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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
CEPHEID
(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:
[ ] 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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4) Date Filed:
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[CEPHEID LETTERHEAD]
May 10, 2001
To Our Shareholders:
I am pleased to invite you to attend the first Annual Meeting of
shareholders of Cepheid to be held at Cepheid's principal executive offices,
1190 Borregas Avenue, Sunnyvale, California, 94089-1302, on Tuesday, June 12,
2001, at 1:00 p.m. local time.
The matters expected to be acted upon at the meeting are described in
detail in the following Notice of Annual Meeting of Shareholders and Proxy
Statement.
The Board of Directors appreciates and encourages shareholder participation
in the Company's affairs and invites you to attend the meeting in person. IT IS
IMPORTANT, HOWEVER, THAT YOUR SHARES BE REPRESENTED AT THE ANNUAL MEETING IN ANY
EVENT AND FOR THAT REASON WE ASK THAT WHETHER OR NOT YOU EXPECT TO ATTEND THE
MEETING, YOU TAKE A MOMENT TO COMPLETE, DATE, SIGN AND RETURN THE ACCOMPANYING
PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE. Returning the proxy does NOT
deprive you of your right to attend the Annual Meeting and to vote your shares
in person.
We thank you for your support and look forward to seeing you at the
meeting.
Sincerely,
/s/ THOMAS L. GUTSHALL
Thomas L. Gutshall
Chairman of the Board and Chief
Executive Officer
Sunnyvale, California
May 10, 2001
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CEPHEID
1190 BORREGAS AVENUE
SUNNYVALE, CALIFORNIA 94089-1302
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 12, 2001
To Our Shareholders:
NOTICE IS HEREBY GIVEN that the Annual Meeting of the shareholders of
Cepheid, a California corporation (the "Company"), will be held at Cepheid's
principal executive offices, 1190 Borregas Avenue, Sunnyvale, California,
94089-1302, on Tuesday, June 12, 2001, at 1:00 p.m. local time for the following
purposes:
1. To elect two (2) Class II directors of the Company to serve on the Board
of Directors for a three-year term or until their successors have been
duly elected and qualified. The Company's Board of Directors intends to
present the following nominees for election as Class II directors:
Gerald S. Casilli
Cristina H. Kepner
2. To consider and vote upon a proposal to amend the Company's 1997 Stock
Option Plan to increase the number of shares of Common Stock reserved
for issuance thereunder by 1,875,000 shares, from 3,592,732 shares to
5,467,732 shares.
3. To ratify the appointment of Ernst & Young LLP as independent auditors
of the Company for the fiscal year ending December 31, 2001.
4. To transact such other business as may properly come before the meeting
or any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The Board of Directors has fixed the close of business on April 29, 2001,
as the record date for the determination of shareholders entitled to notice of,
and to vote at, the meeting or any adjournment thereof.
By Order of the Board of Directors
/s/ SARAH A. O'DOWD
Sarah A. O'Dowd
Secretary
Sunnyvale, California
May 10, 2001
ALL SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON. WHETHER
OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND RETURN
THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN ORDER TO ENSURE YOUR
REPRESENTATION AT THE MEETING. A RETURN ENVELOPE (WHICH IS POSTAGE PREPAID IF
MAILED IN THE UNITED STATES) IS ENCLOSED FOR THAT PURPOSE. EVEN IF YOU HAVE
GIVEN YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE MEETING. PLEASE
NOTE, HOWEVER, THAT IF YOUR SHARES ARE HELD OF RECORD BY A BROKER, BANK OR OTHER
NOMINEE AND YOU WISH TO VOTE AT THE MEETING, YOU MUST OBTAIN FROM THE RECORD
HOLDER A PROXY ISSUED IN YOUR NAME.
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CEPHEID
1190 BORREGAS AVENUE
SUNNYVALE, CA 94089-1302
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PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 12, 2001
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INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors of
Cepheid, a California corporation (the "Company" or "Cepheid"), for use at the
annual meeting of shareholders of the Company to be held on June 12, 2001 at
1:00 p.m. local time, or at any adjournment or postponement of the meeting, for
the purposes set forth in this Proxy Statement and in the accompanying Notice of
Annual Meeting. The annual meeting will be held at Cepheid's principal executive
offices, 1190 Borregas Avenue, Sunnyvale, California 94089-1302. The Company's
telephone number is (408) 541-4191.
These proxy solicitation materials, together with the Company's 2000 Annual
Report, are being mailed on or about May 10, 2001, to all shareholders of record
on April 29, 2001.
RECORD DATE
Shareholders of record at the close of business on April 29, 2001 (the
"Record Date") are entitled to notice of, and to vote at, the meeting. At the
Record Date, approximately 26,404,239 shares of the Company's Common Stock were
issued and outstanding.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Company a written
notice of revocation or a duly executed proxy bearing a date later than the date
of the proxy being revoked, or by attending the meeting and voting in person.
Attending the meeting will not, by itself, revoke the proxy.
VOTING AND SOLICITATION
Holders of the Company's Common Stock are entitled to one vote for each
share held as of the Record Date. In order to constitute a quorum for conduct of
business at the Annual Meeting, a majority of shares of Common Stock outstanding
on the Record Date must be represented at the annual meeting.
Solicitation of proxies may be made by directors, officers and other
employees of the Company by personal interview, telephone, facsimile or other
method. No additional compensation will be paid for such services, but the
Company may reimburse directors, officers and employees for reasonable
out-of-pocket expenses in connection with such solicitation. Costs of
solicitation, including preparation, assembly, printing and mailing of this
proxy statement, the proxy and any other information furnished to the
shareholders, will be borne by the Company. The Company may reimburse the
reasonable charges and expenses of brokerage houses, custodians, nominees,
fiduciaries or others for forwarding proxy materials to, and obtaining authority
to execute proxies from, beneficial owners for whose account they hold shares of
Common Stock.
QUORUM, ABSTENTIONS, AND BROKER NON-VOTES
The Company's Bylaws provide that the holders of a majority of the
Company's Common Stock issued and outstanding and entitled to vote at the Annual
Meeting, present in person or represented by proxy, shall constitute a quorum
for the transaction of business at the Annual Meeting. Broker non-votes and
abstentions
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will be counted in determining whether a quorum is present at the Annual
Meeting. However, abstentions are counted as votes against a proposal for
purposes of determining whether or not a proposal has been approved, whereas
broker non-votes are not counted for purposes of determining whether a proposal
has been approved.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Pursuant to the Company's Amended and Restated Articles of Incorporation,
the Company's Board of Directors (the "Board") is divided into three
classes -- Class I, II and III directors. Each director is elected for a
three-year term of office, with one class of directors being elected at each
annual meeting of shareholders. Each director holds office until his or her
successor is duly elected and qualified or until his or her earlier death,
resignation or removal.
Each nominee listed below is currently a director of the Company. The size
of the Board is presently set at seven members. Directors are elected by a
plurality of the votes present in person or represented by proxy and entitled to
vote. If signed and returned, shares represented by the accompanying proxy will
be voted for the election of the two nominees recommended by the Board unless
the proxy is marked in such a manner as to withhold authority so to vote. If any
nominee for any reason is unable to serve or for good cause will not serve, the
proxies may be voted for such substitute nominee as the proxy holder may
determine. Each person nominated for election has agreed to serve if elected and
the Company has no reason to believe that any nominee will be unable to serve.
DIRECTORS/NOMINEES
The information below sets forth the current members of the Board,
including the nominees for Class II Directors:
NAME OF DIRECTOR AGE CLASS POSITION WITH THE COMPANY DIRECTOR SINCE
---------------- --- ----- ------------------------- --------------
Thomas L. Gutshall................... 63 III Chairman of the Board and Chief 1996
Executive Officer
Kurt Petersen, Ph.D. ................ 53 I President, Chief Operating 1996
Officer and Director
Gerald S. Casilli(1)................. 61 II Director 1997
Cristina H. Kepner(1)................ 54 II Director 1998
Ernest Mario, Ph.D.(1)............... 62 III Director 2000
Dean O. Morton(2).................... 69 I Director 1997
Hollings C. Renton(2)................ 54 III Director 2000
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(1) Current member of the Audit Committee.
(2) Current member of the Compensation Committee.
Thomas L. Gutshall. Mr. Gutshall is a co-founder and has served us as
Chairman of the Board and Chief Executive Officer since August 1996. From
January 1995 to August 1996, he was President and Chief Operating Officer of CV
Therapeutics. From 1989 to 1994, he was Executive Vice President at Syntex
Corporation and a member of the Pharmaceutical Executive Committee. His
responsibilities while at Syntex included managing Syva Company, Syntex
Agribusiness, Pharmaceutical and Chemical Operations and Services, Syntex
Pharmaceutical Intl. Ltd. and Environmental Health and Safety. He is also a
member of the board of directors of Metrika Inc. and CV Therapeutics.
Kurt Petersen, Ph.D. Dr. Petersen is a co-founder and has served us as
President and Chief Operating Officer since August 1996. From January 1996
through July 1996, Dr. Petersen worked as a private consultant. From 1985 to
1995, he served as Vice President, Technology for Lucas NovaSensor. While at
Lucas NovaSensor, he was responsible for commercializing many innovative
micromachined devices and
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fundamental fabrication processes. He holds 20 patents and has authored over 80
technical papers and presentations. Dr. Petersen is a Fellow of the IEEE and a
member of the National Academy of Engineering.
Gerald S. Casilli. Mr. Casilli joined us as a director in April 1997. Mr.
Casilli has served as Chairman of the Board of IKOS Systems, Inc. since 1989 and
as Chief Executive Officer from 1989 to 1995. From 1986 to 1989, he was a
general partner at Trinity Ventures, Ltd., a venture capital firm. Mr. Casilli
was a general partner of Genesis Capital, a venture capital firm from 1982 to
1990. In 1973, Mr. Casilli founded Millennium Systems, a manufacturer of
microprocessor development systems, and served as its President and Chief
Executive Officer until 1982. Mr. Casilli currently serves as a director of
Evans & Sutherland Computer Corporation.
Cristina H. Kepner. Ms. Kepner joined us as a director in May 1998. She is
Advisor at Invemed Associates, LLC, an investment banking firm. She has been
with Invemed since 1978, where she served as Executive Vice President and
Corporate Finance Director until January 2001. She is currently on the boards of
ViroLogic, Inc. and Quipp, Inc.
Ernest Mario, Ph.D. Dr. Mario joined us as a director in March 2000. He has
been the Chairman of the Board since 1997 and Chief Executive Officer of ALZA
Corporation since 1993. From 1993 to 1997, he was Co-Chairman of the Board of
ALZA. Prior to joining ALZA, he served as Chief Executive of Glaxo Holdings plc,
a pharmaceutical corporation, from 1989 to 1993, and as Deputy Chairman from
1992 to 1993. From 1988 to 1989, he served as Chairman of the Board and Chief
Executive Officer of Glaxo, Inc., a subsidiary of Glaxo Holdings, and from 1986
to 1988 as President and Chief Operating Officer of Glaxo, Inc. He currently
serves on the boards of Catalytica Energy Systems, Inc., COR Therapeutics, Inc.,
Orchid Biosciences, Inc., Pharmaceutical Product Development, Inc. and SonoSite,
Inc.
Dean O. Morton. Mr. Morton joined us as a director in July 1997. He was
Executive Vice President, Chief Operating Officer and a director of
Hewlett-Packard Company. He is currently a member of the board of directors of
ALZA Corporation, BEA Systems, Inc., The Clorox Company, KLA-Tencor Corporation
and Pharsight Corporation. He is a trustee of the State Street Research group of
mutual funds and a director of the Metropolitan Series Fund, Inc. and State
Street Research Portfolios, Inc. He serves on the Board of Monterey Bay Aquarium
Research Institute and the Board of Kaiser Foundation Health Plan and Hospitals.
He is a trustee of the David and Lucille Packard Foundation and Chairman of The
Center for Excellence in Non Profits.
Hollings C. Renton. Mr. Renton joined us as a director in March 2000. Since
June 2000, he has served as Chairman of the Board of Onyx Pharmaceuticals, Inc.
and, in addition, he has served as the President and Chief Executive Officer and
a director of Onyx Pharmaceuticals, Inc. since 1993. From 1991 to 1993, he
served as President and Chief Operating Officer of Chiron Corporation following
their acquisition of Cetus Corporation. Prior to the acquisition, he served as
President of Cetus from 1990 to 1991 and as Chief Operating Officer of Cetus
from 1987 to 1990.
REQUIRED VOTE
The two nominees receiving the highest number of affirmative votes of the
shares present or represented and entitled to be voted for them will be elected
as directors.
THE BOARD RECOMMENDS A VOTE FOR THE ELECTION OF
EACH OF THE NOMINATED DIRECTORS
BOARD OF DIRECTORS' MEETINGS AND COMMITTEES
The Board currently consists of seven members. The Board met nine times,
including telephone conference meetings, during 2000, and acted by written
consent three times. No director attended fewer than 75% of the aggregate of the
total number of meetings of the Board (held during the period for which he or
she was a director) and the total number of meetings held by all committees of
the Board on which he or she served (during the period that he or she served).
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Standing committees of the Board include an Audit Committee and a
Compensation Committee. The Company has no nominating committee.
Gerald S. Casilli, Cristina H. Kepner and Ernest Mario, Ph.D. are the
current members of the Company's Audit Committee. The Audit Committee was
constituted in 1998 and met two times, including telephone conference meetings,
in 2000. The Audit Committee makes recommendations to the Board regarding the
selection of independent auditors, reviews the scope of audit and other services
by our independent auditors, reviews the accounting principles and auditing
practices and procedures to be used for our financial statements and reviews the
results of those audits.
Dean O. Morton and Hollings C. Renton are the current members of the
Company's Compensation Committee. The Compensation Committee met two times
during 2000. The Compensation Committee was formed in 1998 and is responsible
for reviewing the compensation and benefits for Cepheid's executive officers, as
well as supervising and making recommendations to the Board on compensation
matters generally. The Committee also administers Cepheid's stock option plans
and makes grants to executive officers under the 1997 Stock Option Plan.
DIRECTOR COMPENSATION
We reimburse our non-employee directors for expenses incurred in connection
with attending board and committee meetings but do not compensate them for their
services as board or committee members. We have in the past granted non-employee
directors options to purchase our Common Stock pursuant to the terms of our
stock plans, and our board continues to have the discretion to grant options to
new non-employee directors. In 1999, none of our non-employee directors were
granted any options. In February 2000, Mr. Casilli and Mr. Morton each received
an option to purchase 10,000 shares of our Common Stock pursuant to the 1997
Stock Option Plan (the "1997 Plan"). In February 2000 and March 2000,
respectively, upon joining our board, Dr. Mario and Mr. Renton each received an
option to purchase 48,000 shares of our Common Stock pursuant to the Plan.
Beginning in April 2000, our new non-employee directors will each receive
nondiscretionary, automatic grants of options to purchase 15,000 shares of our
Common Stock upon joining the board of directors, and our continuing
non-employee directors will each receive nondiscretionary, automatic grants of
options to purchase 5,000 shares of our Common Stock each year after the annual
meeting of shareholders pursuant to the 2000 Non-Employee Directors' Stock
Option Plan (the "2000 Plan"). In July 2000, Ms. Kepner received an option to
purchase 48,000 shares of our Common Stock pursuant to the 2000 Plan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of our Compensation Committee was at any time during 2000, or at
any other time, an officer or employee of the Company. No executive officer of
the Company serves as a member of the board of directors or compensation
committee of any entity that has one or more executive officers serving as a
member of the Company's Board of Directors or Compensation Committee.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of the Company's
Common Stock as of March 31, 2001 by: each person who is known by the Company to
beneficially own more than 5% of the Common Stock; each of the named executive
officers and each director; and all executive officers and directors as a group.
Percentage of ownership is based on 26,405,010 shares of Common Stock
outstanding as of March 31, 2001. Beneficial ownership is calculated based on
Securities and Exchange Commission requirements. All shares of the Common Stock
subject to options currently exercisable or exercisable within 60 days after
March 31, 2001 are deemed to be outstanding for the purpose of computing the
percentage of ownership of the person holding such options, but are not deemed
to be outstanding for computing the percentage of ownership of any other person.
Unless otherwise indicated below, each shareholder named in the table has sole
or shared voting and investment power with respect to all shares beneficially
owned, subject to applicable community property laws. Unless otherwise indicated
in the table, the address of each individual listed in the table is Cepheid,
1190 Borregas Avenue, Sunnyvale, California 94089-1302.
NUMBER OF PERCENTAGE OF
SHARES SHARES
BENEFICIALLY BENEFICIALLY
BENEFICIAL OWNER OWNED OWNED
---------------- ------------ -------------
DIRECTORS AND NAMED EXECUTIVE OFFICERS
Gerald S. Casilli(1)........................................ 318,306 1.2%
Thomas L. Gutshall(2)....................................... 1,111,721 4.2%
Cristina H. Kepner(3)....................................... 113,232 *
Ernest Mario, Ph.D.(4)...................................... 48,000 *
Dean O. Morton(5)........................................... 148,000 *
M. Allen Northrup, Ph.D.(6)................................. 1,148,400 4.4%
Kurt Petersen, Ph.D.(7)..................................... 779,757 3.0%
Hollings C. Renton(8)....................................... 48,000 *
Catherine A. Smith(9)....................................... 261,660 1.0%
All executive officers and directors as a group (9
persons).................................................. 3,977,076 15.1%
FIVE PERCENT SHAREHOLDERS
Applewood Capital Corp.(10)................................. 2,100,545 8.0%
Essex Investment Management Company, LLC(11)................ 2,434,230 9.2%
Barry Fingerhut(12)......................................... 2,273,083 8.6%
Invemed Associates LLC(13).................................. 1,788,248 6.8%
Irwin Lieber(14)............................................ 2,273,083 8.6%
Jonathan Lieber(15)......................................... 2,100,545 8.0%
Seth Lieber(16)............................................. 2,100,545 8.0%
Barry Rubenstein(17)........................................ 2,273,083 8.6%
Wheatley Partners II, LP(18)................................ 2,100,545 8.0%
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* Less than one percent.
(1) Mr. Casilli's business address is c/o IKOS, 19050 Pruneridge Avenue,
Cupertino, CA 95014.
(2) Includes immediately exercisable options to purchase 100,000 shares. As of
March 31, 2001, we have the right to repurchase 25,000 of the shares
issuable upon exercise of these options. Does not include 6,000 shares held
by Mr. Gutshall's children, of which Mr. Gutshall disclaims beneficial
ownership.
(3) Includes a warrant to purchase 6,232 shares of Common Stock. Also includes
an immediately exercisable option to purchase 48,000 shares. As of March
31, 2001, we have the right to repurchase 48,000 of the shares issuable
upon exercise of this option if Ms. Kepner ceases to be one of our
directors. Does not include Common Stock and warrants owned by Invemed
Fund, L.P., a fund for which Invemed Associates LLC is the sole general
partner. See Note 11. Ms. Kepner is an advisor of Invemed
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Associates LLC and disclaims beneficial ownership of the Common Stock and
warrants owned by Invemed Fund, L.P. Ms. Kepner's business address is P.O.
Box 111, Quogue, NY 11959.
(4) Consists of an immediately exercisable option to purchase 48,000 shares. As
of March 31, 2001, we have the right to repurchase 35,000 of the shares
issuable upon exercise of this option if Dr. Mario ceases to be one of our
directors. Dr. Mario's business address is c/o ALZA Corporation, 1900
Charleston Road, Mountain View, CA 94043.
(5) Includes 77,500 shares held of record by MDLC Partners, a California
Limited Partnership, of which Mr. Morton is the general partner. As of
March 31, 2001, we have the right to repurchase 4,000 shares of Common
Stock owned by Mr. Morton if he ceases to be one of our directors. Mr.
Morton's business address is c/o Hewlett-Packard Corporation, 3200 Hillview
Avenue, Palo Alto, CA 94304.
(6) As of March 31, 2001, we have the right to repurchase 25,000 shares of
Common Stock owned by Dr. Northrup if he ceases to be an employee or
consultant for us.
(7) Includes immediately exercisable options to purchase 50,000 shares. As of
March 31, 2001, we have the right to repurchase 41,667 of the shares
issuable upon exercise of these options.
(8) Consists of an immediately exercisable option to purchase 48,000 shares. As
of March 31, 2001, we have the right to repurchase 36,000 of the shares
issuable upon exercise of this option if Mr. Renton ceases to be one of our
directors. Mr. Renton's business address is c/o Onyx Pharmaceuticals, Inc.,
3031 Research Drive, Richmond, CA 94806.
(9) As of March 31, 2001, we have the right to repurchase 44,793 of the shares
of Common Stock owned by Ms. Smith if she ceases to be an employee or
consultant for us. Does not include 9,000 shares held in an irrevocable
trust by Ms. Smith's children, of which Ms. Smith disclaims beneficial
ownership.
(10) Applewood Capital Corp. filed a Schedule 13G dated February 14, 2001 with
the Securities Exchange Commission reporting ownership of 2,100,545 shares
of Common Stock with shared voting and dispositive power with respect to
such shares. Applewood Capital Corp. shares voting and dispositive power
over 2,100,545 shares held by Wheatley Partners II, LP, a limited
partnership in which Applewood Capital Corp. is a general partner, and
disclaims beneficial ownership of these shares except to the extent of its
equity interest therein. The business address of Applewood Capital Corp. is
68 Wheatley Road, Brookville, NY 11545.
(11) Essex Investment Management Company, LLC filed a Schedule 13G dated
February 14, 2001 with the Securities Exchange Commission reporting
ownership of 2,434,230 shares of Common Stock with sole voting power with
respect to 2,299,680 shares and sole dispositive power with respect to
2,434,230 shares. The business address of Essex Investment Management
Company, LLC is 125 High Street, Boston, MA 02110.
(12) Mr. Fingerhut filed a Schedule 13G dated February 14, 2001 with the
Securities Exchange Commission reporting ownership of 2,273,083 shares of
Common Stock with shared voting and dispositive power with respect to
2,100,545 shares and sole voting and dispositive power with respect to
172,538 shares. Mr. Fingerhut shares voting and dispositive power over
2,100,545 shares held by Wheatley Partners II, LP, a limited partnership in
which Mr. Fingerhut is a general partner, and disclaims beneficial
ownership of these shares except to the extent of his equity interest
therein. Mr. Fingerhut's business address is c/o Wheatley Partners II, LP,
80 Cuttermill Road, Suite 311, Great Neck, NY 11021.
(13) Includes 1,555,000 shares of Common Stock owned by Invemed Fund, L.P., a
fund for which Invemed Associates, LLC is the sole general partner and
holds a 0.5 percent partnership interest. Also includes warrants to
purchase an additional 233,248 shares held by Invemed Fund, L.P. The
business address of Invemed Fund, L.P. is c/o Invemed Associates, LLC, 375
Park Avenue, New York, NY 10152.
(14) Mr. Lieber filed a Schedule 13G dated February 14, 2001 with the Securities
Exchange Commission reporting ownership of 2,273,083 shares of Common Stock
with shared voting and dispositive power with respect to 2,100,545 shares
and sole voting and dispositive power with respect to 172,538 shares. Mr.
Lieber shares voting and dispositive power over 2,100,545 shares held by
Wheatley Partners II, LP, a limited partnership in which Mr. Lieber is a
general partner, and disclaims beneficial ownership of
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these shares except to the extent of his equity interest therein. Mr.
Lieber's business address is c/o Wheatley Partners II, LP, 80 Cuttermill
Road, Suite 311, Great Neck, NY 11021.
(15) Mr. Lieber filed a Schedule 13G dated February 14, 2001 with the Securities
Exchange Commission reporting ownership of 2,100,545 shares of Common Stock
with shared voting and dispositive power with respect to such shares. Mr.
Lieber is an officer of Applewood Capital Corp., and shares voting and
dispositive power with respect to 2,100,545 shares held by Wheatley
Partners II, LP, a limited partnership in which Applewood Capital Corp. is
a general partner. Mr. Lieber disclaims beneficial ownership of these
shares except to the extent of its equity interest therein. The business
address of Mr. Lieber is 825 Third Avenue, New York, NY 10022.
(16) Mr. Lieber filed a Schedule 13G dated February 14, 2001 with the Securities
Exchange Commission reporting ownership of 2,100,545 shares of Common Stock
with shared voting and dispositive power with respect to such shares. Mr.
Lieber is an officer of Applewood Capital Corp., and shares voting and
dispositive power with respect to 2,100,545 shares held by Wheatley
Partners II, LP, a limited partnership in which Applewood Capital Corp. is
a general partner. Mr. Lieber disclaims beneficial ownership of these
shares except to the extent of its equity interest therein. The business
address of Mr. Lieber is 825 Third Avenue, New York, NY 10022.
(17) Mr. Rubenstein filed a Schedule 13G dated February 14, 2001 with the
Securities Exchange Commission reporting ownership of 2,273,083 shares of
Common Stock with shared voting and dispositive power with respect to
2,100,545 shares and sole voting and dispositive power with respect to
172,538 shares. Mr. Rubenstein shares voting and dispositive power with
respect to 2,100,545 shares held by Wheatley Partners II, LP, a limited
partnership in which Mr. Rubenstein is a general partner, and disclaims
beneficial ownership of these shares except to the extent of his equity
interest therein. Mr. Rubenstein's business address is c/o Wheatley
Partners II, LP, 80 Cuttermill Road, Suite 311, Great Neck, NY 11021.
(18) Wheatley Partners II, LP filed a Schedule 13G dated February 14, 2001 with
the Securities Exchange Commission reporting ownership of 2,100,545 shares
of Common Stock with sole voting and dispositive power with respect to such
shares. The business address of Wheatley Partners II, LP is 80 Cuttermill
Road, Suite 311, Great Neck, NY 11021.
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EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation paid by Cepheid during 1999
and 2000 to the Chief Executive Officer, to the Company's four other most highly
compensated executive officers and certain other executive officers included
pursuant to the rules and regulations of the Securities and Exchange Commission
(the "Named Executive Officers").
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
--------------------------------- ------------
NUMBER OF
OTHER SECURITIES
ANNUAL UNDERLYING ALL OTHER
NAME AND POSITION YEAR SALARY BONUS COMPENSATION OPTIONS COMPENSATION($)(1)
----------------- ---- -------- ------- ------------ ------------ ------------------
Thomas L. Gutshall.......... 2000 $233,100 -- -- -- $1,465
Chairman of the Board and 1999 $167,500 -- -- -- $1,685
Chief Executive Officer
Kurt Petersen, Ph.D. ....... 2000 $197,213 -- -- -- $ 414
President and Chief 1999 $166,209 -- -- -- $ 691
Operating Officer
M. Allen Northrup, Ph.D. ... 2000 $177,405 $53,280 -- -- $ 234
Vice President, Research 1999 $157,987 $64,625 -- -- $ 383
and Chief Technical
Officer
Catherine A. Smith.......... 2000 $165,592 -- -- -- $ 142
Vice President, Finance 1999 $140,000 -- -- -- $ 184
and Chief Financial
Officer
- ---------------
(1) Value of employee life insurance in excess of $50,000.
STOCK OPTIONS GRANTED IN THE FISCAL YEAR ENDED DECEMBER 31, 2000
The following table sets forth information with respect to stock options
granted during the fiscal year ended December 31, 2000 to each of the named
executive officers. All options were granted under Cepheid's 1997 Stock Option
Plan. The following options are immediately exercisable in full at the date of
grant, but shares purchased on exercise of unvested options are subject to a
repurchase right in favor of the Company that entitles the Company to repurchase
unvested shares at their original exercise price on termination of the
employee's services with the Company. The repurchase right lapses ratably over a
period of twelve months, thirty-six months or forty-eight months. Under certain
circumstances the vesting of options, and consequently the lapse of the
repurchase right, may be accelerated.
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The percentage of options granted is based on an aggregate of 1,016,550
options granted by Cepheid during the fiscal year ended December 31, 2000 to
Cepheid's employees, including the named executive officers. The potential
realizable value amounts in the last two columns of the following chart
represent hypothetical gains that could be achieved for the respective options
if exercised at the end of the option term assuming an initial price equal to
$6.00 (the price at which the Company's Common Stock was first sold to the
public). The assumed 5% and 10% annual rates of stock price appreciation from
the date of grant to the end of the option term are provided in accordance with
rules of the Securities and Exchange Commission and do not represent the
Company's estimate or projection of the future Common Stock price. Actual gains,
if any, on stock option exercises are dependent on the future performance of the
Common Stock, overall market conditions and the option holder's continued
employment through the vesting period.
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
-------------------------------------------------- VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERMS
OPTIONS EMPLOYEES IN PRICE EXPIRATION ----------------------
NAME GRANTED FISCAL YEAR PER SHARE DATE 5% 10%
---- ---------- ------------ --------- ---------- --------- ---------
Thomas L. Gutshall............ 50,000 $1.50 2/16/2010 $413,669 $632,285
50,000 $8.50 9/27/2010 $ 63,669 $282,385
Kurt Petersen, Ph.D. ......... 50,000 $8.50 9/27/2010 $ 63,669 $282,385
M. Allen Northrup, Ph.D. ..... -- -- -- -- -- --
Catherine A. Smith............ 10,000 $1.50 2/16/2010 $ 82,734 $140,625
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 2000 AND FISCAL-YEAR END OPTION
VALUES
The following table sets forth certain information regarding exercised
stock options during the fiscal year ended December 31, 2000 and unexercised
options held as of December 31, 2000 by each of the named executive officers.
The Company granted all options under the 1997 Stock Option Plan. These options
are immediately exercisable in full at the date of grant, but shares purchased
on exercise of unvested options are subject to a repurchase right in favor of
the Company that entitles the Company to repurchase unvested shares at their
original exercise price on termination of the employee's services with the
Company. The repurchase right lapses ratably over a period of twelve months,
thirty-six months or forty-eight months. Under certain circumstances the vesting
of options, and consequently the lapse of the repurchase right, may be
accelerated. The value realized is based on the fair market value of the
underlying securities as of the date of exercise, minus the per share exercise
price, multiplied by the number of shares underlying the option. The value of
unexercised in-the-money options are based on a value of $8.44 per share, the
last reported sale price of the Company's Common Stock on the Nasdaq National
Market on December 31, 2000, minus the per share exercise price, multiplied by
the number of shares underlying the option.
NUMBER OF NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE MONEY OPTIONS AT
ACQUIRED OPTIONS AT FISCAL YEAR-END FISCAL YEAR-END(2)
ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------- ----------- ----------- ------------- ----------- -------------
Thomas L. Gutshall........... -- -- 100,000 0 $347,000 --
Kurt Petersen, Ph.D. ........ -- -- 50,000 0 -- --
M. Allen Northrup, Ph.D. .... -- -- -- -- -- --
Catherine A. Smith........... 10,000 $45,000 -- -- -- --
- ---------------
(1) Upon exercise of the options, the option holder did not receive the amount
reported under the column "Value Realized." The amounts reported under the
column "Value Realized" merely reflect the amount by which the deemed fair
market value of our Common Stock on the date the option was exercised
exceeded the exercise price of the option. The option holder does not
realize any cash until the shares issued upon exercise of the options are
sold.
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(2) These values have been calculated on the basis of the fair market value of
our Common Stock on December 29, 2000, $8.44, less the applicable exercise
price per share, multiplied by the number of shares underlying the options.
COMPENSATION AND OTHER TRANSACTIONS WITH OFFICERS AND DIRECTORS
For information concerning compensation and severance agreements and other
transactions between the Company and certain executive officers and directors,
see "Executive Compensation," "Director Compensation," "Related Party
Transactions" and "Compensation Committee Interlocks and Insider Participation
Interlocks".
AUDIT COMMITTEE REPORT
Under the guidance of a written charter adopted by the Board of Directors,
the purpose of the Audit Committee is to monitor the integrity of the financial
statements of the company, oversee the independence of the company's independent
auditor, and recommend to the Board the selection of the independent auditor
responsible for making recommendations to the Board regarding the selection of
independent accountants. Each of the members of the Audit Committee meets the
independence requirements of NASDAQ. A copy of the charter is included in
Appendix A to this proxy statement.
Management has the primary responsibility for the system of internal
controls and the financial reporting process. The independent accountants have
the responsibility to express an opinion on the financial statements based on an
audit conducted in accordance with generally accepted auditing standards. The
Audit Committee has the responsibility to monitor and oversee these processes.
In this context and in connection with the audited financial statements
contained in the Company's Annual Report on Form 10-K, the Audit Committee:
- reviewed and discussed the audited financial statements with the
Company's management;
- discussed with Ernst & Young LLP, the Company's independent auditors, the
matters required to be discussed by Statement of Auditing Standards No.
61, Communication with Audit Committees, as amended by Statement of
Auditing Standards No. 90, Audit Committee Communications;
- reviewed the written disclosures and the letter from Ernst & Young LLP
required by the Independence Standards Board Standard No. 1, Independence
Discussions with Audit Committees, discussed with the auditors their
independence, and concluded that the nonaudit service performed by Ernst
& Young LLP are compatible with maintaining their independence;
- based on the foregoing reviews and discussions, recommended to the Board
of Directors that the audited financial statements be included in the
Company's 2000 Annual Report on Form 10-K for the fiscal year ended
December 31, 2000 filed with the Securities and Exchange Commission; and
- instructed the independent auditor that the Committee expects to be
advised if there are any subjects that require special attention.
AUDIT COMMITTEE
Gerald S. Casilli
Cristina H. Kepner
Ernest Mario, Ph.D.
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RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
Ernst & Young LLP has been the independent accounting firm that audits the
financial statements of the Company since its inception. In accordance with
standing policy, Ernst & Young LLP periodically changes the personnel who work
on the audit.
In addition to performing the audit of the Company's consolidated financial
statements, Ernst & Young LLP provided various other services during 2000. The
aggregate fees billed for 2000 for each of the following categories of services
are set forth below:
Audit and review of the Company's 2000 financial
statements.............................................. $171,000
Audit-related services.................................... $318,000
All other services........................................ $ 7,000
Ernst & Young LLP did not provide any services related to financial
information systems design and implementation during 2000.
"All other services" includes (i) tax planning and the preparation of tax
returns of the Company, (ii) acquisitions and due diligence reviews and
integration services, and (iii) evaluating the effects of various accounting
issues and changes in professional standards.
The Audit Committee reviews summaries of the services provided by Ernst &
Young LLP and the related fees and has considered whether the provision of
non-audit services is compatible with maintaining the independence of Ernst &
Young LLP.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee") was
formed in 1998 and is responsible for reviewing the compensation and benefits
for Cepheid's executive officers, as well as supervising and making
recommendations to the Board on compensation matters generally. The Committee
also administers Cepheid's stock option plans and makes grants to executive
officers under the 1997 Stock Plan. Prior to 1998, compensation decisions and
grants of stock options were made by the Board. The current members of the
Compensation Committee are Dean O. Morton and Hollings C. Renton, each of whom
is a non-employee director within the meaning of Section 16 of the Exchange Act,
and an "outside director" within the meaning of Section 162(m) of the Internal
Revenue Code.
COMPENSATION PHILOSOPHY
The Committee's compensation philosophy is to provide cash and equity
incentives to Cepheid's executive officers and other employees to:
- attract, retain and motivate highly qualified executive officers and
employees who contribute to the long-term success of Cepheid;
- align the compensation of executive officers with business objectives and
performance; and
- align incentives for executive officers with the interests of
shareholders in maximizing value.
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ELEMENTS OF COMPENSATION
The compensation for executive officers is based on two elements: Base
Compensation and Long-Term Incentive Compensation.
Base Compensation for executives as well as other employees, is determined
on the basis of the level of responsibility, expertise and experience of the
executive officer, taking into account competitive conditions in the industry.
The compensation of the executive officers is reviewed annually by the committee
and increased on the basis of competitive conditions, performance, and Cepheid's
financial results for the previous year.
Long-Term Incentive Compensation is provided through grants of stock
options pursuant to Cepheid's 1997 Stock Plan. Ownership of Cepheid's Common
Stock is a key element of executive compensation and is intended to provide
additional incentives to the executive officers to maximize shareholder value.
Executive officers and other employees of Cepheid are eligible to participate in
the 1997 Stock Plan. The 1997 Stock Plan permits the Board of Directors or the
Committee to grant stock options to employees on such terms as the Board or the
Committee may determine. In determining the size of a stock option grant to a
new executive officer or other employee, the committee takes into account equity
participation by comparable employees within the Company, external competitive
circumstances and other relevant factors. Additional options may be granted to
current executive officers and employees to reward exceptional performance or to
provide additional unvested equity incentives. These options are subject to
four-year vesting and thus require the employee's continuing service to the
Company. The Committee believes that such stock plans align the interests of the
employees with the long-term interests of the stockholders.
EXECUTIVE COMPENSATION
Base Salary. Salaries for executive officers for 2000 were generally
determined on an individual basis by the Board of Directors at the time of hire
and were set at the mid-range of the market for comparable biotechnology
businesses.
Cash Bonus. M. Allen Northrup is eligible to receive an annual cash
performance bonus pursuant to his employment agreement with the Company. Only
Northrup received a bonus in the last two years pursuant to his specific
employment agreement. No other executive officers are eligible for a bonus.
Stock Options. Executive officers are eligible to receive annual
performance-based equity compensation in the form of stock options. The
Compensation Committee believes that equity-based compensation in the form of
stock options links the interests of executives with the long-term interests of
the Company's shareholders and encourages executives to remain employed by the
Company. Since 2000, the Company has issued stock options to executives pursuant
to the 1997 Stock Option Plan. Grants are awarded based on a number of factors,
including the Company's achievement of specific milestones, the individual's
level of responsibility, the amount and term of options already held by the
individual, the individual's contributions to the achievement of Cepheid's
financial and strategic objectives, and industry practices and norms.
CHIEF EXECUTIVE OFFICER COMPENSATION
Thomas L. Gutshall's base salary for 2000 was $235,000 and he received a
stock option to purchase 100,000 shares of the Company's Common Stock. For 2000,
Mr. Gutshall's compensation was based on factors described above for all
executive officers. For 2001, the Compensation Committee will evaluate his
compensation consistent with the factors described above for all executive
officers.
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COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(m)
Section 162(m) of the Code limits the tax deduction to $1 million for
compensation paid to certain executives of public companies. However,
performance-based compensation that has been approved by shareholders is
excluded from the $1 million limit if, among other requirements, the
compensation is payable only upon attainment of pre-established, objective
performance goals and the Board committee that establishes such goals consists
only of "outside directors." Additionally, stock options will qualify for the
performance-based exception where, among other requirements, the exercise price
of the option is not less than the fair market value of the stock on the date of
grant, and the plan includes a per-executive limitation on the number of shares
for which options may be granted during a specified period. All members of the
Compensation Committee qualify as outside directors. The 1997 Stock Option Plan
has been approved by the Company's shareholders in order that grants made
thereunder will meet the Section 162(m) requirements for "performance based"
compensation and be exempt from the limitations on deductibility. Historically,
the combined salary and bonus of each executive officer has been below the $1
million limit. The Compensation Committee's present intention is to grant future
compensation that does not exceed the limitations of Section 162(m), although
the Compensation Committee reserves the right to award compensation that does
not comply with these limits on a case-by-case basis.
COMPENSATION COMMITTEE
Dean O. Morton
Hollings C. Renton
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COMPANY STOCK PRICE PERFORMANCE
The following graph shows the total shareholder return of an investment of
$100 in cash on June 21, 2000, the date the Company's Common Stock began to
trade on the Nasdaq National Market, through December 29, 2000, the last date of
trading of fiscal 2000 for (i) the Company's Common Stock, (ii) the NASDAQ Stock
Market (U.S.) Index, and (iii) the NASDAQ Biotechnology Index. All values assume
reinvestment of the full amount of all dividends.
TOTAL RETURN TO STOCKHOLDERS
(ASSUMES $100 INVESTMENT ON 6/21/00)
(PERFORMANCE GRAPH)
--------------------------------------------------------------------------
6/21/2000 12/29/2000
--------------------------------------------------------------------------
Cepheid $100.00 $93.75
Nasdaq Biotechnology $100.00 $86.72
Nasdaq Composite $100.00 $60.79
--------------------------------------------------------------------------
This section is not "soliciting material," is not deemed "filed" with the
Securities and Exchange Commission and is not to be incorporated by reference in
any filing of the Company under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, whether made before or after the
date hereof and irrespective of any general incorporation language in any such
filing.
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RELATED PARTY TRANSACTIONS
During 1997, we loaned $138,000 to Dr. Northrup for the purchase of Common
Stock from the exercise of the employee's stock options. Dr. Northrup paid 4% of
the total exercise price, and we loaned Dr. Northrup the remaining 96% of the
purchase price. The loan bears interest at 7%.
In connection with the sale of Series B preferred stock in April 1998,
Invemed Associates acted as our agent and received a warrant to purchase 233,248
shares of our Common Stock at $2.58 per share, which was transferred to Invemed
Fund L.P., and Cristina H. Kepner received a warrant to purchase 6,232 shares of
our Common Stock at $2.58 per share.
We have entered into indemnification agreements with our directors and
executive officers for the indemnification of and advancement of expenses to
these persons to the fullest extent permitted by law. We also intend to enter
into these agreements with our future directors and executive officers.
We believe that all transactions between us and our officers, directors,
principal shareholders and other affiliates have been and will be on terms no
less favorable to us than could be obtained from unaffiliated third parties.
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PROPOSAL NO. 2
APPROVAL OF AMENDMENT TO 1997 STOCK OPTION PLAN
The Company's Board approved amendments to the Company's 1997 Stock Option
Plan (the "Stock Option Plan") to increase the number of shares of Common Stock
reserved for issuance under the Stock Option Plan by 1,875,000 shares
(representing less than 5% of the Company's outstanding Common Stock), from
3,592,732 shares to 5,467,732 shares. Shareholder approval of this amendment is
being sought (i) for the purpose of qualifying options as incentive stock
options ("ISOs"), as defined in Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"), and (ii) in accordance with the rules of the
Nasdaq National Market, to permit listing any of such shares purchased by
officers, directors or key employees whether or not the Company could otherwise
obtain listing without such approval. Since as of March 31, 2001, there are only
1,193,243 shares remaining available for issuance under the Stock Option Plan
(subject to annual increases in accordance with the Stock Option Plan), the
Board believes that adding shares to the Stock Option Plan is necessary to
permit the Company to continue to attract and retain quality employees by
providing them with appropriate equity incentives and to remain competitive in
the industry.
The Stock Option Plan was adopted by the Board on January 31, 1997.
Subsequent to its adoption, the Board and the shareholders approved an amendment
to the Stock Option Plan to allow for annual increases to the number of shares
available for issuance under the Stock Option Plan. This proposal seeks approval
of the shareholders of the increase in the number of shares reserved under the
Stock Option Plan to 5,467,732 shares.
Set forth below is a summary of the principal features of the Stock Option
Plan, which summary is qualified in its entirety by reference to the terms and
conditions of the Stock Option Plan. The Company will provide, without charge,
to each person to whom a proxy statement is delivered, upon request of such
person and by first class mail within one business day of receipt of such
request, a copy of the Stock Option Plan. Any such request should be directed as
follows: Cepheid, 1190 Borregas Avenue, Sunnyvale, California 94089-1302;
telephone number (408) 541-4191.
Purposes. The purposes of the Stock Option Plan are to (i) encourage
selected employees, directors and consultants to improve operations and increase
profits of the Company, (ii) encourage selected employees, directors and
consultants to accept or continue employment or association with the Company or
its affiliates, and (iii) increase the interest of selected employees, directors
and consultants in the Company's welfare through participation in the growth in
value of the Common Stock of the Company.
Number of Shares. The maximum number of shares that may be issued pursuant
to options granted under the Stock Option Plan is currently 3,592,732 shares.
The Stock Option Plan, however, provides for annual increases in the number of
shares available for issuance on the first business day of each calendar year
beginning January 1, 2001, equal to the lesser of 1,000,000 shares, 3% of the
outstanding shares of capital stock on the date of the annual increase or an
amount determined by the Board. On January 1, 2001, 792,732 shares were added to
the Stock Option Plan pursuant to the above provision.
Administration. The Stock Option Plan provides that it may be administered
by the Board or a committee appointed by the Board. Currently, the Stock Option
Plan is administered by the Compensation Committee, the members of which are
appointed by the Board. The Compensation Committee currently consists of Dean O.
Morton and Hollings C. Renton, who are members of the Board and are
"non-employee directors" as that term is defined in the rules promulgated under
the Exchange Act. Other than as disclosed in this Proxy Statement, members of
the Compensation Committee have no material relationships with the Company, its
employees or its affiliates. Subject to the terms of the Stock Option Plan, the
Committee determines the optionees, the number of shares subject to each option,
the exercise prices, the exercise periods and the dates of grants. The Committee
also has the authority to construe and interpret any of the provisions of the
Stock Option Plan or any options granted thereunder. Such interpretations are
binding on the Company and on the optionees. Because grants under the Stock
Option Plan are made at the discretion of the
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Committee, future grants under the Stock Option Plan are not determinable.
Options may be granted under the Stock Option Plan until January 31, 2007.
Eligibility. All full-time employees, officers, directors and consultants
of the Company or any affiliate of the Company are eligible to receive option
grants under the Stock Option Plan. On December 31, 2000, approximately 102
employees were eligible to receive options under the Stock Option Plan.
Both ISOs and nonqualified stock options ("NQOs") may be granted under the
Stock Option Plan. The Stock Option Plan limits the aggregate fair market value
(determined as of the time the option is granted) of the shares with respect to
which ISOs are exercisable for the first time by the optionee during any
calendar year to not more than $100,000. There is no similar limit on NQOs
granted under the Stock Option Plan.
Vesting. Subject to the provisions of the Stock Option Plan, the Committee
may determine the vesting schedule of each option and other terms and conditions
of exercisability under the Stock Option Plan. Options granted to date under the
Stock Option Plan generally vest ratably monthly for a period of one to four
years. Holders of options previously granted under the Stock Option Plan also
generally have been granted the right to exercise options prior to vesting with
the Company retaining the right to repurchase at the exercise price any shares
purchased if the optionee ceases to perform services for the Company. This right
of repurchase lapses in accordance with the vesting schedule. Vesting of options
granted under the Stock Option Plan will accelerate and the options will become
fully exercisable for 15 days in the event the Company is acquired, unless the
successor corporation assumes or substitutes equivalent options in their place.
Exercise Period. Options granted under the Stock Option Plan must be
exercised within ten years of the option grant date (or such shorter time as may
be specified in the grant documents evidencing the option), except that an ISO
granted to a person owing ten percent or more of the total combined voting power
of all classes of stock of the Company or of any parent or subsidiary of the
Company (a "Ten Percent Shareholder") must be exercised within five years of the
option grant date (or such shorter time as may be specified in the grant
documents evidencing the option).
Exercise Price. The Committee determines the exercise price of each option
granted under the Stock Option Plan. The exercise price must be at least equal
to the fair market value for ISOs and 85% of fair market value for NQOs (as
defined in the Stock Option Plan and determined as the closing price of the
Company's Common Stock on the Nasdaq National Market on the day of the grant)
per share of the Company's common stock on the date the option is granted,
except that the exercise price of an option granted to a Ten Percent Shareholder
must be at least equal to 110% of the fair market value per share on the date of
grant.
Payment of Exercise Price. To exercise an option, the optionee must deliver
to the Company an executed exercise notice and full payment for the shares being
purchased. With respect to all options under the Stock Option Plan as currently
in effect, payment may be made in cash or, where approved by the Committee in
its sole discretion and where permitted by law, by other specified forms of
payment.
Termination of Options. Under the Stock Option Plan, if an optionee's
association with the Company is terminated for any reason other than death or
disability, any outstanding option, to the extent (and only to the extent) that
it was exercisable on the date of such termination, may be exercised by the
optionee within the 90 days after such termination (or such shorter time as may
be specified in the grant evidencing the option), provided, that if such
exercise of the option would result in liability for the optionee under Section
16(b) of the Exchange Act, then such 90 day period automatically shall be
extended until the tenth day following the last date upon which optionee has any
liability under Section 16(b), but in no event later than the expiration date of
the option. A longer exercise period may apply in the event of termination of an
optionee's association with the Company because of the optionee's death or
disability. If an option granted pursuant to the Stock Option Plan expires or
terminates for any reason without being exercised in whole or in part, the
shares thereby released from such option will again become available for grant
and purchase under other options subsequently granted under the Stock Option
Plan.
Adjustment of Option Shares. If the Company issues additional securities to
raise capital or otherwise where consideration is received for the shares, no
adjustment is required in the number of shares or the
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exercise price per share for outstanding options under the Stock Option Plan. If
the number of outstanding shares of Common Stock of the Company is changed by a
stock dividend, stock split, reverse stock split, recapitalization, combination,
reclassification or similar change in the capital structure of the Company
without consideration, or if a substantial portion of the Company's assets are
distributed, without consideration, to the shareholders of the Company in a
spin-off or similar transaction, the number of shares of Common Stock available
for option grants under the Stock Option Plan and the number of shares and the
exercise price per share for each outstanding option will be proportionately
adjusted, subject to any required action by the Board or shareholders of the
Company.
Assumption or Substitution of Options; Acceleration of Vesting for Options
Not Assumed or Substituted. Under the Stock Option Plan, in the event of a
merger or consolidation in which the Company is not the surviving corporation or
the sale of substantially all of the assets of the Company, any or all
outstanding options may be assumed or replaced by the successor corporation. In
the event such successor corporation, if any, refuses to assume or substitute
options, the options will become fully-exercisable for a period of 15 days.
Amendment and Termination of the Stock Option Plan. The Committee may amend
or terminate the Stock Option Plan at any time and in any respect, including
modifying the form of the grant or the exercise notice, except that the
Committee cannot, without the approval of the shareholders of the Company, make
changes which would require shareholder approval under the Code. No amendment of
the Stock Option Plan may adversely affect any outstanding option or unexercised
portion thereof without the optionee's written consent.
Outstanding Options Under The Stock Option Plan. The following information
with respect to outstanding options under the Stock Option Plan is provided as
of December 31, 2000. A total of 68 persons held options under the Stock Option
Plan to purchase an aggregate of 754,315 shares of Common Stock (including both
ISOs and NQOs), with a weighted average exercise price of $5.30 per share. There
are 622,616 shares of Common Stock available for future grants under the Stock
Option Plan. Over the term of the Stock Option Plan, the following Named
Executive Officers (as defined in "Executive Compensation," above) have been
granted options to purchase shares of Common Stock under the Stock Option Plan:
Thomas L. Gutshall, Chairman of the Board and Chief Executive Officer, 100,000
shares; Kurt Petersen, Ph.D., President and Chief Operating Officer, 50,000
shares; and Catherine A. Smith, Vice President, Finance and Chief Financial
Officer, 268,000 shares. In addition, the following non-executive directors have
been granted options to purchase shares of Common Stock under the Stock Option
Plan: Gerald S. Casilli, 10,000 shares; Ernest Mario, Ph.D., 48,000 shares; Dean
O. Morton, 10,000 shares; and Hollings C. Renton, 48,000 shares.
New Plan Benefits. The amounts of future option grants under the Stock
Option Plan to (i) the Company's Chief Executive Officer, (ii) the Company's
four most highly compensated executive officers (other than the Chief Executive
Officer) who were serving as executive officers at the end of fiscal 2000, (iii)
all current executive officers as a group, (iv) all current directors who are
not executive officers as a group, and (v) all employees, including all officers
who are not executive officers, as a group, are not determinable because, under
the terms of the Stock Option Plan, such grants are made in the discretion of
the Committee. Future option exercise prices under the Stock Option Plan are not
determinable because they are based upon the fair market value of the Company's
Common Stock on the date of grant.
CERTAIN UNITED STATES FEDERAL INCOME TAX INFORMATION
THE FOLLOWING SUMMARY OF FEDERAL INCOME TAX CONSEQUENCES IS BASED UPON
EXISTING STATUTES, REGULATIONS AND INTERPRETATIONS THEREOF. THE APPLICABLE RULES
ARE COMPLEX, AND INCOME TAX CONSEQUENCES MAY VARY DEPENDING UPON THE PARTICULAR
CIRCUMSTANCES OF EACH PLAN PARTICIPANT. THIS PROXY STATEMENT DESCRIBES FEDERAL
INCOME TAX CONSEQUENCES OF GENERAL APPLICABILITY BUT DOES NOT PURPORT TO
DESCRIBE PARTICULAR CONSEQUENCES TO EACH INDIVIDUAL PLAN PARTICIPANT OR FOREIGN,
STATE OR LOCAL INCOME TAX CONSEQUENCES, WHICH MAY DIFFER FROM UNITED STATES
FEDERAL INCOME TAX CONSEQUENCES.
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INCENTIVE STOCK OPTIONS
Award; Exercise. ISOs are intended to constitute "incentive stock options"
within the meaning of Section 422 of the Code. ISOs may be granted only to
employees of the Company (including directors who are also employees). An
optionee does not recognize taxable income upon either the grant or exercise of
an ISO. However, the excess of the fair market value of the shares purchased
upon exercise over the option exercise price (the "Option Spread") is includible
in the optionee's "alternative minimum taxable income" ("AMTI") for purposes of
the alternative minimum tax ("AMT"). The Option Spread is generally measured on
the date of exercise and is includible in AMTI in the year of exercise. Special
rules regarding the time of AMTI inclusion may apply for shares subject to a
repurchase right or other "substantial risk of forfeiture."
Sale Of Option Shares. If an optionee holds the shares purchased under an
ISO for at least two years from the date the ISO was granted and for at least
one year from the date the ISO was exercised, then any gain from a sale of the
shares other than to the Company is taxable as long-term capital gain and will
be taxed at certain lower rates (if held for longer periods). Under these
circumstances, the Company would not be entitled to a tax deduction at the time
the ISO is exercised or at the time the stock is sold. In general, if an
optionee disposes of stock acquired pursuant to an ISO before the end of the
required holding periods other than in certain tax-free exchanges (a
"Disqualifying Disposition"), then the Option Spread (or, if the disposition is
a taxable sale or exchange and the gain realized is less than the Option Spread,
the amount of gain realized) is taxable as ordinary income, and the Company is
entitled to a corresponding tax deduction. Such income is subject to information
reporting requirements and may become subject to withholding. Gain from a
Disqualifying Disposition in excess of the amount required to be recognized as
ordinary income is capital gain. Optionees are required to notify the Company
immediately prior to making a Disqualifying Disposition. If stock is sold to the
Company rather than to a third party, the sale may not produce capital gain or
loss. A sale of shares to the Company will constitute a redemption of such
shares which could be taxable as a dividend unless the redemption is "not
essentially equivalent to a dividend" within the meaning of the Code. The timing
and amount of income from a Disqualifying Disposition and the beginning of the
optionee's holding period for determining whether capital gain or loss is
long-term or short-term may be affected if option stock is acquired subject to a
repurchase right or other "substantial risk of forfeiture."
The present position of the Internal Revenue Service ("IRS") is that, with
respect to ISOs exercised before January 1, 2003, income and employment tax
withholding taxes are not imposed upon the exercise of an ISO or the sale of ISO
shares. The IRS has not stated its position with respect to ISOs exercised after
that date, and may decide to impose withholding.
Exercise of ISOs With Company Stock. An optionee may pay for all or part of
the exercise price of an ISO with stock of the Company acquired under an ISO or
under a qualified employee stock purchase plan (collectively, "statutory option
stock"), or with stock that was acquired by other means such as through the
exercise of an NQO or through purchase on the open market. If the holding
periods with respect to the statutory option stock are satisfied, or the stock
was acquired by other means, then the optionee will not have taxable gain or
deductible loss on the surrendered shares. Instead, shares of newly acquired
statutory option stock that are equal in value to the fair market value of the
payment shares being surrendered are treated as if they had been substituted for
the surrendered payment shares in a stock for stock tax-free exchange, taking as
their basis the basis that the optionee had in the surrendered shares. Special
holding period and additional basis rules apply where previously acquired stock
is used to exercise an ISO.
If, however, the surrendered shares are statutory option stock with respect
to which the Disqualifying Disposition holding periods are not satisfied, then
the use of that statutory option stock to pay for new statutory option stock
will constitute a Disqualifying Disposition of the surrendered statutory option
stock that will result in the recognition of compensation income under the
Disqualified Disposition rules discussed above. Any additional appreciation in
the value of the stock that is not taxed as compensation income under the
Disqualified Disposition rules is subject to the rules applicable to a stock for
stock tax-free exchange. The newly received shares of statutory option stock
that are equal in value to the fair market value of the surrendered statutory
option stock will have the same basis as the surrendered statutory option stock
increased by any reported compensation income as a result of the Disqualifying
Disposition.
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NONQUALIFIED STOCK OPTIONS
Award; Exercise. An optionee is not taxable upon the award of an NQO.
Federal income tax consequences upon exercise will depend upon whether the
shares thereby acquired are subject to a "substantial risk of forfeiture." If
the shares are not subject to a substantial risk of forfeiture, or if they are
so restricted and the optionee files an election under Section 83(b) of the Code
(a "Section 83(b) Election") with respect to the shares, the optionee will have
ordinary income at the time of exercise measured by the Option Spread on the
exercise date. The optionee's tax basis in the shares will be the fair market
value of the shares on the date of exercise, and the holding period for purposes
of determining whether capital gain or loss upon sale is long-term or short-term
also will begin on the date that the shares are acquired pursuant to the
exercise of the NQO or, in the case of a Section 83(b) Election, just after that
date. If the shares are subject to a substantial risk of forfeiture and no
Section 83(b) Election is filed, the optionee will not be taxable upon exercise,
but instead will have ordinary income on the date the restrictions lapse in an
amount equal to the difference between the amount paid for the shares under the
NQO and their fair market value as of the date of lapse. In addition, the
optionee's holding period will begin on the date of the lapse.
Whether or not the shares are subject to a substantial risk of forfeiture,
the amount of ordinary income taxable to an optionee who was an employee at the
time of grant constitutes "supplemental wages" subject to withholding of income
and employment taxes by the Company, and the Company receives a corresponding
tax deduction.
Sale Of Option Shares. Upon sale, other than to the Company, of shares
acquired under an NQO, an optionee generally will recognize capital gain or loss
to the extent of the difference between the sale price and the optionee's tax
basis in the shares, which will be long-term gain or loss if the employee's
holding period in the shares is more than one year. Certain reduced capital
gains rates apply if the shares are held for longer periods. If stock is sold to
the Company, rather than to a third party, the sale may not produce capital gain
or loss. A sale of shares to the Company will constitute a redemption of such
shares, which could be taxable as a dividend unless the redemption is "not
essentially equivalent to a dividend" within the meaning of the Code.
Exercise of NQOs With Company Stock. An optionee may pay for all or part of
the exercise price of an NQO with statutory option stock, or with stock that was
acquired by other means such as through the exercise of an NQO or through
purchase on the open market. The optionee will not have taxable gain or
deductible loss on the surrendered shares. Instead, shares of newly acquired NQO
stock that are equal in value to the fair market value of the payment shares
being surrendered are treated as if they had been substituted for the
surrendered shares in a stock for stock exchange, taking as their basis and
holding period the basis and holding period that the optionee had in the
surrendered shares. The additional shares are treated as newly acquired and,
unless the newly acquired shares are subject to a substantial risk of forfeiture
and the optionee does not make a Section 83(b) Election are taxable to the
optionee at the time of exercise and have a basis equal to their fair market
value on the exercise date.
If the surrendered shares are statutory option stock, then the newly
acquired shares substituted for the statutory option shares should remain
subject to the federal income tax rules governing the surrendered shares.
Special holding period and basis rules will apply. The use of statutory option
stock with respect to which the Disqualifying Disposition holding periods are
not satisfied to pay for NQO shares will not constitute a Disqualifying
Disposition of the surrendered statutory option stock.
ERISA Information. The Company believes that the Stock Option Plan is not
subject to any of the provisions of the Employment Retirement Income Security
Act of 1974, as amended ("ERISA").
SPECIAL FEDERAL INCOME TAX CONSIDERATION DUE TO SHORT SWING PROFIT RULE
The potential liability of a person subject to Section 16(b) of the
Exchange Act to repay short-swing profits from the sale of shares acquired under
a Company plan constitutes a "substantial risk of forfeiture" within the meaning
of the above-described rules, which is generally treated as lapsing at such time
as the potential liability under Section 16(b) lapses. Persons subject to
Section 16 who would be required by Section 16(b) to repay profits from the sale
of stock acquired under a Company plan should consider whether
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to file a Section 83(b) Election at the time they acquire stock under a Company
plan in order to avoid deferral of the date that they are deemed to acquire
shares for federal income tax purposes.
REQUIRED VOTE
Approval of the amendment to the Stock Option Plan requires the affirmative
vote of a majority of the votes cast by shareholders who are present or
represented at a duly held shareholders meeting at which a quorum of the voting
power is represented. Abstentions will have the same effect as a negative vote
on this proposal. Broker non-votes will have no effect on the outcome of this
vote.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL
OF THE AMENDMENT TO THE STOCK OPTION PLAN
PROPOSAL NO. 3
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has selected Ernst & Young LLP, independent
auditors, to audit the financial statements of the Company for the fiscal year
ending December 31, 2001. Ernst & Young LLP has audited the Company's financial
statements since its inception. Representatives of Ernst & Young LLP are
expected to be present at the Annual Meeting and will have the opportunity to
make a statement if they desire to do so, and are expected to be available to
respond to appropriate questions.
REQUIRED VOTE
The affirmative vote of the holders of a majority of the shares of the
Company's Common Stock voting in person or by proxy on this proposal at the
Annual Meeting is required to ratify the appointment of the independent
auditors.
THE BOARD OF DIRECTORS RECOMMENDS THE SHAREHOLDERS VOTE
FOR THE RATIFICATION OF THE APPOINTMENT OF
ERNST & YOUNG LLP AS INDEPENDENT AUDITORS
SHAREHOLDER PROPOSALS
The deadline for submitting a shareholder proposal for inclusion in the
Company's proxy statement and form of proxy for the Company's 2002 annual
meeting of shareholders pursuant to Rule 14a-8 of the Securities and Exchange
Commission is February 12, 2002. Submissions must be received by the Company at
the Company's principal executive office. Any submissions not received in this
manner will not be considered. Shareholders wishing to submit proposals or
director nominations that are not to be included in such proxy statement and
proxy must do so in accordance with our Bylaws. Shareholders also are advised to
review the Company's Bylaws, which contain additional requirements with respect
to advance notice of shareholder proposals and director nominations.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16 of the Exchange Act requires the Company's directors and
officers, and persons who own more than 10% of the Company's Common Stock to
file initial reports of ownership and reports of changes in ownership with the
Securities and Exchange Commission and the Nasdaq National Market. Such persons
are required by Securities and Exchange Commission regulation to furnish the
Company with copies of all Section 16(a) forms that they file.
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Based solely on its review of the copies of such forms furnished to the
Company and written representations from the executive officers and directors,
the Company believes that all Section 16(a) filing requirements were met during
the Company's most recent fiscal year.
ADDITIONAL INFORMATION
The Company's Annual Report for the fiscal year ended December 31, 2000 is
being mailed with this Proxy Statement to shareholders of the Company.
OTHER BUSINESS
The Board does not presently intend to bring any other business before the
meeting, and, so far as is known to the Board, no matters are to be brought
before the meeting except as specified in the Notice of the Annual Meeting of
Shareholders. As to any business that may properly come before the meeting,
however, it is intended that proxies, in the form enclosed, will be voted in
respect thereof in accordance with the judgment of the persons voting such
proxies.
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APPENDIX A
AUDIT COMMITTEE CHARTER
ADOPTED BY THE BOARD OF DIRECTORS OF CEPHEID
Purposes:
The purposes of the audit committee are to:
Monitor the integrity of the financial statements of the company.
Oversee the independence of the company's independent auditor.
Recommend to the board of directors the selection of the independent
auditor, evaluate the independent auditor and, where appropriate, recommend
the replacement of the independent auditor; it being understood that the
independent auditor is ultimately accountable to the board of directors and
the audit committee, and that the board of directors and the audit
committee have the ultimate authority and responsibility to select,
evaluate and, where appropriate, replace the independent auditor (or to
propose the independent auditor for stockholder approval).
Composition:
The audit committee shall be composed of three or more directors, as
determined by the board of directors, each of whom shall be meet the
independence and financial literacy requirements of NASDAQ and at least one of
whom shall have accounting or related financial management expertise, as the
board of directors interprets such qualification in its business judgment.
Unless a chair is designated by the board of directors, the committee
members may appoint their own chair by majority vote.
Responsibilities:
The responsibilities of the audit committee are to:
Recommend to the board of directors the selection of the independent
auditor, which shall ultimately be accountable to the audit committee and
the board of directors.
Evaluate the written disclosures and the letter that the independent
auditor submits to the audit committee regarding the auditor's independence
in accordance with Independence Standards Board Standard No. 1, discuss
such reports with the auditor and, if so determined by the audit committee
in response to such reports, recommend that the board of directors take
appropriate action to oversee the independence of the independent auditor.
Discuss with the independent auditor the matters required to be
discussed by SAS 61, as it may be modified or supplemented.
Meet with management and the independent auditor to review and discuss
the annual financial statements and the report of the independent auditor
thereon and, to the extent the independent auditor or management brings any
such matters to the attention of the audit committee, to discuss
significant issues encountered in the course of the audit work, including
restrictions on the scope of activities, access to required information or
the adequacy of internal controls.
Review the management letter delivered by the independent auditor in
connection with the audit.
Following such reviews and discussions, if so determined by the audit
committee, recommend to the board of directors that the annual financial
statements be included in the company's annual report.
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Meet quarterly with management and the independent auditor to review
and discuss the quarterly financial statements; provided that this
responsibility may be delegated to the chairman of the audit committee.
Meet at least once each year in separate executive sessions with
management and the independent auditor to discuss matters that the
committee or either of these groups believes could significantly affect the
financial statements and should be discussed privately.
Have such meetings with management as the audit committee deems
appropriate to discuss significant financial risk exposures facing the
company, and steps management has taken to monitor and control such
exposures.
Review significant changes to the company's accounting principles and
practices proposed by the independent auditor or management.
Evaluate the performance of the independent auditor and, if so
determined by the audit committee, recommend to the board of directors
replacement of the independent auditor.
At the request of company counsel, review with company counsel legal
and regulatory matters that may have a significant impact on the company's
financial statements, compliance policies or programs.
Conduct or authorize such inquiries into matters within the
committee's scope of responsibility as the committee deems appropriate. The
committee shall be empowered to retain independent counsel and other
professionals to assist in the conduct of any such inquiries.
Provide minutes of audit committee meetings to the board of directors,
and report to the board of directors on any significant matters arising
from the committee's work.
At least annually, review and reassess this charter and, if
appropriate, recommend proposed changes to the board of directors.
Prepare the report required by the rules of the Securities and
Exchange Commission to be included in the company's annual proxy statement.
It is not the responsibility of the audit committee to plan or conduct
audits, or to determine whether the company's financial statements are complete
and accurate or in accordance with generally accepted accounting principles. It
is not the responsibility of the audit committee to conduct inquiries, to
resolve disagreements, if any, between management and the independent auditor,
or to assure compliance with laws, regulations or company compliance policies or
programs.
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APPENDIX B
1997 STOCK OPTION PLAN
OF
CEPHEID
(AS AMENDED)
1. PURPOSES OF THE PLAN
The purposes of the 1997 Stock Option Plan (the "Plan") of Cepheid, a
California corporation (the "Company"), are to:
(a) Encourage selected employees, directors and consultants to improve
operations and increase profits of the Company;
(b) Encourage selected employees, directors and consultants to accept
or continue employment or association with the Company or its Affiliates;
and
(c) Increase the interest of selected employees, directors and
consultants in the Company's welfare through participation in the growth in
value of the common stock of the Company (the "Common Stock").
Options granted under this Plan ("Options") may be "incentive stock
options" ("ISOs") intended to satisfy the requirements of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), or "nonqualified
options" ("NQOs").
2. ELIGIBLE PERSONS
Every person who at the date of grant of an Option is a full-time employee
of the Company or of any Affiliate (as defined below) of the Company is eligible
to receive NQOs or ISOs under this Plan. Every person who at the date of grant
is a consultant to, or non-employee director of, the Company or any Affiliate
(as defined below) of the Company is eligible to receive NQOs under this Plan.
The term "Affiliate" as used in the Plan means a parent or subsidiary
corporation as defined in the applicable provisions (currently Sections 424(e)
and (f), respectively) of the Code. The term "employee" includes an officer or
director who is an employee, of the Company. The term "consultant" includes
persons employed by, or otherwise affiliated with, a consultant.
3. STOCK SUBJECT TO THIS PLAN
Subject to the provisions of Section 6.1.1 of the Plan, the total number of
shares of stock which may be issued under options granted pursuant to this Plan
shall not exceed 4,675,000 shares of Common Stock plus an annual increase to be
added on the first business day of each calendar year beginning January 1, 2001,
equal to the lesser of (i) 1,000,000 shares, (ii) 3% of the outstanding shares
of capital stock on such date or (iii) an amount determined by the Board. The
shares covered by the portion of any grant under the Plan which expire
unexercised shall become available again for grants under the Plan.
4. ADMINISTRATION
(a) This Plan shall be administered by the Board of Directors of the
Company (the "Board") or, either in its entirety or only insofar as required
pursuant to Section 4(b) hereof, by a committee (the "Committee") of at least
two Board members to which administration of the Plan, or of part of the Plan,
is delegated (in either case, the "Administrator").
(b) From and after such time as the Company registers a class of equity
securities under Section 12 of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), it is intended that this Plan shall be administered in
accordance with the disinterested administration requirements of Rule 16b-3
promulgated by the Securities and Exchange Commission ("Rule 16b-3"), or any
successor rule thereto.
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(c) Subject to the other provisions of this Plan, the Administrator shall
have the authority, in its discretion: (i) to grant Options; (ii) to determine
the fair market value of the Common Stock subject to Options; (iii) to determine
the exercise price of Options granted; (iv) to determine the persons to whom,
and the time or times at which, Options shall be granted, and the number of
shares subject to each Option; (v) to interpret this Plan; (vi) to prescribe,
amend, and rescind rules and regulations relating to this Plan; (vii) to
determine the terms and provisions of each Option granted (which need not be
identical), including but not limited to, the time or times at which Options
shall be exercisable; (viii) with the consent of the optionee, to modify or
amend any Option; (ix) to defer (with the consent of the optionee) the exercise
date of any Option; (x) to authorize any person to execute on behalf of the
Company any instrument evidencing the grant of an Option; and (xi) to make all
other determinations deemed necessary or advisable for the administration of
this Plan. The Administrator may delegate nondiscretionary administrative duties
to such employees of the Company as it deems proper and may delegate the
authority to the President or Chief Financial Officer of the Company to grant
Options to employees of, or consultants to, the Company who are not officers or
directors of the Company and whose transactions in securities of the Company are
not subject to Section 16 of the Exchange Act.
(d) All questions of interpretation, implementation, and application of
this Plan shall be determined by the Administrator. Such determinations shall be
final and binding on all persons.
(e) With respect to persons subject to Section 16 of the Exchange Act, if
any, transactions under this Plan are intended to comply with the applicable
conditions of Rule 16b-3, or any successor rule thereto. To the extent any
provision of this Plan or action by the Administrator fails to so comply, it
shall be deemed null and void, to the extent permitted by law and deemed
advisable by the Administrator. Notwithstanding the above, it shall be the
responsibility of such persons, not of the Company or the Administrator, to
comply with the requirements of Section 16 of the Exchange Act; and neither the
Company nor the Administrator shall be liable if this Plan or any transaction
under this Plan fails to comply with the applicable conditions of Rule 16b-3 or
any successor rule thereto, or if any such person incurs any liability under
Section 16 of the Exchange Act.
5. GRANTING OF OPTIONS; OPTION AGREEMENT
(a) No Options shall be granted under this Plan after ten years from the
date of adoption of this Plan by the Board.
(b) Each Option shall be evidenced by a written stock option agreement, in
form satisfactory to the Company, executed by the Company and the person to whom
such Option is granted; provided, however, that the failure by the Company, the
optionee, or both to execute such an agreement shall not invalidate the granting
of an Option, although the exercise of each option shall be subject to Section
6.1.3.
(c) The stock option agreement shall specify whether each Option it
evidences is an NQO or an ISO.
(d) Subject to Section 6.3.3 with respect to ISOs, the Administrator may
approve the grant of Options under this Plan to persons who are expected to
become employees, directors or consultants of the Company, but are not
employees, directors or consultants at the date of approval.
6. TERMS AND CONDITIONS OF OPTIONS
Each Option granted under this Plan shall be subject to the terms and
conditions set forth in Section 6.1. NQOs shall be also subject to the terms and
conditions set forth in Section 6.2, but not those set forth in Section 6.3.
ISOs shall also be subject to the terms and conditions set forth in Section 6.3,
but not those set forth in Section 6.2.
6.1 Terms and Conditions to Which All Options Are Subject. All Options
granted under this Plan shall be subject to the following terms and conditions:
6.1.1 Changes in Capital Structure. Subject to Section 6.1.2, if the
stock of the Company is changed by reason of a stock split, reverse stock split,
stock dividend, or recapitalization, combination or
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reclassification, appropriate adjustments shall be made by the Board in (a) the
number and class of shares of stock subject to this Plan and each Option
outstanding under this Plan, and (b) the exercise price of each outstanding
Option; provided, however, that the Company shall not be required to issue
fractional shares as a result of any such adjustments. Each such adjustment
shall be subject to approval by the Board in its sole discretion.
6.1.2 Corporate Transactions.
(a) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Administrator shall notify the
Optionee at least thirty (30) days prior to such proposed action. To the extent
it has not been previously exercised, all Options will terminate immediately
prior to the consummation of such proposed action.
(b) Merger or Asset Sale. In the event of a merger of the Company
with or into another corporation, or the sale of substantially all of the assets
of the Company:
(i) Options. Each Option shall be assumed or an equivalent option
substituted by the successor corporation (including as a "successor" any
purchaser of substantially all of the assets of the Company) or a parent or
subsidiary of the successor corporation. In the event that the successor
corporation refuses to assume or substitute for the Option, the Optionee shall
have the right to exercise the Option as to all of the shares of Common Stock
covered by the Option, including Shares as to which it would not otherwise be
exercisable. If an Option is exercisable in lieu of assumption or substitution
in the event of a merger or sale of assets, the Administrator 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 shall terminate upon the
expiration of such period. For the purposes of this paragraph, the Option shall
be considered assumed if, following the merger or sale of assets, the option
confers the right to purchase or receive, for each share of Common Stock subject
to the Option immediately prior to the merger or sale of assets, the
consideration (whether stock, cash, or other securities or property) received in
the merger or sale of assets 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 or sale of assets was not solely common stock of the successor
corporation or its parent entity, the Administrator may, with the consent of the
successor corporation, provide for the consideration to be received upon the
exercise of the Option, for each Share of Common Stock subject to the Option, to
be solely common stock of the successor corporation or its parent entity equal
in fair market value to the per share consideration received by holders of
Common Stock in the merger or sale of assets.
(ii) Shares Subject to Right of Repurchase. Any Shares subject to
a Right of Repurchase of the Company shall be exchanged for the consideration
(whether stock, cash, or other securities or property) received in the merger or
asset sale by the holders of Common Stock for each share held on the effective
date of the transaction, as described in the preceding paragraph. If in such
exchange the Optionee receives shares of stock of the successor corporation or a
parent or subsidiary of such successor corporation, and if the successor
corporation has agreed to assume or substitute for Options as provided in the
preceding paragraph, such exchanged shares shall continue to be subject to a
Right of Repurchase as provided in the Optionee's Stock Option Plan stock
purchase agreement. If, as provided in the preceding paragraph, the Optionee
shall have the right to exercise an Option as to all of the shares of Common
Stock covered thereby, all Shares that are subject to a Right of Repurchase of
the Company shall be released from such Right of Repurchase and shall be fully
vested.
6.1.3 Time of Option Exercise. Subject to Section 5 and Section 6.3.4,
Options granted under this Plan shall be exercisable (a) immediately as of the
effective date of the stock option agreement granting the Option, or (b) in
accordance with a schedule related to the date of the grant of the Option, the
date of first employment, or such other date as may be set by the Administrator
(in any case, the "Vesting Base Date") and specified in the written stock option
agreement relating to such Option. In any case, no Option shall be exercisable
until a written stock option agreement in form satisfactory to the Company is
executed by the Company and the optionee.
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6.1.4 Option Grant Date. Except in the case of advance approvals
described in Section 5(d), the date of grant of an Option under this Plan shall
be the date as of which the Administrator, or its delegatee under Section 4(c),
approves the grant.
6.1.5 Nonassignability of Option Rights. No Option granted under this
Plan shall be assignable or otherwise transferable by the optionee except by
will or by the laws of descent and distribution. During the life of the
optionee, an Option shall be exercisable only by the optionee.
6.1.6 Payment. Except as provided below, payment in full, in cash,
shall be made for all stock purchased at the time written notice of exercise of
an Option is given to the Company, and proceeds of any payment shall constitute
general funds of the Company. At the time an Option is granted or exercised, the
Administrator, in the exercise of its absolute discretion after considering any
tax or accounting consequences, may authorize any one or more of the following
additional methods of payment:
(a) Acceptance of the optionee's full recourse promissory note for
all or part of the Option price, payable on such terms and bearing such interest
rate as determined by the Administrator (but in no event less than the minimum
interest rate specified under the Code at which no additional interest would be
imputed), which promissory note may be either secured or unsecured in such
manner as the Administrator shall approve (including, without limitation, by a
security interest in the shares of the Company); and
(b) Delivery by the optionee of Common Stock already owned by the
optionee for all or part of the Option price, provided the value (determined as
set forth in Section 6.1.11) of such Common Stock is equal on the date of
exercise to the Option price, or such portion thereof as the optionee is
authorized to pay by delivery of such stock; provided, however, that if an
optionee has exercised any portion of any Option granted by the Company by
delivery of Common Stock, the optionee may not, within six months following such
exercise, exercise any Option granted under this Plan by delivery of Common
Stock without the consent of the Administrator.
6.1.7 Termination of Employment.
(a) If for any reason other than death or disability, an optionee
ceases to be employed by the Company or any of its Affiliates (such event being
called a "Termination"), Options held at the date of Termination (to the extent
then exercisable) may be exercised in whole or in part at any time within three
months of the date of such Termination, or such other period of not less than
thirty days after the date of such Termination as is specified in the Option
Agreement (but in no event after the Expiration Date); provided, that if such
exercise of the Option would result in liability for the optionee under Section
16(b) of the Exchange Act, then such three-month period automatically shall be
extended until the tenth day following the last date upon which optionee has any
liability under Section 16(b) (but in no event after the Expiration Date).
(b) If an optionee dies while employed by the Company or an Affiliate
or within the period that the Option remains exercisable after Termination,
Options then held (to the extent then exercisable) may be exercised, in whole or
in part, by the optionee, by the optionee's personal representative, or by the
person to whom the Option is transferred by devise or the laws of descent and
distribution, at any time within twelve months after the death of the optionee,
or such other period of not less than six months from the date of Termination as
is specified in the Option Agreement (but in no event after the Expiration
Date).
(c) If an optionee ceases to be employed by the Company as a result
of his or her disability, the optionee may, but only within six (6) months from
the date of Termination (and in no event after the Expiration Date), exercise
the Option to the extent otherwise entitled to exercise it at the date of
Termination; provided, however, that if such disability is not a "disability" as
such term is defined in Section 22(e)(3) of the Code, in the case of an ISO such
ISO shall automatically convert to an NQO on the day three months and one day
following such Termination. To the extent that the optionee was not entitled to
exercise the Option at the date of Termination or if the optionee does not
exercise such Option to the extent so entitled within the time specified herein,
the Option shall terminate, and the Shares covered by such Option shall revert
to the Plan.
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(d) For purposes of this Section 6.1.7, "employment" includes service
as a director or as a consultant. For purposes of this Section 6.1.7, an
optionee's employment shall not be deemed to terminate by reason of sick leave,
military leave, or other leave of absence approved by the Administrator, if the
period of any such leave does not exceed 90 days or, if longer, if the
optionee's right to reemployment by the Company or any Affiliate is guaranteed
either contractually or by statute.
6.1.8 Repurchase of Stock. At the option of the Administrator, the
stock to be delivered pursuant to the exercise of any Option granted to an
employee, director or consultant under this Plan may be subject to a right of
repurchase in favor of the Company with respect to any employee, or director or
consultant whose employment, or director or consulting relationship with the
Company is terminated. Such right of repurchase either:
(a) shall be at the Option exercise price and (i) shall lapse at the
rate of at least 20% per year over five years from the date the Option is
granted (without regard to the date it becomes exercisable), and must be
exercised for cash or cancellation of purchase money indebtedness within 90 days
of such termination and (ii) if the right is assignable by the Company, the
assignee must pay the Company upon assignment of the right (unless the assignee
is a 100% owned subsidiary of the Company or is an Affiliate) cash equal to the
difference between the Option exercise price and the value (determined as set
forth in Section 6.1.11) of the stock to be purchased if the Option exercise
price is less than such value; or
(b) shall be at the higher of the Option exercise price or the value
(determined as set forth in Section 6.1.11) of the stock being purchased on the
date of termination, and must be exercised for cash or cancellation of purchase
money indebtedness within 90 days of termination of employment, and such right
shall terminate when the Company's securities become publicly traded.
Determination of the number of shares subject to any such right of
repurchase shall be made as of the date the employee's employment by, director's
director relationship with, or consultant's consulting relationship with, the
Company terminates, not as of the date that any Option granted to such employee,
director or consultant is thereafter exercised.
6.1.9 Withholding and Employment Taxes. At the time of exercise of an
Option or at such other time as the amount of such obligations becomes
determinable (the "Tax Date"), the optionee shall remit to the Company in cash
all applicable federal and state withholding and employment taxes. If authorized
by the Administrator in its sole discretion after considering any tax or
accounting consequences, an optionee may elect to (i) deliver a promissory note
on such terms as the Administrator deems appropriate, (ii) tender to the Company
previously owned shares of Stock or other securities of the Company, or (iii)
have shares of Common Stock which are acquired upon exercise of the Option
withheld by the Company to pay some or all of the amount of tax that is required
by law to be withheld by the Company as a result of the exercise of such Option,
subject to the following limitations:
(a) Any election pursuant to clause (iii) above by an optionee
subject to Section 16 of the Exchange Act shall either (x) be made at least six
months before the Tax Date and shall be irrevocable; or (y) shall be made in (or
made earlier to take effect in) any ten-day period beginning on the third
business day following the date of release for publication of the Company's
quarterly or annual summary statements of earnings and shall be subject to
approval by the Administrator, which approval may be given at any time after
such election has been made. In addition, in the case of (y), the Option shall
be held at least six months prior to the Tax Date.
(b) Any election pursuant to clause (ii) above, where the optionee is
tendering Common Stock issued pursuant to the exercise of an Option, shall
require that such shares be held at least six months prior to the Tax Date.
Any of the foregoing limitations may be waived (or additional
limitations may be imposed) by the Administrator, in its sole discretion, if the
Administrator determines that such foregoing limitations are not required (or
that such additional limitations are required) in order that the transaction
shall be exempt from Section 16(b) of the Exchange Act pursuant to Rule 16b-3,
or any successor rule thereto. In addition, any of the foregoing limitations may
be waived by the Administrator, in its sole discretion, if the Administrator
B-5
33
determines that Rule 16b-3, or any successor rule thereto, is not applicable to
the exercise of the Option by the optionee or for any other reason.
Any securities tendered or withheld in accordance with this Section
6.1.9 shall be valued by the Company as of the Tax Date.
6.1.10 Other Provisions. Each Option granted under this Plan may
contain such other terms, provisions, and conditions not inconsistent with this
Plan as may be determined by the Administrator, and each ISO granted under this
Plan shall include such provisions and conditions as are necessary to qualify
the Option as an "incentive stock option" within the meaning of Section 422 of
the Code. If Options provide for a right of first refusal in favor of the
Company with respect to stock acquired by employees, directors or consultants,
such Options shall provide that the right of first refusal shall terminate upon
the earlier of (i) the closing of the Company's initial registered public
offering to the public generally, or (ii) the date ten years after the grant
date as set forth in Section 6.1.4.
6.1.11 Determination of Value. For purposes of the Plan, the value of
Common Stock or other securities of the Company shall be determined as follows:
(a) If the stock of the Company 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 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 (or the largest such exchange) for the date the value is to
be determined (or if there are no sales for such date, then for the last
preceding business day on which there were sales), as reported in the Wall
Street Journal or similar publication.
(b) If the stock of the Company is regularly quoted by a recognized
securities dealer but selling prices are not reported, its fair market value
shall be the mean between the high bid and low asked prices for the stock on the
date the value is to be determined (or if there are no quoted prices for the
date of grant, then for the last preceding business day on which there were
quoted prices).
(c) In the absence of an established market for the stock, the fair
market value thereof shall be determined in good faith by the Administrator,
with reference to the Company's net worth, prospective earning power,
dividend-paying capacity, and other relevant factors, including the goodwill of
the Company, the economic outlook in the Company's industry, the Company's
position in the industry and its management, and the values of stock of other
corporations in the same or a similar line of business.
6.1.12 Option Term. Subject to Section 6.3.5, no Option shall be
exercisable more than ten years after the date of grant, or such lesser period
of time as is set forth in the stock option agreement (the end of the maximum
exercise period stated in the stock option agreement is referred to in this Plan
as the "Expiration Date").
6.1.13 Exercise Price. The exercise price of any Option granted to any
person who owns, directly or by attribution under the Code currently Section
424(d), stock possessing more than ten percent of the total combined voting
power of all classes of stock of the Company or of any Affiliate (a "Ten Percent
Shareholder") shall in no event be less than 110% of the fair market value
(determined in accordance with Section 6.1.11) of the stock covered by the
Option at the time the Option is granted.
6.2 Terms and Conditions to Which Only NQOs Are Subject. Options granted
under this Plan which are designated as NQOs shall be subject to the following
terms and conditions:
6.2.1 Exercise Price. Except as set forth in Section 6.1.13, the
exercise price of an NQO shall be not less than 85% of the fair market value
(determined in accordance with Section 6.1.11) of the stock subject to the
Option on the date of grant.
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34
6.3 Terms and Conditions to Which Only ISOs Are Subject. Options granted
under this Plan which are designated as ISOs shall be subject to the following
terms and conditions:
6.3.1 Exercise Price. Except as set forth in Section 6.1.13, the
exercise price of an ISO shall be determined in accordance with the applicable
provisions of the Code and shall in no event be less than the fair market value
(determined in accordance with Section 6.1.11) of the stock covered by the
Option at the time the Option is granted.
6.3.2 Disqualifying Dispositions. If stock acquired by exercise of an
ISO granted pursuant to this Plan is disposed of in a "disqualifying
disposition" within the meaning of Section 422 of the Code, the holder of the
stock immediately before the disposition shall promptly notify the Company in
writing of the date and terms of the disposition and shall provide such other
information regarding the Option as the Company may reasonably require.
6.3.3 Grant Date. If an ISO is granted in anticipation of employment as
provided in Section 5(d), the Option shall be deemed granted, without further
approval, on the date the grantee assumes the employment relationship forming
the basis for such grant, and, in addition, satisfies all requirements of this
Plan for Options granted on that date.
6.3.4 Vesting. Notwithstanding any other provision of this Plan, ISOs
granted under all incentive stock option plans of the Company and its
subsidiaries may not "vest" for more than $100,000 in fair market value of stock
(measured on the grant dates(s)) in any calendar year. For purposes of the
preceding sentence, an option "vests" when it first becomes exercisable. If, by
their terms, such ISOs taken together would vest to a greater extent in a
calendar year, and unless otherwise provided by the Administrator, the vesting
limitation described above shall be applied by deferring the exercisability of
those ISOs or portions of ISOs which have the highest per share exercise prices;
but in no event shall more than $100,000 in fair market value of stock (measured
on the grant date(s)) vest in any calendar year. The ISOs or portions of ISOs
whose exercisability is so deferred shall become exercisable on the first day of
the first subsequent calendar year during which they may be exercised, as
determined by applying these same principles and all other provisions of this
Plan including those relating to the expiration and termination of ISOs. In no
event, however, will the operation of this Section 6.3.4 cause an ISO to vest
before its terms or, having vested, cease to be vested.
6.3.5 Term. Notwithstanding Section 6.1.12, no ISO granted to any Ten
Percent Shareholder shall be exercisable more than five years after the date of
grant.
7. MANNER OF EXERCISE
(a) An optionee wishing to exercise an Option shall give written notice to
the Company at its principal executive office, to the attention of the officer
of the Company designated by the Administrator, accompanied by payment of the
exercise price as provided in Section 6.1.6. The date the Company receives
written notice of an exercise hereunder accompanied by payment of the exercise
price will be considered as the date such Option was exercised.
(b) Promptly after receipt of written notice of exercise of an Option, the
Company shall, without stock issue or transfer taxes to the optionee or other
person entitled to exercise the Option, deliver to the optionee or such other
person a certificate or certificates for the requisite number of shares of
stock. An optionee or permitted transferee of an optionee shall not have any
privileges as a shareholder with respect to any shares of stock covered by the
Option until the date of issuance (as evidenced by the appropriate entry on the
books of the Company or a duly authorized transfer agent) of such shares.
8. EMPLOYMENT OR CONSULTING RELATIONSHIP
Nothing in this Plan or any Option granted thereunder shall interfere with
or limit in any way the right of the Company or of any of its Affiliates to
terminate any optionee's employment or consulting at any time, nor confer upon
any optionee any right to continue in the employ of, or consult with, the
Company or any of its Affiliates.
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35
9. FINANCIAL INFORMATION
The Company shall provide to each optionee during the period such optionee
holds an outstanding Option, and to each holder of Common Stock acquired upon
exercise of Options granted under the Plan for so long as such person is a
holder of such Common Stock, annual financial statements of the Company as
prepared either by the Company or independent certified public accountants of
the Company. Such financial statements shall include, at a minimum, a balance
sheet and an income statement, and shall be delivered as soon as practicable
following the end of the Company's fiscal year.
10. CONDITIONS UPON ISSUANCE OF SHARES
Shares of Common Stock shall not be issued 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
"Securities Act").
11. NONEXCLUSIVITY OF THE PLAN
The adoption of the Plan shall not be construed as creating any limitations
on the power of the Company to adopt such other incentive arrangements as it may
deem desirable, including, without limitation, the granting of stock options
other than under the Plan.
12. MARKET STANDOFF
Each Optionee, if so requested by the Company or any representative of the
underwriters in connection with any registration of the offering of any
securities of the company under the Securities Act shall not sell or otherwise
transfer any shares of Common Stock acquired upon exercise of Options during the
180-day period following the effective date of a registration statement of the
company filed under the Securities Act; provided, however, that such restriction
shall apply only to the first two registration statements of the Company to
become effective under the Securities Act which includes securities to be sold
on behalf of the Company to the public in an underwritten public offering under
the Securities Act. The Company may impose stop-transfer instructions with
respect to securities subject to the foregoing restriction until the end of such
180-day period.
13. AMENDMENTS TO PLAN
The Board may at any time amend, alter, suspend or discontinue this Plan.
Without the consent of an optionee, no amendment, alteration, suspension or
discontinuance may adversely affect outstanding Options except to conform this
Plan and ISOs granted under this Plan to the requirements of federal or other
tax laws relating to incentive stock options. No amendment, alteration,
suspension or discontinuance shall require shareholder approval unless (a)
shareholder approval is required to preserve incentive stock option treatment
for federal income tax purposes, or (b) the Board otherwise concludes that
shareholder approval is advisable.
14. EFFECTIVE DATE OF PLAN
This Plan shall become effective upon adoption by the Board provided,
however, that no Option shall be exercisable unless and until written consent of
the shareholders of the Company, or approval of shareholders of the Company
voting at a validly called shareholders' meeting, is obtained within 12 months
after adoption by the Board. If such shareholder approval is not obtained within
such time, Options granted hereunder shall terminate and be of no force and
effect from and after expiration of such 12-month period. Options may be granted
and exercised under this Plan only after there has been compliance with all
applicable federal and state securities laws.
Plan adopted by the Board of Directors on January 31, 1997; amended on April 19,
2000, September 27, 2000 and March 20, 2001.
Plan approved by Shareholders on January 31, 1997; amended on May 10, 2000.
B-8
36
PROXY
CEPHEID
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
MAY 10, 2001
The undersigned shareholder of Cepheid (the "Company") hereby appoints
Thomas L. Gutshall and Catherine A. Smith, and each of them with full power of
substitution to each, the true and lawful attorneys, agents and proxyholders of
the undersigned, and hereby authorizes them to represent and vote, as specified
herein, all of the shares of Common Stock of the Company held of record by the
undersigned on April 29, 2001, at the Annual Meeting of Shareholders of the
Company to be held on June 12, 2001 (the "Annual Meeting") at 1:00 p.m. at
Cepheid's principal executive offices, 1190 Borregas Avenue, Sunnyvale,
California 94089-1302 and any adjournments or postponements thereof.
[X] Please mark votes as in this example
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED.
IN THE ABSENCE OF DIRECTION, THE SHARES WILL BE VOTED FOR THE PROPOSALS.
THE UNDERSIGNED ACKNOWLEDGES RECEIPT OF THE NOTICE OF ANNUAL MEETING OF
SHAREHOLDERS RELATING TO THE ANNUAL MEETING.
1. To elect two Class II directors of the Company to serve on the Board of
Directors for a three-year term. The Board of Directors intends to present
the following nominees for election as directors:
Vote FOR all the nominees [ ] Vote WITHHELD from all nominees [ ]
(except as directed to the contrary)
Gerald S. Casilli Cristina H. Kepner
INSTRUCTIONS: To withhold vote for any individual nominee, write the nominee's
name in the space provided below:
- --------------------------------------------------------------------------------
CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE
37
2. To consider and vote upon a proposal to amend the Company's 1997 Stock Option
Plan to increase the number of shares of Common Stock reserved for issuance
thereunder by 1,875,000 shares, from 3,592,732 shares to 5,467,732 shares.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. To ratify the appointment of Ernst & Young LLP as independent auditors of the
Company for the fiscal year ending December 31, 2001.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
Please sign exactly as name
appears hereon. Joint owners
should each sign. Trustees and
others acting in a
representative capacity should
indicate the capacity in which
they sign and give their full
title. If a corporation, please
have an authorized officer sign
and indicate the full corporate
name. If a partnership, please
sign in partnership name by an
authorized person.
Please mark, sign and date this
proxy and return it promptly
whether you plan to attend the
meeting or not. If you do
attend, you may vote in person
if you desire.
Signature:
--------------------------------------------------------------------- Date:
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----------------
Signature:
--------------------------------------------------------------------- Date:
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