<PAGE> 1
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. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] 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
</TABLE>
Raytel Medical 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:
<PAGE> 2
RAYTEL MEDICAL CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MARCH 2, 2000
TO THE STOCKHOLDERS:
The Annual Meeting of Stockholders of RAYTEL MEDICAL CORPORATION, a
Delaware corporation, will be held at Le Meridien Hotel, 250 Franklin Street,
Boston, Massachusetts on Thursday, March 2, 2000 at 10:30 a.m. for the following
purposes:
1. To elect three (3) directors to Class II of the Board of Directors.
2. To approve the 2000 Stock Option Plan to reserve 425,000 shares for
issuance thereunder.
3. To ratify the appointment of Arthur Andersen LLP as the independent
accountants of Raytel for the fiscal year ending September 30, 2000.
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Stockholders of record at the close of business on January 14, 2000
shall be entitled to vote at the meeting.
By order of the Board of Directors
/s/ Richard F. Bader
--------------------------
RICHARD F. BADER
Chairman of the Board and
Chief Executive Officer
San Mateo, California
January 26, 2000
IMPORTANT: PLEASE FILL IN, DATE, SIGN AND MAIL PROMPTLY THE ENCLOSED PROXY IN
THE POSTAGE-PAID ENVELOPE PROVIDED TO ASSURE THAT YOUR SHARES ARE REPRESENTED AT
THE MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON IF YOU WISH TO DO
SO EVEN THOUGH YOU HAVE SENT IN YOUR PROXY.
<PAGE> 3
RAYTEL MEDICAL CORPORATION
2755 CAMPUS DRIVE, SUITE 200
SAN MATEO, CALIFORNIA 94403
PROXY STATEMENT
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed Proxy is solicited on behalf of Raytel Medical Corporation,
a Delaware corporation, for use at the Annual Meeting of Stockholders to be held
Thursday, March 2, 2000 at 10:30 a.m., or at any adjournment thereof, for the
purposes set forth herein and in the accompanying Notice of Annual Meeting of
Stockholders. The Annual Meeting will be held at Le Meridien Hotel, 250 Franklin
Street, Boston, Massachusetts. Raytel's principal executive offices are located
at 2755 Campus Drive, Suite 200, San Mateo, California. Its telephone number at
that address is (650) 349-0800.
These proxy solicitation materials were mailed on or about January 26,
2000 to all stockholders entitled to vote at the Annual Meeting.
RECORD DATE
Stockholders of record at the close of business on January 14, 2000 are
entitled to notice of, and to vote at, the Annual Meeting. At the record date,
8,746,344 shares of Raytel Common Stock were issued and outstanding.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before its use by delivering to Raytel a written
notice of revocation or a duly executed proxy bearing a later date or by
attending the Annual Meeting and voting in person.
VOTING
The shares represented by the proxies received will be voted as you
direct. If you give no direction, the shares will be voted as recommended by the
Board of Directors. Each stockholder is entitled to one vote for each share of
stock held by him or her on all matters.
SOLICITATION
Raytel will bear the entire cost of solicitation, including the
preparation, assembly, printing and mailing of this Proxy Statement, the Proxy
and any additional soliciting materials sent to stockholders. Raytel may
reimburse brokerage firms and other persons representing beneficial owners of
shares for their expenses in forwarding solicitation materials to such
beneficial owners. Proxies may also be solicited by certain of Raytel's
directors, officers and regular employees, without additional compensation,
personally or by telephone or telegram. Except as described above, Raytel does
not currently intend to solicit proxies other than by mail.
1
<PAGE> 4
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
Raytel's bylaws require advance notice of any stockholder proposals to
be brought before a stockholders' meeting. Under the bylaws, in order for
business to be properly brought before a meeting by a stockholder, the
stockholder must have given timely notice thereof in writing to the Secretary of
Raytel. To be timely, a stockholder proposal to be presented at an annual
meeting must be received at Raytel's principal executive offices not less than
120 calendar days in advance of the date that Raytel's proxy statement was
released to stockholders in connection with the previous year's annual meeting
of stockholders, except that if no annual meeting was held in the previous year
or the date of the annual meeting has been changed by more than 30 calendar days
from the date contemplated at the time of the previous year's proxy statement,
or in the event of a special meeting, notice by the stockholder will be
considered timely if it is received not later than the close of business on the
10th day following the day on which such notice of the date of the meeting was
mailed or disclosure of the meeting was made.
Accordingly, proposals of stockholders intended to be presented at the
2001 Annual Meeting of Stockholders must be received by Raytel no later than
September 27, 2000. Such proposals may be included in next year's proxy
statement if they comply with certain rules and regulations promulgated by the
Securities and Exchange Commission (the "SEC").
PROPOSAL NO. 1
ELECTION OF DIRECTORS
CLASSIFIED BOARD
Raytel has a classified Board of Directors consisting of three classes
of directors serving staggered three-year terms. The Class I director is Thomas
J Fogarty, M.D., whose current term will end in 2002; the Class II directors are
Gene I. Miller, Mary M. Lampe, and David E. Wertheimer, M.D., whose current
terms will end in 2000; and the Class III directors are Richard F. Bader and
Allan Zinberg, whose current terms will end in 2001. There is currently one
Class I vacancy on the Board. At each annual meeting of stockholders, the
successors to the class of directors whose term expires at such meeting will be
elected to hold office for a term expiring at the annual meeting of stockholders
held in the third year following the year of their election.
NOMINEES
The term of the Class II directors will expire on the date of the
upcoming annual meeting. Accordingly, three persons are to be elected to the
Board as Class II directors at the meeting. Management's nominees for election
to these positions are the current Class II directors, Gene I. Miller, Mary M.
Lampe, and David E. Wertheimer, M.D. If elected, each nominee will serve as a
director until Raytel's annual meeting of stockholders in 2003, or until his or
her successor is elected and qualified. If any of the nominees declines to serve
or becomes unavailable for any reason, or if an additional vacancy occurs before
the election, the Proxies may be voted for such substitute nominees as
management may designate. Management does not currently intend to designate any
nominee to fill the current Class I vacancy prior to the upcoming annual
meeting.
If a quorum is present and voting, the three nominees receiving the
highest number of votes will be elected as Class II directors. Abstentions and
shares held by brokers that are present but not voted because the brokers are
prohibited from exercising discretionary authority, i.e., "broker non-votes,"
will be counted as present for purposes of determining if a quorum is present.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
ELECTION OF THE NOMINEES NAMED IN THIS PROPOSAL.
2
<PAGE> 5
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of Raytel are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Richard F. Bader.................. 62 Chairman of the Board of Directors and
Chief Executive Officer
Allan Zinberg .................... 58 President, Chief Operating Officer and Director
John F. Lawler, Jr................ 53 Vice President and Chief Financial Officer
F. David Rollo, M.D. ............ 60 Senior Vice President and Executive Medical Director
David E. Wertheimer, M.D.......... 44 Senior Vice President
Swapan Sen........................ 47 Senior Vice President - General Manager,
Medical Facility Operations
Michael O. Kokesh ................ 48 Vice President, General Counsel and Secretary
Thomas J. Fogarty, M.D. .......... 65 Director
Mary M. Lampe..................... 52 Director
Gene I. Miller.................... 58 Director
</TABLE>
RICHARD F. BADER was a founder of Raytel in 1981 and has served as its
Chief Executive Officer and as a director since its inception and as Chairman of
Raytel's Board of Directors since April 1986. Mr. Bader also served as President
of Raytel from its inception to May 1988 and again from May 1989 to December
1991, and as Chief Financial Officer from February 1990 to December 1991. Prior
to founding Raytel, Mr. Bader was employed as President and Chief Executive
Officer of Compression Labs, Inc., a developer of video teleconferencing
equipment and digital signal compression technology, from 1977 to 1981, and of
Integrated Microsystems, a manufacturer of semiconductor microsystems, from 1969
to 1975.
ALLAN ZINBERG has been Raytel's President and Chief Operating Officer
since December 1991. Mr. Zinberg joined Raytel as President of Raytel's Cardiac
Datacorp, Inc. subsidiary ("CDI") in February 1990, when CDI was acquired by
Raytel, and has also served as a director of Raytel since that time. From June
1974 to February 1990, Mr. Zinberg was employed by CDI, where he served as a
senior executive from June 1979 to February 1990. Mr. Zinberg retired as an
executive officer effective December 31, 1999, but remains a Director of the
Company.
JOHN F. LAWLER, JR. has served as Raytel's Vice President and Chief
Financial Officer since May 1999, prior to which he had served as Vice
President-Corporate Controller since March 1993. Mr. Lawler served as Corporate
Controller of Zygo Corp., a manufacturer of measuring equipment and optical
components, from September 1983 to March 1993. Prior to September 1983, he
served with Raymond Industries, Inc., a diversified manufacturing company, and
KPMG Peat Marwick.
F. DAVID ROLLO, M.D. Dr. Rollo currently serves as the Senior Vice
President of ADAC Laboratories, Inc. Prior to joining ADAC Laboratories in
November 1999, Dr. Rollo served as Senior Vice President and Executive Medical
Director of Raytel from June 1996 to November 1999 and was a director of Raytel
from March 1993 to July 1998. Dr. Rollo served as Senior Vice President-Medical
Affairs of HCIA, a healthcare information company, from April 1995 to June 1996.
Dr. Rollo served as President and Chief Executive Officer of Metricor, a
healthcare consulting company, from October 1992 to April 1995, when it was
acquired by HCIA. From September 1980 to October 1992, Dr. Rollo served as
Senior Vice President-Medical Affairs of Humana, Inc., a hospital management
company. Dr. Rollo is a director of ADAC Laboratories, Inc.
3
<PAGE> 6
SWAPAN SEN has been a Senior Vice President of Raytel since December
1997 and a Vice President of Raytel since February 1990, when he joined Raytel
following the CDI acquisition. Since Raytel's acquisition of Cardiovascular
Ventures, Inc. ("CVI") in August 1997, Mr. Sen has had primary responsibilities
for the day-to-day operations of Raytel's cardiovascular diagnostic facilities,
and continues to have primary responsibility for the day-to-day operations of
Raytel's imaging centers. From February 1990 to December 1991, he managed the
three imaging centers associated with the CDI acquisition. From December 1985 to
February 1990, Mr. Sen served in the same capacity with CDI.
DAVID E. WERTHEIMER, M.D. has been a Senior Vice President and a
director of Raytel since August 1997, when he joined Raytel following the CVI
acquisition. Dr. Wertheimer founded CVI in 1991, where he served as the Chairman
of the Board and a director until its acquisition by Raytel in August 1997. Dr.
Wertheimer serves as the President of and is a practicing cardiologist with the
Heart Institute of Port St. Lucie, Inc., a multi-specialty physician practice,
and its predecessor practice, which he founded in 1984. Dr. Wertheimer is a
Fellow of the American College of Cardiology, the American College of
Physicians, and the Society for Cardiac Angiography and Intervention. Dr.
Wertheimer currently serves as the chairman of the Medical Advisory Committee of
the Department of Health for the State of Florida, a post that he has held since
1996.
MICHAEL O. KOKESH has been General Counsel and Secretary of Raytel since
March 1996 and a Vice President since December 1996. Mr. Kokesh was a co-founder
of National Reproductive Medical Centers, Inc., where he served as a director
from November 1991 to June 1993 and served as Vice President, General Counsel,
and Secretary from November 1991 until March 1996. From May 1989 to November
1991, Mr. Kokesh was a partner with Bronson, Bronson & McKinnon, a general
practice law firm where he specialized in healthcare law, emphasizing
transactional, corporate and securities matters.
THOMAS J. FOGARTY, M.D. has been a director of Raytel since November
1982. Dr. Fogarty is a cardiovascular surgeon and has served as Professor of
Surgery at Stanford University Medical School since July 1993. Dr. Fogarty
practiced with Pacific Coast Cardiac and Vascular Systems from 1971 to July
1993. Dr. Fogarty is also the founder and President of Fogarty Engineering,
Inc., and Thomas Fogarty Winery and Vineyards. Dr. Fogarty has authored 85
patents in the field of catheter and cardiovascular instrumentation. Dr. Fogarty
is a director of CardioThoracic Systems, Inc., and several privately held
companies. In addition, he is general partner of a venture capital fund focused
on the development of advanced cardiac care products.
MARY M. LAMPE has been a director of Raytel since July 1999. Ms. Lampe
has been the Executive Director and Chief Operating Officer for the
Cardiovascular Research Foundation since February 1999. The Foundation is a
non-profit organization that promotes excellence in interventional cardiology
and vascular therapy through research and education. Prior to joining the
Foundation, Ms. Lampe served for 15 years as the executive director of various
national law firms and 8 years in hospital administration in Pennsylvania.
GENE I. MILLER has been a director of Raytel since February 1989. Mr.
Miller has been a general partner of Peregrine Ventures funds, a venture capital
firm, since its inception in 1981. Mr. Miller serves on the boards of several
privately held companies.
There are no family relationships among directors or executive officers
of Raytel.
4
<PAGE> 7
BOARD MEETINGS AND COMMITTEES
The Board of Directors of Raytel held six regular meetings and eight
special meetings during the fiscal year ended September 30, 1999. The Board of
Directors has a Compensation Committee, an Audit Committee, an Employee Stock
Option Committee, and a Nominating Committee. During the fiscal year ended
September 30, 1999, no incumbent director attended fewer than 75% of the
aggregate of (i) all meetings of the Board of Directors (held during the period
in which such director served) and (ii) all meetings of committees of the Board
on which such director served.
The Compensation Committee currently consists of Dr. Fogarty, Ms. Lampe
and Mr. Miller. The compensation committee reviews and recommends to the board
the compensation and benefits of all executive officers, and establishes and
reviews general policies relating to compensation and benefits of Raytel's
employees. The committee is responsible for reviewing the performance of
Raytel's officers and making recommendations to the Board concerning salaries
and incentive compensation for these officers. The compensation committee held
two meetings during the fiscal year ended September 30, 1999.
The Audit Committee currently consists of Mr. Miller and Ms. Lampe. The
audit committee recommends the appointment of our independent auditors, reviews
our internal accounting procedures and financial statements and consults with
and reviews the services provided by our independent auditors, including the
results and scope of their audit. The audit committee held two meetings during
the fiscal year ended September 30, 1999.
The Employee Stock Option Committee currently consists of Messrs. Bader
and Zinberg. The committee is authorized to grant stock options under Raytel's
1990 Stock Option Plan to employees of Raytel who are not executive officers.
The employee stock option committee held one meeting during the fiscal year
ended September 30, 1999.
The Nominating Committee consists of Messrs. Bader and Miller. The
committee was formed for purposes of identifying and evaluating the
qualifications of all candidates for election to the Board of Directors. The
Nominating Committee will consider nominations recommended by stockholders.
Stockholders wishing to submit nominations must notify Raytel of their intent to
do so on or before the date on which stockholder proposals to be included in the
proxy statement for the stockholder meeting must be received by Raytel. Such
notice must include the information specified in Raytel's bylaws, a copy of
which may be obtained from Raytel.
DIRECTOR COMPENSATION
Non-employee directors are entitled to a fee of $1,500 for each Board
meeting they attend. In addition, Raytel's 1995 Outside Directors Stock Option
Plan (the "Directors Plan") provides for formula-based grants of options to
non-employee directors. The Directors Plan provides that each non-employee
director of Raytel shall be granted an option to purchase 6,000 shares of Raytel
stock on the date on which the optionee first becomes a non-employee director.
Thereafter, on the date immediately following each annual stockholders' meeting,
each non-employee director who is reelected at the meeting shall be granted an
additional option to purchase 6,000 shares if, on that date, he or she has
served on the Board of Directors for at least six months.
The Directors Plan provides that each option shall become exercisable in
three equal annual installments, subject to the director's continuous service
and subject to adjustment at each scheduled vesting date by multiplying the
number of shares eligible for vesting by a fraction, the numerator of which is
the number of meetings of the Board of Directors attended by the director during
the preceding 12-month period and the denominator of which is the total number
of meetings held during such period. Shares which do not vest on a scheduled
vesting date as a result of such an adjustment will vest instead, without
further adjustment, on the fifth anniversary of the date of grant. All options
granted under the Directors Plan have exercise prices equal to the fair market
value of a share of Raytel's stock on the date of grant. Options granted under
the Directors Plan have a term of ten years.
5
<PAGE> 8
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information known to Raytel
relating to the beneficial ownership of Raytel's common stock by (i) each person
who is known by Raytel to be the beneficial owner of more than 5% of the
outstanding shares of common stock, (ii) each executive officer named in the
tables set forth under "Executive Compensation," (iii) each director and (iv)
all executive officers and directors as a group, as of December 31, 1999:
<TABLE>
<CAPTION>
NUMBER OF
SHARES
BENEFICIALLY
NAME AND ADDRESS OWNED(1) PERCENT(1)
---------------- ------------ ----------
<S> <C> <C>
State of Wisconsin Investment Board................ 1,163,239 13.3%
P.O. Box 7842
Madison, WI 53707
Heartland Advisers ................................ 897,000 10.3%
790 N. Milwaukee Street
Milwaukee, WI 53202
Wellington Management Company LLP.................. 885,400 10.1%
75 State Street, 19th Floor
Boston, MA 02109
Richard F. Bader(2)................................ 666,767 7.4%
c/o Raytel Medical Corporation
2755 Campus Drive, Suite 200
San Mateo, CA 94403
Dimensional Fund Advisors, Inc. .................. 582,800 6.7%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Thomas J. Fogarty, M.D.(3)......................... 234,379 2.7%
David E. Wertheimer, M.D.(4) ...................... 201,624 2.3%
Allan Zinberg(5)................................... 141,410 1.6%
Gene I. Miller(6).................................. 52,994 *
Swapan Sen(7)...................................... 40,561 *
F. David Rollo, M.D.(8)............................ 36,375 *
All executive officers and
directors as a group (10 persons)(9)............... 1,392,786 15.2%
</TABLE>
- ----------
* Less than 1%
(1) Beneficial ownership is determined in accordance with the rules of the
SEC. In computing the number of shares beneficially owned by a person
and the percentage ownership of that person, shares of common stock
subject to options held by that person that are currently exercisable,
or will become exercisable within 60 days after December 31, 1999, are
deemed outstanding. Such shares, however, are not deemed outstanding for
purposes of computing the percentage ownership of any other person. In
general, options granted under Raytel's 1983 Stock Option Plan and its
1990 Stock Option Plan are exercisable to the extent they are vested.
Options (or shares issued upon exercise thereof) vest over a period of
two to four years from the date of grant. Unless otherwise indicated in
the footnotes to this table, the persons and entities named in the table
have sole voting and sole investment power with respect to all shares
beneficially owned, subject to community property laws where applicable.
6
<PAGE> 9
(2) Includes 246,522 shares issuable upon exercise of stock options that are
currently exercisable and will be fully vested within 60 days after
December 31, 1999.
(3) Includes 161,935 shares held by the Lincoln Trust Company, Custodian FBO
Thomas J. Fogarty IRA Rollover Account, and 65,194 shares held by the
Fogarty Family Revocable Trust dated September 14, 1971, as amended and
restated February 14, 1991. Also includes 7,250 shares issuable upon
exercise of stock options that are currently exercisable and will be
fully vested within 60 days after December 31, 1999.
(4) Includes 4,100 shares held by Dr. Wertheimer's minor children, as to
which he disclaims beneficial ownership. Also includes 18,750 shares
issuable upon exercise of stock options that are currently exercisable
and will be fully vested within 60 days after December 31, 1999.
(5) Includes 45,716 shares issuable upon exercise of stock options that are
currently exercisable and will be fully vested within 60 days after
December 31, 1999.
(6) Includes 42,469 shares issuable upon exercise of stock options that are
currently exercisable and will be fully vested within 60 days after
December 31, 1999.
(7) Includes 35,561 shares issuable upon exercise of stock options that are
currently exercisable and will be fully vested within 60 days after
December 31, 1999.
(8) Includes 34,999 shares issuable upon exercise of stock options that are
currently exercisable and will be fully vested within 60 days after
December 31, 1999.
(9) Includes 446,829 shares issuable upon exercise of stock options that are
currently exercisable, of which 446,829 shares will be fully vested
within 60 days after December 31, 1999.
7
<PAGE> 10
EXECUTIVE COMPENSATION AND OTHER MATTERS
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table sets forth information concerning the compensation
received for services rendered to Raytel during each of the fiscal years ended
September 30, 1999, 1998 and 1997 by the Chief Executive Officer of Raytel and
the four other most highly compensated executive officers of Raytel whose total
salary and bonus for such fiscal year exceeded $100,000 (collectively, the
"Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL AWARDS
COMPENSATION(1) OPTIONS
FISCAL -------------------- GRANTED ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS (SHARES) COMPENSATION
--------------------------- ------ -------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Richard F. Bader ....................... 1999 $299,760 $190,000 300,000(2) $26,491(3)(4)
Chairman of the Board of Directors 1998 $281,973 $150,000 -- $10,588(5)
and Chief Executive Officer 1997 $281,973 $179,000 300,000 $ 9,944(6)
Allan Zinberg(7) ........................ 1999 $299,760 $ 75,000 100,000(2) $25,842(3)(4)
President and 1998 $281,973 $150,000 -- $ 9,720(5)
Chief Operating Officer 1997 $281,973 $135,000 100,000 $ 9,944(6)
David E. Wertheimer, M.D.(8)............. 1999 $350,000 $ 20,000 -- $ 36(3)
Senior Vice President 1998 $300,000 -- 75,000(2) $ 43(5)
1997 $ 37,500 -- 75,000 --
F. David Rollo, M.D.(9).................. 1999 $254,930 -- 87,000(2) $10,408(3)
Former Senior Vice President and 1998 $250,120 -- -- $12,680(5)
Executive Medical Director 1997 $250,120 $ 37,000 87,000 $ 2,284(6)
Swapan Sen............................... 1999 $186,895 $110,000 61,000(2) $22,886(3)(4)
Senior Vice President-General 1998 $167,797 $100,000 40,000 $10,440(5)
Manager, Medical Facility 1997 $163,324 $ 85,000 -- $10,172(6)
Operations
</TABLE>
- ------------------------
(1) Includes amounts (if any) deferred under Raytel's 401(k) Plan and its
Executive Deferred Compensation Plan.
(2) Consists of options granted in replacement of repriced options. See
"Report of the Employee Stock Option Committee and the Compensation
Committee on Repricing of Options."
(3) Consists of matching contributions by Raytel under the 401(k) Plan,
contributions by Raytel to the Pension Plan and life insurance premiums
paid by Raytel for the benefit of the Named Executive Officer. These
amounts accrue on a calendar year basis. The reported amounts represent
the amounts estimated by Raytel to have accrued during the fiscal year.
The amounts representing 401(k) Plan contributions for fiscal year 1999
are $2,500 for Mr. Bader, $2,751 for Mr. Zinberg, $2,822 for Mr. Sen,
$2,500 for Dr. Rollo and $0 for Dr. Wertheimer. The amounts representing
Pension Plan contributions for the fiscal year 1999 are $7,548 for
Messrs. Bader, Zinberg, Sen, and Rollo, and $0 for Dr. Wertheimer. The
amounts representing life insurance premiums are $450 for Messrs. Bader,
Zinberg, and Sen, $360 for Dr. Rollo and $36 for Dr. Wertheimer.
8
<PAGE> 11
(4) Includes deferred compensation adjustment amounts of $15,993 for Mr.
Bader, $15,093 for Mr. Zinberg and $6,411 for Mr. Sen.
(5) Consists of matching contributions by Raytel under the 401(k) Plan,
contributions by Raytel to the Pension Plan and life insurance premiums
paid by Raytel for the benefit of the Named Executive Officer. These
amounts accrue on a calendar year basis. The reported amounts represent
the amounts estimated by Raytel to have accrued during the fiscal year.
The amounts representing 401(k) Plan contributions for fiscal year 1998
are $2,500 for Mr. Bader, $1,632 for Mr. Zinberg, $2,352 for Mr. Sen,
$2,951 for Dr. Rollo, and $0 for Dr. Wertheimer. The amounts
representing Pension Plan contributions for the fiscal year 1998 are
$7,638 for Messrs. Bader, Zinberg, Sen, and Dr. Rollo and $0 for Dr.
Wertheimer. The amounts representing life insurance premiums for fiscal
year 1998 are $450 for Messrs. Bader, Zinberg, Sen, and $360 Dr. Rollo,
and $43 for Dr. Wertheimer.
(6) Consists of matching contributions by Raytel under the 401(k) Plan,
contributions by Raytel to the Pension Plan and life insurance premiums
paid by Raytel for the benefit of the Named Executive Officer. These
amounts accrue on a calendar year basis. The reported amounts represent
the amounts estimated by Raytel to have accrued during the fiscal year.
The amounts representing 401(k) Plan contributions for the fiscal year
1997 are $2,375 for Mr. Bader, $2,375 for Mr. Zinberg, $2,603 for Mr.
Sen, $1,924 for Dr. Rollo $0 for Dr. Wertheimer. The amounts
representing Pension Plan contributions for the fiscal year 1997 are
$7,119 for Messrs. Bader, Zinberg, and Sen, $0 for Dr. Rollo and $0 for
Dr. Wertheimer. The amounts representing life insurance premiums for
fiscal year 1997 are $450 for Messrs. Bader, Zinberg, and Sen, $360 for
Dr. Rollo and $0 for Dr. Wertheimer.
(7) Mr. Zinberg retired as an executive officer of Raytel effective December
31, 1999.
(8) Dr. Wertheimer joined Raytel in August 1997 with the acquisition of CVI.
(9) Dr. Rollo resigned as an executive officer of Raytel effective October
22, 1999.
STOCK OPTION GRANTS
The following table sets forth information concerning grants of options
to purchase Raytel's Common Stock made during the fiscal year ended September
30, 1999 to the Named Executive Officers.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
------------------------------------------------- VALUE
% OF TOTAL AT ASSUMED RATES OF
NUMBER OF OPTIONS STOCK PRICE
SHARES GRANTED TO EXERCISE APPRECIATION FOR
UNDERLYING EMPLOYEES PRICE OPTION TERM(1)
OPTIONS IN FISCAL PER EXPIRATION ---------------------
NAME GRANTED 1999 SHARE(2) DATE 5% 10%
---- ------------ ----------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Richard F. Bader ....... 300,000(3)(4) 45.29% $3.625 10/15/08 $683,923 $1,733,195
Allan Zinberg .......... 100,000(3)(4) 15.10% $3.625 10/15/08 $227,974 $ 577,732
David E. Wertheimer, M.D. -- N/A N/A N/A N/A N/A
F. David Rollo, M.D. .... 87,000(3)(4) 13.13% $3.625 10/15/08 $198,338 $ 502,627
Swapan Sen............... 61,000(3)(5) 9.21% $3.625 10/15/08 $139,064 $ 352,416
</TABLE>
- -----------------------
(1) Potential realizable values are net of the exercise price but before
taxes associated with the exercise. Amounts represent hypothetical gains
that could be achieved for the respective options if exercised at the
end of the option term. The assumed 5% and 10% rates of stock price
appreciation are provided in accordance with the rules of the SEC and do
not represent Raytel's estimate or projection of the future stock price.
Actual gains, if any, on stock option exercise are dependent on Raytel's
future financial performance, overall market conditions and the option
holders' continued employment through the vesting period.
9
<PAGE> 12
(2) All options were granted at the fair market value of Raytel's stock on
the date of grant, based on the closing price of Raytel's stock on the
Nasdaq National Market.
(3) The options were granted on October 15, 1998 in replacement of
previously outstanding options. On that date, as a result of a decline
in the market price of Raytel's Common Stock, the Employee Stock Option
Committee and the Compensation Committee determined that it was in
Raytel's best interest to offer current option holders the opportunity
to exchange outstanding options with an exercise price equal to or
greater than $7.50 for options with an exercise price equal to the
then-current market price ($3.625). Each new option vests at the same
rate as the option it replaced, and with the vesting of each new option
to commence on December 31, 1998. Of the Named Executive Officers,
Messrs. Bader, Zinberg, and Sen and Dr. Rollo participated in the
exchange.
(4) The options vest and become exercisable at the rate of 1/12 on December
31, 1998 and quarterly thereafter through September 30, 2001.
(5) Represents two separate options, one for 21,000 shares that vests and
become exercisable at the rate of 1/16 on December 31, 1998 and
quarterly thereafter through September 30, 2002, and another for 40,000
shares that vests and becomes exercisable at the rate of 1/4 on October
15, 1999 and annually thereafter through October 15, 2002.
OPTION EXERCISES AND YEAR-END HOLDINGS
The following table sets forth information concerning the exercise of
stock options during the fiscal year ended September 30, 1999 and the stock
options held as of September 30, 1999 by the Named Executive Officers.
AGGREGATE OPTION EXERCISES IN LAST FISCAL
YEAR AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
OPTIONS AT SEPTEMBER 30,1999 SEPTEMBER 30, 1999(1)
---------------------------- -----------------------
NAME EXERCISABLE(2) UNEXERCISABLE EXERCISABLE(2) UNEXERCISABLE
---- -------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
Richard F. Bader ....... 221,521 200,000 $29,968 --
Allan Zinberg .......... 37,382 66,668 -- --
David E. Wertheimer, M.D. 18,750 56,250 -- --
F. David Rollo, M. D. .. 34,999 58,001 -- --
Swapan Sen ............. 24,249 55,750 $11,716 --
</TABLE>
- ----------
(1) Based on the closing price of $2.719 for the Common Stock as quoted on
the Nasdaq National Market on September 30, 1999, less the exercise
price.
(2) Options granted prior to October 1, 1995, including options granted more
recently in replacement of such options, are fully exercisable, subject
to Raytel's right to repurchase any unvested shares at the original
exercise price in the event of the optionee's termination. Options (or
shares issued upon exercise thereof) vest over periods of two to four
years from the date of grant.
10
<PAGE> 13
TEN YEAR OPTION REPRICINGS
The following table provides the specified information concerning all
repricings of options to purchase Raytel's Common Stock held by any executive
officer of Raytel since December 1, 1995, the date of Raytel's initial public
offering.
TEN YEAR OPTION REPRICINGS
<TABLE>
<CAPTION>
LENGTH OF
ORIGINAL
NUMBER OF MARKET EXERCISE TERM
SECURITIES PRICE OF PRICE AT REMAINING
UNDERLYING STOCK AT TIME OF AT DATE OF
OPTIONS REPRICING REPRICING NEW REPRICING
REPRICED OR OR EXERCISE OR
NAME AND POSITION DATE OR AMENDED AMENDMENT AMENDMENT PRICE AMENDMENT
----------------- ---- ---------- --------- --------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Richard F. Bader...................... 10/15/98 300,000 $3.625 $ 8.50 $3.625 8 years
Chairman of the Board of Directors 202 days
And Chief Executive Officer
05/05/97 300,000 $8.50 $ 11.50 $ 8.50 9 years
71 days
Allan Zinberg......................... 10/15/98 100,000 $3.625 $ 8.50 $3.625 8 years
President and 202 days
Chief Operating Officer
05/05/97 100,000 $ 8.50 $ 11.50 $ 8.50 9 years
71 days
David E. Wertheimer, M.D.............. 08/07/98 75,000 $5.625 $12.125 $5.625 9 years
Senior Vice President 21 days
F. David Rollo, M.D................... 10/15/98 87,000 $3.625 $ 8.50 $3.625 8 years
Former Senior Vice President and 202 days
Executive Medical Director
05/05/97 87,000 $ 8.50 $11.875 $ 8.50 9 years
26 days
Swapan Sen............................
Senior Vice President-General 10/15/98 40,000 $3.625 $ 7.50 $3.625 9 years
Manager, Medical Facility 173 days
Operations
10/15/98 21,000 $3.625 $ 9.50 $3.625 7 years
133 days
Michael O. Kokesh..................... 10/15/98 15,000 $3.625 $ 8.50 $3.625 7 years
Vice President, General Counsel 153 days
and Secretary
</TABLE>
EMPLOYMENT AGREEMENTS
Messrs. Bader, Zinberg, and Sen have entered into employment agreements
with Raytel that entitle each to receive a specified base annual salary, subject
to increase by the Board of Directors from time to time, and such bonus as may
be authorized from time to time by the Board. Each agreement has a term of two
years, expiring in September 2001 in the case of Messrs. Bader and Zinberg and
February 2001 in the case of Mr. Sen. These terms are automatically extended for
an additional year in September of each year, in the case of Messrs. Bader and
Zinberg,and February of each year, in the case of Mr. Sen, unless either the
officer or Raytel elects not to renew the agreement. Each of the agreements with
Messrs. Bader, Zinberg, or Sen requires the officer to devote his full time and
attention to Raytel's affairs. If Raytel terminates the employment of Mr. Bader,
Zinberg, or Sen other than for cause (or if the officer voluntarily terminates
his employment following certain specified actions by Raytel), the officer will
be entitled to receive severance payments equal to his then current base salary
for a period of 24 months following the date of termination. The current annual
base salaries of Messrs. Bader, Zinberg, and Sen are $299,760, $299,760, and
$186,895, respectively.
11
<PAGE> 14
As a result of the CVI acquisition in August 1997, Raytel has assumed
the obligations of Dr. Wertheimer's employment agreement, which entitles him to
receive a specified base salary, subject to increase by the Board from time to
time, and such bonus as may be authorized from time to time by the Board. The
agreement has a term of ten years, expiring on December 31, 2006. The agreement
requires that Dr. Wertheimer devote his full time and attention to the affairs
of Raytel, both in his capacity as a physician and as a member of executive
management. The agreement may be terminated only for cause. In addition, the
agreement provides that upon termination other than upon expiration of the
regular term, Dr. Wertheimer is prohibited from engaging in the practice of
medicine within a ten-mile radius of his then current principal place of
practice. Dr. Wertheimer's current annual base salary is $300,000.
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
COMPENSATION PHILOSOPHY
The goals of Raytel's compensation policy are to attract, retain and
reward executive officers who contribute to the overall success of Raytel by
offering compensation that is competitive in the healthcare industry, to
motivate executives to achieve Raytel's business objectives and to align the
interests of officers with the long-term interests of stockholders. Raytel
currently uses salary, a management incentive plan, an executive deferred
compensation plan and stock options to meet these goals.
COMPENSATION COMMITTEE
The Compensation Committee is composed of three non-management members
of the Board of Directors, Thomas J. Fogarty, M.D., Mary M. Lampe, and Gene I.
Miller. The Committee is responsible for setting and administering the policies
governing annual compensation of executive officers, including cash compensation
and grants of stock options. The Committee reviews compensation levels of
executive officers, considers their performance and makes recommendations
regarding their cash compensation and stock option awards to the full Board of
Directors.
FORMS OF COMPENSATION
Raytel provides its executive officers with a compensation package
consisting of base salary, variable incentive pay, and participation in benefit
plans generally available to other employees. In setting total compensation, the
Committee considers individual and Company performance and data gathered from
the public filings of other public companies. The market data consist primarily
of base salary and total cash compensation rates, as well as incentive bonus and
stock programs of the companies considered by the Committee to be peer companies
in Raytel's industry.
Base Salary. Salaries for executive officers are initially set based on
negotiation with individual executive officers at the time of recruitment and
with reference to salaries for comparable positions among individuals of similar
education and background to the executive officers being recruited. Raytel also
gives consideration to the individual's experience, reputation in his or her
industry and expected contributions to Raytel.
Generally, salary adjustments are made for each executive officer at the
end of each fiscal year. The size of the annual salary adjustments for each
executive officer is primarily based on the Committee's determination that the
officer has met or exceeded his or her individual goals. These individual goals
are determined in consultation with management, subject to review and approval
by the Board of Directors, and generally relate to strategic goals within the
responsibility of the executive officer. The Chief Executive Officer's goals
also include Raytel's financial performance, measured primarily by the
achievement of predetermined revenue and expense objectives and maintenance of
adequate cash reserves.
Executive Bonuses. Raytel seeks to provide additional incentives and
rewards to executives who make valuable contributions to Raytel. Accordingly,
the Compensation Committee awards annual bonuses, which can comprise a
substantial portion of the total compensation of each executive officer. At the
beginning of each fiscal year, the Board establishes a suggested budget for
bonuses that may be earned during such fiscal year by executive officers and
other employees. Following the end of the fiscal year, the Compensation
Committee determines the amount of the cash bonus to be awarded to each
executive officer. Awards are based upon such factors as the Compensation
Committee may consider relevant in any particular year, including Raytel's
attainment of certain goals for revenue growth and profitability, as well
12
<PAGE> 15
as the Compensation Committee's evaluation of each executive officer's
individual contribution to the attainment of such goals.
Long-term Incentives. Longer-term incentives are provided through the
1990 Stock Option Plan, which rewards executives and other employees through the
growth in value of Raytel's stock. The committee believes that employee equity
ownership is highly motivating, provides a major incentive for employees to
build stockholder value and serves to align the interests of employees with
those of stockholders.
Grants of stock options to executive officers are based upon each
officer's relative position, responsibilities, historical and expected
contributions to Raytel, and the officer's existing stock ownership and previous
option grants, with primary weight given to the executive officers' relative
rank and responsibilities. Initial stock option grants designed to recruit an
executive officer to join Raytel may be based on negotiations with the officer
and with reference to historical option grants to existing officers. Stock
options are granted at the market price on the date of grant and will provide
value to the executive officers only when the price of Raytel's Common Stock
increases over the exercise price.
Other Benefit Plans. Executive officers may participate in several
benefit plans, including Raytel's Pension Plan, 401(k) Plan and Executive
Deferred Compensation Plan, a nonqualified deferred compensation plan. Raytel
makes matching contributions to the 401(k) Plan equal to 25% of the amount
contributed by each employee.
FISCAL 1999 COMPENSATION
Bonuses paid after the end of fiscal 1999 were based upon Raytel's
operating results in fiscal 1999 and each executive's contribution to these
operating results. Raytel posted income from operations for fiscal 1999 of
$8,773,000, which was approximately 11.9% lower than Raytel's previous amount of
$9,962,000 earned in fiscal 1998.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
The base compensation payable to Richard F. Bader, Raytel's Chairman and
Chief Executive Officer, is determined by the employment agreement described
above under "Employment Agreements." In 1999, based on the recommendation of the
Compensation Committee, the Board increased Mr. Bader's annual salary in light
of the important role Mr. Bader plays as Raytel's Chief Executive Officer and
the compensation paid to chief executive officers of comparable companies. Mr.
Bader's incentive compensation and bonus are determined by the Compensation
Committee based on the financial objectives set by the Compensation Committee
for that fiscal year. The financial objectives include the increase in revenues,
earnings and shareholder value and based upon a survey of compensation paid to
the chief executive officers of comparably sized companies in the same industry
as Raytel. Based on these financial results, the Compensation Committee awarded
Mr. Bader a bonus equal to approximately 63.4% of his 1999 base salary.
For specific information regarding compensation earned in fiscal 1999 by
certain executive officers, see "Executive Compensation - Summary Compensation
Table."
THE COMPENSATION COMMITTEE
Thomas J. Fogarty, M.D.
Mary M. Lampe
Gene I. Miller
REPORT OF THE EMPLOYEE STOCK OPTION COMMITTEE AND THE
COMPENSATION COMMITTEE ON REPRICING OF OPTIONS
REPRICING OF STOCK OPTIONS
In October 1998, the Employee Stock Option Committee and the
Compensation Committee reviewed the options held by the Company's executive
officers and employees and considered the fact that the decline in the price of
the Common Stock of the Company resulted in a substantial number of stock
options granted pursuant to the 1990 Stock Option Plan having exercise prices
well above the recent trading prices for the Common Stock. The Committees were
13
<PAGE> 16
advised by management that management believed that the Company's total
compensation package for employees, which included options with exercise prices
well above the current trading price of the Company's shares, was noncompetitive
and would result in key personnel turnover as well as defeating the purpose of
the options as an incentive to improve shareholder value. The Committees also
considered that the recent decline in the Company's share price would result in
inequities between employees holding higher-priced options and recent hires who
had been granted options with exercise prices set at the lower current trading
price of the Company's shares. The Committees were advised by management that
management believed that key employee turnover was likely to increase in part
because the Company's total compensation package for long-term employees, which
included substantial options with exercise prices well above the current trading
price, was less attractive than compensation offered by other companies in the
same geographic location. This is because options granted to new hires at other
companies would likely be granted at current trading prices, providing more
opportunity for appreciation than the Company's options.
The Committees believed that the Company's success in the future would
depend in large part on its ability to retain a number of its highly skilled
technical, managerial and marketing personnel and the loss of key employees
could have significant adverse impact on the Company's business. The Committees
also believed that unless an adjustment was made in option prices, existing
employees holding options would perceive a substantial inequity in comparison to
new employees granted stock options with exercise prices set at the current,
lower fair market value of the Company's Common Stock and that employee morale
would suffer as a consequence. The Committees concluded that it was important
and cost-effective to provide equity incentives to employees and executive
officers of the Company to improve the Company's performance and the value of
the Company for its stockholders. The Committees considered granting new options
selectively to current key employees at fair market value, but recognized that
the size of the option grants required to offset the decline in market price
would result in significant additional dilution to stockholders. The Committees
recognized that an exchange of existing options with exercise prices higher than
fair market value for options at fair market value would provide additional
incentives to employees because of the increased potential for appreciation. The
Committees also recognized that the new options could include new vesting
schedules providing optionees participating in the exchange with an added
incentive to remain with the Company.
Accordingly, on October 15, 1998, the Committees approved an offer to
specific employees of Raytel, including executive officers whom the Compensation
Committee considered separately, to exchange outstanding options with an
exercise price equal to or greater than $7.50 for options with an exercise price
of $3.625 per share subject to the condition that any participating employee
agree to cancel any stock option held by him or her, and with the vesting of
each new option to commence on October 15, 1998. All replacement options will
terminate no later than 10 years from the date of grant. Accordingly, optionees
who participated in the exchange received a lower exercise price in exchange for
forfeiting vesting under their old options. The offer to exchange options was
completed in October 1998; in total, options for 628,950 shares with exercise
prices ranging from $7.50 per share to $10.00 per share were exchanged for
options for an equal number of shares at an exercise price of $3.625 per share,
the closing price of Raytel's Common Stock on October 15, 1998.
THE EMPLOYEE STOCK OPTION COMMITTEE THE COMPENSATION COMMITTEE
Richard F. Bader Thomas J. Fogarty, M.D.
Allan Zinberg Mary M. Lampe
Gene I. Miller
14
<PAGE> 17
PERFORMANCE GRAPH
Set forth below is a line graph comparing the cumulative total return at
September 30, 1999 (assuming reinvestment of dividends) on $100 invested,
alternatively in Raytel's Common Stock, the Nasdaq Stock Market - US Index, and
the Nasdaq Health Services Index on December 1, 1995, the date of Raytel's
initial public offering.
<TABLE>
<CAPTION>
Cumulative Total Return
--------------------------------------------------------
12/01/95 09/30/96 09/30/97 06/30/98 09/30/99
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Raytel Medical Corporation $100 $169 $181 $ 57 $ 34
Nasdaq Stock Market (US) $100 $117 $161 $164 $265
Nasdaq Health Services Index $100 $118 $118 $ 80 $ 74
</TABLE>
15
<PAGE> 18
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires Raytel's
officers and directors, and persons who own more than 10% of a registered class
of Raytel's equity securities, to file reports of ownership and changes in
ownership with the SEC and Nasdaq. Officers, directors and greater than 10%
stockholders are required by SEC regulations to furnish Raytel with copies of
all Section 16(a) forms they file.
To Raytel's knowledge, based solely on its review of the copies of such
reports received by it, or written representations from reporting persons that
all required reports were filed, all Section 16(a) filing requirements
applicable to its officers, directors and greater-than-10% beneficial owners
during fiscal 1999 were complied with.
CERTAIN TRANSACTIONS
Upon its acquisition of CVI in August 1997, Raytel, through the Heart
Institute of Port St. Lucie ("HIPSL"), a subsidiary of CVI, became a party to a
real estate lease agreement with 1700 S.E. Hillmoor Drive, Inc., a Florida
corporation in which David E. Wertheimer, Senior Vice President and a director
of Raytel, is a minority shareholder. The lease is for an office condominium
consisting of approximately 22,500 square feet in a medical office building. The
lease commenced January 1, 1997 and has a ten-year term, with a single option to
renew for an additional ten-year term on the same terms and conditions. Pursuant
to the terms of the lease, HIPSL is obligated to pay $349,411.68 per year in
rent, payable in equal monthly installments on the first day of each month. The
rent is adjustable beginning in 2002 based on the change, if any, in the
interest rate on the loan secured by the real property. HIPSL is also
responsible for all real estate taxes on the tenant improvements and personal
property located on the premises, as well as all operating costs, such as
utilities, heating, ventilation and air conditioning and all condominium
association fees.
Through an affiliated medical group owned by Dr. Wertheimer, Raytel and
Granada Hills Community Hospital have entered into an agreement for Raytel to be
the exclusive provider of cardiac surgery services at the hospital and to manage
the hospital's cardiovascular surgery program. Raytel has also entered into an
agreement with a leading cardiothoracic surgeon to provide the cardiac surgery
services at the hospital. The initial term of both agreements is nine years.
Raytel provides management services to the affiliated medical group under a
management services agreement pursuant to which Raytel receives all of the
income for its services to the affiliated medical group. Dr. Wertheimer has also
entered into a succession agreement which permits Raytel to appoint the
successor shareholder of the medical group in the event Dr. Wertheimer is no
longer employed by Raytel.
Through additional affiliated medical groups owned by Dr. Wertheimer,
Raytel has entered into professional services arrangements with two independent
medical groups to provide radiology services at two of its diagnostic imaging
centers. Raytel provides management services to the affiliated medical groups
under a management services agreement pursuant to which Raytel receives all of
the income for its services to the affiliated medical group. Dr. Wertheimer has
also entered into a succession agreement which permits Raytel to appoint the
successor shareholder of the medical group in the event Dr. Wertheimer is no
longer employed by Raytel.
For a description of the compensation of officers and directors of
Raytel, employment agreements between certain officers and Raytel and the
eligibility of Raytel's officers and directors to participate in Raytel's
employee benefit plans, see "Proposal No. 1 - Election of Directors - Director
Compensation" and "Executive Compensation - Employment Agreements".
16
<PAGE> 19
PROPOSAL NO. 2
APPROVAL OF RAYTEL'S 2000 STOCK OPTION PLAN
At the Annual Meeting, the stockholders will be asked to approve the
Raytel Medical Corporation 2000 Stock Option Plan (the "2000 Plan"). On January
20, 2000, the Board of Directors adopted the 2000 Plan subject to and effective
upon its approval by the stockholders in order to augment and ultimately replace
Raytel's 1990 Stock Option Plan (the "Predecessor Plan") when that plan expires
in June 2000.
The Board of Directors believes that in order to successfully attract
and retain the best possible candidates for positions of responsibility, Raytel
must continue to offer a competitive equity incentive program. As of January 14,
2000, only 490,454 shares remained available for future stock option grants
under the Predecessor Plan. The proposed 2000 Plan will replace the expiring
Predecessor Plan and is intended to ensure that Raytel will continue to have
available a reasonable number of shares for its stock option program. It
authorizes an additional 425,000 shares of Raytel's Common Stock to be made
available for stock option grants.
SUMMARY OF THE 2000 STOCK OPTION PLAN
The following summary of the 2000 Plan is qualified in its entirety by
the specific language of the plan, a copy of which is available to any
stockholder upon request.
GENERAL. The purpose of the 2000 Plan is to advance the interests of
Raytel and its stockholders by providing an incentive to attract, retain and
reward Raytel's employees, directors and consultants and by motivating such
persons to contribute to Raytel's goals. The 2000 Plan provides for the grant to
employees of incentive stock options within the meaning of Section 422 of the
Internal Revenue Code of 1986 (the "Code") and the grant to employees, directors
and consultants of nonstatutory stock options.
SHARES SUBJECT TO 2000 PLAN. A maximum of 425,000 of the authorized but
unissued or reacquired shares of Common Stock of Raytel may be issued under the
2000 Plan. Appropriate adjustments will be made to the shares subject to the
2000 Plan, the "Grant Limit" described below and to outstanding options upon any
stock dividend, stock split, reverse stock split, recapitalization, combination,
reclassification, or similar change in the capital structure of Raytel. If any
outstanding option expires, terminates or is canceled, or if unvested shares
acquired pursuant to an option are repurchased by Raytel, the expired or
repurchased shares are returned to the 2000 Plan and again become available for
grant.
To enable Raytel to deduct for federal income tax purposes the
compensation recognized by its executive officers in connection with options
granted under the 2000 Plan, the plan is designed so that such compensation will
qualify as "performance-based compensation" under Section 162(m) of the Code. To
comply with Section 162(m), the 2000 Plan limits the number of shares for which
options may be granted to any employee. Under this limitation, no employee (or
prospective employee) may be granted options for more than 300,000 shares in any
fiscal year (the "Grant Limit"). The Grant Limit is subject to appropriate
adjustment in the event of certain changes in Raytel's capital structure, as
previously described.
ADMINISTRATION. The 2000 Plan will be administered by the Board of
Directors or a committee of the Board, which, in the case of options intended to
qualify for the performance-based compensation exemption under Section 162(m) of
the Code, must be comprised solely of two or more independent directors. (For
purposes of this discussion, the term "Board" refers to either the Board of
Directors or such committee.) Subject to the provisions of the 2000 Plan, the
Board determines the persons to whom options are to be granted, the number of
shares to be covered by each option, and the terms and conditions of each
option, including:
- whether it is to be an incentive stock option or a nonstatutory stock
option;
- the timing and terms of exercisability and vesting of the option;
- the purchase price and the type of consideration to be paid to Raytel
upon the exercise of each option; and
17
<PAGE> 20
- the time of expiration of each option.
The Board may modify, extend or renew any option, grant a new option in
substitution for any option, waive any restrictions or conditions applicable to
any option, and accelerate, extend or defer the exercisability or vesting of any
option, subject to the optionee's agreement to any such action that adversely
affects the optionee. The 2000 Plan provides for Raytel to indemnify any
director, officer or employee against all reasonable expenses, including
attorneys' fees, incurred in connection with any legal action arising from such
person's action or failure to act in administering the 2000 Plan. The Board has
the authority to interpret the 2000 Plan and options granted thereunder.
ELIGIBILITY. Options may be granted under the 2000 Plan to employees,
directors and consultants of Raytel or of any present or future parent or
subsidiary corporations of Raytel. In addition, options may be granted to
prospective service providers in connection with written offers of employment or
other service relationship, provided that no shares may be purchased prior to
such person's commencement of service. As of January 14, 2000, Raytel had
approximately 1,000 employees, including five executive officers, three
directors and one consultant who would be eligible under the 2000 Plan. While
any eligible person may be granted a nonstatutory stock option, only employees
may be granted incentive stock options.
TERMS AND CONDITIONS OF OPTIONS. Each option granted under the 2000 Plan
will be evidenced by a written agreement between Raytel and the optionee
specifying the number of shares subject to the option and the other terms and
conditions of the option. Nonstatutory stock options must have an exercise price
at least equal to 85% of the fair market value of Raytel's stock on the date of
grant. All incentive stock options must have an exercise price at least equal to
the fair market value of Raytel's stock on the date of grant; however, any
incentive stock option granted to a person who at the time of grant owns stock
possessing more than 10% of the total combined voting power of all classes of
stock of Raytel or any parent or subsidiary corporation of Raytel (a "10%
Stockholder") must have an exercise price equal to at least 110% of the fair
market value of Raytel's stock on the date of grant. As of January 14, 2000, the
closing price of Raytel's stock, as reported on the Nasdaq National Market, was
$3.156 per share.
The 2000 Plan provides that the option exercise price may be paid in the
form of any lawful consideration approved by the Board, including:
- cash, check or cash equivalent;
- the assignment of the proceeds of a sale or loan with respect to some
or all of the shares being acquired upon the exercise of the option;
- tender of shares of Raytel stock owned by the optionee having a fair
market value not less than the exercise price; or
- delivery of a promissory note if the optionee is an employee;
The maximum term of an incentive stock option granted under the 2000
Plan is 10 years, provided that an incentive stock option granted to a 10%
Stockholder must have a term not exceeding five years. An option generally will
remain exercisable for three months following the optionee's termination of
service; however, options remain exercisable for extended periods in the event
of an optionee's death or if an optionee becomes disabled. In any event, the
option must be exercised no later than its expiration date.
Incentive stock options may not be transferred by the optionee other
than by will or by the laws of descent and distribution, and are exercisable
during the optionee's lifetime only by the optionee. Nonstatutory stock options
granted under the 2000 Plan may be assigned or transferred to the extent
permitted by the Board and set forth in the option agreement.
RESTRICTIONS ON REPRICING. The terms of the 2000 Plan expressly provide
that without stockholder approval, the Board may not reprice options by:
- amending outstanding options to reduce their exercise prices; or
18
<PAGE> 21
- granting lower-priced options upon cancellation of higher-priced
options;
unless the number of shares subject to such amended or canceled options are
excluded from the number of shares available for future option grants under the
2000 Plan.
CHANGE IN CONTROL. The 2000 Plan defines a "Change in Control" of Raytel
as any transaction involving a merger, asset sale, stock transfer or dissolution
after which Raytel's stockholders do not retain direct or indirect ownership of
a majority of the total combined voting power of the stock of Raytel, its
successor or the corporation to which assets or shares were transferred. If a
Change in Control occurs, Raytel's outstanding options may be assumed or
substituted by the acquiror or successor corporation. However, if an outstanding
option is not assumed or replaced, the 2000 Plan provides that its vesting and
exercisability will be accelerated in full effective 10 days prior to the Change
in Control. Options that are not assumed, replaced or exercised prior to the
Change in Control will terminate. In addition, the 2000 Plan authorizes the
Board to provide in any option agreement that if, within 12 months following a
Change in Control, the optionee's service is involuntarily terminated without
cause or the optionee resigns as a result of adverse employment circumstances
specified in the agreement (such as a demotion or a reduction in salary), then
the vesting and exercisability of the option will be accelerated in full, and
the option will remain exercisable for six months after the date of the
optionee's termination of service (but not beyond the option's expiration date).
TERMINATION OR AMENDMENT. The 2000 Plan will continue in effect until
the earlier of its termination by the Board or the date on which all shares
available for issuance under the plan have been issued and all vesting and other
restrictions on such shares have lapsed, provided that all incentive stock
options must be granted within ten years of the effective date of the plan. The
Board may terminate or amend the 2000 Plan at any time. However, without
stockholder approval, the Board may not amend the 2000 Plan to:
- increase the total number of shares issuable thereunder;
- change the class of persons eligible to receive incentive stock
options; or
- effect any other change that would require stockholder approval under
any applicable law, regulation or rule.
No termination or amendment may affect an outstanding option unless expressly
provided by the Board, and, in any event, may not adversely affect an
outstanding option without the consent of the optionee, unless the amendment is
required to preserve an option's status as an incentive stock option or is
necessary to comply with any applicable law, regulation or rule.
SUMMARY OF U.S. FEDERAL INCOME TAX CONSEQUENCES
The following summary is intended only as a general guide as to the U.S.
federal income tax consequences under current law of participation in the 2000
Plan and does not attempt to describe all possible federal or other tax
consequences of such participation or tax consequences based on particular
circumstances.
INCENTIVE STOCK OPTIONS. A holder of an incentive stock option
recognizes no taxable income for regular income tax purposes as a result of the
grant or exercise of the option. Optionees who hold their shares for at least
two years following the date the option was granted and one year following the
exercise of the option will normally recognize a capital gain or loss equal to
the difference between the purchase price and the sale price of the shares. If
an optionee satisfies these holding periods prior to a sale of the shares,
Raytel will not be entitled to any deduction for federal income tax purposes in
connection with the sale. If, however, an optionee sells or transfers the shares
within two years after the date of grant or one year after the date of exercise
(generally referred to as a "disqualifying disposition"), the lesser of:
- the difference between the exercise price and the fair market value of
the shares on the date when the option is exercised or such later date
as the shares vest; and
- the difference between the exercise price and the sale price of the
shares;
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will be taxed as ordinary income at the time of disposition. Any gain in excess
of that amount will be a capital gain. If a loss is recognized, there will be no
ordinary income, and the loss will be treated as a capital loss, which, with
limited exceptions, can be deducted only against capital gains. Any ordinary
income recognized by the optionee upon the disqualifying disposition of the
shares generally should be deductible by Raytel for federal income tax purposes,
subject to some limitations set forth in the Code.
The difference between the option exercise price and the fair market
value of the shares on date when the option is exercised or such later date as
the shares vest is treated as an adjustment in computing the optionee's income
for purposes of computing the alternative minimum tax, which is payable if it
exceeds the taxpayer's regular tax liability for that year. Special rules may
apply if the shares are later sold in a disqualifying disposition, or under
certain other circumstances set forth in the Code.
NONSTATUTORY STOCK OPTIONS. Options that do not qualify as incentive
stock options have no special tax status and are generally referred to as
"nonstatutory stock options." An optionee generally recognizes no taxable income
as the result of the grant of such an option. Upon exercise of the option, the
optionee normally recognizes ordinary income in the amount of the difference
between the option exercise price and the fair market value of the shares on the
date when the option is exercised or such later date as the purchased shares
vest (such date generally being referred to as the "determination date"). If the
optionee is an employee, such ordinary income generally is subject to
withholding of income and employment taxes. If the option is exercised before
the purchased shares are fully-vested, the optionee may elect, pursuant to
Section 83(b) of the Code, to have the exercise date treated as the
determination date by filing an election with the Internal Revenue Service no
later than 30 days after the date the option is exercised. Upon the sale of
stock acquired by the exercise of a nonstatutory stock option, any gain or loss,
based on the difference between the sale price and the fair market value on the
determination date, will be taxed as capital gain or loss. Any ordinary income
recognized by the optionee as a result of the exercise of a nonstatutory stock
option generally should be deductible by Raytel for federal income tax purposes,
subject to some limitations set forth in the Code. No tax deduction is available
to Raytel with respect to the grant of the option or the sale of the underlying
stock.
VOTE REQUIRED AND BOARD OF DIRECTORS RECOMMENDATION
Approval of this proposal requires a number of votes "For" the proposal
that exceeds the number of votes "Against" the proposal with abstentions and
broker non-votes each being counted as present for purposes of determining the
presence of a quorum but having no effect on the outcome of the vote.
As described above, the 2000 Plan is intended to preserve the treatment
of option-related compensation as "performance-based compensation" for purposes
of Section 162(m) of the Code. By approving this proposal, the stockholders will
be approving, among other things, the eligibility requirements for participation
in the 2000 Plan and the Grant Limit.
THE BOARD OF DIRECTORS BELIEVES THAT ADOPTION OF THE PROPOSED 2000 PLAN
IS IN THE BEST INTERESTS OF RAYTEL AND ITS STOCKHOLDERS FOR THE REASONS STATED
ABOVE. THEREFORE, THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE
PROPOSAL TO APPROVE THE 2000 PLAN.
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PROPOSAL NO. 3
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected Arthur Andersen LLP as the
independent auditors of Raytel for the current fiscal year ending September 30,
2000. The selection of the independent auditors is being submitted to the
stockholders for ratification at the Annual Meeting. In the event that
ratification by the stockholders of the selection of Arthur Andersen LLP as
Raytel's independent auditors is not obtained, the Board of Directors will
reconsider such selection. Arthur Andersen LLP has audited Raytel's financial
statements since 1993.
The ratification of the selection of Arthur Andersen LLP will require
the affirmative vote of not less than a majority of the shares of Raytel's
Common Stock represented and voting at the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
RATIFICATION OF THE SELECTION OF ARTHUR ANDERSEN LLP.
OTHER BUSINESS
Raytel currently knows of no other matters to be submitted at the Annual
Meeting. If any other matters properly come before the Annual Meeting, it is the
intention of the persons named in the enclosed form of Proxy to vote the shares
they represent as the Board of Directors may recommend.
THE BOARD OF DIRECTORS
Dated: January 26, 2000
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RAYTEL MEDICAL CORPORATION
2000 STOCK OPTION PLAN
1. ESTABLISHMENT, PURPOSE AND TERM OF PLAN.
1.1 ESTABLISHMENT. The Raytel Medical Corporation 2000 Stock Option
Plan (the "PLAN") is hereby established effective as of the date on which it is
approved by the stockholders of the Company (the "EFFECTIVE DATE").
1.2 PURPOSE. The purpose of the Plan is to advance the interests of
the Participating Company Group and its stockholders by providing an incentive
to attract and retain persons performing services for the Participating Company
Group and by motivating such persons to contribute to the growth and
profitability of the Participating Company Group.
1.3 TERM OF PLAN. The Plan shall continue in effect until the earlier
of its termination by the Board or the date on which all of the shares of Stock
available for issuance under the Plan have been issued and all restrictions on
such shares under the terms of the Plan and the agreements evidencing Options
granted under the Plan have lapsed. However, all Incentive Stock Options shall
be granted, if at all, within ten (10) years from the earlier of the date the
Plan is adopted by the Board or the date the Plan is duly approved by the
stockholders of the Company.
2. DEFINITIONS AND CONSTRUCTION.
2.1 DEFINITIONS. Whenever used herein, the following terms shall have
their respective meanings set forth below:
(a) "BOARD" means the Board of Directors of the Company. If one
or more Committees have been appointed by the Board to administer the Plan,
"BOARD" also means such Committee(s).
(b) "CODE" means the Internal Revenue Code of 1986, as amended,
and any applicable regulations promulgated thereunder.
(c) "COMMITTEE" means the Compensation Committee or other
committee of the Board duly appointed to administer the Plan and having such
powers as shall be specified by the Board. Unless the powers of the Committee
have been specifically limited, the Committee shall have all of the powers of
the Board granted herein, including, without limitation, the power to amend or
terminate the Plan at any time, subject to the terms of the Plan and any
applicable limitations imposed by law.
(d) "COMPANY" means Raytel Medical Corporation, a Delaware
corporation, or any successor corporation thereto.
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(e) "CONSULTANT" means a person engaged to provide consulting or
advisory services (other than as an Employee or a Director) to a Participating
Company, provided that the identity of such person, the nature of such services
or the entity to which such services are provided would not preclude the Company
from offering or selling securities to such person pursuant to the Plan in
reliance on a Form S-8 Registration Statement under the Securities Act.
(f) "DIRECTOR" means a member of the Board or of the board of
directors of any other Participating Company.
(g) "DISABILITY" means the inability of the Optionee, in the
opinion of a qualified physician acceptable to the Company, to perform the major
duties of the Optionee's position with the Participating Company Group because
of the sickness or injury of the Optionee.
(h) "EMPLOYEE" means any person treated as an employee
(including an officer or a Director who is also treated as an employee) in the
records of a Participating Company and, with respect to any Incentive Stock
Option granted to such person, who is an employee for purposes of Section 422 of
the Code; provided, however, that neither service as a Director nor payment of a
director's fee shall be sufficient to constitute employment for purposes of the
Plan.
(i) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(j) "FAIR MARKET VALUE" means, as of any date, the value of a
share of Stock or other property as determined by the Board, in its discretion,
or by the Company, in its discretion, if such determination is expressly
allocated to the Company herein, subject to the following:
(i) If, on such date, the Stock is listed on a national or
regional securities exchange or market system, the Fair Market Value of a share
of Stock shall be the closing price of a share of Stock (or the mean of the
closing bid and asked prices of a share of Stock if the Stock is so quoted
instead) as quoted on the Nasdaq National Market, The Nasdaq SmallCap Market or
such other national or regional securities exchange or market system
constituting the primary market for the Stock, as reported in The Wall Street
Journal or such other source as the Company deems reliable. If the relevant date
does not fall on a day on which the Stock has traded on such securities exchange
or market system, the date on which the Fair Market Value shall be established
shall be the last day on which the Stock was so traded prior to the relevant
date, or such other appropriate day as shall be determined by the Board, in its
discretion.
(ii) If, on such date, the Stock is not listed on a national
or regional securities exchange or market system, the Fair Market Value of a
share of Stock shall be as determined by the Board in good faith without regard
to any restriction other than a restriction which, by its terms, will never
lapse.
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(k) "INCENTIVE STOCK OPTION" means an Option intended to be (as
set forth in the Option Agreement) and which qualifies as an incentive stock
option within the meaning of Section 422(b) of the Code.
(l) "INSIDER" means an officer or a Director of the Company or
any other person whose transactions in Stock are subject to Section 16 of the
Exchange Act.
(m) "NONSTATUTORY STOCK OPTION" means an Option not intended to
be (as set forth in the Option Agreement) or which does not qualify as an
Incentive Stock Option.
(n) "OPTION" means a right to purchase Stock (subject to
adjustment as provided in Section 4.3) pursuant to the terms and conditions of
the Plan. An Option may be either an Incentive Stock Option or a Nonstatutory
Stock Option.
(o) "OPTION AGREEMENT" means a written agreement between the
Company and an Optionee setting forth the terms, conditions and restrictions of
the Option granted to the Optionee and any shares acquired upon the exercise
thereof. An Option Agreement may consist of a form of "Notice of Grant of Stock
Option" and a form of "Stock Option Agreement" incorporated therein by
reference, or such other form or forms as the Board may approve from time to
time.
(p) "OPTIONEE" means a person who has been granted one or more
Options.
(q) "PARENT CORPORATION" means any present or future "parent
corporation" of the Company, as defined in Section 424(e) of the Code.
(r) "PARTICIPATING COMPANY" means the Company or any Parent
Corporation or Subsidiary Corporation.
(s) "PARTICIPATING COMPANY GROUP" means, at any point in time,
all corporations collectively which are then Participating Companies.
(t) "RULE 16b-3" means Rule 16b-3 under the Exchange Act, as
amended from time to time, or any successor rule or regulation.
(u) "SECTION 162(m)" means Section 162(m) of the Code, as
amended by the Revenue Reconciliation Act of 1993 (P.L. 103-66).
(v) "SECURITIES ACT" means the Securities Act of 1933, as
amended.
(w) "SERVICE" means an Optionee's employment or service with the
Participating Company Group, whether in the capacity of an Employee, a Director
or a Consultant. An Optionee's Service shall not be deemed to have terminated
merely because of a change in the capacity in which the Optionee renders Service
to the Participating Company
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Group or a change in the Participating Company for which the Optionee renders
such Service, provided that there is no interruption or termination of the
Optionee's Service. Furthermore, an Optionee's Service with the Participating
Company Group shall not be deemed to have terminated if the Optionee takes any
military leave, sick leave, or other bona fide leave of absence approved by the
Company; provided, however, that if any such leave exceeds ninety (90) days, on
the ninety-first (91st) day of such leave the Optionee's Service shall be deemed
to have terminated unless the Optionee's right to return to Service with the
Participating Company Group is guaranteed by statute or contract.
Notwithstanding the foregoing, unless otherwise designated by the Company or
required by law, a leave of absence shall not be treated as Service for purposes
of determining vesting under the Optionee's Option Agreement. The Optionee's
Service shall be deemed to have terminated either upon an actual termination of
Service or upon the corporation for which the Optionee performs Service ceasing
to be a Participating Company. Subject to the foregoing, the Company, in its
discretion, shall determine whether the Optionee's Service has terminated and
the effective date of such termination.
(x) "STOCK" means the common stock of the Company, as adjusted
from time to time in accordance with Section 4.3.
(y) "SUBSIDIARY CORPORATION" means any present or future
"subsidiary corporation" of the Company, as defined in Section 424(f) of the
Code.
(z) "TEN PERCENT OWNER OPTIONEE" means an Optionee who, at the
time an Option is granted to the Optionee, owns stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of a
Participating Company within the meaning of Section 422(b)(6) of the Code.
2.2 CONSTRUCTION. Captions and titles contained herein are for
convenience only and shall not affect the meaning or interpretation of any
provision of the Plan. Except when otherwise indicated by the context, the
singular shall include the plural and the plural shall include the singular. Use
of the term "or" is not intended to be exclusive, unless the context clearly
requires otherwise.
3. ADMINISTRATION.
3.1 ADMINISTRATION BY THE BOARD. The Plan shall be administered by
the Board. All questions of interpretation of the Plan or of any Option shall be
determined by the Board, and such determinations shall be final and binding upon
all persons having an interest in the Plan or such Option.
3.2 AUTHORITY OF OFFICERS. Any officer of a Participating Company
shall have the authority to act on behalf of the Company with respect to any
matter, right, obligation, determination or election which is the responsibility
of or which is allocated to the Company herein, provided the officer has
apparent authority with respect to such matter, right, obligation, determination
or election.
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3.3 POWERS OF THE BOARD. In addition to any other powers set forth in
the Plan and subject to the provisions of the Plan, the Board shall have the
full and final power and authority, in its discretion:
(a) to determine the persons to whom, and the time or times at
which, Options shall be granted and the number of shares of Stock to be subject
to each Option;
(b) to designate Options as Incentive Stock Options or
Nonstatutory Stock Options;
(c) to determine the Fair Market Value of shares of Stock or
other property;
(d) to determine the terms, conditions and restrictions
applicable to each Option (which need not be identical) and any shares acquired
upon the exercise thereof, including, without limitation, (i) the exercise price
of the Option, (ii) the method of payment for shares purchased upon the exercise
of the Option, (iii) the method for satisfaction of any tax withholding
obligation arising in connection with the Option or such shares, including by
the withholding or delivery of shares of stock, (iv) the timing, terms and
conditions of the exercisability of the Option or the vesting of any shares
acquired upon the exercise thereof, (v) the time of the expiration of the
Option, (vi) the effect of the Optionee's termination of Service with the
Participating Company Group on any of the foregoing, and (vii) all other terms,
conditions and restrictions applicable to the Option or such shares not
inconsistent with the terms of the Plan;
(e) to approve one or more forms of Option Agreement;
(f) to amend, modify, extend, cancel or renew any Option or to
waive any restrictions or conditions applicable to any Option or any shares
acquired upon the exercise thereof;
(g) to accelerate, continue, extend or defer the exercisability
of any Option or the vesting of any shares acquired upon the exercise thereof,
including with respect to the period following an Optionee's termination of
Service with the Participating Company Group;
(h) to prescribe, amend or rescind rules, guidelines and
policies relating to the Plan, or to adopt supplements to, or alternative
versions of, the Plan, including, without limitation, as the Board deems
necessary or desirable to comply with the laws of, or to accommodate the tax
policy or custom of, foreign jurisdictions whose citizens may be granted
Options; and
(i) to correct any defect, supply any omission or reconcile any
inconsistency in the Plan or any Option Agreement and to make all other
determinations and take such other actions with respect to the Plan or any
Option as the Board may deem advisable to the extent not inconsistent with the
provisions of the Plan or applicable law.
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3.4 ADMINISTRATION WITH RESPECT TO INSIDERS. With respect to
participation by Insiders in the Plan, at any time that any class of equity
security of the Company is registered pursuant to Section 12 of the Exchange
Act, the Plan shall be administered in compliance with the requirements, if any,
of Rule 16b-3.
3.5 COMMITTEE COMPLYING WITH SECTION 162(m). If a Participating
Company is a "publicly held corporation" within the meaning of Section 162(m),
the Board may establish a Committee of "outside directors" within the meaning of
Section 162(m) to approve the grant of any Option which might reasonably be
anticipated to result in the payment of employee remuneration that would
otherwise exceed the limit on employee remuneration deductible for income tax
purposes pursuant to Section 162(m).
3.6 INDEMNIFICATION. In addition to such other rights of
indemnification as they may have as members of the Board or officers or
employees of the Participating Company Group, members of the Board and any
officers or employees of the Participating Company Group to whom authority to
act for the Board or the Company is delegated shall be indemnified by the
Company against all reasonable expenses, including attorneys' fees, actually and
necessarily incurred in connection with the defense of any action, suit or
proceeding, or in connection with any appeal therein, to which they or any of
them may be a party by reason of any action taken or failure to act under or in
connection with the Plan, or any right granted hereunder, and against all
amounts paid by them in settlement thereof (provided such settlement is approved
by independent legal counsel selected by the Company) or paid by them in
satisfaction of a judgment in any such action, suit or proceeding, except in
relation to matters as to which it shall be adjudged in such action, suit or
proceeding that such person is liable for gross negligence, bad faith or
intentional misconduct in duties; provided, however, that within sixty (60) days
after the institution of such action, suit or proceeding, such person shall
offer to the Company, in writing, the opportunity at its own expense to handle
and defend the same.
4. SHARES SUBJECT TO PLAN.
4.1 MAXIMUM NUMBER OF SHARES ISSUABLE. Subject to adjustment as
provided in Sections 4.2 and 4.3, the maximum aggregate number of shares of
Stock that may be issued under the Plan shall be four hundred twenty five
thousand (425,000) and shall consist of authorized but unissued or reacquired
shares of Stock or any combination thereof. If an outstanding Option for any
reason expires or is terminated or canceled or if shares of Stock are acquired
upon the exercise of an Option subject to a Company repurchase option and are
repurchased by the Company at the Optionee's exercise price, the shares of Stock
allocable to the unexercised portion of such Option or such repurchased shares
of Stock shall again be available for issuance under the Plan.
4.2 OPTION REPRICING. Without the approval of a majority of the
shares of Stock present or represented by proxy and voting at a meeting of the
stockholders of the Company at which a quorum representing a majority of all
outstanding shares of Stock is present or represented by proxy, the Board shall
not approve a program providing for either (i) the cancellation of outstanding
Options and the grant in substitution therefore of new Options having
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<PAGE> 30
a lower exercise price or (ii) the amendment of outstanding Options to reduce
the exercise price thereof, unless the number of shares subject to such canceled
Options or a number of shares equal to the number of shares subject to such
amended Options, as the case may be, are excluded from the number of shares
available for future Option grants pursuant to Section 4.1 above. This paragraph
shall not be construed to apply to "issuing or assuming a stock option in a
transaction to which section 424(a) applies," within the meaning of Section 424
of the Code.
4.3 ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE. In the event of any
stock dividend, stock split, reverse stock split, recapitalization, combination,
reclassification or similar change in the capital structure of the Company,
appropriate adjustments shall be made in the number and class of shares subject
to the Plan and to any outstanding Options, in the Section 162(m) Grant Limit
set forth in Section 5.4, and in the exercise price per share of any outstanding
Options. If a majority of the shares which are of the same class as the shares
that are subject to outstanding Options are exchanged for, converted into, or
otherwise become (whether or not pursuant to an Ownership Change Event, as
defined in Section 8.1) shares of another corporation (the "NEW SHARES"), the
Board may unilaterally amend the outstanding Options to provide that such
Options are exercisable for New Shares. In the event of any such amendment, the
number of shares subject to, and the exercise price per share of, the
outstanding Options shall be adjusted in a fair and equitable manner as
determined by the Board, in its discretion. Notwithstanding the foregoing, any
fractional share resulting from an adjustment pursuant to this Section 4.3 shall
be rounded down to the nearest whole number, and in no event may the exercise
price of any Option be decreased to an amount less than the par value, if any,
of the stock subject to the Option. The adjustments determined by the Board
pursuant to this Section 4.3 shall be final, binding and conclusive.
5. ELIGIBILITY AND OPTION LIMITATIONS.
5.1 PERSONS ELIGIBLE FOR OPTIONS. Options may be granted only to
Employees, Consultants, and Directors. For purposes of the foregoing sentence,
"Employees," "Consultants" and "Directors" shall include prospective Employees,
prospective Consultants and prospective Directors to whom Options are granted in
connection with written offers of an employment or other service relationship
with the Participating Company Group. Eligible persons may be granted more than
one (1) Option.
5.2 OPTION GRANT RESTRICTIONS. Any person who is not an Employee on
the effective date of the grant of an Option to such person may be granted only
a Nonstatutory Stock Option. An Incentive Stock Option granted to a prospective
Employee upon the condition that such person become an Employee shall be deemed
granted effective on the date such person commences Service with a Participating
Company, with an exercise price determined as of such date in accordance with
Section 6.1.
5.3 FAIR MARKET VALUE LIMITATION. To the extent that options
designated as Incentive Stock Options (granted under all stock option plans of
the Participating Company Group, including the Plan) become exercisable by an
Optionee for the first time during any calendar year for stock having a Fair
Market Value greater than One Hundred Thousand Dollars ($100,000), the portions
of such options which exceed such amount shall be treated as
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Nonstatutory Stock Options. For purposes of this Section 5.3, options designated
as Incentive Stock Options shall be taken into account in the order in which
they were granted, and the Fair Market Value of stock shall be determined as of
the time the option with respect to such stock is granted. If the Code is
amended to provide for a different limitation from that set forth in this
Section 5.3, such different limitation shall be deemed incorporated herein
effective as of the date and with respect to such Options as required or
permitted by such amendment to the Code. If an Option is treated as an Incentive
Stock Option in part and as a Nonstatutory Stock Option in part by reason of the
limitation set forth in this Section 5.3, the Optionee may designate which
portion of such Option the Optionee is exercising. In the absence of such
designation, the Optionee shall be deemed to have exercised the Incentive Stock
Option portion of the Option first. Separate certificates representing each such
portion shall be issued upon the exercise of the Option.
5.4 SECTION 162(m) GRANT LIMIT. Subject to adjustment as provided in
Section 4.3, no Employee or prospective Employee shall be granted one or more
Options within any fiscal year of the Company which in the aggregate are for the
purchase of more than three hundred thousand (300,000) shares (the "SECTION
162(m) GRANT LIMIT"). An Option which is canceled in the same fiscal year in
which it was granted shall continue to be counted against the Section 162(m)
Grant Limit for such period.
6. TERMS AND CONDITIONS OF OPTIONS.
Options shall be evidenced by Option Agreements specifying the number
of shares of Stock covered thereby, in such form as the Board shall from time to
time establish. No Option or purported Option shall be a valid and binding
obligation of the Company unless evidenced by a fully executed Option Agreement.
Option Agreements may incorporate all or any of the terms of the Plan by
reference and shall comply with and be subject to the following terms and
conditions:
6.1 EXERCISE PRICE. The exercise price for each Option shall be
established in the discretion of the Board; provided, however, that (a) the
exercise price per share for an Incentive Stock Option shall be not less than
the Fair Market Value of a share of Stock on the effective date of grant of the
Option, (b) the exercise price per share for a Nonstatutory Stock Option shall
be not less than eighty-five percent (85%) of the Fair Market Value of a share
of Stock on the effective date of grant of the Option, and (c) no Incentive
Stock Option granted to a Ten Percent Owner Optionee shall have an exercise
price per share less than one hundred ten percent (110%) of the Fair Market
Value of a share of Stock on the effective date of grant of the Option.
Notwithstanding the foregoing, an Option (whether an Incentive Stock Option or a
Nonstatutory Stock Option) may be granted with an exercise price lower than the
minimum exercise price set forth above if such Option is granted pursuant to an
assumption or substitution for another option in a manner qualifying under the
provisions of Section 424(a) of the Code.
6.2 EXERCISABILITY AND TERM OF OPTIONS. Options shall be exercisable
at such time or times, or upon such event or events, and subject to such terms,
conditions, performance criteria and restrictions as shall be determined by the
Board and set forth in the Option Agreement evidencing such Option; provided,
however, that (a) no Option shall be
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<PAGE> 32
exercisable after the expiration of ten (10) years after the effective date of
grant of such Option, (b) no Incentive Stock Option granted to a Ten Percent
Owner Optionee shall be exercisable after the expiration of five (5) years after
the effective date of grant of such Option, and (c) no Option granted to a
prospective Employee, prospective Consultant or prospective Director may become
exercisable prior to the date on which such person commences Service with a
Participating Company. Subject to the foregoing, unless otherwise specified by
the Board in the grant of an Option, any Option granted hereunder shall
terminate ten (10) years after the effective date of grant of the Option, unless
earlier terminated in accordance with its provisions.
6.3 PAYMENT OF EXERCISE PRICE.
(a) FORMS OF CONSIDERATION AUTHORIZED. Except as otherwise
provided below, payment of the exercise price for the number of shares of Stock
being purchased pursuant to any Option shall be made (i) in cash, by check or
cash equivalent, (ii) by tender to the Company, or attestation to the ownership,
of shares of Stock owned by the Optionee having a Fair Market Value (as
determined by the Company without regard to any restrictions on transferability
applicable to such stock by reason of federal or state securities laws or
agreements with an underwriter for the Company) not less than the exercise
price, (iii) by delivery of a properly executed notice together with irrevocable
instructions to a broker providing for the assignment to the Company of the
proceeds of a sale or loan with respect to some or all of the shares being
acquired upon the exercise of the Option (including, without limitation, through
an exercise complying with the provisions of Regulation T as promulgated from
time to time by the Board of Governors of the Federal Reserve System) (a
"CASHLESS EXERCISE"), (iv) provided that the Optionee is an Employee (unless
otherwise not prohibited by law, including, without limitation, any regulation
promulgated by the Board of Governors of the Federal Reserve System) and in the
Company's sole discretion at the time the Option is exercised, by delivery of
the Optionee's promissory note in a form approved by the Company for the
aggregate exercise price, provided that, if the Company is incorporated in the
State of Delaware, the Optionee shall pay in cash that portion of the aggregate
exercise price not less than the par value of the shares being acquired, (v) by
such other consideration as may be approved by the Board from time to time to
the extent permitted by applicable law, or (vi) by any combination thereof. The
Board may at any time or from time to time, by approval of or by amendment to
the standard forms of Option Agreement described in Section 7, or by other
means, grant Options which do not permit all of the foregoing forms of
consideration to be used in payment of the exercise price or which otherwise
restrict one or more forms of consideration.
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(b) LIMITATIONS ON FORMS OF CONSIDERATION.
(i) TENDER OF STOCK. Notwithstanding the foregoing, an
Option may not be exercised by tender to the Company, or attestation to the
ownership, of shares of Stock to the extent such tender or attestation would
constitute a violation of the provisions of any law, regulation or agreement
restricting the redemption of the Company's stock. Unless otherwise provided by
the Board, an Option may not be exercised by tender to the Company, or
attestation to the ownership, of shares of Stock unless such shares either have
been owned by the Optionee for more than six (6) months or were not acquired,
directly or indirectly, from the Company.
(ii) CASHLESS EXERCISE. The Company reserves, at any and all
times, the right, in the Company's sole and absolute discretion, to establish,
decline to approve or terminate any program or procedures for the exercise of
Options by means of a Cashless Exercise.
(iii) PAYMENT BY PROMISSORY NOTE. No promissory note shall
be permitted if the exercise of an Option using a promissory note would be a
violation of any law. Any permitted promissory note shall be on such terms as
the Board shall determine at the time the Option is granted. The Board shall
have the authority to permit or require the Optionee to secure any promissory
note used to exercise an Option with the shares of Stock acquired upon the
exercise of the Option or with other collateral acceptable to the Company.
Unless otherwise provided by the Board, if the Company at any time is subject to
the regulations promulgated by the Board of Governors of the Federal Reserve
System or any other governmental entity affecting the extension of credit in
connection with the Company's securities, any promissory note shall comply with
such applicable regulations, and the Optionee shall pay the unpaid principal and
accrued interest, if any, to the extent necessary to comply with such applicable
regulations.
6.4 TAX WITHHOLDING. The Company shall have the right, but not the
obligation, to deduct from the shares of Stock issuable upon the exercise of an
Option, or to accept from the Optionee the tender of, a number of whole shares
of Stock having a Fair Market Value, as determined by the Company, equal to all
or any part of the federal, state, local and foreign taxes, if any, required by
law to be withheld by the Participating Company Group with respect to such
Option or the shares acquired upon the exercise thereof. Alternatively or in
addition, in its discretion, the Company shall have the right to require the
Optionee, through payroll withholding, cash payment or otherwise, including by
means of a Cashless Exercise, to make adequate provision for any such tax
withholding obligations of the Participating Company Group arising in connection
with the Option or the shares acquired upon the exercise thereof. The Fair
Market Value of any shares of Stock withheld or tendered to satisfy any such tax
withholding obligations shall not exceed the amount determined by the applicable
minimum statutory withholding rates. The Company shall have no obligation to
deliver shares of Stock or to release shares of Stock from an escrow established
pursuant to the Option Agreement until the Participating Company Group's tax
withholding obligations have been satisfied by the Optionee.
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6.5 REPURCHASE RIGHTS. Shares issued under the Plan may be subject to
a right of first refusal, one or more repurchase options, or other conditions
and restrictions as determined by the Board in its discretion at the time the
Option is granted. The Company shall have the right to assign at any time any
repurchase right it may have, whether or not such right is then exercisable, to
one or more persons as may be selected by the Company. Upon request by the
Company, each Optionee shall execute any agreement evidencing such transfer
restrictions prior to the receipt of shares of Stock hereunder and shall
promptly present to the Company any and all certificates representing shares of
Stock acquired hereunder for the placement on such certificates of appropriate
legends evidencing any such transfer restrictions.
6.6 EFFECT OF TERMINATION OF SERVICE.
(a) OPTION EXERCISABILITY. Subject to earlier termination of the
Option as otherwise provided herein and unless otherwise provided by the Board
in the grant of an Option and set forth in the Option Agreement, an Option shall
be exercisable after an Optionee's termination of Service only during the
applicable time period determined in accordance with this Section 6.6 and
thereafter shall terminate:
(i) DISABILITY. If the Optionee's Service with the
Participating Company Group terminates because of the Disability of the
Optionee, the Option, to the extent unexercised and exercisable on the date on
which the Optionee's Service terminated, may be exercised by the Optionee (or
the Optionee's guardian or legal representative) at any time prior to the
expiration of twelve (12) months (or such longer period of time as determined by
the Board, in its discretion) after the date on which the Optionee's Service
terminated, but in any event no later than the date of expiration of the
Option's term as set forth in the Option Agreement evidencing such Option (the
"OPTION EXPIRATION DATE").
(ii) DEATH. If the Optionee's Service with the Participating
Company Group terminates because of the death of the Optionee, the Option, to
the extent unexercised and exercisable on the date on which the Optionee's
Service terminated, may be exercised by the Optionee's legal representative or
other person who acquired the right to exercise the Option by reason of the
Optionee's death at any time prior to the Option Expiration Date. The Optionee's
Service shall be deemed to have terminated on account of death if the Optionee
dies within three (3) months (or such longer period of time as determined by the
Board, in its discretion) after the Optionee's termination of Service.
(iii) TERMINATION AFTER CHANGE IN CONTROL. The Board may, in
its discretion, provide in any Option Agreement that if the Optionee's Service
with the Participating Company Group ceases as a result of "Termination After
Change in Control" (as defined in such Option Agreement), then (1) the Option,
to the extent unexercised and exercisable on the date on which the Optionee's
Service terminated, may be exercised by the Optionee (or the Optionee's guardian
or legal representative) at any time prior to the expiration of six (6) months
(or such longer period of time as determined by the Board, in its discretion)
after the date on which the Optionee's Service terminated, but in any event no
later than the Option Expiration Date, and (2) the exercisability and vesting of
the Option and any shares acquired upon the exercise thereof shall be
accelerated effective as of the date on which the
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Optionee's Service terminated to such extent, if any, as shall have been
determined by the Board, in its discretion, and set forth in the Option
Agreement. Notwithstanding the foregoing, if it is determined that the
provisions or operation of this Section 6.6(a)(iii) would preclude treatment of
a Change in Control as a "pooling-of-interests" for accounting purposes and
provided further that in the absence of the preceding sentence such Change in
Control would be treated as a "pooling-of-interests" for accounting purposes,
then this Section 6.6(a)(iii) shall be void ab initio, and the vesting and
exercisability of the Option shall be determined under any other applicable
provision of the Plan or the Option Agreement evidencing such Option.
(iv) OTHER TERMINATION OF SERVICE. If the Optionee's Service
with the Participating Company Group terminates for any reason, except
Disability, death or Termination After Change in Control, the Option, to the
extent unexercised and exercisable by the Optionee on the date on which the
Optionee's Service terminated, may be exercised by the Optionee at any time
prior to the expiration of three (3) months (or such longer period of time as
determined by the Board, in its discretion) after the date on which the
Optionee's Service terminated, but in any event no later than the Option
Expiration Date.
(b) EXTENSION IF EXERCISE PREVENTED BY LAW. Notwithstanding the
foregoing, if the exercise of an Option within the applicable time periods set
forth in Section 6.6(a) is prevented by the provisions of Section 10 below, the
Option shall remain exercisable until three (3) months (or such longer period of
time as determined by the Board, in its discretion) after the date the Optionee
is notified by the Company that the Option is exercisable, but in any event no
later than the Option Expiration Date.
(c) EXTENSION IF OPTIONEE SUBJECT TO SECTION 16(b).
Notwithstanding the foregoing, if a sale within the applicable time periods set
forth in Section 6.6(a) of shares acquired upon the exercise of the Option would
subject the Optionee to suit under Section 16(b) of the Exchange Act, the Option
shall remain exercisable until the earliest to occur of (i) the tenth (10th) day
following the date on which a sale of such shares by the Optionee would no
longer be subject to such suit, (ii) the one hundred and ninetieth (190th) day
after the Optionee's termination of Service, or (iii) the Option Expiration
Date.
6.7 TRANSFERABILITY OF OPTIONS. During the lifetime of the Optionee,
an Option shall be exercisable only by the Optionee or the Optionee's guardian
or legal representative. No Option shall be assignable or transferable by the
Optionee, except by will or by the laws of descent and distribution.
Notwithstanding the foregoing, to the extent permitted by the Board, in its
discretion, and set forth in the Option Agreement evidencing such Option, a
Nonstatutory Stock Option shall be assignable or transferable subject to the
applicable limitations, if any, described in the General Instructions to Form
S-8 Registration Statement under the Securities Act.
7. STANDARD FORMS OF OPTION AGREEMENT.
7.1 OPTION AGREEMENT. Unless otherwise provided by the Board at the
time the Option is granted, an Option shall comply with and be subject to the
terms and conditions set
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<PAGE> 36
forth in the form of Option Agreement approved by the Board concurrently with
its adoption of the Plan and as amended from time to time.
7.2 AUTHORITY TO VARY TERMS. The Board shall have the authority from
time to time to vary the terms of any standard form of Option Agreement
described in this Section 7 either in connection with the grant or amendment of
an individual Option or in connection with the authorization of a new standard
form or forms; provided, however, that the terms and conditions of any such new,
revised or amended standard form or forms of Option Agreement are not
inconsistent with the terms of the Plan.
8. CHANGE IN CONTROL.
8.1 DEFINITIONS.
(a) An "OWNERSHIP CHANGE EVENT" shall be deemed to have occurred
if any of the following occurs with respect to the Company: (i) the direct or
indirect sale or exchange in a single or series of related transactions by the
stockholders of the Company of more than fifty percent (50%) of the voting stock
of the Company; (ii) a merger or consolidation in which the Company is a party;
(iii) the sale, exchange, or transfer of all or substantially all of the assets
of the Company; or (iv) a liquidation or dissolution of the Company.
(b) A "CHANGE IN CONTROL" shall mean an Ownership Change Event
or a series of related Ownership Change Events (collectively, a "TRANSACTION")
wherein the stockholders of the Company immediately before the Transaction do
not retain immediately after the Transaction, in substantially the same
proportions as their ownership of shares of the Company's voting stock
immediately before the Transaction, direct or indirect beneficial ownership of
more than fifty percent (50%) of the total combined voting power of the
outstanding voting stock of the Company or the corporation or corporations to
which the assets of the Company were transferred (the "TRANSFEREE
CORPORATION(S)"), as the case may be. For purposes of the preceding sentence,
indirect beneficial ownership shall include, without limitation, an interest
resulting from ownership of the voting stock of one or more corporations which,
as a result of the Transaction, own the Company or the Transferee
Corporation(s), as the case may be, either directly or through one or more
subsidiary corporations. The Board shall have the right to determine whether
multiple sales or exchanges of the voting stock of the Company or multiple
Ownership Change Events are related, and its determination shall be final,
binding and conclusive.
8.2 EFFECT OF CHANGE IN CONTROL ON OPTIONS. In the event of a Change
in Control, the surviving, continuing, successor, or purchasing corporation or
parent corporation thereof, as the case may be (the "ACQUIRING CORPORATION"),
may either assume the Company's rights and obligations under outstanding Options
or substitute for outstanding Options substantially equivalent options for the
Acquiring Corporation's stock. In the event the Acquiring Corporation elects not
to assume or substitute for outstanding Options in connection with a Change in
Control, any unexercisable or unvested portions of outstanding Options and any
shares acquired upon the exercise thereof held by Optionees whose Service has
not terminated prior to such date shall be immediately exercisable and and the
Vested in full as of
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<PAGE> 37
the date ten (10) days prior to the date of the Change in Control. The exercise
or vesting of any Option and any shares acquired upon the exercise thereof that
was permissible solely by reason of this Section 8.2 shall be conditioned upon
the consummation of the Change in Control. Any Options which are neither assumed
or substituted for by the Acquiring Corporation in connection with the Change in
Control nor exercised as of the date of the Change in Control shall terminate
and cease to be outstanding effective as of the date of the Change in Control.
Notwithstanding the foregoing, shares acquired upon exercise of an Option prior
to the Change in Control and any consideration received pursuant to the Change
in Control with respect to such shares shall continue to be subject to all
applicable provisions of the Option Agreement evidencing such Option except as
otherwise provided in such Option Agreement. Furthermore, notwithstanding the
foregoing, if the corporation the stock of which is subject to the outstanding
Options immediately prior to an Ownership Change Event described in Section
8.1(a)(i) constituting a Change in Control is the surviving or continuing
corporation and immediately after such Ownership Change Event less than fifty
percent (50%) of the total combined voting power of its voting stock is held by
another corporation or by other corporations that are members of an affiliated
group within the meaning of Section 1504(a) of the Code without regard to the
provisions of Section 1504(b) of the Code, the outstanding Options shall not
terminate unless the Board otherwise provides in its discretion.
9. PROVISION OF INFORMATION.
Each Optionee shall be given access to information concerning the
Company equivalent to that information generally made available to the Company's
common stockholders.
10. COMPLIANCE WITH SECURITIES LAW.
The grant of Options and the issuance of shares of Stock upon exercise
of Options shall be subject to compliance with all applicable requirements of
federal, state and foreign law with respect to such securities. Options may not
be exercised if the issuance of shares of Stock upon exercise would constitute a
violation of any applicable federal, state or foreign securities laws or other
law or regulations or the requirements of any stock exchange or market system
upon which the Stock may then be listed. In addition, no Option may be exercised
unless (a) a registration statement under the Securities Act shall at the time
of exercise of the Option be in effect with respect to the shares issuable upon
exercise of the Option or (b) in the opinion of legal counsel to the Company,
the shares issuable upon exercise of the Option may be issued in accordance with
the terms of an applicable exemption from the registration requirements of the
Securities Act. The inability of the Company to obtain from any regulatory body
having jurisdiction the authority, if any, deemed by the Company's legal counsel
to be necessary to the lawful issuance and sale of any shares hereunder shall
relieve the Company of any liability in respect of the failure to issue or sell
such shares as to which such requisite authority shall not have been obtained.
As a condition to the exercise of any Option, the Company may require the
Optionee to satisfy any qualifications that may be necessary or appropriate, to
evidence compliance with any applicable law or regulation and to make any
representation or warranty with respect thereto as may be requested by the
Company.
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<PAGE> 38
11. TERMINATION OR AMENDMENT OF PLAN.
The Board may terminate or amend the Plan at any time. However,
subject to changes in applicable law, regulations or rules that would permit
otherwise, without the approval of the Company's stockholders, there shall be
(a) no increase in the maximum aggregate number of shares of Stock that may be
issued under the Plan (except by operation of the provisions of Section 4.3),
(b) no change in the class of persons eligible to receive Incentive Stock
Options, and (c) no other amendment of the Plan that would require approval of
the Company's stockholders under any applicable law, regulation or rule. No
termination or amendment of the Plan shall affect any then outstanding Option
unless expressly provided by the Board. In any event, no termination or
amendment of the Plan may adversely affect any then outstanding Option without
the consent of the Optionee, unless such termination or amendment is required to
enable an Option designated as an Incentive Stock Option to qualify as an
Incentive Stock Option or is necessary to comply with any applicable law,
regulation or rule.
IN WITNESS WHEREOF, the undersigned Secretary of the Company certifies that the
foregoing sets forth the Raytel Medical Corporation 2000 Stock Option Plan as
duly adopted by the Board on January 20, 2000.
/s/ MICHAEL O. KOKESH
------------------------------------
Secretary
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<PAGE> 39
DETACH HERE
PROXY
RAYTEL MEDICAL CORPORATION
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
SOLICITED BY THE BOARD OF DIRECTORS
The undersigned, revoking all prior proxies, hereby appoints Richard F.
Bader and John F. Lawler, Jr., or either of them, with full power of
substitution, as proxies to represent and vote as designated in the proxy
any and all of the shares of stock of Raytel Medical Corporation, held or owned
by or standing in the name of the undersigned on the Company's books on January
14, 2000 at the Annual Meeting of Stockholders of the Company to be held at the
LeMeridien Hotel, 250 Franklin Street, Boston, Massachusetts at 10:30 a.m. on
March 2, 2000, and any continuation or adjournment thereof, with all powers the
undersigned would possess if personally present at the meeting.
THE UNDERSIGNED HEREBY DIRECTS AND AUTHORIZES SAID PROXIES, AND EACH OF
THEM, OR THEIR SUBSTITUTE OR SUBSTITUTES, TO VOTE AS SPECIFIED BELOW WITH
RESPECT TO THE PROPOSALS LISTED IN PARAGRAPHS 1, 2 AND 3 ON THE REVERSE SIDE,
OR IF NO SPECIFICATION IS MADE, TO VOTE IN FAVOR THEREOF.
The undersigned hereby further confers upon said proxies, and each of them,
or their substitute or substitutes, discretionary authority to vote with
respect to all other matters, which may properly come before the meeting or any
continuation or adjournment thereof.
The undersigned hereby acknowledges receipt of: (a) Notice of Annual
Meeting of Stockholders of the Company, (b) accompanying Proxy Statement, and
(c) Annual Report to Stockholders for the fiscal year ended September 30, 1999.
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
<PAGE> 40
DETACH HERE
[X] PLEASE MARK
VOTES AS IN
THIS EXAMPLE.
THE UNDERSIGNED HEREBY VOTES ALL THE SHARES OF THE STOCK OF RAYTEL MEDICAL
CORPORATION WHICH THE UNDERSIGNED IS ENTITLED TO VOTE AS HEREINAFTER SPECIFIED
UPON THE PROPOSALS LISTED BELOW:
1. Election of three (3) directors to Class II of the Board of Directors.
NOMINEES: (01) Mary Lampe, (02) Gene I. Miller and (03) David E.
Wertheimer, MD
FOR WITHHELD
ALL [ ] [ ] FROM ALL
NOMINEES NOMINEES
[ ]
--------------------------------------------
For all nominees except as noted above
FOR AGAINST ABSTAIN
2. To approve the 2000 Stock Option Plan. [ ] [ ] [ ]
3. To approve the appointment of Arthur Andersen LLP
as independent auditors of the Company for the
fiscal year ending September 30, 2000. [ ] [ ] [ ]
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
Sign exactly as your name(s) appear(s) on your stock certificate. If shares of
stock stand of record in the names of two or more persons or in the name of
husband and wife, whether as joint tenants or otherwise, both or all of such
persons should sign this ballot. If shares of stock are held of record by a
corporation, this ballot should be executed by the President or Vice President
and the Secretary or Assistant Secretary, and the corporate seal should be
affixed thereto. Executors or administrators or other fiduciaries who execute
this ballot for a deceased stockholder should give their full title.
Signature: _____________ Date: ________ Signature: _____________ Date:________
