0000950149-01-501575.txt : 20011030
0000950149-01-501575.hdr.sgml : 20011030
ACCESSION NUMBER: 0000950149-01-501575
CONFORMED SUBMISSION TYPE: DEF 14A
PUBLIC DOCUMENT COUNT: 1
CONFORMED PERIOD OF REPORT: 20011207
FILED AS OF DATE: 20011026
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: INVIVO CORP
CENTRAL INDEX KEY: 0000806168
STANDARD INDUSTRIAL CLASSIFICATION: ELECTROMEDICAL & ELECTROTHERAPEUTIC APPARATUS [3845]
IRS NUMBER: 770115161
STATE OF INCORPORATION: DE
FISCAL YEAR END: 0630
FILING VALUES:
FORM TYPE: DEF 14A
SEC ACT: 1934 Act
SEC FILE NUMBER: 000-15963
FILM NUMBER: 1767992
BUSINESS ADDRESS:
STREET 1: 4900 HOPYARD RD STE 210
CITY: PLEASANTON
STATE: CA
ZIP: 94588
BUSINESS PHONE: 5104687600
MAIL ADDRESS:
STREET 1: 4900 HOPYARD RD STE 210
CITY: PLEASANTON
STATE: CA
ZIP: 94588
FORMER COMPANY:
FORMER CONFORMED NAME: SAFETYTEK CORP
DATE OF NAME CHANGE: 19920703
FORMER COMPANY:
FORMER CONFORMED NAME: SENSOR CONTROL CORP
DATE OF NAME CHANGE: 19911023
DEF 14A
1
f76503def14a.txt
DEFINITIVE 14A
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-11(c) or Rule 14a-12
Invivo Corporation
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
INVIVO CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 7, 2001
To the Stockholders of
Invivo Corporation:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Invivo
Corporation ("the Company"), a Delaware corporation, will be held on December 7,
2001 at 10:00 a.m. at the Company's offices located at 4900 Hopyard Rd., Suite
210, Pleasanton, California, 94588 for the following purposes:
1. To elect directors to serve for the ensuing year and until their
successors are elected.
2. To amend the Company's 1994 Stock Option Plan to increase by
250,000 the number of shares covered by the Plan.
3. To ratify the selection of KPMG LLP as independent public auditors
of the Company.
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The Board of Directors has fixed the close of business on October 31, 2001
as the record date for the determination of stockholders entitled to notice of
and to vote at this Annual Meeting and at any adjournment thereof.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE SIGN AND RETURN THE
ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN THE ENCLOSED POSTPAID ENVELOPE. IF YOU
ARE ABLE TO ATTEND THE MEETING AND WISH TO VOTE YOUR SHARES PERSONALLY, YOU MAY
DO SO AT ANY TIME BEFORE THE PROXY IS EXERCISED.
By Order of the Board of Directors
JAMES B. HAWKINS
Secretary
November 14, 2001
INVIVO CORPORATION
PROXY STATEMENT
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors of
Invivo Corporation (the "Company") for use at the Annual Meeting of Stockholders
to be held on December 7, 2001 at 10:00 a.m. at the Company's offices located at
4900 Hopyard Rd., Suite 210, Pleasanton, California, 94588, including at any
adjournment of the Annual Meeting.
VOTING
The record date for the determination of stockholders entitled to notice of
and to vote at the Annual Meeting or any adjournment thereof has been fixed as
October 31, 2001. As of that date, there were outstanding 4,423,249 shares of
Common Stock of the Company. Each stockholder will be entitled to one vote for
each share of common stock held on all matters to be voted upon. Abstentions are
considered as shares present and entitled to vote and therefore will have the
same effect as a vote against a matter presented at the meeting. Broker
non-votes are considered as shares not entitled to vote with respect to such
matters, but are counted toward the establishment of a quorum. Subject to prior
revocation, all shares represented at the meeting by properly executed proxies
will be voted in accordance with specifications on the proxy. If no
specification is made, the shares will be voted in favor of: (i) the election of
nominees provided for herein as directors; and (ii) the amendment of the
Company's 1994 Stock Option Plan to increase by 250,000 the number of shares
covered by the Plan and (iii) the ratification of KPMG LLP as independent public
auditors of the Company.
REVOCABILITY OF PROXIES
Any person giving a proxy pursuant to this solicitation has the power to
revoke it at any time before it is voted. It may be revoked by filing with the
Secretary of the Company at the Company's principal executive office, 4900
Hopyard Rd., Suite 210, Pleasanton, California, 94588, a written notice of
revocation or a duly executed proxy bearing a later date, or by attending the
Annual Meeting and voting in person.
SOLICITATION
The Company will bear the entire cost of solicitation of proxies, including
preparation, assembly, printing and mailing of this proxy statement, the
enclosed proxy and any additional information furnished to stockholders. Copies
of solicitation material will be furnished to stockholders, and to brokerage
houses, fiduciaries and custodians holding in their names shares of Common Stock
beneficially owned by others to forward to such beneficial owners. The Company
may reimburse persons representing beneficial owners of shares for their
expenses in forwarding solicitation material to such beneficial owners. Original
solicitation of proxies by mail may be supplemented by telephone, telegram or
personal solicitation by directors, officers or other regular employees of the
Company. No additional compensation will be paid for any such services.
This proxy statement and the accompanying proxy card are being mailed to
all stockholders on or about November 14, 2001.
PROPOSAL 1
NOMINATION AND ELECTION OF DIRECTORS
Each director to be elected will hold office until the next annual meeting
of stockholders and until his successor is elected and has qualified, or until
his death, resignation or removal. All of the nominees listed below are
currently directors of the Company. There are no family relationships among
executive officers or directors of the Company, except that Mr. Hawkins, the
President, Chief Executive Officer, Secretary and a director, and Mr. Glenn, the
Chief Financial Officer, are brothers-in-law.
MANAGEMENT RECOMMENDS A VOTE IN FAVOR OF EACH NAMED NOMINEE
Shares of Common Stock represented by executed proxies will be voted, if
authority to do so is not withheld, for the election of the four nominees named
below. In the event that any nominee should become unavailable for election as a
result of an unexpected occurrence, such shares will be voted for the election
of such substitute nominee as the Board of Directors may propose. Each person
nominated for election has agreed to serve if elected, and the Board of
Directors have no reason to believe that any nominee will be unavailable to
serve. The four candidates receiving the highest number of the affirmative votes
cast at the Annual Meeting will be elected directors of the Company. The
Company's Board of Directors is presently set at five members, and thus the
Board of Directors is proposing at this time to leave one vacancy on the Board
of Directors. Executed proxies will not be voted for the election of more than
four directors.
NOMINEES:
The names, ages and periods of service on the Company's Board of Directors
of the nominees, and certain other information about them, is set forth below:
DIRECTOR
NAME AGE SINCE
---- --- --------
James B. Hawkins............................................ 46 1985
Ernest C. Goggio(1,2)....................................... 78 1986
George S. Sarlo(1,2)........................................ 63 1991
Laureen DeBuono(1,2)........................................ 44 1998
---------------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
Mr. Hawkins has been President, Chief Executive Officer and a director of
the Company, and its predecessor, since August 1985. He has served as Secretary
of the Company since September 1986. Mr. Hawkins served as a director of Pillar
Corporation, a stockholder of the Company, from August 1987 to August 1999.
Mr. Goggio has served as Chairman of the Board of Directors of the Company
since November 1986. He has been President and Chairman of the Board of
Directors of Pillar Corporation since 1966. Pillar Corporation, based in
Milwaukee, Wisconsin, manufactures heat induction and melting equipment for the
metals industry.
Mr. Sarlo has been a director of the Company since January 1991. He has
been a general partner of the Walden Group of venture capital funds since 1974.
Mr. Sarlo also founded and since 1973 has served as Chairman of the Board of
Directors of Ashfield and Co. Inc., an investment management company.
Ms. DeBuono has been a director of the Company since February 1998. She is
currently Principal of CEO Management Advisors. From October 1999 to October
2000, Ms. DeBuono was Chief Operating Officer and Chief Financial Officer of
More.com, an online health products retailer. From October 1998 to October 1999,
Ms. DeBuono was Chief Operating Officer and Chief Financial Officer of ReSound
Corporation, a hearing health care company that manufactures and markets
advanced hearing devices. From 1992 to mid-1998, Ms. DeBuono was Executive Vice
President and General Counsel of Nellcor Puritan Bennett Inc., a medical device
company.
2
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock as of September 30, 2001 by
(i) each person known by the Company to beneficially own more than 5% of the
Company's Common Stock, (ii) each director and nominee to the Board of
Directors, (iii) the Chief Executive Officer and each other executive officer of
the Company as of June 30, 2001 whose salary and bonus for the year ended June
30, 2001 exceeded $100,000, and (iv) all officers and directors of the Company
as a group.
AMOUNT OF
BENEFICIAL PERCENTAGE
NAME* OWNERSHIP(1) OF SHARES
----- ------------ ----------
Heartland Advisors.......................................... 563,800(2) 12.7%
789 North Water Street
Milwaukee, WI 53202
Willow Creek Capital Management............................. 394,000(3) 8.9%
17 East Sir Francis Blvd. Suite 100
Larkspur, CA 94939
Ernest C. Goggio............................................ 393,786(4) 8.8%
James B. Hawkins............................................ 313,316(5) 6.9%
Botti Brown Asset Management................................ 308,650(6) 7.0%
655 Montgomery Street, Suite 600
San Francisco, CA 94111
Dimensional Fund Advisors, Inc. ............................ 287,600(7) 6.5%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
George S. Sarlo............................................. 112,037(8) 2.5%
John F. Glenn............................................... 42,500(9) 1.0%
F. Larry Young.............................................. 36,000(10) 0.8%
Stuart Baumgarten........................................... 30,000(11) 0.7%
Laureen DeBuono............................................. 26,000(12) 0.6%
All executive officers and directors as a group (7
persons).................................................. 955,515(13) 20.0%
---------------
* The address of each of the directors or executive officers is c/o Invivo
Corporation, 4900 Hopyard Rd. Suite 210, Pleasanton, CA 94588
(1) Each of the individuals included in the table has sole voting and
investment power over the shares listed, subject to the right of his or her
spouse, if any, under applicable community property laws.
(2) Based upon Schedule 13G filed with the Securities and Exchange Commission
on January 22, 2001
(3) Based upon Schedule 13G filed with the Securities and Exchange Commission
on February 6, 2001
(4) Includes 113,986 shares of Common Stock owned by Pillar Corporation, of
which Mr. Goggio is the President and majority stockholder, 210,800 shares
of Common Stock owned by the Pillar Charitable Remainder Unitrust, of which
Mr. Goggio is the sole trustee, and 46,000 shares of Common Stock issuable
upon exercise of stock options exercisable within 60 days.
(5) Includes 140,000 shares of Common Stock issuable upon exercise of stock
options exercisable within 60 days.
(6) Based upon Schedule 13G filed with the Securities and Exchange Commission
on February 8, 2001
(7) Based upon Schedule 13G filed with the Securities and Exchange Commission
on February 2, 2001
(8) Includes 46,000 shares of Common Stock issuable upon exercise of stock
options exercisable within 60 days.
(9) Includes 42,500 shares of Common Stock issuable upon exercise of stock
options exercisable within 60 days.
3
(10) Includes 36,000 shares of Common Stock issuable upon exercise of stock
options exercisable within 60 days.
(11) Includes 30,000 shares of Common Stock issuable upon exercise of stock
options exercisable within 60 days.
(12) Includes 26,000 shares of Common Stock issuable upon exercise of stock
options exercisable within 60 days.
(13) Includes 366,500 shares of Common stock issuable upon exercise of stock
options exercisable within 60 days.
BOARD AND BOARD COMMITTEE MEETINGS
During the year ended June 30, 2001, the Board of Directors held four
meetings. All of the directors attended all of the Board meetings.
During the year ended June 30, 2001, the Audit Committee of the Board of
Directors held two meetings. Each Committee member attended the meetings.
During the year ended June 30, 2001, the Compensation Committee held one
meeting. Each Committee member attended the meeting. The Compensation Committee
determines the overall compensation policy for senior management of the Company,
and recommends to the Board of Directors new compensation programs or changes in
existing programs which the Committee finds appropriate.
The Board has not established a nominating committee.
4
EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation of
the Chief Executive Officer of the Company and the other most highly compensated
executive officers of the Company as of June 30, 2001 whose total salary and
bonus for the fiscal year ended June 30, 2001 exceeded $100,000 for services in
all capacities to the Company and its subsidiaries during such fiscal year.
SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION AWARDS
-------------------------------
ANNUAL COMPENSATION SECURITIES
FISCAL -------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#) COMPENSATION($)(1)
--------------------------- ------ --------- -------- ---------- ------------------
James Hawkins......................... 2001 265,000 50,000 9,000 2,811
President and Chief Executive
Officer 2000 250,000 60,000 35,000 1,935
1999 241,000 75,000 35,000 1,881
John F. Glenn......................... 2001 155,000 40,000 4,000 2,532
Vice President Of Finance/ 2000 145,000 42,500 11,000 1,920
Chief Financial Officer 1999 131,000 50,000 19,000 1,605
F. Larry Young........................ 2001 150,000 40,000 4,000 2,906
Vice President of Operations 2000 140,000 42,500 11,000 1,826
1999 121,000 50,000 19,000 1,454
Stuart Baumgarten..................... 2001 200,000 50,000 4,000 2,170
President, Invivo Research 2000 188,000 52,000 15,000 1,520
1999 180,000 45,000 15,000 1,289
---------------
NOTES:
(1) The amounts shown represent Company contributions to the Company's 401(k)
Savings Plan.
STOCK OPTIONS
The following table sets forth the stock options granted to the named
executive officers under the Company's 1994 Stock Option Plan during the fiscal
year ended June 30, 2001
OPTION GRANTS IN LAST FISCAL YEAR
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE OR GRANT DATE
OPTIONS GRANTED EMPLOYEES IN BASE PRICE EXPIRATION PRESENT VALUE
NAME (#)(1) FISCAL YEAR ($/SH) DATE ($)(2)
---- --------------- ------------ ----------- ---------- -------------
James Hawkins.................... 9,000 20.6% $8.00 3/15/11 $43,947
John F. Glenn.................... 4,000 9.2% $8.00 3/15/11 $19,532
F. Larry Young................... 4,000 9.2% $8.00 3/15/11 $19,532
Stuart Baumgarten................ 4,000 9.2% $8.00 3/15/11 $19,532
---------------
(1) Stock options become exercisable on a cumulative basis as to one-quarter of
the total number of shares covered thereby on each of the first, second,
third and fourth anniversary dates of the grant of the option. The term of
each option is ten years.
(2) The Black-Scholes option pricing model was used assuming no dividend yield,
a risk free rate of 5.3%, an expected stock price volatility of .68, a
forfeiture rate of .05 and an average expected life of five years. This
valuation is reported pursuant to the rules of the Securities and Exchange
Commission and there can be no assurance that the actual share value of the
options will approximate the value ascribed by the Black-Scholes model.
5
The following table sets forth the number of options exercised and the
value realized upon exercise by the named executive officers during the fiscal
year ended June 30, 2001 and the value of outstanding options held by such
executive officers as of June 30, 2001.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
SHARES FY-END(#) FY-END($)
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE(#) REALIZED($) UNEXERCISABLE UNEXERCISABLE(1)
---- -------------- ----------- --------------- ----------------
James Hawkins....................... -- -- 131,250/52,750 255,600/14,220
John F. Glenn....................... -- -- 38,750/21,750 29,670/6,320
F. Larry Young...................... -- -- 32,250/21,750 12,900/6,320
Stuart Baumgarten................... -- -- 26,250/22,750 --/6,320
---------------
(1) The value of unexercised options is calculated by multiplying the number of
options outstanding by the difference between the option exercise price and
the June 29, 2001 closing price of $9.58 per share of the Company's common
stock as reported on The Nasdaq National Market.
EMPLOYMENT AGREEMENTS AND CHANGE-OF-CONTROL ARRANGEMENTS
In October 2001, the Company renewed one year employment agreements with
each of the named executive officers and four additional key employees pursuant
to which the Company has agreed to pay a specific severance amount if the
executive officer is employed by the Company on the occurrence of the change in
control, unless the officer resigns voluntarily or is terminated with cause
within 90 days following a change of control of Invivo. For James B. Hawkins,
the severance payment will be $814,500, an amount equal to two times the
aggregate of the executive officer's annual base salary and target bonus plus
other benefits and expenses. For Stuart Baumgarten, John F. Glenn, and F. Larry
Young, the severance payment will be $262,000, $220,000 and $214,500,
respectively, which amounts are equal to the aggregate of each executive
officer's annual base salary and target bonus plus other benefits and expenses.
In addition to the severance payment, upon a change of control of Invivo, any
unvested stock option to purchase shares of common stock of Invivo then held by
the executive officer will become 100% vested and exercisable immediately prior
to such change of control. If the Company terminates Mr. Hawkins, Mr. Glenn, Mr.
Young or Mr. Baumgarten without just cause, but not following a change of
control of Invivo, the Company has agreed to pay such executive officer one-half
of the severance payment amount that such executive officers would have received
for a termination without cause after a change of control of Invivo. These
agreements further established each executive officer's base salary and target
annual bonus for the one-year term of the agreements.
DIRECTOR COMPENSATION
Members of the Board of Directors who are not officers of the Company are
entitled to receive fees of $600 for, and reimbursement for travel expenses
incurred in connection with, each Board of Directors meeting attended, except
for Ms. DeBuono who receives $1,500 for each board meeting attended. Ms. DeBuono
also receives an annual retainer fee for consulting services of $10,000.
Mr. Goggio, Mr. Sarlo and Ms. DeBuono each received options to purchase
4,000 shares of the Company's Common Stock in fiscal 2001 pursuant to the
automatic grant provisions of the 1994 Stock Option Plan. All elected directors
will be entitled to receive additional annual grants of options to purchase
4,000 shares of Common Stock under the 1994 Stock Option Plan on the date of the
annual meeting of stockholders and each year for as long as they serve as
independent directors of the Company.
6
The Company has entered into indemnification agreements with each of its
directors and executive officers. Such agreements require the Company to
indemnify such individuals to the full extent permitted by law.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Goggio, Mr. Sarlo and Ms. DeBuono serve as the Compensation Committee
of the Board of Directors. None of the members of the Compensation Committee are
an employee of the Company. Mr. Goggio is the President and Chairman of the
Board of Pillar Corporation. See "Director Compensation" above for a description
of options granted to, and consulting fees paid to, Messrs. Goggio and Sarlo and
Ms. DeBuono.
COMPENSATION COMMITTEE REPORT
COMPENSATION COMMITTEE
The Compensation Committee currently consists of Mr. Goggio, Mr. Sarlo and
Ms. DeBuono. The Compensation Committee determines on an annual basis the cash
compensation to be paid to the Chief Executive Officer and the senior executive
officers of the Company. In doing so, the Compensation Committee is apprised of
stock option awards made to these executives by the Board of Directors.
The Compensation Committee believes that in order for the Company to
succeed it must be able to attract and retain qualified executive officers. In
determining the type and amount of executive officer compensation, the
objectives of the Compensation Committee are to provide levels of base
compensation and bonuses that will attract and retain talented executive
officers and align their interests with the success of the Company. The
Company's executive officer compensation program is comprised of base salary, an
annual cash bonus, and stock options. The Company's compensation policies seek
to enhance the profitability of the Company and increase stockholder value.
BASE SALARIES
The Company's policy is to maintain base salaries competitive with salaries
paid to similarly situated executive officers in other middle market companies
(i.e. those with sales of $100 million or less) that are believed to be
comparable for compensation purposes by the Compensation Committee. Adjustments
to base compensation will generally be made based upon competitive market
conditions as well as assigned responsibility and performance as measured
against specific goals and objectives of the Company and individual employees.
The Compensation Committee has not established a particular group or listing of
generally comparable companies for this purpose and may evaluate different
companies on a year to year basis.
BONUSES
An integral part of the Company's compensation of senior executive officers
has been the annual payment of cash bonuses. The amount of these bonuses is
based in part on the review of compensation practices of comparable size
companies referred to in the above paragraph. Further, the amount of bonuses in
any year is significantly dependent on the Company's operating performance
relative to its goals, as well as to other considerations that may be deemed
relevant in any given year or instance by the Compensation Committee.
CHIEF EXECUTIVE OFFICER COMPENSATION
In determining the compensation of Mr. Hawkins, the Compensation Committee
evaluated Mr. Hawkins' responsibilities and performance and the overall results
of the Company to determine the total compensation paid. Mr. Hawkins' base
compensation level increased to $265,000 for fiscal 2001 as compared to $250,000
for fiscal 2000. For fiscal 2001, Mr. Hawkins received a bonus of $50,000 under
the executive bonus plan.
Ernest C. Goggio, Chairman
George Sarlo
Laureen DeBuono
7
AUDIT COMMITTEE REPORT
The management of Invivo Corporation is responsible for establishing and
maintaining internal controls and for preparing the financial statements of
Invivo Corporation. The independent auditors are responsible for auditing the
financial statements. It is the responsibility of the Audit Committee to oversee
these activities. The charter of the Audit Committee is attached as Appendix A
to this Proxy Statement.
The Audit Committee has reviewed and discussed with Invivo management the
audited financial statements for the fiscal year ended June 30, 2001. Based on
that review and discussion, the Audit Committee recommended to the Board of
Directors that the audited financial statements be included in Invivo
Corporation's Annual Report on Form 10K for the fiscal year ended June 30, 2001.
In December, 2000 the Audit Committee discussed with KPMG LLP, the
Company's independent auditors, the matters required to be discussed by
Statement on Auditing Standards (SAS) No. 61, Communications with Audit
Committees, for the fiscal year ended June 30, 2000. At the December, 2001 Audit
Committee meeting, any items required to be communicated by the independent
auditors in accordance with SAS 61 for the fiscal year ended June 30, 2001 will
be discussed.
Laureen DeBuono, Chairman
George Sarlo
Ernest C. Goggio
BOARD OF DIRECTORS REPORT
The Board of Directors administers the stock option plans including the
grants of stock options.
The specific objective of the Stock Option Plan is to align the long-term
interests of the Company's officers and employees with those of stockholders by
creating a strong link between executive pay and stockholder return.
Additionally, because options are subject to forfeiture if the employee leaves
the Company prior to their becoming exercisable, options provide an incentive to
remain with the Company long term. The Board of Directors makes specific awards
of options based on an individual's ability to impact Company-wide performance
and in light of the total compensation appropriate for the individual's
position. A total of 21,000 stock options were granted to executive officers in
fiscal 2001. Of these stock options, 9,000 were granted to Mr. Hawkins.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who beneficially own more than ten percent
of the Company's common Stock to file reports of their initial ownership of the
Company's Common Stock and subsequent changes in such ownership with the
Securities and Exchange Commission (the "SEC") within prescribed time periods.
Officers, directors and greater than ten percent shareholders are required by
SEC regulations to furnish the Company copies of all Section 16(a) forms filed.
Based solely on review of copies of SEC Forms 3, 4, and 5, and any
amendments to such forms furnished to the Company, the Company believes that
with respect to the Company's most recent fiscal year all Section 16(a) filing
obligations were met on a timely basis.
8
PERFORMANCE GRAPH
The following performance graph compares the performance of the Company's
Common Stock to the NASDAQ Stock Market (U.S.) Index and to the NASDAQ
Non-Financial Index. Given the diversity of its businesses, the Company was
unable to identify a peer group of companies based on a common business. The
graph assumes that the value of the investment in the Company's common stock and
each index was $100 at June 30, 1996 and that all dividends were reinvested.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG INVIVO CORPORATION, THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE NASDAQ NON-FINANCIAL INDEX
(Invivo Comparison Chart)
* $100 invested on 6/30/96 in stock or index -- including reinvestment of
dividends. Fiscal year ending June 30.
--------------------------------------------------------------------------------
6/96 6/97 6/98 6/99 6/00 6/01
--------------------------------------------------------------------------------
INVIVO CORPORATION 100.00 73.81 126.19 125.00 104.76 91.24
NASDAQ STOCK MARKET
(U.S.) 100.00 121.60 160.06 230.22 340.37 184.51
NASDAQ
NON-FINANCIAL 100.00 117.48 153.30 227.00 351.23 178.97
--------------------------------------------------------------------------------
PROPOSAL 2
APPROVAL OF AMENDMENT TO 1994 STOCK OPTION PLAN
In October 1994, the Company adopted an Incentive Stock Option Plan (the
"Plan"). The options granted under the Plan may be either incentive stock
options, within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended, or non-qualified stock options. The Plan is designed to enhance the
Company's ability to attract and retain qualified employees, directors and
consultants. In addition, the
9
Plan is designed to provide an inducement to selected employees and other
persons to advance the interests of the Company by providing or increasing the
ownership interest of such persons in the Company. Approximately 350 people are
currently eligible to participate in the Plan which includes directors,
non-director officers, and employees of the Company and its subsidiaries
including officers who are not executive officers. The Plan is interpreted and
is administered by the Board of Directors which has the authority to determine
the recipients of options under the Plan, the time of grant of the options, and
the number of shares covered by the grant and certain other terms and provisions
of each option granted. Any rights granted under the Plan must be granted within
ten years of the Plan's effective date of October 6, 1994.
Each person who was a director and not an employee of the Company on the
date of adoption of the Plan received a non-qualified stock option covering
8,000 shares of Common Stock of the Company. Thereafter, each director of the
Company who is not an employee of the Company receives a non-qualified stock
option covering 4,000 shares of Common Stock of the Company immediately
following each annual meeting of stockholders of the Company (provided that a
person whose term expires on such day and who is not reelected to the Board of
Directors shall not receive such an option). Each such option has an exercise
price equal to the fair market value of the Common Stock of the Company on the
date of the annual meeting to which it relates. Each of the non-employee
nominees for director at this meeting who is elected will receive a
non-qualified option covering 4,000 shares.
Unless the stock option agreement executed by the optionee expressly
otherwise provides, (i) an option granted to an officer or other key employee or
consultant shall become exercisable on a cumulative basis as to one-quarter of
the total number of shares covered thereby on each of the first, second, third,
and fourth anniversary dates of the grant of the option, (ii) an option granted
to a director who is not an employee of the Company shall become exercisable on
a cumulative basis as to one-half of the total number of shares covered thereby
on each of the first and second anniversary dates of the date of grant of the
option, and (iii) an option shall not be exercisable after the expiration of ten
years from the date of grant. Any option granted to an executive officer or
director of the Company shall in no event be exercisable until the elapse of six
months from the date of its grant.
The exercise price for incentive stock options granted under the Plan may
not be less than 100% of the fair market value of the underlying shares as of
the date of grant, provided that if the recipient holds 10% or more of the
aggregate voting power of the Company, then the exercise price must not be less
than 110% of such fair market value. The exercise price of any non-qualified
stock option shall not be less than 85% of the fair market value of the
underlying shares on the date of grant. On October 24, 2001, the closing sale
price of Invivo's Common Stock as reported on the NASDAQ Stock Market was $12.95
per share. Payment of the exercise price shall be made in cash or in shares of
the outstanding Common Stock of the Company which have been held by the optionee
for at least six months (or such other period as is specified by the Board of
Directors) or in a combination of cash and such stock, except that the Board of
Directors in its sole discretion may authorize payment by any optionee (for all
or part of his or her purchase price) by a promissory note or such other form of
legal consideration that may be acceptable to the Board of Directors. Payment
may also be made by delivering a copy of irrevocable instructions to a broker to
deliver promptly to the Company the amount of sale or loan proceeds sufficient
to pay the purchase price, and, if required, the amount of any federal, state,
local or foreign withholding taxes.
The grant of an incentive stock option should have no tax effect on the
Company or the optionee to whom it is granted, and there generally is no tax
upon exercise of the option. If an optionee does not dispose of shares acquired
upon exercise of the option within two years of the date of granting the option,
nor within one year after exercise of the option, any gain realized by the
optionee on the subsequent sale of such shares is treated as a long-term capital
gain for federal income tax purposes. If the shares are sold prior to the
expiration of such periods, the lesser of (a) the difference between the
exercise price and the value of the stock at the date of exercise and (b) the
amount realized on disposition over the purchase price is treated as
compensation to the optionee taxable as ordinary income. The excess gain, if
any, is treated as capital gain (which will be short-term or long-term capital
gain depending upon the length of time the shares were held). The Company is
allowed a deduction for tax purposes only to the extent, and at the time, that
the optionee receives ordinary income by reason of the optionee's sale of
shares.
10
The grant of a non-qualified stock option under the 1994 Option Plan also
should have no tax effect on the Company or the recipient of the grant. The
spread between the exercise price and the market value of the Company's Common
Stock on the date of exercise of a non-qualified option is taxable to the
optionee as ordinary income on the exercise of the option, and the Company has a
corresponding deduction.
Stockholder approval is required to increase the aggregate number of shares
of the Company's Common Stock subject to options that may be granted under the
Plan. The Plan currently provides for the grant of options to purchase an
aggregate of 800,000 shares of the Company's Common Stock. Options to purchase
752,475 shares have been granted and are outstanding under the Plan as of
September 30, 2001, of which 300,000 of such options were granted to directors
and 163,500 to non-director officers.
The Plan does not require that awards be made to any particular person or
persons other than the annual awards to non-employee directors. By way of
background, during fiscal 2001, options to purchase 55,600 shares were awarded
under the Plan. The number of shares subject to options granted to the Named
Executive Officers under the Plan is set forth in the table above under
"Executive Compensation -- Option Grants in Last Fiscal Year."
The Company's Board of Directors has approved and submitted to the
stockholders of the Company amendments to the Plan to increase by 250,000 shares
(to an aggregate of 1,050,000 shares) the number of shares of the Company's
Common Stock subject to options that may be granted under the Plan.
The amendment to the Plan requires approval by a majority of the
outstanding shares of Common Stock of the Company represented at the annual
meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE IN FAVOR OF THESE
AMENDMENTS TO THE PLAN
PROPOSAL 3
RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC AUDITORS
The Board of Directors has selected KPMG LLP as the Company's independent
public auditors for the year ended June 30, 2002 and has further directed that
management submit the selection of independent public auditors for ratification
by the stockholders at the Annual Meeting. KPMG LLP has audited the Company's
financial statements since 1985. Representatives of KPMG LLP are expected to be
present at the Annual Meeting, and will have an opportunity to make a statement
if they so desire and will be available to respond to appropriate questions.
Stockholder ratification of the selection of KPMG LLP as the Company's
independent public auditors is not required by the Company's Bylaws or
otherwise. However, the Board is submitting the selection of KPMG LLP to the
stockholders for ratification as a matter of good corporate practice. In the
event the stockholders fail to ratify the selection, the Board will reconsider
whether or not to retain that firm.
Even if the selection is ratified, the Board in its discretion may direct
the appointment of a different independent accounting firm at any time during
the year if the Board feels that such a change would be in the best interests of
the Company and its stockholders. The affirmative vote of the holders of a
majority of the outstanding shares of Common Stock represented at the Annual
Meeting will be required to ratify the selection of KPMG LLP.
FEES PAID TO THE INDEPENDENT AUDITORS
During fiscal 2001, the aggregate fees billed by KPMG LLP for professional
services were as follows:
AUDIT FEES
Amounts billed by KPMG LLP related to the fiscal 2001 financial audit and
for the review of the quarterly financial statements were $132,500.
11
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
No amounts were billed by KPMG LLP in fiscal 2001 for financial information
systems design and implementation services.
ALL OTHER FEES
Amounts billed by KPMG LLP for all other professional services in fiscal
2001 were $81,600 and were related to tax services.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF THE PROPOSAL.
STOCKHOLDER PROPOSALS
Proposals of stockholders that are intended to be presented by such
stockholders at the Company's next Annual Meeting of stockholders must be
received by the Company no later than July 17, 2002 in order to be included in
the proxy statement and proxy relating to that meeting.
In addition, proposals of the Company's stockholders that such stockholders
intend to present at that meeting, but not include in the Company's proxy
statement and form of proxy, must be received by the Company's Secretary at the
Company's offices at Hopyard Road, Suite 210, Pleasanton, California 94588, no
later than September 30, 2002. In the event that the Company does not receive
timely notice with respect to such a proposal, the proxy holders named by the
Company's Board of Directors for such meeting will exercise their discretionary
voting power on such proposal.
OTHER MATTERS
The Company knows of no other matters to be submitted to the meeting.
However, if any other matters are properly presented to the Annual Meeting it is
the intention of the persons named in the accompanying proxy to vote in respect
thereof in accordance with their best judgment.
The Board of Directors hopes that stockholders will attend the meeting.
Whether or not you plan to attend, you are urged to complete, sign and return
the enclosed proxy in the accompanying envelope. A prompt response will greatly
facilitate arrangements for the meeting, and your cooperation will be
appreciated. Stockholders who attend the meeting may vote their shares
personally even though they have sent in their proxies.
By Order of the Board of Directors
JAMES B. HAWKINS
Secretary
November 14, 2001
12
APPENDIX A
INVIVO CORPORATION
CHARTER OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
I. PURPOSE
The purpose of the Audit Committee (the "Committee") of the Board of
Directors (the "Board") of Invivo Corporation (the "Company") is to assist the
Board in fulfilling its statutory and fiduciary oversight responsibilities
relating to the Company's financial accounting, reporting and controls. The
Committee's principal functions are to:
- monitor the periodic reviews of the adequacy of the accounting and
financial reporting processes and systems of internal control that are
conducted by the Company's financial and senior management;
- review and evaluate the independence and performance of the Company's
independent auditors;
- facilitate communication among the Company's independent auditors, the
Company's financial and senior management and the Board.
The Committee will fulfill these functions primarily by carrying out the
activities enumerated in Part IV of this charter. In order to serve these
functions, the Committee shall have unrestricted access to Company personnel and
documents, and shall have authority to direct and supervise an investigation
into any matters within the scope of its duties, including the power to retain
outside counsel in connection with any such investigation.
While the Audit Committee has the responsibilities and powers set forth in
this charter, it is not the duty of the Committee to plan or conduct audits or
to determine that the Company's financial statements are complete and accurate
and are in accordance with generally accepted accounting principles. This is the
responsibility of management and the Company's independent auditors. Nor is it
the duty of the Committee to conduct investigations, to resolve disagreements,
if any, between management and its independent auditors or to assure compliance
with laws and regulations and the Company's policies and procedures.
II. MEMBERSHIP
All members of the Committee will be appointed by, and shall serve at the
discretion of, the Board. Unless a chair is elected by the full Board, the
members of the Committee may designate a Chair by majority vote of the Committee
membership.
III. MEETINGS
Meetings of the Committee shall be held from time to time as determined by
the Board and/or the members of the Committee. The Committee should meet
annually with the independent auditors out of the presence of management about
internal controls, the fullness and accuracy of the Company's financial
statements and any other matters that the Committee or these groups believe
should be discussed privately with the Committee. The Committee members should
communicate with management and the independent auditors on a quarterly basis in
connection with their review of the Company's financial statements.
IV. RESPONSIBILITIES AND DUTIES
The following shall be the principal recurring processes of the Committee
in carrying out its oversight responsibilities. These processes are set forth as
a guide with the understanding that the Committee may supplement them as
appropriate and may establish policies and procedures from time to time that it
deems necessary or advisable in fulfilling its responsibilities.
1. Review the Company's quarterly and annual financial statements,
including any report or opinion by the independent auditors, prior to
distribution to the public or filing with the Securities and Exchange
Commission.
A-1
2. In connection with the Committee's review of the annual financial
statements:
- Discuss with the independent auditors and management the financial
statements and the results of the independent auditors' audit of the
financial statements.
- Discuss any items required to be communicated by the independent
auditors in accordance with SAS 61, as amended. These discussions
should include the independent auditors' judgments about the quality
and appropriateness of the Company's accounting principles, the
reasonableness of significant judgments, the clarity of the
disclosures in the Company's financial statements and any
significant difficulties encountered during the course of the audit,
including any restrictions on the scope of work or access to
required information.
3. In connection with the Committee's review of the quarterly
financial statements:
- Discuss with the independent auditors and management the results of
the independent auditors' SAS 71 review of the quarterly financial
statements.
- Discuss significant issues, events and transactions and any
significant changes regarding accounting principles, practices,
judgments or estimates with management and the independent auditors,
including any significant disagreements among management and the
independent auditors.
4. Discuss any comments or recommendations of the independent
auditors outlined in their annual management letter. Approve a schedule for
implementing any recommended changes and monitor compliance with the
schedule.
5. Discuss with the independent auditors and management their
periodic reviews of the adequacy of the Company's accounting and financial
reporting processes and systems of internal control, including the adequacy
of the systems of reporting to the audit committee by each group.
6. Consult annually with the independent auditors out of the presence
of management about internal controls, the fullness and accuracy of the
Company's financial statements and any other matters that the Committee or
these groups believe should be discussed privately with the Committee.
7. Review the independence and performance of the independent
auditors. Recommend to the Board of Directors the appointment or discharge
of the independent auditors.
8. Communicate with the Company's independent auditors about the
Company's expectations regarding its relationship with the auditors,
including the following: (i) the independent auditors' ultimate
accountability to the Board and the Committee, as representatives of the
Company's stockholders; and (ii) the ultimate authority and responsibility
of the Board and the Committee to select, evaluate and, where appropriate,
replace the independent auditors.
9. Review and approve processes and procedures to ensure the
continuing independence of the Company's independent auditors. These
processes shall include obtaining and reviewing, on an annual basis, a
letter from the independent auditors describing all relationships between
the independent auditors and the Company required to be disclosed by
Independence Standards Board Standard No. 1, reviewing the nature and scope
of such relationships and discontinuing any relationships that the
Committee believes could compromise the independence of the auditors.
10. Review the independent auditors' audit plan.
11. Approve the fees and other significant compensation to be paid to
the independent auditors.
12. Review quarterly the status of any legal matters that could have
a significant impact on the Company's financial statements.
13. Annually prepare a report to the Company's stockholders for
inclusion in the Company's annual proxy statement as required by the rules
and regulations of the Securities and Exchange Commission, as they may be
amended from time to time.
A-2
14. Maintain minutes of meetings and periodically report to the Board
of Directors on significant matters related to the Committee's
responsibilities.
15. Review and reassess the adequacy of the Committee's charter at
least annually. Submit the charter to the Company's Board of Directors for
review and include a copy of the charter as an appendix to the Company's
proxy statement as required by the rules and regulations of the Securities
and Exchange Commission, as they may be amended from time to time.
16. Perform any other activities required by applicable law, rules or
regulations, including the rules of the Securities and Exchange Commission
and any stock exchange or market on which the Company's Common Stock is
listed, and perform other activities that are consistent with this charter,
the Company's Bylaws and governing laws, as the Committee or the Board
deems necessary or appropriate.
A-3
INVIVO CORPORATION
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR ANNUAL MEETING OF STOCKHOLDERS
The undersigned hereby appoints Ernest C. Goggio and James B. Hawkins, or
either of them, each with power of substitution and revocation, as the proxy or
proxies of the undersigned to represent the undersigned and vote all shares of
the Common Stock, $.01 par value, of INVIVO CORPORATION, which the undersigned
would be entitled to vote if personally present at the Annual Meeting of
Stockholders of Invivo Corporation, to be held on December 7, 2001 at 10:00
a.m. at the Company's offices located at 4900 Hopyard Drive, Suite 210,
Pleasanton, California, and any adjournments thereof, upon the following
matters:
SEE REVERSE
SIDE
For All
Nominees WITHHOLD
(CONTINUED FROM OTHER SIDE) For ALL Except as AUTHORITY
Nominees Crossed Out do not vote for
1. To elect directors Listed Below Below any nominees
INSTRUCTION: To withhold authority for any individual nominee, [ ] [ ] [ ]
cross out the nominee's name in the following list:
Ernest C. Goggio, James B. Hawkins, George Sarlo, Laureen DeBuono
FOR AGAINST ABSTAIN
2. To amend the Company Stock Option Plan to increase by 250,000 the [ ] [ ] [ ]
number of shares covered by the Plan.
3. To ratify the selection of KPMG Peat Marwick LLP as independent [ ] [ ] [ ]
public auditors of this Company.
4. With discretionary authority on such matters as may properly [ ] [ ] [ ]
come before the meeting.
The shares covered by this proxy will be voted in accordance with the choices made. WHEN NO CHOICE IS
MADE, THIS PROXY WILL BE VOTED FOR ALL LISTED NOMINEES FOR DIRECTOR AND FOR PROPOSALS 2, 3 AND 4.
The Annual Meeting may be held as scheduled only if a majority of the shares outstanding are represented
at the meeting by attendance or proxy. Accordingly, please complete this proxy and return it promptly in the
enclosed envelope.
Please date and sign exactly as your name(s) appear on your shares. If signing for estates, trusts or
corporations, title or capacity should be stated. If shares are held jointly, each holder should sign.
Signature of Stockholder(s): ___________________________________________________ Dated: _______________ 2001