chief Executive Officer
NEOPROBE CORPORATION
NOTICE OF 1997 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 29, 1997
To the Stockholders of
NEOPROBE CORPORATION:
The Annual Meeting of the Stockholders of Neoprobe Corporation, a Delaware
corporation (the "Company"), will be held at The Hyatt on Capitol Square, 75
East State Street, Columbus, Ohio, on May 29, 1997 at 11:00 a.m., Eastern
Daylight Time, for the following purposes:
1. To elect three directors, each to serve for a term of three years or
until their successors are duly elected and qualified;
2. To consider and vote upon a proposal to amend the 1996 Stock
Incentive Plan; and
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on April 4, 1997 as
the record date for the determination of stockholders entitled to notice of and
to vote at the Annual Meeting and any adjournment thereof. A list of
stockholders will be available for examination by any stockholder at the Annual
Meeting and for a period of 10 days before the Annual Meeting at the executive
offices of the Company.
Whether or not you plan to attend the Annual Meeting, please sign, date,
and return the enclosed proxy card in the envelope provided.
By Order of the Board of Directors
John L. Ridihalgh
Chairman of the Board and
Chief Executive Officer
Columbus, Ohio
April 23, 1997
NEOPROBE CORPORATION
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1997 ANNUAL MEETING OF STOCKHOLDERS
May 29, 1997
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PROXY STATEMENT
Dated April 23, 1997
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GENERAL INFORMATION
Solicitation. This Proxy Statement is furnished to the stockholders of
Neoprobe Corporation, a Delaware corporation (the "Company"), in connection with
the solicitation by the Board of Directors of the Company (the "Board of
Directors") of proxies to be voted at the 1997 Annual Meeting of Stockholders of
the Company (the "Annual Meeting") to be held on May 29, 1997 and any
adjournment thereof. This Proxy Statement and the accompanying proxy card are
first being mailed to stockholders on or about April 23, 1997.
Voting Rights. Stockholders of record at the close of business on April 4,
1997 are entitled to notice of and to vote at the Annual Meeting. As of that
date, there were 22,712,436 shares of Common Stock of the Company, par value
$.001 per share ("Common Stock"), outstanding. Each stockholder of record on
April 4, 1997 is entitled to one vote per share held with respect to all matters
which may be brought before the Annual Meeting.
Authorization. All shares represented by properly executed proxies
received by the Company pursuant to this solicitation will be voted in
accordance with the stockholder's directions specified on the proxy card. If no
directions have been specified by marking the appropriate squares on the
accompanying proxy card, the shares represented by such proxy will be voted in
accordance with the recommendations of the Board of Directors, which are (1) FOR
the election of Melvin D. Booth, John S. Christie and J. Frank Whitley, Jr. as
directors, each to serve for a term of three years; AND (2) FOR the approval of
the proposal to amend the 1996 Stock Incentive Plan. The proxy will also be
voted at the discretion of the persons acting under the proxy to transact such
other business as may properly come before the Annual Meeting and any
adjournment thereof.
Revocation. Any stockholder returning the accompanying proxy has the power
to revoke it at any time before its exercise by giving notice of revocation to
the Company, by duly executing and delivering to the Company a proxy card
bearing a later date, or by voting in person at the Annual Meeting.
Tabulation. Under Section 216 of the General Corporation Law of the State
of Delaware ("GCL") and the By-laws of the Company, a quorum must be present at
the Annual Meeting in order for any valid action, including the election of
directors, the amendment of the 1996 Stock Incentive Plan (the "Original Plan")
and voting on the other matters presented to the meeting, other than
adjournment, to be taken thereat. Section 216 of the GCL and the By-laws of the
Company provide that a quorum consists of a majority of the shares entitled to
vote at the Annual Meeting present in person or represented by proxy. Shares
represented by signed proxies that are returned to the Company will be counted
toward the quorum in all matters even though they are marked as "Abstain,"
"Against" or "Withhold Authority" on one or more or all matters or they are not
marked at all (see "Authorization"). Broker/dealers, who hold their customers'
shares in street name, may, under the applicable rules of the exchanges and
other self-regulatory organizations of which such broker/dealers are members,
sign and submit proxies for such shares and may vote such shares on routine
matters,
which, under such rules, typically include the election of directors, but
broker/dealers may not vote such shares on other matters without specific
instructions from the customer who owns such shares. Proxies signed and
submitted by broker/dealers which have not been voted on certain matters as
described in the previous sentence are referred to as broker non-votes. Such
proxies count toward the establishment of a quorum.
Under Section 216 of the GCL and the By-laws of the Company, directors are
elected by a plurality of the votes for the respective nominees. Therefore,
proxies that are marked "Withhold Authority" and broker non-votes, if any, will
not affect the election of directors.
Under Section 9.12 of the Original Plan, an amendment to the Original Plan
must be approved by the affirmative vote of the holders of a majority of the
shares of Common Stock present in person, or represented by proxy, and entitled
to vote at the Annual Meeting at which a quorum is present. A proxy marked
"Abstain" has the same effect as a vote against approval but a broker non-vote
is disregarded in determining the number of shares voted for approval and in
determining the total number of shares as to which the majority is determined in
such matter.
ELECTION OF DIRECTORS
Nominees for Election as Directors
The Company presently has nine directors on its Board of Directors,
comprised of three directors in each of three classes, with terms expiring at
the Annual Meeting in 1997, 1998 and 1999, respectively. At the Annual Meeting,
the three nominees to the Board of Directors receiving the highest number of
votes will be elected as directors to a term of three years expiring in 2000.
Melvin D. Booth, John S. Christie and J. Frank Whitley, Jr. have been nominated
as directors to serve for a term of three years.
The Company has no reason to believe that any of the nominees will not
stand for election or serve as a director. In the event any person nominated
fails to stand for election, the proxies will be voted for the election of such
other person as shall be designated by the persons named in the proxy. See
"General Information -- Tabulation."
The Board of Directors has nominated the following persons to serve as
directors of the Company until the 2000 Annual Meeting:
Melvin D. Booth, age 52, has been President, Chief Operating Officer and a
director of Human Genome Sciences, Inc. since July 1995. Mr. Booth was with
Syntex Corporation and its subsidiaries from 1975 to 1995. Mr. Booth was the
President of Syntex Laboratories, Inc. from 1993 to 1995 and served as a Vice
President of Syntex Corporation from 1992 to 1995. From 1992 to 1993 he served
as the President of Syntex Pharmaceuticals Pacific. From 1991 to 1992 he served
as an area Vice President of Syntex, Inc. From 1986 to 1991 he served as the
President of Syntex, Inc., Canada. He has been active in U.S. pharmaceutical
industry organizations and is also a past Chairman of the Pharmaceutical
Manufacturers Association of Canada. Mr. Booth has a B.S. degree from Northwest
Missouri State University and holds a Certified Public Accountant certificate.
John S. Christie, age 47, has been President of JMAC, Inc., an investment
holding company, since September 1995. From August 1988 until September 1995, he
was a Senior Vice President of Battelle Memorial Institute. Mr. Christie also
serves as a director of Karrington Health, Inc. Mr. Christie has a B.S. degree
in Business Administration from Miami University and an MBA from Emory
University.
J. Frank Whitley, Jr., age 54, has served as a director of the Company
since May 1994. Mr. Whitley has been Director of Mergers, Acquisitions and
Licensing at The Dow Chemical Company ("Dow"), a multinational chemical company,
since June 1993. Since joining Dow in 1965, Mr. Whitley has served in a variety
of marketing, financial, and business management functions. Mr. Whitley has a
B.S. degree in Mathematics from Lamar State University.
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Directors Whose Terms Continue Until the 1998 Annual Meeting:
David C. Bupp, age 47, has served as President, Chief Operating Officer
and a director of the Company since August 1992. From August 1992 to May 1993,
Mr. Bupp served as Treasurer of the Company. In addition to the foregoing
positions, from December 1991 to August 1992, he was Acting President, Executive
Vice President, Chief Operating Officer and Treasurer, and from December 1989 to
December 1991, he was Vice President--Finance and Chief Financial Officer. From
1982 to December 1989, Mr. Bupp was Senior Vice President, Regional Manager for
AmeriTrust Company National Association, a nationally chartered bank holding
company, where he was in charge of commercial banking operations throughout
Central Ohio. Mr. Bupp has a B.A. degree in Economics from Ohio Wesleyan
University. Mr. Bupp completed a course of study at Stonier Graduate School of
Banking.
Julius R. Krevans, M.D., age 72, has served as a director of the Company
since May 1994. Dr. Krevans served as Chancellor of the University of
California, San Francisco from July 1982 until May 1993, and now serves on the
faculty of that institution's School of Medicine. Prior to his appointment as
Chancellor, Dr. Krevans served as a Professor of Medicine and Dean of the School
of Medicine at the University of California, San Francisco from 1971 to 1982.
Dr. Krevans is a member of the Institute of Medicine, National Academy of
Sciences, and led its committee for the National Research Agenda on Aging until
1991. He is Chairman of the Bay Area Economic Forum, a member of the Medical
Panel of A.P. Giannini Foundation, and a member of the Board of Directors of the
Bay Area BioScience Center. Dr. Krevans has a B.S. degree and an M.D. degree,
both from New York University.
James F. Zid, age 63, has served as a director of the Company since
November 1993. Mr. Zid also serves as a director for the Net Med Corporation.
Now retired, Mr. Zid was a partner from September 1981 until September 1993 (and
served as managing partner of the Columbus, Ohio office from September 1981 to
September 1992) of Ernst & Young and its predecessors. Mr. Zid has a B.S. degree
in Accounting from St. Joseph's College.
Directors Whose Terms Continue Until the 1999 Annual Meeting:
C. Michael Hazard, age 65, has served as a director of the Company since
May 1995. Mr. Hazard has been Chairman, Chief Executive Officer and a director
of Westfield Capital Management Company, an investment management firm, since
1989. Prior to founding Westfield Capital Management Company, he was Vice
Chairman and a director of Essex Investment Management Co., Inc. in Boston,
Massachusetts from 1977 to 1989. Mr. Hazard has a B.A. degree from Yale
University and is a graduate of the Wharton School Institute of Investment
Banking, University of Pennsylvania.
Michael P. Moore, M.D., Ph.D., age 46, has served as a director of the
Company since May 1994. Dr. Moore has been Attending Physician, Breast Surgery,
Columbia Presbyterian Medical Center since June 1986. Dr. Moore has a B.S.
degree from Boston College, a Ph.D. degree from Loyola University of Chicago,
and an M.D. degree from The Loyola Stritch School of Medicine.
John L. Ridihalgh, Ph.D., age 55, has served as a director of the Company
and Chairman of the Board since 1988. He was President of the Company from 1984
to November 1991. Dr. Ridihalgh served as Chief Executive Officer of the Company
from 1984 to November 1991 and resumed the position in June 1992. From November
1991 to June 1992, Dr. Ridihalgh served as a consultant to the Company. From
1968 to 1974, Dr. Ridihalgh was a research scientist at Battelle Memorial
Institute. He founded a consulting firm to the nuclear industry in 1974 and a
manufacturer of long-distance telephone network access devices in 1981. He is
also the founder of a medical instrument development company and an animal
vaccine company which has licensed a number of vaccines for veterinary use. Dr.
Ridihalgh has a B.S. degree in Mathematics and a Ph.D. degree in Nuclear
Engineering, both from Iowa State University.
3
Board of Directors Meetings
The Board of Directors held six meetings in fiscal 1996 and each of the
directors attended at least 75 percent of the aggregate number of meetings of
the Board of Directors and committees (if any) on which he served.
Committees
The Company has a standing Audit Committee and a standing Compensation
Committee. The Company does not have a committee whose functions include
nominating directors.
The Audit Committee (comprised of James F. Zid (Chairman), J. Frank
Whitley, Jr. and C. Michael Hazard) recommends the firm to be employed by the
Company as its independent auditors; consults with the firm so chosen to be the
independent auditors with regard to the plan of audit; reviews, in consultation
with the independent auditors, their report of audit, or proposed report of
audit and the accompanying management letter, if any; and consults with the
independent auditors with regard to the adequacy of the internal accounting
controls. The Audit Committee held two meetings in fiscal 1996.
The Compensation Committee (comprised of J. Frank Whitley, Jr. (Chairman),
Julius R. Krevans and James F. Zid) establishes the compensation of all
employees and consultants of the Company, administers and interprets the
Company's Amended and Restated Stock Option and Restricted Stock Purchase Plan
and the 1996 Stock Incentive Plan and takes any action that is permitted to be
taken by a committee of the Board of Directors under the terms of such plan,
including the granting of options. The Compensation Committee held two meetings
in fiscal 1996.
AMENDMENT TO THE 1996 STOCK INCENTIVE PLAN
Proposal
The Original Plan was adopted by the Board of Directors on January 18,
1996 and approved by the Company's stockholders at the 1996 Annual Meeting of
Stockholders. The 1997 amendment to the 1996 Stock Incentive Plan (the "Amended
Plan") was adopted by the Board of Directors on March 13, 1997 and amends and
restates the Original Plan. The Board has proposed that the Company's
stockholders approve the Amended Plan. The material changes in the Original Plan
instituted by the Amended Plan are a provision allowing grants of limited
amounts of unrestricted stock to employees and consultants of the Company;
changing the number of shares subject to non-employee director annual stock
option awards ("Directors' Options") from 3,600 shares to 5,000 shares and
adding an attendance requirement to Board of Directors meetings as a
precondition to these grants; giving the Board of Directors power to increase or
decrease the number of shares covered by each Directors' Option; and removing
the limitation on the frequency with which the provisions concerning Director's
Options may be amended.
The following is a description of the material features of the Amended
Plan. Material differences between the Amended Plan and the Original Plan are
specifically noted.
Purpose, Duration, Amendment and Termination
The Amended Plan is designed to attract and retain capable directors,
employees and consultants and to provide them with long term incentives to
continue their services to the Company, to maximize the value of the Company to
its stockholders and to acquire a continuing ownership interest in the Company.
No award of unrestricted stock (an "Unrestricted Stock Award"), no award of a
stock option (an "Option") or award of a right to purchase restricted stock (a
"Restricted Stock Award") (collectively all Unrestricted Stock Awards, all
Options, and all Restricted Stock Awards are referred to as an "Award") may be
granted under the Amended Plan more than 10 years after January 18, 1996. The
Board of Directors may at any time terminate the Amended Plan, or make such
amendment to the Amended Plan as it may deem advisable. However, no amendment
will be effective without the approval of the stockholders of the
4
Company if it would materially increase the benefits accruing to participants
under the Amended Plan, materially increase the number of shares of Common Stock
which may be issued under the Amended Plan or materially modify the requirements
as to eligibility for participation in the Amended Plan. No amendment or
termination of the Amended Plan may alter or impair the rights of a person to
whom an Award was granted (a "Grantee") under any Award made before the adoption
of such amendment or termination by the Board of Directors, without the written
consent of such Grantee.
The provisions of the Original Plan which provided that the formulae for
determining the exercise price of Directors' Options, the number of shares of
Common Stock as to which they are exercisable, the times when they are granted
and the persons who are participants could not be amended more than once every
six months, other than to comport with changes in the Internal Revenue Code of
1986 (the "Code") and the Employee Retirement Income Security Act of 1974, or
rules thereunder, are eliminated in the Amended Plan. These provisions in the
Original Plan were intended to comply with Securities and Exchange Commission
regulations which were rescinded in 1996.
Administration
The Amended Plan will be administered by a committee of the Board of
Directors consisting of two or more directors, each of whom is a "non-employee
director" as defined in Rule 16b - 3(b)(3)(i) under the Securities Exchange Act
of 1934 and is an "outside director" as described in Section 162(m) of the Code
and the regulations thereunder (the "Committee"). Unless the Board of Directors
designates another of its committees to administer the Amended Plan, the Amended
Plan will be administered by a committee consisting of those members of the
Compensation Committee who are qualified, but, if the Compensation Committee is
abolished or its membership does not contain two persons who are qualified, the
Board of Directors will either reconstitute the Compensation Committee or create
another committee that complies with these requirements to administer the
Amended Plan. See "Election of Directors -- Committees." Subject to the express
provisions of the Amended Plan and in addition to the powers granted by other
sections of the Amended Plan, the Committee has the authority, in its
discretion, to determine the participants, grant Awards and determine their
timing, pricing and amount; define, prescribe, amend and rescind rules,
regulations, procedures, terms and conditions relating to the Amended Plan; make
all other determinations necessary or advisable for administering the Amended
Plan, including, but not limited to, interpreting the Amended Plan, correcting
defects, reconciling inconsistencies and resolving ambiguities; and review and
resolve all claims.
The Original Plan required that the committee consist of two or more
directors, each of whom was a "disinterested person" as described in Rule 16b-3.
The term "disinterested person" was eliminated from Rule 16b-3 in 1996 and
replaced with the term "non-employee director" referenced above. The terminology
was changed in the Amended Plan to conform to the new terminology used in the
Rule.
Common Stock
The aggregate number of shares of Common Stock in respect of which Awards
may be granted under the Amended Plan may not exceed 1,500,000. The Amended Plan
does not change this number. As of April 11, 1997, Awards had been granted with
respect to approximately 490,000 of these shares leaving approximately 1,010,000
shares in respect of which Awards may be granted under the Amended Plan. The
number of shares in respect of which Awards may be granted and the terms of any
Award will be adjusted proportionately if the shares of Common Stock are split,
combined or altered by a stock dividend or a merger or other corporate event. If
any Award granted under the Amended Plan is canceled, terminates or expires for
any reason without having been exercised in full, the shares of Common Stock
related to the unexercised portion of the Award may be used again. If any shares
of Common Stock purchased under the Amended Plan are forfeited for any reason,
the shares shall be available again for purposes of the Amended Plan. Except as
otherwise determined by the Board of Directors, the shares of Common Stock
issued under the Amended Plan will be authorized but unissued shares. However,
shares which are to be delivered under the Amended Plan may be obtained by the
Company from its treasury, by purchases on the open market or from private
sources. The proceeds of the exercise of any Award will be general corporate
funds of the Company.
5
Employees' and Consultants' Stock Options
Only employees and consultants who are not members of the Committee
("Eligible Employees") are eligible to receive Options under this provision. On
December 31, 1996, the Company had 89 full-time employees and 16 consultants.
The Committee will determine which Eligible Employees will be granted Options,
the number of shares of Common Stock for which the Options may be exercised, the
times when they will receive them and the terms and conditions of individual
Option grants (which need not be identical); provided, however, that the maximum
number of shares of Common Stock with respect to which Options may be granted
during any fiscal year to any Eligible Employee will be 500,000. The Committee
will determine the exercise price of each Option at the time that it is granted,
but in no event will the exercise price of an Option be less than the fair
market value of a share of Common Stock on the date of grant, which is the
average closing price of the Common Stock on all securities exchanges on which
it is listed. On April 11, 1997, the closing price of a share of Common Stock on
the Nasdaq National Market was $14.25. The Committee has the authority, in its
discretion, to delegate to the officers of the Company the authority to select
Grantees (who are not officers) and grant Awards of Options to Eligible
Employees under this provision to such Grantees having terms and in aggregate
amounts determined by the Committee.
The Committee will determine the term during which an Option is
exercisable at the time that it is granted, but no Option will be exercisable
after 10 years from the date of grant. Generally, each Option will vest and
first become exercisable as to one-third of the shares of Common Stock
originally subject to the Option on each anniversary of the date of grant
provided the Grantee thereof has been an employee or a consultant, as the case
may be, continuously during the time beginning on the date of grant and ending
on the date when such portion of the Option first becomes exercisable.
Generally, each Option will lapse and cease to be exercisable upon the earliest
of the expiration of 10 years from the date of grant, nine months after the
Grantee ceases to be an employee or consultant because of his death or
disability (six months for incentive stock options, see below), 90 days after
the Grantee's employment with or services to the Company are terminated by the
Company without cause, or immediately upon termination of the Grantee's
employment with or services to the Company for cause or by the Grantee's
resignation. The Committee may, in its sole discretion, accelerate the time at
which any Options become exercisable or waive any provisions of the Amended Plan
relating to the manner of payment or procedures for the exercise of any Option.
Any such acceleration may be made effective with respect to one or more or all
Grantees, with respect to some or all of the shares subject to an Option of any
Grantee or for a period of time ending at or before the expiration date of any
Option.
The Committee will determine whether an Option is an incentive stock
option or a non-qualified option (as such terms are defined in the Code, see
"Taxation") at the time that it is granted, and if no express determination is
made by the Committee, all Options granted to employees who are not 10 percent
stockholders of the Company are incentive stock options and all Options granted
to consultants or 10 percent stockholders are non-qualified options. The
aggregate fair market value of the shares of Common Stock, determined as of the
time the Option is granted, which first become exercisable under all incentive
stock options granted to the Eligible Employee may not exceed $100,000 during
any calendar year and if that limit would be exceeded by the terms of any
incentive stock option, the exerciseability of a portion of such Option will be
deferred, but the Committee may, in its sole discretion, waive such deferral. No
10 percent stockholder will be granted an incentive stock option, unless the
exercise price thereof is at least 110 percent of the fair market value and the
Option is not exercisable after five years.
Directors' Stock Options
Only a director who is not an employee of the Company and who has attended
at least 75 percent of the total number of meetings of the Board of Directors
(and committees thereof of which he is a member) during the most recently ended
fiscal year of the Company ("Eligible Director") is eligible to receive
Directors' Options under this provision. On the date the Amended Plan was
approved, each Eligible Director received a Directors' Option on 5,000 shares of
Common Stock. On the date of the first meeting of the Board of Directors in each
fiscal year of the Company ("First Meeting Date"), beginning in 1998, a
Directors' Option on 5,000 shares of Common Stock will be granted automatically
to each Eligible Director. The Board of Directors may, by a resolution adopted
on or before a First Meeting Date uniformly applying to all Eligible Directors,
increase or decrease the number of shares of Common Stock
6
subject to the Directors' Options granted on the First Meeting Date on which
such resolution is adopted and thereafter. The exercise price of such Directors'
Options will be the fair market value of a share of Common Stock on the date of
grant (see "Employees' and Consultants' Stock Options"). Under the Original
Plan, a director who was not an employee of the Company did not have to meet an
attendance requirement in order to be an Eligible Director, an Eligible Director
received an option for 3,600 shares of Common Stock each year and the Board of
Directors had no authority to increase or decrease the number of shares subject
to such options.
Each Directors' Option shall vest and first become exercisable as to
one-third of the shares of Common Stock originally subject to the Directors'
Option on each First Meeting Date which occurs more than six months after the
date of grant if the Grantee is a director at the time of the adjournment of the
meeting of the Board of Directors held on such First Meeting Date. Each
Directors' Option shall lapse and cease to be exercisable upon the earlier of
the expiration of 10 years from the date of grant, nine months after the Grantee
ceases to be a director because of his death or disability, immediately upon
resignation by the director as a director, or 30 days after the director ceases
to be a director for any reason other than his death, disability or resignation.
Directors' Options are non-qualified options (as such term is defined in
the Code), see "Taxation."
Restricted Stock Awards
Only officers of the Company who are not members of the Committee
("Eligible Officers") are eligible to purchase Restricted Stock under the
Amended Plan. The Company had eleven Eligible Officers on April 4, 1997. The
Committee determines which Eligible Officers may purchase Restricted Stock, the
number of shares of Restricted Stock each Grantee may purchase, the times when
they may purchase Restricted Stock and the performance goals (see "Performance
Goals"), and the vesting and forfeiture provisions in the Restricted Stock
Purchase Agreement.
Each Grantee must enter into a Restricted Stock Purchase Agreement under
which the Grantee purchases a number of shares of Restricted Stock for a
purchase price, which may be less than the market value of a share of Common
Stock but not less than the par value thereof ($.001 per share). A Holder may
not transfer or sell any shares of the Restricted Stock unless and until they
vest. Generally, the Holder will forfeit any portion of the Restricted Stock
that has not vested (and the Company will refund the purchase price paid) on the
earliest of nine months after the termination of employment by reason of death
or disability, 90 days after the termination of employment without cause,
immediately upon termination of employment for cause or if the Grantee resigns,
or on the expiration of the term of the Restricted Stock Purchase Agreement,
which may not be more than 10 years after the date of the Restricted Stock
Purchase Agreement. A portion of the Restricted Stock that has not previously
been forfeited shall vest and become transferable if and when the vesting
conditions established in the Restricted Stock Purchase Agreement are met. Such
conditions shall include a preestablished performance goal that satisfies the
requirements of Section 162(m) of the Code and the regulations thereunder. See
"Performance Goals." Except for these restrictions on transfer and possibilities
of forfeiture, the Holder has all other rights with respect to the Restricted
Stock, including the right to vote such shares or receive cash dividends.
Performance Goals
The Committee will establish performance goals as preconditions to the
vesting of Restricted Stock Awards. Performance goals may be based on one or
more business criteria that apply to the individual Grantee, a business unit or
the Company as a whole. Such business criteria may include one or a combination
of stock price, total stockholder return, earnings per share or return on
equity. Other business criteria may be statistics relating to economic
performance including revenue, operating expenses, or earnings before interest,
taxes, depreciation and amortization; or the business criteria may be the
achievement of a non-statistical goal such as the introduction, testing or
licensing of a new product, licensing or acquiring assets or rights, entering
into a joint venture or strategic alliance, or a change in control of the
Company or another merger or acquisition.
7
Unrestricted Stock Awards
An Unrestricted Stock Award is a grant of shares of Common Stock without
any precondition, restriction on transfer or risk of forfeiture. Only Eligible
Employees may receive Unrestricted Stock Awards under this provision. Under the
Amended Plan, the Committee may grant an Unrestricted Stock Award to an Eligible
Employee in consideration for services rendered by the Eligible Employee if such
services are deemed by the Committee to have a value to the Company in excess of
the par value of the shares so awarded. The Committee shall determine which
Eligible Employees will receive Unrestricted Stock, the number of shares of
Unrestricted Stock each grantee will receive, the times when each Grantee shall
receive Unrestricted Stock, and the terms and conditions of individual
Unrestricted Stock Awards (which need not be identical). The Committee may also
grant an Unrestricted Stock Award to a person to whom the Company is offering
employment, but any such grant shall lapse if the person does not subsequently
become an employee pursuant to such offer. The maximum number of shares of
Unrestricted Stock which may be granted during any fiscal year of the Company to
any one person shall be 25,000 shares. Promptly after the grant of an
Unrestricted Stock Award, the Company shall issue to the Grantee a certificate
representing the shares received thereunder. The Original Plan did not provide
for Unrestricted Stock Awards.
Provisions Applicable to all Types of Awards
The Committee may, in its sole discretion, and upon such terms and
conditions as it shall determine at or after the date of grant, permit the
exercise price of an Award to be paid in cash, by the tender to the Company of
shares of Common Stock owned by the Grantee or by a combination thereof. If the
Committee does not make such determination, the exercise price must be paid in
cash, by certified or cashier's check, wire transfer or reduction of a debt of
the Company to the Grantee. Shares of Common Stock may not be delivered to the
Company as payment for the exercise of an Award, if such shares have been owned
by the Grantee (together with his decedent or testator) for less than six months
or if such shares were acquired upon the exercise of an incentive stock option
and their disposition would be taxable.
The Committee may permit the voluntary surrender of all or a portion of
any Award to be conditioned upon the granting to the participant of a new Award
for the same or a different number of shares as the Award surrendered, or may
require such voluntary surrender as a condition precedent to a grant of a new
Award to such participant. Subject to the other provisions of the Amended Plan,
such new Award shall be exercisable at the price, during the period and on such
other terms and conditions as are specified by the Committee at the time the new
Award is granted. The Committee may grant Awards having terms and conditions
which vary from those specified in the Amended Plan if such Awards are granted
in substitution for, or in connection with the assumption of, existing awards
granted by another business entity and assumed or otherwise agreed to be
provided for by the Company pursuant to a transaction involving a merger or
consolidation of or acquisition of substantially all of the assets or stock of
another business entity that is not a subsidiary of the Company prior to such
acquisition. The Committee, subject to the written consent of the Grantee where
the action impairs or adversely alters the rights of the Grantee, has the right
at any time after the date of grant of any Award to modify its terms.
Notwithstanding the terms of any Award, all Awards that have not
previously been exercised nor lapsed and ceased to be exercisable, will vest and
become exercisable upon the occurrence of any change in control of the Company
if the Grantee is then an employee, consultant or director, as the case may be.
A change in control includes (a) the acquisition, directly or indirectly, by a
person (other than the Company or an employee benefit plan established by the
Board of Directors) of beneficial ownership of 15 percent or more of the
Company's securities with voting power in the next meeting to elect the
directors; (b) the election of a majority of the directors elected at any
meeting of the holders of the Company's voting securities who are persons who
were not nominated by the Company's then current Board of Directors or
authorized committee thereof; or (c) the approval by the stockholders of the
Company of a merger or consolidation with another person, other than a merger or
consolidation in which the holders of the Company's voting securities continue
to hold voting securities in the surviving corporation (in the same relative
proportions as existed
8
before the event) comprising 80% percent or more of the voting power of the
surviving corporation; or (d) the approval by the stockholders of the Company of
a transfer of substantially all of the assets of the Company to another person
other than a transfer to a transferee, 80% percent or more of the voting power
of which is owned by the Company or by the holders of the Company's voting
securities in the same relative proportions to each other as existed before the
event.
Disability
If a Grantee who is an employee with or consultant to the Company is
absent from work with the Company because of a physical or mental disability,
such Grantee will not be considered to have ended his employment with the
Company for purposes of the Amended Plan, while he has that disability, unless
he resigns or the Committee decides otherwise. If a Grantee who is a director is
absent from meetings of the Board of Directors because of a physical or mental
disability, such Grantee will not be considered to have ended his service with
the Board of Directors for purposes of the Amended Plan while the Grantee has
that disability, unless the Grantee resigns or is not re-elected by the
stockholders.
Transfer Restrictions
No Award under the Amended Plan may be sold, pledged or otherwise
transferred other than by will or the laws of descent and distribution; and no
Award may be exercised during the life of the participant to whom it was granted
except by such participant.
Taxation
GRANTEES SHOULD CONSULT WITH THEIR INDIVIDUAL TAX ADVISERS BEFORE
EXERCISING ANY OPTION OR DISPOSING OF ANY SHARES
ACQUIRED ON THE EXERCISE OF AN AWARD
Grantees are not taxed on the grant or exercise of an incentive stock
option. The difference between the exercise price of an incentive stock option
and the fair market value of a share of Common Stock received upon the exercise
of an incentive stock option may be subject to the federal alternative minimum
tax. If a Grantee exercises an incentive stock option and disposes of any of the
shares of Common Stock received by such Grantee as a result of such exercise
within two years from the date of grant or within one year after the transfer of
such shares to such Grantee, the Company will receive a tax deduction and the
Grantee will be taxed, as ordinary income, on the lesser of the gain on sale or
the difference between the exercise price and the fair market value of a share
at the time of exercise; and the Grantee must pay or provide for the withholding
taxes on such ordinary income. The Grantee will also have a capital gain to the
extent that the sale price exceeds the fair market value on the date of
exercise. If the shares are not sold by the Grantee before the end of those
periods, the Grantee will have a capital gain or capital loss upon sale of the
shares to the extent that the sale price differs from the exercise price. No tax
effect will result to the Company by reason of the grant or exercise of
incentive stock options, or upon the disposition of shares after expiration of
two years from the date of grant or one year from the date of exercise.
Non-qualified options are not taxed upon grant. The Grantee is taxed, as
ordinary income, on the exercise of such an Option. The exercise of a
non-qualified option requires the Grantee to realize ordinary income to the
extent that the fair market value on the date of exercise exceeds the exercise
price. The Grantee's basis for determining capital gain or capital loss upon
sale of the shares is the higher of their fair market value on the date of
exercise and the exercise price. The Company is entitled to a deduction equal to
the ordinary income realized by the Grantee upon the exercise of non-qualified
options.
Shares of Restricted Stock are not taxed upon purchase. The Holder will be
taxed, as having received ordinary compensation income, on the vesting of shares
of Restricted Stock. Such vesting requires the Holder to realize ordinary income
to the extent that the fair market value of the vested shares exceeds the amount
paid for such shares. The Holder's basis for determining capital gain or capital
loss upon the sale or exchange of vested shares of Restricted Stock
9
is the higher of the fair market value of shares on the date of vesting or the
purchase price thereof. The Company will be entitled to a deduction equal to the
ordinary income realized by the Holder upon the vesting of shares of Restricted
Stock.
Upon the grant of shares of Unrestricted Stock, the Grantee will be taxed
as having received ordinary compensation income to the extent of the fair market
value of the shares of Unrestricted Stock. The Grantee's basis for determining
capital gain or capital loss upon the sale or exchange of shares of Unrestricted
Stock is the fair market value of shares on the date of grant. The Company will
be entitled to a deduction equal to the ordinary income realized by the Grantee
upon the grant of shares of Unrestricted Stock.
The Amended Plan is intended to be a performance based compensation plan
that will comply with the requirements of Section 162(m) of the Code and the
regulations thereunder. If the Amended Plan complies with such law and
regulations and the Amended Plan continues to be in compliance, amounts
deductible by the Company under the Amended Plan will not be limited by the cap
on the deductibility of compensation paid to certain executive officers of
public corporations which exceeds $1,000,000. Because Section 162(m) is a new
provision of the Code, and compliance may depend upon factors, such as
relationships between the Company and the members of the Compensation Committee
and periodic re-authorization of the Amended Plan by the stockholders, which are
presently unforeseeable, no assurance can be given that the Company will remain
in compliance with these rules or that non-compliance will not cause amounts
payable under the Amended Plan to become non-deductible.
10
New Plan Benefits
The following table sets forth the number of shares of Common Stock that
will be received under the Amended Plan by (i) each of the Named Executives (see
"Compensation of Management--Summary Compensation Table"), (ii) the current
executive officers of the Company as a group, (iii) the current directors of the
Company who are not executive officers, as a group, and (iv) all employees of
the Company, including all current officers of the Company who are not executive
officers of the Company, as a group, to the extent such Awards are determinable.
AMENDED 1996 STOCK INCENTIVE PLAN
Employees' and Directors' Stock Unrestricted
Consultants' Number Options Number Restricted Stock Number
Name and Position of Shares of Shares Number of Shares of Shares
- ----------------- --------- --------- ---------------- ---------
John L. Ridihalgh, (a) Not applicable (a) (a)
Chairman and Chief
Executive Officer
David C. Bupp, President and (a) Not applicable (a) (a)
Chief Operating Officer
Louis F. Cosentino, Vice (a) Not applicable (a) (a)
President, Marketing &
Corporate Development
William A. Eisenhardt, Ph.D., (a) Not applicable (a) (a)
Vice President, Research and
Development
J. Kenneth Poggenburg, Jr., (a) Not applicable (a) (a)
Ph.D., Vice President,
Operations
Executive Group (a) Not applicable (a) (a)
Non-Executive Director Not applicable 35,000(b) Not applicable Not applicable
Group
Non-Executive Officer (a) Not applicable Not applicable (a)
Employee Group
(a) Grants of Options, Restricted Stock and Unrestricted Stock to employees
and consultants are discretionary with the Committee and are, therefore,
not currently determinable. See "Compensation of Management" for certain
information as to grants of Options made previous fiscal years.
(b) Mr. Hazard, Dr. Krevans, Dr. Moore, Mr. Mueller, Mr. Vromen, Mr. Whitley
and Mr. Zid each received a grant of an Option to purchase 5,000 shares of
Common Stock with an exercise price of $13.375 per share subject to the
approval of the Plan.
Vote Required
The affirmative vote of the holders of a majority of the shares of Common
Stock present, or represented, and entitled to vote at the Annual Meeting will
be required to approve the Amended Plan. See "General Information--Tabulation,"
above.
Board Recommendation
The Board unanimously recommends a vote FOR the approval of the Amendment
to the 1996 Stock Incentive Plan.
11
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS,
DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS
The following table sets forth, as of March 31, 1997, certain information
with respect to the beneficial ownership of shares of Common Stock by (i) each
person known to the Company to be the beneficial owner of more than 5 percent of
the outstanding shares of Common Stock, (ii) each Director or nominee for
Director of the Company, (iii) each of the Named Executives (see "Compensation
of Management--Summary Compensation Table"), and (iv) the Company's Directors
and executive officers as a group.
Number of
Shares
Beneficially Percent
Beneficial Owner Owned(a) of Class
- -------------------------------------- -------------- -----------
Melvin D. Booth -0- (r)
David C. Bupp 330,552 (b) 1.4%
John S. Christie 187 (r)
Louis F. Cosentino 20,034 (c) (r)
William A. Eisenhardt 57,856 (d) (r)
C. Michael Hazard 552,867 (e) 2.4%
Julius R. Krevans 7,367 (f) (r)
Michael P. Moore 11,367 (g) (r)
Jerry K. Mueller, Jr 77,356 (h) (r)
J. Kenneth Poggenburg, Jr 53,259 (i) (r)
John L. Ridihalgh 502,517 (j) 2.2%
Zwi Vromen 80,423 (k) (r)
J. Frank Whitley, Jr 2,200 (l) (r)
James F. Zid 12,167 (m) (r)
All directors and officers as a group 1,863,847 (n) 7.9%
(15 persons)
Kenneth R. McGuire (o) 1,567,100 (o) 6.9%
The Knowlton/Lee Group (p) 1,401,460 (p) 6.2%
The TCW Group, Inc. (q) 1,506,600 (q) 6.6%
(a) Unless otherwise indicated, the beneficial owner has sole voting and
dispositive power over these shares subject to the spousal rights, if any,
of the spouses of those beneficial owners who have spouses.
(b) This amount includes 291,667 shares issuable upon exercise of options
which are exercisable within 60 days, 1,686 shares in Mr. Bupp's account
in the Neoprobe Corporation 401(k) Plan (the "401(k) Plan") and 2,200
shares held by Mr. Bupp's wife and daughters, as to which latter shares he
disclaims beneficial ownership, but it does not include 138,933 shares
issuable upon exercise of options which are not exercisable within 60
days. Mr. Bupp is one of three trustees of the 401(k) Plan and may, as
such, share dispositive power over Common Stock held in such plan. The
401(k) Plan holds an aggregate total of 14,116 shares of Common Stock. Mr.
Bupp disclaims any beneficial ownership of shares held by the 401(k) Plan
that are not allocated to his personal account.
(c) This amount consists of 20,000 shares issuable upon exercise of options
which are exercisable within 60 days and 34 shares in Mr. Cosentino's
account in the 401(k) Plan, but does not include 20,000 shares issuable
upon exercise of options which are not exercisable within 60 days.
(d) This amount includes 57,333 shares issuable upon exercise of options which
are exercisable within 60 days and 523 shares in Dr. Eisenhardt's account
in the 401(k) Plan, but it does not include 34,667 shares issuable upon
exercise of options which are not exercisable within 60 days.
(e) This amount includes 2,867 shares issuable upon exercise of options which
are exercisable within 60 days, 225,000 shares held by Westfield
Performance Fund, Limited Partnership, over which Mr. Hazard has voting
and dispositive power, and 325,000 shares held in a client's advisory
account managed by Mr. Hazard's employer, over which Mr. Hazard has voting
and dispositive power, but does not include 8,233 shares issuable upon
exercise of options which are not exercisable within 60 days. Mr. Hazard
disclaims beneficial ownership of the 325,000 shares held in the advisory
account and the 225,000 shares held by Westfield Performance Fund, Limited
Partnership, in excess of his ownership interest in the limited
partnership.
12
(f) This amount includes 5,367 shares issuable upon exercise of options which
are exercisable within 60 days, but does not include 8,233 shares issuable
upon exercise of options which are not exercisable within 60 days.
(g) This amount includes 5,367 shares exercisable upon exercise of options
which are exercisable within 60 days, but does not include 8,233 shares
issuable upon exercise of options which are not exercisable within 60
days.
(h) This amount includes 75,781 shares held by an Ohio limited liability
company, a member of which is a revocable trust in which Mr. Mueller has a
beneficial interest and of which he is a trustee. Mr. Mueller has shared
voting and dispositive power over these shares. This amount also includes
375 shares held by a company in which Mr. Mueller holds a 25 percent
interest and 1,200 shares issuable upon exercise of options which are
exercisable within 60 days, but does not include 7,400 shares issuable
upon exercise of options which are not exercisable within 60 days.
(i) This amount includes 43,333 shares issuable upon exercise of options which
are exercisable within 60 days and 426 shares in Dr. Poggenburg's account
in the 401(k) Plan, but it does not include 26,667 shares issuable upon
exercise of options which are not exercisable within 60 days.
(j) This amount includes 361,667 shares issuable upon exercise of options
which are exercisable within 60 days, 1,660 shares held in Dr. Ridihalgh's
account in the 401(k) Plan and 14,750 shares held by Dr. Ridihalgh's wife,
as to which latter shares he disclaims beneficial own ership, but it does
not include 140,333 shares issuable upon exercise of options which are not
exercisable within 60 days.
(k) This amount includes 5,367 shares issuable upon exercise of options which
are exercisable within 60 days, but does not include 8,233 shares issuable
upon exercise of options which are not exercisable within 60 days.
(l) This amount includes 1,200 shares issuable upon exercise of options which
are exercisable within 60 days, but does not include 7,400 shares issuable
upon exercise of options which are not exercisable within 60 days, or any
shares held by Dow. See "Certain Transactions." Mr. Whitley is an employee
of Dow and he disclaims beneficial ownership of any shares held by Dow.
(m) This amount includes 7,867 shares issuable upon exercise of options which
are exercisable within 60 days and 300 shares in Mr. Zid's IRA, but does
not include 8,233 shares issuable upon exercise of options which are not
exercisable within 60 days.
(n) This amount includes 946,465 shares issuable upon exercise of options and
warrants which are exercisable within 60 days (which includes 263,898
shares issuable upon exercise by non-director executive officers) and
6,592 shares held in the Company's 401(k) Plan. Certain executive officers
of the Company are the trustees of the 401(k) Plan and may, as such, share
dispositive power over Common Stock held in such plan. Each trustee
disclaims any beneficial ownership of shares held by the 401(k) Plan that
are not allocated to his personal account. The 401(k) Plan holds an
aggregate total of 14,116 shares of Common Stock. This amount also
includes the 325,000 shares held in a client's advisory account managed by
Mr. Hazard's employer and the 225,000 shares held by Westfield Performance
Fund, Limited Partnership, discussed in note (e) above. This amount does
not include the shares owned by Dow excluded in note (l) above or 591,235
shares issuable upon the exercise of options or warrants which are not
exercisable within 60 days (including 256,002 shares issuable upon
exercise by non-director executive officers).
(o) Mr. McGuire's address is 3000 North Clybourn, Hangar 34, Burbank,
California 91505. This amount includes 17,600 shares held by Mr. McGuire
as custodian under the Uniform Transfer to Minors Act of California for
his four children.
(p) This beneficial owner is a "group" within the meaning of Rule 13d-5 under
the Securities Exchange Act of 1934. The notice address of the group is
c/o Mr. Stanley Knowlton, Knowlton Brothers, Inc., 530 Fifth Avenue, New
York, New York 10036. The following are the members of the group: The
Family Partnership, L.P.; The Frontier Partnership, L.P.; The Darwin
Partnership, L.P.; Flagship Partners, Ltd.; Darwin Partners, Ltd.; Barker,
Lee & Co., Limited Partnership; J.M.R. Barker Foundation; Quaker Hill
Associates, L.P.; Upland Associates, L.P.; Namakagon Associates, L.P.;
Family Partners & Co.; Frontier Partners & Co.; Knowlton Brothers, Inc.;
Knowlton Associates, Inc.; Hugh Knowlton Trust For The Benefit of Erica
Knowlton; Winthrop Knowlton; Stanley Knowlton; Christopher Knowlton;
Robert R. Barker; and Dwight E. Lee. This amount includes 144,600 shares
issuable upon exercise of Class E Redeemable Common Stock Purchase
Warrants ("Class E Warrants"). The Class E Warrants expired on November
12, 1996. The Company does not know whether The Knowlton/Lee Group
exercised its Class E Warrants.
(q) The TCW Group, Inc. ("TCW") is a parent holding company. TCW's address is
865 South Figueroa Street, Los Angeles, California 90017. TCW does not
directly own any of these shares. TCW has indirect ownership of these
shares because of the following TCW subsidiaries' interests in the shares:
Trust Company of the West, a California corporation and a bank as defined
in Section 3(a)(6) of the Securities Exchange Act of 1934; TCW Asset
Management Company, a California corporation and an Investment Adviser
registered under Section 203 of the Investment Advisers Act of 1940; and
TCW Funds Management, Inc., also a California corporation and an
Investment Adviser registered under Section 203 of the Investment Advisers
Act of 1940. Robert Day is an individual who may be deemed to control The
TCW Group, Inc. and its subsidiaries listed above.
(r) Less than 1 percent.
13
COMPENSATION OF MANAGEMENT
Summary Compensation Table
The following table sets forth certain information concerning the annual
and long-term compensation of the chief executive officer of the Company and the
Company's other four most highly compensated executive officers during the last
fiscal year (the "Named Executives") for the Company's last three fiscal years.
Long Term
Compensation
Awards
Securities
Underlying
Annual Compensation Options All Other
Name and Principal Year Salary Bonus (shares) Compensation(*)
------------------ ---- ------ ----- ------ ------------
John L. Ridihalgh, Ph.D., 1996 $ 250,000 $ 95,000 20,000 $ 1,500
Chairman and Chief Executive Officer 1995 178,338 50,000 150,000 1,694
1994 149,154 20,000 --- 1,470
David C. Bupp, 1996 $ 236,250 $ 90,000 20,000 $ 1,500
President and Chief Operating Officer 1995 156,346 60,000 150,000 1,681
1994 134,135 25,000 --- 1,313
Louis F. Cosentino, 1996 $ 113,705 $ 56,344 40,000 $ 613
Vice President, Marketing and
Corporate Development (a)
William A. Eisenhardt, Ph.D., 1996 $ 167,286 $ 59,051 10,000 $ 1,500
Vice President, Research and 1995 157,635 31,030 42,000 1,547
Development 1994 114,327 15,000 40,000 ---
J. Kenneth Poggenburg, Jr., Ph.D., 1996 $ 126,730 $ 43,750 10,000 $ 1,448
Vice President, Operations 1995 120,683 18,056 30,000 1,207
1994 96,779 10,000 40,000 ---
(*) Amounts of matching contribution under the Company's 401(k) Plan. Eligible
employees may make voluntary contributions and the Company may, but is not
obligated to, make matching contributions based on 20 percent of the
employee's contribution, up to five percent of the employee's salary.
Contributions by employees are invested by an independent plan
administrator in mutual funds and contributions, if any, by the Company
are made in the form of shares of Common Stock. The 401(k) Plan is
intended to qualify under section 401 of the Code, which provides that
employee and Company contributions and income earned on contributions are
not taxable to the employee until withdrawn from the plan, and that
Company contributions will be deductible by the Company when made.
(a) Mr. Cosentino began his employment with the Company in January, 1996.
14
Option Grants in Last Fiscal Year
The following table presents certain information concerning stock options
granted to the Named Executives during the last fiscal year (1996).
Individual Grants Grant Date Value
----------------------------------------------------------------------- ----------------
Percent of Total
Number of Securities Options Granted
Underlying Options to Employees in Exercise Price Expiration Grant Date
Name Granted (shares) Fiscal Year Per Share Date(a) Present Value $
---- --------------- ----------- --------- ---- ---------------
John L. Ridihalgh 20,000(b) 4.6% $15.75 1/18/06 $295,000(f)
David C. Bupp 20,000(b) 4.6% $15.75 1/18/06 $295,000(f)
Louis F. Cosentino 13,333(c) 3.1% $15.75 1/18/06 $187,200(g)
13,333(d) 3.1% $15.75 1/18/06 $170,000(h)
13,333(e) 3.1% $15.75 1/18/06 $187,200(g)
William A. Eisenhardt 10,000(b) 2.3% $15.75 1/18/06 $147,500(f)
J. Kenneth Poggenburg, Jr. 10,000(b) 2.3% $15.75 1/18/06 $147,500(f)
(a) The options terminate on the earlier of the Expiration Date, nine months
after death or disability, 90 days after termination of employment without
cause or immediately upon termination of employment for cause or by
resignation.
(b) Vests as to one-third of these shares on each of the first three
anniversaries of the date of grant.
(c) Vests monthly in equal portions over the first 24 months following the
date of grant.
(d) Vested upon the completion and implementation of the marketing plan by the
Company.
(e) Vests upon the submittal of a Product License Application or European
Dossier.
(f) The per share weighted average fair value of these stock options during
1996 was $14.75 on the date of grant using the Black Scholes option
pricing model with the following assumptions: an expected life of 4 years,
an average risk-free interest rate of 5.24%, volatility of 181% and no
expected dividend rate.
(g) The per share weighted average fair value of these stock options during
1996 was $14.04 on the date of grant using the Black Scholes option
pricing model with the following assumptions: an expected life of 3 years,
an average risk-free interest rate of 5.24%, volatility of 181% and no
expected dividend rate.
(h) The per share weighted average fair value of these stock options during
1996 was $12.75 on the date of grant using the Black Scholes option
pricing model with the following assumptions: an expected life of 2 years,
an average risk-free interest rate of 5.24%, volatility of 181% and no
expected dividend rate.
15
Fiscal Year End Option Numbers and Values
The following table sets forth certain information concerning each
exercise of stock options and the number and value of unexercised options held
by the Named Executives at the end of the last fiscal year (December 31, 1996).
Number of Securities
Underlying Value of Unexercised
Shares Unexercised Option In-the-Money Options
Acquired Value at Fiscal Year-End: at Fiscal Year-End:
Name on Exercise Realized Exercisable/Unexercisable Exercisable/Unexercisable
---- ----------- -------- ------------------------- -------------------------
John L. Ridihalgh --- --- 361,667 / 113,333 $3,878,125 / $1,287,500
David C. Bupp --- --- 291,667 / 113,333 $3,019,875 / $1,287,500
Louis F. Cosentino --- --- 6,667 / 33,333 --- / ---
William A. Eisenhardt --- --- 56,750 / 35,250 $527,740 / $368,010
J. Kenneth Poggenburg, Jr. 8,000 $107,250 43,917 / 27,083 $382,510 / $262,865
Long-Term Incentive Plans - Awards in Last Fiscal Year
The following table presents certain information concerning long-term incentives
awarded to the Named Executives during the last fiscal year (1996).
Number of Shares Performance or Other Period
Name Units or Other Rights Until Maturation or Payout
---- --------------------- --------------------------
John L. Ridihalgh (a) 50,000 6/5/06
David C. Bupp (a) 30,000 6/5/06
Louis F. Cosentino --- ---
William A. Eisenhardt, Ph.D. --- ---
J. Kenneth Poggenburg, Jr., Ph.D. --- ---
(a) The terms of the awards which took the form of restricted stock purchase
agreements are described below under "Employment Agreements."
16
Common Share Performance
The following graph compares the cumulative total return on the Company's
Common Shares to the cumulative total returns of the Nasdaq Stock Market Index
(U.S.) and the Nasdaq Pharmaceutical Index (an index of pharmaceutical and
bio-technology companies the securities of which are traded on the Nasdaq
National Market) since the Company's initial public offering on November 10,
1992. The graph is based upon an assumed investment of $100.00 in each of the
Company's Common Shares, the Nasdaq Stock Market Index (U.S.) and the Nasdaq
Pharmaceutical Index on November 10, 1992 and dividend reinvestment thereafter.
[The following table was represented as a line chart in the printed material]
- ----------------------------------------------------------
Neoprobe Corporation Common Stock Performance Graph
- ----------------------------------------------------------
- ----------------------------------------------------------
- ----------------------------------------------------------
Neoprobe Nasdaq Stock Nasdaq
Date Corporation Market Index Pharmaceuticals
Common Stock (U.S.) Index
- ----------------------------------------------------------
11-Nov-92 100.0000 100.0000 100.0000
- ----------------------------------------------------------
31-Dec-92 102.1300 107.8700 103.8142
- ----------------------------------------------------------
31-Dec-93 106.3800 123.8200 92.5311
- ----------------------------------------------------------
31-Dec-94 25.5300 121.0300 69.6427
- ----------------------------------------------------------
31-Dec-95 274.4700 171.1700 127.4029
- ----------------------------------------------------------
31-Dec-96 261.7000 210.5500 127.7975
- ----------------------------------------------------------
Compensation Committee Report on Executive Compensation
Background. The Company is in its early growth phase and it has not yet
begun to mature as a business which can set compensation policies based on
traditional statistical measures of growth and profitability such as sales, net
earnings and return on assets. The management of the Company must identify and
focus on the key initiatives and corporate milestones that will, when achieved,
allow it to attain profitable operations and growth. The purpose of the
Company's compensation philosophy is to attract and provide proper incentives to
high-quality, experienced managers and employees who will establish and attain
these key initiatives and milestones.
Bio-technology is an industry where growth and success depend upon
attracting highly-trained and qualified personnel. As a group, bio-technology
companies employ higher proportions of personnel with earned doctorate degrees
and other advanced degrees in the sciences, as well as, physicians and surgeons.
In order to attract and hold these employees the Company must provide them with
a sufficient base of cash compensation, as well as opportunities to participate
in the Company's growth. This leads the Company to a compensation philosophy
oriented towards the use of variable compensation and long-term incentives. It
is the Company's philosophy that this program be offered to all employees
commensurate with their responsibilities. To make the high compensation of key
personnel worthwhile to the shareholders, a high proportion of annual
compensation should be at risk against the attaining of key accomplishments and
milestones and a high portion of the total compensation must be at risk against
the return to the long-term shareholders of the Company who have funded its
growth.
Base Salary. Base pay is only one element of key personnel's compensation
package and it is targeted to be at or below the midpoint of a representative
list of small growing bio-technology companies similar to the Company (the "Peer
Group").
17
Variable Compensation. Variable compensation has an important role in the
Company's compensation philosophy. It is used to create incentives to attain key
initiatives and milestones in the short to medium term and to place a portion of
compensation at risk against the attaining of those targets. The Committee sets
a total amount of variable compensation based on a percentage of base salary.
The total amount available is targeted above the midpoint of the variable
compensation of the Peer Group but the amount paid is based on the elements of
corporate financial performance and the achievement of specific near-term
objectives judged to be important to the Company and established in advance by
the Compensation Committee. For example, during 1996 those targets included
filing of the Company's biological license applications for its initial products
with the United States Food and Drug Administration and comparable European
authorities and the implementation of the Company's strategic alliance with
United States Surgical Corporation.
Long-Term Incentive Compensation. Stock options provide the principal
vehicle for long-term incentive compensation. Options are issued under the
Company's 1994 and 1996 Stock Option Plans. The target levels for option grants
are set at or above the midpoint of the Peer Group. By their nature, options
directly compensate employees to the extent that long-term investors achieve
high rates of return. Options are also a key element in being able to obtain and
retain experienced and skilled employees. All options are granted at market.
Many options have significant vesting conditions in addition to longevity such
as the attainment of corporate and individual goals. The options are granted to
all levels of employees in order to provide incentives and to minimize cash
compensation.
Chief Executive Officer Compensation. Dr. Ridihalgh's 1996 compensation
consisted of base salary, variable compensation and stock options. During 1996,
Dr. Ridihalgh entered into a new Employment Agreement, the terms of which are
described under the heading "Compensation of Management - Employment
Agreements." Dr. Ridihalgh's base salary under the contract was set in line with
the philosophy described above. During 1996, Dr. Ridihalgh realized variable
compensation opportunities based on the achievement of corporate goals including
those described above and was granted options to purchase 20,000 shares of
stock, the terms of which are described above under the heading "Compensation of
Management - Employment Agreements." During 1997, the Committee intends to grant
variable compensation opportunities and stock options to Dr. Ridihalgh in
accordance with the philosophy outlined above.
Internal Revenue Code Provisions. Under Section 162(m) of the Code,
compensation paid by the Company to a Named Executive which is in excess of
$1,000,000 in a year will be nondeductible by the Company for purposes of
determining its federal taxable income unless such compensation is paid under a
performance-based plan which is approved by the stockholders of the Company.
Under the Internal Revenue Service regulations promulgated under Section 162(m),
the Company's 1994 and 1996 Stock Option Plans should be deemed to be
performance-based compensation plans and amounts realized by the Named
Executives under such plans should continue to be deductible by the Company.
Because of the favorable treatment of the Company's Stock Option Plans and the
remoteness of the possibility that base compensation and cash variable
compensation levels will exceed $1,000,000 during fiscal 1997 and the years
thereafter, the Committee did not consider the impact of Section 162(m) on its
decisions concerning compensation.
Compensation Committee: J. Frank Whitley, Jr. (Chairman), Julius R.
Krevans and James F. Zid.
Employment Agreements
John L. Ridihalgh is employed under a three-year employment agreement
effective January 1, 1996. The agreement provides for a base salary of $250,000,
$262,500 and $275,500 for the calendar years 1996, 1997 and 1998, respectively.
Dr. Ridihalgh will be paid a bonus of $12,500 upon the occurrence of any of the
following three events during the term of the employment: entering into a
strategic alliance for the marketing of any RIGScan(R) products in the United
States; obtaining United States Food and Drug Administration ("FDA") approval
for a Product License Application ("PLA") for a RIGScan product; or obtaining
equivalent regulatory approval for a RIGScan product from the European
regulatory authorities. Other bonuses are payable at the discretion of the Board
of Directors based on the performance of the Company and Dr. Ridihalgh. The
employment agreement provides for a two year non-competition agreement after the
end of the term of employment. Dr. Ridihalgh is a shareholder in Cira
Technologies, Inc. ("Cira") which is developing a process for treating chronic
infectious diseases using activated cellular therapy. The Company waived any
claim that the stock ownership of Dr. Ridihalgh in Cira and his participation in
the management thereof are violations of the employment agreement. If a change
in control event occurs with respect to the Company and the employment of Dr.
Ridihalgh is concurrently or subsequently terminated (i) without cause (cause is
defined as any
18
willful breach of a material duty by Dr. Ridihalgh in the course of his
employment or willful and continued neglect of his duty as an employee), (ii)
the term of the agreement expires or (iii) Dr. Ridihalgh resigns because his
authority, responsibilities or compensation have materially diminished, a
material change occurs in his working conditions or the Company breaches the
agreement, Dr. Ridihalgh will be paid a severance payment equal to twice his
annual base salary (less amounts paid as Dr. Ridihalgh's salary and benefits
that continue for the remaining term of the agreement if his employment is
terminated without cause). A change in control includes (a) the acquisition,
directly or indirectly, by a person (other than the Company or an employee
benefit plan established by the Board of Directors) of beneficial ownership of
15 percent or more of the Company's securities with voting power in the next
meeting of holders of voting securities to elect the Directors; (b) a majority
of the Directors elected at any meeting of the holders of the Company's voting
securities are persons who were not nominated by the Company's then current
Board of Directors or an authorized committee thereof; (c) the stockholders of
the Company approve a merger or consolidation of the Company with another
person, other than a merger or consolidation in which the holders of the
Company's voting securities issued and outstanding immediately before such
merger or consolidation continue to hold voting securities in the surviving or
resulting corporation (in the same relative proportions to each other as existed
before such event) comprising eighty percent (80%) or more of the voting power
for all purposes of the surviving or resulting corporation; or (d) the
stockholders of the Company approve a transfer of substantially all of the
assets of the Company to another person other than a transfer to a transferee,
eighty percent (80%) or more of the voting power of which is owned or controlled
by the Company or by the holders of the Company's voting securities issued and
outstanding immediately before such transfer in the same relative proportions to
each other as existed before such event. Dr. Ridihalgh's compensation will
continue for the full term of the agreement if his employment is terminated
without cause.
In June 1996, the Company and Dr. Ridihalgh also entered into a restricted
stock purchase agreement under which Dr. Ridihalgh purchased 50,000 shares of
Common Stock for a purchase price equal to the par value of $.001 per share. Dr.
Ridihalgh may not transfer or sell any of the restricted shares unless and until
they vest. Dr. Ridihalgh will forfeit any portion of the restricted shares that
has not vested (and the Company will refund the purchase price paid) on the
earliest of the termination of his employment under the employment agreement for
any reason unless the Company is, at the time of termination for death or
disability, actively engaged in negotiations that could reasonably be expected
to lead to a change in control (as defined above) or the tenth anniversary of
the date of the employment agreement. The restricted shares that have not
previously been forfeited will vest if and when there is a change in control of
the Company (as defined above). Except for these restrictions on transfer and
possibilities of forfeiture, Dr. Ridihalgh has all other rights with respect to
the restricted shares, including the right to vote such shares and receive cash
dividends. The Company has not recognized any expense under the employment
agreement due to the contingent nature of the vesting provision and the risk of
forfeiture.
Upon the extension of the employment agreement in February 1995, Dr.
Ridihalgh was granted options to purchase 150,000 shares of Common Stock at an
exercise price of $2.50 per share (the then current market price). Such options
terminate on the earlier of 10 years after the date of grant, nine months after
death, six months after termination of employment due to disability or two years
after any other termination of employment. The options will vest in three equal
tranches, one of which will vest upon the occurrence of any of the following
three events: entering into a strategic alliance for the marketing of any
RIGScan products in the United States; obtaining FDA approval for a PLA for a
RIGScan product; or obtaining equivalent regulatory approval for a RIGScan
product from the European regulatory authorities. All previously unvested option
shares will vest if there is a change in control (as defined therein) and half
of the previously unvested option shares will vest upon termination of Dr.
Ridihalgh's employment by the Company without cause. In January 1996, Dr.
Ridihalgh was granted options to purchase 20,000 shares of Common Stock at an
exercise price of $15.75 per share. Such options terminate on the earlier of 10
years after the date of grant, nine months after death or disability, 90 days
after termination of employment without cause, or immediately upon termination
of employment by resignation. The options will vest as to one-third of the
shares originally subject to the option on each anniversary of the date of
grant. All previously unvested option shares will vest if there is a change of
control (as defined above).
David C. Bupp is employed under a three-year employment agreement
effective January 1, 1996. The employment agreement provides for a base salary
of $225,000, $236,300 and $248,000 for the calendar years 1996, 1997 and 1998,
respectively. Other than the compensation provisions, Mr. Bupp's employment
agreement has substantially the same terms as Dr. Ridihalgh's agreement (see
above). In June 1996, the Company and Mr. Bupp entered into a restricted
19
stock purchase agreement under which Mr. Bupp purchased 30,000 shares of Common
Stock for a purchase price equal to the par value of $.001 per share. The
vesting provisions and other terms of the restricted stock purchase agreement
are substantially the same as Dr. Ridihalgh's restricted stock purchase
agreement (see above). Upon the extension of the employment agreement in
February 1995, Mr. Bupp was granted options to purchase 150,000 shares of Common
Stock on the same terms as the options granted to Dr. Ridihalgh in February 1995
(see above). In January 1996, Mr. Bupp was granted options to purchase 20,000
shares of Common Stock on the same terms as the options granted to Dr.
Ridihalgh in January 1996 (see above).
Compensation of Non-Employee Directors
Non-employee Directors who are neither legal counsel to the Company nor
affiliated with a principal stockholder of the Company receive a quarterly
retainer of $2,500 and a fee of $1,000 for each board meeting attended, as well
as reimbursement for travel expenses incurred in connection with attending
meetings. Each such Director will also be granted an option to purchase 5,000
shares of Common Stock which vest over a three-year period and have an exercise
price equal to no less than the market price at the time of grant. Other
Directors do not receive any compensation for their services as Directors.
Effective March 1, 1997, members of committees of the Board of Directors
will be paid $500 per committee meeting for committee meetings held in
conjunction with regular board meetings, and $800 per committee meeting for
committee meetings not held in conjunction with regularly scheduled board
meetings.
CERTAIN TRANSACTIONS
In 1991 and 1992, Neoprobe entered into agreements with The Dow Chemical
Company ("Dow"), which at that time was a principal stockholder of the Company,
pursuant to which Dow and Neoprobe agreed to coordinate their research and
development activities relative to the commercialization of RIGS products and
Neoprobe was granted certain rights. Under the agreements, Dow (i) granted to
Neoprobe an exclusive global, commercial sublicense to use CC49 as a RIGS
technology product, (ii) agreed to grant to Neoprobe, upon its request and after
approval by NCI/NIH, a sublicense to any other antibody under Dow's commercial
license agreement with NCI/NIH, (iii) granted to Neoprobe an exclusive global
license to Dow's proprietary iodination technology which may be used by Neoprobe
to radiolabel antibodies for RIGS system products and (iv) licensed or
sublicensed certain other targeting agents for use as RIGS technology products.
The agreements provide that Neoprobe is obligated to pay Dow royalties on
certain RIGS system antibody product revenues, part of which compensates Dow for
royalties payable under Dow's license agreement with NCI/NIH. Additional
royalties may be payable if Dow's technology is used in the commercial
production of RIGS system products. If Neoprobe fails to comply with certain
financial and timing requirements of the sublicense, the rights under such
sublicense may revert back to Dow.
Neoprobe's sublicense of CC49 from Dow is subject to a commercial license
agreement between Dow and NCI/NIH under which NCI/NIH reserved the right to use
CC49 for government purposes. If the Dow-NCI/NIH commercial license agreement is
terminated for any reason, including a default by Dow, the Dow-NCI/NIH
commercial license agreement allows Neoprobe to apply for a license for
antibodies previously granted by Dow to Neoprobe (subject to approval and
acceptance by NCI/NIH). If the Dow-NCI/NIH commercial license agreement is
terminated, the Dow-Neoprobe agreement allows Neoprobe to either obtain a
license directly from NCI/NIH (subject to approval and acceptance by NCI/NIH) or
to terminate provisions of the Dow-Neoprobe agreement that relate to the
Dow-NCI/NIH commercial license agreement.
In May 1996, Neoprobe and Dow executed an agreement under which Dow
granted Neoprobe global rights to certain technology related to targeting
agents, radiolabeling and radioimmunotherapy products developed by Dow
researchers. Upon completion, the global licenses will provide Neoprobe with
global access to technology covered by issued patents for use in the development
of RIGS and radioimmunotherapy products. Dow received 124,805 shares of Common
Stock in exchange for the technology rights. Dow currently holds 847,920 shares
of Common Stock.
20
Mueller and Smith, L.P.A., has performed legal services for the Company
since the inception of the Company and continues to serve as the Company's
patent counsel. Jerry K. Mueller, Jr., a director and officer of the Company, is
a partner of that law firm. Fees related to services performed by that firm were
approximately $140,000 and approximately $61,000 in out-of-pocket costs and
expenses were incurred for fiscal year ended 1996. Mr. Mueller's term as a
Director will expire on the date of the Annual Meeting.
Dr. Richard Olsen, an emeritus professor of veterinary pathobiology at
OSU, and Dr. John Ridihalgh, Chairman of the Company, invented a process for
treating chronic infectious and/or autoimmune diseases using activated cellular
therapy, conducted tests of their invention on animals and filed an application
for a United States patent thereon. In March 1996, Dr. Ridihalgh and the
Company, represented by a committee of independent directors, agreed that a
newly organized corporation, Cira, would exploit the process. The Company
received 10 percent of the originally issued shares in Cira and the remainder
was divided among Drs. Ridihalgh and Olsen and their colleagues, including Jerry
K. Mueller, Jr. who acted as their patent counsel. The Company and Cira also
executed a Technology Option Agreement, under which Cira granted the Company an
option to acquire exclusive world-wide licenses to Cira's activated cellular
therapy for the treatment of human immunodeficiency virus infected patients and
chronic infectious and/or autoimmune disease in humans and the Company agreed to
support a Phase I clinical trial of this process on up to 40 patients at a cost
not to exceed $500,000. The Company and Cira also cross licensed improvements in
activated cellular therapy. In addition to technology rights, the Company
obtained an option to increase its interest in Cira by 15%. The exercise price
of this option is 15% of the fair market value of Cira's outstanding securities
on the earlier of the third anniversary of a license agreement under the
Technology Option Agreement, or the commencement of a pivotal clinical trial
study, subject to a minimum of $1.95 million and a maximum of $4.5 million.
Mr. Vromen is a partner in Reico, Ltd. Reico, Ltd. received $48,000 in
fiscal year 1996 as compensation for services which Mr. Vromen rendered to
Neoprobe (Israel), Ltd. Neoprobe (Israel), Ltd. is a subsidiary of the Company.
FORMS 3, 4 AND 5; SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
This disclosure relates to events occurring in 1996. An untimely Form 3
was filed with the Securities and Exchange Commission for Joseph Bianchine,
Vice-President - Clinical Research and Medical Director, and four transactions
in Company securities were reported to the Securities and Exchange Commission on
untimely Forms 4 and one transaction was reported to the Securities and Exchange
Commission on an untimely amendment to a Form 5 for Trudie Seeger, Vice
President - Regulatory Affairs.
The Company does not know of any other failures to make filings required
by Section 16 on a timely basis by any of its directors, executive officers or
beneficial owners of 10% or more of its equity securities.
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P. served as the Company's independent accountants
for the fiscal year 1996 which ended December 31, 1996, and has audited the
Company's financial statements for each of the past three fiscal years. At the
suggestion of management, the Audit Committee has recommended the retention of
Coopers & Lybrand L.L.P. as the Company's independent accountants for the 1997
fiscal year.
A representative of Coopers & Lybrand L.L.P. is expected to be present at
the Annual Meeting. The representative will have an opportunity to make a
statement if he so desires and is expected to be available to respond to
appropriate questions of stockholders.
21
OTHER BUSINESS
The Board of Directors does not intend to present, and has no knowledge
that others will present, any other business at the meeting. If, however, any
other matters are properly brought before the meeting, it is intended that the
persons named in the enclosed proxy will vote the shares represented thereby in
accordance with their best judgment.
COST OF SOLICITATION OF PROXIES
The cost of this solicitation will be paid by the Company. The Company may
request persons holding shares in their names for others to forward soliciting
materials to their principals to obtain authorization for the execution of
proxies, and the Company will reimburse such persons for their expenses in so
doing.
STOCKHOLDER PROPOSALS
A stockholder proposal intended for inclusion in the proxy statement and
form of proxy for the Annual Meeting of Shareholders of the Company to be held
in 1998 must be received by the Company before December 24, 1997, at its
executive offices, Attention: John Schroepfer.
A stockholder who wishes to nominate a candidate for election to the Board
of Directors must follow the procedures put forth in Article III, Section 2 of
the Company's By-Laws. A copy of these procedures is available upon request from
the Company at 425 Metro Place North, Suite 400, Dublin, Ohio 43017-1367,
Attention: John Schroepfer. In order for a stockholder to nominate a candidate
for the Board of Directors election at the 1998 Annual Meeting, notice of the
nomination must be delivered to the Company's executive offices, Attention: John
Schroepfer, before December 24, 1997.
22
NEOPROBE CORPORATION THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints John L. Ridihalgh and David C. Bupp,
and each of them, severally, with full power of substitution, as proxies
for the undersigned, and hereby authorizes them to represent and to vote,
as designated below, all of the shares of Common Stock, par value $.001
per share, of Neoprobe Corporation held of record by the undersigned on
April 4, 1997, at the Annual Meeting of Stockholders to be held on May
29, 1997, or any adjournment thereof, with all the power the undersigned
would possess if present in person.
THE BOARD OF DIRECTORS RECOMMENDS ADOPTION OF THE PROPOSAL AND THE
ELECTION OF ALL NOMINEES.
1. To elect as directors the nominees named below for a term of one
year and until their successors are duly elected and qualified.
NOMINEES: MELVIN D. BOOTH, JOHN S. CHRISTIE, AND J. FRANK WHITLEY, JR.
[ ] FOR all nominees listed above (except as marked to the
contrary)
[ ] WITHHOLD AUTHORITY to vote for all nominees listed above
(INSTRUCTIONS: To withhold authority to vote for any individual
nominee, strike a line through the nominee's name listed above.)
2. Approval of the Amendment to the 1996 Stock Incentive Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(Continued, to be dated and signed, on the other side.)
(Continued from the other side)
In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the Annual Meeting of Stockholders or
any adjournment thereof.
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 IN FAVOR OF THE PROPOSAL AND FOR THE ELECTION OF ALL NOMINEES
LISTED ABOVE.
The undersigned hereby acknowledges receipt with this Proxy of a copy of
the Notice of Annual Meeting and Proxy Statement dated April 18, 1997 and a
copy of the Company's 1996 Annual Report to Stockholders.
Date:____________________ , 1997
--------------------------------
Signature
--------------------------------
Signature (if held jointly)
IMPORTANT: Please sign exactly
as name or names appear to the
left. When shares are held by
joint tenants, both should sign.
When signing as attorney,
executor, administrator, trustee
or guardian, please give full
title as such. Corporations
should sign in their full
corporate name by their
president or other authorized
officer. If a partnership,
please sign in partnership name
by an authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.