SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
(Amendment no. )
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
[X] Definitive Proxy Statement Commission Only (as permitted by
[ ] Definitive Additional Materials Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
CHOLESTECH CORPORATION
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transactions applies:
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(2) Aggregate number of securities to which transactions applies:
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(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
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[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing party:
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(4) Date filed:
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CHOLESTECH CORPORATION
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Notice of Annual Meeting of Shareholders
To Be Held August 20, 1998
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TO THE SHAREHOLDERS OF CHOLESTECH CORPORATION:
Notice is hereby given that the Annual Meeting of Shareholders of CHOLESTECH
CORPORATION will be held at the Hotel Sofitel San Francisco Bay located at 223
Twin Dolphin Drive, Redwood City, California 94065, on Thursday, August 20,
1998, at 10:00 a.m. Pacific Time, for the following purposes:
1. To elect seven directors to serve until the next Annual Meeting of
Shareholders or until their successors are elected.
2. To approve an amendment to the Company's 1997 Stock Incentive Program
to increase the annual non-discretionary grant under such plan to the
Chairman of Board of Directors of the Company to 20,000 shares of Common
Stock per annum.
3. To ratify the appointment of PricewaterhouseCoopers LLP as independent
public accountants of the Company for the fiscal year ending March 26, 1999.
4. To transact such other business as may properly come before the
meeting or any adjournments thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice. Only shareholders of record at the close of
business on June 26, 1998 are entitled to notice of and to vote at the Annual
Meeting and any adjournments thereof.
All shareholders are cordially invited to attend the Annual Meeting in
person. However, to ensure your representation at the meeting, you are urged to
mark, sign, date and return the enclosed proxy card as promptly as possible in
the postage prepaid envelope enclosed for that purpose. You may revoke your
proxy in the manner described in the accompanying Proxy Statement at any time
before it has been voted at the Annual Meeting. Any shareholder attending the
Annual Meeting may vote in person even if he or she has returned a proxy.
By Order of the Board of Directors,
/s/ Andrea J. Tiller
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Andrea J. Tiller
Chief Financial Officer
July 23, 1998
YOUR VOTE IS IMPORTANT
IN ORDER TO ASSURE YOUR REPRESENTATION AT THE MEETING, YOU ARE REQUESTED TO
COMPLETE, SIGN AND DATE THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE AND RETURN IT
IN THE ENCLOSED ENVELOPE.
CHOLESTECH CORPORATION
PROXY STATEMENT
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INFORMATION CONCERNING SOLICITATION AND VOTING
General
This Proxy Statement and the accompanying Notice of Annual Meeting of
Shareholders and Proxy Card are being furnished to the shareholders of
Cholestech Corporation ("Cholestech" or the "Company") in connection with the
solicitation of proxies by the Board of Directors of the Company for use at the
1998 Annual Meeting of Shareholders of the Company (the "Annual Meeting") to be
held at the Hotel Sofitel San Francisco Bay located at 223 Twin Dolphin Drive,
Redwood City, California 94065, on Thursday, August 20, 1998 at 10:00 a.m.
Pacific Time. The Company's principle executive office is located at 3347
Investment Boulevard, Hayward, California 94545, and its telephone number at
that address is (510) 732-7200.
These proxy solicitation materials and the Annual Report to Shareholders for
the fiscal year ended March 27, 1998, including financial statements, were first
mailed on or about July 23, 1998 to all shareholders entitled to vote at the
meeting.
Record Date and Voting Securities
Shareholders of record at the close of business on June 26, 1998 of the
Company's Common Stock, no par value ("Common Stock"), are entitled to notice of
and to vote at the Annual Meeting and any adjournment thereof. On that date,
11,468,207 shares of Common Stock were outstanding and entitled to vote and held
by approximately 265 shareholders. No shares of the Company's Preferred Stock
were outstanding.
Revocability of Proxy
A proxy may be revoked by a shareholder prior to its use at the Annual
Meeting by written notice to the Secretary of the Company, by submission of
another proxy bearing a later date or by voting in person at the Annual Meeting.
Such notice or later proxy will not affect a vote on any matter taken prior to
the receipt thereof by the Company. The mere presence at the Annual Meeting of
the shareholder who has appointed a proxy will not revoke the previously
delivered proxy.
Voting and Solicitation
Each shareholder is entitled to one vote for each share held. Each
shareholder voting in the election of directors (Proposal One) may cumulate such
shareholder's votes and give one candidate a number of votes equal to the number
of directors to be elected multiplied by the number of shares held by such
shareholder, or distribute such shareholder's votes on the same principle among
as many candidates as the shareholder may select, provided that votes cannot be
cast for more candidates than the number of directors to be elected (seven).
However, no shareholder shall be entitled to cumulate votes unless the
candidate's name has been placed in nomination prior to the voting and the
shareholder, or any other shareholder, has given notice at the meeting, prior to
the voting, of such shareholder's intention to cumulate the shareholder's votes.
On all other matters, each share has one vote. A quorum comprising the holders
of the majority of the outstanding shares of Common Stock on the record date
must be present or represented for the transaction of business at the Annual
Meeting. Abstentions and broker non-votes will be counted in establishing the
quorum.
The cost of soliciting votes will be borne by the Company. The Company may
reimburse brokerage firms and other persons representing beneficial owners for
their expenses in forwarding solicitation material to such beneficial owners.
Proxies may also be solicited by certain of the Company's directors, officers
and employees, without additional compensation, personally or by telephone or by
facsimile.
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Deadline of Receipt of Shareholder Proposals
Proposals of shareholders of the Company that are intended to be presented by
such shareholders at the Company's 1999 Annual Meeting of Shareholders must be
received by the Company no later than March 19, 1999 in order that they may be
considered for inclusion in the proxy statement and form of proxy relating to
the meeting.
PROPOSAL ONE
ELECTION OF DIRECTORS
General
A board of seven directors is to be elected at the Annual Meeting. Unless
otherwise instructed, the proxy holders will vote the proxies received by them
for management's seven nominees named below, all of who are presently directors
of the Company. In the event that any management nominee is unable or declines
to serve as a director at the time of the Annual Meeting, the proxies will be
voted for a nominee who shall be designated by the present Board of Directors to
fill the vacancy. In the event that additional persons are nominated for
election as directors, the proxy holders intend to vote all proxies received by
them in such a manner (in accordance with cumulative voting) as will assure the
election of as many of the nominees listed below as possible, and, in such
event, the specific nominees to be voted for will be determined by the proxy
holders. The Company is not aware of any nominee who will be unable or will
decline to serve as a director. The term office for each person elected as a
director will continue until the next Annual Meeting of Shareholders or until
such director's successor has been duly elected and qualified.
Vote Required and Board Recommendation
If a quorum is present and voting, the seven nominees receiving the highest
number of affirmative votes of the shares entitled to be voted shall be elected
to the Board of Directors. Abstentions and "broker non-votes" are not counted in
the election of directors.
Nominees
The names of the nominees and certain information about them are set forth
below.
Director
Name of Nominee Age Position with the Company Since
- -------------------------------------------- ----- ------------------------------------------------- ---------
Harvey S. Sadow, Ph.D.(1)(2)(3)(4) ......... 75 Chairman of the Board 1990
Warren E. Pinckert II(3)(4) ................ 55 President, Chief Executive Officer and Director 1993
Joseph Buchman M.D.(1) ..................... 68 Director 1994
John L. Castello(2)(3)(4) .................. 62 Director 1993
John H. Landon ............................. 57 Director 1997
H. R. Shepherd(1) .......................... 77 Director 1994
Larry Y. Wilson ............................ 48 Director 1998
<FN>
- ------------
(1) Member of the Audit Committee
(2) Member of the Compensation Committee
(3) Member of the Governance Committee
(4) Member of the Nominating Committee
</FN>
There is no family relationship between any director or executive officer of
the Company.
Harvey S. Sadow, Ph.D. has been a director of the Company since January 1990
and has served as Chairman of the Board since 1992. Dr. Sadow was President and
Chief Executive Officer of Boehringer Ingelheim Corporation, a health care
company, from 1971 to 1988, and of Boehringer Ingelheim Pharmaceuticals, Inc.,
an ethical specialty pharmaceutical company, from 1984 to 1988. In 1988, upon
his retirement, Dr. Sadow became Chairman of the Board of Directors of both
Boehringer Ingelheim Corporation and Boehringer Ingelheim Pharmaceuticals, Inc.
Dr. Sadow retired as Chairman of both companies in 1990 but remained on their
Boards of Directors until 1992. Dr. Sadow is Chairman of Acacia
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Biosciences, Inc., a drug discovery technology company; Chairman of Cortex
Pharmaceuticals, Inc., a neuroscience company; a director of Penederm
Incorporated, a developer and marketer of specialized dermatology products; a
director of Anika Therapeutics, Inc., a hyaluronic acid technology specialty
company; a director of Trega Biosciences, Inc., a drug discovery company and a
director of several privately held companies in the health care field. Dr.
Sadow earned a B.S. from the Virginia Military Institute, a M.S. from the
University of Kansas and a Ph.D. from the University of Connecticut.
Warren E. Pinckert II has served as President, Chief Executive Officer and a
director of the Company since June 1993. Mr. Pinckert served as Executive Vice
President of Operations of the Company from 1991 to June 1993 and as Chief
Financial Officer and Vice President of Business Development of the Company from
1989 to June 1993. Mr. Pinckert also served as Secretary of the Company from
1989 to January 1997. Prior to joining the Company, Mr. Pinckert was Chief
Financial Officer of Sunrise Medical Inc., an international durable medical
equipment manufacturer, from 1983 to 1989. Mr. Pinckert also serves on the Board
of Directors of PacifiCare Health Systems, Inc., a managed care organization.
Mr. Pinckert earned a B.S. in Accounting and a M.B.A. from the University of
Southern California and is a certified public accountant.
Joseph Buchman, M.D. has been a director of the Company since July 1994. Dr.
Buchman is a practicing physician with a private practice in Connecticut. Dr.
Buchman is a certified member of the American Board of Internal Medicine and
Cardiovascular Disease. Dr. Buchman is currently Director of the Preventive
Cardiology Program for Danbury Hospital Health Services, and has been a member
of the Cardiothoracic and Vascular Group, a professional corporation in
Connecticut, since 1992. Prior to 1992, Dr. Buchman maintained a private medical
practice. Dr. Buchman has published numerous articles on the subject of coronary
risk factors. Dr. Buchman earned a B.A. from Wesleyan University and a M.D. from
New York University, College of Medicine.
John L. Castello has been a director of the Company since August 1993. Mr.
Castello is the Chairman of the Board of XOMA Corporation ("XOMA"), a
biotechnology company. Mr. Castello joined XOMA in April 1992 after serving as
President of the Ares Serono Group, Inc., a Swiss ethical pharmaceutical
company, from 1986 to 1991, and prior to that Mr. Castello was Chairman and
Chief Executive Officer from August 1991 to April 1992. From 1977 to 1986, Mr.
Castello held senior management positions at Amersham International PLC and
Abbott Laboratories. Mr. Castello also serves on the Board of Directors of Metra
Biosystems, Inc. Mr. Castello earned a B.S. in Mechanical and Industrial
Engineering from Notre Dame University.
John H. Landon has been a director of the Company since December 1997. Mr.
Landon served as Vice President and General Manager, Medical Products of DuPont
from 1992 to 1996. Prior to that, Mr. Landon served in various capacities at
DuPont, including Vice President and General Manager, Diagnostics and
Biotechnology from 1990 to 1992, Director of Diagnostics from 1988 to 1990,
Business Director of Diagnostic Imaging from 1985 to 1988 and in various other
professional and management positions at DuPont from 1962 to 1985. Mr. Landon is
also a director of Digene Corporation and a director and member of the Executive
Committee of Christiana Care Corporation, a firm created by the merger of the
Medical Center of Delaware, Mid-Atlantic Health Systems, and several other
healthcare entities. Previously, Mr. Landon served as a director of The DuPont
Merck Pharmaceutical Company and the Health Industry Manufacturers Association.
Mr. Landon earned a B.S. in Chemical Engineering from the University of Arizona.
H. R. Shepherd has been a director of the Company since July 1994. Mr.
Shepherd is a special advisor to the Chairman of the Board of Directors of
Medeva PLC ("Medeva"), an international pharmaceutical company, and is a founder
and Chairman of the Board of Directors of the Albert B. Sabin Vaccine Institute
at Georgetown University. Mr. Shepherd is also an adjunct professor in the
Department of Microbiology and Immunology at Georgetown University Medical
Center. Mr. Shepherd served as Chairman and Chief Executive Officer of Armstrong
Pharmaceuticals, Inc., a company specializing in aerosol pharmaceutical
packaging and labeling, from 1985 to 1993, before it was acquired by Medeva. Mr.
Shepherd earned a B.S. from Cornell University and a Honorary Doctorate of
Humane Letters from Villanova University.
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Larry Y. Wilson has been a director of the Company since May 1998. Since
1987, Mr. Wilson has served as the Executive Vice President and Chief Operating
Officer of Catholic Healthcare West ("Catholic Healthcare"), a health care
system that operates 38 acute care facilities and eight medical groups of the
CHW Medical Foundation in Arizona, California and Nevada. Prior to that time,
Mr. Wilson served as the Executive Vice President and Chief Financial Officer of
Mercy Health System, a predecessor of Catholic Healthcare, from 1983 to 1986,
and as a principal of the Health and Medical Division of Booz Allen & Hamilton,
a consulting company, from 1979 to 1983. Mr. Wilson also serves as a director of
PriMed Medical Management, Inc., the entity that operates the Hill Physicians
Medical Group. Mr. Wilson earned a B.A. in English from Harvard University and
an M.B.A. from Stanford University.
Meetings and Committees of the Board of Directors
The Board of Directors held five meetings in fiscal 1998 and all directors
attended at least 75 percent of the meetings of the Board and its Committees of
which they were members at the time of such meetings. The Board of Directors has
an Audit Committee, a Compensation Committee, Governance Committee and a
Nominating Committee. The Audit Committee is comprised of Messrs. Sadow, Buchman
and Shepherd. The Compensation Committee is comprised of Messrs. Sadow and
Castello. The Governance Committee is comprised of Messrs. Sadow, Pinckert and
Castello. The Nominating Committee is comprised of Messrs. Sadow, Pinckert and
Castello.
The Audit Committee met twice during fiscal 1998. The responsibilities of the
Audit Committee include recommending to the Board the selection of the
independent public accountants and reviewing the Company's internal accounting
controls. The Audit Committee is authorized to conduct such reviews and
examinations as it deems necessary or desirable with respect to the practices
and procedures of the independent public accountants, the scope of the annual
audit, accounting controls, practices and policies, and the relationship between
the Company and its independent public accountants, including the availability
of Company records, information and personnel.
The Compensation Committee of the Board of Directors held six meetings during
fiscal 1998. The Compensation Committee focuses on executive compensation,
incentive and other forms of compensation for directors, officers and other
employees and the administration of the Company's various compensation and
benefit plans.
The Governance Committee of the Board of Directors was formed by the Board in
June 1998 and therefore did not hold any meetings in fiscal 1998. The purpose of
the Governance Committee is to ensure that the Board is operating efficiently
and effectively.
The Nominating Committee of the Board of Directors held two meetings during
fiscal 1998. The Nominating Committee recommends to the Board of Directors
candidates for nomination to the Board of Directors. The Nominating Committee
will consider nominees recommended by shareholders. Shareholders making such
recommendations should follow the procedures outlined above under "Deadline of
Receipt of Shareholder Proposals."
Compensation Committee Interlocks and Insider Participation
The Compensation Committee consists of directors Sadow and Castello. There
are no interlocking relationships, as described by the Securities and Exchange
Commission, between the Compensation Committee members. Mr. Pinckert, President,
Chief Executive Officer and director of the Company, participated in all
discussions and decisions regarding salaries and incentive compensation for all
employees and consultants to the Company, except that Mr. Pinckert was excluded
from discussions regarding his own salary and incentive compensation.
4
Record Date and Principal Share Ownership
The following table sets forth, as of June 26, 1998 information relating to
the beneficial ownership of the Company's Common Stock as to (i) each person
known to the Company to be the beneficial owner of more than five percent of the
outstanding shares of Common Stock, (ii) by each director, (iii) by each of the
executive officers named in the table under "Executive Compensation--Summary
Compensation Table" below and (iv) by all directors and executive officers as a
group. Except as otherwise noted, the shareholders named in the table have sole
voting and investment power with respect to all shares of Common Stock shown as
beneficially owned by them, subject to applicable common property laws.
Shares of Common Stock Percent of
Beneficially Owned Outstanding Shares(1)
------------------------ ----------------------
Kopp Investments Advisors, Inc. (2) ............. 1,488,440 13.0%
6600 France Avenue South
Suite 672
Edina, MN 55433
The Kaufmann Fund, Inc(3) ....................... 800,000 7.0%
140 East 45th Street, 43rd Floor
New York, New York 10017
U.S. Bancorp(4) ................................. 573,122 5.0%
111 S.W. Fifth Avenue
Portland, Oregon 97208
Warren E. Pinckert II(5) ........................ 396,670 3.4%
Gary E. Hewett(6) ............................... 100,942 *
Harvey S. Sadow, Ph.D. (7) ...................... 58,224 *
Steve L. Barbato(8) ............................. 51,123 *
Andrea Tiller(9) ................................ 46,032 *
Mark J. Kussman (10) ............................ 39,947 *
John L. Castello(11) ............................ 37,500 *
Joseph Buchman(12) .............................. 28,000 *
H.R. Shepherd(13) ............................... 5,000 *
John H. Landon(14) .............................. 3,750 *
Larry Y. Wilson ................................. 1,250 *
All current Directors and executive officers as a
group (11 persons)(15) ........................ 768,438 6.4%
<FN>
- ------------
* Less than one percent.
(1) This table is based upon information supplied by officers, directors and
principal shareholders. Applicable percentage of ownership is based on
11,468,207 shares of Common Stock outstanding as of June 26, 1998 together
with applicable options for such shareholder. Beneficial ownership is
determined in accordance with the rules of the Securities and Exchange
Commission, and includes voting and investment power with respect to
shares. Shares of Common Stock subject to options or warrants currently
exercisable or exercisable within 60 days after June 26, 1998 are deemed
outstanding for computing the percentage ownership of the person holding
such options or warrants, but are not deemed outstanding for computing the
percentage of any other person.
(2) Reflects ownership as reported on Schedule 13G/A dated February 9, 1998
with the Commission by Kopp Investment Advisors, Inc. ("KIA"). Represents
shares beneficially owned by (i) KIA, a registered investment advisor, (ii)
Kopp Holding Company ("Holding") and (iii) LeRoy C. Kopp individually and
through his ownership of a controlling interest in KIA, his position as
sole stockholder of Holding and his individual interests. KIA has sole
voting power over 379,000 shares of the Company's Common Stock, sole
dispositive power over 320,000 and shared dispositive power over 1,168,400
shares of the Company's Common Stock. Holding has beneficial ownership over
1,488,440 shares of the Company's Common Stock. Mr. Kopp has sole voting
and dispositive power over 51,200 shares of the Company's Common Stock and
beneficial ownership over 1,539,640 shares of the Company's Common Stock.
(Footnotes continued on next page)
5
(Footnotes continued from previous page)
(3) Reflects ownership of the Company's Common Stock as reported to the
Securities and Exchange Commission on Form 13G/A by The Kaufmann Fund, Inc.
("Kaufmann") on January 29, 1998. Kaufmann is a registered investment
company pursuant to Section 8 of the Investment Company Act of 1940, as
amended. Includes 800,000 shares of Common Stock over which Kaufmann has
sole voting and dispositive power.
(4) Reflects ownership of the Company's Common Stock as reported to the
Securities and Exchange Commission on Form 13G/A by U.S. Bancorp on
February 13, 1998. U.S. Bancorp is a bank holding company registered
pursuant to the Bank Holding Company Act of 1956, as amended. Includes (i)
573,122 shares of Common Stock over which U.S. Bancorp has sole voting
power, (ii) 554,622 shares over which U.S. Bancorp has sole dispositive
power and (iii) 3,500 shares of the Company's Common Stock over which U.S.
Bancorp has shared dispositive power.
(5) Includes 276,928 shares of Common Stock issuable pursuant to stock options
exercisable within 60 days after June 26, 1998.
(6) Includes 85,936 shares of Common Stock issuable pursuant to stock options
exercisable within 60 days after June 26, 1998.
(7) Includes 40,000 shares of Common Stock issuable pursuant to stock options
exercisable within 60 days after June 26, 1998.
(8) Represents 51,123 shares of Common Stock issuable pursuant to stock options
exercisable within 60 days after June 26, 1998.
(9) Represents 40,936 shares of Common Stock issuable pursuant to stock options
exercisable within 60 days after June 26, 1998.
(10) Represents 39,686 shares of Common Stock issuable pursuant to stock options
exercisable within 60 days after June 26, 1998.
(11) Represents 37,500 shares of Common Stock issuable pursuant to stock options
exercisable within 60 days after June 26, 1998.
(12) Represents 28,000 shares of Common Stock issuable pursuant to stock options
exercisable within 60 days after June 26, 1998.
(13) Represents 5,000 shares of Common Stock issuable pursuant to stock options
exercisable within 60 days after June 26, 1998.
(14) Represents 3,750 shares of Common Stock issuable pursuant to stock options
exercisable within 60 days after June 26, 1998.
(15) Includes 610,109 shares of Common Stock issuable pursuant to stock options
exercisable within 60 days after June 26, 1998.
</FN>
PROPOSAL TWO
AMENDMENT OF 1997 STOCK INCENTIVE PROGRAM
At the Annual Meeting, the shareholders are being asked to approve an
amendment to the 1997 Stock Incentive Program (the "Incentive Program") to
increase in the number of shares granted annually to the Chairman of Board of
Directors to 20,000 shares pursuant to the automatic annual grant mechanism set
forth in such plan. The adoption of the 1997 Stock Incentive Program was
approved by the shareholders of the Company in August 1997. The Company's
Incentive Program authorizes the Board of Directors to grant incentive and
non-statutory stock options to eligible employees, consultants, and non-employee
directors of the Company in order to assist the Company in attracting, retaining
and motivating the best available personnel for the successful conduct of the
Company's business. In addition, stock options are considered a competitive
necessity in the medical diagnostic industry. The Incentive Program also
provides for automatic, non-discretionary grants to non-employee directors.
Non-employee directors who do not represent holders of one percent or more of
the Company's Common Stock receive options to purchase 5,000 shares of Common
Stock upon joining the Board of Directors and an annual grant of 10,000 shares
on the day of the Company's Annual Meeting of Shareholders for each year
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thereafter that such person remains a director of the Company. The annual and
initial grants to each non-employee director other then the Chairman of the
Board of Directors would remain unchanged if the proposed amendment to the
Incentive Program is approved by the shareholders. The proposed amendment to the
Incentive Program would increase the annual grant to the Chairman of the Board
of Directors, if such person is a non-employee director, to 20,000 shares per
year from 10,000 shares. The initial grant to the Chairman of the Board of
Directors would continue to be 5,000 shares.
The adoption of the amendment was approved by the Board of Directors in June
1998. The total number of shares of Common Stock that may be issued pursuant to
the Incentive Program is 900,000. The Incentive Program terminates in February
2008. For a description of the Incentive Program, see "Description of the 1997
Stock Incentive Program" below. As of June 26, 1998, options to purchase an
aggregate of 1,438,219 shares of the Company's Common Stock were outstanding
under the 1988 Stock Incentive Program (which program terminated in February
1998) and 1997 Stock Incentive Program with the exercise price ranging from
$1.75 to $14.125 per share, and 666,351 shares were available for future grant
under the Incentive Program.
Vote Required
The affirmative vote of a majority of the Votes Cast will be required under
California law to approve the amendment to the Incentive Program. For this
purpose, the "Votes Cast" is defined under California law to be the shares of
the Company's Common Stock represented and voting at the Annual Meeting of
Shareholders. In addition, the affirmative votes must constitute at least a
majority of the required quorum, which quorum is a majority of the shares
outstanding on the Record Date. Votes that are cast against the proposal will be
counted for purposes of determining (i) the presence or absence of a quorum and
(ii) the total number of Votes Cast with respect to the proposal. Abstentions
will be counted for purposes of determining the presence or absence of a quorum
for the transaction of business, but shall not be counted for the purpose of
determining the total number of Votes Cast with respect to the proposal. Broker
non-votes will be counted for purposes of determining the presence or absence of
a quorum for the transaction of business, but will not be counted for purposes
of determining the number of Votes Cast with respect to the proposal.
The Board of Directors recommends that shareholders vote FOR the amendment of
the Incentive Program.
Description of the 1997 Stock Incentive Program
Purpose. The purpose of the Incentive Program is to attract and retain the
best available personnel for positions of substantial responsibility at the
Company, to provide additional incentive to employees, consultants and
non-employee directors ("Outside Directors") of the Company and to promote the
success of the Company's business.
Administration. The Incentive Program may be administered by the Board of
Directors or by a committee appointed by the Board. The Compensation Committee
of the Board of Directors will administer the Incentive Program. The Board or
the committee appointed to administer the Incentive Program is referred to in
this description as the "Administrator." With the exception of automatic
non-discretionary grants to Outside Directors, the Administrator determines the
terms of options granted, including the exercise price, number of shares subject
to the option and the exerciseability thereof. All questions of interpretation
are determined by the Administrator and its decisions are final and binding upon
all participants. Members of the Board receive no additional compensation for
their services in connection with the administration of the Incentive Program.
Eligibility. The Incentive Program provides that either incentive stock
options or non-statutory stock options may be granted to employees (including
officers and employee directors) of the Company or any of its subsidiaries. In
addition, the Incentive Program provides that non-statutory options may be
granted to consultants of the Company or any of its subsidiaries. The
Administrator selects the optionees and determines the number of shares to be
subject to each option. In making such determination, there are taken into
account the duties and the responsibilities of the optionee, the value of the
optionee's
7
services, the optionee's present and potential contribution to the success of
the Company and other relevant factors. The Incentive Program does not provide
for a maximum or minimum number of shares of Common Stock which may be granted
under option to any person, although there is a limit of $100,000 on the
aggregate fair market value of shares subject to all incentive stock options
which are exercisable for the first time in any calendar year.
Eligibility of Outside Directors. The Incentive Program provides that Outside
Directors who represent shareholders holding more than one percent of the
outstanding shares are not eligible to receive grants under the Incentive
Program. Outside Directors who do not represent shareholders holding more than
one percent of the outstanding shares are eligible pursuant to an automatic
grant mechanism, see "Directors' Compensation" below. Options granted to Outside
Directors have an exercise price equal to the fair market value as of the date
of grant and vest at a rate of 25% per calendar quarter following the date of
grant so long as the optionee remains a director of the Company. The closing
sale price of the Company's Common Stock on June 26, 1998 was $6.38.
Terms of Options. Each option is evidenced by a stock option agreement
between the Company and the optionee and is subject to the following terms and
conditions.
(a) Exercise of the Option. The Administrator determines when options may be
exercised. An option is exercised by giving written notice of exercise to the
Company specifying the number of full shares of Common Stock to be purchased and
by tendering payment to the Company of the purchase price. The purchase price of
the shares purchased upon exercise of an option may be paid in consideration of
such form as is determined by the Administrator, and such form may vary for each
option. Such consideration may consist of (i) cash, (ii) check, (iii) promissory
note, (iv) with certain exceptions the tender of already-owned shares of Common
Stock of the Company which have a fair market value on the exercise date equal
to the exercise price of the option, (v) the assignment of the proceeds of a
sale of some or all of the shares being acquired by the exercise of an option or
(vi) by any combination thereof.
(b) Exercise Price. The exercise price under the Incentive Program is
determined by the Administrator and may not be less than 100% of the fair market
value of the Common Stock on the date the option is granted and in the case of
an incentive stock option, not less than 100% of the fair market value of the
Common Stock on the date the option is granted. For purposes of the Incentive
Program, fair market value is defined as the closing price per share of the
Common Stock on the date of grant as reported on the Nasdaq Stock Market. In the
case of an option granted to an optionee who at the time of grant owns stock
representing more than 10% of the voting power of all classes of stock of the
Company, the option price must be not less than 110% of the fair market value on
the date of grant. Notwithstanding the foregoing options may be granted with an
exercise price of less than 100% of the Fair Market Value on the date of grant
pursuant to a merger or other corporate transaction.
(c) Termination of Employment. If the optionee's employment terminates for
any reason other than death or disability, options under the Incentive Program
may be exercised not later than three months after such termination and may be
exercised only to the extent the option was exercisable on the date of
termination.
(d) Disability. If an optionee is unable to continue his or her employment
with the Company as a result of total and permanent disability, options may be
exercised within one year from the date of such termination and may be exercised
only to the extent the option was exercisable on the date of termination.
(e) Death. Under the Incentive Program, if an optionee should die while
employed by the Company, options may be exercised within one year after the date
of death but only to the extent the optionee was entitled to exercise the
options at the date of death.
(f) Termination of Options. Stock options granted under the Incentive Program
may not exceed ten years and one day, although the Company grants stock options
which expire five years from the date of grant or such shorter period as may be
provided by the Administrator. In the case of an option granted to an optionee
who at the time the option is granted owns stock representing more than 10% of
the voting power of the Company, the term of the option shall be five years from
the date of grant or such shorter time as may be provided by the Administrator.
No option may be exercised after its expiration.
8
(g) Non-transferability of Options. An option is non-transferable by the
optionee other than by will or the laws of descent and distribution, and during
the optionee's lifetime is exercisable only by the optionee.
Adjustments Upon Merger. In the event of a proposed sale of substantially all
the assets of the Company or the merger of the Company with or into another
corporation, the option shall be assumed or an equivalent option shall be
substituted by the successor corporation or a parent or subsidiary of such a
successor corporation, unless the Board of Directors determines in the exercise
of its sole discretion and in lieu of such assumption or substitution that the
optionee shall have the right to exercise the option as to all shares subject to
such option, including shares as to which the option would not otherwise be
exercisable. If the Board makes an option fully exercisable in lieu of
assumption or substitution in the event of a merger or sale of assets, the Board
shall notify the optionee that the option is fully exercisable for a period of
15 days from the date of such notice, and the option will terminate upon the
expiration of such fifteen day period.
Adjustments Upon Changes in Capitalization. In the event of any change, such
as a stock split or stock dividend, made in the Company's capitalization which
results in an increase or a decrease in the number of outstanding shares of
Common Stock without receipt of consideration by the Company, appropriate
adjustment shall be made in the exercise price and in the number of shares
subject to each option as well as in the number of shares available for issuance
under the Incentive Program. In the event of dissolution of liquidation, the
optionee shall have until 10 days prior to such transaction to exercise his or
her options. In addition, the Administrator may repurchase such options. The
Board of Directors may in its discretion make provision for accelerating the
exerciseability of shares subject to options under the Incentive Program in such
event. In the event of the proposed dissolution or liquidation of the Company
all outstanding options will terminate unless otherwise provided by the Board of
Directors.
Amendment and Termination of the Incentive Program. The Board of Directors
may amend the Incentive Program at any time or from time to time or may
terminate it without approval of the shareholders. However, to the extent
necessary to comply with the Rule 16b-3 under the Securities Exchange Act of
1934, as amended, or Section 422A of the Internal Revenue Code of 1986, as
amended (the "Code"), the Company will obtain shareholder approval of any
amendment in such a manner and to such a degree as is required. No action by the
Board of Directors or shareholders may alter or impair any option previously
granted under the Incentive Program. The Incentive Program will terminate in
February 2008.
Certain Federal Income Tax Considerations
Options granted under the Incentive Program may be either incentive stock
options, as defined in Section 422 of the Code, or non-statutory stock options.
An optionee who is granted an incentive stock option will not recognize
income either at the time the option is granted or upon its exercise, although
the exercise may subject the optionee to the alternative minimum tax. Upon a
sale or exchange of the shares more than two years after the grant of the option
and one year after its exercise, any gain or loss will be treated as long-term
capital gain or loss. If these holding periods are not satisfied, the optionee
will recognize ordinary income at the time of the sale or exchange equal to the
difference between the exercise price and the lower of (i) the fair market value
of the shares on the date of exercise or (ii) the sale price of the shares. A
different rule for measuring ordinary income upon such a premature disposition
may apply if the optionee is also an officer, director, or 10% shareholder of
the Company.
Any gain or loss recognized on such a premature disposition of the shares in
excess of the amount treated as ordinary income will be characterized as
long-term or short-term capital gain or loss, depending on the holding period.
Generally, the Company will be entitled to a deduction in the same amount as the
ordinary income recognized by the optionee at the time of such disposition.
Options that do not qualify as incentive stock options are referred to as
non-statutory options. An optionee will not recognize income at the time a
non-statutory option is granted. However, upon its exercise, the optionee will
recognize ordinary income generally measured as the excess of the then fair
9
market value of the shares over the exercise price. Any ordinary income
recognized in connection with the exercise of a non-statutory option by an
optionee who is also an employee of the Company will be subject to tax
withholding by the Company. Generally, the Company will be entitled to a tax
deduction in the same amount as the ordinary income recognized by the optionee
upon exercise of a non-statutory stock option.
Upon resale of the shares by the optionee, any difference between the sale
price and the optionee's purchase price, to the extent not recognized as
ordinary income as described above, will be treated as long-term or short-term
capital gain or loss, depending on the holding period.
The foregoing is only a summary of the effects of federal income taxation
upon the optionee and the Company with respect to the grant and exercise of
options under the Incentive Program. It does not purport to be complete, and it
does not discuss the tax consequences of the optionee's death or the income tax
laws of any municipality, state or foreign country in which an optionee may
reside.
Participation in the Incentive Program
The grant of options under the Incentive Program to executive officers,
including the officers named in the Summary Compensation Table below, is subject
to the discretion of the Administrator. As of the date of this proxy statement,
there has been no determination by the Administrator with respect to future
awards under the Incentive Program with the exception of automatic nondiscretary
grants to Outside Directors of 10,000 shares per Outside Director granted at the
Annual Shareholder Meeting. If the proposed amendment to the Incentive Program
is approved, an annual grant of 20,000 shares will be made to Dr. Sadow on the
date of the Annual Meeting of Shareholders. Accordingly, future awards are not
determinable. The table of option grants under "Executive Compensation--Stock
Option Grants in Fiscal Year 1998" provides information with respect to the
grant of options to the Named executive officers during fiscal 1998. Information
regarding options granted to Outside Directors during fiscal 1998 is set forth
under the heading "Executive Compensation--Director Compensation." During fiscal
1998, all current directors and executive officers named in the Summary
Compensation Table below, as a group and all other employees as a group received
options to purchase 309,893 shares and 140,000 shares, respectively, pursuant to
the Incentive Program and 1988 Stock Incentive Program, which terminated in
February 1998.
PROPOSAL THREE
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected PricewaterhouseCoopers LLP, independent
public accountants, to audit the financial statements of the Company for the
fiscal year ending March 26, 1999, and recommends that shareholders vote for
ratification of such appointment. In the event of a negative vote on such
ratification, the Board of Directors will reconsider its selection.
PricewaterhouseCoopers LLP has been the Company's independent public
accountants since 1990. A representative of PricewaterhouseCoopers LLP will be
present at the Annual Meeting and will have an opportunity to make a statement
if he desires to do so and will be available to respond to questions.
The Board of Directors recommends that shareholders vote FOR the ratification
of the appointment of PricewaterhouseCoopers LLP as the Company's independent
accountants.
10
EXECUTIVE COMPENSATION AND OTHER MATTERS
Executive Compensation
The following table shows compensation paid by the Company for services
rendered during fiscal years 1998, 1997 and 1996 to the Chief Executive Officer
and the four other most highly compensated executive officers of the Company
whose compensation exceeded $100,000 (collectively with the Chief Executive
Officer, the "Named Executive Officers") in fiscal 1998.
Summary Compensation Table
Long-term
Compensation
Annual Compensation Awards
----------------------------------------------- -------------
Securities
Other Annual Underlying All Other
Name and Principal Position Year Salary ($) Bonus ($) Compensation(1) Options (#) Compensation(2) ($)
- ------------------------------- ------ ------------ ---------------- ----------------- ------------- --------------------
Warren E. Pinckert II 1998 $194,167 $ -- $ -- 40,000 $5,308
President and 1997 167,461 8,000 (5) -- 115,000 4,378
Chief Executive Officer 1996 145,440 -- -- 10,000 6,050
Steven L. Barbato 1998 130,833 -- -- 25,000 7,512
Vice President of Operations 1997 114,005 5,250 (5) -- 50,000 5,995
1996 106,050 -- -- 3,000 5,914
Gary E. Hewett 1998 144,646 -- 6,661 25,000 4,375
Vice President and 1997 137,150 6,500 (5) 2,225 17,500 3,394
Chief Scientific Officer 1996 131,191 -- 39,336 -- 1,863
Mark J. Kussman(3) 1998 145,833 -- 11,138 25,000 7,564
Vice President of Sales and 1997 89,654 -- 46,794 70,000 3,413
Marketing 1996 -- -- -- -- --
Andrea J. Tiller(4) 1998 130,833 -- -- 25,000 2,656
Vice President of Finance, 1997 42,147 -- -- 80,000 868
Chief Financial Officer, 1996 -- -- -- -- --
Treasurer and Secretary
<FN>
- ------------
(1) The amounts described hereunder were paid by the Company as follows: In
fiscal 1998, to Mr. Hewett, $6,661 for compensation paid in connection with
the Company's Research and Development Incentive Program and to Mr. Kussman,
$11,138 for forgiveness of interest and principal on a relocation loan from
the Company. In fiscal 1997, to Mr. Hewett, $2,225 for the compensation paid
in connection with the Company's Research and Development Incentive Program
and to Mr. Kussman, $5,656 for forgiveness of interest and principal on a
relocation loan from the Company and $41,138 for moving, temporary living
and other expenses in connection with his relocation. In fiscal 1996, to Mr.
Hewett, $35,640 forgiveness of a loan and $3,696 for the compensation paid
in connection with the Company's Research and Development Incentive Program.
(2) The amounts described hereunder were paid by the Company for premiums on
group term life insurance, medical and dental insurance and long term
disability insurance.
(3) Mr. Kussman joined the Company as its Vice President of Sales and Marketing
in August 1996.
(4) Ms. Tiller joined the Company as its Chief Financial Officer in December
1996.
(5) Bonus pursuant to Wage Freeze Bonus Plan of 1994.
</FN>
11
Stock Option Grants in Last Fiscal Year
The following table provides information relating to stock options awarded to
each of the Named Executive Officers during the fiscal year ended March 27,
1998. All such options were awarded under the Company's 1988 Stock Incentive
Program.
Individual Grants Potential Realizable
--------------------------------------------------------------------- Value
at Assumed Annual
% of Total Rates of Stock
Options Exercise Price Appreciation for
Number of Granted to Price Option Term(5)
Shares Underlying Employees in Per Expiration ------------------------
Name Granted Options Fiscal Year(1) Share(2)(3) Date(4) 5% 10%
- ------------------------------- ------------------- ---------------- ------------- ------------ ---------- -----------
Warren E. Pinckert II ......... 40,000 8.89% $ 6.44 08/22/02 $71,143 $157,206
Steven L. Barbato ............. 25,000 5.55 6.44 08/22/02 44,464 98,254
Gary E. Hewett ................ 25,000 5.55 6.44 08/22/02 44,464 98,254
Mark J. Kussman ............... 25,000 5.55 6.44 08/22/02 44,464 98,254
Andrea J. Tiller .............. 25,000 5.55 6.44 08/22/02 44,464 98,254
<FN>
- ------------
(1) Based on an aggregate of 449,893 options granted under the 1988 Stock
Incentive Program and the 1997 Stock Incentive Program.
(2) Options were granted at an exercise price equal to the fair market value of
the Company's Common Stock, as determined by the Board of Directors on the
date of grant.
(3) Exercise price and tax withholding obligations related to exercise may be
paid in cash, check, promissory note, by delivery of already-owned shares of
the Company's Common Stock subject to certain conditions, or pursuant to a
cashless exercise procedure under which the optionee provides irrevocable
instructions to a brokerage firm to sell the purchased shares and to remit
to the Company, out of the sale proceeds, an amount equal to the exercise
price plus all applicable withholding taxes.
(4) The stock options granted in the fiscal year ended March 27, 1998 are
generally exercisable starting three months after the date of grant, with
6.25% of the shares covered thereby becoming exercisable at that time and
with an additional 6.25% of the option shares becoming exercisable at the
end of each three month period thereafter, with full vesting occurring on
the fourth anniversary of the date of grant. Under the 1988 Stock Incentive
Program, the Board retains the discretion to modify the terms, including the
price, of outstanding options.
(5) Potential realizable value is based on the assumption that the Common Stock
of the Company appreciates at the annual rate shown (compounded annually)
from the date of grant until the expiration of the five year option term.
These numbers are calculated based on the requirements promulgated by the
Securities and Exchange Commission and do not reflect the Company's estimate
of future stock price growth.
</FN>
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values
The following table sets forth, for each of the Named Executive Officers,
the aggregated option exercises in the last fiscal year and the year end value
of unexercised options.
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Shares Acquired Value Options Options
Name on Exercise # Realized (#)(1) Exercisable/Unexercisable Exercisable/Unexercisable (#)(2)
- --------------------------- ----------------- ----------------- --------------------------- ---------------------------------
Warren E. Pinckert II ..... -- -- 298,828/116,130 $3,371,905/$1,148,800
Steven L. Barbato ......... 25,000 $90,625 39,187/ 58,813 430,528/ 574,467
Gary E. Hewett ............ -- -- 79,687/ 32,813 896,546/ 301,489
Mark J. Kussman ........... -- -- 26,874/ 68,126 271,404/ 661,127
Andrea J. Tiller .......... -- -- 26,874/ 78,126 258,523/ 736,539
<FN>
- ------------
(1) Market value of underlying securities at date of exercise less the exercise
price, but does not necessarily indicate that the optionee sold the
underlying stock.
(2) Market value of the Common Stock as of March 27, 1998 minus the exercise
price.
</FN>
12
Directors' Compensation
Non-employee directors receive a $1,000 monthly retainer and a $1,000
director's meeting fee for each Board meeting they attend. In June 1998, the
Outside Directors implemented a new compensation program for the Chairman of the
Board of Directors whereby the Chairman will receive a $2,000 monthly retainer
and $2,000 meeting fee for each Board meeting attended effective July 1998.
Non-employee directors also receive a $500 fee for each meeting of the Audit,
Compensation, Governance or Nominating Committees attended that is not in
conjunction with a regular board meeting with the exception of the Chairman who
will receive $1,000 per meetings effective July 1998. In addition, the Incentive
Program provides that options to purchase the Company's Common Stock may be
granted to non-employee directors pursuant to a non-discretionary, automatic
grant mechanism, whereby each such director is granted an option to purchase
10,000 shares on the date of each Annual Meeting of Shareholders or an initial
grant of 5,000 shares upon becoming a member of the Board of Directors if the
date such director joins the Board is within six months of the most recent
Annual Meeting of Shareholders. If Proposal Two is adopted, the annual grant to
the Chairman of the Board of Directors would be 20,000 shares effective at the
1998 Annual Meeting of Shareholders. In August 1997, pursuant to the provisions
of the 1988 Stock Incentive Program, Dr. Buchman, Mr. Castello, Dr. Sadow and
Mr. Shepherd were each granted non-statutory options to purchase 10,000 shares
of the Company's Common Stock at an exercise price of $6.44 per share. Mr.
Landon was granted a non-statutory option to purchase 5,000 shares of the
Company's Common Stock in December 1997 at an exercise price of $10.06 per share
pursuant to the 1988 Stock Incentive Program when he joined the Company's Board
of Directors, Mr. Wilson was granted a non-statutory option to purchase 5,000
shares of the Company's Common Stock in May 1998 at an exercise price of $14.13
per share when he joined the Company's Board of Directors. The grant to Mr.
Wilson was discretionary as he joined the Company's Board of Directors more than
five months after most recent Annual Meeting of Shareholders but was granted at
fair market value on the date of grant and vests on the same schedule as if it
were a nondiscretionary initial option.
Employment Agreements and Change in Control Arrangements
The Board of Directors has approved a twelve-month wage and benefits
continuation package, including but not limited to twelve months acceleration of
Incentive Stock Option vesting and medical and dental coverage, for Mr.
Pinckert. In the event he is terminated by the Company, for any or no reason,
Mr. Pinckert will be paid, in a lump-sum, within thirty days of the date of such
termination, an amount equal to one years' salary, at the rate of salary in
effect immediately prior to such termination (minus applicable withholding).
The Board of Directors has approved a six-month wage and benefits
continuation package, including but not limited to six months acceleration of
Incentive Stock Option vesting and medical and dental coverage, for Mr. Barbato,
Mr. Kussman and Ms. Tiller. In the event any of them is terminated by the
Company, for any or no reason, he or she will be paid, in a lump-sum, within
thirty days of the date of such termination, an amount equal to six months
salary, at the rate of his or her salary in effect immediately prior to such
termination (minus applicable withholding).
In addition, the Board of Directors has approved a three month wage and
benefits continuation package, including but not limited to three months
acceleration of Incentive Stock Option vesting and medical and dental coverage
for Mr. Hewett. In the event he is terminated by the Company, for any or no
reason, Mr. Hewett will be paid, in a lump-sum, within thirty days of the date
of such termination, an amount equal to three months salary, at the rate of his
salary in effect immediately prior to such termination (minus applicable
withholding).
Report of the Compensation Committee of the Board of Directors
The Compensation Committee (the "Committee") of the Board of Directors
reviews and approves the Company's executive compensation policies. The
Committee administers the Company's various incentive plans, including the
Incentive Program, sets compensation policies applicable to the Company's Named
Executive Officers and evaluates the performance of the Company's Named
Executive Officers. The compensation levels of the Company's Named Executive
Officers for the fiscal year ended March 27,
13
1998, including base salary levels, potential bonuses and stock option grants
were determined by the Committee at the beginning of the fiscal year. The
following is a report of the Committee describing the compensation policies and
rationale applicable with respect to the compensation paid to the Company's
Named Executive Officers for the fiscal year ended March 27, 1998.
Compensation Philosophy
The Company's philosophy in setting its compensation policies for Named
Executive Officers is to maximize shareholder value over time. The primary goal
of the Company's executive compensation program is therefore to closely align
the interests of the Named Executive Officers with those of the Company's
shareholders. To achieve this goal the Company attempts to (i) offer
compensation opportunities that attract and retain executives whose abilities
are critical to the long-term success of the Company, motivate individuals to
perform at their highest level and reward outstanding achievement, (ii) maintain
a portion of the executive's total compensation at risk, tied to achievement of
financial, organizational and management performance goals, and (iii) encourage
executives to manage from the perspective of owners with an equity stake in the
Company. The Compensation Committee currently uses base salary, annual cash
incentives and stock options to meet these goals.
Base Salary
Base salary is primarily used by the Company as a device to attract,
motivate, reward and retain highly skilled executives. The Committee reviewed
and approved fiscal 1998 base salaries for the Chief Executive Officer and other
Named Executive Officers at the beginning of the fiscal year. Base salaries were
established by the Committee based upon an executive officer's job
responsibilities, level of experience, individual performance, contribution to
the business, the Company's financial performance for the past year, and
recommendations from management. The Committee also takes into account the
salaries for similar positions at comparable companies, based on each individual
Committee member's industry experience. In reviewing base salaries, the
Committee focused significantly on each Named Executives Officer's prior
performance with the Company and expected contribution to the Company's future
success. In making base salary decisions, the Committee exercised its discretion
and judgment based upon these factors. No specific formula was applied to
determine the weight of each factor. In fiscal 1998, as part of annual executive
salary review, the Board approved a salary adjustment to increase Mr. Pinckert's
salary to $210,000 awarded on the basis of his outstanding performance and
consistent high standards in his execution of established duties. Adoption of
such increase was approved solely by members of the Board of Directors who are
not employees of the Company.
Annual Cash Incentives
Each Named Executive Officer's bonus is based on qualitative and quantitative
factors and is intended to motivate and reward such Named Executive Officers by
directly linking the amount of any cash bonus to specific Company-based
performance targets and specific individual-based performance targets. Annual
incentive bonuses for Named Executive Officers are intended to reflect the
Committee's belief that a portion of the compensation of each Named Executive
Officer should be contingent upon the performance of the Company, as well as the
individual contribution of each Named Executive Officer. To carry out this
philosophy, the Board of Directors review and approves the financial budget for
the fiscal year. The Committee then establishes target bonuses for each Named
Executive Officer as a percentage of the officer's base salary. The Named
Executive Officers, including Mr. Pinckert, must successfully achieve these
performance targets which are submitted by management to the Compensation
Committee for its evaluation and approval at the beginning of the fiscal year.
The Company-based performance goals are tied to different indicators of the
Company's performance, such as the operating results of the Company. The
individual performance goals are tied to different indicators of such Named
Executive Officer's performance, such as the financial performance of the
Company, new product development and increase in the customer base. The
Committee evaluates the completion of the Company-based performance targets and
specific individual-based performance targets and approves a performance rating
relative to the goals so completed. This scoring is influenced by the
Committee's perception of the
14
importance of the various corporate and individual goals. The Committee believes
that the bonus arrangement provides an excellent link between the Company's
earnings performance and the incentives paid to the Named Executive Officers.
Stock Options
The Committee provides the Company's Named Executive Officers with long-term
incentive compensation through grants of stock options under the Company's
Incentive Program. The Committee believes that stock options provide the
Company's Named Executive Officers with the opportunity to purchase and maintain
an equity interest in the Company and to share in the appreciation of the value
of the Company's Common Stock. The Committee believes that stock options
directly motivate an executive to maximize long-term shareholder value. Such
options also utilize vesting periods that encourage key executives to continue
in the employ of the Company. All options granted to Named Executive Officers to
date have been granted at the fair market value of the Company's Common Stock on
the date of grant. The Committee considers the grant of each option
subjectively, considering factors such as the Named Executive Officer's relative
position and responsibilities with the Company, the individual performance of
the Named Executive Officer over the previous fiscal year, and the anticipated
contribution of the Named Executive Officer to the attainment of the Company's
long-term strategic performance goals. Stock options granted in prior years are
also taken into consideration. The Committee views stock option grants as an
important component of its long-term, performance-based compensation philosophy.
In fiscal 1998, the Committee recommended and the Board of Directors granted an
option to purchase 75,000 shares at fair market value on the date of grant to
Mr. Pinckert on the basis of his outstanding performance and consistent high
standards in his execution of established duties.
Section 162(m)
The Committee has considered the potential future effects of Section 162(m)
of the Internal Revenue Code on the compensation paid to the Company's Named
Executive Officers. Section 162(m) disallows a tax deduction for any publicly
held corporation for individual compensation exceeding $1.0 million in any
taxable year for any of the Named Executive Officers. Certain performance-based
compensation, however, is specifically exempt from the deduction limit. The
Company has adopted a policy that, where reasonably practicable, the Company
will take the necessary steps to conform its compensation, including
compensation derived from the exercise of stock options, to comply with the
deductibility limitations of Section 162(m).
Respectfully submitted by Members of the
Compensation Committee:
Harvey S. Sadow, Ph.D.
John L. Castello
15
PERFORMANCE GRAPH
The following is a line graph comparing the cumulative total return to
shareholders of the Company's Common Stock at March 27, 1998 since March 31,
1993 to the cumulative total return over such period of (i) the Nasdaq Stock
Market United States Index and (ii) a Peer Group Index, which includes all
companies in the Standard Industrial Classification Code 3826--Measuring and
Controlling Devices, of which the Company is a member.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN(1)
AMONG CHOLESTECH CORPORATION, THE NASDAQ STOCK MARKET
UNITED STATES INDEX AND A PEER GROUP(2)(3)
[The following descriptive data is supplied in accordance with Rule 304(d) of
Regulation S-T]
Cumulative Total Return
----------------------------------------------------
3/31/93 3/31/94 3/31/95 3/31/96 3/31/97 3/31/98
Cholestech Corp CTEC 100.00 72.73 27.27 109.09 74.55 243.64
PEER GROUP 100.00 107.43 130.08 147.55 164.16 189.67
NASDAQ STOCK MARKET (U.S.) 100.00 107.94 120.07 163.03 181.21 275.21
- ------------
(1) Assumes that $100.00 was invested on March 31, 1993 in the Company's Common
Stock or index, and that all dividends were reinvested. No dividends have
been declared on the Company's Common Stock. Shareholder returns over the
indicated period should not be considered indicative of future shareholder
returns.
(2) Peer Group is SIC Code 3826--Measuring and Controlling Devices.
(3) The Company operates on a 52/53 week fiscal year, which ends on the last
Friday in March. Accordingly, the last trading day of its fiscal year may
vary. For consistent presentation and comparison to the indices shown
herein, the Company has calculated its stock performance graph assuming a
March 31 year-end.
The information contained above under the captions "Report of the
Compensation Committee of the Board of Directors" and "Performance Graph" shall
not be deemed to be "soliciting material" or to be "filed" with the SEC, nor
shall such information be incorporated by reference into any future filing under
the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934,
as amended, except to the extent that the Company specifically incorporates it
by reference into such filing.
16
CERTAIN TRANSACTIONS
None.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, and
regulations of the Securities and Exchange Commission (the "Commission")
thereunder require the Company's executive officers and directors, and persons
who own more than ten percent of a registered class of the Company's equity
securities, to file reports of initial ownership and changes in ownership with
the Commission. Based solely on its review of copies of such forms received by
the Company, or on written representations from certain reporting persons that
no other reports were required for such persons, the Company believes that with
the exception of H.R. Shepherd who failed to timely file one Statement of
Changes in Beneficial Ownership on Form 4 as required to report a single
transaction, all of the Section 16(a) filing requirements applicable to its
executive officers, directors and ten percent shareholders were complied with
during or with respect to the period from March 29, 1997 to March 27, 1998.
OTHER MATTERS
The Company is not aware of any other business to be presented at the Annual
Meeting. If matters other than those described herein should properly arise at
the meeting, the proxies will vote on such matters in accordance with their best
judgment.
By Order of the Board of Directors
Dated: July 23, 1998
17
Appendix A
________________________________________________________________________________
PROXY CHOLESTECH CORPORATION PROXY
1998 ANNUAL MEETING OF SHAREHOLDERS
AUGUST 20, 1998
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned shareholder of Cholestech Corporation, a California
corporation, hereby acknowledges receipt of the Notice of Annual Meeting of
Shareholders and Proxy Statement, each dated July 23, 1998, and hereby appoints
John L. Castello and Warren E. Pinckert II and each of them, proxies and
attorneys-in-fact, with full power to each of substitution, on behalf and in the
name of the undersigned, to represent the undersigned at the 1998 Annual Meeting
of Shareholders of Cholestech Corporation to be held on August 20, 1998 at 10:00
a.m., Pacific Time, at the Hotel Sofitel San Francisco Bay, 223 Twin Dolphin
Drive, Redwood City, California 94065, and at any adjournment or adjournments
thereof, and to vote all shares of Common Stock which the undersigned would be
entitled to vote if then and there personally present, on the matters set forth
on the reverse side.
(Continued, and to be signed on the other side)
________________________________________________________________________________
^ FOLD AND DETACH HERE ^
[X] Please mark
your votes
as this
1. Elections of Directors FOR WITHHOLD 2. To approve an amendment to Company's FOR AGAINST ABSTAIN
FOR ALL stock incentive program to increase
If you wish to withhold [ ] [ ] the annual non-discretionary option [ ] [ ] [ ]
authority to vote for grant to the Chairman of the Board
any individual nominee, of Directors of the Company to
strike a line through 20,000 shares of common stock per
that nominee's name in annum.
the list below:
3. Proposal to ratify the appointment
Harvey S. Sadow, Ph.D., Warren E. Pinckert II, of Pricewaterhouse Coopers LLP as [ ] [ ] [ ]
Joseph Buchman, M.D., John L. Castello, John H. Landon, the independent public accountants
H.R. Shepherd and Larry Y. Wilson of the Company for fiscal 1999.
_____________________________________________________ and, in their discretion, upon such
other matter or matters which may
properly come before the meeting or any
adjournment or adjournments thereof.
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY
DIRECTION IS INDICATED, WILL BE VOTED FOR THE ELECTION OF
DIRECTORS, FOR THE AMENDMENT OF THE COMPANY'S 1997 STOCK
INCENTIVE PROGRAM AND FOR THE RATIFICATION OF THE
APPOINTMENT OF PRICEWATERHOUSE COOPERS LLP AS INDE-
PENDENT PUBLIC ACCOUNTANTS AND AS SAID PROXIES DEEM
ADVISABLE ON SUCH OTHER MATTERS AS MAY PROPERLY COME
BEFORE THE MEETING.
Signature(s) ________________________________________________________________________ Dated __________________________________, 1998
(This Proxy should be marked, dated and signed by the shareholder(s) exactly as his or her name appears hereon, and returned
promptly in the enclosed envelope. Persons signing in a fiduciary capacity should so indicate. If shares are held by joint tenants
or as community property, both should sign.)
APPENDIX B
CHOLESTECH CORPORATION
1997 STOCK INCENTIVE PROGRAM
(As amended as of August 20, 1998)
1. Purposes of the 1997 Stock Incentive Program (the "Plan"). The
purposes of this Plan are:
o to attract and retain the best available personnel for
positions of substantial responsibility,
o to provide additional incentive to Employees, Directors
and Consultants, and
o to promote the success of the Company's business.
Options granted under the Plan may be Incentive Stock Options or
Nonstatutory Stock Options, as determined by the Administrator at the time of
grant. Stock Purchase Rights may also be granted under the Plan. The Plan also
provides for automatic grants of Nonstatutory Stock Options to certain Outside
Directors.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Administrator" means the Board or any of its Committees as
shall be administering the Plan, in accordance with Section 4 of the Plan.
(b) "Applicable Laws" means the requirements relating to the
administration of stock option plans under U. S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or quotation
system on which the Common Stock is listed or quoted and the applicable laws of
any foreign country or jurisdiction where Options or Stock Purchase Rights are,
or will be, granted under the Plan.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) "Committee" means a committee of Directors appointed by the
Board in accordance with Section 4 of the Plan.
(f) "Common Stock" means the common stock of the Company.
(g) "Company" means Cholestech Corporation, a California
corporation.
(h) "Consultant" means any person, including an advisor, engaged
by the Company or a Parent or Subsidiary to render services to such entity.
(i) "Director" means a member of the Board.
(j) "Disability" means total and permanent disability as defined
in Section 22(e)(3) of the Code.
(k) "Employee" means any person, including Officers and
Directors, employed by the Company or any Parent or Subsidiary of the Company. A
Service Provider shall not cease to be an Employee in the case of (i) any leave
of absence approved by the Company or (ii) transfers between locations of the
Company or between the Company, its Parent, any Subsidiary, or any successor.
For purposes of Incentive Stock Options, no such leave may exceed ninety days,
unless reemployment upon expiration of such leave is guaranteed by statute or
contract. If reemployment upon expiration of a leave of absence approved by the
Company is not so guaranteed, on the 181st day of such leave any Incentive Stock
Option held by the Optionee shall cease to be treated as an Incentive Stock
Option and shall be treated for tax purposes as a Nonstatutory Stock Option.
Neither service as a Director nor payment of a director's fee by the Company
shall be sufficient to constitute "employment" by the Company.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(m) "Fair Market Value" means, as of any date, the value of
Common Stock determined as follows:
(i) If the Common Stock is listed on any established
stock exchange or a national market system, including without limitation the
Nasdaq National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market,
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 exchange or system for
the last market trading day prior to the time of determination, as reported in
The Wall Street Journal or such other source as the Administrator deems
reliable;
(ii) If the Common Stock is regularly quoted by a
recognized securities dealer but selling prices are not reported, the Fair
Market Value of a Share of Common Stock shall be the mean between the high bid
and low asked prices for the Common Stock on the last market trading day prior
to the day of determination, as reported in The Wall Street Journal or such
other source as the Administrator deems reliable; or
(iii) In the absence of an established market for the
Common Stock, the Fair Market Value shall be determined in good faith by the
Administrator.
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(n) "Incentive Stock Option" means an Option intended to qualify
as an incentive stock option within the meaning of Section 422 of the Code and
the regulations promulgated thereunder.
(o) "Inside Director" means a Director who is an Employee.
(p) "Nonstatutory Stock Option" means an Option not intended to
qualify as an Incentive Stock Option.
(q) "Notice of Grant" means a written or electronic notice
evidencing certain terms and conditions of an individual Option or Stock
Purchase Right grant. The Notice of Grant is part of the Option Agreement.
(r) "Officer" means a person who is an officer of the Company
within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
(s) "Option" means a stock option granted pursuant to the Plan.
(t) "Option Agreement" means an agreement between the Company and
an Optionee evidencing the terms and conditions of an individual Option grant.
The Option Agreement is subject to the terms and conditions of the Plan.
(u) "Option Exchange Program" means a program whereby outstanding
Options are surrendered in exchange for Options with a lower exercise price.
(v) "Optioned Stock" means the Common Stock subject to an Option
or Stock Purchase Right.
(w) "Optionee" means the holder of an outstanding Option or Stock
Purchase Right granted under the Plan.
(x) "Outside Director" means a Director who is not an Employee.
(y) "Parent" means a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(z) "Plan" means this 1997 Stock Incentive Program.
(aa) "Restricted Stock" means shares of Common Stock acquired
pursuant to a grant of Stock Purchase Rights under Section 11 of the Plan.
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(bb) "Restricted Stock Purchase Agreement" means a written
agreement between the Company and the Optionee evidencing the terms and
restrictions applying to stock purchased under a Stock Purchase Right. The
Restricted Stock Purchase Agreement is subject to the terms and conditions of
the Plan and the Notice of Grant.
(cc) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any
successor to Rule 16b-3, as in effect when discretion is being exercised with
respect to the Plan.
(dd) "Section 16(b)" means Section 16(b) of the Exchange Act.
(ee) "Service Provider" means an Employee, Director or
Consultant; provided, however, that such term shall not include those
individuals who are representatives of shareholders owning more than one percent
(1%) of the outstanding Shares of the Company.
(ff) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 14 of the Plan.
(gg) "Stock Purchase Right" means the right to purchase Common
Stock pursuant to Section 11 of the Plan, as evidenced by a Notice of Grant.
(hh) "Subsidiary" means a "subsidiary corporation", whether now
or hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 14
of the Plan, the maximum aggregate number of Shares which may be optioned and
sold under the Plan is 900,000 Shares (the "Pool"). The Shares may be
authorized, but unissued, or reacquired Common Stock.
If an Option or Stock Purchase Right expires or becomes
unexercisable without having been exercised in full, or is surrendered pursuant
to an Option Exchange Program, the unpurchased Shares which were subject thereto
shall become available for future grant or sale under the Plan (unless the Plan
has terminated); provided, however, that Shares that have actually been issued
under the Plan, whether upon exercise of an Option or Right, shall not be
returned to the Plan and shall not become available for future distribution
under the Plan, except that if Shares of Restricted Stock are repurchased by the
Company at their original purchase price, such Shares shall become available for
future grant under the Plan.
4. Administration of the Plan.
(a) Procedure.
(i) Multiple Administrative Bodies. The Plan may be
administered by different Committees with respect to different groups of Service
Providers.
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(ii) Section 162(m). To the extent that the
Administrator determines it to be desirable to qualify Options granted hereunder
as "performance-based compensation" within the meaning of Section 162(m) of the
Code, the Plan shall be administered by a Committee of two or more "outside
directors" within the meaning of Section 162(m) of the Code.
(iii) Rule 16b-3. To the extent desirable to qualify
transactions hereunder as exempt under Rule 16b-3, the transactions contemplated
hereunder shall be structured to satisfy the requirements for exemption under
Rule 16b-3.
(iv) Grants to Outside Directors. All grants of Options
to Outside Directors made pursuant to Section 12 of the Plan shall be automatic
and nondiscretionary.
(v) Other Administration. Other than as provided above,
the Plan shall be administered by (A) the Board or (B) a Committee, which
committee shall be constituted to satisfy Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of the
Plan, and in the case of a Committee, subject to the specific duties delegated
by the Board to such Committee, the Administrator shall have the authority, in
its discretion:
(i) to determine the Fair Market Value;
(ii) to select the Service Providers to whom Options and
Stock Purchase Rights may be granted hereunder;
(iii) to determine the number of shares of Common Stock
to be covered by each Option and Stock Purchase Right granted hereunder;
(iv) to approve forms of agreement for use under the
Plan;
(v) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any Option or Stock Purchase Right
granted hereunder. Such terms and conditions include, but are not limited to,
the exercise price, the time or times when Options or Stock Purchase Rights may
be exercised (which may be based on performance criteria), any vesting
acceleration or waiver of forfeiture restrictions, and any restriction or
limitation regarding any Option or Stock Purchase Right of the shares of Common
Stock relating thereto, based in each case on such factors as the Administrator,
in its sole discretion, shall determine;
(vi) to reduce the exercise price of any Option or Stock
Purchase Right to the then current Fair Market Value if the Fair Market Value of
the Common Stock covered by such Option or Stock Purchase Right shall have
declined since the date the Option or Stock Purchase Right was granted;
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(vii) to institute an Option Exchange Program;
(viii) to construe and interpret the terms of the Plan
and awards granted pursuant to the Plan;
(ix) to prescribe, amend and rescind rules and
regulations relating to the Plan, including rules and regulations relating to
sub-plans established for the purpose of qualifying for preferred tax treatment
under foreign tax laws;
(x) to modify or amend each Option or Stock Purchase
Right (subject to Section 16(c) of the Plan), including the discretionary
authority to extend the post-termination exercisability period of Options longer
than is otherwise provided for in the Plan;
(xi) to allow Optionees to satisfy withholding tax
obligations by electing to have the Company withhold from the Shares to be
issued upon exercise of an Option or Stock Purchase Right that number of Shares
having a Fair Market Value equal to the amount required to be withheld. The Fair
Market Value of the Shares to be withheld shall be determined on the date that
the amount of tax to be withheld is to be determined. All elections by an
Optionee to have Shares withheld for this purpose shall be made in such form and
under such conditions as the Administrator may deem necessary or advisable;
(xii) to authorize any person to execute on behalf of
the Company any instrument required to effect the grant of an Option or Stock
Purchase Right previously granted by the Administrator;
(xiii) to make all other determinations deemed necessary
or advisable for administering the Plan.
(c) Effect of Administrator's Decision. The Administrator's
decisions, determinations and interpretations shall be final and binding on all
Optionees and any other holders of Options or Stock Purchase Rights.
5. Eligibility. Nonstatutory Stock Options and Stock Purchase Rights
may be granted to Service Providers. Incentive Stock Options may be granted only
to Employees.
6. Limitations.
(a) Each Option shall be designated in the Option Agreement as
either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year (under
all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such
Options shall be treated as
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Nonstatutory Stock Options. For purposes of this Section 6(a), Incentive Stock
Options shall be taken into account in the order in which they were granted. The
Fair Market Value of the Shares shall be determined as of the time the Option
with respect to such Shares is granted.
(b) Neither the Plan nor any Option or Stock Purchase Right shall
confer upon an Optionee any right with respect to continuing the Optionee's
relationship as a Service Provider with the Company, nor shall they interfere in
any way with the Optionee's right or the Company's right to terminate such
relationship at any time, with or without cause.
7. Term of Plan. Subject to Section 20 of the Plan, the Plan shall
become effective upon its adoption by the Board. It shall continue in effect for
a term of ten (10) years unless terminated earlier under Section 16 of the Plan.
8. Term of Option. The term of each Option shall be stated in the
Option Agreement. In the case of an Incentive Stock Option, the term shall be
ten (10) years from the date of grant or such shorter term as may be provided in
the Option Agreement. Moreover, in the case of an Incentive Stock Option granted
to an Optionee who, at the time the Incentive Stock Option is granted, owns
stock representing more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company or any Parent or Subsidiary, the
term of the Incentive Stock Option shall be five (5) years from the date of
grant or such shorter term as may be provided in the Option Agreement.
9. Option Exercise Price and Consideration.
(a) Exercise Price. The per share exercise price for the Shares
to be issued pursuant to exercise of an Option shall be determined by the
Administrator, subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time the
Incentive Stock Option is granted, owns stock representing more than ten percent
(10%) of the voting power of all classes of stock of the Company or any Parent
or Subsidiary, the per Share exercise price shall be no less than 110% of the
Fair Market Value per Share on the date of grant.
(B) granted to any Employee other than an Employee
described in paragraph (A) immediately above, the per Share exercise price shall
be no less than 100% of the Fair Market Value per Share on the date of grant.
(ii) In the case of a Nonstatutory Stock Option, the per
Share exercise price shall be determined by the Administrator. In the case of a
Nonstatutory Stock Option intended to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Code,
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the per Share exercise price shall be no less than 100% of the Fair Market Value
per Share on the date of grant.
(iii) Notwithstanding the foregoing, Options may be
granted with a per Share exercise price of less than 100% of the Fair Market
Value per Share on the date of grant pursuant to a merger or other corporate
transaction.
(b) Waiting Period and Exercise Dates. At the time an Option is
granted, the Administrator shall fix the period within which the Option may be
exercised and shall determine any conditions which must be satisfied before the
Option may be exercised.
(c) Form of Consideration. The Administrator shall determine the
acceptable form of consideration for exercising an Option, including the method
of payment. In the case of an Incentive Stock Option, the Administrator shall
determine the acceptable form of consideration at the time of grant. Such
consideration may consist entirely of:
(i) cash;
(ii) check;
(iii) promissory note;
(iv) other Shares which (A) in the case of Shares
acquired upon exercise of an option, have been owned by the Optionee for more
than six months on the date of surrender, and (B) have a Fair Market Value on
the date of surrender equal to the aggregate exercise price of the Shares as to
which said Option shall be exercised;
(v) consideration received by the Company under a
cashless exercise program implemented by the Company in connection with the
Plan;
(vi) a reduction in the amount of any Company liability
to the Optionee, including any liability attributable to the Optionee's
participation in any Company-sponsored deferred compensation program or
arrangement;
(vii) any combination of the foregoing methods of
payment; or
(viii) such other consideration and method of payment
for the issuance of Shares to the extent permitted by Applicable Laws.
10. Exercise of Option.
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(a) Procedure for Exercise; Rights as a Shareholder. Any Option
granted hereunder shall be exercisable according to the terms of the Plan and at
such times and under such conditions as determined by the Administrator and set
forth in the Option Agreement. Unless the Administrator provides otherwise,
vesting of Options granted hereunder shall be tolled during any unpaid leave of
absence. An Option may not be exercised for a fraction of a Share.
An Option shall be deemed exercised when the Company
receives: (i) written or electronic notice of exercise (in accordance with the
Option Agreement) from the person entitled to exercise the Option, and (ii) full
payment for the Shares with respect to which the Option is exercised. Full
payment may consist of any consideration and method of payment authorized by the
Administrator and permitted by the Option Agreement and the Plan. Shares issued
upon exercise of an Option shall be issued in the name of the Optionee or, if
requested by the Optionee, in the name of the Optionee and his or her spouse.
Until the Shares are issued (as evidenced by the appropriate entry on the books
of the Company or of a duly authorized transfer agent of the Company), no right
to vote or receive dividends or any other rights as a shareholder shall exist
with respect to the Optioned Stock, notwithstanding the exercise of the Option.
The Company shall issue (or cause to be issued) such Shares promptly after the
Option is exercised. No adjustment will be made for a dividend or other right
for which the record date is prior to the date the Shares are issued, except as
provided in Section 14 of the Plan.
Exercising an Option in any manner shall decrease the
number of Shares thereafter available, both for purposes of the Plan and for
sale under the Option, by the number of Shares as to which the Option is
exercised.
(b) Termination of Relationship as a Service Provider. If an
Optionee ceases to be a Service Provider, other than upon the Optionee's death
or Disability, the Optionee may exercise his or her Option within such period of
time as is specified in the Option Agreement to the extent that the Option is
vested on the date of termination (but in no event later than the expiration of
the term of such Option as set forth in the Option Agreement). In the absence of
a specified time in the Option Agreement, the Option shall remain exercisable
for three (3) months following the Optionee's termination. If, on the date of
termination, the Optionee is not vested as to his or her entire Option, the
Shares covered by the unvested portion of the Option shall revert to the Plan.
If, after termination, the Optionee does not exercise his or her Option within
the time specified by the Administrator, the Option shall terminate, and the
Shares covered by such Option shall revert to the Plan.
(c) Disability of Optionee. If an Optionee ceases to be a Service
Provider as a result of the Optionee's Disability, the Optionee may exercise his
or her Option within such period of time as is specified in the Option Agreement
to the extent the Option is vested on the date of termination (but in no event
later than the expiration of the term of such Option as set forth in the Option
Agreement). In the absence of a specified time in the Option Agreement, the
Option shall remain exercisable for twelve (12) months following the Optionee's
termination. If, on the date of
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termination, the Optionee is not vested as to his or her entire Option, the
Shares covered by the unvested portion of the Option shall revert to the Plan.
If, after termination, the Optionee does not exercise his or her Option within
the time specified herein, the Option shall terminate, and the Shares covered by
such Option shall revert to the Plan.
(d) Death of Optionee. If an Optionee dies while a Service
Provider, the Option may be exercised within such period of time as is specified
in the Option Agreement (but in no event later than the expiration of the term
of such Option as set forth in the Notice of Grant), by the Optionee's estate or
by a person who acquires the right to exercise the Option by bequest or
inheritance, but only to the extent that the Option is vested on the date of
death. In the absence of a specified time in the Option Agreement, the Option
shall remain exercisable for twelve (12) months following the Optionee's
termination. If, at the time of death, the Optionee is not vested as to his or
her entire Option, the Shares covered by the unvested portion of the Option
shall immediately revert to the Plan. The Option may be exercised by the
executor or administrator of the Optionee's estate or, if none, by the person(s)
entitled to exercise the Option under the Optionee's will or the laws of descent
or distribution. If the Option is not so exercised within the time specified
herein, the Option shall terminate, and the Shares covered by such Option shall
revert to the Plan.
(e) Buyout Provisions. The Administrator may at any time offer to
buy out for a payment in cash or Shares an Option previously granted based on
such terms and conditions as the Administrator shall establish and communicate
to the Optionee at the time that such offer is made.
11. Stock Purchase Rights.
(a) Rights to Purchase. Stock Purchase Rights may be issued
either alone, in addition to, or in tandem with other awards granted under the
Plan and/or cash awards made outside of the Plan. After the Administrator
determines that it will offer Stock Purchase Rights under the Plan, it shall
advise the offeree in writing or electronically, by means of a Notice of Grant,
of the terms, conditions and restrictions related to the offer, including the
number of Shares that the offeree shall be entitled to purchase, the price to be
paid, and the time within which the offeree must accept such offer. The offer
shall be accepted by execution of a Restricted Stock Purchase Agreement in the
form determined by the Administrator.
(b) Repurchase Option. Unless the Administrator determines
otherwise, the Restricted Stock Purchase Agreement shall grant the Company a
repurchase option exercisable upon the voluntary or involuntary termination of
the purchaser's service with the Company for any reason (including death or
Disability). The purchase price for Shares repurchased pursuant to the
Restricted Stock Purchase Agreement shall be the original price paid by the
purchaser and may be paid by cancellation of any indebtedness of the purchaser
to the Company. The repurchase option shall lapse at a rate determined by the
Administrator.
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(c) Other Provisions. The Restricted Stock Purchase Agreement
shall contain such other terms, provisions and conditions not inconsistent with
the Plan as may be determined by the Administrator in its sole discretion.
(d) Rights as a Shareholder. Once the Stock Purchase Right is
exercised, the purchaser shall have the rights equivalent to those of a
shareholder, and shall be a shareholder when his or her purchase is entered upon
the records of the duly authorized transfer agent of the Company. No adjustment
will be made for a dividend or other right for which the record date is prior to
the date the Stock Purchase Right is exercised, except as provided in Section 14
of the Plan.
12. Automatic Option Grants to Outside Directors.
(a) First Option. Each Outside Director who first becomes an
Outside Director within six months after an annual meeting of the Company's
shareholders after the effective date of this Plan shall be automatically
granted a Nonstatutory Stock Option to purchase 5,000 Shares (the "First
Option") on the date on which such person first becomes an Outside Director,
whether through election by the shareholders of the Company or appointment by
the Board to fill a vacancy; provided, however, that an Inside Director who
ceases to be an Inside Director but who remains a Director shall not receive a
First Option.
(b) Subsequent Option. Each Outside Director other than the
Chairman of the Board of Directors shall be automatically granted a Nonstatutory
Stock Option to purchase 10,000 Shares (a "Subsequent Option") on the date of
the annual shareholder meeting of each year; provided that he or she is then an
Outside Director. The Chairman of the Board of Directors shall be automatically
granted a Nonstatutory Stock Option to purchase 20,000 Shares on the date of the
annual shareholder meeting of each year; provided that he or she is then an
Outside Director.
(c) Terms of Options. The terms of First Options and Subsequent
Options granted hereunder shall be as follows:
(i) the term of each Option shall be five (5) years.
(ii) the exercise price per Share shall be 100% of the
Fair Market Value per Share on the date of grant. In the event that the date of
grant is not a trading day, the exercise price per Share shall be the Fair
Market Value on the next trading day immediately following the date of grant.
(iii) 25% of the Shares subject to the Option shall vest
each calendar quarter after the date of grant, so that 100% of the Optioned
Stock shall be exercisable one year after the date of grant, subject to the
Optionee remaining a Service Provider as of such vesting dates.
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(d) In the event that any Option granted under this Section 12
would cause the number of Shares subject to outstanding Option plus the number
of Shares previously purchased under Options to exceed the Pool, then the
remaining Shares available for Option grant under this Section 12 shall be
granted on a pro rata basis. No further grants shall be made under this Section
12 until such time, if any, as additional Shares become available for grant
under the Plan through action of the Board or the stockholders to increase the
number of Shares which may be issued under the Plan or through cancellation or
expiration of Options previously granted hereunder.
13. Non-Transferability of Options and Stock Purchase Rights. Unless
determined otherwise by the Administrator, an Option or Stock Purchase Right may
not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any
manner other than by will or by the laws of descent or distribution and may be
exercised, during the lifetime of the Optionee, only by the Optionee. If the
Administrator makes an Option or Stock Purchase Right transferable, such Option
or Stock Purchase Right shall contain such additional terms and conditions as
the Administrator deems appropriate.
14. Adjustments Upon Changes in Capitalization, Dissolution, Merger or
Asset Sale.
(a) Changes in Capitalization. Subject to any required action by
the shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option and Stock Purchase Right, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options or Stock Purchase Rights have yet been granted or which have
been returned to the Plan upon cancellation or expiration of an Option or Stock
Purchase Right, as well as the price per share of Common Stock covered by each
such outstanding Option or Stock Purchase Right, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option or Stock
Purchase Right.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Administrator shall notify each
Optionee as soon as practicable prior to the effective date of such proposed
transaction. The Administrator in its discretion may provide for an Optionee to
have the right to exercise his or her Option until ten (10) days prior to such
transaction as to all of the Optioned Stock covered thereby, including Shares as
to which the
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Option would not otherwise be exercisable. In addition, the Administrator may
provide that any Company repurchase option applicable to any Shares purchased
upon exercise of an Option or Stock Purchase Right shall lapse as to all such
Shares, provided the proposed dissolution or liquidation takes place at the time
and in the manner contemplated. To the extent it has not been previously
exercised, an Option or Stock Purchase Right will terminate immediately prior to
the consummation of such proposed action.
(c) 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, each outstanding Option and Stock Purchase Right shall be
assumed or an equivalent option or right substituted by the successor
corporation or a Parent or Subsidiary of the successor corporation. In the event
that the successor corporation refuses to assume or substitute for the Option or
Stock Purchase Right, the Optionee shall fully vest in and have the right to
exercise the Option or Stock Purchase Right as to all of the Optioned Stock,
including Shares as to which it would not otherwise be vested or exercisable. If
an Option or Stock Purchase Right becomes fully vested and exercisable in lieu
of assumption or substitution in the event of a merger or sale of assets, the
Administrator shall notify the Optionee in writing or electronically that the
Option or Stock Purchase Right shall be fully vested and exercisable for a
period of fifteen (15) days from the date of such notice, and the Option or
Stock Purchase Right shall terminate upon the expiration of such period. For the
purposes of this paragraph, the Option or Stock Purchase Right shall be
considered assumed if, following the merger or sale of assets, the option or
right confers the right to purchase or receive, for each Share of Optioned Stock
subject to the Option or Stock Purchase Right 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 is not solely common
stock of the successor corporation or its Parent, the Administrator may, with
the consent of the successor corporation, provide for the consideration to be
received upon the exercise of the Option or Stock Purchase Right, for each Share
of Optioned Stock subject to the Option or Stock Purchase Right, to be solely
common stock of the successor corporation or its Parent equal in fair market
value to the per share consideration received by holders of Common Stock in the
merger or sale of assets.
15. Date of Grant. The date of grant of an Option or Stock Purchase
Right shall be, for all purposes, the date on which the Administrator makes the
determination granting such Option or Stock Purchase Right, or such other later
date as is determined by the Administrator. Notice of the determination shall be
provided to each Optionee within a reasonable time after the date of such grant.
16. Amendment and Termination of the Plan.
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(a) Amendment and Termination. The Board may at any time amend,
alter, suspend or terminate the Plan.
(b) Shareholder Approval. The Company shall obtain shareholder
approval of any Plan amendment to the extent necessary and desirable to comply
with Applicable Laws.
(c) Effect of Amendment or Termination. No amendment, alteration,
suspension or termination of the Plan shall impair the rights of any Optionee,
unless mutually agreed otherwise between the Optionee and the Administrator,
which agreement must be in writing and signed by the Optionee and the Company.
Termination of the Plan shall not affect the Administrator's ability to exercise
the powers granted to it hereunder with respect to Options granted under the
Plan prior to the date of such termination.
17. Conditions Upon Issuance of Shares.
(a) Legal Compliance. Shares shall not be issued pursuant to the
exercise of an Option or Stock Purchase Right unless the exercise of such Option
or Stock Purchase Right and the issuance and delivery of such Shares shall
comply with Applicable Laws and shall be further subject to the approval of
counsel for the Company with respect to such compliance.
(b) Investment Representations. As a condition to the exercise of
an Option or Stock Purchase Right, the Company may require the person exercising
such Option or Stock Purchase Right to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required.
18. Inability to Obtain Authority. The inability of the Company to
obtain authority from any regulatory body having jurisdiction, which authority
is deemed by the Company's counsel to be necessary to the lawful issuance and
sale of any Shares hereunder, shall relieve the Company of any liability in
respect of the failure to issue or sell such Shares as to which such requisite
authority shall not have been obtained.
19. Reservation of Shares. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
20. Shareholder Approval. The Plan shall be subject to approval by the
shareholders of the Company within twelve (12) months after the date the Plan is
adopted. Such shareholder approval shall be obtained in the manner and to the
degree required under Applicable Laws.
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APPENDIX C
CHOLESTECH CORPORATION
1997 STOCK INCENTIVE PROGRAM
STOCK OPTION AGREEMENT
Unless otherwise defined herein, the terms defined in the Plan shall
have the same defined meanings in this Option Agreement.
I. NOTICE OF STOCK OPTION GRANT
[Optionee's Name and Address]
You have been granted an option to purchase Common Stock of the
Company, subject to the terms and conditions of the Plan and this Option
Agreement, as follows:
Grant Number _________________________
Date of Grant _________________________
Vesting Commencement Date _________________________
Exercise Price per Share $________________________
Total Number of Shares Granted _________________________
Total Exercise Price $_________________________
Type of Option: ___ Incentive Stock Option
___ Nonstatutory Stock Option
Term/Expiration Date: _________________________
Vesting Schedule:
This Option may be exercised, in whole or in part, in accordance with
the following schedule:
25% of the Shares subject to the Option shall vest twelve months after
the Vesting Commencement Date, and 1/48 of the Shares subject to the Option
shall vest each month thereafter,
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so that 100% of the Optioned Stock shall be exercisable after four years,
subject to the Optionee continuing to be a Service Provider on such dates.
Termination Period:
This Option may be exercised for three months after Optionee ceases to
be a Service Provider. Upon the death or Disability of the Optionee, this Option
may be exercised for one year after Optionee ceases to be a Service Provider. In
no event shall this Option be exercised later than the Term/Expiration Date as
provided above.
II. AGREEMENT
1. Grant of Option. The Plan Administrator of the Company hereby grants
to the Optionee named in the Notice of Grant attached as Part I of this
Agreement (the "Optionee") an option (the "Option") to purchase the number of
Shares, as set forth in the Notice of Grant, at the exercise price per share set
forth in the Notice of Grant (the "Exercise Price"), subject to the terms and
conditions of the Plan, which is incorporated herein by reference. Subject to
Section 16(c) of the Plan, in the event of a conflict between the terms and
conditions of the Plan and the terms and conditions of this Option Agreement,
the terms and conditions of the Plan shall prevail.
If designated in the Notice of Grant as an Incentive Stock Option
("ISO"), this Option is intended to qualify as an Incentive Stock Option under
Section 422 of the Code. However, if this Option is intended to be an Incentive
Stock Option, to the extent that it exceeds the $100,000 rule of Code Section
422(d) it shall be treated as a Nonstatutory Stock Option ("NSO").
2. Exercise of Option.
(a) Right to Exercise. This Option is exercisable during its term
in accordance with the Vesting Schedule set out in the Notice of Grant and the
applicable provisions of the Plan and this Option Agreement.
(b) Method of Exercise. This Option is exercisable by delivery of
an exercise notice, in the form attached as Exhibit A (the "Exercise Notice"),
which shall state the election to exercise the Option, the number of Shares in
respect of which the Option is being exercised (the "Exercised Shares"), and
such other representations and agreements as may be required by the Company
pursuant to the provisions of the Plan. The Exercise Notice shall be completed
by the Optionee and delivered to Secretary of the Company. The Exercise Notice
shall be accompanied by payment of the aggregate Exercise Price as to all
Exercised Shares. This Option shall be deemed to be exercised upon receipt by
the Company of such fully executed Exercise Notice accompanied by such aggregate
Exercise Price.
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No Shares shall be issued pursuant to the exercise of this Option
unless such issuance and exercise complies with Applicable Laws. Assuming such
compliance, for income tax purposes the Exercised Shares shall be considered
transferred to the Optionee on the date the Option is exercised with respect to
such Exercised Shares.
3. Method of Payment. Payment of the aggregate Exercise Price shall be
by any of the following, or a combination thereof, at the election of the
Optionee:
(a) cash;
(b) check;
(c) consideration received by the Company under a cashless
exercise program implemented by the Company in connection with the Plan; or
(d) surrender of other Shares which (i) in the case of Shares
acquired upon exercise of an option, have been owned by the Optionee for more
than six (6) months on the date of surrender, and (ii) have a Fair Market Value
on the date of surrender equal to the aggregate Exercise Price of the Exercised
Shares.
4. Non-Transferability of Option. This Option may not be transferred in
any manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of Optionee only by the Optionee. The terms
of the Plan and this Option Agreement shall be binding upon the executors,
administrators, heirs, successors and assigns of the Optionee.
5. Term of Option. This Option may be exercised only within the term
set out in the Notice of Grant, and may be exercised during such term only in
accordance with the Plan and the terms of this Option Agreement.
6. Tax Consequences. Some of the federal tax consequences relating to
this Option, as of the date of this Option, are set forth below. THIS SUMMARY IS
NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE.
THE OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR
DISPOSING OF THE SHARES.
(a) Exercising the Option.
(i) Nonstatutory Stock Option. The Optionee may incur
regular federal income tax liability upon exercise of a NSO. The Optionee will
be treated as having received compensation income (taxable at ordinary income
tax rates) equal to the excess, if any, of the Fair Market Value of the
Exercised Shares on the date of exercise over their aggregate Exercise Price. If
the Optionee is an Employee or a former Employee, the Company will be required
to withhold from
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his or her compensation or collect from Optionee and pay to the applicable
taxing authorities an amount in cash equal to a percentage of this compensation
income at the time of exercise, and may refuse to honor the exercise and refuse
to deliver Shares if such withholding amounts are not delivered at the time of
exercise.
(ii) Incentive Stock Option. If this Option qualifies as
an ISO, the Optionee will have no regular federal income tax liability upon its
exercise, although the excess, if any, of the Fair Market Value of the Exercised
Shares on the date of exercise over their aggregate Exercise Price will be
treated as an adjustment to alternative minimum taxable income for federal tax
purposes and may subject the Optionee to alternative minimum tax in the year of
exercise. In the event that the Optionee ceases to be an Employee but remains a
Service Provider, any Incentive Stock Option of the Optionee that remains
unexercised shall cease to qualify as an Incentive Stock Option and will be
treated for tax purposes as a Nonstatutory Stock Option on the date three (3)
months and one (1) day following such change of status.
(b) Disposition of Shares.
(i) NSO. If the Optionee holds NSO Shares for at least
one year, any gain realized on disposition of the Shares will be treated as
long-term capital gain for federal income tax purposes.
(ii) ISO. If the Optionee holds ISO Shares for at least
one year after exercise and two years after the grant date, any gain realized on
disposition of the Shares will be treated as long-term capital gain for federal
income tax purposes. If the Optionee disposes of ISO Shares within one year
after exercise or two years after the grant date, any gain realized on such
disposition will be treated as compensation income (taxable at ordinary income
rates) to the extent of the excess, if any, of the lesser of (A) the difference
between the Fair Market Value of the Shares acquired on the date of exercise and
the aggregate Exercise Price, or (B) the difference between the sale price of
such Shares and the aggregate Exercise Price. Any additional gain will be taxed
as capital gain, short-term or long-term depending on the period that the ISO
Shares were held.
(c) Notice of Disqualifying Disposition of ISO Shares. If the
Optionee sells or otherwise disposes of any of the Shares acquired pursuant to
an ISO on or before the later of (i) two years after the grant date, or (ii) one
year after the exercise date, the Optionee shall immediately notify the Company
in writing of such disposition. The Optionee agrees that he or she may be
subject to income tax withholding by the Company on the compensation income
recognized from such early disposition of ISO Shares by payment in cash or out
of the current earnings paid to the Optionee.
7. Entire Agreement; Governing Law. The Plan is incorporated herein by
reference. The Plan and this Option Agreement constitute the entire agreement of
the parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the
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Company and Optionee with respect to the subject matter hereof, and may not be
modified adversely to the Optionee's interest except by means of a writing
signed by the Company and Optionee. This agreement is governed by the internal
substantive laws, but not the choice of law rules, of California.
8. NO GUARANTEE OF CONTINUED SERVICE. OPTIONEE ACKNOWLEDGES AND AGREES
THAT THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED
ONLY BY CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (AND NOT
THROUGH THE ACT OF BEING HIRED, BEING GRANTED AN OPTION OR PURCHASING SHARES
HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE
TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO
NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A
SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL
NOT INTERFERE WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO TERMINATE
OPTIONEE'S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT
CAUSE.
By your signature and the signature of the Company's representative
below, you and the Company agree that this Option is granted under and governed
by the terms and conditions of the Plan and this Option Agreement. Optionee has
reviewed the Plan and this Option Agreement in their entirety, has had an
opportunity to obtain the advice of counsel prior to executing this Option
Agreement and fully understands all provisions of the Plan and Option Agreement.
Optionee hereby agrees to accept as binding, conclusive and final all decisions
or interpretations of the Administrator upon any questions relating to the Plan
and Option Agreement. Optionee further agrees to notify the Company upon any
change in the residence address indicated below.
OPTIONEE: CHOLESTECH CORPORATION
- ----------------------------------- ------------------------------------
Signature By
- ------------------------------------ ------------------------------------
Print Name Title
- ------------------------------------
Residence Address
- ------------------------------------
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CONSENT OF SPOUSE
The undersigned spouse of Optionee has read and hereby approves the
terms and conditions of the Plan and this Option Agreement. In consideration of
the Company's granting his or her spouse the right to purchase Shares as set
forth in the Plan and this Option Agreement, the undersigned hereby agrees to be
irrevocably bound by the terms and conditions of the Plan and this Option
Agreement and further agrees that any community property interest shall be
similarly bound. The undersigned hereby appoints the undersigned's spouse as
attorney-in-fact for the undersigned with respect to any amendment or exercise
of rights under the Plan or this Option Agreement.
---------------------------------------
Spouse of Optionee
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APPENDIX D
EXHIBIT A
1997 STOCK INCENTIVE PROGRAM
EXERCISE NOTICE
Cholestech Corporation
3347 Investment Blvd.
Hayward, CA 94545-3808
Attention: Secretary
1. Exercise of Option. Effective as of today, ________________, 199__,
the undersigned ("Purchaser") hereby elects to purchase ______________ shares
(the "Shares") of the Common Stock of Cholestech Corporation (the "Company")
under and pursuant to the 1997 Stock Incentive Program (the "Plan") and the
Stock Option Agreement dated ____________, 19___ (the "Option Agreement"). The
purchase price for the Shares shall be $____________, as required by the Option
Agreement.
2. Delivery of Payment. Purchaser herewith delivers to the Company the
full purchase price for the Shares.
3. Representations of Purchaser. Purchaser acknowledges that Purchaser
has received, read and understood the Plan and the Option Agreement and agrees
to abide by and be bound by their terms and conditions.
4. Rights as Shareholder. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the Shares, no right to vote or receive dividends or
any other rights as a shareholder shall exist with respect to the Optioned
Stock, notwithstanding the exercise of the Option. The Shares so acquired shall
be issued to the Optionee as soon as practicable after exercise of the Option.
No adjustment will be made for a dividend or other right for which the record
date is prior to the date of issuance, except as provided in Section 14 of the
Plan.
5. Tax Consultation. Purchaser understands that Purchaser may suffer
adverse tax consequences as a result of Purchaser's purchase or disposition of
the Shares. Purchaser represents that Purchaser has consulted with any tax
consultants Purchaser deems advisable in connection with the purchase or
disposition of the Shares and that Purchaser is not relying on the Company for
any tax advice.
6. Entire Agreement; Governing Law. The Plan and Option Agreement are
incorporated herein by reference. This Agreement, the Plan and the Option
Agreement constitute the entire agreement of the parties with respect to the
subject matter hereof and supersede in their entirety all
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prior undertakings and agreements of the Company and Purchaser with respect to
the subject matter hereof, and may not be modified adversely to the Purchaser's
interest except by means of a writing signed by the Company and Purchaser. This
agreement is governed by the internal substantive laws, but not the choice of
law rules, of California.
Submitted by: Accepted by:
PURCHASER: CHOLESTECH CORPORATION
- ---------------------------------- -------------------------------------
Signature By
- ---------------------------------- -------------------------------------
Print Name Its
Address: Address:
- ---------------------------------- 3347 Investment Blvd.
- ---------------------------------- Hayward, CA 94545-3808
-------------------------------------
Date Received
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