SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. )
[X] Filed by the Registrant
[_] Filed by a Party other than the Registrant
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
IBAH, Inc.
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(Name of Registrant as Specified in its Charter)
IBAH, Inc.
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(Name of Person(s) Filing Proxy Statement)
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 transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11. (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Dated Filed:
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IBAH, INC.
Four Valley Square
512 Township Line Road
Blue Bell, PA 19422-2724
------------
Notice of Special Meeting of Stockholders
To Be Held February 5, 1997
------------
TO OUR STOCKHOLDERS:
You are invited to be present either in person or by proxy at the
Special Meeting of Stockholders of IBAH, Inc. (the "Company") to be held at the
offices of the Company, Four Valley Square, 512 Township Line Road, Blue Bell,
Pennsylvania 19422-2724 on Wednesday, February 5, 1997 at 10:00 a.m., for the
following purposes:
1. to consider and act upon a proposal to approve the IBAH, Inc.
1997 Equity Compensation Plan; and
2. to transact such other business as may properly come before the
meeting or any adjournment or adjournments thereof.
The Board of Directors has fixed the close of business on December 26,
1996 as the record date for determining stockholders entitled to notice of and
to vote at the meeting and any adjournments thereof. A list of stockholders
entitled to vote at the meeting will be available for examination by any
stockholder for any purpose germane to the meeting ten days prior to the meeting
during normal business hours at the Company's offices at Four Valley Square, 512
Township Line Road, Blue Bell, Pennsylvania 19422-2724. Such list of
stockholders will also be available for inspection at the meeting.
The Directors hope that you will find it convenient to attend the
meeting in person, but whether or not you plan to attend, please sign, date and
return the enclosed proxy promptly to ensure your shares are represented at the
meeting. Stockholders who execute proxies retain the right to revoke them (in
writing) at any time prior to the voting thereof. A return envelope, which
requires no postage if mailed in the United States, is enclosed for your
convenience.
By Order of the Board of Directors,
Jane H. Hollingsworth
Secretary
Blue Bell, Pennsylvania
December 30, 1996
===============================================================================
REGARDLESS OF WHETHER YOU EXPECT TO ATTEND THE MEETING, YOUR VOTE IS IMPORTANT.
ACCORDINGLY, YOU ARE REQUESTED TO SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT
IN THE ENCLOSED ENVELOPE TO ENSURE THAT YOUR SHARES ARE REPRESENTED. RETURNING
YOUR PROXY WILL NOT DEPRIVE YOU OF YOUR RIGHT TO ATTEND THE MEETING AND VOTE
YOUR SHARES IN PERSON.
===============================================================================
IBAH, INC.
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PROXY STATEMENT
FOR SPECIAL MEETING OF STOCKHOLDERS
To Be Held February 5, 1997
-----------
This Proxy Statement is furnished to the stockholders of IBAH, Inc., a
Delaware corporation (the "Company"), in connection with the solicitation of
proxies by the Board of Directors for use at the special meeting of stockholders
of the Company to be held on February 5, 1997 and any adjournment or
adjournments thereof (the "Meeting"). A copy of the notice of the Meeting
accompanies this Proxy Statement. It is anticipated that the mailing of this
Proxy Statement will commence on or about December 30, 1996.
If the enclosed proxy is executed and returned, it may nevertheless be
revoked at any time before it is exercised by giving written notice to the
Secretary of the Company, but mere attendance at the Meeting, without such
notice, will not revoke the proxy. Shares represented by a valid proxy which is
received pursuant to this solicitation and not revoked before it is exercised
will be voted as provided on the proxy at the Meeting or any adjournments
thereof.
The Company's executive offices are located at Four Valley Square,
512 Township Line Road, Blue Bell, Pennsylvania 19422-2724.
Voting At The Meeting
Only holders of shares of Common Stock of the Company (the "Common
Stock") and Series A Convertible Preferred Stock of the Company (the "Series A
Preferred Stock") of record at the close of business on December 26, 1996 will
be entitled to vote at the Meeting. On December 26, 1996, 21,364,185 shares of
Common Stock and 749,665 shares of Series A Preferred Stock, the only
outstanding voting securities of the Company, were issued and outstanding. Each
share of Common Stock is entitled to one vote and each share of Series A
Preferred Stock is entitled to three votes on all matters.
The holders of a majority of the shares entitled to vote, present in
person or represented by proxy, constitute a quorum. The affirmative vote of a
majority of the shares present in person or represented by proxy at the Meeting
and entitled to vote is required for the adoption of the proposal to approve the
IBAH, Inc. 1997 Equity Compensation Plan (the "Plan") or to take action with
respect to any other matter as may properly be brought before the Meeting.
Shares cannot be voted at the Meeting unless the holder of record is present in
person or by proxy. The enclosed proxy is a means by which a stockholder may
authorize the voting of his or her shares at the Meeting. The shares of Common
Stock and Series A Preferred Stock represented by each properly executed proxy
card will be voted at the Meeting in accordance with each stockholder's
directions. Stockholders are urged to specify their choices by marking the
appropriate boxes on the enclosed proxy; if no choice has been specified, the
shares will be voted as recommended by the Board of Directors. If any other
matters are properly presented to the Meeting for action, the proxy holders will
vote the proxies (which confer discretionary authority to vote on such matters)
in accordance with their best judgment.
Abstentions may be specified on the proposal to approve the Plan.
Abstentions will be considered present and entitled to vote at the Meeting, but
will not be counted as votes cast in the affirmative. Abstentions will have the
effect of a negative vote because the proposal to approve the Plan requires the
affirmative vote of a majority of the shares present at the Meeting in person or
represented by proxy at the Meeting and entitled to vote.
Brokers who hold shares in street name for customers have the authority
under the rules of the various stock exchanges to vote on certain items when
they have not received instructions from beneficial owners. Brokers that do not
receive instructions are not entitled to vote such shares with respect to the
proposal to approve the Plan. A failure by brokers to vote those shares will
have no effect on the outcome of the proposal to approve the Plan because such
shares are not considered shares present and entitled to vote with respect to
such matters under applicable Delaware law.
The Company will bear the cost of the Meeting and the cost of
soliciting proxies, including the cost of mailing the proxy material. In
addition to solicitation by mail, directors, officers and regular employees of
the Company (who will not be specifically compensated for such services) may
solicit proxies in person and by telephone or facsimile. Arrangements have been
made for the Company's transfer agent (and may also be made with brokerage
houses and other custodians, nominees and fiduciaries) for forwarding proxy
materials to the beneficial owners of shares of Common Stock held of record by
such persons, and the Company will reimburse the transfer agent (and such other
entities) for its (or their) reasonable out-of-pocket expenses incurred in
forwarding such materials.
Your proxy vote is important. Accordingly, the Company asks you to
complete, sign and return the accompanying proxy whether or not you plan to
attend the Meeting. If you plan to attend the Meeting to vote in person and your
shares are registered with the Company's transfer agent, American Stock Transfer
& Trust Company, in the name of a broker, bank or other custodian, nominee or
fiduciary, you must secure a proxy from such person assigning you the right to
vote your shares.
Company History
The Company was originally Affinity Biotech, Inc., a New Jersey
corporation (the "New Jersey Corporation"), which was incorporated in January
1990. In April 1992, the New Jersey Company was merged into Affinity Biotech,
Inc., a Delaware corporation ("Affinity"). In April 1992, Affinity completed its
initial public offering of Common Stock. On April 27, 1994, Bio-Pharm Clinical
Services, Inc., a clinical research organization ("Bio-Pharm"), and Affinity, a
drug delivery and technology corporation, merged (the "Merger") and simultaneous
with the Merger, Affinity changed its name to IBAH, Inc. ("IBAH"). Since the
Merger resulted in the former Bio-Pharm shareholders having a majority ownership
of IBAH, the Merger was accounted for as an acquisition of Affinity by
Bio-Pharm.
On April 19, 1996, the Company completed a public offering of 3,000,000
shares of Common Stock in which the Company raised approximately $18 million in
net proceeds. The shares were sold to selected institutional investors. The
Company acquired Resource Biometrics, Inc. ("RBI") on July 18, 1996. RBI
provides software products and data services to the pharmaceutical,
biotechnology and medical device industries. RBI's software tools are used to
increase the efficiency of data cleanup, database consolidation, data analysis
and reporting. RBI has a staff of 25 employees and operates from an office in
San Francisco, California. The Company acquired HGB, Inc. ("HGB"), which did
business as "The Hardardt Group," on October 1, 1996. HGB, which now operates as
a part of the Bio-Pharm Clinical Services Division, specialized in clinical
trial management of drug development trials for the pharmaceutical,
biotechnology, medical device and diagnostics industries.
2
SECURITY OWNERSHIP
The following table sets forth certain information as of December 13,
1996, as supplied to the Company, regarding the beneficial ownership of the
Common Stock by all persons known to the Company who own more than 5% of the
outstanding shares of the Company's Common Stock or the Series A Preferred
Stock, each director of the Company and each executive officer named in the
Summary Compensation Table included elsewhere herein and all executive officers
and directors as a group. Unless otherwise indicated, based upon information
provided to the Company by the directors, executive officers and principal
stockholders, the persons named in the table below have sole voting and
investment power with respect to all shares of Common Stock shown as
beneficially owned by them.
Number of
Shares Percent
Beneficially Beneficially
Name Owned Owned
- ---- ------------ ------------
Greater than 5% Stockholders
Geraldine A. Henwood (1)(2)............................................. 3,158,758 14.5%
Thomas F. Henwood(3).................................................... 3,158,758 14.5%
Vector Later-Stage Equity Fund, L.P. (4)................................ 2,141,904 9.0%
Sandra Panem, Ph.D.(5).................................................. 2,141,904 9.0%
H&Q Investment Funds(6)................................................. 1,907,099 7.9%
Winston J. Churchill(7)................................................. 1,674,667 7.6%
T. Rowe Price New Horizons Fund, Inc.(8)................................ 1,285,140 5.6%
SmithKline Beecham Corporation(9)....................................... 1,161,669 5.1%
Prolific Asset Management, Ltd.(10)..................................... 642,570 2.7%
Judith L. Hardardt (11)................................................. 2,036,182 9.4%
Other Directors
Ernst-Gunter Afting..................................................... --- ---
Victor J. Bauer, Ph.D.(12).............................................. 8,000 *
Edwin A. Bescherer, Jr.(13)............................................. 6,000 *
Martyn D. Greenacre(14)................................................. 4,000 *
Sidney Jevons, Ph.D.(15)................................................ 545,909 2.5%
Richard L. Sherman, Esq.(14)............................................ 19,000 *
Other Named Executive Officers
John M. Cullen, Ph.D.(14)(20) .......................................... 210,773 1.0%
Stuart J. Hamill, Ph.D(2)(16)(20)....................................... 946,420 4.2%
John L. Santoro(2)(17).................................................. 834,456 3.8%
Leonard F. Stigliano(18)................................................ 36,010 *
All directors and executive officers
as group (15 persons)(19)............................................. 10,497,669 42.6%
- ------------------
* Indicates less than 1%.
(1) Includes 466,055 shares owned of record by Ms. Henwood's husband and
24,000 shares subject to exercisable options. Ms. Henwood disclaims
beneficial ownership of the shares owned by her husband.
(2) The address of this stockholder is c/o IBAH, Inc., Four Valley Square,
512 Township Line Road, Blue Bell, Pennsylvania 19422.
3
(3) Includes 2,668,703 shares owned of record by Mr. Henwood's wife and
24,000 shares subject to options exercisable by Ms. Henwood. Mr.
Henwood disclaims beneficial ownership of the shares owned by his wife
and those that are subject to options. The address of this stockholder
is 6 Jorrocks Lane, Malvern, Pennsylvania 19355.
(4) Includes 356,984 shares of Series A Preferred Stock, convertible into
1,070,952 shares of Common Stock, and 1,070,952 shares subject to
exercisable warrants. The address of this stockholder is 1751 Lake
Cook Road, Suite 350, Deerfield, Illinois 60015. See also footnote 5.
Vector Securities International, Inc., an affiliate of Vector
Later-Stage Equity Fund, L.P. (the "Later-Stage Fund"), is the owner
of 40,000 warrants to purchase Common Stock of the Company. The
Later-Stage Fund disclaims beneficial ownership of these securities.
Further, Vector Securities International, Inc. disclaims beneficial
ownership of all securities of the Company owned beneficially and of
record by the Later-Stage Fund.
(5) Consists entirely of shares and warrants owned beneficially and of
record by the Later-Stage Equity Fund. Includes 356,984 shares of
Series A Preferred Stock, convertible into 1,070,952 shares of Common
Stock, and 1,070,952 shares subject to exercisable warrants. Dr. Panem
is the President of Vector Fund Management, L.P., the General Partner
of the Later-Stage Fund, and may be deemed to have voting and
investment power with respect to such shares. Dr. Panem disclaims
beneficial ownership of such shares. See also footnote 4.
(6) Consists of two affiliated investment funds; H&Q Healthcare Investors,
which owns two-thirds of the amount stated and H&Q Life Sciences
Investors, which owns the balance. The amount shown includes 825,909
shares subject to exercisable warrants and 178,491 shares of Series A
Preferred Stock convertible into 535,473 shares of Common Stock. The
address of these stockholders is 50 Rowes Wharf, Boston, MA 02110.
(7) Includes 120,219 shares owned of record by Mr. Churchill's Retirement
Plan; 614,327 shares that Mr. Churchill and his wife own as tenants by
the entireties; 35,000 shares owned by Mrs. Churchill as custodian for
Mr. Churchill's son; 153,750 shares owned by a trust for the benefit
of Mr. Churchill's son; 78,000 shares subject to exercisable options
by Mr. Churchill; 576,540 shares owned of record by Mr. Churchill's
affiliate, CIP Capital, L.P.; and 96,831 shares subject to exercisable
warrants by CIP Capital, L.P. The address of this stockholder is c/o
Churchill Investment Partners, Inc., 20 Valley Stream Parkway, Suite
265, Malvern, PA 19355.
(8) The address of this stockholder is 100 East Pratt Street, Baltimore,
MD 21202. The amount shown includes 642,570 shares subject to
exercisable warrants and 214,190 shares of Series A Preferred Stock
convertible into 642,570 shares of Common Stock.
(9) Consists entirely of shares owned beneficially and of record by S.R.
One, Limited, a wholly-owned subsidiary of SmithKline Beecham
Corporation. The address of this stockholder is One Franklin Plaza,
Philadelphia, PA 19101.
(10) The address of this stockholder is Walbrook House, 23 Walbrook, London,
England EC4N8LD. The amount shown includes 321,285 shares subject to
exercisable warrants and 107,095 shares of Series A Preferred Stock
convertible into 321,285 shares of Common Stock.
(11) Ms. Hardardt became a director of the Company on October 1, 1996. The
address of this Stockholder is c/o IBAH, Inc., Four Valley Square, 512
Township Line Road, Blue Bell, Pennsylvania 19422.
(12) Includes 4,000 shares owned by Mr. Bauer and his wife as tenants in
common and 4,000 shares subject to exercisable options.
(13) Mr. Bescherer became a director of the Company on March 15, 1996.
(14) Amount represents shares subject to exercisable options.
(15) Includes 130,063 shares owned by Dr. Jevons and his wife as tenants in
common and 5,510 shares subject to exercisable options.
(16) Includes 305,365 shares subject to exercisable options.
(17) Includes 450,419 shares subject to exercisable options.
(18) Includes 34,010 shares subject to exercisable options.
(19) Includes 651,023 shares subject to exercisable options, 1,167,783
shares subject to exercisable warrants and 356,984 shares of Series A
Preferred Stock, convertible into 1,070,952 shares of Common Stock.
(20) Drs. Cullen and Hamill are no longer executive officers of the Company.
4
PROPOSAL TO APPROVE THE
IBAH, INC. 1997 EQUITY COMPENSATION PLAN
At the Meeting, there will be presented to the stockholders a proposal
to approve the IBAH, Inc. 1997 Equity Compensation Plan. The Plan is being
presented to the Stockholders at this time in order to be available to promote
and assist in the recruiting of new employees caused by recent growth and
acquisition activity of the Company. In December 1996, the Board of Directors of
the Company approved the Plan. The Plan is intended to foster and promote the
long-term financial success of the Company by (1) attracting and retaining
employees, certain advisers and non-employee directors by the granting of stock
options; (2) providing employee, adviser and director compensation opportunities
which are competitive with those of other corporations; and (3) enabling such
employees, advisers and directors to participate in the financial success of the
Company by encouraging them to become stockholders of the Company. A copy of the
Plan is attached as Appendix A to this Proxy Statement and incorporated herein.
Material Features of the Plan
To accomplish the purposes described above, the Plan provides for the
grant of incentive stock options ("ISOs") and non-qualified stock options
("NQSOs") (collectively, "Options") to designated employees, including employee
members of the Board of Directors, (there are currently approximately 700
employees) key advisers who render bona fide services to the Company (but not in
connection with the offer or sale of securities in capital-raising transactions)
(there are currently no key advisers), and non-employee directors (there are
approximately 7 non-employee directors) (collectively, "Participants"). Only
employees are eligible to receive grants of ISOs under the Plan. Those
Participants to receive Options are selected by a committee composed of two or
more persons who are appointed by the Board of Directors and who are not
employees of the Company (the "Committee"). All Options granted to non-employee
directors must be ratified or approved by the Board of Directors.
The price per share of all Options is determined by the Committee on
the date the Option is granted and may be equal to, less than or greater than
the fair market value of a share of Common Stock on the date of grant,
determined in accordance with the Plan; provided, however, that the price per
share of an ISO cannot be less than the fair market value of a share of Common
Stock on the date of grant. On December 20, 1996, the closing price of a share
of the Company's Common Stock on the Nasdaq National Market was $5.75. Options
are exercisable in accordance with terms designated by the Committee and set
forth in each Participant's grant letter. An ISO granted to a Participant who
owns more than 10% of the combined voting power of the Company's stock must have
a price per share of at least 110% of the fair market value of a share of
Company stock on the date of grant and will expire not later than five years
from the date of grant. All other Options will expire not later than ten years
from the date of grant, but will generally expire earlier in the case of the
Participant's termination of service, disability or death.
The maximum number of shares of Common Stock which may be issued by the
Company under the Plan is 1,500,000 and the maximum number of shares any
individual may receive under the Plan during a calendar year is 200,000. If
there is any change in the number or kind of shares of Company stock outstanding
because of a stock split or recapitalization, merger or reorganization, payment
of an extraordinary dividend or a similar corporate change or event occurs, the
maximum number of shares authorized under the Plan, the individual annual limit,
and the number of shares issuable to Participants upon the exercise of Options
shall be appropriately adjusted by the Committee.
The Plan provides for certain actions to be taken in the event of a
merger, consolidation, sale of all or substantially all of the Company's assets,
the liquidation of the Company, a tender or exchange offer for more than 50% of
the Company's Common Stock, or if the Board of Directors consists of a majority
of individuals who were not nominated or elected by the directors in office at
the time of the nomination or election.
The Board of Directors can modify or amend the Plan, except that
without stockholder approval it may not make any amendment that would require
stockholder approval under Section 162(m) of the Internal Revenue Code of 1986,
as amended.
5
Federal Income Tax Consequences of the Plan
There are no federal income tax consequences to a Participant or the
Company upon the grant of an Option under the Plan. Upon the exercise of a NQSO,
a Participant will recognize ordinary compensation income in an amount equal to
the excess of the fair market value of the shares at the time of exercise over
the option price, and the Company will generally be entitled to a corresponding
federal income tax deduction at such time. Upon the sale of shares acquired by
the exercise of a NQSO, a Participant will have a capital gain or loss
(short-term or long-term depending upon whether the shares were held for more
than six months) in an amount equal to the difference between the Participant's
basis in the shares and the amount realized upon the sale.
Upon the exercise of an ISO, a Participant will not recognize taxable
income, but in the year in which an ISO is exercised, will include in the
computation of the recipient's alternative minimum taxable income the amount by
which the fair market value of the shares acquired upon exercise exceeds the
option price. Upon the sale of shares acquired by the exercise of an ISO after
two years from the date of grant and after one year from the date such shares
were transferred to the Participant upon exercise of the ISO, the Participant
will recognize long-term capital gain or loss in the amount of the difference
between the option price (or the Participant's other tax basis in the shares)
and the amount realized on the sale, and the Company will not be entitled to any
tax deduction by reason of the grant or exercise of the ISO. As a general rule,
if a Participant disposes of the shares acquired upon exercise of an ISO before
satisfying both holding period requirements (a "disqualifying disposition"), the
gain recognized on such a disposition will be taxed as ordinary income to the
extent of the difference between the fair market value of such shares on the
date of exercise and the option price, and the Company will be entitled to a
deduction in that amount. The gain, if any, in excess of the amount recognized
as ordinary income on such a disqualifying disposition will be long-term or
short-term capital gain, depending upon the length of time the Participant held
the shares prior to the disposition.
Required Approval for the Plan
Approval of the Plan requires an affirmative vote by the holders of a
majority of the shares of Common Stock and Series A Preferred Stock (on an as if
converted basis), voting together as a class, present in person or by proxy at
the Meeting and entitled to vote thereon.
The Board of Directors recommends that you vote FOR approval of the
Plan.
EXECUTIVE COMPENSATION
The following table sets forth the total compensation for the Company's
Chief Executive Officer, the other five most highly compensated executive
officers of the Company and one former executive officer as of December 31, 1995
(the "Named Executive Officers") for services in all capacities to the Company
or its subsidiaries for the fiscal year ended December 31, 1995 and the total
compensation earned by such individual for the Company's prior two fiscal years.
The Company's business is conducted primarily through its two primary operating
divisions, Bio-Pharm Clinical Services Division and Bio-Pharm Pharmaceutics
Services Division.
6
Summary Compensation Table
Long-Term
Compensation
------------
Annual Compensation Securities
Name and ------------------------------------- Underlying All Other
Principal Position Year Salary Bonus Options (#) Compensation(1)
------------------ ---- ------ ----- ------------ ---------------
Geraldine A. Henwood 1995 $250,000 $ 0 $ 25,000 $ 150
----
Chief Executive Officer 1994 250,000 --- --- 150
----
1993 250,000 --- --- 150
----
John M. Cullen, Ph.D. 1995 250,000 15,000 30,000 300
----
Chief Operating Officer (2) 1994 250,000 65,000 15,510 300
----
1993 14,423 --- 248,204 ---
----
Stuart J. Hamill, Ph.D. 1995 211,696 7,500 --- 450
----
President, Bio-Pharm 1994 194,615 --- 10,010 450
----
Clinical Services-U.S. (3) 1993 156,341 125,000 --- 450
----
Sidney Jevons, Ph.D. 1995 196,875 --- --- 47,250
----
Managing Director, UK Operations (4) 1994 153,340 11,501 10,010 46,002
----
John L. Santoro 1995 165,000 5,000 --- 450
----
President, Bio-Pharm 1994 149,369 --- 10,010 450
----
Pharmaceutics Services 1993 132,192 125,000 --- 450
----
Leonard F. Stigliano 1995 86,154 --- 150,000 0
----
Chief Financial Officer (5)
Arthur A. Koch, Jr. 1995 33,923 --- --- 75,296
----
Former Chief Financial Officer (6) 1994 147,116 23,297 17,510 450
----
1993 115,000 10,000 --- 450
----
============================================================================================================================
(1) These amounts consist of the Company's contributions to the officer's
account under the Company's 401(k) Savings and Investment Plan (the
"401(k) Plan") for its U.S. employees, except that, in the case of Mr.
Koch for 1995, it consists of $74,846 in severance payments and $450 in
401(k) Plan contributions. In the case of Dr. Jevons, the amounts
consist of the Company's Defined Contribution Plan in the U.K.
(2) Dr. Cullen ceased being an employee of the Company in September 1996.
(3) Dr. Hamill ceased being an executive officer of the Company in
December 1996.
(4) Dr. Jevons' salary and bonus were calculated in British pounds sterling
using the average $/(pound) exchange rate for 1995. Dr. Jevons was not
an employee of the Company in 1993. As of April 1, 1996, Dr. Jevons
assumed a new position of Chairman, U.K. and Executive Vice President
of International Development.
(5) Mr. Stigliano was not an employee of the Company in 1993 or 1994. He
became an employee and Chief Financial Officer of the Company in June
1995.
(6) Mr. Koch ceased being an employee of the Company in February 1995.
7
The following table sets forth certain information concerning grants of
stock options made during the year ended December 31, 1995 to the Named
Executive Officers.
OPTION GRANTS IN THE LAST FISCAL YEAR
Potential Realizable Value at
Number of % of Total Assumed Annual Rates of
Securities Options Stock Price Appreciation for
Underlying Granted to Exercise Option Term (10 years) (1)
Options Employees Price Expiration -----------------------------
Name Granted In Fiscal Year ($/share) Date 0% 5% 10%
- ---- ------- -------------- --------- ---------- -- -- ---
Geraldine A. Henwood 25,000 5.0 2.875 02/21/05 0 45,202 114,550
John M. Cullen, Ph.D. (2) 10,000 2.0 2.187 06/06/05 0 13,757 34,863
10,000 2.0 3.750 09/19/05 0 23,584 59,765
10,000 2.0 5.125 12/13/05 0 32,231 81,679
Stuart J. Hamill, Ph.D. (3) --- --- --- --- --- --- ---
Sidney Jevons, Ph.D. --- --- --- --- --- --- ---
John L. Santoro --- --- --- --- --- --- ---
Leonard F. Stigliano 150,000 29.9 2.187 06/06/05 0 206,356 522,947
Arthur A. Koch, Jr. (4) --- --- --- --- --- --- ---
(1) The dollar amounts under these columns are the result of calculations
at 0%, 5% and 10% rates set by the Securities and Exchange Commission
and, therefore, are not intended to forecast possible future
appreciation of the price of the Common Stock. The Company did not use
an alternative formula for a grant date valuation, an approach which
would state gains at present, and therefore lower value. The Company is
not aware of any formula that will determine with reasonable accuracy a
present value based on future unknown or volatile factors.
(2) Dr. Cullen ceased being an employee of the Company in September 1996.
(3) Dr. Hamill ceased being an executive officer of the Company in
December 1996.
(4) Mr. Koch ceased being an employee of the Company in February 1995.
8
The table below sets forth certain information regarding the number and
value of unexercised options held by the Named Executive Officers of the Company
at December 31, 1995. No options were exercised by the Named Executive Officers
during the fiscal year ended December 31, 1995.
Aggregated Fiscal Year-End Option Values
Value of
Number of Securities Unexercised
Underlying Unexercised In-the-Money
Options at Options at
December 31, 1995 December 31, 1995(1)
------------------- ----------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
Geraldine A. Henwood 15,000 25,000 $ 3,750 $ 84,375
John M. Cullen, Ph.D. (2) 152,032 141,682 662,774 553,580
Stuart J. Hamill, Ph.D. (3) 600,865 8,000 3,677,765 27,000
Sidney Jevons, Ph.D. 2,010 8,000 6,784 27,000
John L. Santoro 445,919 8,000 2,727,946 27,000
Leonard Stigliano --- 150,000 --- 609,375
Arthur A. Koch, Jr. (4) --- --- --- ---
(1) Based on the closing price of the Common Stock on the NASDAQ National Market
on that date, $6.25, net of the exercise price.
(2) Dr. Cullen ceased being an employee of the Company in September 1996.
(3) Dr. Hamill ceased being an executive officer of the Company in December
1996.
(4) Mr. Koch ceased being an employee of the Company in February 1995.
Director Compensation
Except as described below, directors are not compensated for their
services as directors. Directors are reimbursed for their travel expenses in
attending meetings. In addition, on the date of each annual meeting at which
directors of any class are elected or re-elected, each non-employee director
shall receive options to acquire 10,000 shares of Common Stock under the 1994
Non-Employee Director Stock Option Plan (the "Director Plan"). The exercise
price per share shall be equal to the fair market value of the Common Stock as
determined in accordance with the terms of the Director Plan. All options
granted under the Director Plan will be exercisable 20% per year beginning with
the first anniversary of the date of grant. All options expire ten years from
the date of grant.
Employment Agreements
On May 25, 1995 the Company entered into an employment agreement with
Leonard F. Stigliano, the Company's Chief Financial Officer. Under the
agreement, Mr. Stigliano is entitled to an annual base salary of $160,000 and
will be eligible for merit increases each year on the anniversary date of his
employment. Mr. Stigliano is eligible for a bonus of up to 30% of his base
salary based upon the achievement of objectives mutually agreed upon by the
Company and Mr. Stigliano. The Company also agreed to pay Mr. Stigliano up to
$1,500 of charges for a leased vehicle; rental costs of an apartment for up to
12 months; and reasonable closing costs on his home in New Jersey and in
Pennsylvania if Mr. Stigliano moves to Pennsylvania before May 25, 1997. The
agreement also awarded Mr. Stigliano options to purchase 150,000 shares of
9
Common Stock at $2.1875 per share. The options vest 20% per year over five years
and expire ten years from the date of grant. He is entitled to severance
benefits of up to one year of his base salary, reduced by payments received from
a subsequent employer, if the Company terminates the employment without cause
and due to management changes, merger, acquisition or incompatibility.
On January 4, 1994 Bio-Pharm entered into a three-year employment
agreement with Dr. Cullen, to serve as President and Chief Operating Officer of
Bio-Pharm. Dr. Cullen currently is the Chief Operating Officer of the Company.
Under the agreement, he is entitled to a minimum annual base salary of $250,000
and a signing bonus of $65,000, which was payable in installments through March
15, 1994. He is also entitled to receive performance bonuses, equal to from 25%
to 37.5% of his base salary, based upon meeting or exceeding performance
objectives as jointly determined by the Company and Dr. Cullen. He is entitled
to severance benefits if his employment terminates for any reason other than
death, permanent disability, termination by the Company for cause or voluntary
resignation under certain defined circumstances. In such event, he will receive
an amount (subject to reduction if he secures other employment) equal to one
year of his then base salary plus, if such termination occurs on or after
January 4, 1996, an additional six months of such base salary. The agreement
also awarded him an option to purchase 248,204 shares of Common Stock at $1.87
per share. The option, which expires ten years from the date of grant, vests in
four equal installments, beginning on the date of grant and such options are
included in the tables above. Dr. Cullen's employment agreement terminated on
September 15, 1996, when he ceased being an employee of the Company. Under the
terms of Dr. Cullen's former employment contract, all of his unvested options
vested as of the termination of his employment. Additionally, as of September
15, 1996, the date of the termination of his employment contract, Dr. Cullen and
the Company entered into a consulting agreement for a one year period. The
consulting agreement provides for the payment of $375,000 over the one year
period.
On January 4, 1994 Bio-Pharm entered into a service agreement with
Dr. Sidney Jevons covering his employment from December 31, 1993 through
December 31, 1996. Pursuant to the agreement, Dr. Jevons served as the President
of the Company's European operations and later, as Managing Director of the
Company's U.K. Operations. As of April 1, 1996, this agreement was amended to
extend the term of the agreement to March 31, 1999, to change Dr. Jevons'
position with the Company to Chairman, U.K. and Executive Vice President of
International Development and to increase his annual salary to (pound)138,000
($210,560 based on exchange rates on March 31, 1996). Dr. Jevons is also
eligible for the standard bonus and benefit plans of the Company. Additionally,
the Company will contribute 30% of Dr. Jevons' base salary to a retirement plan
in the U.K.
Notwithstanding anything to the contrary, the following report of the
Compensation Committee and the performance graph on page 12 shall not be deemed
incorporated by reference by any general statement incorporating by reference
this Proxy Statement into any filing under the Securities Act of 1933, as
amended, or under the Securities Exchange Act of 1934, as amended, except to the
extent that the Company specifically incorporates this information by reference,
and shall not otherwise be deemed filed under such Acts.
REPORT OF COMPENSATION COMMITTEE ON ANNUAL COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee")
meets several times each year to act on specific recommendations by management
for the grant of stock options and to review the overall compensation
philosophy, policies and practices of the Company with regard to all employees.
The Committee also reviews policies upon which compensation decisions are based,
and, where required, recommends to the Board of Directors for approval the
philosophy and policies established by the Committee.
The Company's overall philosophy on compensation, as adopted by the
Committee, is to provide competitive compensation capable of attracting talented
employees. This compensation is provided to all employees, including executive
officers, on the same basis and includes base salary, incentive pay, stock
options and a Company match to contributions made to the Company's 401(k) Plan.
Other than eligibility for certain levels of stock options, there are no
perquisites, pay or benefit programs offered to executive officers which are not
offered to all employees. An incentive awards plan is generally
10
proposed annually by management for senior executives and reviewed and
recommended, in aggregate, by the Committee. These awards are based upon a
combination of individual and Company performance against predetermined
objectives, each of which is tested against the goal of the creation of
stockholder value.
The components of overall compensation for each position are set by,
among other things, comparison with the pay practices of comparable companies.
Potential incentive pay awards of up to 20% of base salary may be made. Taking
into consideration the recommendations of the Committee, the approved maximum
awards for 1995 did not exceed 10% of salary. Stock options were granted in 1995
to each permanent employee who came into the Company during that year according
to the same formula approved by the Committee for the 1994 Company-wide option
grant. Under this program, 100% of the options become exercisable upon the fifth
anniversary of the grant date. The Company matches contributions to the 401(k)
Plan at the rate of 30 percent of employee contribution to a limit of 6% of
qualified pay.
A portion of the Committee's meetings each year take place without the
Chief Executive Officer's presence to discuss the performance and compensation
of the Chief Executive Officer. Objectives used in determining such performance
are based upon milestones related to the achievement of growth, profits,
financing, and external alliance goals. Further, while difficult to measure, the
Committee believes that the demonstration of vision and unrelenting commitment
are critical measures of the performance of the Chief Executive Officer. Cash
compensation and stock option awards made to the Chief Executive Officer during
the year ended December 31, 1995 were made in accordance with these principles.
Winston J. Churchill, Committee Chairman
Sandra Panem, Committee Member
Compensation Committee Interlocks and Insider Participation
Mr. Churchill, the Chairman of the Board of Directors, served on the
Compensation Committee during 1995. On January 1, 1992 the Company entered into
a consulting agreement with Churchill Investment Partners, Inc. ("CIP"),
pursuant to which CIP provides management consulting services to the Company.
The term of this agreement expires on December 31, 1996. This agreement provides
for the payment by the Company to CIP of an annual fee of $100,000 for the first
year (1992) increasing by 5% each year thereafter. In 1995, after a waiver by
CIP of one quarterly payment, the Company paid a total of $86,821.89 to CIP. Mr.
Churchill is the Chairman, Chief Executive Officer and controlling stockholder
of CIP.
Dr. Panem, a member of the Board of Directors, has served on the
Compensation Committee since she became a director in August 1995. Dr. Panem is
the President of Vector Fund Management, L.P., the general partner of Vector
Later-Stage Equity Fund, L.P. (the "Later-Stage Fund"), a major stockholder of
the Company. Vector Securities International, Inc. ("Vector"), an affiliate of
the Later-Stage Fund, entered into an agreement with the Company on January 12,
1996 to provide certain strategic advisory services to the Company in return for
$50,000, warrants to purchase 40,000 shares of Common Stock at $6.50 per share,
and a percentage of the sale or acquisition price of certain acquisitions or
sales by the Company. In addition, Vector entered into a separate agreement with
the Company, dated April 16, 1996, to act as placement agent in connection with
the offer and sale of 3,000,000 newly issued shares of Common Stock on a best
efforts basis. Vector received 6.5% of the proceeds of the offering as a selling
commission, aggregating $1,267,500, and was reimbursed by the Company for
$50,000 of expenses associated with the offer and sale.
Comparative Performance Graph
The graph below compares the cumulative total stockholder return on the
Common Stock with the cumulative total stockholder return of (i) the NASDAQ
Stock Market (U.S.) Index (the "NASDAQ Index"), and (ii) a peer group of NASDAQ
stocks classified in standard industrial classification numbers 8730 through
8739, representing U.S. companies in research, development and testing services
(the "Peer Group"), assuming an investment of $100 on April 4, 1992 in each of
the Common Stock of the Company, the NASDAQ Index stocks and the Peer Group
stocks. The graph assumes dividend reinvestment and, with respect to companies
in the Peer Group, the returns of each such company have been weighted at
11
each measurement point to reflect relative stock market capitalization. The
graph commences as of April 14, 1992, the date the Common Stock became publicly
traded.
COMPARISON OF CUMULATIVE TOTAL RETURN
AMONG THE COMPANY, NASDAQ INDEX STOCK
AND PEER GROUP STOCKS
12/31/92 12/31/93 12/30/94 12/29/95
-------- -------- -------- --------
66.7 63.5 37.5 104.2
114.6 131.5 128.5 181.8
80.5 76.5 55.2 110.4
12
OTHER MATTERS
No other matter requiring a vote of the stockholders is expected to
come before the Meeting. However, if other matters should properly come before
the Meeting, it is the intention of the persons named in the enclosed proxy to
vote in accordance with their best judgment on such matters.
Stockholder Proposals
As disclosed in the Company's Proxy Statement for 1996 Annual Meeting
of Stockholders, dated May 3, 1996, proposals by stockholders intended to be
presented at the 1997 annual meeting of stockholders must have been received by
the Company at its executive offices at Four Valley Square, 512 Township Line
Road, Blue Bell, PA 19422-2724 on or before December 26, 1996 to be included in
the Company's Proxy Statement and form of proxy for the 1997 annual meeting.
13
Appendix A
----------
IBAH, INC.
1997 EQUITY COMPENSATION PLAN
-----------------------------
The purpose of the IBAH, Inc. 1997 Equity Compensation Plan (the "Plan") is
to provide (i) designated employees of IBAH, Inc. (the "Company") and its
subsidiaries, (ii) certain key advisors who perform services for the Company or
its subsidiaries and (iii) non-employee members of the Board of Directors of the
Company (the "Board") with the opportunity to receive grants of incentive stock
options and nonqualified stock options. The Company believes that the Plan will
encourage the participants to contribute materially to the growth of the
Company, thereby benefitting the Company's stockholders, and will align the
economic interests of the participants with those of the stockholders.
1. Administration
--------------
(a) Committee. The Plan shall be administered and interpreted by a
---------
committee (the "Committee"), which shall consist of two or more persons
appointed by the Board, all of whom shall be "outside directors" as defined
under section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code") and related Treasury regulations. The Committee may also consist of
"non-employee directors" as defined in Rule 16b-3 under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). However, notwithstanding anything
in the Plan to the contrary, the Board must ratify or approve any grants made to
Non-Employee Directors. References in the Plan to the "Committee" shall be
deemed to include the Board, with respect to ratification or approval of grants
made to Non-Employee Directors.
(b) Committee Authority. The Committee shall have the sole authority to
-------------------
(i) determine the individuals to whom grants shall be made under the Plan, (ii)
determine the type, size and terms of the grants to be made to each such
individual, (iii) determine the time when the grants will be made and the
duration of any applicable exercise or restriction period, including the
criteria for exercisability and the acceleration of exercisability and (iv) deal
with any other matters arising under the Plan.
(c) Committee Determinations. The Committee shall have full power and
------------------------
authority to administer and interpret the Plan, to make factual determinations
and to adopt or amend such rules, regulations, agreements and instruments for
implementing the Plan and for the conduct of its business as it deems necessary
or advisable, in its sole discretion. The Committee's interpretations of the
Plan and all determinations made by the Committee pursuant to the powers vested
in it hereunder shall be conclusive and binding on all persons having any
interest in the Plan or in any awards granted hereunder. All powers of the
Committee shall be executed in its
A-1
sole discretion, in the best interest of the Company, not as a fiduciary, and in
keeping with the objectives of the Plan and need not be uniform as to similarly
situated individuals.
2. Options
-------
Awards under the Plan may consist of grants of incentive stock options
("Incentive Stock Options") or nonqualified stock options ("Nonqualified Stock
Options") as described in Section 5 (Incentive Stock Options and Nonqualified
Stock Options are collectively referred to as "Options"). All Options shall be
subject to the terms and conditions set forth herein and to such other terms and
conditions consistent with this Plan as the Committee deems appropriate and as
are specified in writing by the Committee to the individual in a grant
instrument (the "Grant Instrument") or an amendment to the Grant Instrument.
The Committee shall approve the form and provisions of each Grant Instrument.
Options need not be uniform as among the grantees.
3. Shares Subject to the Plan
--------------------------
(a) Shares Authorized. Subject to the adjustment specified below, the
-----------------
aggregate number of shares of common stock of the Company ("Company Stock") that
may be issued or transferred under the Plan is 1,500,000 shares, and the maximum
aggregate number of shares of Company Stock that shall be subject to Options
granted under the Plan to any individual during any calendar year shall be
200,000 shares. The shares may be authorized but unissued shares of Company
Stock or reacquired shares of Company Stock, including shares purchased by the
Company on the open market for purposes of the Plan. If and to the extent
Options granted under the Plan terminate, expire, or are canceled, forfeited,
exchanged or surrendered without having been exercised, the shares subject to
such grants shall again be available for purposes of the Plan.
(b) Adjustments. If there is any change in the number or kind of shares of
-----------
Company Stock outstanding (i) by reason of a stock dividend, spinoff,
recapitalization, stock split, or combination or exchange of shares, (ii) by
reason of a merger, reorganization or consolidation in which the Company is the
surviving corporation, (iii) by reason of a reclassification or change in par
value, or (iv) by reason of any other extraordinary or unusual event affecting
the outstanding Company Stock as a class without the Company's receipt of
consideration, or if the value of outstanding shares of Company Stock is
substantially reduced as a result of a spinoff or the Company's payment of an
extraordinary dividend or distribution, the maximum number of shares of Company
Stock available for Options, the maximum number of shares of Company Stock for
which any individual participating in the Plan may be granted Options in any
year, the number of shares covered by outstanding Options, the kind of shares
issued under the Plan, and the price per share of such Options shall be
appropriately adjusted by the Committee to reflect any increase or decrease in
the number of, or change in the kind or value of, issued shares of Company Stock
to preclude, to the extent practicable, the enlargement or dilution of rights
and benefits under such Options; provided, however, that any fractional shares
resulting from such adjustment shall be
A-2
eliminated. Any adjustments determined by the Committee shall be final, binding
and conclusive.
4. Eligibility for Participation
-----------------------------
(a) Eligible Persons. All employees of the Company and its subsidiaries
----------------
("Employees"), including Employees who are officers or members of the Board, and
members of the Board who are not Employees ("Non-Employee Directors") shall be
eligible to participate in the Plan. Key advisors who perform services to the
Company or any of its subsidiaries ("Key Advisors") shall be eligible to
participate in the Plan if the Key Advisors render bona fide services and such
services are not in connection with the offer or sale of securities in a
capital-raising transaction.
(b) Selection of Grantees. The Committee shall select the Employees, Non-
---------------------
Employee Directors and Key Advisors to receive Options and shall determine the
number of shares of Company Stock subject to a particular Option in such manner
as the Committee determines. Employees, Key Advisors and Non-Employee Directors
who receive Options under this Plan shall hereinafter be referred to as
"Grantees".
5. Granting of Options
-------------------
(a) Number of Shares. The Committee shall determine the number of shares
----------------
of Company Stock that will be subject to each grant of Options to Employees,
Non-Employee Directors and Key Advisors.
(b) Type of Option and Price.
------------------------
(i) The Committee may grant Incentive Stock Options that are
intended to qualify as "incentive stock options" within the meaning of section
422 of the Code or Nonqualified Stock Options that are not intended so to
qualify, or any combination of Incentive Stock Options and Nonqualified Stock
Options, all in accordance with the terms and conditions set forth herein.
Incentive Stock Options may be granted only to Employees. Nonqualified Stock
Options may be granted to Employees, Non-Employee Directors and Key Advisors.
(ii) The purchase price (the "Exercise Price") of Company Stock
subject to an Option shall be determined by the Committee and may be equal to,
greater than, or less than the Fair Market Value (as defined below) of a share
of Company Stock on the date the Option is granted; provided, however, that (x)
the Exercise Price of an Incentive Stock Option shall be equal to, or greater
than, the Fair Market Value of a share of Company Stock on the date the
Incentive Stock Option is granted and (y) an Incentive Stock Option may not be
granted to an Employee who, at the time of grant, owns stock possessing more
than 10 percent of the total combined voting power of all classes of stock of
the Company or any parent or subsidiary of the
A-3
Company, unless the Exercise Price per share is not less than 110% of the Fair
Market Value of Company Stock on the date of grant.
(iii) If the Company Stock is publicly traded, then the Fair Market
Value per share shall be determined as follows: (x) if the principal trading
market for the Company Stock is a national securities exchange or the Nasdaq
National Market, the mean between the reported high and low sale prices thereof
on the relevant date or (if there were no trades on that date) the latest
preceding date upon which a sale was reported, or (y) if the Company Stock is
not principally traded on such exchange or market, the mean between the last
reported "bid" and "asked" prices of Company Stock on the relevant date, as
reported on Nasdaq or, if not so reported, as reported by the National Daily
Quotation Bureau, Inc. or as reported in a customary financial reporting
service, as applicable and as the Committee determines. If the Company Stock is
not publicly traded or, if publicly traded, is not subject to reported
transactions or "bid" or "asked" quotations as set forth above, the Fair Market
Value per share shall be as determined by the Committee.
(c) Option Term. The Committee shall determine the term of each Option.
-----------
The term of any Option shall not exceed ten years from the date of grant.
However, an Incentive Stock Option that is granted to an Employee who, at the
time of grant, owns stock possessing more than 10 percent of the total combined
voting power of all classes of stock of the Company, or any parent or subsidiary
of the Company, may not have a term that exceeds five years from the date of
grant.
(d) Exercisability of Options. Options shall become exercisable in
-------------------------
accordance with such terms and conditions, consistent with the Plan, as may be
determined by the Committee and specified in the Grant Instrument or an
amendment to the Grant Instrument. The Committee may accelerate the
exercisability of any or all outstanding Options at any time for any reason.
(e) Termination of Employment, Disability or Death.
----------------------------------------------
(i) Except as provided below, an Option may only be exercised while
the Grantee is employed by, or providing services to, the Company as an
Employee, Key Advisor or member of the Board. In the event that a Grantee ceases
to be employed by, or provide services to, the Company for any reason other than
a "disability", death, or "termination for cause", any Option which is otherwise
exercisable by the Grantee shall terminate unless exercised within 90 days after
the date on which the Grantee ceases to be employed by, or provide services to,
the Company (or within such other period of time as may be specified by the
Committee), but in any event no later than the date of expiration of the Option
term. Any of the Grantee's Options that are not otherwise exercisable as of the
date on which the Grantee ceases to be employed by, or provide services to, the
Company shall terminate as of such date.
(ii) In the event the Grantee ceases to be employed by, or provide
services to, the Company on account of a "termination for cause" by the Company,
any Option held by the
A-4
Grantee shall terminate as of the date the Grantee ceases to be employed by, or
provide services to, the Company.
(iii) In the event the Grantee ceases to be employed by, or provide
services to, the Company because the Grantee is "disabled", any Option which is
otherwise exercisable by the Grantee shall terminate unless exercised within one
year after the date on which the Grantee ceases to be employed by, or provide
services to, the Company (or within such other period of time as may be
specified by the Committee), but in any event no later than the date of
expiration of the Option term. Any of the Grantee's Options which are not
otherwise exercisable as of the date on which the Grantee ceases to be employed
by, or provide services to, the Company shall terminate as of such date.
(iv) If the Grantee dies while employed by, or providing services to, the
Company or within 90 days after the date on which the Grantee ceases to be
employed by, or provide services to, the Company on account of a termination of
employment specified in Section 5(e)(i) above (or within such other period of
time as may be specified by the Committee), any Option that is otherwise
exercisable by the Grantee shall terminate unless exercised within one year
after the date on which the Grantee ceases to be employed by, or provide
services to, the Company (or within such other period of time as may be
specified by the Committee), but in any event no later than the date of
expiration of the Option term. Any of the Grantee's Options that are not
otherwise exercisable as of the date on which the Grantee ceases to be employed
by, or provide services to, the Company shall terminate as of such date.
(v) For purposes of this Section 5(e):
(A) The term "Company" shall mean the Company and its parent and subsidiary
corporations.
(B) "Employed by, or provide services to, the Company" shall mean
employment or service as an Employee, Key Advisor or member of the Board, so
that, for purposes of exercising Options, a Grantee shall not be considered to
have terminated employment until the Grantee ceases to be an Employee, Key
Advisor and member of the Board, unless the Committee determines otherwise.
(C) "Disability" shall mean a Grantee's becoming disabled within the
meaning of section 22(e)(3) of the Code.
(D) "Termination for cause" shall mean, except to the extent specified
otherwise by the Committee, a finding by the Committee that the Grantee has
committed a material breach of his or her employment or service contract with
the Company, or has been engaged in disloyalty to the Company, including,
without limitation, fraud, embezzlement, theft, commission of a felony or proven
dishonesty in the course of his or her employment or service, or has disclosed
trade secrets or confidential information of
A-5
the Company to persons not entitled to receive such information. In the
event a Grantee's employment is terminated for cause, in addition to the
immediate termination of all Options, the Grantee shall automatically
forfeit all shares underlying any exercised portion of an Option for which
the Company has not yet delivered the share certificates, upon refund by
the Company of the Exercise Price paid by the Grantee for such shares.
(f) Exercise of Options. A Grantee may exercise an Option that has become
-------------------
exercisable, in whole or in part, by delivering a notice of exercise to the
Company with payment of the Exercise Price. The Grantee shall pay the Exercise
Price for an Option as specified by the Committee (x) in cash, (y) with the
approval of the Committee, by delivering shares of Company Stock owned by the
Grantee (including Company Stock acquired in connection with the exercise of an
Option, subject to such restrictions as the Committee deems appropriate) and
having a Fair Market Value on the date of exercise equal to the Exercise Price
or (z) by such other method as the Committee may approve, including payment
through a broker in accordance with procedures permitted by Regulation T of the
Federal Reserve Board. Shares of Company Stock used to exercise an Option shall
have been held by the Grantee for the requisite period of time to avoid adverse
accounting consequences to the Company with respect to the Option. The Grantee
shall pay the Exercise Price and the amount of any withholding tax due (pursuant
to Section 6) at the time of exercise.
(g) Limits on Incentive Stock Options. Each Incentive Stock Option shall
---------------------------------
provide that, if the aggregate Fair Market Value of the stock on the date of the
grant with respect to which Incentive Stock Options are exercisable for the
first time by a Grantee during any calendar year, under the Plan or any other
stock option plan of the Company or a parent or subsidiary, exceeds $100,000,
then the Option, as to the excess, shall be treated as a Nonqualified Stock
Option. An Incentive Stock Option shall not be granted to any person who is not
an Employee of the Company or a parent or subsidiary (within the meaning of
section 424(f) of the Code).
6. Withholding of Taxes
--------------------
(a) Required Withholding. All Options under the Plan shall be subject to
--------------------
applicable federal (including FICA), state and local tax withholding
requirements. The Company may require the Grantee or other person receiving
shares upon the exercise of Options to pay to the Company the amount of any
federal, state or local taxes that the Company is required to withhold with
respect to such Options, or the Company may deduct from other wages paid by the
Company the amount of any withholding taxes due with respect to such Options.
(b) Election to Withhold Shares. If the Committee so permits, a Grantee
---------------------------
may elect to satisfy the Company's income tax withholding obligation with
respect to an Option by having shares withheld up to an amount that does not
exceed the Grantee's maximum marginal tax rate for federal (including FICA),
state and local tax liabilities. The election must be in a form and manner
prescribed by the Committee and shall be subject to the prior approval of the
Committee.
A-6
7. Transferability of Options
--------------------------
(a) Nontransferability of Options. Except as provided below, only the
-----------------------------
Grantee may exercise rights under an Option during the Grantee's lifetime. A
Grantee may not transfer those rights except by will or by the laws of descent
and distribution or, with respect to Nonqualified Stock Options, if permitted in
any specific case by the Committee, pursuant to a domestic relations order (as
defined under the Code or Title I of the Employee Retirement Income Security Act
of 1974, as amended, or the regulations thereunder). When a Grantee dies, the
personal representative or other person entitled to succeed to the rights of the
Grantee ("Successor Grantee") may exercise such rights. A Successor Grantee
must furnish proof satisfactory to the Company of his or her right to receive
the Option under the Grantee's will or under the applicable laws of descent and
distribution.
(b) Transfer of Nonqualified Stock Options. Notwithstanding the foregoing,
--------------------------------------
the Committee may provide, in a Grant Instrument, that a Grantee may transfer
Nonqualified Stock Options to family members or other persons or entities
according to such terms as the Committee may determine; provided that the
Grantee receives no consideration for the transfer of an Option and the
transferred Option shall continue to be subject to the same terms and conditions
as were applicable to the Option immediately before the transfer.
8. Change of Control of the Company
--------------------------------
As used herein, a "Change of Control" shall be deemed to have occurred if:
(a) Any "person" (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act) becomes a "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company representing
more than 50% of the voting power of the then outstanding securities of the
Company, except where the acquisition is approved by the Board;
(b) The stockholders of the Company approve (or, if stockholder approval is
not required, the Board approves) an agreement providing for (i) the merger or
consolidation of the Company with another corporation where the stockholders of
the Company, immediately prior to the merger or consolidation, will not
beneficially own, immediately after the merger or consolidation, shares
entitling such stockholders to more than 50% of all votes to which all
stockholders of the surviving corporation would be entitled in the election of
directors (without consideration of the rights of any class of stock to elect
directors by a separate class vote), or where the members of the Board,
immediately prior to the merger or consolidation, would not, immediately after
the merger or consolidation, constitute a majority of the board of directors of
the surviving corporation, (ii) the sale or other disposition of all or
substantially all of the assets of the Company, or (iii) a liquidation or
dissolution of the Company;
A-7
(c) Any person has commenced a tender offer or exchange offer for or more
than 50% of the voting power of the then outstanding shares of the Company; or
(d) At least a majority of the Board does not consist of individuals who
were elected, or nominated for election, by the directors in office at the time
of such election or nomination.
9. Consequences of a Change of Control
-----------------------------------
(a) Notice and Acceleration. Upon a Change of Control, unless the
-----------------------
Committee determines otherwise, (i) the Company shall provide each Grantee with
outstanding Options written notice of such Change of Control and (ii) all
outstanding Options that are not then exercisable shall automatically accelerate
and become fully exercisable.
(b) Assumption of Options. Upon a Change of Control where the Company is
---------------------
not the surviving corporation (or survives only as a subsidiary of another
corporation), unless the Committee determines otherwise, all outstanding Options
that are not exercised shall be assumed by, or replaced with comparable options
by, the surviving corporation.
(c) Other Alternatives. Notwithstanding the foregoing, subject to
------------------
subsection (e) below, in the event of a Change of Control, the Committee may
take one or both of the following actions: the Committee may (i) require that
Grantees surrender their outstanding Options in exchange for a payment by the
Company, in cash or Company Stock as determined by the Committee, in an amount
equal to the amount by which the then Fair Market Value of the shares of Company
Stock subject to the Grantee's unexercised Options exceeds the Exercise Price of
the Options, or (ii) after giving Grantees an opportunity to exercise their
outstanding Options, terminate any or all unexercised Options at such time as
the Committee deems appropriate. Such surrender or termination shall take place
as of the date of the Change of Control or such other date as the Committee may
specify.
(d) Committee. The Committee making the determinations under this Section
---------
9 following a Change of Control must be comprised of the same members as those
on the Committee immediately before the Change of Control. If the Committee
members do not meet this requirement, the automatic provisions of Subsections
(a) and (b) shall apply, and the Committee shall not have discretion to vary
them with respect to an outstanding Option without the consent of the Grantee.
(e) Limitations. Notwithstanding anything in the Plan to the contrary, in
-----------
the event of a Change of Control, the Committee shall not have the right to take
any actions described in the Plan (including without limitation actions
described in subsection (c) above) that would make the Change of Control
ineligible for pooling of interests accounting treatment or that would make the
Change of Control ineligible for desired tax treatment if, in the absence of
such right, the Change of Control would qualify for such treatment and the
Company intends to use such treatment with respect to the Change of Control.
A-8
10. Amendment and Termination of the Plan
-------------------------------------
(a) Amendment. The Board may amend or terminate the Plan at any time;
---------
provided, however, that the Board shall not amend the Plan without stockholder
approval if such approval is required by Section 162(m) of the Code.
(b) Termination of Plan. The Plan shall terminate on the day immediately
-------------------
preceding the tenth anniversary of its effective date, unless the Plan is
terminated earlier by the Board or is extended by the Board with the approval of
the stockholders.
(c) Termination and Amendment of Outstanding Options. A termination or
------------------------------------------------
amendment of the Plan that occurs after an Option is made shall not materially
impair the rights of a Grantee unless the Grantee consents or unless the
Committee acts under Section 17(b). The termination of the Plan shall not
impair the power and authority of the Committee with respect to an outstanding
Option. Whether or not the Plan has terminated, an outstanding Option may be
terminated or amended under Section 17(b) or may be amended by agreement of the
Company and the Grantee consistent with the Plan.
(d) Governing Document. The Plan shall be the controlling document. No
------------------
other statements, representations, explanatory materials or examples, oral or
written, may amend the Plan in any manner. The Plan shall be binding upon and
enforceable against the Company and its successors and assigns.
11. Funding of the Plan
-------------------
This Plan shall be unfunded. The Company shall not be required to
establish any special or separate fund or to make any other segregation of
assets to assure the payment of any Options under this Plan. In no event shall
interest be paid or accrued on any Option.
12. Rights of Participants
----------------------
Nothing in this Plan shall entitle any Employee, Non-Employee Director, Key
Advisor or other person to any claim or right to be granted an Option under this
Plan. Neither this Plan nor any action taken hereunder shall be construed as
giving any individual any rights to be retained by or in the employ of the
Company or any other employment rights.
13. No Fractional Shares
--------------------
No fractional shares of Company Stock shall be issued or delivered pursuant
to the Plan or any Option. The Committee shall determine whether cash, other
awards or other property shall be issued or paid in lieu of such fractional
shares or whether such fractional shares or any rights thereto shall be
forfeited or otherwise eliminated.
A-9
14. Requirements for Issuance or Transfer of Shares
-----------------------------------------------
No Company Stock shall be issued or transferred in connection with any
Option hereunder unless and until all legal requirements applicable to the
issuance or transfer of such Company Stock have been complied with to the
satisfaction of the Committee. The Committee shall have the right to condition
any Option granted to any Grantee hereunder on such Grantee's undertaking in
writing to comply with such restrictions on his or her subsequent disposition of
such shares of Company Stock as the Committee shall deem necessary or advisable
as a result of any applicable law, regulation or official interpretation
thereof, and certificates representing such shares may be legended to reflect
any such restrictions. Certificates representing shares of Company Stock issued
or transferred under the Plan will be subject to such stop-transfer orders and
other restrictions as may be required by applicable laws, regulations and
interpretations, including any requirement that a legend be placed thereon.
15. Headings
--------
Section headings are for reference only. In the event of a conflict
between a title and the content of a Section, the content of the Section shall
control.
16. Effective Date of the Plan.
--------------------------
Subject to approval by the Company's stockholders, the Plan shall be
effective on January 1, 1997.
17. Miscellaneous
-------------
(a) Grants in Connection with Corporate Transactions and Otherwise.
--------------------------------------------------------------
Nothing contained in this Plan shall be construed to (i) limit the right of the
Committee to make grants under this Plan in connection with the acquisition, by
purchase, lease, merger, consolidation or otherwise, of the business or assets
of any corporation, firm or association, including grants to employees thereof
who become Employees of the Company, or for other proper corporate purposes, or
(ii) limit the right of the Company to grant stock options or make other awards
outside of this Plan. Without limiting the foregoing, the Committee may grant
an Option to an employee of another corporation who becomes an Employee by
reason of a corporate merger, consolidation, acquisition of stock or property,
reorganization or liquidation involving the Company or any of its subsidiaries
in substitution for a stock option granted by such corporation. The terms and
conditions of the substitute grants may vary from the terms and conditions
required by the Plan and from those of the substituted stock incentives. The
Committee shall prescribe the provisions of the substitute grants.
(b) Compliance with Law. The Plan, the exercise of Options and the
-------------------
obligations of the Company to issue or transfer shares of Company Stock under
Options shall be subject to all applicable laws and to approvals by any
governmental or regulatory agency as may be required.
A-10
With respect to persons subject to Section 16 of the Exchange Act, it is the
intent of the Company that the Plan and all transactions under the Plan comply
with all applicable provisions of Rule 16b-3 or its successors under the
Exchange Act. The Committee may revoke any Option if it is contrary to law or
modify an Option to bring it into compliance with any valid and mandatory
government regulation. The Committee may also adopt rules regarding the
withholding of taxes on payments to Grantees. The Committee may, in its sole
discretion, agree to limit its authority under this Section.
(c) Governing Law. The validity, construction, interpretation and effect
-------------
of the Plan and Grant Instruments issued under the Plan shall exclusively be
governed by and determined in accordance with the law of the State of Delaware.
A-11
FORM OF PROXY CARD
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PROXY PROXY
IBAH, INC.
Special Meeting of Stockholders, February 5, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints GERALDINE A. HENWOOD and JANE H.
HOLLINGSWORTH, and each of them, jointly and severally, proxies, with full power
of substitution, to vote, as designated on the reverse side hereof, all shares
of stock which the undersigned is entitled to vote on the proposal on the
reverse side hereof, on all other matters which may come before the Special
Meeting of Stockholders of IBAH, Inc. or any adjournment thereof.
The shares represented by this Proxy, duly executed, will be voted. If
instructions are given in the spaces on the reverse side hereof, the shares will
be voted in accordance therewith; if instructions are not given, the shares will
be voted in favor of Proposal 1.
(Continued and to be signed on Reverse Side)
- -------------------------------------------------------------------------------
[X] Please mark your votes as in this example.
1. PROPOSAL TO APPROVE THE 1997 EQUITY COMPENSATION PLAN.
FOR [_] AGAINST [_] ABSTAIN [_]
2. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF SPECIAL MEETING AND
PROXY STATEMENT OF IBAH, INC.
Please sign, date and return in the enclosed postage-prepaid envelope.
Dated: , 1997
----------------------------
[SEAL]
----------------------------------
Signature
----------------------------------------
Signature if held jointly
Please sign exactly as name appears above. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
- -------------------------------------------------------------------------------