Executive Compensation
The following table summarizes the compensation paid by the Company for services
rendered during the years indicated to each of the Company's executive officers
whose total salary and bonus exceeded $100,000 during fiscal 1998. Numbers of
underlying securities have been adjusted to account for a 2-for-1 stock split
implemented through a stock dividend as of April 15, 1998.
Summary Compensation Table
Long-Term
Compensation
Name and ------------
Principal Position Annual Compensation Securities All
------------------ -------------------- Underlying Other
Year Salary(1) Bonus Options Compensation(2)
---- --------- -------- ----------- --------------
M. Christine Jacobs 1998 $218,852 $289,800 - $783
President & Chief 1997 $209,449 $294,000 - $322
Executive Officer(3) 1996 $151,455 $170,000 240,000 $357
Bruce W. Smith 1998 $145,655 $ - - $592
Secretary, Treasurer 1997 $105,445 $ 20,000 100,000 $455
Chief Financial 1996 $ 71,430 $ 20,000 - $399
Officer & Executive
Vice-President (4)
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(1) Includes amounts deferred under the 401(k) feature of the Company's
Employee Savings Plan.
(2) Represents premiums on a term life insurance policy.
(3) The Company has an agreement with Ms. Jacobs, dated August 1,
1996, which provides for her employment for the period
commencing August 1, 1996 and expiring July 31, 1999. This
agreement provides for a minimum annual base salary of
$200,000 plus an annual bonus determined by the Compensation
Committee of the Board of Directors. In addition, in the event
of termination, the agreement provides a severance package of
up to two years' salary and other related benefits.
(4) The Company has an agreement with Mr. Smith, dated January 1,
1999, which provides for his employment for the period
commencing January 1, 1999 and expiring December 31, 2003, and
for successive one year renewal periods thereafter. This
agreement provides for a minimum annual base salary of
$150,000, subject to review at least annually, and
discretionary annual bonuses. In addition, in the event of
termination, the agreement provides a severance package of up
to two years' salary.
Options. No stock options were granted to Ms. Jacobs or Mr. Smith during
fiscal 1998. The following table sets forth information concerning options
exercised during 1998 and the value of unexercised options as of December
31, 1998 held by Ms. Jacobs and Mr. Smith. No stock appreciation rights have
ever been issued by the Company. Numbers of underlying securities have been
adjusted to account for a 2-for-1 stock split implemented through a stock
dividend as of April 15, 1998.
Option Exercises in Fiscal 1998
and Fiscal Year-End Option Values Table
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options on Options on
December 31, December 31,
Shares 1998 1998
Acquired Exercisable/ Exercisable/
Name on Value Un-exercisable Un-exercisable(2)
Exercise Realized(1)
-------- ---------- --------------- -----------------
M. Christine Jacobs 6,000 $144,188 394,000/80,000 $4,645,250/$670,000
Bruce W. Smith --- $ --- 36,000/96,000 $ 226,000/$226,000
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(1) An individual, upon exercise of an option, does not receive cash equal
to the amount contained in the Value Realized column of this table.
Instead, the amounts contained in the Value Realized column reflect the
increase in the price of Company Common Stock from the option grant
date to the option exercise date. No cash is realized until the shares
received upon exercise of an option are sold.
(2) Based on $16.8125 per share, the December 31, 1998 closing price as
quoted on the New York Stock Exchange.
Board Compensation Committee Report on Executive Compensation. The
Compensation Committee sets only the compensation of the Chief Executive
Officer. Compensation of other executive officers is set by the Chief Executive
Officer based on a structure similar to that established by the Compensation
Committee for compensation of the Chief Executive Officer, except that stock
options are awarded by the Stock Option Committee of the Board of Directors. The
Compensation Committee has a policy that a significant portion of the Chief
Executive Officer's pay should be related to the performance of the Company and
the Chief Executive Officer's contribution to that performance. In determining
the amount and type of compensation, the Committee's goal is to provide a
package that is competitive with the marketplace while placing a substantial
portion of the C.E.O.'s compensation "at risk" by tying it to both short-term
and long-term measures of the Company's performance.
In determining the C.E.O.'s performance bonus for 1998 the compensation
committee reviewed the accomplishments of Ms. Jacobs and the Company for the
year. These accomplishments included the following: an increase in revenue and
net earnings over 1997 of 55% and 48%, respectively; the doubling of production
capacity over 1997; the completion of the construction and the opening of the
Company's new, larger manufacturing facilities with no perceivable negative
impact on the manufacturing process; attainment of ISO 9001 Certification;
attainment of CE Marking, which granted regulatory approval for the marketing of
TheraSeed(R) throughout the member countries of the European Union; the
commencement of European sales; effecting a 2 for 1 stock split through a stock
dividend; and the transition of the listing of the Company's common stock from
Nasdaq to the New York Stock Exchange. The compensation committee believes that
these and other accomplishments should have a direct impact on the long-term
success of the Company. Accordingly, the compensation committee awarded Ms.
Jacobs a bonus of $289,800 for the year ended December 31, 1998, which the
committee believes is commensurate with the contribution of the C.E.O. to these
accomplishments, and the impact these accomplishments should have on the
long-term success of the Company.
It is also the Committee's responsibility to address issues raised by
Section 162(m) of the Internal Revenue Code. The revisions to this section made
certain non-performance-based compensation in excess of $1,000,000 to executives
of public companies nondeductible to the companies beginning in 1994. The
Committee has reviewed these issues and has determined that no portion of
compensation payable to any executive officer for 1998 is nondeductible.
Submitted by the Members of the Compensation Committee:
Otis W. Brawley, M.D.
Charles R. Klimkowski
The Stock Option Committee of the Board of Directors administers the
Company's stock option plans and determines the terms of options granted under
these plans. These plans form the basis of the Company's long-term incentive
compensation plan. The Stock Option Committee believes that placing a portion of
executives' compensation in the form of stock options achieves three objectives.
It aligns the interest of the Company's executives directly with those of the
Company's stockholder's, gives executives a significant long-term interest in
the Company's success and helps the Company retain key executives. In
determining the number and terms of options to grant an executive, the Stock
Option Committee primarily considers the executive's past performance as an
indicator of future performance and the degree to which an incentive for
long-term performance would benefit the Company. Based on these factors, in
relatively equal proportions, the Stock Option Committee awarded the Chief
Executive Officer 240,000 options during fiscal 1996. No stock options were
awarded to the C.E.O. in fiscal 1997 or 1998. Mr. Smith was awarded 100,000
options in 1997. No stock options were awarded to Mr. Smith in 1996 or 1998.
Submitted by Members of the Stock Option Committee:
Otis W. Brawley, M.D.
Orwin L. Carter, Ph.D.
Charles R. Klimkowski
Peter A.A. Saunders
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