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. 1)
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-12
ENZO BIOCHEM, INC.
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(Name of Registrant as Specified in Its Charter)
N/A
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(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials:
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[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
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(1) Amount previously paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party: Enzo Biochem, Inc.
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ENZO BIOCHEM, INC.
60 EXECUTIVE BOULEVARD
FARMINGDALE, NEW YORK 11735
(631) 755-5500
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JANUARY 20, 2005
To the Shareholders of Enzo Biochem, Inc.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Enzo
Biochem, Inc., a New York corporation (the "Company"), will be held at The Yale
Club of New York, 50 Vanderbilt Avenue, Grand Ballroom, 20th Floor, New York,
New York, on January 20, 2005, at 9:00 a.m. local time (the "Annual Meeting"),
for the following purposes:
1. To elect Barry W. Weiner, John J. Delucca and Melvin F. Lazar as Class
II Directors for a term of three (3) years or until their respective
successors are elected and qualified;
2. To consider and vote upon a proposal to approve and adopt our 2005
Equity Compensation Incentive Plan (which we refer to in the
accompanying proxy statement as the "Equity Compensation Incentive
Plan Proposal");
3. To ratify the appointment of Ernst & Young LLP as the independent
auditors for the Company for the Company's fiscal year ending July 31,
2005; and
4. To transact such other business as may properly come before the Annual
Meeting or any adjournment thereof.
The close of business on November 24, 2004 has been fixed as the record
date for the determination of shareholders entitled to notice of and to vote at
the Annual Meeting. The transfer books of the Company will not be closed.
All shareholders are cordially invited to attend the Annual Meeting. Please
note that you will be asked to present valid picture identification, such as a
driver's license or passport, in order to attend the Annual Meeting. The use of
cameras, recording devices and other electronic devices will be prohibited at
the Annual Meeting.
Whether or not you expect to attend, you are requested to sign, date and
return the enclosed proxy promptly. Shareholders who execute proxies retain the
right to revoke them at any time prior to the voting thereof by filing written
notice of such revocation with the Secretary of the Company, by submission of a
duly executed proxy bearing a later date or by voting in person at the Annual
Meeting of Shareholders. Attendance at the Annual Meeting will not in and of
itself constitute revocation of a proxy. Any written notice revoking a proxy
should be sent to Enzo Biochem, Inc., 60 Executive Boulevard, Farmingdale, New
York 11735, Attention: Shahram K. Rabbani, Secretary. A return envelope which
requires no postage if mailed in the United States is enclosed for your
convenience.
By Order of the Board of Directors,
Shahram K. Rabbani, SECRETARY
Farmingdale, New York
November 26, 2004
ENZO BIOCHEM, INC.
60 EXECUTIVE BOULEVARD
FARMINGDALE, NEW YORK 11735
(631) 755-5500
------------------
PROXY STATEMENT
------------------
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JANUARY 20, 2005
This Proxy Statement is furnished in connection with the solicitation, by
the Board of Directors of Enzo Biochem, Inc., a New York corporation (the
"Company"), of proxies in the enclosed form for the Annual Meeting of
Shareholders to be held at The Yale Club of New York, 50 Vanderbilt Avenue,
Grand Ballroom, 20th Floor, New York, New York, on January 20, 2005 at 9:00 a.m.
local time (the "Annual Meeting"), and for any adjournment or adjournments
thereof, for the purposes set forth in the preceding Notice of Annual Meeting of
Shareholders. The form of proxy solicited by the Board of Directors affords
stockholders the ability to specify a choice among approval of, disapproval of,
or abstention with respect to, each matter acted upon at the Annual Meeting. The
persons named in the enclosed form of proxy will vote the shares for which they
are appointed in accordance with the directions of the shareholders appointing
them. In the absence of such directions, such shares will be voted FOR Proposals
1, 2 and 3 listed below and, in their best judgment, will be voted on any other
matters as may come before the Annual Meeting. Any shareholder giving a proxy
has the power to revoke the same at any time before it is voted by filing
written notice of such revocation with the Secretary of the Company, by
submission of a duly executed proxy bearing a later date or by voting in person
at the Annual Meeting. Attendance at the Annual Meeting will not in and of
itself constitute revocation of a proxy. Any written notice revoking a proxy
should be sent to Enzo Biochem, Inc., 60 Executive Boulevard, Farmingdale, New
York 11735, Attn.: Shahram K. Rabbani, Secretary. A return envelope which
requires no postage if mailed in the United States is enclosed for your
convenience.
The expense of the solicitation of proxies for the meeting, including the
cost of mailing, will be borne by the Company. In addition to mailing copies of
the enclosed proxy materials to stockholders, the Company may request persons,
and reimburse them for their expenses with respect thereto, who hold stock in
their names or custody or in the names of nominees for others, to forward copies
of such materials to those persons for whom they hold stock of the Company and
to request authority for the execution of the proxies. In addition to the
solicitation of proxies by mail, it is expected that some of the officers,
directors and regular employees of the Company, without additional compensation,
may solicit proxies on behalf of the Board of Directors by telephone, telefax,
and personal interview.
The principal executive offices of the Company are located at 60 Executive
Boulevard, Farmingdale, New York 11735. The approximate date on which this Proxy
Statement and the accompanying form of proxy will first be sent or given to the
Company's shareholders is November 26, 2004.
VOTING SECURITIES
Only holders of shares of common stock, par value $.01 per share (the
"Common Stock"), of the Company of record as of the close of business on
November 24, 2004 are entitled to vote at the Annual Meeting (the "Record
Date"). On the Record Date there were issued and outstanding 32,395,401 shares
of Common Stock. Each outstanding share of Common Stock is entitled to one (1)
vote upon all matters to be acted upon at the Annual Meeting. The holders of a
majority of the outstanding shares of Common Stock as of the Record Date shall
constitute a quorum.
The election of a nominee for director requires a plurality (i.e., an
excess of votes over those cast for an opposing candidate) in the event that
more than one candidate is running for a vacancy. An affirmative vote of the
majority of the votes cast is required for approval of Proposal 2, Proposal 3
and all other matters submitted to the shareholders at the Annual Meeting.
Abstentions and broker non-votes are not counted as votes cast on any matter to
which they relate and will have no effect on the outcome of the vote. A broker
non-vote occurs when a broker or other nominee does not have discretionary
authority and has not received instructions with respect to a particular
proposal. Proxy ballots are received and tabulated by the Company's transfer
agent and certified by the inspector of election.
STOCK OWNERSHIP OF PRINCIPAL SHAREHOLDERS AND MANAGEMENT
Set forth below is information concerning stock ownership of all persons
known by the Company to own beneficially 5% or more of the shares of Common
Stock of the Company, the executive officers named under "Compensation of
Directors and Executive Officers," all directors, and all directors and
executive officers of the Company as a group based upon the number of
outstanding shares of Common Stock as of the close of business on the Record
Date. Except as otherwise indicated, each of the persons named has sole voting
and investment power with respect to the shares shown.
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT
BENEFICIAL OWNER BENEFICIAL OWNERSHIP (1) OF CLASS (2)
------------------- ------------------------ ------------
Elazar Rabbani, Ph.D. ............................ 2,064,792 (3) 6.373%
Shahram K. Rabbani ............................... 1,995,537 (4) 6.16%
Barry W. Weiner .................................. 1,249,775 (5) 3.858%
Dean Engelhardt, Ph.D. ........................... 235,724 (6) *
Norman E. Kelker, Ph.D. .......................... 142,979 (7) *
John J. Delucca .................................. 47,339 (8) *
Irwin C. Gerson .................................. 30,181 (9) *
Melvin F. Lazar, CPA ............................. 45,019 (10) *
John B. Sias ..................................... 168,281 (11) *
Marcus Conant, M.D. .............................. 9,550 (12) *
J. Morton Davis .................................. 3,045,656 (13) 9.5%
Smith Barney Fund Management LLC,
Citigroup Global Markets Holdings, Inc. ........ 3,878,274 (14) 12.1%
All directors and executive officers as
a group (13 persons) (15) ...................... 6,276,384 (16) 18.74%
---------------
* Less than 1%.
(1) Except as otherwise noted, all shares of Common Stock are beneficially
owned and the sole investment and voting power is held by the persons
named, and such persons' address is c/o Enzo Biochem, Inc., 60 Executive
Boulevard, Farmingdale, New York 11735.
(2) Based upon 32,395,401 shares of Common Stock of the Company outstanding as
of the close of business on the Record Date.
(3) Includes (i) 357,203 shares of Common Stock issuable upon the exercise of
options which are exercisable within 60 days from the date hereof, (ii)
3,469 shares of Common Stock held in the name of Dr. Rabbani as custodian
for certain of his children and (iii) 2,168 shares of Common Stock held in
the name of Dr. Rabbani's wife as custodian for certain of their children.
Does not include 183,143 shares of Common Stock issuable upon the exercise
of options which are not exercisable within 60 days from the date hereof.
Includes 3,141 shares of Common Stock held in the Company's 401(k) plan.
(4) Includes (i) 357,203 shares of Common Stock issuable upon the exercise of
options which are exercisable within 60 days from the date hereof, (ii) 644
shares of Common Stock held in the name of Mr. Rabbani's son and (iii)
1,754 shares of Common Stock that Mr. Rabbani holds as custodian for
certain of his nephews. Does not include 183,143 shares of Common Stock
issuable upon the exercise of options which are not exercisable within 60
days from the date hereof. Includes 3,106 shares of Common Stock held in
the Company's 401(k) plan.
2
(5) Includes (i) 357,203 shares of Common Stock issuable upon the exercise of
options which are exercisable within 60 days from the date hereof and (ii)
3,642 shares of Common Stock which Mr. Weiner holds as custodian for
certain of his children. Does not include 183,143 shares of Common Stock
issuable upon the exercise of options which are not exercisable within 60
days from the date hereof. Includes 3,148 shares of Common Stock held in
the Company's 401(k) plan.
(6) Includes 51,683 shares of Common Stock issuable upon the exercise of
options which are exercisable within 60 days from the date hereof. Does not
include 37,840 shares of Common Stock issuable upon the exercise of options
which are not exercisable within 60 days from the date hereof. Includes
3,128 shares of Common Stock held in the Company's 401(k) plan.
(7) Includes 25,731 shares of Common Stock issuable upon the exercise of
options which are exercisable within 60 days from the date hereof. Does not
include 29,669 shares of Common Stock issuable upon the exercise of options
which are not exercisable within 60 days from the date hereof. Includes
3,057 shares of Common Stock held in the Company's 401(k) plan.
(8) Includes 47,339 shares of Common Stock issuable upon the exercise of
options which are exercisable within 60 days from the date hereof. Does not
include 20,485 shares of Common Stock issuable upon the exercise of options
which are not exercisable within 60 days from the date hereof.
(9) Includes 30,181 shares of Common Stock issuable upon the exercise of
options which are exercisable within 60 days from the date hereof. Does not
include 12,009 shares of Common Stock issuable upon the exercise of options
which are not exercisable within 60 days from the date hereof.
(10) Does not include 7,875 shares of Common Stock issuable upon the exercise of
options which are not exercisable within 60 days from the date hereof.
Includes 7,875 shares of Common Stock owned by Mr. Lazar's wife and 3,150
shares of Common Stock held in the name of a defined benefit plan for which
Mr. Lazar is the sole trustee and beneficiary.
(11) Includes 98,622 shares of Common Stock issuable upon the exercise of
options which are exercisable within 60 days from the date hereof. Does not
include 20,485 shares of Common Stock issuable upon the exercise of options
which are not exercisable within 60 days from the date hereof.
(12) Includes 9,550 shares of Common Stock issuable upon the exercise of options
which are exercisable within 60 days from the date hereof. Does not include
16,908 shares of Common Stock issuable upon the exercise of options which
are not exercisable within 60 days from the date hereof.
(13) Mr. Davis' address is D.H. Blair Investment Banking Corp., 44 Wall Street,
New York, New York 10005. Includes (i) 38,545 owned directly by Mr. Davis,
(ii) 1,427,681 shares of Common Stock owned by D.H. Blair Investment
Banking Corp. of which Mr. Davis is the sole shareholder, (iii) 903,201
shares owned by Rosalind Davidowitz, Mr. Davis' wife, (iv) 663,496 shares
of Common Stock owned by Engex, Inc., a close-end registered investment
company of which Mr. Davis is the Chairman of the Board of Directors, and
(v) 12,733 shares owned by an investment advisor whose principal is Mr.
Davis . This information is based solely on Amendment No. 3 to a Schedule
13G filed on February 11, 2004.
(14) The address of Smith Barney is 333 West 34th Street, New York, NY 10036,
and the address of Citigroup Inc. is 399 Park Avenue, New York, New York
10001, the address of Citigroup Global Holdings, Inc. is 388 Greenwich
Street, New York, New York 10001. This information is based solely on
Amendment No. 3 to Schedule 13G filed on August 31, 2004 and adjusted to
reflect a 5% stock dividend paid on November 15, 2004.
(15) The total number of directors and executive officers includes three (3)
executive officers who were not named under "Compensation of Directors and
Executive Officers."
(16) Includes 1,460,138 shares of Common Stock issuable upon the exercise of
options which are exercisable within 60 days from the date hereof. Does not
include 773,666 shares of Common Stock issuable upon the exercise of
options held by such individuals which are not exercisable within 60 days
from the date hereof.
3
PROPOSAL 1
ELECTION OF DIRECTORS
The Company has three (3) staggered classes of Directors, each of which
serves for a term of three (3) years. At the Annual Meeting, the Company's Class
II Directors will be elected to hold office for a term of three (3) years or
until their respective successors are elected and qualified. Unless otherwise
instructed, the accompanying form of proxy will be voted for the election of the
below-listed nominees all of whom currently serve as Class II Directors, to
continue such service as Class II Directors. Management has no reason to believe
that any of the nominees will not be a candidate or will be unable to serve as a
director. However, in the event that the nominees should become unable or
unwilling to serve as directors, the form of proxy will be voted for the
election of such persons as shall be designated by the Class I and Class III
Directors.
CLASS II DIRECTOR NOMINEES TO SERVE UNTIL
THE 2008 ANNUAL MEETING, IF ELECTED:
CLASS II: NEW TERM TO EXPIRE IN 2008
NAME AGE YEAR FIRST BECAME A DIRECTOR
---- --- ----------------------------
Barry W. Weiner ..................... 54 1977
John J. Delucca ..................... 61 1982
Melvin F. Lazar, CPA ................ 65 2002
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE "FOR" THE ELECTION
OF THE ABOVE-NAMED NOMINEES. PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE
SO VOTED UNLESS SHAREHOLDERS SPECIFY IN THEIR PROXIES A CONTRARY CHOICE.
DIRECTORS WHO ARE CONTINUING IN OFFICE:
CLASS I: TERM TO EXPIRE IN 2007
NAME AGE YEAR FIRST BECAME A DIRECTOR
---- --- ----------------------------
Shahram Rabbani ..................... 52 1976
Irwin C. Gerson ..................... 74 2001
CLASS III: TERM TO EXPIRE IN 2006
NAME AGE YEAR FIRST BECAME A DIRECTOR
---- --- ----------------------------
Elazar Rabbani, Ph.D. ............... 60 1976
John B. Sias ........................ 77 1982
Marcus A. Conant, M.D. .............. 69 2004
4
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company are identified in the
table below. Each executive officer of the Company serves at the pleasure of the
Board of Directors.
YEAR BECAME A
DIRECTOR OR
NAME AGE EXECUTIVE OFFICER POSITION
---- --- ----------------- --------
Elazar Rabbani, Ph.D. .................. 60 1976 Chairman of the Board of Directors and
Chief Executive Officer
Shahram K. Rabbani ..................... 52 1976 Chief Operating Officer, Treasurer,
Secretary and Director
Barry W. Weiner ........................ 54 1977 President, Chief Financial Officer and
Director
Dean Engelhardt, Ph.D. ................. 64 1981 Executive Vice President
Norman E. Kelker, Ph.D ................. 65 1981 Senior Vice President
Herbert B. Bass ........................ 56 1995 Vice President of Finance
Barbara E. Thalenfeld, Ph.D. ........... 64 1995 Vice President, Corporate Development
David C. Goldberg ...................... 47 1995 Vice President, Business Development
John J. Delucca ........................ 61 1982 Director
John B. Sias ........................... 77 1982 Director
Irwin C. Gerson ........................ 74 2001 Director
Melvin F. Lazar, CPA ................... 65 2002 Director
Marcus A. Conant, M.D. ................. 69 2004 Director
BIOGRAPHICAL INFORMATION REGARDING DIRECTORS AND EXECUTIVE OFFICERS
DR. ELAZAR RABBANI is one of Enzo Biochem's founders and has served as the
Company's Chairman of the Board of Directors and Chief Executive Officer since
its inception in 1976. Dr. Rabbani has authored numerous scientific publications
in the field of molecular biology, in particular, nucleic acid labeling and
detection. He is also the lead inventor of many of the company's pioneering
patents covering a wide range of technologies and products. Dr. Rabbani received
his Bachelor of Arts degree from New York University in Chemistry and his Ph.D.
in Biochemistry from Columbia University. He is a member of the American Society
for Microbiology.
SHAHRAM K. RABBANI is the Chief Operating Officer, Treasurer, Secretary and
Director, is a founder and has been with the Company since its inception. He is
also President of Enzo Clinical Labs. Mr. Rabbani serves on the New York State
Clinical Laboratory Association, a professional board. Mr. Rabbani is a trustee
of Adelphi University and serves as Chairman of its Audit Committee. He received
a Bachelor of Arts Degree in Chemistry from Adelphi University, located in Long
Island, New York.
BARRY W. WEINER President, Chief Financial Officer and Director, is a
founder of the Company. He has served as the Company's President since 1996, and
previously held the position of Executive Vice President. Before his employment
with Enzo, he worked in several managerial and marketing positions at the
Colgate Palmolive Company. Mr. Weiner is a Director of the New York
Biotechnology Association. He received his Bachelor of Arts degree in Economics
from New York University and a Master of Business Administration in Finance from
Boston University.
DR. DEAN ENGELHARDT has been the Company's Executive Vice President, since
July 2000. Since joining the Company in 1981, Dr. Engelhardt has held several
other executive and scientific positions within Enzo Biochem. In addition, Dr.
Engelhardt has authored many papers in the area of nucleic acid synthesis and
protein production and has been a featured presenter at numerous scientific
conferences and meetings. He holds a Ph.D. degree in Molecular Genetics from
Rockefeller University.
5
DR. NORMAN E. KELKER is the Senior Vice President and has held this
position since 1989. Before this, he was the Company's Vice President for
Scientific Affairs. Dr. Kelker has authored numerous scientific papers and
presentations in the biotechnology field. He is a member of American Society of
Microbiology and the American Association of the Advancement of Science. Dr.
Kelker received his Ph.D. in Microbiology and Public Health from Michigan State
University.
HERBERT B. BASS is the Company's Vice President of Finance for the Company
and is also Senior Vice President of Enzo Clinical Labs. Before his promotion in
1989 to Vice President of Finance, Mr. Bass served as the Corporate Controller
of the Company. Mr. Bass has been with the Company since 1986. From 1977 to
1986, Mr. Bass held various positions at Danziger and Friedman, Certified Public
Accountants, the most recent of which was audit manager. For the preceding seven
years, he held various positions at Berenson & Berenson, Certified Public
Accountants. Mr. Bass received a Bachelor of Business Administration degree in
Accounting from Bernard M. Baruch College, in New York City.
DR. BARBARA E. THALENFELD is the Vice President of Corporate Development
for Enzo Biochem and Vice President of Clinical Affairs for Enzo Therapeutics
and has been employed with the Company since 1982. Dr. Thalenfeld has authored
over 20 scientific papers in the areas of molecular biology and genetics, and is
a member of the American Society of Gene Therapy, the Drug Development
Association and the Association of Clinical Research Professionals. Dr.
Thalenfeld received her Ph.D. at the Institute of Microbiology at Hebrew
University in Jerusalem and a Master of Science degree in Biochemistry from Yale
University, and completed a Post Doctoral Fellowship in the Department of
Biological Sciences at Columbia University.
DAVID C. GOLDBERG is the Vice President of Business Development for Enzo
Biochem and Senior Vice President of Enzo Clinical Labs, has been employed with
the company since 1985. He has held several managerial positions within Enzo
Biochem. Mr. Goldberg also held management and marketing positions with
DuPont-NEN and Gallard Schlesinger Industries before joining the Company. He
received a Master of Science degree in Microbiology from Rutgers University and
a Master of Business Administration in Finance from New York University.
JOHN B. SIAS has been a Director of the Company since January 1982. Mr.
Sias was President and Chief Executive Officer of Chronicle Publishing Company
from April 1993 to September 2000. From January 1986 until April 1993, Mr. Sias
was President of ABC Network Division, Capital Cities/ABC, Inc. From 1977 until
January 1986, he was the Executive Vice President, President of the Publishing
Division (which includes Fairchild Publications) of Capital Cities
Communications, Inc.
JOHN J. DELUCCA has been a Director of the Company since January 1982. From
2003 to 2004, Mr. Delucca was Executive Vice President and Chief Financial
Officer of REL Consulting Group. Mr. Delucca had been the Chief Financial
Officer & Executive Vice President, Finance & Administration of Coty, Inc., from
January 1999 to January 2002. From October 1993 until January 1999, he was
Senior Vice President and Treasurer of RJR Nabisco, Inc. From January 1992 until
October 1993, he was managing director and Chief Financial Officer of Hascoe
Associates, Inc. From October 1, 1990 to January 1992, he was President of The
Lexington Group. From September 1989 until September 1990, he was Senior Vice
President-Finance of the Trump Group. From May 1986 until August 1989, he was
senior Vice President-Finance at International Controls Corp. From February 1985
until May 1986, he was a Vice President and Treasurer of Textron, Inc. Before
that, he was a Vice President and Treasurer of the Avco Corporation, which was
acquired by Textron.
IRWIN C. GERSON has been a Director of the Company since May 8, 2001. From
1995 until December 1998, Mr. Gerson served as Chairman of Lowe McAdams
Healthcare and prior thereto had been, since 1986, Chairman and Chief Executive
Officer of William Douglas McAdams, Inc., one of the largest advertising
agencies in the U.S. specializing in pharmaceutical marketing and communications
to healthcare professionals. In February 2000, he was inducted into the Medical
Advertising Hall of Fame. Mr. Gerson has a Bachelor of Science in Pharmacy from
Fordham University and an MBA from the NYU Graduate School of Business
Administration. He is a director of Andrx Corporation, a NASDAQ listed company
which specializes in proprietary drug delivery technologies. From 1990 to 1999,
he was Chairman of the Council of Overseers of the Arnold and Marie Schwartz
College of Pharmacy and has served as a trustee of The Albany College of
Pharmacy and Long Island University.
6
MELVIN F. LAZAR, CPA (age 65) has been a Director of the Company since
August 1, 2002. Mr. Lazar was a founding partner of the public accounting firm
of Lazar, Levine & Felix (LLP) from 1969 until October 2002. Mr. Lazar and his
firm served the business and legal communities for over 30 years. He is an
expert on the topic of business valuations and merger and acquisition
activities. Mr. Lazar is a board member and chairman of the audit committee of
Arbor Realty Trust, Inc. (ABR:NYSE). Arbor is a real estate investment trust
(REIT) formed to invest in real estate related bridge and mezzanine loans,
preferred equity investments and other real estate related assets. Mr. Lazar is
a board member and serves as the Chairman of the Audit Committee of privately
owned Active Media Services, Inc., the largest corporate barter company in the
nation. Mr. Lazar is also a board member and serves as the Chairman of the Audit
Committee of Ceco Environmental Corp., which is a provider of innovative
solutions to industrial ventilating and air quality problems. Mr. Lazar holds a
Bachelor of Business Administration degree from The City College of New York
(Baruch College).
MARCUS A. CONANT, M.D. has been a Director of the Company since July 1,
2004. Dr. Conant, received his B.S. and M.D. degrees from Duke University. He
was an exchange student at Hammersmith Hospital in London, England and held an
Elective Fellowship in Biochemistry at the London Hospital. Dr. Conant has been
the recipient of numerous awards, and has served as a member of or consultant to
a broad array of scientific societies and associations, community organizations
and government committees and has authored or co-authored more than 70 published
papers. Dr. Conant is a Clinical Professor at the University of California San
Francisco (UCSF) and has been on the faculty of UCSF since 1967. He currently
serves as Chairman of the Board of the Conant Foundation, an HIV/AIDS education
and research foundation based in San Francisco. Dr. Conant served as principal
investigator for Enzo's Phase I clinical trial of its gene medicine for HIV-1
infection.
Dr. Elazar Rabbani and Shahram K. Rabbani are brothers and Barry W. Weiner
is their brother-in-law.
CORPORATE GOVERNANCE
Our Board of Directors and management are committed to responsible
corporate governance to ensure that the Company is managed for the long-term
benefit of its stockholders. To that end, during the past year, as in prior
years, the Board of Directors and management have periodically reviewed and
updated, as appropriate, the Company's corporate governance policies and
practices. During the past year, the Board has also continued to evaluate and,
when appropriate, update the Company's corporate governance policies and
practices in accordance with the requirements of the Sarbanes-Oxley Act of 2002
and the rules and listing standards issued by the Securities and Exchange
Commission and the New York Stock Exchange ("NYSE").
CORPORATE GOVERNANCE POLICIES AND PRACTICES
The Company has instituted a variety of policies and practices to foster
and maintain responsible corporate governance, including the following:
CORPORATE GOVERNANCE GUIDELINES - The Board of Directors adopted Corporate
Governance Guidelines, which collect in one document many of the corporate
governance practices and procedures that had evolved over the years. These
guidelines address the duties of the Board of Directors, director qualifications
and selection process, director compensation, Board operations, Board committee
matters and continuing education. The guidelines also provide for annual
self-evaluations by the Board and its committees. The Board reviews these
guidelines on an annual basis. The guidelines are available on the Company's
website at www.enzo.com.
CORPORATE CODE OF ETHICS - The Company has a Code of Ethics that applies to
all of the Company's employees, officers and members of the Board. The Code of
Ethics is available on the Company's website at www.enzo.com.
BOARD COMMITTEE CHARTERS - Each of the Company's Audit, Compensation and
Nominating/Governance Committees has written charters adopted by the Company's
Board of Directors that establish practices and procedures for each committee in
accordance with applicable corporate governance rules and regulations. The
charters are available on the Company's website at www.enzo.com.
7
DIRECTOR INDEPENDENCE
REQUIREMENTS - The Board of Directors believes that a substantial majority
of its members should be independent, non-employee directors. The Board adopted
the following "Director Independence Standards," which are consistent with
criteria established by the New York Stock Exchange, to assist the Board in
making these independence determinations.
No Director can qualify as independent if he or she has a material
relationship with the Company outside of his or her service as a Director of the
Company. A Director is not independent if, within the preceding three years:
o The director was an employee of the Company.
o An immediate family member of the director was an executive officer of
the Company.
o A director was affiliated with or employed by a present or former
internal or external auditor of the Company.
o An immediate family member of a director was affiliated with or
employed in a professional capacity by a present or former internal or
external auditor of the Company.
o A director, or an immediate family member of the director, received
more than $100,000 per year in direct compensation from the Company,
other than director and committee fees and pension or other forms of
deferred compensation for prior services (provided such compensation
is not contingent in any way on continued service).
o The director, or an immediate family member of the director, was
employed as an executive officer of another company where any of the
Company's executives served on that company's compensation committee
of the board of directors.
o The director was an executive officer or employee, or an immediate
family member of the director was an executive officer, of another
company that made payments to, or received payments from, the Company
for property or services in an amount which, in any single fiscal
year, exceeded the greater of $1 million or two percent (2%) of such
other company's consolidated gross revenues.
o The director, or an immediate family member of the director, was an
executive officer of another company that was indebted to the company,
or to which the Company was indebted, where the total amount of either
company's indebtedness to the other was five percent (5%) or more of
the total consolidated assets of the company he or she served as an
executive officer.
o The director, or an immediate family member of the director, was an
officer, director or trustee of a charitable organization where the
Company's annual discretionary charitable contributions to the
charitable organization exceeded the greater of $1 million or five
percent (5%) of that organization's consolidated gross revenues.
The Board has reviewed all material transactions and relationships between
each director, or any member of his or her immediate family, and the Company,
its senior management and its independent auditors. Based on this review and in
accordance with its independence standards outlined above, the Board of
Directors has affirmatively determined that all of the non-employee directors
are independent.
BOARD NOMINATION POLICIES AND PROCEDURE
NOMINATION PROCEDURE - The Nominating/Governance Committee is responsible
for identifying, evaluating, and recommending candidates for election to the
Board, with due consideration for recommendations made by other Board members,
the CEO, stockholders, and other sources. In addition to the above criteria, the
Nominating/Governance Committee also considers the appropriate balance of
experience, skills, and characteristics desirable among the members of the
board. The independent members of the Board review the Nominating/Governance
Committee candidates and nominate candidates for election by the Company
stockholders.
Directors must also possess the highest personal and professional ethics,
integrity and values and be committed to representing the long-term interests of
all shareholders. Board members are expected to diligently prepare for, attend
and participate in all Board and applicable Committee meetings. Each Board
member is expected to ensure that other existing and future commitments do not
materially interfere with the member's service as a director.
8
The Nominating/Governance Committee also reviews whether a potential
candidate will meet the Company's independence standards and any other director
or committee membership requirements imposed by law, regulation or stock
exchange rules.
Director candidates recommended to the Committee are subject to full Board
approval and subsequent election by the shareholders. The Board of Directors is
also responsible for electing directors to fill vacancies on the Board that
occur due to retirement, resignation, expansion of the Board or other reasons
between the Shareholders' annual meetings. The Nominating/Governance Committee
may retain a recruitment firm, from time to time, to assist in identifying and
evaluating director candidates. When a firm is used, the Committee provides
specified criteria for director candidates, tailored to the needs of the Board
at that time, and pays the firm a fee for these services. Suggestions for
director candidates are also received from board members and management and may
be solicited from professional associations as well.
Upon the recommendation of the Committee, Dr. Marcus Conant was elected to
the Board of Directors effective July 1, 2004. Dr. Conant was selected from a
group of several candidates and he was identified as a candidate to the
Committee by a non-management director. Dr. Conant was interviewed by the Chair
of the Nominating/Governance Committee, the Chairman and CEO and several
Committee members prior to his election.
BOARD COMMITTEES
All members of each of the Company's three standing committees - the Audit,
Compensation, and Nominating/Governance - are required to be independent in
accordance with NYSE criteria. See below for a description of the
responsibilities of the Board's standing committees.
EXECUTIVE SESSIONS OF NON-MANAGEMENT DIRECTORS
The Board and the Audit, Compensation and Nominating/Governance Committees
periodically hold meetings of only the independent directors or Committee
members without management present. The presiding director of the Executive
Sessions is rotated among the independent, non-management directors.
BOARD ACCESS TO INDEPENDENT ADVISORS
The Board as a whole, and each of the Board committees separately, have
authority to retain and terminate such independent consultants, counselors or
advisors to the Board as each shall deem necessary or appropriate.
SHAREHOLDER COMMUNICATIONS WITH BOARD OF DIRECTORS
DIRECT COMMUNICATIONS - Any stockholder desiring to communicate with the
Board of Directors or with any director regarding the Company may write to the
Board or the director, c/o Shahram K. Rabbani, Office of the Secretary, Enzo
Biochem, Inc., 60 Executive Boulevard, Farmingdale, NY 11735. The Office of the
Secretary will forward all such communications to the director(s). Shareholders
may also submit an email by filling out the email form on the Company's website
at www.enzo.com.
ANNUAL MEETING - The Company encourages its directors to attend the annual
meeting of stockholders each year. Dr. Elazar Rabbani and Messrs. Melvin F.
Lazar, Shahram K. Rabbani and Barry W. Weiner attended the Annual Meeting of
Shareholders held in January 2004.
MEETINGS OF THE BOARD OF DIRECTORS AND ITS COMMITTEES
During the fiscal year ended July 31, 2004, there were 4 formal meetings of
the Board of Directors, several actions by unanimous consent and several
informal meetings. Currently, the Board of Directors has a Nominating/Governance
Committee, an Audit Committee and a Compensation Committee. The
Nominating/Governance Committee had one formal meeting, the Audit Committee had
four formal meetings and the Compensation Committee had one formal meeting in
fiscal 2004. Each of the Committees also held additional informal meetings.
The Audit Committee was established by and among the Board of Directors for
the purpose of overseeing the accounting and financial reporting processes of
the Company and audits of the financial statements of the Company in accordance
with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended, The
Audit Committee is authorized to review proposals of the Company's auditors
regarding annual audits, recommend the engagement
9
or discharge of the auditors, review recommendations of such auditors concerning
accounting principles and the adequacy of internal controls and accounting
procedures and practices, review the scope of the annual audit, approve or
disapprove each professional service or type of service other than standard
auditing services to be provided by the auditors, and review and discuss the
audited financial statements with the auditors. The current members of the Audit
Committee are Messrs. Delucca, Gerson, Lazar and Sias, and Mr. Delucca is the
Chairman. The Board of Directors has determined that each of the Audit Committee
members are independent, as defined in the NYSE's listing standards and as
defined in Item 7(d)(3)(iv) of Schedule 14A under the Securities and Exchange
Act of 1934. The Board of Directors has further determined that Messrs. Delucca
and Lazar are each "audit committee financial experts" as such term is defined
under Item 401(h)(2) of Regulation S-K.
The Compensation Committee has the power and authority to (i) establish a
general compensation policy for the officers and employees of the Corporation,
including to establish and at least annually review officers' salaries and
levels of officers' participation in the benefit plans of the Corporation, (ii)
prepare any reports that may be required by the regulations of the Securities
and Exchange Commission or otherwise relating to officer compensation, (iii)
approve any increases in directors' fees, (iv) grant stock options and (v)
exercise all other powers of the Board of Directors with respect to matters
involving the compensation of employees and the employee benefits of the
Corporation as shall be delegated by the Board of Directors to the Compensation
Committee. The current members of the Compensation Committee are Messrs. Gerson,
Delucca and Lazar and Mr. Gerson is the Chairman.
The Nominating/Governance Committee has the power to recommend to the Board
of Directors prior to each annual meeting of the shareholders of the
Corporation: (i) the appropriate size and composition of the Board of Directors;
and (ii) nominees: (1) for election to the Board of Directors for whom the
Corporation should solicit proxies; (2) to serve as proxies in connection with
the annual shareholders' meeting; and (3) for election to all committees of the
Board of Directors other than the Nominating/Governance Committee. The
Nominating/Governance Committee will consider nominations from the stockholders,
provided that they are made in accordance with the Company's By-laws. The
current members of the Nominating/Governance Committee are Messrs. Gerson,
Delucca, Lazar and Sias and Mr. Sias is the Chairman.
AUDIT COMMITTEE REPORT
In connection with the preparation and filing of the Company's Annual
Report on Form 10-K for the year ended July 31, 2004:
(1) The Audit Committee reviewed and discussed the audited financial
statements with management;
(2) The Audit Committee discussed with the independent auditors matters
required to be discussed under Statement on Auditing Standards No. 61,
as may be modified or supplemented;
(3) The Audit Committee reviewed the written disclosures and the letter
from the independent auditors required by the Independence Standards
Board Standard No. 1, as may be modified or supplemented, and
discussed with the independent auditors any relationships that may
impact their objectivity and independence and satisfied itself as to
the auditors' independence;
(4) The Audit Committee discussed with the Company's independent auditors
the overall scope and plans for their audits. The Audit Committee met
with the independent auditors, with and without management present, to
discuss the results of their examinations, their evaluations of the
Company's internal controls, and the overall quality of the Company's
financial reporting. The Audit Committee held four formal meetings
during the fiscal year ended July 31, 2004 and
(5) Based on the review and discussions referred to above, the Audit
Committee recommended to the Board of Directors that the audited
financial statements of the Company be included in the 2004 Annual
Report on Form 10-K.
Submitted by the members of the Audit Committee
John J. Delucca
Irwin C. Gerson
Melvin F. Lazar, CPA
John B. Sias
10
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's executive officers, directors and persons who beneficially own
more than 10% of a registered class of the Company's equity securities
(collectively, "Reporting Persons") to file with the Securities and Exchange
Commission initial reports of ownership and reports of changes in ownership of
common stock and other equity securities of the Company. Such executive
officers, directors and greater than 10% beneficial owners are required by
Securities and Exchange Commission regulation to furnish the Company with copies
of all Section 16(a) forms filed by such reporting persons.
Based solely on the Company's review of such forms furnished to the Company
and written representations from certain reporting persons, the Company believes
that the Reporting Persons have complied with all applicable filing requirements
except the Form 4s relating to the Automatic Director Options granted to each of
the non-employee directors following the Company's Annual Meeting of
Shareholders held in 2004 were filed late.
CERTAIN RELATIONSHIP AND RELATED TRANSACTIONS
Enzo Clinical Labs, Inc. ("Enzolabs"), a subsidiary of the Company, leases
a facility located in Farmingdale, New York from Pari Management Corporation
("Pari"). Pari is owned equally by Elazar Rabbani, Ph.D., Shahram Rabbani and
Barry Weiner and his wife, the officers and directors of Pari. The lease
commenced on December 20, 1989 and terminates on November 30, 2004. Subsequent
to the lease termination, the Company will lease the facility on a month to
month basis consistent with the lease payments required immediately prior to its
termination pending the negotiation and execution of a new lease, which terms
will be subject to approval by a majority of the independent directors of the
Company. During fiscal 2004, Enzolabs paid approximately $1,370,800 (including
$148,900 in real estate taxes) to Pari with respect to such facility and future
payments are subject to cost of living adjustments. The Company, which has
guaranteed Enzolabs' obligations to Pari under the lease, believes that the
existing lease terms are as favorable to the Company as would be available from
an unaffiliated party
CODE OF ETHICS
The Company has adopted a Code of Ethics (as such term is defined in Item
406 of Regulation S-K), which code has been filed as Exhibit 14 to the Company's
annual report on Form 10-K for the fiscal year ended July 31, 2003. The Code of
Ethics applies to the Company's Executive Officer, Chief Financial Officer and
principal accounting officer or controller, or persons performing similar
functions. The Code of Ethics has been designed to deter wrongdoing and to
promote:
(1) Honest and ethical conduct, including the ethical handling of actual
or apparent conflicts of interest between personal and professional
relationships;
(2) Full, fair, accurate, timely, and understandable disclosure in reports
and documents that the Company files with, or submits to, the
Securities and Exchange Commission and in other public communications
made by the Company;
(3) Compliance with applicable governmental laws, rules and regulations;
(4) The prompt internal reporting or violations of the Code of Ethics to
an appropriate person or persons identified in the Code of Ethics; and
(5) Accountability for adherence to the Code of Ethics.
11
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
The following summary compensation table sets forth the aggregate
compensation paid by the Company to its chief executive officer and to the
Company's four other most highly compensated executive officers whose annual
compensation exceeded $100,000 for the fiscal year ended July 31, 2004 (each, a
"Named Executive Officer") for services during the fiscal years ended July 31,
2004, 2003 and 2002:
SUMMARY COMPENSATION TABLE
LONG TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
---------------------------- -------------------
SECURITIES
UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) OPTIONS/SARS (#)
--------------------------- ---- ---------- ---------- ----------------
ELAZAR RABBANI, PH.D., 2004 $430,942 $275,000 78,750
Chairman of the Board of 2003 $402,963 $275,000 105,000
Directors and CEO 2002 $367,656 $245,000 -0-
SHAHRAM K. RABBANI, 2004 $395,046 $260,000 78,750
Chief Operating Officer, 2003 $367,825 $260,000 105,000
Treasurer, Secretary 2002 $332,526 $230,000 -0-
and Director
BARRY W. WEINER, 2004 $395,046 $260,000 78,750
President, Chief Financial 2003 $367,825 $260,000 105,000
Officer and Director 2002 $332,526 $230,000 -0-
DEAN ENGELHARDT, PH.D., 2004 $225,737 $55,000 15,750
Executive Vice President 2003 $221,622 $55,000 15,750
2002 $204,527 $50,000 -0-
NORMAN E. KELKER, PH.D., 2004 $202,476 $45,000 15,750
Senior Vice President 2003 $183,268 $45,000 10,500
2002 $168,760 $30,000 -0-
OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
-------------------------------------------------------------------------------
POTENTIAL REALIZABLE
PERCENT OF VALUE AT ASSUMED
NUMBER OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS/SARS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OF OPTIONS TERM
OPTION/SARS EMPLOYEES IN BASE PRICE EXPIRATION ----------------------
NAME GRANTED (#) FISCAL YEAR ($ / SH) DATE 5% ($) 10% ($)
---- ------------ ------------- ----------- ---------- ----------------------
Elazar Rabbani, Ph.D., Chairman
of the Board of Directors and
Chief Executive Officer .............. 78,750 18.360% 17.45 3/07/14 864,219 2,190,101
Shahram K. Rabbani, Chief
Operating Officer, Treasurer,
Secretary and Director ............... 78,750 18.360% 17.45 3/07/14 864,219 2,190,101
Barry W. Weiner,
President and Director ............... 78,750 18.360% 17.45 3/07/14 864,219 2,190,101
Dean Engelhardt, Ph.D.,
Executive Vice President ............. 15,750 3.672% 17.45 3/07/14 172,844 438,020
Norman Kelker, Ph.D.,
Senior Vice President ................ 15,750 3.672% 17.45 3/07/14 172,844 438,020
12
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES
The following table sets forth certain information with respect to stock
option exercises by the Named Executive Officers during the fiscal year ended
July 31, 2004 and the value of unexercised options held by them at fiscal
year-end.
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS OPTIONS AT IN-THE-MONEY OPTIONS/SARS AT
SHARES FISCAL YEAR-END (#) FISCAL YEAR-END ($) (1)
ACQUIRED ON VALUE -------------------------- ---------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ ------------ ----------- ------------- ----------- -------------
Elazar Rabbani, Ph.D. 284,137 2,509,221 357,203 183,143 1,373,818 149,858
Shahram K. Rabbani 284,137 2,509,221 357,203 183,143 1,373,818 149,858
Barry W. Weiner 201,014 1,775,158 357,203 183,143 1,373,818 149,858
Dean Engelhardt, Ph.D. 13,400 149,812 51,683 37,840 237,190 27,672
Norman E. Kelker, Ph.D. -0- 177,158 25,731 29.669 171,348 19,981
----------------
(1) Market value of the underlying securities at fiscal year end minus the
exercise price paid in cash or stock.
EMPLOYMENT AGREEMENTS
Each of Mr. Barry Weiner, Mr. Shahram Rabbani and Dr. Elazar Rabbani (the
"Executives") are parties to an employment agreement effective May 4, 1994 (the
"Employment Agreement(s)") with the Company. Pursuant to the terms of their
respective Employment Agreements, as amended, Messrs. Weiner and Rabbani and Dr.
Rabbani are currently compensated for the calendar year 2004 at a base annual
salary of $434,700, $398,500 and $398,500, respectively. Each Executive will
also receive an annual bonus, the amount of which shall be determined by the
Board of Directors in its discretion. Each Employment Agreement provides that,
in the event of termination of the Executive for good reason or without cause
(or, additionally, in the case of Dr. Rabbani, a nonrenewal), as such terms are
defined therein, each Executive shall be entitled to receive: (a) a lump sum in
an amount equal to three (3) years of the Executive's base annual salary; (b) a
lump sum in an amount equal to the annual bonus paid by the Company to the
Executive for the last fiscal year of the Company ending prior to the date of
termination multiplied by three (3); (c) insurance coverage for the Executive
and his dependents, at the same level and at the same charges to the Executive
as immediately prior to his termination, for a period of three (3) years
following his termination from the Company; (d) all accrued obligations, as
defined therein; and (e) with respect to each incentive pay plan (other than
stock option or other equity plans) of the Company in which the Executive
participated at the time of termination, an amount equal to the amount the
Executive would have earned if he had continued employment for three (3)
additional years. If the Executive is terminated by reason of his disability, he
shall be entitled to receive, for three (3) years after such termination, his
base annual salary less any amounts received under a long term disability plan.
If the Executive is terminated by reason of his death, his legal representatives
shall receive the balance of any remuneration due him. The term of each of the
Executive's Employment Agreement, as amended, currently expires on May 4, 2006,
which term automatically renews for successive two year periods if notice to the
Company is not given by either party within 180 days of the end of such
successive term.
COMPENSATION OF DIRECTORS
As of January 1, 2004, each person who serves as a director and who is not
otherwise an officer or an employee (such director being classified as an
"Outside Director") of the Company, receives an annual director's fee of $20,000
and a fee of $1,500 for each meeting attended in person or by telephone. In
addition, as of March 10, 2004 each non-management Director who serves on a
Committee of the Board of Directors will receive a fee of $1,000 for each
meeting of the Committee attended by telephone and the Chairman of each such
Committee shall receive an additional $500 for each meeting of such Committee
attended. Furthermore, on the date persons are first elected to serve as Outside
Directors of the Company's Board of Directors, such persons shall receive
options ("Initial Director Options") to purchase 15,000 shares of Common Stock
of the Company, and will automatically receive options ("Automatic Director
Options" and together with the Initial Director Options, the "Director Options")
to purchase 12,500 shares of the Company's Common Stock immediately following
the date of each annual meeting of the Company's shareholders, PROVIDED,
HOWEVER, that such persons did not receive Initial
13
Director Options since the most recent grant of Automatic Director Options and
continue to serve as directors of the Company's Board of Directors. The exercise
price for each share subject to a Director Option shall be equal to the fair
market value of the Company's Common Stock on the date of grant. Director
Options shall become exercisable at the discretion of the Board of Directors,
subject to acceleration in certain circumstances, and shall expire the earlier
of ten (10) years after the date of grant or ninety (90) days after the
termination of the director's service on the Board of Directors. On January 7,
2004, each of Messrs Delucca, Gerson, Lazar and Sias were issued options to
purchase 7,875 shares (adjusted to reflect a 5% stock dividend) of Common Stock.
On March 8, 2004 each of Dr. Rabbani and Messrs. Rabbani and Weiner were issued
options to purchase 78,750 shares (adjusted to reflect a 5% stock dividend) of
Common Stock. On July 1, 2004 Dr. Conant was granted an Initial Director Option
to acquire 15,875 shares (adjusted to reflect a 5% stock dividend) of Common
Stock.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current members of the Compensation Committee are Messrs. Gerson,
Delucca and Lazar. No member of the Compensation Committee has a relationship
that would constitute an interlocking relationship with the Company's executive
officers or other directors.
COMPENSATION COMMITTEE REPORT
The Company strives to apply a uniform philosophy to compensation for all
of its employees, including the members of its senior management. This
philosophy is based on the premise that the achievements of the Company result
from the combined and coordinated efforts of all employees working toward common
goals and objectives.
The goals of the Company's compensation program are to align remuneration
with business objectives and performance, and to enable the Company to retain
and competitively reward executive officers who contribute to the long-term
success of the Company. The Company's compensation program for executive
officers is based on the following principles, which are applicable to
compensation decisions for all employees of the Company. The Company attempts to
pay its executive officers competitively in order that it will be able to retain
the most capable people in the industry. Information with respect to levels of
compensation being paid by comparable companies is obtained from various
publications and surveys.
During the last fiscal year, the compensation of executive officers
consisted principally of salary and bonus and the Company granted stock options
to certain of its executive officers, additional grants of which may be made in
the future. The cash portion of such program includes base salary and annual
bonuses, which are awarded in the discretion of the Board of Directors. Salary
levels have been set based upon historical levels, amounts being paid by
comparable companies and performance. The Company's equity-based compensation
consists of the award of discretionary stock options, which are designed to
provide additional incentives to executive officers to maximize shareholder
value. Through the use of extended vesting periods, the option program is
designed to encourage executive officers to remain in the employ of the Company.
In addition, because the exercise prices of such options are typically set at or
above the fair market value of the stock on the date the option is granted,
executive officers can only benefit from such options if the trading price of
the Company's shares of Common Stock increases, thus aligning their financial
interests directly with those of the shareholders.
In consideration for Dr. Elazar Rabbani's services as Chairman of the Board
of Directors and Chief Executive Officer of the Company for the fiscal year
ended July 31, 2004, the Company paid Dr. Rabbani an annual salary of $430,942
and a bonus of $275,000. Such compensation was determined pursuant to the
Company's employment agreement with Dr. Rabbani and was based on the Board's
view of Dr. Rabbani's successful performance as Chief Executive Officer. See
"Employment Agreements."
Submitted by the members of the Compensation Committee
Irwin W. Gerson
John J. Delucca
Melvin F. Lazar
14
401(K) PLAN
The Company has adopted a salary reduction profit sharing plan which is
generally available to employees of the Company and any subsidiary of the
Company. Officers and directors who are employees of the Company participate in
the Plan on the same basis as other employees.
The Plan permits voluntary contributions by employees in varying amounts up
to 17% of annual earnings (not to exceed the maximum allowable in any calendar
year which is $13,000 for 2004). Employee contributions are made by salary
reduction under Section 401(k) of the Internal Revenue Code of 1986, as amended
(the "Code"), and are excluded from taxable income of the employee. The Company
may also contribute additional discretionary amounts as it may determine.
All employees of the Company who are twenty-one (21) years or older and
have been employed by the Company for a minimum of three (3) months are eligible
to participate in the Plan. Employees, who have more than 500 hours of service
per service year, but less than 1,000 hours per service year, are still
considered members of the Plan, but contribution allocations and vesting will
not increase during such time.
A participant's account is distributed to him upon retirement or
termination of employment for any reason and in certain other limited
situations. The amount of the Plan allocation attributable to the Company's
discretionary contributions will vest in accordance with a schedule. For the
fiscal year ended July 31, 2004, the Company has made contributions of 50% of
the employees' contribution up to 10% of the employees' compensation in Common
Stock of the Company.
1999 STOCK OPTION PLAN
Under the Company's 1999 Stock Option Plan (the "1999 Plan"), the Company's
Board of Directors may grant ISOs and NQSOs to selected key employees,
directors, executive officers, consultants and advisors of the Company to
purchase the Company's Common Stock. ISOs and NQSOs granted under the 1999 Plan
generally vest no earlier than six (6) months after the date of grant and can be
exercised no later than the tenth (10th) anniversary date of the date of grant.
When the optionee, however, holds more than 10% of all combined voting stock of
the Company, ISOs granted under the 1999 Plan cannot be exercised later than the
fifth (5th) anniversary date of the date of grant. The exercise prices of
options granted under the 1999 Plan are set by the Board of Directors of the
Company, or designated committee. In any event, however, ISOs granted under the
1999 Plan may not be exercisable at a price lower than the fair market value of
the Company's Common Stock on the date such options are granted, and, when the
optionee holds more than 10% of all combined voting stock of the Company, the
exercise prices of such options may not be less than 110% of the fair market
value of the Common Stock of the Company on the date of grant. ISOs granted
under the 1999 Plan to any optionee which become exercisable for the first time
in any one calendar year for shares of Common Stock of the Company with an
aggregate fair market value, as of the respective date or dates of grant, of
more than $100,000 shall be treated as NQSOs. The awards under the 1999 Plan are
subject to restrictions on transferability, are forfeitable in certain
circumstances and are exercisable at such time or times and during such period
as shall be set forth in the option agreement evidencing such option. During the
fiscal year ended July 31, 2004, options to purchase up to 428,925 shares of the
Company's Common Stock were awarded under the 1999 Plan. As of the Record Date,
of the 2,312,356 shares of the Company's Common Stock reserved for issuance upon
the exercise of options authorized for grant under the 1999 Plan, 238,780 shares
of the Company's Common Stock remain available for issuance upon the exercise of
options authorized for grant under the 1999 Plan.
2005 EQUITY COMPENSATION INCENTIVE PLAN
On October 5, 2004, our Board of Directors approved the adoption, subject
to approval by our shareholders, of its 2005 Equity Compensation Incentive Plan
for the purpose of recruiting and retaining our officers, employees, directors,
consultants and advisors pursuant to the terms of a program to be administered
by our Compensation Committee. As of the Record Date, no grants have been made
under such Plan. The 2005 Equity Compensation Incentive Plan is being presented
to our shareholders as Proposal 2 for adoption.
15
INSURANCE FOR INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company has in effect, with American International Group Companies
("AIG") under a policy effective February 21, 2004, and expiring on February 22,
2005, insurance covering all of its directors and officers and certain other
employees of the Company against certain liabilities and reimbursing the Company
for obligations which it incurs as a result of its indemnification of such
directors, officers and employees. Such insurance has been obtained in
accordance with the provisions of Section 726 of the Business Corporation Law of
the State of New York. The annual premium is $350,000.
This report has been provided by the Board of
Directors of the Company.
Elazar Rabbani, Ph.D.
Shahram K. Rabbani
Barry W. Weiner
Marcus A. Conant, M.D.
John J. Delucca
Irwin C. Gerson
Melvin F. Lazar, CPA
John B. Sias
16
PERFORMANCE GRAPH
The graph below compares the five-year cumulative shareholder total return
based upon an initial $100 investment (assuming the reinvestment of dividends)
for Enzo Biochem, Inc. shares of Common Stock with the comparable return for the
New York Stock Exchange Market Value Index and two peer issuer indices selected
on an industry basis. The two peer group indices include: (i) 60 biotechnology
companies engaged in the research and development of diagnostic substances and
(ii) 10 companies engaged in the medical laboratories business. All of the
indices include only companies whose common stock has been registered under
Section 12 of the Securities Exchange Act of 1934 for at least the time frame
set forth in the graph.
The total shareholder returns depicted in the graph are not necessarily
indicative of future performance. The Performance Graph and related disclosure
shall not be deemed to be incorporated by reference in any filing by the Company
under the Securities Act of 1933 or the Securities Exchange Act of 1934, except
to the extent that the Company specifically incorporates the graph and such
disclosure by reference.
COMPARE 5-YEAR CUMULATIVE TOTAL RETURN
AMONG ENZO BIOCHEM, INC.,
NYSE MARKET INDEX AND SIC CODE INDEX
[Data below represents line chart in printed piece.]
ENZO MEDICAL NYSE MARKET BIOTECHNOLOGY
BIOCHEM, INC. LABORATORIES INDEX PEERS
------------- ------------ ----------- -------------
1999 100 100 100 100
2000 269.94 212.06 103.52 198.31
2001 133.87 229.22 101.06 164.68
2002 73.91 160.86 81.81 138.24
2003 115.81 171.01 89.75 165.54
2004 76.2 187.98 102.91 184.49
ASSUMES $100 INVESTED ON AUGUST 1, 1999
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING JULY 31, 2004
COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN OF THE
COMPANY, TWO PEER GROUP INDICES AND THE NYSE MARKET INDEX
1999 2000 2001 2002 2003 2004
------ ------ ------ ------ ------ ------
ENZO BIOCHEM, INC. 100.00 269.94 133.87 73.91 115.81 76.20
MEDICAL LABORATORIES 100.00 212.06 229.22 160.86 171.01 187.98
NYSE MARKET INDEX 100.00 103.52 101.06 81.81 89.75 102.91
BIOTECHNOLOGY PEERS 100.00 198.31 164.68 138.24 165.54 184.49
17
PROPOSAL 2
2005 EQUITY COMPENSATION INCENTIVE PLAN PROPOSAL
We have established a 2005 Equity Compensation Incentive Plan (the "2005
Plan") for the purpose of recruiting and retaining our officers, employees,
directors and consultants. The 2005 Plan authorizes the issuance of options to
purchase shares of common stock and the grant of restricted common stock awards.
Section 162(m) of the Code ("Section 162(m)") limits a corporation's income tax
deduction for compensation paid to each executive officer to $1 million per year
unless the compensation qualifies as "performance-based compensation." In
general, for a grant under the 2005 Plan to qualify as "performance-based
compensation," the 2005 Plan must have been approved by the Company's public
stockholders. The availability of the exemption for awards of "performance-based
compensation" depends upon obtaining approval of the 2005 Plan by the Company's
public stockholders. The Board of Directors determined that it was in the best
interests of the Company to seek stockholder approval at the Annual Meeting.
The discussion below is a summary of material terms of the 2005 Plan. The
discussion below is merely a summary of the Plan and does not provide detailed
information for every aspect of the 2005 Plan.
SUMMARY OF THE 2005 EQUITY COMPENSATION INCENTIVE PLAN
ADMINISTRATION
Administration of the 2005 Plan is carried out by the Compensation
Committee of the Board of Directors. The Compensation Committee may delegate a
portion of its authority under the 2005 Plan to one or more of our officers. As
used in this summary, the term "administrator" means the Compensation Committee
or its delegate.
ELIGIBILITY
Our officers and employees and those of our subsidiaries are eligible to
participate in the 2004 Plan. Our directors and other persons that provide
consulting or advisory services to us and our subsidiaries are also eligible to
participate in the 2005 Plan. The term subsidiary is used in this summary to
refer to both corporate subsidiaries and other entities for which we directly or
indirectly control at least 50% of the equity and any other entity in which we
have a material equity interest.
MAXIMUM SHARES AND AWARD LIMITS
Under the 2005 Plan, the maximum number of shares of common stock that may
be subject to stock options and stock awards is 1,000,000. No one participant
may receive awards for more than 200,000 shares of common stock in any one
calendar year. These limitations, and the terms of outstanding awards, will be
adjusted without the approval of our stockholders as the administrator
determines is appropriate in the event of a stock dividend, stock split,
reclassification of stock or similar events. If an option terminates, expires or
becomes unexercisable, or shares of common stock subject to a stock award are
forfeited, the shares subject to such option or stock award are available under
the first sentence of this paragraph for future awards under the 2005 Plan. In
addition, shares which are issued under any type of award under the 2005 Plan
and which are repurchased or reacquired by us at the original purchase price for
such shares are also available under the first sentence of this paragraph for
future awards under the 2005 Plan.
STOCK OPTIONS
The 2005 Plan provides for the grant of both options intended to qualify as
incentive stock options under Section 422 of the Internal Revenue Code (the
"Code") and options that are not intended to so qualify. Options intended to
qualify as incentive stock options may be granted only to persons who are our
employees or are employees of our subsidiaries which are treated as corporations
for federal income tax purposes. No participant may be granted incentive stock
options that are exercisable for the first time in any calendar year for common
stock having a total fair market value (determined as of the option grant) in
excess of $100,000.
The administrator will select the participants who are granted options and,
consistent with the terms of the 2005 Plan, will prescribe the terms of each
option, including the vesting rules for such option. The option exercise price
cannot be less than the common stock's fair market value on the date the option
is granted, and in the event a participant is deemed to be a 10% owner of our
Company or one of our subsidiaries, the exercise price of an
18
incentive stock option cannot be less than 110% of the common stock's fair
market value on the date the option is granted. The 2005 Plan prohibits
repricing of an outstanding option, and therefore, the administrator may not,
without the consent of the stockholders, lower the exercise price of an
outstanding option. This limitation does not, however, prevent adjustments
resulting from stock dividends, stock splits, reclassifications of stock or
similar events. The option price may be paid in cash or by surrendering shares
of common stock, or a combination of cash and shares of common stock. Options
may be exercised in accordance with requirements set by the administrator. The
maximum period in which an option may be exercised will be fixed by the
administrator but cannot exceed ten years, and in the event a participant is
deemed to be a 10% owner of our Company or one of our corporate subsidiaries,
the maximum period for an incentive stock option granted to such participant
cannot exceed five years. Options generally will be nontransferable except in
the event of the participant's death but the administrator may allow the
transfer of non-qualified stock options through a gift or domestic relations
order to the participant's family members.
Unless provided otherwise in a participant's stock option agreement and
subject to the maximum exercise period for the option, an option generally will
cease to be exercisable upon the earlier of three months following the
participant's termination of service with us or the expiration date under the
terms of the participant's stock option agreement. The right to exercise an
option will expire immediately upon termination if the termination is for
"cause" or a voluntary termination any time after an event that would be grounds
for termination for cause. Upon death or disability, the option exercise period
is extended to the earlier of one year from the participant's termination of
service or the expiration date under the terms of the participant's stock option
agreement.
STOCK AWARDS AND PERFORMANCE BASED COMPENSATION
The administrator also will select the participants who are granted
restricted common stock awards and, consistent with the terms of the 2005 Plan,
will establish the terms of each stock award. A restricted common stock award
may be subject to payment by the participant of a purchase price for shares of
common stock subject to the award, and a stock award may be subject to vesting
requirements or transfer restrictions or both, if so provided by the
administrator. Those requirements may include, for example, a requirement that
the participant complete a specified period of service or that certain
performance objectives be achieved. The performance objectives may be based on
the individual performance of the participant, our performance or the
performance of our subsidiaries, divisions, departments or functions in which
the participant is employed or has responsibility. In the case of a performance
objective for an award intended to qualify as "performance based compensation"
under Section 162(m), the objectives are limited to specified levels of and
increases in our or a business unit's return on equity; total earnings; earnings
per share; earnings growth; return on capital; return on assets; economic value
added; earnings before interest and taxes; earnings before interest, taxes,
depreciation and amortization; sales growth; gross margin return on investment;
increase in the fair market value of the shares; share price (including but not
limited to growth measures and total stockholder return); net operating profit;
cash flow (including, but not limited to, operating cash flow and free cash
flow); cash flow return on investments (which equals net cash flow divided by
total capital); funds from operations; internal rate of return; increase in net
present value or expense targets. Transfer of the shares of common stock subject
to a stock award normally will be restricted prior to vesting.
AMENDMENT AND TERMINATION
No awards may be granted under the 2005 Plan after the tenth anniversary of
the adoption of the 2005 Plan. The Board of Directors may amend or terminate the
2005 Plan at any time, but an amendment will not become effective without the
approval of our stockholders if it increases the aggregate number of shares of
common stock that may be issued under the 2005 Plan, changes the class of
employees eligible to receive incentive stock options or stockholder approval is
required by any applicable law, regulation or rule, including any rule of the
NYSE. No amendment or termination of the 2005 Plan will affect a participant's
rights under outstanding awards without the participant's consent.
FEDERAL INCOME TAX ASPECTS OF THE 2005 PLAN
The following is a brief summary of the federal income tax aspects of
awards that may be made under the 2005 Plan based on existing U.S. federal
income tax laws. This summary provides only the basic tax rules. It does not
describe a number of special tax rules, including the alternative minimum tax
and various elections that may be applicable under certain circumstances. The
tax consequences of awards under the 2005 Plan depend upon the type of award and
if the award is to an executive officer, whether the award qualifies as
performance-based compensation under Section 162(m) of the Code.
19
INCENTIVE STOCK OPTIONS
The recipient of an incentive stock option generally will not be taxed upon
grant of the option. Federal income taxes are generally imposed only when the
shares of stock from exercised incentive stock options are disposed of, by sale
or otherwise. The amount by which the fair market value of the stock on the date
of exercise exceeds the exercise price is, however, included in determining the
option recipient's liability for the alternative minimum tax. If the incentive
stock option recipient does not sell or dispose of the stock until more than one
year after the receipt of the stock and two years after the option was granted,
then, upon sale or disposition of the stock, the difference between the exercise
price and the market value of the stock as of the date of exercise will be
treated as a capital gain, and not ordinary income. If a recipient fails to hold
the stock for the minimum required time, at the time of the disposition of the
stock, the recipient will recognize ordinary income in the year of disposition
in an amount equal to any excess of the market value of the common stock on the
date of exercise (or, if less, the amount realized on disposition of the shares)
over the exercise price paid for the shares. Any further gain (or loss) realized
by the recipient generally will be taxed as short-term or long-term gain (or
loss) depending on the holding period. The Company will not receive a tax
deduction for incentive stock options which are taxed to a recipient as capital
gains; however, the Company will receive a tax deduction if the sale of the
stock does not qualify for capital gains tax treatment.
NONQUALIFIED STOCK OPTIONS
The recipient of stock options not qualifying as incentive stock options
generally will not be taxed upon the grant of the option. Federal income taxes
are generally due from a recipient of nonqualified stock options when the stock
options are exercised. The difference between the exercise price of the option
and the fair market value of the stock purchased on such date is taxed as
ordinary income. Thereafter, the tax basis for the acquired stock is equal to
the amount paid for the stock plus the amount of ordinary income recognized by
the recipient. The Company will take a tax deduction equal to the amount of
ordinary income realized by the option recipient by reason of the exercise of
the option.
STOCK AWARDS
The payment of stock awards under the 2005 Plan will generally be treated
as ordinary compensation income at the time of payment or, in the case of
restricted common stock subject to a vesting requirement, at the time
substantial vesting occurs. A recipient who receives restricted shares which are
not substantially vested, may, within 30 days of the date the shares are
transferred, elect in accordance with Section 83(b) of the Code to recognize
ordinary compensation income at the time of transfer of the shares. The amount
of ordinary compensation income is equal to the amount of any cash and the
amount by which the then fair market value of any common stock received by the
participant exceeds the purchase price, if any, paid by the participant. Subject
to the application of Section 162(m), the Company will receive a tax deduction
for the amount of the compensation income.
SECTION 162(m)
Section 162(m) would render non-deductible to the Company certain
compensation in excess of $1,000,000 in any year to certain officers of the
Company unless such excess is "performance-based compensation" (as defined in
the Code) or is otherwise exempt from Section 162(m) granted under the 2005 Plan
are designed to qualify as performance-based compensation. As described above
with respect to restricted common stock, the administrator may condition such
awards on attainment of one or more performance goals that are intended to
qualify such awards as performance-based compensation.
All future awards under the 2005 Plan will be discretionary and therefore
are not determinable at this time.
Approval of the 2005 Equity Compensation Incentive Plan Proposal requires
the affirmative vote of a majority of the votes cast on the matter by holders of
our outstanding common shares at the Annual Meeting, provided a quorum is
present.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 2 RELATING TO THE
APPROVAL AND ADOPTION OF OUR 2005 EQUITY COMPENSATION INCENTIVE PLAN. PROXIES
SOLICITED BY THE BOARD OF DIRECTORS WILL BE SO VOTED UNLESS SHAREHOLDERS SPECIFY
IN THEIR PROXIES A CONTRARY CHOICE.
20
PROPOSAL 3
APPROVAL OF INDEPENDENT AUDITORS
The Board of Directors has appointed Ernst & Young LLP, as independent
auditors, to audit the accounts of the Company for the fiscal year ending July
31, 2005. The Board of Directors approved the reappointment of Ernst & Young LLP
(which has been engaged as the Company's independent auditors since 1983). Ernst
& Young LLP has advised the Company that neither the firm nor any of its members
or associates has any direct financial interest in the Company or any of its
affiliates other than as auditors. Although the selection and appointment of
independent auditors is not required to be submitted to a vote of shareholders,
the Directors deem it desirable to obtain the shareholders' ratification and
approval of this appointment.
The following table sets forth the aggregate fees billed by Ernst & Young
LLP for the years ended July 31, 2004 and 2003 for audit and non-audit services
(as well as all "out-of-pocket" costs incurred in connection with these
services) and are categorized as Audit Fees, Audit-Related Fees, Tax Fees and
All Other Fees. The nature of the services provided in each such category is
described following the table.
2004 2003
---- ----
AUDIT FEES $215,000 $178,000
AUDIT-RELATED FEES 16,000 12,000
TAX FEES 8,000 75,000
ALL OTHER FEES 0 0
-------- --------
TOTAL FEES $239,000 $265,000
-------- --------
AUDIT FEES - Consists of professional services rendered in connection with
the annual audit of the Company's consolidated financial statements on Form 10-K
and quarterly reviews of the Company's interim financial statements on Form
10-Q. Audit fees also include fees for services performed by Ernst & Young LLP
that are closely related to the audit and in many cases could only be provided
by the Company's independent auditors. Such services include the issuance of
comfort letters and consents related to the Company's registration statements
and capital raising activities, assistance with and review of other documents
filed with the Commission and accounting advice on completed transactions.
AUDIT RELATED FEES - Consists of services related to audits of properties
acquired, due diligence services related to contemplated property acquisitions
and accounting consultations. The 2004 and 2003 fees were incurred in connection
with consultations regarding the Company's implementation of The Sarbanes-Oxley
Act of 2002.
TAX FEES - Consists of services related to corporate tax compliance,
including review of corporate tax returns, review of the tax treatments for
certain expenses and tax due diligence relating to acquisitions.
ALL OTHER FEES - There were no professional services rendered by Ernst &
Young LLP that would be classified as other fees during the years ended July 31,
2004 and 2003.
PRE-APPROVAL POLICIES AND PROCEDURES - The Audit Committee has adopted a
policy that requires advance approval of all audit, audit-related, tax services,
and other services performed by the independent auditor. The policy provides for
pre-approval by the Audit Committee of specifically defined audit and non-audit
services. Unless the specific service has been previously pre-approved with
respect to that year, the Audit Committee must approve the permitted service
before the independent auditor is engaged to perform it. The Audit Committee has
delegated to the Chair of the Audit Committee authority to approve permitted
services provided that the Chair reports any decisions to the Committee at its
next scheduled meeting.
In making its recommendations to ratify the appointment of Ernst & Young
LLP as the Company's independent accountants for the fiscal year ending July 31,
2005, the Audit Committee has considered whether the non-audit services provided
by Ernst & Young LLP are compatible with maintaining the independence of Ernst &
Young LLP.
Representatives of Ernst & Young LLP are expected to be present at the
Annual Meeting with the opportunity to make a statement if they desire to do so
and are expected to be available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 3 RELATING TO THE
RATIFICATION OF THE APPOINTMENT OF THE AUDITORS. PROXIES SOLICITED BY THE BOARD
OF DIRECTORS WILL BE SO VOTED UNLESS SHAREHOLDERS SPECIFY IN THEIR PROXIES A
CONTRARY CHOICE.
21
GENERAL
The Management of the Company does not know of any matters other than those
stated in this Proxy Statement which are to be presented for action at the
meeting. If any other matters should properly come before the meeting, it is
intended that proxies in the accompanying form will be voted on any such matters
in accordance with the judgment of the persons voting such proxies.
Discretionary authority to vote on such matters is conferred by such proxies
upon the persons voting them.
The Company will bear the cost of preparing, assembling and mailing the
Proxy, Proxy Statement and other material which may be sent to the shareholders
in connection with this solicitation. In addition to the solicitation of proxies
by use of the mails, officers and regular employees may solicit the return of
proxies. The Company may reimburse persons holding stock in their names or in
the names of other nominees for their expense in sending proxies and proxy
material to principals. In addition, American Stock Transfer & Trust Company,
6201 15th Avenue, Brooklyn, NY 11219, the Company's transfer agent, has been
engaged to solicit proxies on behalf of the Company for a fee, excluding
expenses, of approximately $5,000. Proxies may be solicited by mail, personal
interview, telephone and telegraph.
ENZO WEBSITE
In addition to the information about the Company and its subsidiaries
contained in this proxy statement, extensive information about the Company can
be found on our website located at www.enzo.com, including information about our
management team, products and services and our corporate governance practices.
The corporate governance information on our website includes the Company's
Corporate Governance Guidelines, the Code of Conduct and the charters of each of
the committees of the Board of Directors. These documents can be accessed at
www.enzo.com. Printed versions of our Corporate Governance Guidelines, our Code
of Conduct and the charters for our Board committees can be obtained, free of
charge, by writing to the Company at: Enzo Biochem, Inc., 60 Executive
Boulevard, Farmingdale, New York 11735, Attn: Corporate Secretary.
This information about Enzo's website and its content, together with other
references to the website made in this proxy statement, is for information only
and the content of the Company's website is not deemed to be incorporated by
reference in this proxy statement or otherwise filed with the Securities and
Exchange Commission.
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON BEING SOLICITED BY
THIS PROXY STATEMENT, UPON THE WRITTEN REQUEST OF ANY SUCH PERSON, A COPY OF THE
ANNUAL REPORT OF THE COMPANY ON FORM 10-K FOR THE YEAR ENDED JULY 31, 2004 (AS
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION) INCLUDING THE FINANCIAL
STATEMENTS AND THE SCHEDULES THERETO. ALL SUCH REQUESTS SHOULD BE DIRECTED TO
SHAHRAM K. RABBANI, SECRETARY, ENZO BIOCHEM, INC., 60 EXECUTIVE BOULEVARD,
FARMINGDALE, NEW YORK 11735.
22
SHAREHOLDER PROPOSALS TO BE PRESENTED
AT THE NEXT ANNUAL MEETING
SHAREHOLDER PROPOSALS. Proposals of shareholders intended to be presented
at the Company's 2005 Annual Shareholder Meeting (i) must be received by the
Company at its offices no later than July 29, 2005 (120 days preceding the one
year anniversary of the Mailing Date), (ii) may not exceed 500 words and (iii)
must otherwise satisfy the conditions established by the Securities and Exchange
Commission for stockholder proposals to be included in the Company's Proxy
Statement and form of proxy for that meeting.
DISCRETIONARY PROPOSALS. Shareholders intending to commence their own proxy
solicitations and present proposals from the floor of the 2005 Annual
Shareholder Meeting in compliance with Rule 14a-4 promulgated under the Exchange
Act of 1934, as amended, must notify the Company of such intentions before
October 12, 2005 (45 days preceding the one year anniversary of the Mailing
Date). After such date, the Company's proxy in connection with the 2005 Annual
Shareholder Meeting may confer discretionary authority on the Board to vote.
By Order of the Board of Directors
Shahram K. Rabbani, Secretary
Dated: November 26, 2004
23
PROXY
ENZO BIOCHEM, INC.
60 EXECUTIVE BOULEVARD, FARMINGDALE, NEW YORK 11735
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Elazar Rabbani, Ph.D. and Shahram K.
Rabbani as Proxies, each with the power to appoint his substitute, and hereby
authorizes them to represent and to vote, as designated below, all the shares of
the Common Stock of Enzo Biochem, Inc. held of record by the undersigned on
November 24, 2004, at the Annual Meeting of Shareholders to be held on January
20, 2005 or any adjournment thereof.
PROPOSAL 1. Election of Barry W. Weiner, John J. Delucca and Melvin F. Lazar,
CPA as Class II Directors.
[ ] FOR all nominees [ ] WITHHOLDING AUTHORITY
(except as marked to the as to all nominees
contrary below)
(INSTRUCTION: To withhold authority to vote for any individual
nominee, print that nominee's name on the line provided below.)
Withheld for:
-----------------------------------
PROPOSAL 2. To consider and vote upon a proposal to approve and adopt our 2005
Equity Compensation Incentive Plan (which we refer to in the
accompanying proxy statement a the "2005 Equity Compensation
Incentive Plan Proposal").
[ ] FOR [ ] AGAINST [ ] ABSTAIN
PROPOSAL 3. Ratification of the appointment of Ernst & Young LLP as
independent auditors for the fiscal year ending July 31, 2005.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the Proxies are authorized to vote upon such
other business as may properly come before the Annual Meeting. This proxy when
properly executed will be voted in the manner directed herein by the undersigned
shareholder. If no direction is made, this proxy will be voted FOR Proposals 1,2
and 3.
PLEASE SIGN EXACTLY AS NAME APPEARS BELOW. WHEN SHARES OF COMMON
STOCK ARE HELD BY JOINT TENANTS, BOTH SHOULD SIGN.
Dated: , 2004 / 2005 (circle one)
-------------------
Signature:
-----------------------------------
Signature if held jointly:
----------------------------
(When signing as attorney, as executor, as
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.)
2
--------------------------------------------------------------------------------
(4) Date Filed: November 26, 2004
--------------------------------------------------------------------------------
ENZO BIOCHEM, INC.
2005 EQUITY COMPENSATION INCENTIVE PLAN
1. PURPOSE
The Enzo Biochem, Inc. 2005 Equity Compensation Incentive Plan is
intended to promote the best interests of and its stockholders by (i) assisting
the Company and its Subsidiaries in the recruitment and retention of persons
with ability and initiative, (ii) providing an incentive to such persons to
contribute to the growth and success of the Company's businesses by affording
such persons equity participation in the Company and (iii) associating the
interests of such persons with those of the Company and its Subsidiaries and
stockholders.
2. DEFINITIONS
As used in the Plan the following definitions shall apply:
"AWARD" means any Option or Restricted Stock Award granted hereunder.
"BOARD" means the Board of Directors of the Company.
"CAUSE" means in the case where the Participant does not have an
employment, consulting or similar agreement in effect with the Company or its
Subsidiaries or where there is such an agreement but it does not define "cause"
(or words of like import), conduct related to the Participant's service to the
Company or a Subsidiary for which either criminal or civil penalties against the
Participant may be sought, misconduct, insubordination, material violation of
the Company's or its Subsidiaries policies, disclosing or misusing any
confidential information or material concerning the Company or any Subsidiary or
material breach of any employment, consulting agreement or similar agreement, or
in the case where the Participant has an employment agreement, consulting
agreement or similar agreement that defines a termination for "cause" (or words
of like import), "cause" as defined in such agreement; provided, however, that
with regard to any agreement that defines "cause" on occurrence of or in
connection with change of control, such definition of "cause" shall not apply
until a change of control actually occurs and then only with regard to a
termination thereafter.
"CODE" means the Internal Revenue Code of 1986, and any amendments
thereto.
"COMMITTEE" means the Compensation Committee of the Board acting as
administrator of the Plan pursuant to Section 3 hereof. The Committee shall
consist solely of three (3) or more Directors who are (i) Non-Employee Directors
(within the meaning of Rule 1 6b-3 under the Exchange Act) for purposes of
exercising administrative authority with respect to Awards granted to Eligible
Persons who are subject to Section 16 of the Exchange Act; (ii) to the extent
required by the rules of the New York Stock Exchange, "independent" within the
meaning of such rules; and (iii) at such times as an Award under the Plan by the
Company is subject to Section 162(m) of the Code (to the extent relief from the
limitation of Section 162(m) of the Code is sought with respect to Awards and
administration of the Awards by a committee of "outside directors" is required
to receive such relief) "outside directors" within the meaning of Section 162(m)
of the Code. Notwithstanding the preceding designation of the Compensation
Committee and the qualifications for membership on the Committee, prior to the
date that the Company has a class of equity securities registered under the
Exchange Act, the "Committee" means the Board.
1
"COMMON STOCK" means the common stock, $0.01 par value, of the Company.
"COMPANY" means Enzo Biochem, Inc., a New York corporation.
"CONSULTANT" means any person, other than an employee, performing
consulting or advisory services for the Company or any Subsidiary.
"CONTINUOUS SERVICE" means that the Participant's service with the
Company or a Subsidiary, whether as an employee, Director or Consultant, is not
interrupted or terminated. A Participant's Continuous Service shall not be
deemed to have been interrupted or terminated merely because of a change in the
capacity in which the Participant renders service to the Company or a Subsidiary
as an employee, Consultant or Director or a change in the entity for which the
Participant renders such service. The Participant's Continuous Service shall be
deemed to have terminated either upon an actual termination or upon the entity
for which the Participant is performing services ceasing to be a Subsidiary of
the Company. The Committee shall determine whether Continuous Service shall be
considered interrupted in the case of any leave of absence approved by the
Company, including sick leave, military leave or any other personal leave.
"CORPORATION LAW" means the general corporation law of the jurisdiction
of incorporation of the Company.
"DIRECTOR" means a member of the Board.
"DISABILITY" means that a Participant covered by a Company or
Subsidiary-funded long term disability insurance program has incurred a total
disability under such insurance program and a Participant not covered by such an
insurance program has suffered a permanent and total disability within the
meaning of Section 22(e)(3) of the Code or any successor statute thereto.
"ELIGIBLE PERSON" means an employee, officer, Director, consultant or
advisor to the Company or a Subsidiary (including an entity that becomes a
Subsidiary after the adoption of the Plan).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"FAIR MARKET VALUE" means, on any given date, the current fair market
value of the shares of Common Stock as determined as follows:
(i) If the Common Stock is traded on the New York Stock
Exchange or is listed on a national securities exchange, the closing price for
the day of determination as quoted on such market or exchange which is the
primary market or exchange for trading of the Common Stock or if no trading
occurs on such date, the last day on which trading occurred, or such other
appropriate date as determined by the Committee in its discretion, as reported
in The Wall Street Journal or such other source as the Committee deems reliable;
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean between the high and the low asked prices for the Common Stock
for the day of determination; or
(iii) In the absence of an established market for the Common
Stock, Fair Market Value shall be determined by the Committee in good faith.
2
"INCENTIVE STOCK OPTION" means an Option (or portion thereof) intended
to qualify for special tax treatment under Section 422 of the Code.
"NONQUALIFIED STOCK OPTION" means an Option (or portion thereof) which
is not intended or does not for any reason qualify as an Incentive Stock Option.
"OPTION" means any option to purchase shares of Common Stock granted
under the Plan.
"PARTICIPANT" means an Eligible Person who is selected by the Committee
to receive an Option or Restricted Stock Award and is party to any Stock Option
Agreement or Restricted Stock Award Agreement required by the terms of such
Option or Restricted Stock Award.
"PLAN" means this Enzo Biochem, Inc. 2005 Equity Compensation Incentive
Plan.
"RESTRICTED STOCK AWARD" means an award of Common Stock under Section
7.
"SECURITIES ACT" means the Securities Act of 1933 as amended.
"STOCK AWARD AGREEMENT" means a written agreement between the Company
and a Participant setting forth the specific terms and conditions of a
Restricted Stock Award granted to the Participant under Section 7. Each
Restricted Stock Award Agreement shall be subject to the terms and conditions of
the Plan and shall include such terms and conditions as the Committee shall
authorize.
"STOCK OPTION AGREEMENT" means a written agreement between the Company
and a Participant setting forth the specific terms and conditions of an Option
granted to the Participant. Each Stock Option Agreement shall be subject to the
terms and conditions of the Plan and shall include such terms and conditions as
the Committee shall authorize.
"SUBSIDIARY" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if each of the
corporations (other than the last corporation in the unbroken chain) owns stock
possessing at least fifty percent (50%) of the total combined voting power of
all classes of stock in one of the other corporations in such chain.
"TEN PERCENT OWNER" means any Eligible Person owning at the time an
Option is granted more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company or of a Subsidiary. An individual shall,
in accordance with Section 424(d) of the Code, be considered to own any voting
stock owned (directly or indirectly) by or for his brothers, sisters, spouse,
ancestors and lineal descendants and any voting stock owned (directly or
indirectly) by or for a corporation, partnership, estate, trust or other entity
shall be considered as being owned proportionately by or for its stockholders,
partners or beneficiaries.
3. ADMINISTRATION
A. ADMINISTRATION. The Committee shall serve as the administrator of
the Plan. If permitted by the Corporation Law, and not prohibited by the charter
or the bylaws of the Company, the Committee may delegate a portion of its
authority to administer the Plan to an officer or officers of Company designated
by the Committee.
B. POWERS OF THE COMMITTEE. Subject to the provisions of the Plan, and
subject at all times to the terms and conditions of the delegation of authority
from the Board, the Committee shall have the
3
authority to implement, interpret and administer the Plan. Such authority shall
include, without limitation, the authority:
(i) To construe and interpret all provisions of the Plan and
all Stock Option Agreements and Restricted Stock Award Agreements under the
Plan.
(ii) To determine the Fair Market Value of Common Stock.
(iii) To select the Eligible Persons to whom Awards, are
granted from time-to-time hereunder.
(iv) To determine the number of shares of Common Stock covered
by an Option or Restricted Stock Award; determine whether an Option shall be an
Incentive Stock Option or Nonqualified Stock Option; and determine such other
terms and conditions, not inconsistent with the terms of the Plan, of each
Award. Such terms and conditions include, but are not limited to, the exercise
price of an Option, purchase price of Common Stock subject to a Restricted Stock
Award, the time or times when Options or Restricted Stock Awards may be
exercised or Common Stock issued thereunder, the right of the Company to
repurchase Common Stock issued pursuant to the exercise of an Option or a
Restricted Stock Award and other restrictions or limitations (in addition to
those contained in the Plan) on the forfeitability or transferability of
Options, Restricted Stock Awards or Common Stock issued pursuant to Awards. Such
terms may include conditions as shall be determined by the Committee and need
not be uniform with respect to Participants.
(v) To amend, cancel, extend, renew, accept the surrender of,
modify or accelerate the vesting of or lapse of restrictions on all or any
portion of an outstanding Option or Restricted Stock Award; and to determine the
time at which a Restricted Stock Award or Common Stock issued under the Plan may
become transferable or nonforfeitable.
(vi) To prescribe the form of Stock Option Agreements and
Restricted Stock Award Agreements; to adopt policies and procedures for the
exercise of Options or Restricted Stock Awards, including the satisfaction of
withholding obligations; to adopt, amend, and rescind policies and procedures
pertaining to the administration of the Plan; and to make all other
determinations necessary or advisable for the administration of the Plan.
Any decision made, or action taken, by the Committee or in
connection with the administration of the Plan shall be final, conclusive and
binding on all persons having an interest in the Plan.
4. ELIGIBILITY
A. ELIGIBILITY FOR AWARDS. Incentive Stock Options may be granted only
to employees of the Company or Subsidiary. Other Awards may be granted to any
Eligible Person selected by the Committee.
B. SUBSTITUTION AWARDS. The Committee may make Restricted Stock Awards
and may grant Options under the Plan by assumption, substitution or replacement
of stock awards or stock options, granted by another entity (including a
Subsidiary), if such assumption, substitution or replacement is in connection
with an asset acquisition, stock acquisition, merger, consolidation or similar
transaction involving the Company (and/or its Subsidiary) and such other entity
(and/or its Subsidiary). Notwithstanding any provision of the Plan (other than
the maximum number of shares of Common Stock
4
that may be issued under the Plan), the terms of such assumed, substituted or
replaced Restricted Stock Awards or Options shall be as the Committee, in its
discretion, determines is appropriate.
5. COMMON STOCK SUBJECT TO PLAN
A. SHARE RESERVE AND LIMITATIONS ON GRANTS. Subject to adjustment as
provided in Section 9, the maximum aggregate number of shares of Common Stock
that may be (i) issued under the Plan pursuant to the exercise of Options and
(ii) issued pursuant to Restricted Stock Awards is 1,000,000 shares of Common
Stock. No Participant may receive Awards representing more than 200,000 shares
in any one calendar year. This limitation shall be applied as of any date by
taking into account the number of shares available to be made the subject of new
Awards as of such date, plus the number of shares previously issued under the
Plan and the number of shares subject to outstanding Awards as of such date.
B. REVERSION OF SHARES. If an Option or Restricted Stock Award is
terminated, expires or becomes unexercisable, in whole or in part, for any
reason, the unissued or unpurchased shares of Common Stock which were subject
thereto shall become available for future grant under the Plan. Shares of Common
Stock that have been actually issued under the Plan shall not be returned to the
share reserve for future grants under the Plan; except that shares of Common
Stock issued pursuant to a Restricted Stock Award which are repurchased or
reacquired by the Company at the original purchase price of such shares
(including, in the case of shares forfeited back to the Company, no purchase
price), shall be returned to the share reserve for future grant under the Plan.
For avoidance of doubt, this Section 5.B shall not apply to any per Participant
limit set forth in Section 5.A.
C. SOURCE OF SHARES. Common Stock issued under the Plan may be shares
of authorized and unissued Common Stock or shares of previously issued Common
Stock that have been reacquired by the Company.
D. BOOK-ENTRY. Notwithstanding any other provision of the Plan to the
contrary, the Company may elect to satisfy any requirement under the Plan for
the delivery of stock certificates through the use of book-entry.
6. OPTIONS
A. AWARD. In accordance with the provisions of Section 4, the Committee
will designate each Eligible Person to whom an Option is to be granted and will
specify the number of shares of Common Stock covered by such Option. The Stock
Option Agreement shall specify whether the Option is an Incentive Stock Option
or Nonqualified Stock Option, the vesting schedule applicable to such Option and
any other terms of such Option. No Option that is intended to be an Incentive
Stock Option shall be invalid for failure to qualify as an Incentive Stock
Option.
B. EXERCISE PRICE. The exercise price per share for Common Stock
subject to an Option shall be determined by the Committee, but shall comply with
the following:
(i) The exercise price per share for Common Stock subject to a
Nonqualified Stock Option shall be not less than one hundred percent (100%) of
the Fair Market Value on the date of grant.
(ii) The exercise price per share for Common Stock subject to
an Incentive Stock Option:
5
o granted to a Participant who is deemed to be a Ten
Percent Owner on the date such option is granted,
shall not be less than one hundred ten percent (110%)
of the Fair Market Value on the date of grant.
o granted to any other Participant, shall not be less
than one hundred percent (100%) of the Fair Market
Value on the date of grant.
C. MAXIMUM OPTION PERIOD. The maximum period during which an Option may
be exercised shall be determined by the Committee on the date of grant, except
that no Option shall be exercisable after the expiration of ten years from the
date such Option was granted. In the case of an Incentive Stock Option that is
granted to a Participant who is or is deemed to be a Ten Percent Owner on the
date of grant, such Option shall not be exercisable after the expiration of five
years from the date of grant. The terms of any Option may provide that it is
exercisable for a period less than such maximum period.
D. MAXIMUM VALUE OF OPTIONS WHICH ARE INCENTIVE STOCK OPTIONS. To the
extent that the aggregate Fair Market Value of the Common Stock with respect to
which Incentive Stock Options granted to any person are exercisable for the
first time during any calendar year (under all stock option plans of the Company
or any of its Subsidiaries or parent) exceeds $100,000 (or such other amount
provided in Section 422 of the Code), the Options are not Incentive Stock
Options. For purposes of this section, the Fair Market Value of the Common Stock
will be determined as of the time the Incentive Stock Option with respect to the
Common Stock is granted. This section will be applied by taking Incentive Stock
Options into account in the order in which they are granted.
E. NONTRANSFERABILITY. Options granted under the Plan which are
intended to be Incentive Stock Options shall be nontransferable except by will
or by the laws of descent and distribution and during the lifetime of the
Participant shall be exercisable by only the Participant to whom the Incentive
Stock Option is granted. If the Stock Option Agreement so provides or the
Committee so approves, a Nonqualified Stock Option may be transferred by a
Participant through a gift or domestic relations order to the Participant's
family members to the extent in compliance with applicable securities
registration rules. The holder of a Nonqualified Stock Option transferred
pursuant to this section shall be bound by the same terms and conditions that
governed the Option during the period that it was held by the Participant;
provided that unless the Committee approves a subsequent transfer, such Option
shall be nontransferable by the initial transferee of such Option except by will
or by the laws of descent and distribution. Except to the extent transferability
of a Nonqualified Stock Option is provided for in the Stock Option Agreement or
is approved by the Committee, during the lifetime of the Participant to whom the
Nonqualified Stock Option is granted, such Option may be exercised only by the
Participant. No right or interest of a Participant in any Option shall be liable
for, or subject to, any lien, obligation, or liability of such Participant.
F. VESTING AND TERMINATION OF CONTINUOUS SERVICE. Except as provided in
a Stock Option Agreement, the following rules shall apply:
(i) Options will vest as provided in the Stock Option
Agreement. An Option will be exercisable only to the extent that it is vested on
the date of exercise. Vesting of an Option will cease on the date of the
Participant's termination of Continuous Service and the Option will be
exercisable only to the extent the Option is vested on the date of termination
of Continuous Service.
(ii) If the Participant's termination of Continuous Service is
for reason of death or Disability, the right to exercise the Option (to the
extent vested) will expire on the earlier of (a) one (1) year after the date of
the Participant's termination of Continuous Service, or (b) the expiration date
under
6
the terms of the Stock Option Agreement. Until the expiration date, the
Participant or, in the event of the Participant's death (including death after
termination of Continuous Service but before the right to exercise the Option
expires) Participant's heirs, legatees or legal representative may exercise the
Option, except to the extent the Option was previously transferred pursuant to
Section 6.E.
(iii) If the Participant's termination of Continuous Service
is an involuntary termination without Cause or a voluntary termination (other
than a voluntary termination described in Section 6.F(iv)), the right to
exercise the Option (to the extent that it is vested) will expire on the earlier
of (a) three (3) months after the date of the Participant's termination of
Continuous Service, or (b) the expiration date under the terms of the Stock
Option Agreement. If the Participant's termination of Continuous Service is an
involuntary termination without Cause or a voluntary termination (other than a
voluntary termination described in Section 6.F(iv)) and the Participant dies
after his or her termination of Continuous Service but before the right to
exercise the Option has expired, the right to exercise the Option (to the extent
vested) shall expire on the earlier of (x) one (1) year after the date of the
Participant's termination of Continuous Service or (y) the date the Option
expires under the terms of the Stock Option Agreement, and, until expiration,
the Participant's heirs, legatees or legal representative may exercise the
Option, except to the extent the Option was previously transferred pursuant to
Section 6.E.
(iv) If the Participant's termination of Continuous Service is
for Cause or is a voluntary termination at any time after an event which would
be grounds for termination of the Participant's Continuous Service for Cause,
the right to exercise the Option shall expire as of the date of the
Participant's termination of Continuous Service.
G. EXERCISE. An Option, if exercisable, shall be exercised by
completion, execution and delivery of notice (written or electronic) to the
Company of the Option which states (i) the Option holder's intent to exercise
the Option, (ii) the number of shares of Common Stock with respect to which the
Option is being exercised, (iii) such other representations and agreements as
may be required by the Company and (iv) the method for satisfying any applicable
tax withholding as provided in Section 10. Such notice of exercise shall be
provided on such form or by such method as the Committee may designate, and
payment of the exercise price shall be made in accordance with Section 6.H.
Subject to the provisions of the Plan and the applicable Stock Option Agreement,
an Option may be exercised to the extent vested in whole at any time or in part
from time to time at such times and in compliance with such requirements as the
Committee shall determine. A partial exercise of an Option shall not affect the
right to exercise the Option from time to time in accordance with the Plan and
the applicable Stock Option Agreement with respect to the remaining shares
subject to the Option. An Option may not be exercised with respect to fractional
shares of Common Stock.
H. PAYMENT.
(i) Unless otherwise provided by the Stock Option Agreement,
payment of the exercise price for an Option shall be made in cash or a cash
equivalent acceptable to the Committee. Payment of all or part of the exercise
price of an Option may also be made (a) by surrendering shares of Common Stock
to the Company, or (b) if the Common Stock is traded on an established
securities market, payment of the exercise price by a broker-dealer or by the
Option holder with cash advanced by the broker-dealer if the exercise notice is
accompanied by the Option holder's written irrevocable instructions to deliver
the Common Stock acquired upon exercise of the Option to the broker-dealer.
(ii) If Common Stock is used to pay all or part of the
exercise price, the sum of the cash or cash equivalent and the Fair Market Value
(determined as of the date of exercise) of the shares surrendered must not be
less than the exercise price of the shares for which the Option is being
exercised.
7
(iii) On or after the date any Option other than an Incentive
Stock Option is granted, the Committee may determine that payment of the
exercise price may also be made in whole or part in the form of Restricted Stock
or other Common Stock that is subject to a risk of forfeiture or restrictions on
transfer. Unless otherwise determined by the Committee, whenever the exercise
price is paid in whole or in part in accordance with this Section 6.H(iii), the
Stock received by the Participant upon such exercise shall be subject to the
same risks of forfeiture or restrictions on transfer as those that applied to
the consideration surrendered by the Participant, provided that such risks of
forfeiture and restrictions on transfer shall apply only to the same number of
shares received by the Participant as applied to the forfeitable or restricted
shares surrendered by the Participant.
I. NO REPRICING OF OPTIONS. The Committee may not without the approval
of the stockholders of the Company lower the exercise price of an outstanding
Option, whether by amending the exercise price of the outstanding Option or
through cancellation of the outstanding Option and reissuance of a replacement
or substitute Option; provided that stockholder approval shall not be required
for adjustments made in connection with a capitalization event described in
Section 8.B. in order to prevent enlargement, dilution or diminishment of
rights.
J. STOCKHOLDER RIGHTS. No Participant shall have any rights as a
stockholder with respect to shares subject to an Option until the date of
exercise of such Option and the certificate for shares of Common Stock to be
received on exercise of such Option has been issued by the Company.
K. DISPOSITION. A Participant shall notify the Company of any sale or
other disposition of Common Stock acquired pursuant to an Incentive Stock Option
if such sale or disposition occurs (i) within two years of the grant of an
Option or (ii) within one year of the issuance of the Common Stock to the
Participant. Such notice shall be in writing and directed to the Secretary of
the Company.
L. DIRECTORS OPTIONS . When persons, who are not otherwise employees or
executive officers of the Company, are first elected or appointed to serve as
directors on the Company's Board of Directors, such persons shall receive, to
the extent not otherwise issued under any other existing stock option or similar
plan of the Company, options to purchase 15,000 shares of the Company's Common
Stock on the date such persons are first elected or appointed, and will
automatically receive options ("Automatic Director Options" and together with
the Initial Director Options, the "Director Options") to purchase 12,500 shares
of the Company's Common Stock immediately following the date of each annual
meeting of the Company's shareholders, provided, however, that such persons did
not receive Initial Director Options since the most recent grant of Automatic
Director Options and continue to serve as directors of the Company's Board of
Directors. The exercise price for each share subject to a Director Option shall
be equal to the fair market value of the Company's Common Stock on the date of
grant. Each Director Option granted under the Plan shall be exercisable either
in full or in installments at such time or times and during such period as shall
be set forth in the option agreement evidencing such Director Option, subject to
the provisions of the Plan. No Director Option granted to a Reporting Person for
purposes of the Exchange Act, however, shall be exercisable during the first six
(6) months after the date of grant. Director Options shall expire the earlier of
ten (10) years after the date of grant or ninety (90) days after the termination
of the director's service on the Board of Directors.
7. RESTRICTED STOCK AWARDS
Each Restricted Stock Award Agreement for a Restricted Stock Award
shall be in such form and shall contain such terms and conditions as the
Committee shall deem appropriate. The terms and conditions of the Restricted
Stock Award Agreements for Restricted Stock Awards may change from time to time,
and the terms and conditions of separate Restricted Stock Awards need not be
identical, but each
8
Restricted Stock Award shall include (through incorporation of the provisions
hereof by references in the agreement or otherwise) the substance of each of the
following provisions.
(I) PURCHASE PRICE. The Committee may establish a purchase
price for Common Stock subject to a Restricted Stock Award.
(II) CONSIDERATION. The purchase price, if any, of Common
Stock acquired pursuant to the Restricted Stock Award shall be paid either: (a)
in cash at the time of purchase, or (b) in any other form of legal consideration
that may be acceptable to the Committee in its discretion.
(III) VESTING. Shares of Common Stock acquired under a
Restricted Stock Award may, but need not, be subject to a share repurchase
option in favor of the Company in accordance with a vesting schedule to be
determined by the Committee. Any grant or the vesting thereon may be further
conditioned upon the attainment of Performance Objectives established by the
Committee.
(IV) PARTICIPANT'S TERMINATION OF SERVICE OR FAILURE OF
VESTING. In the event of a Participant's termination of Continuous Service
before vesting or other failure of the Common Stock to vest, then, unless
otherwise provided in the Restricted Stock Award Agreement, the Participant
shall forfeit shares of Common Stock held by a Participant under the terms of a
Restricted Stock Award which have not vested and for which no purchase price was
paid by the Participant and the Company may repurchase or otherwise reacquire
(including by way of forfeiture by the Participant) any or all of the shares of
Common Stock held by the Participant which have not vested under the terms of
the Restricted Stock Award Agreement for such Restricted Stock Award and for
which a purchase price was paid by the Participant at such purchase price.
(V) TRANSFERABILITY. Rights to acquire shares of Common Stock
under a Restricted Stock Award shall be transferable by the Participant only
upon such terms and conditions as are set forth in the Restricted Stock Award
Agreement for such Restricted Stock Award, as the Committee shall determine in
its discretion, so long as Common Stock granted under the Restricted Stock Award
remains subject to the terms of the Restricted Stock Award Agreement.
(VI) ADDITIONAL RIGHTS. Any grant may require that any or all
dividends or other distributions paid on the shares acquired under a Restricted
Stock Award during the period of such restrictions be automatically sequestered
and reinvested on an immediate or deferred basis in additional shares of Common
Stock which may be subject to the same restrictions as the underlying Award or
such other restrictions as the Committee shall determine. Unless provided
otherwise in the Restricted Stock Award Agreement, Participants holding shares
of Common Stock subject to restrictions under a Restricted Stock Award Agreement
may exercise full voting rights with respect to the shares.
8. CHANGES IN CAPITAL STRUCTURE
A. NO LIMITATIONS OF RIGHTS. The existence of outstanding Options or
Restricted Stock Awards shall not affect in any way the right or power of the
Company or its stockholders to make or authorize any or all adjustments,
recapitalizations, reorganizations or other changes in the Company's capital
structure or its business, or any merger or consolidation of the Company, or any
issuance of bonds, debentures, preferred or prior preference stock ahead of or
affecting the Common Stock or the rights thereof, or the dissolution or
liquidation of the Company, or any sale or transfer of all or any part of its
assets or business, or any other corporate act or proceeding, whether of a
similar character or otherwise.
B. CHANGES IN CAPITALIZATION. If the Company shall effect (i) any stock
dividend, stock split, subdivision or consolidation of shares, recapitalization
or other capital readjustment, (ii) any merger
9
consolidation, separation of the Company (including a spin-off or split-up),
reorganization, partial or complete liquidation or other distribution of assets
(other than ordinary dividends or distributions) without receiving consideration
therefore in money, services or property, or (iii) any other corporate
transaction having a similar effect, then (iv) the number, class, and per share
price or base amount of shares of Common Stock subject to outstanding Options
and Restricted Stock Awards shall be equitably adjusted by the Committee as it
in good faith determines is required in order to prevent enlargement, dilution,
or diminishment of rights, (v) the number and class of shares of Common Stock
then reserved for issuance under the Plan and the maximum number of shares for
which Awards may be granted to a Participant during a specified time period
shall be adjusted as the Committee deems appropriate to reflect such
transaction, and (vi) the Committee shall make such modifications to the
Performance Objectives for each outstanding Restricted Award as the Committee
determines are appropriate in accordance with Section 2, "Performance
Objectives." The conversion of convertible securities of the Company shall not
be treated as effected "without receiving consideration." The Committee shall
make such adjustments, and its determinations shall be final, binding and
conclusive.
C. MERGER, CONSOLIDATION OR ASSET SALE. If the Company (i) is
dissolved, liquidated, merged or consolidated with another entity, (ii) sells or
otherwise disposes of substantially all of its assets to another entity or (iii)
engages in any transaction (including without limitation a merger or
reorganization in which the Company is the surviving entity) that results in any
person or entity (other than persons who are stockholders or Subsidiaries
immediately prior to the transaction) owning fifty percent (50%) or more of the
combined voting power of all classes of stock of the Company, while Options or
Restricted Stock Awards remain outstanding under the Plan, unless provisions are
made in connection with such transaction for the continuance of the Plan and/or
the assumption or substitution of such Options or Restricted Stock Awards with
new options or stock awards covering the stock of the successor entity, or
parent or Subsidiary thereof, with appropriate adjustments as to the number and
kind of shares and prices, then all outstanding Options and Restricted Stock
Awards which have not been continued, assumed or for which a substituted award
has not been granted shall become exercisable immediately prior to and terminate
immediately as of the effective date of any such merger, consolidation, sale, or
other applicable transaction. In the alternative, the Board may elect, in its
sole discretion, to cancel any outstanding Options and Restricted Stock Awards
and pay or deliver, or cause to be paid or delivered, to the holder thereof an
amount in cash or securities having a value (as determined by the Board acting
in good faith), in the case of Restricted Stock Awards, equal to the formula or
fixed price per share paid to holders of shares of Stock and, in the case of
Options, equal to the product of the number of shares of Stock subject to the
Option multiplied by the amount, if any, by which (A) the formula or fixed price
per share paid to holders of shares of Stock pursuant to such transaction
exceeds (B) the exercise price applicable to such Option.
D. LIMITATION ON ADJUSTMENT. Except as previously expressly provided,
neither the issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, for cash or property,
or for labor or services either upon direct sale or upon the exercise of rights
or warrants to subscribe therefor, or upon conversion of shares or obligations
of the Company convertible into such shares or other securities, nor the
increase or decrease of the number of authorized shares of stock, nor the
addition or deletion of classes of stock, shall affect, and no adjustment by
reason thereof shall be made with respect to, the number, class or price of
shares of Common Stock then subject to outstanding Options or Restricted Stock
Awards.
9. WITHHOLDING OF TAXES
The Company or a Subsidiary shall have the right, before any
certificate for any Common Stock is delivered, to deduct or withhold from any
payment owed to a Participant any amount that is necessary in order to satisfy
any withholding requirement that the Company or Subsidiary in good faith
believes is imposed upon it in connection with Federal, state, or local taxes,
including transfer taxes, as a result of the
10
issuance of, or lapse of restrictions on, such Common Stock, or otherwise
require such Participant to make provision for payment of any such withholding
amount. Subject to such conditions as may be established by the Committee, the
Committee may permit a Participant to (i) have Common Stock otherwise issuable
under an Option or Restricted Stock Award withheld to the extent necessary to
comply with minimum statutory withholding rate requirements for supplemental
income, (ii) tender back to the Company shares of Common Stock received pursuant
to an Option or Restricted Stock Award to the extent necessary to comply with
minimum statutory withholding rate requirements for supplemental income, (iii)
deliver to the Company previously acquired Common Stock, (iv) have funds
withheld from payments of wages, salary or other cash compensation due the
Participant, or (v) pay the Company or its Subsidiary in cash, in order to
satisfy part or all of the obligations for any taxes required to be withheld or
otherwise deducted and paid by the Company or its Subsidiary with respect to the
Option or Restricted Stock Award.
10. COMPLIANCE WITH LAW AND APPROVAL OF REGULATORY BODIES
A. GENERAL REQUIREMENTS. No Option or Restricted Stock Award shall be
exercisable, no Common Stock shall be issued, no certificates for shares of
Common Stock shall be delivered, and no payment shall be made under the Plan
except in compliance with all applicable federal and state laws and regulations
(including, without limitation, withholding tax requirements), any listing
agreement to which the Company is a party, and the rules of all domestic stock
exchanges or quotation systems on which the Company's shares may be listed. The
Company shall have the right to rely on an opinion of its counsel as to such
compliance. Any share certificate issued to evidence Common Stock when a
Restricted Stock Award is granted or for which an Option or Restricted Stock
Award is exercised may bear such legends and statements as the Committee may
deem advisable to assure compliance with federal and state laws and regulations.
No Option or Restricted Stock Award shall be exercisable, no Restricted Stock
Award shall be granted, no Common Stock shall be issued, no certificate for
shares shall be delivered, and no payment shall be made under the Plan until the
Company has obtained such consent or approval as the Committee may deem
advisable from regulatory bodies having jurisdiction over such matters.
B. PARTICIPANT REPRESENTATIONS. The Committee may require that a
Participant, as a condition to receipt or exercise of a particular award,
execute and deliver to the Company a written statement, in form satisfactory to
the Committee, in which the Participant represents and warrants that the shares
are being acquired for such person's own account, for investment only and not
with a view to the resale or distribution thereof. The Participant shall, at the
request of the Committee, be required to represent and warrant in writing that
any subsequent resale or distribution of shares of Common Stock by the
Participant shall be made only pursuant to either (i) a registration statement
on an appropriate form under the Securities Act of 1933, which registration
statement has become effective and is current with regard to the shares being
sold, or (ii) a specific exemption from the registration requirements of the
Securities Act of 1933, but in claiming such exemption the Participant shall,
prior to any offer of sale or sale of such shares, obtain a prior favorable
written opinion of counsel, in form and substance satisfactory to counsel for
the Company, as to the application of such exemption thereto.
11. GENERAL PROVISIONS
A. EFFECT ON EMPLOYMENT AND SERVICE. Neither the adoption of the Plan,
its operation, nor any documents describing or referring to the Plan (or any
part thereof) shall (i) confer upon any individual any right to continue in the
employ or service of the Company or a Subsidiary, (ii) in any way affect any
right and power of the Company or a Subsidiary to change an individual's duties
or terminate the employment or service of any individual at any time with or
without assigning a reason therefor, or (iii) except to the extent the Committee
grants an Option or Restricted Stock Award to such individual, confer on any
individual the right to participate in the benefits of the Plan.
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B. USE OF PROCEEDS. The proceeds received by the Company from the sale
of Common Stock pursuant to the Plan shall be used for general corporate
purposes.
C. UNFUNDED PLAN. The Plan, insofar as it provides for grants, shall be
unfunded, and the Company shall not be required to segregate any assets that may
at any time be represented by grants under the Plan. Any liability of the
Company to any person with respect to any grant under the Plan shall be based
solely upon any contractual obligations that may be created pursuant to the
Plan. No such obligation of the Company shall be deemed to be secured by any
pledge of, or other encumbrance on, any property of the Company.
D. FURTHER RESTRICTIONS ON TRANSFER. Any Award made under the Plan may
expressly provide that all or any part of the shares of Common Stock that are:
(i) to be issued or transferred by the Company upon the exercise of an Option ,
or (ii) no longer subject to a substantial risk of forfeiture and restrictions
on transfer referred to in Section 7 of the Plan, shall be subject to further
restrictions on transfer.
E. FRACTIONAL SHARES. The Company shall not be required to issue
fractional shares pursuant to the Plan. The Committee may provide for
elimination of fractional shares or the settlement of such fraction shares in
cash.
F. RULES OF CONSTRUCTION. Headings are given to the Sections of the
Plan solely as a convenience to facilitate reference, and shall not be used in
interpreting, construing or enforcing any provision hereof. The reference to any
statute, regulation, or other provision of law shall be construed to refer to
any amendment to or successor of such provision of law. To the extent that any
provision of the Plan would prevent any Option that was intended to qualify
under particular provisions of the Code from so qualifying, such provision of
the Plan shall be null and void with respect to such Option, provided that such
provision shall remain in effect with respect to other Options, and there shall
be no further effect on any provision of the Plan.
G. FOREIGN EMPLOYEES. In order to facilitate the making of any grant or
combination of grants under the Plan, the. Committee may provide for such
special terms for Awards to Participants who are foreign nationals, or who are
employed by the Company or any subsidiary outside of the United States, as the
Committee may consider necessary or appropriate to accommodate differences in
local law, tax policy or custom. Moreover, the Committee may approve such
supplements to, or amendments, restatements or alternative versions of, the Plan
as it may consider necessary or appropriate for such purposes without thereby
affecting the terms of the Plan, as then in effect, unless the Plan could have
been amended to eliminate such inconsistency without further approval by the
Stockholders of the Company.
H. CHOICE OF LAW. The Plan and all Stock Option Agreements and
Restricted Stock Award Agreements entered into under the Plan (except to the
extent that any such Stock Option Agreement or Restricted Stock Award Agreement
otherwise provides) shall be governed by and interpreted under the laws of the
jurisdiction of incorporation of the Company excluding (to the greatest extent
permissible by law) any rule of law that would cause the application of the laws
of any jurisdiction other than the laws of the jurisdiction of incorporation of
the Company.
12. AMENDMENT AND TERMINATION
The Board may amend or terminate the Plan from time to time; provided,
however, that with respect to any amendment that (i) increases the aggregate
number of shares of Common Stock that may be issued under the Plan, (ii) changes
the class of employees eligible to receive Incentive Stock Options or (iii)
stockholder approval is required by the terms of any applicable law, regulation,
or rule, including,
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without limitation, any rule of the New York Stock Exchange, or any national
securities exchange on which the Common Stock is publicly traded, each such
amendment shall be subject to the approval of the stockholders of the Company.
Except as specifically permitted by a provision of the Plan (other than Section
3.B.), the Stock Option Agreement or Restricted Stock Award Agreement or as
required to comply with applicable law, regulation or rule, no amendment to the
Plan or a Stock Option Agreement or Restricted Stock Award Agreement shall,
without a Participant's consent, adversely affect any rights of such Participant
under any Option or Restricted Stock Award outstanding at the time such
amendment is made; provided, however, that an amendment that may cause an
Incentive Stock Option to become a Nonqualified Stock Option, and any amendment
that is required to comply with the rules applicable to Incentive Stock Options,
shall not be treated as adversely affecting the rights of the Participant.
13. EFFECTIVE DATE AND DURATION OF PLAN
A. The Plan became effective upon adoption by the Board, subject to
approval within twelve (12) months by the stockholders holding of a majority of
the shares of entitled to vote thereon. Unless and until the plan has been
approved the stockholders of the Company, no Option or Restricted Stock Award
may be exercised, and no shares of Common Stock may be issued under the Plan. In
the event that the stockholders of the Company shall not approve the Plan within
such twelve (12) month period, the Plan and any previously granted Option or
Restricted Stock Award shall terminate.
B. Unless previously terminated, the Plan will terminate ten (10) years
after the earlier of (i) the date the Plan is adopted by the Board, or (ii) the
date the Plan is approved by the stockholders, except that Options and Stock
Awards that are granted under the Plan prior to its termination will continue to
be administered under the terms of the Plan until the Options and Stock Awards
terminate or are exercised.
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