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SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
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Filed by a Party other than the Registrant [ ]
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[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Com-
mission only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
AutoCyte, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
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computed pursuant to Exchange Act Rule 0-11 (Set forth the
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was determined):
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[ ] Check box if any part of the fee is offset as provided by Exchange
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AUTOCYTE, INC.
780 Plantation Drive
Burlington, North Carolina 27215
(336) 222-9707
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be held on May 26, 1999
Notice is hereby given that the 1999 Annual Meeting of Stockholders of
AutoCyte, Inc. (the "Company"), a Delaware corporation, will be held on
Wednesday, May 26, 1999, at 10:00 a.m. at the Courtyard by Marriott, 3141
Wilson Drive, Burlington, North Carolina, to consider and act upon the
following matters:
1. To elect two (2) members of the Board of Directors;
2. To ratify the selection by the Board of Directors of Ernst & Young LLP
as the Company's independent auditors for the current fiscal year.
3. To vote on a proposed amendment to AutoCyte's Amended and Restated
1996 Equity Incentive Plan (the "Plan") that would increase the number
of shares of Common Stock available for issuance pursuant to awards
under the Plan by 900,000 shares from 2,086,325 to 2,986,325 shares.
4. To transact such other business as may properly come before the
meeting or any adjournments thereof.
Only stockholders of record at the close of business on April 13, 1999
will be entitled to vote at the meeting.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING.
THEREFORE, WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE YOUR
PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF
MAILED IN THE UNITED STATES. IF YOU ATTEND THE MEETING AND WISH TO VOTE IN
PERSON, YOUR PROXY WILL NOT BE USED.
By order of the Board of Directors,
Steven N. Farber
Secretary
April 30, 1999
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AUTOCYTE, INC.
780 Plantation Drive
Burlington, North Carolina 27215
(336) 222-9707
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PROXY STATEMENT
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GENERAL INFORMATION
This Proxy Statement, with the enclosed proxy card, is being furnished
on behalf of the Board of Directors of AutoCyte, Inc. ("AutoCyte" or the
"Company") for use at the Company's 1999 Annual Meeting of Stockholders to be
held on Wednesday, May 26, 1999, at 10:00 a.m. at the Courtyard by Marriott,
3141 Wilson Drive, Burlington, North Carolina and at any adjournments thereof
(the "Meeting").
When the proxy card of a stockholder is duly executed and returned,
the shares represented thereby will be voted in accordance with the voting
instructions given on the proxy by the stockholder. If no such voting
instructions are given on a proxy card with respect to one or more proposals,
the shares represented by that proxy card will be voted to elect the directors
nominated by the Board of Directors and to approve the amendments to the
Company's Amended and Restated 1996 Equity Incentive Plan. Stockholders may
revoke their proxies at any time prior to any vote at the Meeting by written
notice of revocation to the Secretary of the Company at or before the Meeting,
by submission of a duly executed proxy card bearing a later date or by voting
in person by ballot at the Meeting.
This Proxy Statement and the enclosed proxy card are first being
mailed or otherwise furnished to all stockholders of the Company entitled to
notice of and to vote at the Meeting on or about April 30, 1999.
Holders of the Company's common stock, $0.01 par value per share
("Common Stock"), of record on the books of the Company at the close of
business on April 13, 1999 (the "Record Date") are entitled to notice of and to
vote at the Meeting. On the Record Date, there were 12,868,081 shares of Common
Stock issued and outstanding, each of which entitles the holder to one vote on
each matter submitted to a vote at the Meeting.
The presence, in person or by proxy, of the holders of a majority of
the Company's Common Stock entitled to vote at the Meeting is necessary to
constitute a quorum at the Meeting. Abstentions and broker non-votes will be
treated as present for purposes of determining the presence of a quorum. A
"broker non-vote" occurs when a registered broker holding a customer's shares
in the name of the broker has not received voting instructions on a matter from
the customer and is barred by applicable rules from exercising discretionary
authority to vote on the matter and so indicates on the proxy.
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SHARE OWNERSHIP
The following table and footnotes set forth certain information
regarding the beneficial ownership of the Company's Common Stock as of April 1,
1999 by (i) each person known by the Company to own beneficially 5% or more of
the Company's Common Stock, (ii) each Named Executive Officer (as defined in
"Executive Compensation" below), (iii) each director of the Company and (iv)
all directors and executive officers of the Company as a group:
Shares of Common Stock
Beneficially Owned(1)
--------------------------
Beneficial Owner Shares Percent
- ---------------- --------------------------
Roche Image Analysis Systems, Inc................................................. 3,049,680 23.7%
1080 U.S. Highway 202
Somerville, NJ 08876-3771
Sprout Capital VII, L.P. and certain
related entities (2)............................................................. 2,170,098 16.9%
3000 Sand Hill Road
Bldg 3, Suite 170
Menlo Park, CA 94025-7114
Ampersand Specialty Materials
and Chemicals III Limited
Partnership and certain related
entities (3)..................................................................... 2,156,411 16.8%
55 William Street
Suite 240
Wellesley, MA 02481
Allemanni, LLC ................................................................... 1,991,763 15.5%
1573 York Place
Burlington, NC 27215
James B. Powell, M.D. (4) ........................................................ 2,148,888 16.7%
Richard Charpie, Ph.D. (5)........................................................ 2,156,411 16.8%
Robert E. Curry, Ph.D. (6)........................................................ 2,170,098 16.9%
Thomas P. Mac Mahon .............................................................. 48,819 *
Susan E. Whitehead (7)............................................................ 12,918 *
Ernest A. Knesel (8).............................................................. 262,710 2.0%
Thomas Gahm, Ph.D. (9)............................................................ 119,516 *
Eric W. Linsley (10) ............................................................. 106,036 *
Steven C. McPhail. (11)........................................................... 67,870 *
All current executive officers and
directors as a group (12 persons) (12) .......................................... 7,249,135 56.3%
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* Indicates less than 1%.
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(1) The persons and entities named in the table have sole voting and
investment power with respect to the shares beneficially owned by
them, except as noted below. Share numbers include shares of Common
Stock issuable pursuant to outstanding options that may be exercised
within the 60-day period following April 1, 1999.
(2) Consists of the following shares: 1,887,760 shares held by Sprout
Capital VII, L.P. ("Sprout"); 217,009 shares held by DLJ First ESC,
L.L.C. ("DLJ First"); 43,401 shares held by DLJ Capital Corporation
("DLJ Capital"); and 21,928 shares held by the Sprout CEO Fund, L.P.
("Sprout CEO"). DLJ Capital is the managing general partner of Sprout
and Sprout CEO and has voting and investment control over the shares
held by those two entities. DLJ LBO Plans Management Corporation ("DLJ
LBO") is the manager of DLJ First and has voting and investment
control over the shares held by DLJ First. DLJ Capital and DLJ LBO
both are wholly owned subsidiaries of Donaldson, Lufkin & Jenrette,
Inc. ("DLJ, Inc."). Does not include 29,500 shares beneficially owned
by Alliance Capital Management L.P. ("Alliance"). Both Alliance and
DLJ, Inc. are majority-owned subsidiaries of The Equitable Companies
Incorporated ("The Equitable"). In a Schedule 13G filed on February
16, 1999, The Equitable reported that Alliance and DLJ, Inc. operate
independent of The Equitable and The Equitable has no power to vote or
dispose of the shares owned by Alliance or DLJ, Inc. or any of the
DLJ, Inc. subsidiaries.
(3) Consists of the following shares: 1,724,126 shares held by Ampersand
Specialty Materials and Chemicals III Limited Partnership ("ASMC
III"); 28,183 shares held by Ampersand Specialty Materials and
Chemicals III Companion Fund Limited Partnership ("ASMC III C.F.");
282,841 shares held by Laboratory Partners I Limited Partnership ("Lab
Partners I"); and 121,261 shares held by Laboratory Partners Companion
Fund Limited Partnership ("Lab Partners C.F."). ASMC-III MCLP LLP is
the general partner of ASMC-III Management Company Limited
Partnership, which itself is the general partner of both ASMC-III and
ASMC-III C.F. and has voting and investment control over the shares
held by those two entities. Ampersand Lab Partners MCLP LLP is the
general partner of Ampersand Lab Partners Management Company Limited
Partnership which itself is the general partner of both Lab Partners I
and Lab Partners C.F. and has voting and investment control over the
shares held by those two entities.
(4) Includes 1,991,763 shares held by record by Allemanni, LLC
("Allemanni"). Dr. Powell is the manager of Allemanni and has voting
and investment control over the shares held by that entity. Dr. Powell
disclaims beneficial ownership of such shares except to the extent of
his pecuniary interest. Also includes 7,125 shares that may be
acquired within 60 days of April 1, 1999 upon the exercise of options.
(5) Consists solely of shares as described in note (3). Dr. Charpie is a
general partner of ASMC-III MCLP LLP and Ampersand Lab Partners MCLP
LLP and thus may be considered the beneficial owner of the shares
described in note (3). Dr. Charpie disclaims beneficial ownership of
such shares except to the extent of his pecuniary interest.
(6) Consists solely of shares as described in note (2). Dr. Curry is
divisional Vice President of DLJ Capital and acts as attorney-in-fact
with respect to its investment in AutoCyte and thus may be considered
the beneficial owner of the shares described in note (2). Dr. Curry
disclaims beneficial ownership of such shares except to the extent of
his pecuniary interest.
(7) Includes 4,918 shares that may be acquired within 60 days of April 1,
1999 upon the exercise of options.
(8) Includes 97,638 shares held by LE'BET, LLC ("LE'BET"). Mr. Knesel is
the general manager of LE'BET and has voting and investment control
over the shares held by that entity. Mr. Knesel disclaims beneficial
ownership of such shares. Also includes 45,526 shares that may be
acquired within 60 days of April 1, 1999 upon the exercise of options.
(9) Includes 20,603 shares that may be acquired within 60 days of April 1,
1999 upon the exercise of options.
(10) Includes 16,801 shares that may be acquired within 60 days of April 1,
1999 upon the exercise of options.
(11) Includes 16,122 shares that may be acquired within 60 days of April 1,
1999 upon the exercise of options.
(12) See notes (2) through (11) above. Includes 201,010 shares that may be
acquired within 60 days of April 1, 1999 upon the exercise of options.
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ELECTION OF DIRECTORS
In accordance with Section 2 of Article II of the Company's Amended
and Restated By-laws (the "By-laws"), the Board of Directors (the "Board") has
fixed the number of directors at five for the coming year. The Board is divided
into three classes, with the members of each class elected for three-year terms
and the term for each class expiring in successive years. At the Meeting, two
Class II directors will be elected to hold office for three years until his
respective successor is duly elected and qualified. The Board has nominated
Richard A. Charpie, Ph.D. and Robert E. Curry, Ph.D. for election for terms
expiring in 2002. Dr. Charpie and Dr. Curry are currently directors of the
Company and have consented to be nominated and to serve if elected. In the
event either Dr. Charpie or Dr. Curry shall be unable to serve as a director,
the shares represented by the proxy will be voted for the person, if any,
designated by the Board to replace the nominee. In the event that a vacancy
occurs during the three years, such vacancy may be filled by the Board for the
remainder of the full term.
Pursuant to the Delaware General Corporation Law, the Company's
Restated Certificate of Incorporation and its By-laws, directors are elected by
a plurality of the votes properly cast at the Meeting. Abstentions and votes
withheld will not be treated as votes cast for this purpose and will not affect
the outcome of the election.
The following table contains certain information about the nominees
for election to the Board and about each other person whose term of office as a
director will continue after the Meeting.
Present
Business Experience During Past Five Director Term
Name and Age Years and Other Directorships Since Expires
------------ ------------------------------------ -------- -------
Nominees for Director:
Class II Directors
Richard A. Charpie, Ph.D. Dr. Charpie is Chairman of the Board of Directors. Dr. 1996 1999
Charpie is the Managing General Partner of Ampersand
Age: 47 Ventures ("Ampersand") and all of its affiliated
partnerships. He founded Ampersand in 1988 as a spin-off
from PaineWebber Incorporated. Dr. Charpie is currently
a director of V.I. Technologies, Inc. and of several
privately held companies. Dr. Charpie holds a M.S. in
physics and a Ph.D. in applied economics and finance,
both from the Massachusetts Institute of Technology.
Robert E. Curry, Ph.D. Dr. Curry is Vice President of DLJ Capital Corporation, a 1996 1999
wholly owned subsidiary of Donaldson, Lufkin & Jenrette,
Age: 52 Inc. He joined the Sprout Group ("Sprout"), a submanager
of various venture capital funds within the Donaldson,
Lufkin & Jenrette organization, as a general partner in
May 1991. Prior to joining Sprout, Dr. Curry served in
various capacities with Merrill Lynch R&D Management and
Merrill Lynch Venture Capital from 1984, including as
President of both organizations from January 1990 to May
1991. Previously, Dr. Curry was a Vice President of
Becton Dickinson from May 1980 to July 1984, and General
Manager of Bio-Rad Laboratory Inc.'s Diagnostics Systems
Division from August 1976 to May 1980. He currently is a
director of Adeza Biomedical, Inc., Biometric Imaging,
Inc., Instrumentation Metrics, Inc., Mycotech, Inc.,
Urosurge, Inc., Prometheus Laboratories, Inc. and Photon
Technology International, Inc. Dr. Curry received a B.S.
from the University of Illinois, and a M.S. and Ph.D. in
chemistry from Purdue University.
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Present
Business Experience During Past Five Director Term
Name and Age Years and Other Directorships Since Expires
------------ ------------------------------------ -------- -------
Continuing Directors:
Class III Directors
Thomas P. Mac Mahon Mr. Mac Mahon succeeded Dr. Powell as President and Chief 1996 2000
Age: 52 Executive Officer of LabCorp in January 1997 and also
serves as Chairman of the Board of LabCorp. Mr. Mac
Mahon served as Senior Vice President of Hoffmann-La
Roche Inc. from 1993 to January 1997 and President of
Roche Diagnostics Group and a Director and member of the
Executive Committee of Hoffmann-La Roche Inc. from 1988
to January 1997. A graduate of St. Peter's College, Mr.
Mac Mahon received a M.B.A. in marketing from Fairleigh
Dickinson University.
Susan E. Whitehead Ms. Whitehead is Chair of the Whitehead Institute for 1997 2000
Age: 45 Biomedical Research, a trustee of the Massachusetts
Institute of Technology, a trustee of the Horizons
Initiative, a Boston-based group focused on the needs of
homeless children and Chair of the Planned Parenthood
League of Massachusetts. From 1989 to 1995, Ms.
Whitehead was an attorney in private practice in Boston,
Massachusetts. From 1982 until 1987, she served as a
prosecutor in New York City. Ms. Whitehead received a
J.D. from Cardozo School of Law, and a B.S. from Cornell
University.
Class I Director
James B. Powell, M.D. Dr. Powell has served as President and Chief Executive 1996 2001
Age: 60 Officer of AutoCyte since January 1997. Prior to joining
AutoCyte, Dr. Powell served as the President and Chief
Executive Officer of Laboratory Corporation of America
Holdings ("LabCorp") from May 1995 until January 1997. From
June 1982 until May 1995, Dr. Powell served as President of
Biomedical Reference Laboratories/Roche Biomedical
Laboratories, Inc., the predecessor to both LabCorp and Roche
Image Analysis, Inc., which he co-founded. He continues to
serve on the board of LabCorp, a publicly traded company. Dr.
Powell received a B.A. degree from Virginia Military
Institute and a M.D. from Duke University, and is board
certified in anatomical and clinical pathology.
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During the year ended December 31, 1998, the Board held five (5)
meetings. Each of the directors attended at least 75% of the Board meetings and
meetings of committees of the Board of which he or she was a member, except for
Ms. Whitehead who attended 50% of such meetings. In addition, from time to
time, the members of the Board of Directors and its committees may act by
unanimous written consent pursuant to Delaware law in lieu of a meeting.
The Company has standing Audit and Compensation Committees of the
Board, but does not have a Nominating Committee.
The Audit Committee consisted of Dr. Charpie, Dr. Curry and Ms.
Whitehead from January 1, 1998 until April 8, 1998. Mr. Mac Mahon replaced Ms.
Whitehead on the Audit Committee effective as of April 9, 1998. The Audit
Committee assists the Board in the discharge of its duties and responsibilities
by providing the Board with an independent review of the financial health of
the Company and of the reliability of the Company's financial contracts and
financial reporting systems. The Audit Committee reviews the general scope of
the Company's annual audit, the fee charged by the Company's independent
auditors and other matters relating to internal control systems. The Audit
committee held three (3) meetings in 1998.
The Compensation Committee currently consists of Dr. Charpie, Dr.
Curry and Mr. Mac Mahon. The Compensation Committee determines the compensation
paid to all executive officers of the Company, including the Chief Executive
Officer. The Compensation Committee's duties include the administration of the
Company's Amended and Restated 1996 Equity Incentive Plan. The Compensation
Committee held three (3) meetings in 1998.
DIRECTOR COMPENSATION
Directors currently receive no compensation for their service on the
Board except pursuant to the 1997 Director Stock Option Plan (the "Director
Plan"), which was adopted by the Board and stockholders of the Company in June
1997. All of the directors who are not employees of the Company (the "Eligible
Directors") are currently eligible to participate in the Director Plan. There
are 100,000 shares of Common Stock reserved for issuance under the Director
Plan. Upon the election or reelection of an Eligible Director, such director
automatically will be granted an option to purchase 10,000 shares of Common
Stock. Options become exercisable with respect to 2,000 shares on each
anniversary of the date of grant for a period of five years, provided that the
optionee is still a director of the Company at the opening of business on such
date. Each option has a term of ten years. The exercise price for each option
is equal to the last sale price for the Common Stock on the business day
immediately preceding the date of grant, as reported on the Nasdaq National
Market. The exercise price may be paid in cash, shares of Common Stock or a
combination of both.
PROPOSAL TO AMEND THE AMENDED AND RESTATED 1996 EQUITY INCENTIVE PLAN
GENERAL
The Amended and Restated 1996 Equity Incentive Plan (the "Plan") was
adopted by the Board of Directors in 1996 and was approved by the stockholders
of AutoCyte in June 1997. Currently, AutoCyte may grant options and award
shares under the Plan for a total of 2,086,325 shares of Common Stock. The
purpose of the Plan is to attract and retain key personnel of AutoCyte and its
affiliates, to provide incentives for them to achieve long-range performance
goals and to enable them to participate in the long-term growth of AutoCyte.
The Closing price of AutoCyte's Common Stock on April 16, 1999, as
reported by the Nasdaq National Market was $7.00 per share.
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AMENDMENT TO THE PLAN
The Board of Directors voted on February 2, 1999, subject to the
approval of the stockholders of such Plan amendment, to amend the Plan by
increasing the aggregate number of shares that may be subject to grants under
the Plan by 900,000 shares from 2,086,325 to 2,986,325 shares.
ADMINISTRATION AND ELIGIBILITY
The Plan provides for the grant of stock options (incentive and
nonstatutory), stock appreciation rights and restricted stock (collectively,
"Awards") to employees, directors and consultants of AutoCyte and its
affiliates. As of April 16, 1999, 85 employees were eligible to participate in
the Plan. The Compensation Committee has delegated to James B. Powell the power
to grant Awards under the Plan to persons who are not subject to the reporting
requirements of Section 16 of the Exchange Act or whose income is not subject
to Section 162(m) of the Internal Revenue Code of 1986, as amended from time to
time, or any successor law.
PLAN BENEFITS
Awards are granted at the discretion of the Compensation Committee,
which determines the recipients and establishes the terms and conditions upon
which such Awards will be granted, including the exercise price, the form of
payment of the exercise price, the number of shares subject to options or other
equity rights and the time at which such options become exercisable. However,
the exercise price of any incentive stock option granted under the Plan may not
be less than the fair market value of the Common Stock on the date of grant.
The amount of Awards to be received under the Plan by each of the
executive officers named in the Summary Compensation Table, the current
executive officers of AutoCyte as a group, all current directors who are also
consultants to AutoCyte and all employees, including all current officers of
AutoCyte who are not executive officers, as a group, is not determinable and is
in the discretion of the Compensation Committee. Details on options granted
during the last fiscal year under the Plan to certain executive officers are
presented in the tables and text under the heading "EXECUTIVE COMPENSATION." In
general, as of April 1, 1999, options to purchase an aggregate of 1,858,534
shares of Common Stock have been granted and not cancelled unexercised under
the Plan, of which options to purchase 386,462 shares have been exercised and
options to purchase 1,472,072 shares were outstanding. In addition, a total of
590,260 shares of restricted stock have been granted, leaving 537,531 shares
available for future grants of Awards as of April 1, 1999, including the
900,000 shares added by the amendment for which stockholder approval is being
requested. Of the aggregate number of options granted, options to purchase an
aggregate of 917,145 shares of Common Stock have been granted to all current
executive officers as a group, options to purchase an aggregate of 692,079
shares of Common Stock have been granted to all Named Executive Officers as a
group, 297,290 of which have been exercised, and options to purchase an
aggregate of 1,166,455 shares of Common Stock have been granted to all other
employees and consultants of the Company, 89,172 of which had been exercised as
of April 1, 1999.
FEDERAL INCOME TAX CONSEQUENCES RELATING TO STOCK OPTIONS
Incentive Stock Options. An optionee does not realize taxable income
upon the grant or exercise of an incentive stock option ("ISO") under the Plan.
If no disposition of shares issued to an optionee pursuant to the
exercise of an ISO is made by the optionee within two years from the date of
grant nor within one year from the date of exercise, then (a) upon sale of such
shares, any amount realized in excess of the option price (the amount paid for
the shares) is taxed to the optionee as a capital gain and any loss sustained
will be a capital loss and (b) no deduction is allowed to AutoCyte for Federal
income tax purposes. The exercise of ISOs gives rise to an adjustment in
computing alternative minimum taxable income that may result in alternative
minimum tax liability for the optionee.
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If shares of Common Stock acquired upon the exercise of an ISO are
disposed of prior to the expiration of either the two-year or the one-year
holding periods described above (a "disqualifying disposition") then (a) the
optionee realizes ordinary income in the year of disposition in an amount equal
to the excess (if any) of the fair market value of the shares at exercise (or,
if less, the amount realized on a sale of such shares) over the option price
thereof and (b) AutoCyte is entitled to deduct such amount. Any further gain
realized is taxed as a short-term or long-term capital gain and does not result
in any deduction to AutoCyte. A disqualifying disposition in the year of
exercise will generally avoid the alternative minimum tax consequences of the
exercise of an ISO.
Nonstatutory Stock Options. No income is realized by the optionee at
the time a nonstatutory option is granted. Upon exercise, (a) ordinary income
is realized by the optionee in an amount equal to the difference between the
option price and the fair market value of the shares on the date of exercise
and (b) AutoCyte receives a tax deduction for the same amount. Upon disposition
of the shares, appreciation or depreciation after the date of exercise is
treated as a short-term or long-term capital gain or loss and will not result
in any deduction by AutoCyte.
VOTE REQUIRED
The affirmative vote by the holders of a majority of the shares of
Common Stock present or represented and entitled to vote at the meeting is
required to approve the amendment to the Plan. Broker non-votes will not be
counted as present or represented for this purpose. Abstentions will be counted
as present and entitled to vote and, accordingly, will have the effect of a
negative vote.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board has selected the firm of Ernst & Young LLP as independent
auditors of the Company for the fiscal year ending December 31, 1999. Although
shareholder approval of the Board's selection of Ernst & Young LLP is not
required by law, the Board believes that it is advisable to give the
shareholders an opportunity to ratify this selection. If this proposal is not
approved at the Meeting, the Board will reconsider the selection of Ernst &
Young LLP.
The firm of Ernst & Young LLP examined the Company's financial
statements for the year ended December 31, 1998. Representatives of Ernst &
Young LLP are expected to attend the Annual Meeting to respond to appropriate
questions and will have the opportunity to make a statement if they desire.
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EXECUTIVE COMPENSATION
The Compensation Committee Report on Executive Compensation and the
tables set forth below provide information about the compensation of executive
officers of the Company.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee")
currently consists of Dr. Richard A. Charpie, Dr. Robert E. Curry and Thomas P.
Mac Mahon. The Committee's responsibilities include: (i) reviewing the
performance of the Chief Executive Officer and the other executive officers of
the Company and making determinations as to their cash and equity-based
compensation and benefits; and (ii) administration of employee stock option
grants and stock awards under AutoCyte's Amended and Restated 1996 Equity
Incentive Plan. The Committee held three (3) meetings in 1998.
The Company's executive compensation policy is designed to increase
shareholder value by attracting, retaining and motivating executive officers to
maximize the Company's performance. Generally, the Company has set the salaries
of its executive officers at slightly below industry averages and provided for
significant variable compensation through stock options. There is no annual
cash incentive plan. Various other benefits include medical, life insurance and
retirement savings plans generally available to all employees.
The Committee reviews the entire executive compensation package, which
consists of base salary and stock option grants under the Option Plan.
ELEMENTS OF EXECUTIVE COMPENSATION
Base Salary
The Company's policy is to set base salaries of its executives at
slightly below industry average, as determined using compensation surveys for
the industry. Base salaries are reviewed on an annual basis using compensation
surveys for the industry. Base salaries for executive officers for fiscal year
1998 were determined after considering the base salary level of the executive
officers in prior years, and taking into account for each executive officer the
amount of base salary as a component of total compensation.
Cash Incentive Compensation
The Company does not maintain a cash incentive plan for executive
officers. The Committee believes that the Company's stage of life and cash
requirements make it more prudent to motivate management with non-cash
incentives, consisting of stock option grants.
Stock Options
In general, stock options are granted to AutoCyte's executive officers
at the time of their hire and at such other times as the Committee may deem
appropriate. In reviewing option grants, the Committee uses the same industry
survey data as used in its analysis of base salaries. The Committee bases its
stock option award decisions upon a comparison with the equity ownership of
officers holding similar positions in other medical technology companies, as
well as upon the number of options and shares currently held by the executive
and performance factors.
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The stock option grants made by the Committee are designed to align
the interests of management with those of the shareholders. In order to
maintain the incentive aspects of these grants, the Committee has determined
that a significant percentage of any executive officer's stock options should
be unvested option shares. Consistent with this determination, the Committee
uses a four-year vesting period for the majority of option shares and
periodically reviews individual officer stock option holdings. Stock options
also are issued to lower the overall cash cost of compensation.
Benefits
The Company provides medical, life insurance and retirement savings
benefits to executive officers on terms generally available to all employees.
CHIEF EXECUTIVE OFFICER COMPENSATION
In fiscal year 1998, the Company's President and Chief Executive
Officer, Dr. James B. Powell, was paid a base salary of $171,976. The base
salary is below industry average, as determined using compensation surveys for
the industry, and reflects Dr. Powell's significant ownership interest in the
Company. During 1998, Dr. Powell was granted options with respect to 5,500
shares of Common Stock. These options became exercisable with respect to 4,125
shares on December 31, 1998 upon the Company's achieving certain
performance-based criteria. These options terminated with respect to the
remaining 1,375 shares on December 31, 1998.
On January 13, 1998, the Company and Dr. Powell entered into an
amendment to the Restricted Stock Purchase Agreement, dated as of November 22,
1996 between the Company and Dr. Powell, providing that, upon any termination
of Dr. Powell's employment with the Company for any reason other than for
cause, 50% of the then unvested shares under the Restricted Stock Purchase
Agreement will vest and will not be subject to the Company's repurchase option
under such agreement. There are currently 233,645 unvested shares under Dr.
Powell's Restricted Stock Purchase Agreement.
DEDUCTION LIMIT FOR EXECUTIVE COMPENSATION
With respect to qualifying compensation paid to executive officers
under Section 162(m) of the Internal Revenue Code, AutoCyte does not expect to
have compensation exceeding the one-million-dollar limitation for the
foreseeable future. Outstanding stock options granted under the Option Plan
will not be subject to the limitation under applicable regulations, and
AutoCyte plans to maintain the exclusion for any additional options that may be
granted to employees covered by Section 162(m).
By the AutoCyte, Inc. Compensation Committee,
Richard A. Charpie, Ph.D.
Robert E. Curry, Ph.D.
Thomas P. Mac Mahon
10
13
The following table sets forth certain compensation information for
the Chief Executive Officer of the Company and the four other most highly
compensated executive officers of the Company whose total salary for the year
ended December 31, 1998 exceeded $100,000 (together, the "Named Executive
Officers"):
SUMMARY COMPENSATION TABLE
LONG-TERM
ANNUAL COMPENSATION ALL OTHER
COMPENSATION AWARDS COMPENSATION
------------ ------------ ------------
Securities
Underlying
Name and Principal Position Year Salary (1) Options (#)
- --------------------------- ---- ---------- -----------
James B. Powell, M.D.................. 1998 $171,976 4,125 $5,000(2)
President and Chief Executive 1997 $145,279 -- $2,542(2)
Officer(4)
Ernest A. Knesel........................ 1998 $190,304 17,379 $5,000(2)
Executive Vice President(5) 1997 $184,032 -- $4,750(2)
1996 $193,931 245,941 $22,771(3)
Thomas Gahm, Ph.D.................... 1998 $175,976 17,165 $5,000(2)
Vice President of Computer 1997 $164,287 -- $4,750(2)
Science 1996 $159,509 135,268 $6,775(3)
Eric W. Linsley........................ 1998 $148,195 16,471 $4,369(2)
Vice President of Operations and 1997 $88,266 135,268 $96,235(8)
Business Development (6)
Steven C. McPhail.................. 1998 $158,556 16,719 $3,083(2)
Vice President of Sales and 1997 $94,343 98,376 $96,798(9)
Marketing (7)
- --------------------------
(1) The amounts shown for 1996 represent amounts paid by Roche Image
Analysis Systems, Inc. ("RIAS"), the Company's predecessor, for
services performed from January 1, 1996 to November 21, 1996, and
amounts paid by the Company for services performed from November 22,
1996 to December 31, 1996.
(2) Represents contributions by the Company to its 401(k) plan on behalf
of the Named Executive Officers.
(3) Represents payments made by RIAS in connection with the formation of
the Company for accrued vacation time with RIAS.
(4) Dr. Powell joined the Company as President and Chief Executive Officer
in January 1997.
(5) Mr. Knesel served as interim President from November 22, 1996 until
January 1997. During that period, no executive officer held the title
of Chief Executive Officer.
(6) Mr. Linsley joined the Company as Vice President of Operations and
Business Development in May 1997.
(7) Mr. McPhail joined the Company as Vice President of Sales and
Marketing in May 1997.
11
14
(8) Represents payments of $95,251 made by the Company for relocation
expenses and related income tax gross-up payments and contributions of
$984 by the Company to its 401(k) plan on behalf of the Named
Executive Officer.
(9) Represents payments of $96,564 made by the Company for relocation
expenses and related income tax gross-up payments and contributions of
$234 by the Company to its 401(k) plan on behalf of the Named
Executive Officer.
12
15
The following table sets forth certain information regarding options granted
during the fiscal year ended December 31, 1998 by the Company to the Named
Executive Officers.
OPTION GRANTS IN LAST FISCAL YEAR
Individual Grants
-------------------------------------------------------
Potential Realizable Value
Number of Percent of at Assumed Annual Rates of
Securities Total Options Stock Price Appreciation
Underlying Granted to Exercise for Option Term
Options Employees in or Base Expiration --------------------------
Name Granted Fiscal Year Price/Share Date 5%(1) 10%(1)
- --------------------------------------------------------------------------------------------------------------------------
James B. Powell, M.D............. 5,500(2) 1.18% $4.188 2/5/2008 $14,486 $36,710
Ernest A. Knesel................. 14,000(3) 3.01% $4.188 2/5/2008 $36,873 $93,444
4,506(4) 0.97% $4.188 2/5/2008 $11,868 $30,076
Thomas Gahm, Ph.D................ 14,000(3) 3.01% $4.188 2/5/2008 $36,873 $93,444
4,220(5) 0.91% $4.188 2/5/2008 $11,115 $28,167
Eric W. Linsley.................. 14,000(3) 3.01% $4.188 2/5/2008 $36,873 $93,444
3,375(6) 0.78% $4.188 2/5/2008 $8,889 $22,527
Steven C. McPhail................ 14,000(3) 3.01% $4.188 2/5/2008 $36,873 $93,444
3,625(7) 0.73% $4.188 2/5/2008 $9,548 $24,195
- ----------------------
(1) The dollar amounts shown in these columns are the result of
calculations at the 5% and 10% rates required by the Securities and
Exchange Commission and, therefore, are not intended to forecast
possible future appreciation, if any, in the price of the underlying
Common Stock. No gain to the optionee is possible without an increase
in price of the underlying Common Stock, which will benefit all
stockholders proportionately.
(2) These options became exercisable with respect to 4,125 shares on
December 31, 1998 upon the Company's achieving certain
performance-based criteria. These options terminated with respect to
the remaining 1,375 shares on December 31, 1998.
(3) These options were granted on February 6, 1998 and become exercisable
as to 1/48th of the shares on the first day of each month following
the date of grant.
(4) These options became exercisable with respect to 3,379 shares on
December 31, 1998 upon the Company's achieving certain
performance-based criteria. These options terminated with respect to
the remaining 1,127 shares on December 31, 1998.
(5) These options became exercisable with respect to 3,165 shares on
December 31, 1998 upon the Company's achieving certain
performance-based criteria. These options terminated with respect to
the remaining 1,055 shares on December 31, 1998.
(6) These options became exercisable with respect to 2,471 shares on
December 31, 1998 upon the Company's achieving certain
performance-based criteria. These options terminated with respect to
the remaining 904 shares on December 31, 1998.
(7) These options became exercisable with respect to 2,719 shares on
December 31, 1998 upon the Company's achieving certain
performance-based criteria. These options terminated with respect to
the remaining 906 shares on December 31, 1998.
13
16
The following table sets forth certain information concerning
exercisable and unexercisable stock options held by the Named Executive
Officers as of December 31, 1998.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
Number of
Securities
Underlying Value of Unexercised
Unexercised In-The-Money
Options at Options at
Fiscal Year- Fiscal Year-
End End (2)
Shares ---------------- -------------------
Acquired on Value Exercisable/ Exercisable/
Name Exercise Realized (1) Unexercisable Unexercisable
---- -------- ------------ ---------------- -------------------
James B. Powell, M.D. ..... - $ - 4,125 / - $ - / $ -
Ernest A. Knesel ........... 114,732 $494,632 11,533 / 134,055 $20,869 / $489,941
Thomas Gahm, Ph.D. ......... 37,453 $153,754 34,262 / 78,718 $112,279 / $269,467
Eric W. Linsley............. 28,471 $125,313 30,459 / 92,809 $101,051 / $325,609
Steven C. McPhail........... 2,000 $14,718 40,575 / 70,520 $139,208 / $236,805
- ---------------------
(1) Based on the difference between the last sale price of the Common
Stock on the date of exercise, as reported on the Nasdaq National
Market, and the exercise price.
(2) Based on the difference between the last sale price of the Common
Stock on December 31, 1998 as reported on the Nasdaq National Market
of $4.1875, and the option exercise price.
14
17
COMPENSATION COMMITTEE INTERLOCKS, INSIDER PARTICIPATION
AND CERTAIN TRANSACTIONS
During fiscal year 1998, the Compensation Committee consisted of Dr.
Charpie, Dr. Curry and Mr. Mac Mahon. None of the members of the Compensation
Committee is an officer of the Company.
Dr. Charpie is a general partner of (i) ASMC-III MCLP LLP, which is
the general partner of the general partner of both Ampersand Specialty
Materials and Chemicals III Limited Partnership and Ampersand Specialty
Materials and Chemicals III Companion Fund Limited Partnership, and (ii)
Ampersand Lab Partners MCLP LLP, which is the general partner of both
Laboratory Partners I Limited Partnership and Laboratory Partners Companion
Fund Limited Partnership, which, together, are a principal stockholder of the
Company.
Dr. Curry is divisional Vice President of DLJ Capital Corporation
("DLJ Capital"), the managing general partner of Sprout Capital VII, L.P. and
Sprout CEO Fund, L.P., and acts as attorney-in-fact with respect to DLJ
Capital's direct and indirect investments in AutoCyte. Together, these entities
are a principal stockholder of the Company.
Mr. Mac Mahon succeeded Dr. Powell as President and Chief Executive
Officer of LabCorp, a publicly held company of which Dr. Powell currently is a
director. Mr. Mac Mahon also serves as LabCorp's Chairman of the Board.
LabCorp Arrangements
The Company has entered into certain ongoing arrangements with LabCorp
for selling its products to LabCorp. In 1998, LabCorp purchased approximately
$635,000 worth of products from the Company. The Company currently expects that
LabCorp's purchases of its products in 1999 will exceed 5% of the Company's
consolidated gross revenue for 1999.
The Company has continuing arrangements with LabCorp (i) for leasing a
portion of LabCorp's facility in Elon College, North Carolina and (ii) for
providing cytology services in support of the Company's clinical trials. In
1998, the Company paid LabCorp approximately $62,000 and $5,500 respectively,
under these arrangements.
15
18
COMPARATIVE STOCK PERFORMANCE GRAPH
The following graph shows the cumulative stockholder return of the
Company's Common Stock from September 5, 1997 (the first trading day for the
Company's Common Stock) through December 31, 1998 as compared with that of the
Nasdaq (U.S. Companies) Index and the Hambrecht & Quist Healthcare Section
Excluding Biotech Index. The graph assumes the investment of $100 in the
Company's Common Stock and each of the comparison groups on September 5, 1997
and assumes the reinvestment of dividends. The Company has never declared a
dividend on the Common Stock of the Company. The stock price performance
depicted in the graph below is not necessarily indicative of future price
performance.
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG AUTOCYTE, INC.,
NASDAQ (U.S. COMPANIES) INDEX AND HAMBRECHT & QUIST HEALTHCARE SECTION
EXCLUDING BIOTECH INDEX
9/5/97 9/30/97 12/31/97 3/31/98 6/30/98 9/30/98 12/31/98
------- ------- -------- ------- ------- ------- --------
AutoCyte, Inc. $100.00 $ 85.00 $ 71.25 $ 78.75 $ 55.00 $ 29.69 $ 41.88
Nasdaq Stock Market (U.S.) $100.00 $102.55 $ 96.20 $112.51 $115.76 $104.80 $135.17
H&Q Healthcare-Excluding Biotech $100.00 $104.58 $104.57 $118.90 $121.14 $106.94 $127.06
16
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
AutoCyte's directors, certain of its executive officers and persons
who own beneficially more than 10% of AutoCyte's Common Stock (collectively
"Reporting Persons") are required under Section 16(a) of the Securities
Exchange Act of 1934 to file initial reports of ownership and changes in
ownership of AutoCyte securities with the Securities and Exchange Commission
(the "Commission"). Reporting Persons also are required by Commission
regulations to furnish AutoCyte with copies of all Section 16(a) reports they
file.
To AutoCyte's knowledge, based solely on a review of the copies of
reports furnished to AutoCyte and written representations that no other reports
were required, AutoCyte believes that during its 1998 fiscal year, its
directors, executive officers, and 10% beneficial owners complied with all
applicable Section 16(a) filing requirements.
STOCKHOLDER PROPOSALS FOR THE 2000 ANNUAL MEETING
In order to be considered for inclusion in the Company's proxy
materials for the 2000 Annual Meeting of Stockholders, stockholder nominations
of persons for election to the Board and proposals of business to be considered
by the stockholders must be received by the Company no later than January 1,
2000. Proposals should be sent to the attention of the Assistant Secretary at
the Company's offices at 780 Plantation Drive, Burlington, North Carolina,
27215.
ADVANCE NOTICE PROVISIONS FOR
STOCKHOLDER PROPOSALS AND NOMINATIONS
The By-laws provide that in order for a stockholder to bring business
before or propose director nominations at an annual meeting, the stockholder
must give written notice to the Secretary of the Company not less than 50 days
nor more than 75 days prior to the meeting. The notice must contain specified
information about the proposed business or each nominee and the stockholder
making the proposal or nomination. If less than 65 days notice or prior public
disclosure of the date of the annual meeting is given or made to stockholders,
the notice given by the stockholder must be received not later than the 15th
day following the day on which the notice of such annual meeting date was
mailed or public disclosure made, whichever first occurs.
EXPENSES OF SOLICITATION
The cost of soliciting proxies, including expenses in connection with
preparing and mailing this Proxy Statement, will be borne by the Company.
Proxies may be solicited by directors, officers or regular employees of the
Company by mail, by telephone, in person or otherwise. No such person will
receive additional compensation for such solicitation. In addition, the Company
will request banks, brokers and other custodians, nominees and fiduciaries to
forward proxy material to the beneficial owners of Common Stock and to obtain
voting instructions from such beneficial owners. The Company will reimburse
such firms for their reasonable expenses in forwarding proxy materials and
obtaining voting instructions.
17
20
OTHER MATTERS
The Meeting is called for the purposes set forth in the notice. The
Board does not know of any matter for action by the stockholders at the Meeting
other than the matters described in the notice. However, the enclosed proxy
confers discretionary authority on the persons named therein with respect to
matters which are not known to the directors at the date of printing hereof and
which may properly come before the Meeting. It is the intention of the persons
named in the proxy to vote in accordance with their best judgment on any such
matter.
Copies of the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1998 as filed with the Securities and Exchange Commission
are available to stockholders upon written request addressed to the President
at the Company's offices at 780 Plantation Drive, Burlington, North Carolina,
27215.
Whether or not you intend to be present at the Meeting, you are urged
to fill out, sign, date and return the enclosed proxy at your earliest
convenience.
18
21
This Plan was approved by the Board of Directors on November 22, 1996.
This Plan was amended by the Board of Directors on May 19, 1997.
This Plan, as amended, was approved by the stockholders on June 26, 1997.
This Plan was amended and restated by the Board of Directors on June 24, 1997.
This Plan, as amended and restated, was approved by the stockholders on June 26,
1997.
This Plan was amended by the Board of Directors on February 2, 1999.
This Plan, as amended, was approved by the stockholders on _________ ___, 1999.
AUTOCYTE, INC.
AMENDED AND RESTATED
1996 EQUITY INCENTIVE PLAN
1. PURPOSE
The purpose of the Autocyte, Inc. 1996 Amended and Restated Equity
Incentive Plan (the "Plan") is to attract and retain key personnel of the
Company and its Affiliates, to provide an incentive for them to achieve
long-range performance goals, and to enable them to participate in the long-term
growth of the Company by granting Awards with respect to the Company's Common
Stock.
2. ADMINISTRATION
The Plan shall be administered by the Committee, provided that the
Board may in any instance perform any of the functions delegated to the
Committee hereunder. The Committee shall select the Participants to receive
Awards and shall determine the terms and conditions of the Awards. The Committee
shall have authority to adopt, alter and repeal such administrative rules,
guidelines and practices governing the operation of the Plan as it shall from
time to time consider advisable, and to interpret the provisions of the Plan.
The Committee's decisions shall be final and binding. To the extent permitted by
applicable law, the Committee may delegate to one or more executive officers of
the Company the power to make Awards to Participants who are not Reporting
Persons or Covered Employees and all determinations under the Plan with respect
thereto, provided that the Committee shall fix the maximum amount of such Awards
for all such Participants and a maximum for any one Participant.
22
3. ELIGIBILITY
All employees, directors and consultants of the Company or any
Affiliate capable of contributing significantly to the successful performance of
the Company, other than a person who has irrevocably elected not to be eligible,
are eligible to be Participants in the Plan. Incentive Stock Options may be
granted only to persons eligible to receive such Options under the Code.
4. STOCK AVAILABLE FOR AWARDS
(a) AMOUNT. Subject to adjustment under subsection (b), Awards may be
made under the Plan for up to 2,986,325 shares of Common Stock. If any Award
expires or is terminated unexercised or is forfeited or settled in a manner that
results in fewer shares outstanding than were awarded, the shares subject to
such Award, to the extent of such expiration, termination, forfeiture or
decrease, shall again be available for award under the Plan. Common Stock issued
through the assumption or substitution of outstanding grants from an acquired
company shall not reduce the shares available for Awards under the Plan. Shares
issued under the Plan may consist in whole or in part of authorized but unissued
shares or treasury shares.
(b) ADJUSTMENT. In the event that the Committee determines that any
stock dividend, extraordinary cash dividend, recapitalization, reorganization,
merger, consolidation, split-up, spin-off, combination, exchange of shares or
other transaction affects the Common Stock such that an adjustment is required
in order to preserve the benefits intended to be provided by the Plan, then the
Committee (subject in the case of Incentive Stock Options to any limitation
required under the Code) shall equitably adjust any or all of (i) the number and
kind of shares in respect of which Awards may be made under the Plan, (ii) the
number and kind of shares subject to outstanding Awards, (iii) the exercise
price with respect to any of the foregoing, and (iv) if considered appropriate,
the Committee may make provision for a cash payment with respect to an
outstanding Award; provided that in the case (i) or (ii) above the number of
shares subject to any Award shall always be a whole number.
(c) LIMIT ON INDIVIDUAL GRANTS. The maximum number of shares of Common
Stock subject to Options and Stock Appreciation Rights that may be granted to
any Participant in the aggregate in any calendar year shall not exceed 1,000,000
shares, subject to adjustment under subsection (b).
5. STOCK OPTIONS
(a) GRANT OF OPTIONS. Subject to the provisions of the Plan, the
Committee may grant options ("Options") to purchase shares of Common Stock
complying with the requirements of Section 422 of the Code or any successor
provision and any regulations thereunder ("Incentive Stock Options") and (ii)
not intended to comply with such requirements ("Nonstatutory Stock Options").
The Committee shall determine the number of shares subject to each Option and
the exercise price therefor, which in the case of Incentive Stock Options shall
not be less than 100% of the Fair Market Value of the Common Stock on the date
of grant. No Incentive Stock Option may be granted hereunder more than ten years
after the effective date of the Plan.
23
(b) TERMS AND CONDITIONS. Each Option shall be exercisable at such
times and subject to such terms and conditions as the Committee may specify in
the applicable grant or thereafter. The Committee may impose such conditions
with respect to the exercise of Options, including conditions relating to
applicable federal or state securities laws, as it considers necessary or
advisable.
(c) PAYMENT. Payment for shares to be delivered pursuant to any
exercise of an Option may be made in whole or in part in cash or, to the extent
permitted by the Committee at or after the grant of the Option, by delivery of a
note or other commitment satisfactory to the Committee or shares of Common Stock
owned by the optionee, including Restricted Stock, or by retaining shares
otherwise issuable pursuant to the Option, in each case valued at their Fair
Market Value on the date of delivery or retention, or such other lawful
consideration as the Committee may determine.
6. STOCK APPRECIATION RIGHTS
(a) GRANT OF SARS. Subject to the provisions of the Plan, the Committee
may grant rights to receive any excess in value of shares of Common Stock over
the exercise price ("Stock Appreciation Rights" or "SARs") in tandem with an
Option (at or after the award of the Option), or alone and unrelated to an
Option. SARs in tandem with an Option shall terminate to the extent that the
related Option is exercised, and the related Option shall terminate to the
extent that the tandem SARs are exercised. The Committee shall determine at the
time of grant or thereafter whether SARs are settled in cash, Common Stock or
other securities of the Company, Awards or other property, and may define the
manner of determining the excess in value of the shares of Common Stock.
(b) EXERCISE PRICE. The Committee shall fix the exercise price of each
SAR or specify the manner in which the price shall be determined. An SAR granted
in tandem with an Option shall have an exercise price not less than the exercise
price of the related Option. An SAR granted alone and unrelated to an Option may
not have an exercise price less than 100% of the Fair Market Value of the Common
Stock on the date of the grant, provided that such an SAR granted to a new
employee or consultant within 90 days of the date of employment may have a lower
exercise price so long as it is not less than 100% of Fair Market Value on the
date of employment.
7. RESTRICTED STOCK
(a) GRANT OF RESTRICTED STOCK. Subject to the provisions of the Plan,
the Committee may grant shares of Common Stock subject to forfeiture
("Restricted Stock") and determine the duration of the period (the "Restricted
Period") during which, and the conditions under which, the shares may be
forfeited to the Company and the other terms and conditions of such Awards.
Shares of Restricted Stock may be issued for no cash consideration, such minimum
consideration as may be required by applicable law or such other consideration
as the Committee may determine.
(b) RESTRICTIONS. Shares of Restricted Stock may not be sold, assigned,
transferred, pledged or otherwise encumbered, except as permitted by the
Committee, during the Restricted
24
Period. Notwithstanding the foregoing, in the Committee's discretion, Awards in
the form of Restricted Stock may be made transferable to a limited liability
corporation controlled solely by the Participant. Shares of Restricted Stock
shall be evidenced in such manner as the Committee may determine. Any
certificates issued in respect of shares of Restricted Stock shall be registered
in the name of the Participant and unless otherwise determined by the Committee,
deposited by the Participant, together with a stock power endorsed in blank,
with the Company. At the expiration of the Restricted Period, the Company shall
deliver such certificates to the Participant or if the Participant has died, to
the Participant's Designated Beneficiary.
8. GENERAL PROVISIONS APPLICABLE TO AWARDS
(a) REPORTING PERSON LIMITATIONS. Notwithstanding any other provision
of the Plan, Awards made to a Reporting Person shall not be transferable by such
person other than by will or the laws of descent and distribution and are
exercisable during such person's lifetime only by such person or by such
person's guardian or legal representative. Awards, unless Incentive Stock
Options, may also be made transferable pursuant to a domestic relations order as
defined in the Code or Title I of the Employee Retirement Income Security Act or
the rules thereunder.
(b) DOCUMENTATION. Each Award under the Plan shall be evidenced by a
writing delivered to the Participant specifying the terms and conditions thereof
and containing such other terms and conditions not inconsistent with the
provisions of the Plan as the Committee considers necessary or advisable to
achieve the purposes of the Plan or to comply with applicable tax and regulatory
laws and accounting principles.
(c) COMMITTEE DISCRETION. Each type of Award may be made alone, in
addition to or in relation to any other Award. The terms of each type of Award
need not be identical, and the Committee need not treat Participants uniformly.
Except as otherwise provided by the Plan or a particular Award, any
determination with respect to an Award may be made by the Committee at the time
of grant or at any time thereafter.
(d) DIVIDENDS AND CASH AWARDS. In the discretion of the Committee, any
Award under the Plan may provide the Participant with (i) dividends or dividend
equivalents payable currently or deferred with or without interest and (ii) cash
payments in lieu of or in addition to an Award.
(e) TERMINATION OF EMPLOYMENT. The Committee shall determine the effect
on an Award of the disability, death, retirement or other termination of
employment of a Participant and the extent to which, and the period during
which, the Participant's legal representative, guardian or Designated
Beneficiary may receive payment of an Award or exercise rights thereunder.
(f) CHANGE IN CONTROL. In order to preserve a Participant's rights
under an Award in the event of a "change in control" (as defined by the
Committee) of the Company, the Committee in its discretion may, at the time an
Award is made or at any time thereafter, take one or more of the following
actions: (i) provide for the acceleration of any time period relating to the
exercise or payment of the Award, (ii) provide for payment to the Participant of
cash or other property with a Fair Market Value equal to the amount that would
have been received upon the
25
exercise or payment of the Award had the Award been exercised or paid upon the
change in control, (iii) adjust the terms of the Award in a manner determined by
the Committee to reflect the change in control, (iv) cause the Award to be
assumed, or new rights substituted therefor, by another entity, or (v) make such
other provision as the Committee may consider equitable to Participants and in
the best interests of the Company.
(g) LOANS. The Committee may authorize the making of loans or cash
payments to Participants in connection with the grant or exercise of any Award
under the Plan, which loans may be secured by any security, including Common
Stock, underlying or related to such Award (provided that the loan shall not
exceed the Fair Market Value of the security subject to such Award), and which
may be forgiven upon such terms and conditions as the Committee may establish at
the time of such loan or at any time thereafter.
(h) WITHHOLDING TAXES. The Participant shall pay to the Company, or
make provision satisfactory to the Committee for payment of, any taxes required
by law to be withheld in respect of Awards under the Plan no later than the date
of the event creating the tax liability. In the Committee's discretion, such tax
obligations may be paid in whole or in part in shares of Common Stock, including
shares retained from the Award creating the tax obligation, valued at their Fair
Market Value on the date of delivery. The Company and its Affiliates may, to the
extent permitted by law, deduct any such tax obligations from any payment of any
kind otherwise due to the Participant.
(i) FOREIGN NATIONALS. Awards may be made to Participants who are
foreign nationals or employed outside the United States on such terms and
conditions different from those specified in the Plan as the Committee considers
necessary or advisable to achieve the purposes of the Plan or to comply with
applicable laws.
(j) AMENDMENT OF AWARD. The Committee may amend, modify or terminate
any outstanding Award, including substituting therefor another Award of the same
or a different type, changing the date of exercise or realization and converting
an Incentive Stock Option to a Nonstatutory Stock Option, provided that the
Participant's consent to such action shall be required if the action, taking
into account any related action, would adversely affect the Participant.
9. CERTAIN DEFINITIONS
"Affiliate" means any business entity in which the Company owns
directly or indirectly 50% or more of the total voting power or has a
significant financial interest as determined by the Committee.
"Award" means any Option, Stock Appreciation Right or Restricted Stock
granted under the Plan.
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, or any successor law.
26
"Committee" means one or more committees each comprised of not less
than two members of the Board appointed by the Board to administer the Plan or a
specified portion thereof. If the Committee is authorized to grant Options to a
Reporting Person or a Covered Employee, each member shall be a "Non-Employee
Director" or the equivalent within the meaning of Rule 16b-3 under the Exchange
Act or an "outside director" or the equivalent within the meaning of Section
162(m) of the Code, respectively. In the event no such Committee is appointed,
then "Committee" means the Board.
"Common Stock" means the Common Stock, $0.01 par value, of the Company.
"Company" means AutoCyte, Inc., a Delaware corporation.
"Covered Employee" means a person whose income is subject to Section
162(m) of the Code.
"Designated Beneficiary" means the beneficiary designated by a
Participant, in a manner determined by the Committee, to receive amounts due or
exercise rights of the Participant in the event of the Participant's death. In
the absence of an effective designation by a Participant, "Designated
Beneficiary" means the Participant's estate.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, or any successor law.
"Fair Market Value" means, with respect to the Common Stock or any
other property, the fair market value of such property as determined by the
Committee in good faith or in the manner established by the Committee from time
to time.
"Participant" means a person selected by the Committee to receive an
Award under the Plan.
"Reporting Person" means a person subject to Section 16 of the Exchange
Act.
10. MISCELLANEOUS
(a) NO RIGHT TO EMPLOYMENT. No person shall have any claim or right to
be granted an Award. Neither the Plan nor any Award hereunder shall be deemed to
give any employee the right to continued employment or to limit the right of the
Company to discharge any employee at any time.
(b) NO RIGHTS AS STOCKHOLDER. Subject to the provisions of the
applicable Award, no Participant or Designated Beneficiary shall have any rights
as a stockholder with respect to any shares of Common Stock to be distributed
under the Plan until he or she becomes the holder thereof. A Participant to whom
Common Stock is awarded shall be considered the holder of the Stock at the time
of the Award except as otherwise provided in the applicable Award.
(c) EFFECTIVE DATE. The 1996 Equity Incentive Plan became effective on
November 22, 1996. Subject to the approval of the stockholders of the Company,
this Amended and
27
Restated 1996 Equity Incentive Plan will be effective on June 26, 1997. Prior to
such approval, awards may be made under the Plan expressly subject to such
approval.
(d) AMENDMENT OF PLAN. The Board may amend, suspend or terminate the
Plan or any portion thereof at any time, subject to such stockholder approval as
the Board determines to be necessary or advisable to comply with any tax or
regulatory requirement.
(e) GOVERNING LAW. The provisions of the Plan shall be governed by and
interpreted in accordance with the laws of Delaware.
-----------------------------------------
28
(FRONT OF PROXY CARD)
AUTOCYTE, INC.
780 PLANTATION DRIVE
BURLINGTON, NORTH CAROLINA 27215
(336) 222-9707
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS
MAY 26, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of AutoCyte, Inc. (the "Company") hereby
appoints Richard A. Charpie, Ph.D. and James B. Powell, M.D., and each of them
acting singly, the attorneys and proxies of the undersigned, with full power of
substitution, to vote on behalf of the undersigned all of the shares of capital
stock of the Company that the undersigned is entitled to vote at the Annual
Meeting of Stockholders of the Company to be held Wednesday, May 26, 1999, and
at all adjournments thereof, hereby revoking any proxy heretofore given with
respect to such shares.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
BY THE UNDERSIGNED STOCKHOLDER(S). IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR ALL PROPOSALS. IN THEIR DISCRETION, THE PROXIES ARE ALSO AUTHORIZED
TO VOTE UPON SUCH MATTERS AS MAY PROPERLY COME BEFORE THE MEETING.
MARK HERE FOR ADDRESS CHANGE AND NOTE ON REVERSE [ ]
PLEASE SIGN AND MAIL PROXY TODAY
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE.)
[SEE REVERSE SIDE]
29
(REVERSE OF PROXY CARD)
[X] PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE.
FOR WITHHELD
All nominees For all nominees
1. Proposal to elect directors [ ] [ ]
FOR, except withheld from the following nominee(s):
______________________________________________
Nominees: Richard A. Charpie, Ph.D.
Robert E. Curry, Ph.D.
FOR AGAINST ABSTAIN
2. Proposal to ratify the selection [ ] [ ] [ ]
by the Board of Directors of
Ernst & Young LLP as the
Company's independent public
auditors for the current fiscal
year.
FOR AGAINST ABSTAIN
3. Proposal to amend the Company's [ ] [ ] [ ]
Amended and Restated 1996
Equity Incentive Plan
Signature:___________________________ Date:__________________
Signature:___________________________ Date:__________________
NOTE: Please sign exactly as name appears on stock certificate. 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.