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
Filed by the registrant [x]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e) 2 )
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14(a) - 12
The Quigley Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) filing Proxy Statement, if other than Registrant)
Payment of filing fee (check the appropriate box):
[ ] $125 per Exchange Act Rule 0-11(c) (1) (ii), 14a-6 (i) (1), or
14a-6 (i) (2) or Item 22 (a) (2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6 (I) (3).
[ ] 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:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(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:
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] 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:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement no.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
-2-
THE QUIGLEY CORPORATION
Landmark Building
10 South Clinton Street
P. O. Box 1349
Doylestown, PA 18901
--------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
to be held May 8, 1998
----------------------
TO THE STOCKHOLDERS OF THE QUIGLEY CORPORATION:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of THE QUIGLEY
CORPORATION, a NEVADA Corporation (the "Company") will be held at Aldie
Mansion, 85 Old Dublin Pike, Doylestown, PA 18901 on Friday, May 8, 1998, at
4:00 P.M., local time, for the following purposes:
(i) To elect a Board of Directors to serve for the ensuing year and until
their respective successors have been duly elected and qualified.
(ii) To approve the adoption of the 1997 Stock Option Plan.
(iii)To ratify the appointment of Coopers & Lybrand L.L.P. as independent
auditors for the year ending December 31, 1998.
(iv) To transact such other business as may properly come before the
meeting and any adjournments thereof.
Only stockholders of record at the close of business on March 16, 1998 will be
entitled to notice of and to vote at the Meeting or any adjournment thereof.
Any stockholder may revoke a proxy at any time prior to its exercise by filing
a later-dated proxy, or a written notice of revocation with the Secretary of
the Company, or by voting in person at the meeting. If a stockholder is not
attending the meeting, any proxy or notice should be returned in time for
receipt no later that the close of business on the day preceding the meeting.
DUE TO LIMITED SEATING CAPACITY, ADMISSION WILL BE LIMITED TO ONE (1) SEAT PER
STOCKHOLDER OF RECORD. IF YOUR SHARES ARE HELD BY A BANK OR BROKER, YOU MUST
BRING TO THE MEETING YOUR BANK OR BROKER'S STATEMENT EVIDENCING YOUR BENEFICIAL
OWNERSHIP OF THE QUIGLEY CORPORATION STOCK.
By Order of the Board of Directors
/S/ ERIC H. KAYTES
------------------
ERIC H. KAYTES, Secretary
Doylestown, PA
April 8, 1998
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, YOU ARE URGED TO FILL
IN, DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED , WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
THE QUIGLEY CORPORATION
Landmark Building
10 South Clinton Street
P. O. Box 1349
Doylestown, PA 18901
--------------------
PROXY STATEMENT
---------------
April 8, 1998
This proxy statement is furnished in connection with the solicitation of
proxies by the Board of Directors of The Quigley Corporation, (the "Company")
for use at the Annual Meeting of Stockholders of the Company to be held at
Aldie Mansion, 85 Old Dublin Pike, Doylestown, PA 18901, on Friday, May 8, 1998
at 4.00 P.M., local time, and any adjournments thereof (the "Meeting").
The principal executive offices of the Company are located at the Landmark
Building, 10 South Clinton Street, P.O. Box 1349, Doylestown, Pennsylvania
18901. The approximate date on which this Proxy Statement and the accompanying
Proxy will first be sent or given to stockholders is April 8, 1998.
At the Meeting, the following proposals will be presented to the Stockholders
for approval:
(i) To elect a Board of Directors to serve for the ensuing year and until
their respective successors have been duly elected and qualified.
(ii) To approve the adoption of the 1997 Stock Option Plan.
(iii)To ratify the appointment of Coopers & Lybrand L.L.P. as independent
auditors for the year ending December 31, 1998.
(iv) To transact such other business as may properly come before the
meeting and any adjournments thereof.
DUE TO LIMITED SEATING CAPACITY, ADMISSION WILL BE LIMITED TO ONE (1) SEAT PER
STOCKHOLDER OF RECORD. IF YOUR SHARES ARE HELD BY A BANK OR BROKER, YOU MUST
BRING TO THE MEETING YOUR BANK OR BROKER'S STATEMENT EVIDENCING YOUR BENEFICIAL
OWNERSHIP OF THE QUIGLEY CORPORATION STOCK.
RECORD AND VOTING SECURITIES
----------------------------
Only stockholders of record at the close of business on March 16, 1998 will be
entitled to notice of and to vote at the Meeting. At the close of business on
such record date, the Company had 13,427,996 shares of Common Stock, par value
$.0005 per share (the "Common Stock") outstanding and entitled to vote at the
Meeting. Each outstanding share of Common Stock is entitled to one vote. There
was no other class of voting securities of the Company outstanding on the
Record Date. A majority of the outstanding shares of Common Stock present in
person or by Proxy is required for a quorum.
PROXIES AND VOTING RIGHTS
-------------------------
Shares of Common Stock represented by Proxies that are properly executed, duly
returned and not revoked will be voted in accordance with the instructions
contained therein. If no instructions are contained in a Proxy, the shares of
Common Stock represented thereby will be voted (i) for election as directors of
the persons who have been nominated by the Board of Directors, (ii) for
approval of the Company's 1997 Stock Option Plan, (iii) for ratification of the
appointment of Coopers & Lybrand L.L.P. as the Company's independent auditors
for the year ending December 31, 1998, and (iv) upon any other matter that may
properly be brought before the Meeting, in accordance with the judgment of the
person or persons voting the Proxy. The execution of a Proxy will in no way
affect a stockholder's right to attend the Meeting and to vote in person. Any
Proxy executed and returned by a stockholder may be revoked at any time
thereafter by written notice of revocation given to the Secretary of the
Company prior to the vote to be taken at the Meeting, by execution of a
subsequent Proxy that is presented at the Meeting, or by voting in person at
the Meeting, in any such case, except as to any matter or matters upon which a
vote shall have been cast pursuant to the authority conferred by such Proxy
prior to such revocation. Broker "non-votes" and the shares as to which a
stockholder abstains are included for purposes of determining whether a quorum
of shares is present at a meeting. A broker "non-vote" occurs when a nominee
holding shares for a beneficial owner does not vote on a particular proposal
because the nominee does not have discretionary voting power with respect to
that item and has not received instructions from the beneficial owner. Broker
"non-votes" are not included in the tabulation of the voting results on the
election of directors or issues requiring approval of a majority of the votes
cast and, therefore, do not have the effect of votes in opposition in such
tabulations. Proxies marked as abstaining with respect to the proposals to
adopt the 1997 Stock Option Plan and to ratify the appointment of independent
auditors will have no on the vote for such proposals except, the extent the
number of abstentions causes the number of shares voted for the proposals not
to exceed a majority of the quorum required for the Meeting.
ANNUAL REPORT PROVIDED WITH PROXY STATEMENT
-------------------------------------------
The Company's Annual Report containing audited financial statements of the
Company for the year ended December 31, 1997, are being mailed together with
this proxy statement to all stockholders entitled to vote.
SECURITY OWNERSHIP
------------------
The following table sets forth information concerning ownership of the
Company's Common Stock as of March 16, 1998 by each person known by the Company
to be the beneficial owner of more than five percent of the Common Stock, each
director and executive officer and by all directors and executive officers of
the Company as a group. Unless otherwise indicated, the address of each person
or entity listed below is the Company's principal executive office.
Five percent stockholders, directors, Common Stock
and all executive officers Beneficially Percent of
and Directors as a group Owned (1) (2) Class
----------------------------------------------------------------------------
GUY J. QUIGLEY (3) (4) (5) 3,801,854 26.1
CHARLES A. PHILLIPS (3) (4) (6) 1,482,992 10.6
GEORGE J. LONGO (3) (4) (7) 125,000 .9
ERIC H. KAYTES (3) (4) (8) 402,992 3.0
GURNEY P. SLOAN, JR., ESQUIRE (3) (9) 500 -
JACQUELINE F. LEWIS (3) (10) - -
ALL DIRECTORS AND OFFICERS (11) 5,813,338 37.6
(Six Persons)
William J. Reilly, Esquire (12) 824,033 6.1
(1) Common Stock was split on a two-for-one basis for stockholders of record
on January 15, 1997.
(2) Beneficial ownership has been determined in accordance with Rule 13d-3
under the Exchange Act ("Rule 13d-3") and unless otherwise indicated,
represents shares for which the beneficial owner has sole voting and
investment power. The percentage of class is calculated in accordance with
Rule 13d-3 and includes options of other rights to subscribe which are
exercisable within sixty (60) days of March 16, 1998.
-2-
(3) Director of the Company
(4) Officer of the Company
(5) Mr. Quigley's beneficial ownership includes warrants exercisable within
sixty (60) days from March 16, 1998, to purchase 715,000 shares of Common
Stock, 400,000 warrants beneficially owned by Mr. Quigley's wife and an
aggregate of 380,000 shares beneficially owned by members of Mr. Quigley's
immediate family.
(6) Mr. Phillip's beneficial ownership includes warrants exercisable within
sixty (60) days from March 16, 1998, to purchase 610,000 shares of Common
Stock.
(7) Mr. Longo's beneficial ownership includes warrants exercisable within
sixty (60) days from March 16, 1998, to purchase 125,000 shares of Common
Stock.
(8) Mr. Kaytes's beneficial ownership includes warrants exercisable within
sixty (60) days from March 16, 1998, to purchase 170,000 shares of Common
Stock.
(9) Mr. Sloan's address is 610 Lewis Drive, Suite 303, Warminister, PA 18974.
(10) Ms. Lewis's address is 3805 Old Easton Road, Doylestown, PA 18901.
(11) There are 2,020,000 shares of common stock underlying these unexercised
warrants.
(12) Mr. Reilly's beneficial ownership includes warrants exercisable within
sixty (60) days from March 16, 1998, to purchase 125,000 shares of Common
Stock, and an aggregate of 225,000 shares beneficially owned by members of
Mr. Reilly's immediate family, or trusts controlled by an immediate family
member. Mr. Reilly's address is 396 Broadway, Suite 1001, New York, NY
10013.
COMPENSATION AND OTHER INFORMATION
CONCERNING DIRECTORS AND OFFICERS
---------------------------------
Executive Compensation
- ----------------------
The following table provides summary information concerning cash and certain
other compensation paid or accrued by the Company to or on behalf of the
Company's Chief Executive Officer and each of the other most highly compensated
executive officers of the Company whose compensation exceeded $100,000 during
the year ended December 31, 1997, three months ended December 31, 1996 (5), and
years ended September 30, 1996 and 1995:
SUMMARY COMPENSATION TABLE
--------------------------
Annual Compensation Long-Term Compensation
-------------------------------- ---------------------------------------
Other Annual Restricted
Name and Principal Position Salary Bonus Compensation Stock Options All Other
Year (1) (2) (3) Award (4) Compensation
$ $ $ $ $ $
- ------------------------------ ---------- --------- --------- ------------ ----------- ---------- ------------
Guy J. Quigley 1997 250,000 437,500 2,546,262 240,000
Chairman of the 1996 (5) 21,450 121,931 75,000
Board, President, 1996 125,000 500,000
Chief Executive Officer 1995 62,400
Charles A. Phillips 1997 175,000 306,250 847,990 185,000
Executive Vice 1996 (5) 21,450 40,644 75,000
President, Chief 1996 85,000 450,000
Operating Officer 1995 38,050
George J. Longo 1997 150,000 262,500 200,000
Vice President, 1996 (5) 50,000
Chief Financial Officer 1996
1995
Eric H. Kaytes 1997 100,000 175,000 135,000
Vice President, MIS, 1996 (5) 11,532 25,000
Secretary-Treasurer, 1996 11,300 110,000
Chief Information Officer 1995
-3-
(1) Compensation paid pursuant to employee agreements.
(2) Bonus's paid pursuant to the Company attaining specified sales and
net income goals.
(3) Additional payments, including founder's royalties at 3.75% of sales
less certain deductions for Mr. Quigley, and founder's royalties at
1.25% of sales less certain deductions for Mr. Phillips.
(4) Includes options issued pursuant to the 1997 Stock Option Plan in
amounts of 100,000, 100,000, 125,000 and 100,000 for Messrs. Quigley,
Phillips, Longo, and Kaytes, respectively. Such options are subject
to stockholder approval of the 1997 Stock Option Plan.
(5) Represents interim three month period ended December 31, 1996.
(6) The value of personal benefits for the executive officers of the
Company during 1997 that might be attributable to management as
executive fringe benefits, such as vehicles can not be specifically
or precisely determined; however, it would not exceed the lesser of
$50,000 or 10% of the total annual salary and bonus reported for any
individual named above.
Compensation Pursuant to Plans
- ------------------------------
The Company maintains neither a pension nor a profit-sharing plan. In November
1994, the Company established an Incentive Stock Option Plan for Employees,
Consultants and Advisors, however no Options pursuant to such Plan have been
granted to Directors or Executive Officers.
Other Compensation
- ------------------
The Company, since its inception, has granted to its Officers, Directors and
Employees, Common Stock Purchase Warrants as additional non-cash compensation.
As of December 31, 1997, Officers and Directors of the Company have been issued
an aggregate of 2,020,000 warrants and options to purchase shares of the
Company's Common Stock at various exercise prices. The following table sets
forth certain information regarding (i) warrants and stock option grants made
to officers of the Company during the year ended December 31, 1997 and (ii)
unexercised warrants and stock options held by officers of the Company as of
December 31, 1997. No warrants or stock options were exercised by such officers
during the year ended December 31, 1997.
OPTION GRANTS IN 1997 AND 1997 YEAR END OPTION VALUES
-----------------------------------------------------
Value of
Percent of Unexercised
Number of Total Options Number of In-the Money
Securities Granted to Securities Options at
Name Underlying Employees Underlying Exercise Year End
Options in Fiscal Unexercised or Base $14.71875
Granted (1) Year Options Price ($) per share ($)
- ------------------------------------------------------------------------------------------------------
Guy J. Quigley 240,000 28.4 100,000 (1) -
140,000 10.00 (2) 660,625
75,000 2.50 (3) 916,406
300,000 1.75 (4) 3,890,625
200,000 .50 (5) 2,843,750
Charles A. Phillips 185,000 21.9 100,000 (1) -
85,000 10.00 (2) 401,094
75,000 2.50 (3) 916,406
300,000 1.75 (4) 3,890,625
150,000 .50 (5) 2,132,812
George J. Longo 200,000 23.7 125,000 (1) -
75,000 10.00 (2) 353,906
50,000 2.50 (3) 610,938
Eric H. Kaytes 135,000 16.0 100,000 (1) -
35,000 10.00 (2) 165,156
25,000 2.50 (3) 305,469
50,000 1.75 (4) 648,438
60,000 .50 (5) 853,125
-4-
(1) Options are exercisable at $17.50 per share for incentive stock options,
and $15.00 per share for non-qualified stock options granted on December
2, 1997. These options are subject to stockholder approval of the 1997
Stock Option Plan.
(2) Warrants granted May 1997, and expires May 2002.
(3) Warrants granted November 1996, and expires November 2001.
(4) Warrants granted July 1996, and expires June 2001.
(5) Warrants granted December 1995, and expires December 2000.
Royalty and Employment Agreements
- ---------------------------------
The Cold-Eeze(R) product is manufactured for the Company by an independent
manufacturer and marketed by the Company in accordance with the terms of the
licensing agreement (between the Company and Godfrey Science & Design, Inc. and
John C. Godfrey, Ph.D; hereinafter "Dr. Godfrey"). The contract is assignable
by the Company with Dr. Godfrey's consent. Throughout the duration of the
agreement Dr. Godfrey is to receive a three percent (3%) royalty on the gross
sales of the Company's Cold-Eeze(R) lozenge following the receipt by the
Company of payment upon such sales, less certain deductions.
A separate consulting agreement between the parties referred to directly above
was similarly entered into on May 4, 1992 whereby Dr. John C. Godfrey and Dr.
Nancy J. Godfrey are to receive a consulting fee of two percent (2%) of gross
sales of the lozenge by the Company, less certain deductions, for their
consulting services to the Company with respect to such product.
Pursuant to the license agreement entered into between the Company and George
Eby Research, the Company pays a royalty fee. Throughout the duration of the
agreement, George Eby of George Eby Research, is to receive a three percent
(3%) royalty on the gross sales of the Company's Cold-Eeze(R) lozenge following
the receipt by the Company of payment upon such sales, less certain deductions.
An employment agreement between the Company and Guy J. Quigley was entered into
on June 1, 1995, whereby Guy J. Quigley is employed as the Chief Executive
Officer of the Company for a term ending on May 31, 2005. In addition to
compensation for services as an officer of the Company, Mr. Quigley is entitled
to receive a royalty of five percent (5%) of gross sales of the Company's
Cold-Eeze(R) lozenge following the receipt by the Company of payment upon such
sales, less certain deductions, for the term of said agreement. Upon the
termination of the contract for any reason, Mr. Quigley is entitled to the
remainder of his compensation owed him through May 31, 2005.
An employment agreement between the Company and Charles A. Phillips was entered
into on June 1, 1995, whereby Charles A. Phillips is employed as the Executive
Vice President and Chief Operating Officer of the Company for a term ending on
May 31, 2005. In addition to compensation for services as an officer of the
Company, Mr. Phillips is entitled to receive twenty five percent (25%) of the
royalty received by Guy J. Quigley, either directly from Guy J. Quigley or, if
requested, directly from the Company. Should Mr. Phillips make such a request
upon the Company, the amount owed to him would be deducted from any royalties
due Guy J. Quigley. Upon the termination of the contract for any reason, Mr.
Phillips is entitled to the remainder of his compensation owed him through May
31, 2005.
George J. Longo is employed as the Chief Financial Officer of the Company
pursuant to an employment agreement dated November 5, 1996, for a term ending
on December 31, 2001. The agreement provides for a base salary of $150,000, or
such greater amount, as the Board of Directors may from time to time determine,
with annual increases over the prior year's base salary. In the event of his
disability, Mr. Longo is to receive the full amount of his base salary for
eighteen months. Upon a change of control of the Company, Mr. Longo is entitled
to receive severance compensation equal to forty-eight months of his
compensation. Upon early termination by the Company without cause (as defined
in the agreement), the Company is required to pay Mr. Longo the remainder of
the salary owed him through December 31, 2001.
The Company entered into an employment agreement dated as of January 1, 1997,
with Eric H. Kaytes on terms substantially similar to those of George J.
Longo's employment agreement for a term ending on December 31, 2001.
-5-
Mr. Kaytes's agreement provides for his employment by the Company as its Chief
Information Officer at a base salary of $100,000, or such greater amount, as
the Board of Directors may from time to time determine, with annual increases
over the prior year's base salary. Mr. Kaytes is entitled to receive severance
compensation equal to twelve months of his compensation upon a change of
control of the Company. Upon early termination by the Company without cause (as
defined in the agreement), the Company is required to pay Mr. Kaytes the
remainder of the salary owed him through December 31, 2001.
REPORTS ABOUT OWNERSHIP OF THE COMPANY'S COMMON STOCK AND COMPLIANCE WITH
SECTION 16 (a) OF THE SECURITIES AND EXCHANGE ACT OF 1934
---------------------------------------------------------
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the
Company's officers and directors, and persons who own more than ten percent of
a registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities Exchange Commission (the
"Commission"). Officers, directors and greater than ten-percent stockholders
are required by the Commission's regulations to furnish the Company with copies
of all Section 16(a) forms they file.
Each of Messrs. Quigley, Phillips, Longo and Kaytes failed to file on a timely
basis an annual statement of changes in beneficial ownership of securities for
fiscal 1997 as required by Section 16(a). Each of such persons have
subsequently reported all reportable transactions to the Commission on a Form
5. In addition, Mr. Sloan and Ms. Lewis failed to file on a timely basis an
initial statement of beneficial ownership within ten days of being elected as
directors of the Company in December 1997. Each of such individuals have
subsequently filed a Form 3 with the Commission indicating that they hold 500,
and zero shares respectively, of the Company's Common Stock and no options to
purchase shares of the Company's Common Stock.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------
For the year ended December 31, 1997, three months ended December 31, 1996 and
year ended September 30, 1996, $3,394,252, $162,575, and $0, respectively, were
made as payments under royalty agreements between the Company and Guy J.
Quigley and Charles A. Phillips, who share a royalty of 5% of gross sales after
certain adjustments. Compensated legal services to William J. Reilly, Esquire,
a principal security holder, amounted to $25,000, $35,000 and $263,500,
respectively.
PROPOSALS TO BE SUBMITTED FOR STOCKHOLDER APPROVAL
--------------------------------------------------
Proposal 1. ELECTION OF A BOARD OF DIRECTORS
The Directors of the Company are elected annually and hold office for the
ensuing year until the next annual meeting of stockholders and until their
successors have been elected and qualified. The directors are elected by
plurality of votes cast by stockholders. The Company's by-laws state that the
number of directors constituting the entire Board of Directors shall be
determined by resolution of the Board of Directors. The number of directors
currently fixed by the Board of Directors is six. This number may be changed by
resolution of the Board of Directors.
No proxy may be voted for more people than the number of nominees listed below.
Shares represented by all proxies received by the Board of Directors and not so
marked as to withhold authority to vote for any individual director (by writing
that individual director's name where indicated on the proxy) or for all
directors will be voted "FOR" the election of all the nominees named below
(unless one or more nominees are unable or unwilling to serve). The Board of
Directors knows of no reason why any such nominee would be unable or unwilling
to serve, but if such should be the case, proxies may be voted for the election
of some other person.
-6-
The following table and the paragraphs following the table sets forth
information regarding the current ages, terms of office and business experience
of the current directors of the Company, all of whom are being nominated for
re-election:
Year
First
Name Position Age Elected
- ------------------------------ ------------------------- --- -------
Guy J. Quigley (1) Chairman of the Board,
President, CEO 56 1989
Charles A. Phillips* (1) Executive Vice President,
COO and Director 50 1989
George J. Longo Vice President, CFO and
Director 51 1997
Eric H. Kaytes Vice President, CIO and
Director 43 1989
Gurney P. Sloan, Jr., Esquire* Director 66 1997
Jacqueline F. Lewis* Director 52 1997
* Member of the audit
committee
(1) Member of the compensation committee
GUY J. QUIGLEY has been Chairman of the Board, President, and Chief Executive
Officer of the Company since September 1989. Prior to this date, Mr. Quigley,
an accomplished author, established and operated various manufacturing, sales,
marketing and real estate companies in the United States, Europe and the
African Continent.
CHARLES A. PHILLIPS has been Vice President, Chief Operations Officer and a
Director of the Company since September 1989. Before his employment with the
Company, Mr. Phillips founded and operated KEB Enterprises, a gold and diamond
mining operation that was based in Sierra Leone, West Africa. In addition, Mr.
Phillips, also served as a technical consultant for Re-Tech, Inc., Horsham,
Pennsylvania, where he was responsible for full marketing and production of a
prototype electrical device.
GEORGE J. LONGO currently serves as Vice President, Chief Financial Officer and
Director. Mr. Longo assumed his duties as Vice President and Chief Financial
Officer for the Company in January 1997. Mr. Longo was also appointed as a
Director of the Company in March 1997. Before joining the Company, Mr. Longo
served as Chief Financial Officer of two privately held international
manufacturing firms and Manager of Corporate Accounting with the predecessor
pharmaceutical company to Rhone-Poulenc, Inc. (NYSE-RP), being responsible for
SEC and IRS compliance, and was involved in acquisition and general accounting
issues. Prior to that, Mr. Longo was with KPMG Peat Marwick.
ERIC H. KAYTES currently serves as Vice President and Chief Information
Officer, Secretary, Treasurer and Director of the Company. From 1989 until
January 1997, Mr. Kaytes also served as the Chief Financial Officer of the
Company. Prior to 1989 and concurrent with his responsibilities for the
Company, Mr. Kaytes had been an independent programmer and designer of computer
software.
GURNEY P. SLOAN, JR., ESQUIRE, appointed to the Board of Directors in December
1997, is presently an attorney, executive, trustee, and investor. From 1966
until the end of 1997, Mr. Sloan's law practice, a professional corporation,
had been engaged in, both independently and in association or partnership, with
various prestigious Philadelphia law firms, for the practice of securities and
corporate law, with particular interest in new ventures. Presently, and since
1984, Mr. Sloan serves as director for Rorer Asset Management, and investment
advisor, with $3 billion under management. Prior to the practice of law, Mr.
Sloan's experience included serving as Vice-President, Marketing with the
predecessor pharmaceutical company to Rhone-Poulenc, Inc. (NYSE-RP).
JACQUELINE F. LEWIS, appointed to the Board of Directors in December 1997 is
presently Vice President and Chief Operating Officer of D. A. Lewis, Inc., a
direct mail advertising company that she co-founded in 1976. D. A. Lewis now
employs 250 people. Ms. Lewis has also served on the Board of Directors of
Suburban Community Bank since 1993.
-7-
Meetings and Committees of the Board of Directors
- -------------------------------------------------
For the fiscal year ended December 31, 1997, there were fifteen meetings of the
Board of Directors. In addition, members of the Board of Directors consulted
regularly with each other and from time to time acted by unanimous written
consent pursuant to the laws of the State of Nevada. The Board of Directors has
established two standing committees described below. No meetings of the Audit
Committee or Executive Operating Committee were held during the fiscal year
ended December 31, 1997. The Compensation Committee, which was previously
established, held two meetings during the fiscal year ended December 31, 1997.
Prior to establishing the Audit Committee and Executive Operating Committee,
the customary functions of such committees had been performed by the entire
Board of Directors. The Board of Directors does not presently have a standing
nominating committee, the customary functions of such committee being performed
by the entire Board of Directors.
The members of the Audit Committee are Messrs. Phillips, Sloan and Ms. Lewis.
The Audit Committee reviews, analyzes and makes recommendations to the Board of
Directors with respect to the Company's accounting policies, controls and
statements, consults with the Company's independent public accountants, reviews
filings containing financial information of the Company to be made with the
Securities and Exchange Commission and reviews for approval proposed
transactions in the Company's securities by officers, directors and employees
of the Company in light of applicable statutes, rules and regulations.
The members of the Executive Operating Committee are Messrs. Quigley, Phillips,
Longo, and Kaytes. The Executive Operating Committee possesses and exercises
all the power and authority of the Board of Directors in the management and
direction of the business and affairs of the Company except as limited by law
and except for the power to change the membership or to fill vacancies on the
Board of Directors or the Executive Operating Committee.
The members of the Compensation Committee are Messrs. Quigley and Phillips. The
Compensation Committee reviews and approves the salary and other compensation
of officers and employees of the Company, including non-cash benefits, and
designates the employees entitled to participate in the Company's benefits
plans and other arrangements, as from time to time constituted. The
Compensation Committee also administers the Company's Stock Option Plans,
together with the Board of Directors, and determines the terms of grants of
stock options and the persons to whom such options shall be granted in
accordance with such plans.
Compensation of Directors
- -------------------------
Outside directors receive compensation at the rate of $1,500 per meeting.
Outside directors that serve on the audit committee receive an additional $500
per meeting. Officers of the Company receive no compensation for their service
on the Board or on any Committee.
Required Vote
- -------------
Directors are elected by a plurality of the votes cast, in person or by proxy,
at the Meeting. Votes withheld and broker non-votes are not counted toward a
nominee's total.
Recommendation of the Board of Directors
- ----------------------------------------
The Board of Directors of the Company recommends a vote "FOR" the election of
each of the nominees.
Proposal 2. APPROVAL OF THE ADOPTION OF THE 1997 STOCK OPTION PLAN
On December 2, 1997, the Board of Directors has unanimously approved for
submission to a vote of stockholders a proposal to approve the 1997 Stock
Option Plan (the "1997 Plan") set forth in Appendix A to this proxy statement.
The following discussion of the 1997 Stock Option Plan is qualified in its
entirety by reference to Appendix A.
-8-
The purpose of the 1997 Plan is to provide additional incentive to the
officers, directors, and employees of the Company who are primarily responsible
for the management and growth of the Company, in order to strengthen their
desire to remain in the employ or retention of the Company and to stimulate
their efforts on behalf of the Company, and to retain and attract to the employ
of the Company persons of competence. The 1997 Plan provides for the grant of
both "incentive stock options" and "nonqualified stock options". Any employee
shall be eligible to receive incentive stock options or nonqualified stock
options. Directors of the Company who are not employees shall be eligible to
receive nonqualified stock options.
Administration
- --------------
The Plan shall be administered by the Compensation Committee (the "Committee").
Replacements to the Committee shall be appointed by the Board of Directors of
the Company ("Board"). The members shall serve at the pleasure of the Board.
Notwithstanding the foregoing, with respect to any options granted to directors
and "officers" (as such term is defined in Rule 16a-1 of the Securities and
Exchange Commission ("Rule 16a-1"), if and as "Rule 16b-3 is then in effect) of
the Company, the Plan shall be administered by the entire Board, unless the
Committee at the time of grant, award or other acquisition under the Plan of
Options to any such person consists of two or more directors of the Company
that are "Non-Employee Directors" (as such term is defined in Rule 16b-3 of the
Securities and Exchange Commission ("Rule 16b-3"), if and as Rule 16b-3 is then
in effect). In addition, any options granted to the Company"s Chief Executive
Officer or to any of the Company's other four most highly compensated officers
that are intended to qualify as performance-based compensation under Section
162 (m) of the Code may only be granted by a Committee consisting of two or
more directors of the Company that are "Outside Directors" (as such term is
defined in Section 162 (m) of the Code).
Common Stock Subject to the 1997 Plan
- -------------------------------------
The 1997 Plan currently authorizes the issuance of a maximum of 1,500,000
shares of Common Stock. The maximum number of shares that may be subject to
options granted under the 1997 Plan to any individual in any calendar year may
not exceed 500,000, and the method of counting such shares shall conform to any
requirements applicable to "performance-based" compensation under Section 162
(m) of the Code. If any option under the 1997 Plan shall expire or terminate
for any reason, without having been exercised in full, the unpurchased shares
subject thereto shall again be available for the purposes of the 1997 Plan.
Options to purchase an aggregate of 500,000 shares of Common Stock were granted
by the Board in December 1997 and January 1998 under the 1997 Plan. Of such
options, (i) Guy J. Quigley was granted an option to purchase an aggregate of
100,000 shares, (ii) Charles A. Phillips was granted an option to purchase an
aggregate of 100,000 shares, (iii) George J. Longo was granted an option to
purchase an aggregate of 125,000 shares, and (iv) Eric H. Kaytes was granted an
option to purchase an aggregate of 100,000 shares. All of such options are
subject to and conditioned upon stockholder approval of the 1997 Plan. The 1997
Plan will become effective upon such approval.
Exercise Price and Terms
- ------------------------
The option price per share applicable to options granted under the 1997 Plan
shall be determined by the Committee, but (i) as to an incentive stock option
shall not be less than 100% of the fair market value per share of Common Stock
on the date such option is granted and (ii) as to a non-qualified stock option,
shall not be less than 80% of the fair market value on the date such option is
granted. If an option granted to the Company's Chief Executive Officer or to
any of the Company's other four most highly compensated officers is intended to
qualify as "performance-based" compensation under Section 162 (m) of the Code,
the exercise price of such option shall not be less than 100% of the fair
market value on the date such option is granted. The Committee shall fix the
term of each option, provided that the maximum length of the term of each
option granted under the 1997 Plan shall be ten years.
-9-
Federal Income Tax Consequences
- -------------------------------
Incentive Stock Options. Incentive stock options granted under the 1997 Plan
are intended to be "incentive stock options" within the meaning of Section 422
of the Code. Under present law, the grantee of an incentive stock option will
not realize taxable income upon the grant or the exercise of the incentive
stock option and the Company will not receive an income tax deduction at either
such time. However, if the incentive stock option is exercised more than three
(3) months after the optionee has left the employ of the Company, the optionee
will recognize taxable income equal to the difference between the fair market
value of the Common Stock at the time of exercise and the sum of the optionee's
basis in the option (if any) plus any consideration paid by the optionee upon
such exercise. Generally, if the optionee was an employee of the Company at any
time during the period beginning on the date the option is granted and ending
on the date three (3) months before the date such option is exercised and the
optionee does not sell the Common Stock acquired upon exercise of an incentive
stock option within either (i) two years after the grant of the incentive stock
option or (ii) one year after the date of exercise of the incentive stock
option, the gain upon a subsequent sale of the Common Stock will be taxed as
long-term capital gain. If the optionee, within either of the above periods,
disposes of the Common Stock acquired upon exercise of the incentive stock
option ( a "disqualifying disposition"), the optionee must recognize as
compensation income, the gain upon such disposition. Generally, the gain would
be equal to the difference between the option's exercise price and the Common
Stock's fair market value at the time of exercise. This compensation income
will be added to the option's basis for purposes of determining the capital
gain, as discussed below, on the disposition of the acquired Common Stock. If
the price that the optionee received on the disqualifying dispositions of the
Common Stock would result in a loss to the optionee if the foregoing tax rule
regarding disqualifying dispositions were applied, then the amount of
compensation income that the optionee would recognize would be the excess, if
any, of the amount realized on the sale over the basis of the acquired Common
Stock. In such event, the Company would be entitled to a corresponding income
tax deduction equal to the amount recognized as compensation income by the
optionee. The gain in excess of such amount recognized by the optionee as
compensation income would be taxed as long-term capital gain or short-term
capital gain (subject to the holding period requirements for long-term or
short-term capital gain treatment).
The exercise of an incentive stock option will generally result in the excess
of the Common Stock's fair market value on the date of exercise over the
exercise price being included in the optionee's alternative minimum taxable
income ("AMTI"). If, however, a disqualifying disposition occurs in the year in
which the option is exercised, the maximum amount that will be included in AMTI
is the gain on the disposition of the Common Stock. Should there be a
disqualifying disposition in a year other that the year of exercise, the income
resulting from the disqualifying disposition will not be considered income for
alternative minimum tax purposes. In addition, the basis of the Common Stock
for determining gain or loss for alternative minimum tax purposes will be the
exercise price for the Common Stock increased by the amount that AMTI was
increased due to the earlier exercise of the Common Stock. Liability for the
alternative minimum tax is a complex determination and depends upon an
individual's overall tax situation. Before exercising an incentive stock
option, an optionee should discuss the possible application of the alternative
minimum tax with his tax advisor.
Non-Qualified Stock Options. Upon exercise of a non-qualified stock option
granted under the Plan, the optionee will recognize ordinary income in an
amount equal to the excess of the fair market value of the Common Stock
received over the exercise price of such Common Stock. That amount will
increase the optionee's basis in the Common Stock acquired pursuant to the
exercise of the option. Upon a subsequent sale of the Common Stock, the
optionee will recognize short term or long term gain or loss depending upon his
holding period for the Common Stock and upon the subsequent appreciation or
depreciation in the market value of the Common Stock. The Company will be
allowed an income tax deduction for the amount recognized as compensation
income by the optionee upon the optionee's exercise of the option.
-10-
NEW PLAN BENEFITS (1)
1997 STOCK OPTION PLAN (2)
Name and Position Dollar Value Number of Units
------------------------------------- ------------ ---------------
Guy J. Quigley
Chairman of the Board,
President, Chief Executive Officer N/D 100,000
Executive Group N/D 425,000
Non-Executive Director Group N/D -
Non-Executive Employee Group N/D 75,000
(1) N/D means that the amount is not determinable.
(2) As benefits are not determinable pursuant to Instruction 3 of Item 10
of Regulation Section 240.14a-101 of the Exchange Act, benefits
stated are the number of shares covered by options granted to each of
the groups of employees under the 1997 Plan. Such grants are subject
to stockholder approval of the 1997 Plan. The future value, if any,
is not determinable.
Required Vote
- -------------
The affirmative vote of the holders of a majority of the shares of Common Stock
present, in person or by Proxy, is required to approve the 1997 Plan. An
abstention, withholding of authority to vote or broker non-vote, therefore,
will not have the same legal effect as an "against" vote and will not be
counted in determining whether the proposal has received the requisite
stockholder vote.
Recommendation of the Board of Directors
- ----------------------------------------
The Board of Directors of the Company recommends a vote "FOR" the approval of
the 1997 Plan.
Proposal 3. RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed Coopers & Lybrand L.L.P. as the Company's
independent public auditor for the fiscal year ending December 31, 1998.
Although the selection of auditors does not require ratification, the Board of
Directors has directed that the appointment of Coopers & Lybrand L.L.P. be
submitted to stockholders for ratification due to the significance of their
appointment to the Company. A representative of Coopers & Lybrand L.L.P. is
expected to be present at the Meeting. Such representative will have an
opportunity to make a statement if he or she desires to do so and will be
available to respond to appropriate questions from stockholders.
Required Vote
- -------------
The affirmative vote of the holders of a majority of the shares of Common Stock
present, in person or by Proxy is required for ratification of the appointment
of Coopers & Lybrand L.L.P. as independent auditors of the Company. An
abstention, withholding of authority to vote or broker non-vote, therefore,
will not have the same legal effect as an "against" vote and will not be
counted in determining whether the proposal has received the requisite
stockholder vote.
Recommendation of the Board of Directors
- ----------------------------------------
The Board of Directors of the Company recommends a vote "FOR" the ratification
of the appointment of Coopers & Lybrand L.L.P. as the Company's independent
public auditors for the fiscal year ending December 31, 1998.
-11-
STOCKHOLDER PROPOSALS
---------------------
Proposals of stockholders intended for inclusion in the proxy statement to be
furnished to all stockholders entitled to vote at the next annual meeting of
stockholders of the Company must be received at the Company's principal
executive offices not later than December 9, 1998. In order to curtail
controversy as to the date on which a proposal was received by the Company, it
is suggested that proponents submit their proposals by Certified Mail - Return
Receipt Requested.
EXPENSES AND SOLICITATION
-------------------------
The cost of solicitation of proxies will be borne by the Company, and in
addition soliciting stockholders by mail through its regular employees, the
Company may request banks, brokers and other custodians, nominees and
fiduciaries to solicit their customers who have stock of the Company registered
in the names of a nominee and, if so, will reimburse such banks, brokers and
other custodians, nominees and fiduciaries for their reasonable out-of-pocket
costs. Solicitation by officers and employees of the Company may also be made
of some stockholders in person or by mail, telephone or telegraph following the
original solicitation.
OTHER BUSINESS
--------------
The Board of Directors knows of no business that will be presented for
consideration at the Meeting other than those items stated above. If any other
business should come before the Meeting, votes may be cast, pursuant to
proxies, in respect to any such business in the best judgment of the person or
persons acting under the proxies.
Dated: April 8, 1998 THE QUIGLEY CORPORATION
By: /s/ ERIC H. KAYTES
------------------
ERIC H. KAYTES, Secretary
-12-
Appendix A
1997 STOCK OPTION PLAN
OF
THE QUIGLEY CORPORATION
1. Purpose of the Plan.
--------------------
This 1997 Stock Option Plan (the "Plan") is intended as an incentive, to
retain in the employ or as directors, of The Quigley Corporation (the
"Company") and any Subsidiary of the Company (within the meaning of Section
424(f) of the Internal Revenue Code of 1986, as amended (the "Code")), persons
of training, experience and ability, to attract new employees, and directors
whose services are considered valuable, to encourage the sense of
proprietorship and to stimulate the active interest of such persons in the
development and financial success of the Company and its Subsidiaries.
It is further intended that certain options granted pursuant to the Plan
shall constitute incentive stock options within the meaning of Section 422 of
the Code ("Incentive Options") while certain other options granted pursuant to
the Plan shall be nonqualified stock options ("Nonqualified Options").
Incentive Options and the Nonqualified Options are hereinafter referred to
collectively as "Options."
The Company intends that the Plan meet the requirements of Rule 16b-3
("Rule 16b-3") promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") and that transactions of the type specified in
subparagraphs (c) to (f) inclusive of Rule 16b-3 by officers and directors of
the Company pursuant to the Plan will be exempt from the operation of Section
16(b) of the Exchange Act. In all cases, the terms, provisions, conditions and
limitations of the Plan shall be construed and interpreted consistent with the
Company's intent as stated in this Section 1.
2. Administration of the Plan.
---------------------------
The Plan shall be administered by a committee initially consisting of Mr.
Guy J. Quigley, and Mr. Charles A. Phillips (the "Committee"). Replacements on
the Committee shall be appointed by the Board of Directors of the Company (the
"Board"). The members of the Committee shall serve at the pleasure of the
Board. Notwithstanding the foregoing, with respect to any Options granted to
directors and "officers" (as such term is defined in Rule 16a-1 of the
Securities and Exchange Commission ("Rule 16a-1"), if and as Rule 16b-3 is then
in effect) of the Company, the Plan shall be administered by the entire Board,
unless the Committee at the time of grant, award or other acquisition under the
Plan of Options to any such person consists of two or more directors of the
Company that are "Non-Employee Directors" (as such term is defined in Rule
16b-3 of the Securities and Exchange Commission ("Rule 16b-3"), if and as Rule
16b-3 is then in effect).
The Committee, subject to Section 3 hereof, shall have full power and
authority to designate recipients of Options, to determine the terms and
conditions of respective Option agreements (which need not be identical) and to
interpret the provisions and supervise the administration of the Plan. Subject
to Section 7 hereof, the Committee shall have the authority, without
limitation, to designate which Options granted under the Plan shall be
Incentive Options and which shall be Nonqualified Options. To the extent any
Option does not qualify as an Incentive Option, it shall constitute a separate
Nonqualified Option.
Subject to the provisions of the Plan, the Committee shall interpret the
Plan and all Options granted under the Plan shall make such rules as it deems
necessary for the proper administration of the Plan, make all other
determinations necessary or advisable for the administration of the Plan and
correct any defects or supply any omission or reconcile any inconsistency in
the Plan or in any Options granted under the Plan in the manner and to the
extent that the Committee deems desirable to carry the Plan or any Options into
effect. The act or determination of a majority of the Committee shall be deemed
to be the act or determination of the Committee and any decision reduced to
writing and signed by all of the members of the Committee shall be fully
effective as if it had been made by a majority at a meeting duly held. Subject
to the provisions of the Plan, any action taken or determination made by the
Committee pursuant to this and the other paragraphs of the Plan shall be
conclusive on all parties.
In the event that for any reason the Committee is unable to act or if the
Committee at the time of any grant, award or other acquisition under the Plan
of Options or Stock as hereinafter defined does not consist of two or more
Non-Employee Directors, or if there shall be no such Committee, then the Plan
shall be administered by the Board and any such grant, award or other
acquisition may be approved or ratified in any other manner contemplated by
subparagraph (d) of Rule 16b-3.
Notwithstanding anything herein to the contrary, any options granted to
the Company's Chief Executive Officer or to any of the Company's other four
most highly compensation officers that are intended to qualify as
performance-based compensation under Section 162(m) of the Code may only be
granted by a Committee consisting of two or more directors of the Company that
are "Outside Directors" (as such term is defined in Section 162(m) of the
Code).
3. Designation of Optionees.
-------------------------
The persons eligible for participation in the Plan as recipients of
Options ("Optionees") shall include full-time and part-time employees, officers
and directors of the Company or any Subsidiary; provided that Incentive Options
may only be granted to employees of the Company and the Subsidiaries. In
selecting Optionees, and in determining the number of shares to be covered by
each Option granted to Optionees, the Committee may consider the office or
position held by the Optionee, the Optionee's degree of responsibility for and
contribution to the growth and success of the Company or any Subsidiary, the
Optionee's length of service, promotions, potential and any other facts to
which the Committee may consider relevant. Subject to the next sentence, an
employee who has been granted an Option hereunder may be granted an additional
Option or Options, if the Committee shall so determine.
4. Stock Reserved for the Plan.
----------------------------
Subject to adjustment as provided in Section 7 hereof, a total of one
million five hundred thousand (1,500,000) shares of common stock, $.0005 par
value ("Stock"), of the Company shall be subject to the Plan. The shares of
Stock subject to the Plan shall consist of unissued shares or previously issued
shares reacquired and held by the Company or any Subsidiary of the Company, and
such amount of shares of Stock shall be and is hereby reserved for such
purpose. Any of such shares of Stock which may remain unsold and which are not
subject to outstanding Options at the termination of the Plan shall cease to be
reserved for the purpose of the Plan, but until termination of the Plan the
Company shall at all times reserve a sufficient number of shares of Stock to
meet the requirements of the Plan. Should any Option expire or be canceled
prior to its exercise in full or should the number of shares of Stock to be
delivered upon the exercise in full of any Option be reduced for any reason,
the shares of Stock theretofore subject to such Option may again be subject to
an Option under the Plan.
Notwithstanding the foregoing, with respect to any options that are
intended to qualify as performance-based compensation under Section 162(m) of
the Code, the maximum number of shares of stock that may be subject to options
granted under the Plan to any individual in any calendar year shall not exceed
500,000, and the method of counting such shares shall conform to any
requirements applicable to performance-based compensation under Section 162(m)
of the Code.
5. Terms and Conditions of Options.
--------------------------------
Options granted under the Plan shall be subject to the following
conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Committee shall deem desirable:
(a) Option Price. The purchase price of each share of Stock
purchasable under an Option shall be determined by the Committee at the
time of grant but shall not be less than 100% of the Fair Market Value (as
defined below) of such share of Stock on the date the Option is granted in
the case of an Incentive Option and not less than 80% of the fair market
value of such share of Stock on the date the Option is granted in the case
of a non-Incentive Option; provided, however, that with respect to an
Incentive Option, in the case of an Optionee who, at the time such Option
is granted, owns (within the meaning of Section 424(d) of the Code) more
than 10% of the total combined voting power of all classes of stock of the
Company or of any Subsidiary, then the purchase price per share of stock
shall be at least 110% of the Fair Market Value per share of Stock at the
time of
-2-
grant, provided, however, that if an option granted to the Company's Chief
Executive Officer or to any of the Company's other four most highly
compensation officers is intended to qualify as performance-based
compensation under Section 162(m) of the Code, the exercise price of such
Option shall not be less than 100% of the Fair Market Value of such share
of Stock on the date the Option is granted. The purchase price of each
share of Stock purchasable under a Nonqualified Option shall not be less
than 80% of the Fair Market Value of such share of Stock on the date the
Option is granted. The exercise price for each incentive stock option
shall be subject to adjustment as provided in Section 7 below. The fair
market value ("Fair Market Value") means the closing price of publicly
traded shares of Stock on the national securities exchange on which shares
of Stock are listed (if the shares of Stock are so listed) or on the
Nasdaq National Market (if the shares of stock are regularly quoted on the
Nasdaq National Market), or, if not so listed or regularly quoted, the
mean between the closing bid and asked prices of publicly traded shares of
Stock in the over-the-counter market, or, if such bid and asked prices
shall not be available, as reported by any nationally recognized quotation
service selected by the Company, or as determined by the Committee in a
manner consistent with the provisions of the Code. Anything in this
Section 5(a) to the contrary notwithstanding, in no event shall the
purchase price of a share of Stock be less than the minimum price
permitted under the rules and policies of the securities exchange or
automated quotation system on which the shares of Stock are listed.
(b) Option Term. The term of each Option shall be fixed by the
Committee, but no Option shall be exercisable more than ten years after
the date such Option is granted; provided, however, that in the case of an
Optionee who, at the time such Option is granted, owns more than 10% of
the total combined voting power of all classes of stock of the Company or
any Subsidiary, then such Incentive Stock Option shall not be exercisable
with respect to any of the shares subject to such Incentive Stock Option
later than the date which is five years after the date of grant.
(c) Exercisability. Subject to paragraph (j) of this Section 5,
Options shall be exercisable at such time or times and subject to such
terms and conditions as shall be determined by the Committee at grant.
(d) Method of Exercise. Options may be exercised in whole or in part
at any time during the option period, by giving written notice to the
Company specifying the number of shares to be purchased, accompanied by
payment in full of the purchase price, in cash, by check or such other
instrument as may be acceptable to the Committee, including a cashless
exercise. As determined by the Committee, in its sole discretion, at or
after grant, payment in full or in part may also be made in the form of
Stock owned by the Optionee (based on the Fair Market Value of the Stock
owned by the Optionee (based on the Fair Market Value of the Stock on the
trading day before the Option is exercised); provided, however, that if
such Stock was issued pursuant to the exercise of an Incentive Option
under the Plan, the holding requirements for such Stock under the Code
shall first have been satisfied. An Optionee shall have the rights to
dividends or other rights of a shareholder with respect to shares subject
to the Option after (i) the Optionee has given written notice of exercise
and has paid in full for such shares and (ii) becomes a shareholder of
record.
(e) Transferability of Options. No Option granted hereunder shall be
transferable otherwise than by (i) will, (ii) the laws of descent and
distribution or (iii) pursuant to a qualified domestic relations order as
defined by the Internal Revenue Code or Title 1 of the Employee Retirement
Income Security Act of 1986, as amended, or the rules and regulations
promulgated thereunder; provided, however, that to the extent the option
agreement provisions do not disqualify such option for exemption under
Rule 16b-3 under the Act of 1934, as amended, Nonqualified Options may be
transferable during an Optionee's lifetime to immediate family members of
an optionee, partnerships in which the only partners are members of the
Optionee's immediate family, and trusts established solely for the benefit
of such immediate family members.
(f) Termination by Death. Unless otherwise determined by the
Committee at grant, if any Optionee's employment with the Company or any
Subsidiary terminates by reason of death, the Option may thereafter be
immediately exercised, to the extent then exercisable (or on such
accelerated basis as the Committee shall determine at or after grant), by
the legal representative of the estate or by the legatee or the Optionee
under the will of the Optionee, for a period of one year from the date of
such death or until the expiration of the stated term of such Option as
provided under the Plan, whichever period is shorter.
-3-
(g) Termination by Reason of Disability. Unless otherwise determined
by the Committee at grant, if any Optionee's employment with the Company
or any Subsidiary terminates by reason of total and permanent disability
as determined under the Company's long term disability policy
("Disability"), any Option held by such Optionee may thereafter be
exercised, to the extent it was exercisable at the time of termination due
to Disability (or on such accelerated basis as the Committee shall
determine at or after grant), but may not be exercised after one year from
the date of such termination of employment or the expiration of the stated
term of such Option, whichever period is shorter; provided, however, that,
if the Optionee dies within such one-year period, any unexercised Option
held by such Optionee shall thereafter be exercisable to the extent to
which it was exercisable at the time of death for a period of one year
from the date of such death or for the stated term of such Option,
whichever period is shorter.
(h) Other Termination. Unless otherwise determined by the Committee
at grant, if any Optionee's employment with the Company or any Subsidiary
terminates for any reason other than death, or disability, any Option held
by such Optionee may thereafter be exercised to the extent it was
exercisable at the time of such termination of employment (or on such
accelerated basis as the Committee shall determine at or after grant), but
may not be exercised after one year from the date of such termination of
employment or the expiration of the stated term of such Option, whichever
period is shorter. Notwithstanding the foregoing, if any Optionee's
employment with the Company or any Subsidiary terminates for Cause, such
Option may not be exercised following the expiration of three months after
the date of such termination of employment. "Cause" shall mean a felony
conviction or the failure of an Optionee to contest prosecution for a
felony or an Optionee's willful misconduct or dishonesty, any of which is
harmful to the business or reputation of the Company or any Subsidiary.
The transfer of an Optionee from the employ of the Company to a
Subsidiary, or vice versa, or from one Subsidiary to another, shall not be
deemed to constitute a termination of employment for purposes of the Plan.
Notwithstanding anything herein to the contrary, Incentive Options
may not be exercised after three months from the date of such termination
of employment or the expiration of the stated term of such Option,
whichever period is shorter; provided, however, that, if the Optionee dies
within such three-month period, any unexercised Option held by such
Optionee shall thereafter be exercisable, to the extent to which it was
exercisable at the time of death, for a period of one year from the date
of such death or for the stated term of such Option, whichever period is
shorter.
(i) Limit on Value of Incentive Option. The aggregate Fair Market
Value, determined as of the date the Option is granted, of the Stock for
which Incentive Options are exercisable for the first time by any Optionee
during any calendar year under the Plan (and/or any other stock option
plans of the Company or any Subsidiary) shall not exceed $100,000.
(j) Disposition of Incentive Option Shares. The stock option
agreement evidencing any Incentive Options granted under this Plan shall
provide that if the Optionee makes a disposition, within the meaning of
Section 424(c) of the Code and regulations promulgated thereunder, of any
share or shares of Stock issued to him pursuant to his exercise of an
Incentive Option granted under the Plan within the two-year period
commencing on the day after the date of the grant of such Incentive Option
or within a one-year period commencing on the day after the date of
transfer of the share or shares to him pursuant to the exercise of such
Incentive option, he shall, within ten days of such disposition, notify
the Company thereof and immediately deliver to the Company any amount of
federal income tax withholding required by law.
6. Term of Plan.
-------------
No Option shall be granted pursuant to the Plan on or after December 2,
2007, but Options granted may extend beyond that date.
7. Capital Change of the Company.
------------------------------
In the event of any merger, reorganization or consolidation of the Company
with one or more corporations as a result of which the Company is not the
surviving corporation, or upon a sale of substantially all of the property or
-4-
more than 80% of the then-outstanding shares of Stock of the Company to another
corporation, all Options granted under the Plan shall immediately vest. In the
event of a stock dividend or recapitalization, or other change in corporate
structure affecting the Stock not covered in the first sentence of this Section
7 (or in the event of a merger, reorganization or consolidation where the
Optionee has not held the Option for at least six months), the Committee shall
make an appropriate and equitable adjustment in the number and kind of shares
reserved for issuance under the Plan and in the number and option price of
shares subject to outstanding Options granted under the Plan, to the end that
after such event each Optionees's proportionate interest shall be maintained as
immediately before the occurrence of such event.
8. Proportionate Adjustments.
---------------------------
If the outstanding shares of Stock are increased, decreased, changed into
or exchanged into a different number or kind of shares of Stock or securities
of the Company through reorganization, recapitalization, reclassification,
stock dividend, stock split, reverse stock split or other similar transaction,
an appropriate and proportionate adjustment shall be made to the maximum number
and kind of shares of Stock as to which Options may be granted under this Plan.
A corresponding adjustment changing the number or kind of shares of Stock
allocated to unexercised Options or portions thereof, which shall have been
granted prior to any such change, shall likewise be made. Any such adjustment
in the outstanding Options shall be made without change in the purchase price
applicable to the unexercised portion of the Option with a corresponding
adjustment in the exercise price of the shares of Stock covered by the Option.
Notwithstanding the foregoing, there shall be no adjustment for the issuance of
shares of Stock on conversion of notes, preferred stock or exercise of warrants
or shares of Stock issued by the Board for such consideration as the Board
deems appropriate.
9. Purchase for Investment.
------------------------
Unless the Options and shares covered by the Plan have been registered
under the Securities Act of 1933, as amended (the "Securities Act"), or the
Company has determined that such registration is unnecessary, each person
exercising an Option under the Plan may be required by the Company to give a
representation in writing that he is acquiring the shares for his own account
for investment and not with a view to, or for sale in connection with, the
distribution of any part thereof.
10. Taxes.
------
The Company may make such provisions as it may deem appropriate,
consistent with applicable law, in connection with any Options granted under
the Plan with respect to the withholding of any taxes or any other tax matters.
11. Effective Date of Plan.
-----------------------
The Plan shall be effective on December 2, 1997 (the date that it was
approved by the Board), provided, however, that the Plan shall subsequently be
approved by majority vote of the Company's shareholders not later than December
1, 1998.
12. Amendment and Termination.
--------------------------
The Board may amend, suspend, or terminate the Plan, except that no
amendment shall be made which would impair the right of any Optionee under any
Option theretofore granted without his consent, and except that no amendment
shall be made which, without the approval of the shareholders, would:
(a) materially increase the number of shares which may be issued under
the Plan, except as is provided in Sections 7 and 8;
(b) materially increase the benefits accruing to the Optionees under the
Plan;
(c) materially modify the requirements as to eligibility for
participation in the Plan;
-5-
(d) decrease the exercise price of an Incentive Option to less than 100%
of the Fair Market Value on the date of grant thereof or the exercise
price of a Nonqualified option to less than 80% of the Fair Market
Value on the date of grant thereof; or
(e) extend the Option term provided for in Section 5(b).
The Committee may amend the terms of any Option theretofore granted,
prospectively or retroactively, but no such amendment shall impair the rights
of any Optionee without his consent. The Committee may also substitute new
Options for previously granted Options, including options granted under other
plans applicable to the participant and previously granted Options having
higher option prices, upon such terms as the Committee may deem appropriate.
13. Government Regulations.
-----------------------
The Plan, and the granting and exercise of Options hereunder, and the
obligation of the Company to sell and deliver shares under such Options, shall
be subject to all applicable laws, rules and regulations, and to such approvals
by any governmental agencies or national securities exchanges as may be
required.
14. General Provisions.
------------------
(a) Certificates. All certificates for shares of Stock delivered under
the Plan shall be subject to such stock transfer orders and other
restrictions as the Committee may deem advisable under the rules,
regulations, and other requirements of the Securities and Exchange
Commission, any stock exchange upon which the Stock is then listed,
and any applicable Federal or state securities law, and the Committee
may cause a legend or legends to be placed on any such certificates
to make appropriate reference to such restrictions.
(b) Employment Matters. The adoption of the Plan shall not confer upon
any Optionee of the Company or any Subsidiary, any right to continued
employment (or, in case the Optionee is also a director, continued
retention as a director) with the Company or a Subsidiary, as the
case may be, nor shall it interfere in any way with the right of the
Company or any Subsidiary to terminate the employment of any of its
employees at any time.
(c) Limitation of Liability. No member of the Board or the Committee, or
any officer or employee of the Company acting on behalf of the Board
or the Committee, shall be personally liable for any action,
determination, or interpretation taken or made in good faith with
respect to the Plan, and all members of the Board of the Committee
and each and any officer or employee of the Company acting on their
behalf shall, to the extent permitted by law, be fully indemnified
and protected by the Company in respect of any such action,
determination or interpretation.
(d) Registration of Stock. Notwithstanding any other provision in the
Plan, no Option may be exercised unless and until the Stock to be
issued upon the exercise thereof has been registered under the
Securities Act and applicable state securities laws, or are, in the
opinion of counsel to the Company, exempt from such registration. The
Company shall not be under any obligation to register under
applicable federal or state securities laws any Stock to be issued
upon the exercise of any Option granted hereunder, or to comply with
an appropriate exemption from registration under such laws in order
to permit the exercise of an Option and the issuance and sale of the
Stock subject to such Option, however, the Company may in its sole
discretion register such Stock at such time as the Company shall
determine. If the Company chooses to comply with such an exemption
from registration, the Stock issued under the Plan may, at the
direction of the Committee, bear an a appropriate restrictive legend
restricting the transfer or pledge of the Stock represented thereby,
and the Committee may also give appropriate stop-transfer
instructions to the transfer agent to the Company.
-6-